SEVENTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
( f t f f i r i  o f  f h c ^ v n
..I'25 P1 :S5
SENATE
S.B. No. 1223
RK( i : i \  i.i) BY:
Introduced by Senator JOEL VILLANUEVA
AN ACT
AMENDING PD 972 (AS AMENDED BY PD 1174) ALSO KNOWN AS 
THE “COAL MINING DEVELOPMENT ACT OF 1976”
EXPLANATORY NOTE
Over the decades, the Philippine coal mining industry has displayed a 
considerable expansion. Nevertheless, whether the industry has made significant 
economic and social benefits remains a question. Currently, coal mining contributes 
a measly share to the public sector. Under existing sharing scheme of the coal 
revenues, a coal mining company can deduct as much as 90% of the gross 
proceeds of coal as expenses. 
While such deductions are commonly allowed 
among government contracts with extractive industries, the proportion of 
recoverable cost for coal operators is among the highest; oil and natural gas 
operators, for example, are only allowed to deduct up to 70% of total proceeds of 
their extractions as expenses.
From the remaining 10% of gross proceeds, the company receives a share 
equal to 7%. This is tantamount to the sum of the company’s “basic fees” and 
“special allowances.” Thus, the state -  the inherent owner of these extracted 
resources -  is left with a measly share of 3% of the gross proceeds from coal.
As part of its incentives, coal mining operators are also exempted from 
payment of all national taxes, except income tax. However, a company’s income tax 
expense may be included in the total amount of expenditure to be deducted from the 
total sale of coal, as explicitly stated in the “Guidelines for Coal Operations in the 
Philippines.”
Moreover, the governing law on coal mining operation -  last amended in 1977 
-  needs to be strengthened to minimize the unwanted environmental impact of coal
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mining operations. Lastly, like other mineral mining companies, coal operators need 
to directly contribute to the sustainable development of their host communities. This 
is to ensure that significant benefits from the use of the country’s finite resources are 
enjoyed by the current and future generations.
In consideration of these factors, this bill seeks the to amend Presidential 
Decree 972 to increase the public share from the coal proceeds, minimize the 
environmental impact of the coal mining operations, and strengthen the role of coal 
operators to the development of communities:
a) Lower the proportion of allowable deduction from 90% to 70% of gross 
proceeds, and exclude taxes and fees from the items included in the 
operating expense to be deducted from the gross proceeds;
b) Repeal the 30% special allowance thus leave the share of operators to 40% 
of net proceeds;
c) Exclude excise taxes on coal, and local taxes, fees, and charges from the 
incentives granted to operators;
d) Require operators to incorporate an Environmental Protection and 
Enhancement Program in the operators’ exploration and production programs;
e) Create a Mine Rehabilitation Fund to be used for physical and social 
rehabilitation of areas and communities affected by coal mining activities, 
among others;
f) Require coal mining operators to allocate 1.5% of their operating expense for 
programs and projects designed to improve the well-being of host 
communities.
The immediate passage of this important measure is earnestly sought.
SENATOR JOEL VILLANUEVA


SEVENTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
Q 
pi'iunv
2 > 
:J ! ;! '6
SENATE
S.B. No. 1223
R ia.I iS i;i) BYf=
Introduced by Senator JOEL VILLANUEVA
AN ACT
AMENDING PD 972 (AS AMENDED BY PD 1174) ALSO KNOWN AS 
THE “COAL MINING DEVELOPMENT ACT OF 1976”
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Be it enacted by the Senate and House of Representatives of the Philippines 
in Congress assembled:
SEC. 1. Section 9 of PD 972, as amended by PD 1174, is hereby amended further 
to read as follows;
“SEC. 9. Obligations of Operator in a Coal Operating Contract.
“x  X X
“On the other hand, the Energy Development Board shall:
(a) On behalf of the Government, reimburse the operator for all operating 
expenses not exceeding SEVENTY PERCENT (70%) of the gross 
proceeds from production in any year; Provided, that if in any year, the 
operating expenses exceed SEVENTY PERCENT (70%) of the gross 
proceeds from production, then the unrecovered expenses shall be 
recovered from the operating of succeeding years. Operating expenses 
means the total expenditures for coal operating incurred by the operator as 
provided in a coal operating contract. OPERATING EXPENSES TO BE 
DEDUCTED FROM THE GROSS PROCEEDS SHALL EXCLUDE 
TAXES, FEES, OR CHARGES, INCLUDING RELATED SURCHARGES 
INTERESTSS OR FINES, PAID TO THE NATIONAL AND LOCAL 
GOVERNMENT.
“x X X.”
SEC. 2. Section 10 of PD 972, as amended by PD 1174, is hereby REPEALED and 
a new Section 10 is provided to read as follow:
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“SEC. 10. SOCIAL DEVELOPMENT. EACH CONTRACTOR SHALL ALLOT AT 
LEAST ONE AND A HALF PERCENT (1.5%) OF ITS OPERATING COST TO 
ASSIST IN THE DEVELOPMENT OF ITS HOST COMMUNITY, AND IN THE 
PROMOTION OF THE GENERAL WELFARE OF ITS INHABITANTS.”
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SEC. 3. A new Section 10-A of PD 972, as amended by PD 1174, is hereby
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amended to read as follow:
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“SEC. 10-A. ENVIRONMENTAL PROTECTION EACH CONTRACTOR SHALL
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UNDERTAKE AN ENVIRONMENTAL PROTECTION AND ENHANCEMENT
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PROGRAM COVERING THE PERIOD OF THE COAL OPERATING CONTRACT.
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SUCH ENVIRONMENTAL PROGRAM SHALL BE INCORPORATED IN BOTH
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THE EXPLORATION PROGRAM AND DEVELOPMENT AND PRODUCTION
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PROGRAM. THE ENVIRONMENTAL PROGRAM SHALL INCLUDE NOT ONLY
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PLANS RELATIVE TO EXPLORATION AND PRODUCTION OPERATIONS BUT
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ALSO 
TO 
REHABILITATION, 
REGENERATION, 
REVEGETATION 
AND
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REFORESTATION OF COAL CONTRACT AREAS, SLOPE STABILIZATION OF
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THE COVERED AREAS, AQUACULTURE, WATERSHED DEVELOPMENT AND
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WATER CONSERVATION.”
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SEC. 4. A new Section 10-B of PD 972, as amended by PD 1174, is hereby inserted
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to read as follow:
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“SEC. 10-B. ENVIRONMENTAL IMPACT ASSESSMENT EXCEPT DURING
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THE 
EXPLORATION 
PERIOD OF A COAL MINING CONTRACT 
AN
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ENVIRONMENTAL CLEARANCE CERTIFICATE SHALL BE REQUIRED BASED
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ON AN ENVIRONMENTAL IMPACT ASSESSMENT AND PROCEDURES
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UNDER THE PHILIPPINE ENVIRONMENTAL IMPACT ASSESSMENT SYSTEM
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INCLUDING SECTIONS 26 AND 27 OF THE LOCAL GOVERNMENT CODE OF
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1991 WHICH REQUIRE NATIONAL GOVERNMENT AGENCIES TO MAINTAIN
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ECOLOGICAL BALANCE, AND PRIOR CONSULTATION WITH THE LOCAL
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GOVERNMENT 
UNITS, 
NON-GOVERNMENTAL 
AND 
PEOPLE'S
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ORGANIZATIONS 
AND 
OTHER 
CONCERNED 
SECTORS 
OF 
THE
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COMMUNITY: PROVIDED, THAT A COMPLETED ECOLOGICAL PROFILE OF
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THE PROPOSED COAL CONTRACT AREA SHALL ALSO CONSTITUTE PART
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OF 
THE 
ENVIRONMENTAL 
IMPACT 
ASSESSMENT. 
PEOPLE'S
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ORGANIZATIONS AND NON-GOVERNMENTAL ORGANIZATIONS SHALL BE
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ALLOWED AND ENCOURAGED TO PARTICIPATE IN ENSURING THAT
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CONTRACTORS 
SHALL 
OBSERVE 
ALL 
THE 
REQUIREMENTS 
OF
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ENVIRONMENTAL PROTECTION.
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SEC. 5. A new Section 10-C of PD 972, as amended by PD 1174, is hereby inserted
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to read as follow:
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“SEC. 10-C. REHABILITATION. CONTRACTORS SHALL TECHNICALLY AND
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BIOLOGICALLY REHABILITATE THE COAL CONTRACT AREAS TO THE
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CONDITION OF ENVIRONMENTAL SAFETY, AS MAY BE PROVIDED IN THE
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IMPLEMENTING RULES AND REGULATIONS OF THIS ACT. A MINE
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REHABILITATION FUND SHALL BE CREATED AND SHALL BE DEPOSITED


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AS A TRUST FUND IN A GOVERNMENT DEPOSITORY BANK AND USED 
FOR 
PHYSICAL 
AND 
SOCIAL 
REHABILITATION 
OF 
AREAS 
AND 
COMMUNITIES AFFECTED BY COAL MINING ACTIVITIES AND FOR 
RESEARCH ON THE SOCIAL, TECHNICAL AND PREVENTIVE ASPECTS OF 
REHABILITATION. FAILURE TO FULFILL THE ABOVE OBLIGATION SHALL 
MEAN IMMEDIATE SUSPENSION OR CLOSURE OF THE COAL MINING 
ACTIVITIES OF THE CONTRACTOR CONCERNED.”
SEC. 6. Section 16 of PD 972, as amended by PD 1174, is hereby amended to read 
as follows;
“SEC. 16. Incentives to Operators.
(a) Exemption from all taxes except income tax, EXCISE TAXES, AND 
LOCAL TAXES, 
FEES, AND 
CHARGES 
IMPOSED 
BY 
LOCAL 
GOVERNMENT UNITS HOSTING THE COAL MINING OPERATION;
“x X X.”
SEC. 7. Separability Clause. -  If any provision of this Act is declared 
unconstitutional or invalid, other parts or provisions hereof not affected thereby shall 
continue to be in full force and effect.
SEC. 8. Repealing Clause. 
-  
All laws, decrees, executive orders, rules and 
regulations or parts thereof which are contrary to or inconsistent with this Act are 
hereby repealed, amended or modified accordingly.
SEC. 9. Effectivity. -  This Act shall take effect fifteen (15) days after its publication 
in this Official Gazette or in any two newspapers of general circulation.
Approved.