EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus

House Bill No. 3822
EXPLANATORY NOTE

Last July 12, 2010, residents of a condominium in Barangay Bangkal in Makati City
the West Tower Condominium, were surprised to see that their basement was flooded and
discovered that there was seepage from a pipeline of the First Philippine Industrial
Corporation (FPIC) that caused fuel to be mixed with flood waters. As a result, immediate
evacuation was ordered because of a potential disaster that could happen.

The incident became an eye-opener for the public and the government because it
was discovered that there is no particular governing body that regulates the operation of fuel
pipelines in the country and nobody is in charge of ensuring that necessary safeguards and
regulations are in place to protect the public

To avoid a similar situation from happening again and to properly monitor and
regulate the operations of oil and gas pipelines in the country, a regulatory board for this
specific industry is necessary, specially considering that regulating oil and gas pipelines are
an entirely different matter since different safety standards are needed and that it also
involves different technologies. The creation of this new Board comes at an opportune time
considering that the Department of Energy is prioritizing the establishment of gas pipelines
from Batangas to Metro Manila and establishing other pipelines in order to improve the
delivery of supply all over the country. Also, it must be clarified and put into law that oil and
gas pipeline systems are national security concems and that the transport of oil and gas is
an act of common carriers and as such requires the owners of the oil and gas pipeline to
secure a Congressional franchise before they could operate

In view of the foregoing, immediate passage of this bill is eamestly requested.


EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

~ Introduced by Representative Rufus B. Rodriguez

House Bill No. 3822

AN ACT
PROVIDING FOR THE REGULATION OF OIL AND GAS PIPELINES, CREATING THE
NATIONAL PIPELINE BOARD FOR THE PURPOSE, APPROPRIATING FUNDS
THEREFOR, AND FOR OTHER PURPOSES

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

CHAPTER |
GENERAL PROVISIONS
SECTION 1. Short Title. - This Act shall be known as the "Oil and Gas Pipeline Regulation
Act’

SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to provide for
enhanced safety and environmental protection in pipeline transportation, and greater
reliability in the transportation of oil and gas by pipeline in the country

SEC. 3. Scope and Application. - This Act shall apply to alll existing and future oil and gas
pipelines in the country.

SEC. 4, Definition of Terms. -

a) AFP - shall refer to the Armed Forces of the Philippines;

b) DILG - shall refer to the Department of interior and Local Government;

c) DOE - shall refer to the Department of Energy;

d) DOH - shall refer to the Department of Health;

e) DOTC - shall refer to the Department of Transportation and Communications;

f) DND - shall refer to the Department of National Defense;

g) DPW - shall refer to the Department of Public Works and Highways;

h) Gas Pipeline - shalll refer to a structure for transporting gaseous fuels over long distances;
i) NPB - shall refer to the National Pipeline Board created under this Act;

}) Oil pipeline - shall refer to a structure for transporting liquid fuels over long distances;

k) Person - shall include natural or juridical person;

1) Petroleum - shall include any mineral oi, hydrocarbon 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; and

m) Pipeline - shall mean a conduit made from pipes connected end-to-end for long-distance
transport and traversing different local geographical units.

CHAPTER Il
PIPELINE FRANCHISE
SEC. 5. Nature and Scope of a Pipeline Franchise. - Subject to the provisions of the 1987
Constitution and applicable laws, rules and regulations, the Congress of the Philippines may
grant, upon application of any person, a franchise to construct, install, own, operate and
maintain for commercial purposes and in the interest of the public, oil and gas pipeline


system including such other equipment or facilities as may be needed from time to time for
the purpose of transporting and distributing oil and gas through pipeline in the country.

SEC. 6. Prior Approval of the Department of Energy and the Department of Environment and
Natural Resources. - The franchise grantee shall secure from the DOE and the DENR, the
appropriate permits and licenses for the construction, installation, ownership, operation and
maintenance of oil and gas pipeline system.

SEC. 7. Rights Conveyed Under the Pipeline Franchise. - A pipeline franchise grantee
acquires the non-exclusive right to transport petroleum, by means of, and through, a pipeline
or system of pipelines, between the sources of production and/or refining and the places
defined in the Pipeline Franchise, in accordance with the provisions of this Act and the
implementing rules and regulations.

This franchise privilege includes the construction and operation of pipelines, pumping
or compressing stations, storage tanks, gas tanks, power plants, shops, storehouses and
‘other buildings, water supply and communication systems, roads, and such other equipment
or facilities as may be needed for the purpose of the franchise.

All such auxiliary works and operations and the products thereof shall be for the
‘exclusive use of the franchise grantee in the operation of his franchise: Provided, however:
That all roads and bridges constructed by the franchise grantee, except as may otherwise be
agreed upon between the Secretary of the DOE and the franchise grantee, shall be available
for public use.

SEC. 8. Pipeline Franchise as a Common Carrier. - A pipeline franchise shall have the
preferential right to utilize his installations for the transportation of petroleum owned by him,
but is obligated to utilize any remaining transportation capacity pro rata for the transportation
of such other petroleum as may be offered by others for transport, and to charge without
discrimination such rates as may be approved by the NPB, pursuant to the provisions of this
Act.

When the pipeline franchise grantee is also an exploration concessionaire, the
Secretary of DOE may require that the royalty in kind of the Govemment received from the
same franchise grantee, be transported, pro rata, with that owned by the franchise grantee
from the same concession; and in all cases the petroleum of the Govemment shall have
priority over all other petroleum in the utilization of the excess capacity of the pipeline over
that required to transport petroleum owned by the pipeline franchise grantee.

Procedure for the determination of pipeline transportation rates and the conditions
governing the transportation of petroleum other than that owned by the franchise grantee
shall conform to the implementing rules and regulations set by the NPB.

SEC. 9. Term of Pipeline Franchise. - The term of a Pipeline Franchise shall not exceed
twenty-five (25) years counted from the date of its issuance, unless sooner revoked or
cancelled. The term of the franchise is renewable for another twenty-five (25) years, upon
application of the grantee filed prior to the expiration of the original term

SEC. 10. Termination of Pipeline Franchise. - Any Pipeline Franchise may be terminated or
revoked at any time for any violation of the franchise terms and conditions.

SEC. 11. Franchise Tax. - In lieu of all national intemal revenue taxes, the grantee of a
Pipeline Franchise shall pay an annual franchise tax equivalent to five percent (5%) of gross
income eamed during the year.


CHAPTER Ill
PETROLEUM TRANSPORTATION CAPACITY AND
REGULATORY ADEQUACY STUDY

SEC. 12. Petroleum Transportation Capacity and Regulatory Study. The Secretary of the
DOE shall conduct periodic analyses of the domestic transport of petroleum products by
pipeline. Such analyses should identify the areas through which the pipeline traverses where
Unplanned loss of pipeline facilities may cause shortages of petroleum products or price
disruptions and where shortages of pipeline capacity and reliability concerns may have or
are anticipated to contribute to shortages of petroleum products or price disruptions. Upon
identifying such areas, the Secretary may determine if the current level of regulation is
sufficient to minimize the potential for unplanned losses of pipeline capacity.

SEC. 13. Consultation with other Government Agencies. In preparing any analysis under this
Chapter, the Secretary of DOE may consult with the heads of other government agencies
and public and private-sector experts in pipeline and other forms of petroleum product
transportation, energy consumption, pipeline capacity, population and economic
development

CHAPTER IV
CREATION OF THE NATIONAL PIPELINE BOARD,
ITS POWERS AND FUNCTIONS

‘SEC. 14. Creation of the National Pipeline Board (NPB) - The National Pipeline Board (NPB)
is hereby created. The NPB shall be composed of the Secretary of the DOE as Chairman
and the Secretaries of DENR, DOTC, DPWH, DOH and DILG as members or their duly
designated representatives who shall not be below the rank of Assistant Secretary and who
shall sit on a permanent basis

The DOE Secretary, in his capacity as Chairperson, shall, within one month from the
effectivity of this Act, convene the NPB.

The NPB shall be assisted by a Technical Secretariat attached to the Oil Industry
Management Bureau of the DOE. The number of staff of the Technical Secretariat and the
corresponding positions shall be determined by the NPB, subject to approval by the
Department of Budget and Management (DBM) and existing civil service rules and
regulations.

SEC. 15. Powers and Functions of the NPB. - The NPB shall have the following powers and
functions:

a) Prescribe the environment and safety standards in the construction, installation,
‘ownership, operation and maintenance of oil and gas pipeline systems, as well as in
remediation procedures in cases of pipeline leaks or other physical disturbances;

b) Within six months from convening, the NPB shall prescribe minimum standards for
integrity management programs for oil and gas pipelines. For this purpose, the NPB may
require operators of distribution pipelines to continually identify and assess risks on their
distribution lines, to remediate conditions that present a potential threat to line integrity and
to monitor program effectiveness;

¢) Issue regulations providing that, after notice and opportunity for a hearing, if it
determines that the pipeline facility has a condition that poses a pipeline integrity risk to
public safety, property, or the environment, it may order the pipeline franchise grantee to
take the necessary corrective action, including physical inspection, testing, repair, or other
appropriate action, to remedy the condition;

d) Order and require the pipeline franchise grantee, forthwith, or within or at any
specified time and in any manner prescribed by it, any act, matter or undertaking that such
Pipeline franchise grantee is or may be required to do under this Act, or any regulation,
certificate, license, or permit, or any order or direction made or given under this Act;

€) Prohibit the commission or violation of any provisions of the pipeline franchise;


f) Be the repository of pipeline franchises, data and information pertaining to the oil
and gas pipeline industry;

9) In carrying out its duties and functions under this section, it shall, wherever
appropriate, utilize agencies of the government to obtain technical, economic and statistical
information and advice

CHAPTER V
PIPELINE SECURITY AND
ROLE OF OTHER GOVERNMENT AGENCIES
SEC. 16. Pipeline Security. - It is hereby declared that oil and gas pipeline systems are
national security concerns. For this purpose, the DOE, DND and DILG shall compose the
Pipeline Security Inter-Agency Committee under the supervision of the NPB which shall
devise a "National Pipeline Security Plan". The composition of the Pipeline Security Inter-
‘Agency Committee may be expanded by the President to include other concerned agencies

SEC. 17. Role of Other Government Agencies. - In the implementation of the provisions of
this Act, its implementing rules and regulations and related laws, the following agencies shall
perform, among others, the following functions:
a) The DOE shall:
') Conduct periodic analyses of the domestic transport of petroleum products
by pipeline; and.
ii) Monitor the integrity of the pipeline.
b) The DOTC shall:
i) Coordinate networks of pipeline transportation as well as the fast and safe
transportation services; and
ii) Advise the NPB of identified routes, zones and/or areas of operations of
particular operators.
c) The DENR shall
i) Enforce environmental protection laws;
ii) Recommend rules and regulations for environmental impact assessments
and provide technical assistance for their implementation and monitoring;
ili) Take charge of remediation measures; and
iv) Undertake, in the event that emergency clean-up operations are necessary
and the polluter fails to undertake the same, in coordination with other goverment
agencies concemed, containment, removal and clean-up operations. Expenses
incurred in said operations shall be reimbursed by the persons found to have caused
such pollution upon proper administrative determination in accordance with this Act
d) The DPWH shall
i) Identify and/or advise the Pipeline Franchise Grantee the route or areas
where the pipeline can be installed; and
ii) Provide the technical supervision in the construction and installation of oil
and gas pipelines.
e) The DND shall:
i) Develop, through the AFP, a security plan for oil and gas pipelines; and
ii) Conduct regular site security inspections of the oil and gas pipelines.
f) The DILG shall
i) Provide, through the Philippine National Police (PNP), manpower to
implement the security plan established under e (i) of this Section;
ii) Employ the assistance, cooperation and coordination of local government
units (LGUs) in the implementation of the policies and orders issued by the NPB; and
iil) Mobilize the Bureau of Fire Protection (BFP) to ensure the prevention and
suppression of all destructive fires on the petroleum industry installations
h) The DOH shall
i) Formulate rules and regulations conceming health emergency
preparedness and response in cases of oil and gas pipeline system disturbances


CHAPTER VI
REPORTORIAL REQUIREMENTS

SEC. 18. Reportorial Requirements. - To ensure the safety, security and integrity of the oil
‘and gas pipelines and the installations within the vicinity where said pipelines traverse, the
following are required to be submitted to the NPB:
a) For franchise grantees’

1. Pipeline Profile;

2. Pipeline Right of Way;

3. Vicinity Layout and Route Map of the Pipeline;

4, Pipeline Integrity Inspection Report, annually;

5. Safety Management Plan;

6. In-Out Petroleum Data Supply, quarterly;

7. Repair Method;
8. Weld Procedures for welding on live pipelines;
9. Accomplishment Reports; and,
10. Audit Process for management and operating systems

b) For oil and gas companies. - Oil and gas companies transporting their products in the
pipeline system of the franchise grantee are required to submit, on a regular basis, with a
minimum of monthly basis, to the pipeline franchise grantee the supply or delivery reports of
oil and gas which passed through the pipeline facility of the franchise grantee. Significant
loss or underdelivery of oil and gas should be immediately reported to the franchise grantee
and the NPB, in which case if the NPB found that there is sufficient basis that the loss or
under-delivery of oil and gas is due to leak/leaks in the pipeline, the NPB, through its
Chairman, may motu propio, order the franchise grantee to shut down its pipeline operations
and conduct an investigation, including leak tests, to determine the real cause of the loss or
under-delivery

The NPB may require other documents and data, other than the abovementioned,
from the pipeline franchise grantee, and the oil companies, especially in cases of leaks,
disasters and similar emergencies.

CHAPTER Vil
PROHIBITED ACTS
SEC. 19. Prohibited Acts. - The following acts shall be prohibited:

a) Any person who engages in demolition, excavation, tunneling, or construction in
areas traversed by the oil and gas pipelines without first securing clearance from the NPB.
and

b) Any entity who fails to comply with any of the foregoing provisions shall be subject
to appropriate sanctions imposed under applicable laws, rules and regulations

CHAPTER VIII
FINAL PROVISIONS
SEC. 20. Transitory Provision. - The grantee of existing pipeline concession shall be allowed
to operate until the expiration of the term of its concession. Thereafter, such concessionaire
shall secure a Congressional franchise to be allowed to continue to operate

SEC. 21. Penal Sanction. - Any person who violates any of the provisions of this Act shall
suffer the penalty of two (2) to six (6) years imprisonment and a fine ranging from Five
Hundred Thousand Pesos (PhP500,000.) to One Million Pesos (Ph Pi ,000,000.). If the
violator is a corporation, the president or chief executive officer shall be held liable.

SEC. 22. Implementing Rules and Regulations. - The DOE, in coordination with the Board,
shall formulate and issue the necessary implementing rules and regulations within (60) days
after the effectivity of this Act


SEC. 23. Appropriations. - An amount of Two Hundred Million Pesos (PhP200,000,000,) is
hereby appropriated for the initial operation of the NPB and to be included in the General
Appropriations Act in the year following the approval of this Act

Thereafter, the fund necessary to carry out the provisions of this Act shall be included

in the annual General Appropriations Act

SEC. 24. Separability Clause. - If any provision of this Act is declared invalid or
unconstitutional, the other provisions not affected thereby shall remain valid and subsisting

SEC. 25. Repealing Clause. - Republic Act No. 387, otherwise known as the "Petroleum Act
of 1949" is hereby repealed. Such other laws, acts, executive orders, rules and regulations
and other issuances inconsistent with this Act are hereby repealed or modified accordingly.

SEC. 26. Effectivity. - This Act shalll take effect immediately upon publication in at least two
(2) newspapers of general circulation.

Approved,