Republic of the Philippines
HOUSE OF REPRESENTATIVES
Batasang Pambansa, Quezon City

FIFTEENTH CONGRESS
First Regular Session

3267

HOUSE BILL NO.

INTRODUCED BY REP. JOSEPH VICTOR G. EJERCITO

EXPLANATORY NOTE

This bill seeks to amend Republic Act No. 8479, otherwise known as the
“Downstream Oil Industry Deregulation Act” by increasing competition at the
retail industry level and strengthening the power of the Department of Energy

One of the primary aims of this amendment is to encourage greater
competition at the retail level. To address this, the retail industry has to be freed
from the influence of big oil companies which own most of the retail outlets all
over the country. This will encourage investment in the retail level, which will
eventually lead to greater competition. With greater margin of competition, it is
hoped that pump prices will be brought to reasonable levels.

The deregulation of the oil industry was brought about by the desire of the
government to allow free market forces to influence the prices of oil petroleum
products. With the deregulation of the industry, it was the intention of the law for
new players to come in, thus creating an environment of competition, which
eventually will lead to fair, market-driven oil prices.

There are currently 66 new players that invested in the oil industry.
However, the industry suffers from incredulity in terms of fair competition. While
new players are present, there is a growing concern whether there indeed exists
free enterprise, or whether there is a cartel-like environment that allows present
players to dictate in one way or the other the prices of oil products.

Despite all the developments in the industry, the reality is that there is a
need for more players. Notwithstanding Section 10 of the Downstream Oil
Industry Deregulation Act of 1998 which provides for financial assistance for the
establishment and operation of gasoline stations, the number of existing gasoline
stations does not seem to suggest a friendly retail-level industry. Of the Php300
million allocated by law to be taken out of PAGCOR coffers for this purpose, only
Php30 million was actually divested to the DOE. Out of this amount, only Php20
million has been used up for loans since the passage of the oil deregulation law
in 1998. With big oil companies controlling the industry down the whole supply
chain, it is understandable that operating a gasoline station does not present
itself to be a promising enterprise. Hence, there is the necessity to introduce the
proposed amendment.


There is also a need to have transparency in the pricing of oil products.
Deregulation allows industry players to determine their prices, but in an industry
imbued with much public interest, the public has the right to know whether the
prices are fairly determined. Thus, the Department of Energy's powers are
expanded so that it may effectively carry out its mandate to inform and protect
the public from any illicit practices in the industry.

In view of the foregoing, approval of this bill is earnestly requested.

ee .

JOSEPH VICTOR G. EJERCITO


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Batasang Pambansa, Quezon City

FIFTEENTH CONGRESS
First Regular Session

267
HOUSE BILL NO.

INTRODUCED BY REP. JOSEPH VICTOR G. EJERCITO

AN ACT
AMENDING REPUBLIC ACT NO. 8479, OTHERWISE KNOWN AS
THE “DOWNSTREAM OIL INDUSTRY DEREGULATION ACT”

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Section 4 of R.A. No. 8479 is hereby amended to
read as follows:

“SEC. 4. Definition of Terms. - For purposes of this Act, the
following terms are herein below defined:

“(a) Base Convention shall refer to the international accord
which governs the trade or movement of hazardous and toxic
wastes across borders;

“(b) Board shall refer to the Energy Regulatory Board;
“(c) BOI shall refer to the Board of Investments;

“(D) COMPANY OPERATED STATION MEANS A SERVICE STATION
OWNED OR CONTROLLED BY AN OIL COMPANY AND OPERATED
WITH COMPANY PERSONNEL, A SUBSIDIARY COMPANY, OR A
COMMISSIONED AGENT OR UNDER CONTRACT WITH, ANY
PERSON, FIRM OR CORPORATION MANAGING ANY SUCH
OUTLET ON A FEE ARRANGEMENT OR ON ANY FEE FOR SERVICE
ARRANGEMENT WITH THE OIL COMPANY.

“(E) [(d)] Crude Oil shall refer to oil in its natural state before
the same has

been refined or otherwise treated, but excluding water, bottoms,
sediments and foreign substances;

“(F) [(e)] Dealer shall refer to any person, whether natural or
juridical, who is engaged I the marketing and direct selling of


petroleum products to motorists, end users, and other
consumers;

*(G) [(Q] DOE shall refer to the Department of Energy;
*(H) [(g)] DOJ shall refer to the Department of Justice;

(I) [(h)] Downstream Oil Industry (DOI) or Industry shall refer
to the business of importing; exporting, re-exporting, shipping,
transporting, processing, refining, storing, distributing,
marketing and/or selling crude oil, gasoline, diesel, liquefied
petroleum gas (LPG), kerosene, and other petroleum products;

(J) [(i)] Hauler shall refer to any person, whether natural or
juridical, engaged in the transport, distribution, hauling, and
carriage of petroleum products, whether in bulk or packed form,
from the oil companies and independent marketers to the
petroleum dealers and other consumers;

“(K) [G)] LPG Distributor shall refer to any person or entity,
whether natural

or juridical, engaged in exporting, refilling, transporting,
marketing, and/or selling of LPG to end users and other
consumers;

“(L) [(k)] New Industry Participants shall refer to new
participants in a particular sub-sector of the downstream oil
industry with investments and initial business operations
commencing after January 1,1994;

“(M) OIL COMPANY SHALL REFER TO ANY PERSON, FIRM OR
CORPORATION OR AFFILIATE THEREOF, ENGAGED IN THE
REFINING R IMPORTATION OF PETROLEUM PRODUCTS TO BE
SOLD TO DEALERS OR RETAILERS.

“(N) [(I)] Person shall refer to any person, whether natural or
juridical, who is engaged in any activity of the downstream oil
industry;

“(0) [(m)] Petroleurn shall refer to the naturally occurring
mixture of compounds of hydrogen and carbon with a small
proportion of impurities and shall include any mineral oil,
petroleum gas, hydrogen gas, bitumen, asphalt, mineral wax,
and all other similar or naturally-associated substances, with the
exception of coal, peat, bituminous shale and/or other stratified
mineral fuel deposits;

“(P) [(n)] Petroleum Producers shall refer to products formed in
the case of refining crude petroleum through distillation,
cracking, solvent refining and chemical treatment coming out as
primary stocks from the refinery such as, but not limited to:
LPG, naphtha, gasolines, solvents, kerosenes, aviation fuels,
diesel oils, fuel oils, waxes and petrolatums, asphalt, bitumens,
coke and refinery sludges, or other such refinery petroleum


fractions which have not undergone any process or treatment as
to produce separate chemically-defined compounds in a pure or
commercially pure state and to which various substances may
have been added to render them suitable for particular uses:
Provided, That the resultant product contains not less than fifty
percent (50%) by weight of such petroleum products;

“(Q) [(0)] Singapore Import Parity (SIP) shall refer to the
deemed landed cost of a petroleum product imported from
Singapore at a free-on-board price equal to the average
Singapore Posting for that product at the time of loading;

“(R): [(p)] Singapore Posting shall refer to the price of petroleum
products periodically posted by oil refineries in Singapore and
reported by independent international publications: and

“(S) [(q)] Wholesale Posted Price (WPP) shall refer to the ceiling
price of petroleum products set by the Board based on its duly
approved automatic pricing formula.”

SEC. 2. Section 10 of R.A. 8479 is hereby amended to read as
follows:

“SEC 10. Promotion of Retail Competition. - (A) To
achieve the social and policy objective of fair prices, facilitate the
attainment of a truly competitive product market in the retail
level, the DOE shall promote and encourage by way of
information dissemination, networking, FINANCING and
management skills training, the active and direct participation of
the private sector and cooperatives in the retailing of petroleum
Products through joint venture/supply agreements with new
industry participants for the establishment and operation of
gasoline stations: Provided, That the training herein shall include
LPG retailing.

20000000

“Of this amount, two percent (2%) plus any additional funding
shall be allocated for the two-fold program; one percent (lo/)
Plus any additional funding shall be set aside for administrative,
maintenance, and other operating expenses: ninety-four percent
(94%) shall be used exclusively for lending and financial
assistance: the remaining three percent (3%) shall be utilized in
accordance with the provisions of Section 26 of this Act:
Provided, That the loans to be awarded herein shall be from
short- to medium-term with low interest rates; Provided, further
That these loans shall be awarded to qualified persons who are
able to comply with the conditions set forth in the next two (2)
preceding paragraphs.

“(B) BEGINNING JANUARY 1, 2011, NO OIL COMPANY MAY OPEN
NEW COMPANY-OPERATED GASOLINE STATION, PROVIDED,
THAT BEGINNING JANUARY 1, 2012, NO SUCH OIL COMPANY
MAY OPERATE MORE THAN ONE HALF (1/2) THE NUMBER OF ITS


GASOLINE STATIONS LAWFULLY OPERATED ON JANUARY 1,
2011; PROVIDED FURTHER, THAT BEGINNING JANUARY 1,
2013, NO SUCH OIL COMPANY MAY OPERATE ANY GASOLINE
STATION PROVIDED, FINALLY THAT OIL COMPANIES MAY ENTER
INTO NON-EXCLUSIVE FRANCHISE AGREEMENT WITH
INDEPENDENT GASOLINE STATION DEALERS.

“IT SHALL BE UNLAWFUL FOR OIL COMPANIES TO:

“(1) SELL OR OFFER TO SELL PETROLEUM PRODUCTS TO AN
INDEPENDENT GASOLINE STATION DEALER AT A PRICE THAT
EXCEEDS THE CURRENT MARKET RETAIL PRICE OF PETROLEUM
PRODUCT OF THE SAME GRADE BEING SOLD AT ANY COMPANY
OPERATED STATION DURING THE PERIOD THAT OIL
COMPANIES ARE ALLOWED TO OPERATE GASOLINE STATIONS;

“(2) OVERCHARGE AN INDEPENDENT GASOLINE STATION
DEALER FOR PETROLEUM PRODUCT;

“(3) PERFORM SUCH OTHER ACTS WHERE THE EFFECT THEREOF
AMOUNTS TO A CIRCUMVENTION OF THIS PROVISION OR OF
OTHER ACTS PROHIBITED BY THIS LAW.

“ANY PERSON. INCLUDING BUT NOT LIMITED TO THE
CHIEF OPERATING OFFICER OR CHIEF EXECUTIVE OFFICER OF
THE PARTNERSHIP, CORPORATION OR ANY ENTITY INVOLVED,
WHO IS FOUND GUILTY OF ANY OF THE SAID PROHIBITED ACTS
SHALL SUFFER THE PENALTY OF IMPRISONMENT FOR FIVE (5)
YEARS AND FINE RANGING FROM FIVE HUNDRED THOUSAND
PESOS (P500,000.00) TO ONE MILLION PESOS
(P1,000,000.00).”

SEC. 3. Section 14 of RA 8479 is hereby amended to read as
follows:

“SECTION 14. Monitoring - (a) The DOE shall monitor and
publish daily international crude oil prices, as well as follow the
movements of domestic oil prices THROUGHOUT THE WHOLE
SUPPLY CHAIN. IT SHALL DETERMINE THE FACTORS WHICH
CAUSE THE INCREASE AND DECREASE IN PRICES OF
PETROLEUM PRODUCTS AND ANALYZE THE PROPRIETY AND
NECESSITY OF SUCH INCREASE OR DECREASE. THIS MAY BE
THE BASIS, AMONG OTHERS, FOR THE PROPER ACTION
AGAINST ANY PERSON OR ENTITY IN THE INDUSTRY WHICH
VIOLATES THE PROVISIONS OF THIS ACT. TO IMPLEMENT THIS,
ANY PERSON OR ENTITY ENGAGED IN THE INDUSTRY SHALL
SUBMIT A VERIFIED MONTHLY REPORT TO THE DOE OF THEIR
PRICES FOR THE PROCESSING, SALE, EXPORTATION, REFINING,
STORAGE, TRANSPORT OR DELIVERY OF PETROLEUM
PRODUCTS, DETAILING IN THE SAID REPORT ALL THE
FACTORS, ASSUMPTIONS, AND FORMULATE USED IN THE
COMPUTATION OF THE PRICE. THE INFORMATION HEREUNDER
OBTAINED SHALL BE CONSIDERED AS MATTER OF PUBLIC
INTEREST AND SHALL BE MADE PUBLIC FROM TIME TO TIME.


‘(B) ON THE BASIS OF RELEVANT DATA AND INFORMATION
OBTAINED, INCLUDING BUT NOT LIMITED TO THE AFORESAID
REPORT, THE DOE SHALL ISSUE AND PUBLISH EACH MONTH AN
OPINION WHICH STATES ITS VIEW WHETHER THE PRICES OF
PETROLEUM PRODUCTS AT THE RETAIL LEVEL FAIRLY REFLECT
THEIR COST OF PRODUCTION.

“(C) [It] THE DOE shall [likewise] monitor the quality of
petroleum products and stop the operation of businesses
involved in the sale of petroleum products which do not comply
with the national standards of quality that are aligned with the
national standards/protocols of quality. The Bureau of Product
Standards of the DTI, together with the Department of
Environment and Natural Resources (DENR), the DOE, the
Department of Science and Technology (DOST), representatives
of the fuel and automotive industries and the consumers, shall
set the specifications for all types of fuel and fuel-related
products to improve fuel composition for increased efficiency and
reduced emissions. The BPS shall also specify the allowable
content of additives in all types of fuels and fuel-related
products.

*(D) [(b)] The DOE shall monitor the refining and manufacturing
processes of local petroleum products to ensure that clean and
safe (environment and worker-benign) technologies are applied.
This shall also apply to the process of marketing local and
imported petroleum products.

*(E) [(€)] The DOE shall maintain a periodic schedule of present
and future total industry inventory of petroleum products for the
purpose of determining the level of supply. To implement this,
the importers, refiners, and marketers are hereby required to
submit monthly to the DOE their actual importations, local
purchases, sales and/or consumption, and inventory on a per
crude/product basis.

“(F) [(d)] Any report from any person of an unreasonable rise in
the prices of petroleum products shall be immediately acted
upon. For this purpose, the creation of the DOE-DO) Task Force
is hereby mandated to determine within thirty (30) days the
merits of the report and initiate the necessary actions warranted
under the circumstance: Provided, That nothing herein shall
prevent the said task force from investigating and/or filing the
necessary complaint with the proper court or agency motu
propio.

“Upon the effectivity of this Act, the Secretaries of Energy and
Justice shall jointly appoint the members of a committee who
shail be tasked with the drafting of the rules and guidelines to be
adopted by the Task Force in the performance of its duty. These
guidelines shall ensure the efficiency, promptness, and
effectiveness in the handling of its cases. The Task Force shall be


organized and its members appointed within one (1) month from
the effectivity of this Act.

“(G) [(e)] In times of national emergency, when the public
interest so requires, the DOE may, during the emergency and
under reasonable terms prescribed by it, temporarily take over
or direct the operation of any person or entity engaged in the
Industry.”

SEC 4. A new Section 15 is inserted to read as follows:

“SECTION 15. VISITORIAL AND INSPECTION POWERS. - (A). TO
ENFORCE AND ENSURE COMPLIANCE WITH THE PROVISIONS OF
THIS ACT OR DETERMINE ANY VIOLATION THEREOF, THE
SECRETARY OF ENERGY OR HIS DULY AUTHORIZED
REPRESENTATIVES SHALL REGULARLY CONDUCT AN
UNANNOUNCED INSPECTION OF PREMISES AND EQUIPMENT
OWNED, LEASED OR OPERATED BY PERSONS OR ENTITITES
ENGAGED IN THE INDUSTRY, AND SHALL HAVE THE AUTHORITY
TO INSPECT THE BOOKS OF ACCOUNTS AND RECORDS OF ANY
SUCH PERSON OR ENTITY AND TO INVESTIGATE ANY FACT,
CONDITION OR MATTER WHICH MAY BE NECESSARY TO
DETERMINE VIOLATIONS OR WHICH MAY AID THE
ENFORCEMENT OF THIS ACT.”

SEC. 5. The current Section 15 is renumbered to become
Section 16. A new Section 17 is hereby inserted to read as follows:

SECTION 17. FOR THE DOE TO EFFECTIVELY CARRY OUT ITS
MANDATE UNDER THIS ACT, THE CONGRESS SHALL INCREASE
ITS BUDGET IN THE GENERAL ANNUAL APPROPRIATIONS TO BE
ALLOCATED FOR THE MONITORING OF PRICES, QUALITY AND
LEVEL OF SUPPLY OF PETROLEUM PRODUCTS, AND THE
ENFORCEMENT OF THE SECRETARY'S VISITORIAL AND
INSPECTION POWERS.

SEC. 6. Sections 16 to 29 of the current law are hereby
renumbered accordingly pursuant to the foregoing amendments.

SEC. 7. Repealing Clause. - All laws, decrees and orders or
parts thereof inconsistent herewith, are deemed repealed or modified
accordingly.

SEC. 8. Separability Clause. -The provisions of this Act are
hereby declared to be separable and, in the event any of such
provisions is declared unconstitutional, the other provisions which are
not affected thereby shall remain in full force and effect.

SEC. 9. Effectivity - This Act shall take effect fifteen (15) days
following its publications in a newspaper of general circulation in the
Philippines.

Approved,