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Republic of the Philippines
HOUSE OF THE REPRESENTATIVES >
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Quezon City

RECEIVED %

mel 3 SEP
TIME:

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 3593

Introduced by REP. RODEL M. BATOCABE, REP. ALFREDO A. GARBIN, Jr. and REP.
CHRISTOPHER S. CO

AN ACT AMENDING PRESIDENTIAL DECREE NO. 910, ENTITLED "CREATING AN
ENERGY DEVELOPMENT BOARD, DEFINING ITS POWERS AND FUNCTIONS,
PROVIDING FUNDS, THEREFOR, AND FOR OTHER PURPOSES" AND
SPECIFIYING THE USE OF THE MALAMPAYA FUNDS AND FOR OTHER
PURPOSES

EXPLANATORY NOTE

The Malampaya Deep Water Gas-to-Power Project operated by a consortium of Shell
Philippines Exploration BV (45%), Chevron Malampaya LLC (45%), and the Philippine
National Oil Company-Exploration Corporation (PNOC-EC) (10%) is under Service
Contract 38, signed in December 1990 by then President Corazon Aquino’.

Since 2002, the Malampaya project has been producing natural gas commercially,
supplying fuel to three 2700 MW gas-fired power plants in Batangas? which currently
supplies 42% of the energy requirements of Luzon.

By virtue of PD 1234 issued in November 1977, these billions of pesos collected through
the Department of Energy (DOE) from, among others, government share representing
royalties and rentals, as well as production share on service contracts and other
payments on the exploration, development and exploitation of energy resources are
credited and booked under Fund Code 151, a Special Account in the General Fund
(SAGF) managed by the Bureau of Treasury*.

As provided by PD 910 issued on 1976, funds such as that from the Malampaya Project
shall form part of a Special Fund to be used to finance energy resource development and
exploitation programs and projects of the government and for such other purposes as
may be hereafter directed by the President’

In the Budget Briefing on the Development Budget Coordinating Committee, by the House
Committee on Appropriations, DBM Secretary Benjamin Diokno admitted that the
Malampaya fund is now in the amount of Php183 billion, and it is still increasing. Further,
the Budget Secretary stated that the 2017 proposed national budget did not touch the
Malampaya Fund.

1 http://malampaya.com/2010/12/service-contract-38-marks-its-20th-vear
 https://www.doe.gov.oh/natgas/malampaya-gas-field

* http://www.dof.gov.ph/index.hp/p137-3-billion-malampaya-fund-available,
4 http:/Avww.gov.ph/1976/03/22/presidential-decree-no-910/



The Malampaya funds has been under scrutiny and criticism for being prone to misuse
because of the discretion granted to the President as to the use of the funds®. Critics also
emphasize the service contract for being disadvantageous to the government®. A 2014
report stated that the Commission on Audit (COA) tagged government agencies for
possible misuse of the multi-billion-peso Malampaya fund, with huge amounts had
released to them but they managed to skip state audit.

We believe that the Malampaya fund should be utilized specifically for three purposes,
which are: 1) Payment for the stranded debts and stranded contract costs of NPC as well
as qualified stranded contract cost of distribution, 2) Subsidy for missionary electrification,
and 3) Fund the repair and rehabilitation of power stations, lines and facilities damaged
by natural disasters. These costs are passed on to the end user or consumer, resulting
to high electricity bill. In times of calamity, costs for repair of power lines, stations and
facilities are still passed on to the end user. We should put an end to these charges, and
provide for a lower electricity cost for our citizens,

In line with this, and the current administration's focus on transparency in government,
this bill seeks to amend PD 910, to specify areas where these funds collected from
exploration, development and exploitation of energy resources, such as the Malampaya
Fund, could be utilized as provided under the law.

In view of the foregoing, the immediate passa, eof this bill is earnestly sought.

>

——

RODEL M. BATOCABE ALFREDQ fA. GARBIN, Jr. CHRISTOPHER S. CO

5 htto://www.rappler.com/nation/41041-recto-change-law-malampaya-fund
6 nttp://ennphilippines.com/investigative/2015/06/05/Malampaya-Fund-Part-3-Is-government-losing-out-on-
deal.html



Republic of the Philippines
HOUSE OF THE REPRESENTATIVES.
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

3593

HOUSE BILL No.

Introduced by REP. RODEL M. BATOCABE, REP. ALFREDO A. GARBIN, Jr. and REP,
CHRISTOPHER S. CO

AN ACT AMENDING PRESIDENTIAL DECREE NO. 910, ENTITLED "CREATING AN
ENERGY DEVELOPMENT BOARD, DEFINING ITS POWERS AND FUNCTIONS,
PROVIDING FUNDS, THEREFOR, AND FOR OTHER PURPOSES" AND
SPECIFIYING THE USE OF THE MALAMPAYA FUNDS AND FOR OTHER
PURPOSES.

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

SECTION 1, Declaration of Policy — It is hereby declared the policy of the State to adopt
effective and efficient allocation of public funds for needed basic services of the citizens.
It is further adopted that public funds should be spent in accordance with the provisions
provided by law instead of being solely left to the discretion of a single public official.

SECTION 2. Amendment - Section 8 of Presidential Decree No. 910, entitled "Creating
An Energy Development Board, Defining Its Powers And Functions, Providing Funds,
Therefor, And For Other Purposes" is hereby amended to read as follows:

"SECTION 8. Appropriations. - The sum of Five Million Pesos out of any
available funds from the National Treasury is hereby appropriated and
authorized to be released for the organization of the Board and its initial
operations. Henceforth, funds sufficient to fully carry out the functions and
objectives of the Board shall be appropriated every fiscal year in the
General Appropriations Act.

All fees, revenues and receipts of the Board from any and all sources
including receipts from service contracts and agreements such as
application and processing fees, signature bonus, discovery bonus,
production bonus; all money collected from concessionaires, representing
unspent work obligations, fines and penalties under the Petroleum Act of
1949; as well as the government share representing royalties, rentals,
production share on service contracts and similar payments on the
exploration, development and exploitation of energy resources, shall (for

ident] be used to
subsidize stranded costs and missionary electrification, as well as to
finance the repair and rehabilitation of power stations, lines and
facilities damaged by natural disasters.


SECTION 3. Repealing Clause. - All laws, executive and administrative orders or parts
thereof, inconsistent with any provision of this Act are hereby repealed or modified
accordingly.

SECTION 4. Effectivity. - This Act shall take effect after fifteen (15) days following the
completion of its publication in the Official Gazette or in a national newspaper of general
circulation.

Approved,