25 Se 2013 ©
Republic of the Philippines Hatt |
HOUSE OF REPRESENTATIVES y

Quezon City \ * eps)
DEX owe

SIXTEENTH CONGRESS
First Regular Session

2993

HOUSE BILL No. _ ~~

Introduced by
BAYAN MUNA Rep. Neri Colmenares, GABRIELA Women’s Party Rep. Luz Tlagan,
ACT Teachers Party-List Rep. Antonio Tinio, GABRIELA Women’s Party Rep. Emmi
de Jesus, ANAKPAWIS Rep. Fernando Hicap, KABATAAN Rep. Testy Ridon,
BAYAN MUNA Rep. Carlos Isagani Zarate, Rep. Mercedes Cagas, Rep. Napoleon Dy,
Rep, Lani Mercado-Revilla, Rep. Jose Panganiban Jr., and Rep. Aleta Suarez

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 MANDATING
THE TRANSFER OF MALAMPAYA FUNDS TO THE GENERAL
FUND SUBJECT TO CONGRESSIONAL APPROPRIATION AND FOR
OTHER PURPOSES

EXPLANATORY NOTE

The Malampaya Contract has been criticized as a disadvantageous agreement between the
Philippine Government and the big oil companies represented by Shell and Chevron. Bayan
Muna Rep. Neri J. Colmenares in June 2012 exposed through a Privilege Speech the anomalies in
this contract, which in essence defrauded the Philippine Government in terms of profit sharing,
as will be briefly explained below. ‘The contract practically favors Shell and Chevron at the
expenses of the Filipino people. Other than the “sweetheart deal” that is the Malampaya
Contract, the Malampaya fund was subject to various anomalous disbursements. It is a lump
sum amount in a special account the disbursement of which is subject solely to the president's
discretion, which makes its disbursements very vulnerable to corruption and patronage politics.

The object of this House Bill will touch on the government misuse and abuse of the revenues
collected from this contentious and highly profitable Malampaya Contract, which misuse and
abuse principally springs from the unfettered presidential discretion over the funds. Presidential
Decree (PD) No. 910 promulgated during the Marcos regime authorizes the to use the funds

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not only to finance energy resource development and exploitation programs and projects, but
also for such other purposes as may be directed by the President.

Because of these facts, the Makabayan bloc is prompted to put a stop to the presidential power
over this fund by amending the presidential decree that gives sole power to use these funds, and
recommends that the income collected by the Department of Energy (DOB) from its service
contractors be taken up as income of the General Fund pursuant to EO No. 292 and PD 1445,
which would make the proceeds part of the national treasury and become once and for all
ny so that it could be allocated to the most important needs of the

subject to congressional se
people including basic social services for health and education,

This was in fact the recommendation of the Commission on Audit (COA) as early as 2011 when
it publicly stated that:

“It would be favorable to the government if subject funds were transferred to the
unappropriated surplus and made available for appropriation by the Congress of the Philippines.
‘This will not only augment depleting funds of the National Government and greatly ease current
financial pressures but will also facilitate the fair allocation of resources to agencies in accordance
with their identified plans/programs/activities,” the COA said.

‘The Malampaya Natural Gas Project (MNGP) is covered by Service Contract No. 38 signed on
December 11, 1990 and the project started operation in October 2001. It is a project shared
among Shell-Philippines Exploration (45%), Chevron-Texaco (45%) and Philippine National Oil
Company (PNOC) (10%). ‘This project is envisioned to provide the government with US$8-10
Billion revenues within 20 years, reduce the country's dependence on imported fuel by at least
30%, and create new job opportunities.

From 2002 to 2009, the MNGP project generated gross proceeds of US$8,920.26 Million from
which cost recovery worth US$3,221.03 Million was deducted and yielded a net proceeds of
US$5,699.23 Million, To date, the Malampaya fund has accrued a total of P173 Billion but the
Department of Energy admitted dusing the deliberation of their 2014 budget that only P132
Billion of the fund remains, According to Marites Vitug “This whopping amount is
unimaginable to many government departments: 30 times more than the budget of the energy
department (P4.5 billion), 8 times more than the judiciary budget (P15 billion), and 6 times more
than the agrarian reform department budget (P21 billion)”.!

Aside from releases to the province of Palawan (P3.96 Billion), the Department of Budget and
Management (DBM) reports of P22.52 Billion worth of funds given to various national
government agencies (NGAs) which leaves a balance of P79.48 Billion as of May 31, 2011.

In its 2010 Annual Report, the COA observed that out of the total teleases to NGAs, only P250.
Million or 1.27% were given to DOE while P19.39 Billion or 98.73% were given to other
agencies for other purposes not related to energy.

| “Presidential power over Malampaya billions” published in Rappler on Sept, 20, 2013; available at
http://www rappler.com/thought-leaders/39452-presidential-power-over-malampaya-billions; last accessed Sept.

23, 2013
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No. __| Name of Agency Total amount released
1 DA P5,824,000,000,00
2 DAR 900,000,000.00
3 Dept. of Science & Technology - PAG-ASA 400,000.00
4 Dept. of Finance ~ National Housing Authority 1,398,860,000.00
3 DPWH 7,073,806,659.00
6 DBM 62,000,000.00
7 Dept. National Defense 1,198,093,418.00.
fs DIL il 2,140,000,000.00
9 DOTC = Philippine Coast Guard 50,000,000.00
10 | Dept. of Health 745,926,000.00
[41 | DOE 250,000,000.00
12 | Province of Palawan 3,958,508,492.51
TOTAL RELEASES AS OF Dec. 31, 2010 P23,601,594,569.51

‘Sources COA Memorandum June 27, 2017

COA in the 2010 Annual Report further observed that the fund allocation were solely
determined by the Executive Department and made through Administrative Orders, Executive
Orders and other presidential directives.

This prompted COA to recommend, as early as 2010, that the provisions of PD No. 910
be revisited, and that the income collected by the DOE from its Service Contractors be
taken up as income of the General Fund pursuant to EO No. 292 and PD 1445, which
respectively provides:

Sec. 44, Chapter 5, Book VI of EO 292:
“All income accruing to the departments, offices and agencies by virtue of the
provisions of existing laws, orders and regulations shall be deposited in the
National Treasury or in the duly authorized depository of the Government.”

Sec. 65 of PD 1445:
“Unless otherwise specifically provided by law, income accruing to the agencies
by virtue of the provisions of law, orders and regulations shall be deposited to
the National Treasury or in any duly authorized government depositary and shall
accrue to the unappropriated surplus of the General Fund of the Government.”

A look at how former President Gloria Macapagal-Arroyo dispensed with the Malampaya funds
from 2002-2010 is aptly described in an audit repott of the DOE itself in 2010:

“Analysis of the fund releases from SAGF-Malampaya Funds revealed that, out of the
19,643 Billion released to national government agencies, only P250 Million or 1.27%
represented release to DOE for electrification of 211 barangays while P19.393 Billion or
98.73% was released to other national government agencies for various purposes other
than exploration, development and exploitation of energy resources. Further, huge
increasing balances of the fund with year-end balance amounting to P77,187 Billion, for
Malampaya alone, remained continuously idle for the past 8 years.”

President Arroyo handed out projects to various districts of her allies totaling about P7.094
Billion through the Department of Public Works and Highways (DPWH), all in 2009 just before

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the 2010 elections, Where these went and how they were spent, ot whether the projects were
ghost projects remain unclear until now.

This abuse is highlighted by the fact that in one year alone (2009) 138 Statements of Allocation
and Release Order (SARO) were released to the DPWH for non-enetgy related expenses
amounting to P7,094,806,659.00 Billion. This will swell up to P8,003 Billion if we include the
DPWH SAROS amounting to P909 Million released for the first and second districts of Palawan
in 2006-2008.

Meanwhile, a huge amount of the funds have been released for Palawan as eatly as 2006 through
the provincial government, the city government, DPWH and Department of Transportation and
Communication (DOTC) in the total amount of P3.961 Billion broken down as follows

P1.6 Billion - Philippine National Police (PNP) and another for
P 540 Million - PNP
P2.140 Billion - Department of the Interior and Local Government (DILG)-PNP

The P2.14 Billion given to DILG-PNP was for “disaster preparedness” which according to
reports were spent on rubberized boats and other overpriced projects in 2009. This was exposed
during the budget deliberation of the DILG 2012 budget upon the interpellation of Bayan
Muna, Then DILG Secretary Jesse Robredo promised an immediate investigation during the
plenary when he cannot explain how or where these funds were spent. There has been no
information on this investigation as of the time of the writing of this House Bill,

The Department of Agriculture (DAA) was given a lump sum amount of P5.82 Billion for again, a
vague purpose called the “Agricultural Guarantee Fund” and to “rehabilitate areas affected by
typhoon Ondoy and Pepeng.”

‘The Department of Agrarian Reform (DAR) was given a lump sum amount of P900 Million,
again for the vague purpose of giving “support semicer to Agrarian Reform Communities (ARC) as
assistance in the recovery of losses/ damages brought about by typhoons Ondoy & Pepeng.”. “The P 900 Million
\was reportedly siphoned to the fake NGOs and non-existent beneficiaries of Janet Lim-Napoles,

The DND also managed to get Pt Billion for its modernization fund in 2009, again, just before
the election. Strangely, there is no SARO number for this account because according to the
DOE, no SARO was found on the records. Another P198 Million was spent to buy a “generator
set” and repair the roofs and structures of the Philippine Military Academy.

President Aquino continued the practice in 2011 after he assumed the presidency. According
to the records, so far, he disbursed the Malampaya fund in the following projects:

(1) Lump sum given to the National Power Corporation (NPC) - P2 billion

2) Lump sum for the Public Transport Assistance Program (PTAP) - Pantawid Pasada,
P300 million

@) Another Lump sum for PTA'TP - Pantawid Pasada, P150 million

(4) Acquisition of US Coast Guard Cutter Hamilton, 423,063,900

() Fuel requirement, lease/rental and half of capital expenditures requirements of NPC-
SPUG, P1,624,500,000

(©) Given to the AFP-DND P4,954,580,167

(1) Sitio Blecttfication Project, P814,41 1,357

(8) Payment for NPC's short term loan facility P3 billion



(9) Barangay Line Enhancement Projects, P1,108,245,890
(10) Transfer, dry-docking and hull maintenance costs of Coast Guard Cutter ship,
P880,615,176

Deputy Spokesperson Abigail Valte admitted that Pres, Aquino has actually disbursed P
15,255,416,490 Million in his three years in office or P5 Billion each year, so much more than
Pres. Arroyo's average Malampaya spending of P2.4 Billion per year,

Commission on Audit (COA) Chairperson Grace Pulido-Tan bared recently that its COA Audit
report, to be released in October this year would be “explosive”, indicating that the fund was
used either inappropriately or was a source of plunder.

Agrarian Reform Secretary Virgilio de los Reyes also bared that an in-house review they
conducted showed that P900 Million from the operation of gas and oil fields in the waters off
Palawan province coursed through his department in 2009 went to ghost projects of
businesswoman Janet Lim-Napoles. The DAR component is included in the COA special audit,
De los Reyes said that the P900 Million meant for victims of Tropical Storms “Ondoy” and
“Pepeng” in 2009 in agrarian reform communities in 97 municipalities had gone instead to Lim-
Napoles’ 12 NGOs,

For all the anomalies and irregulatities related to the use and abuse of the Malampaya Fund,
some of which have just been recently uncovered and others have yet to be disclosed, such a
Special Fund is clearly vulnerable to abuse because of the law that grants the President authority
to spend the funds even beyond the ambit of energy and at his whim. It is also a clear violation
of the constitutional power of Congress over the purse because said funds are disbursed without
the approval or knowledge of Congress.

Itis time that a Martial Law decree crafted by the deposed President Ferdinand Marcos be put to
an end. Thus, that provision in PD 910 granting the President sole authority disburse
related revenues must be struck down.

Appretd i
ep. NERI J. IENARES
Bayan M
Es EB i
Rep. Li ‘IMINDA C, 1) AN ep. ANTONIO L, TINIO
Gitbriela Women's Party ACT Teachers Panty-lig
Wop q ed l y
AW
Rep. EMMI A. Df JESUS Rep. FERNANDO MIC.
Gabriela Women's Party [Anakpanis Party list

ep. TERRY RIDON Rep. Sxtrotr a ARane
Kabataan Party-list Bayan Matta Party-list

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Printed Name

ANAC 10 antale st

Epitens Si

Printed Name Signature



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

2993

HOUSE BILL No,

Introduced by
BAYAN MUNA Rep. Neri Colmenares, GABRIELA Women's Party Rep. Luz Lagan,
ACT Teachers Party-List Rep. Antonio Tinio, GABRIELA Women’s Party Rep. Emmi
de Jesus, ANAKPAWIS Rep. Fernando Hicap, KABATAAN Rep. Tetry Ridon,
BAYAN MUNA Rep. Carlos Isagani Zarate, Rep. Mercedes Cagas, Rep. Napoleon Dy,
Rep. Lani Metcado-Revilla, Rep. Jose Panganiban Jr., and Rep. Aleta Suarez

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 MANDATING THE TRANSFER OF MALAMPAYA
FUNDS TO THE GENERAL FUND SUBJECT TO CONGRESSIONAL
APPROPRIATION AND FOR OTHER PURPOSES

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

SECTION 1. Policy—Public funds must be effectively and efficiently allocated for the actual
needs of the people. It must be subject to the collective deliberation of communities, local
government units and Congress 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 catty 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 sevice contracts and similar payments on the


exploration, development and exploitation of energy resources, shall (form part of a
Special Fund to be used to finance enetgy resource development and exploitation
programs and projects of the government and for such other purposes as may be
hereafter directed by the President] BE TRANSFERRED TO ‘THE
UNAPPROPRIATED SURPLUS OF THE GENERAL FUND AND SHALL BE
APPROPRIATED BY CONGRESS.”

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

SECTION 4. ‘This Act shal 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,