SEVENTEENTH CONGRESS OF THE
REPUBLIC OF THE PHILIPPINES
Third Regular Session

“8 JUL 24 P4335

Senate Bin 1883 :

Introduced by Senator Grace Poe i

AN ACT
IMPROVING THE DISCLOSURE AND
TRANSPARENCY OF THE EXTRACTIVE INDUSTRIES

EXPLANATORY NOTE

The Philippines is known for its abundant minerals, oil and gas reserves and is
estimated to possess about 21.5 billion metric tons of metal deposits, highest in
‘Southeast Asia. The Philippines has potential deposits of petroleum of about 8.9 billion
barrel of oil equivalent (bboe) or a total of about 1 million square kilometers!. Mineral,
oil and gas are finite resources, with a single opportunity to gain from its extraction.

Thus, ensuring that the Filipino people maximize benefits from it while
minimizing losses is essential. Proper management of these resources may contribute
to economic growth and social development. In contrast, if left unimpeded, it may
cause permanent environmental damage and create conflict within and among
communities.

Communities have experienced adverse environmental and social impacts from
mining: fish kill in Lake Mainit near the operation of Greenstone Resources
Corporation?; breaching of Philex Padcal Mine tailings pond in Itogon, Benguet,
releasing over 20 million metric tons of sediments and toxic materials into water

+ Data from the Philippine Extractive Industries Transparency Initiative Report 2014.

2 ‘http://www.mindanews.com/top-stories/2015/12/15/mayor-threatens-to-close-mining-firm-if-found-
responsible-for-fish-killin-lake-
‘mainit/?utm_campaign=shareaholicButm_medium=facebook&utm_source=socialnetwork.

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channels in August 20123; incidents of mine collapse in Semirara Mining and Power
Corporation's Painan pit in 2013 and 2015 costing the lives of over a dozen workers;
landslide and destruction of homes in Itogon, Benguet forcing the Mines and
Geoscience Bureau (MGB) to review the mining areas in 20165; the killing and
displacement of Lumads in Mindanao because of development aggression®; and the
Proven water, air, and soil pollution, and siltation in Zambales and Pangasinan caused
by five mining firms as decided in a Supreme Court case where a Writ of Kalikasan
was issued.”

In 2015, the Caraga Region was host to 21 of 40 operating large-scale metallic
mines®. Based on the Fourth PH-EITI Annual Report, a reconciled amount of Php186
million? was collected in taxes and fees by local government units in the region from
the 12 mining entities in Caraga that participated in PH-EITI!°. Collections from
national wealth including mining taxes"! and proceeds from mineral resources"2 for
the same period was at Php162 million. Current policies mandate social and
environmental expenditures for the development of mining communities, and for the
protection and enhancement of impacted areas. A total of Php980 million was declared
as mandatory expenditures in 2015. In addition, operating large-scale metallic mining
companies in the Caraga Region employed about 13,800 individuals during the
period. Despite the mandatory payments, programs, and individuals employed,
development in the area is slow. Per 2015 Philippine Statistics Authority, the Caraga

* https://ejatlas.org/conflict/philex-padcal-mining-disaster-benguet-philippines.
4 [www.gmanetwork.com/news/news/regions/524006/ocd-9-workers-dead-after-semirara-
mining-mi

ip/story/.
s http://www.sunstar.com.ph/baguio/local-news/2016/01/05/geologists-cordillera-mull-review-mining-
areas-450153,
6 _http://www.abs-cbnnews.com/blogs/opinions/11/09/15/on-eve-of-apec-summit-ph-leaders-ignore-
cost-of-development-on-social-margins.
7 __http://www.sunstar.com.ph/manila/local-news/2016/06/21/sc-issues-writ-kalikasan-vs-5-mining-
firms-480726.
® Fourth Ph-EITI Report, p. 35-36.
Fourth Ph-EITI Report, p. 345. Locally collected taxes and fees include local business tax, real property
tax and special education funds, among others.
+ Fourth Ph-EITI Report, p. 438.
1 Fourth Ph-EITI Report, p. 357.
22 Fourth Ph-EITT Report, p.363.
Fourth Ph-EITI Report, p. 114-117.



Region has a poverty incidence of 39.1%, well above the national poverty level of
21.6%",

Minerals, coal, petroleum, gas, and other mineral oils are owned by the State'5
on behalf of its citizens. As such, management of these resources are of public
concern.

The Extractive Industries Transparency Initiative (EITI) is an international
standard of open and accountable governance in mining, oil, and gas sectors'®. The
Philippines expressed its commitment to participate in EITI through Executive Order
No. 79 S. 2012!7. Further, the Philippines, as one of the founding countries of the
Open Government Partnership (OGP), aims to increase access to information, public
accountability, and civic participation. EITI compliance is one of the country’s
commitments to the OGP.

Moreover, EITI fulfills the people's constitutional right to information under
Section 7, Article III of the 1987 Constitution. Composed of representatives from
government, extractive companies, and civil society organizations, the EITI provides
a platform for the regular and systematic reporting, review, and assessment of
information concerning the industry. It also strengthens multi-sectoral participation in
extractives governance.

Transparency is a cornerstone of governance. This bill aims to ensure sustained
transparency in the extractive industries. In so doing, government commits to disclose
timely, complete, and accurate information and documents pertinent to resource
extraction to enable evidence-based management. Further, it intends to continue
producing the PH-EITI Annual Report. To date, the Philippines has published four
Annual Reports. The said Reports contain information on fees, taxes, and other
mandatory payments made by mining, oil, and gas companies. The Report may be
° htps:/psa.gov-ph/ poverty press releases data Table 2
45 Article XII, Section 2 of the 1987 Constitution.

26 https: //eiti.org/who-we-are
7 Section 14, Executive Order No. 79, s. 2012.



expanded to extensively discuss social and environmental costs and benefits.
Moreover, it may also be extended to reflect economic linkages. With access to such
information, citizens are empowered to meaningfully participate in resource
management.

In the wake of fiscal rationalization, monitoring the impact of taxes and
incentives to assess if they meet their set objectives is key. Institutionalizing PH-EITI
is therefore urgently needed. The passage of this bill is earnestly sought.

defor



SEVENTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
Third Regular Session )
sg gy 24 P35
SENATE
Senate BillNo.__ 1883 h

U
Introduced by Senator Grace Poe

AN ACT
IMPROVING THE DISCLOSURE AND
TRANSPARENCY OF THE EXTRACTIVE INDUSTRIES

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

Section 1. Title. — This Act shall be known as the “Open Extractives Data Act.”

Sec. 2. Declaration of Policy. - Under Section 7, Article III of the Philippine
Constitution, the right of the people to information on matters of public concern shall
be recognized — access to official records, and to documents, and papers pertaining
to official acts, transactions, or decisions shall be afforded the citizen. Accordingly, the
following are declared policies of the State:

a. The State shall adopt and implement a policy of full public disclosure of all
its transactions involving public interest.

b. All natural resources are owned by Filipinos represented by the State. The
State shall be under the full control and supervision of the exploration,
development, and utilization of natural resources.

c. The State shall be responsible for promoting the rational exploration,
development, utilization, and conservation of the country’s mineral
resources through the combined efforts of government and the private
sector in order to enhance national growth in a way that effectively
safeguards the environment and protects the rights of affected communities

d. The State shall protect and advance the right of the people to a balanced
and healthful ecology in accord with the rhythm and harmony of nature.

Sec. 3. Objectives. — In pursuit of Section 28, Article II of the Philippine

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1 Constitution, this Act shall have the following objectives:

2 a. To ensure sustained Philippine government's commitment to participate in

3 the Extractive Industries Transparency Initiative (EITI) that sets |
4 international standards for transparency and accountability in the extractive |

industries and in government; |

6 b. To promote better understanding of the public on the nature of extractive
7 industries and the benefits of transparent and accountable governance of |
8 our natural resources;

9 ¢. To promote genuine participation of civil society in the design,
10 implementation, evaluation and modification of policies and actions of the
11 Government associated with resource governance in the Philippines;

12 d. To require all entities engaged in the extraction of natural resources to
13 Participate in such initiative;

14 e. To ensure that the initiative is effectively integrated in other related
15 government reform agenda and make the information required by EITI
16 available and accessible through government reporting systems and
7 structures; and

18 f. To ensure material information is disclosed and payments are reconciled.
19 Sec. 4. Definition of Terms. ~ For purposes of this Act, the following terms
20 _ shall be defined as follows:

21 a. Beneficial owner refers to the natural person/s who directly or indirectly
22 ultimately owns or controls the corporate entity.

23 b. Contract refers to an agreement between the Government and a contractor
24 for the exploration, development, production and utilization of natural
25 resources for commercial and other uses as authorized by law.

26 c. Contractor refers to a qualified person acting alone or in consortium who is
7 a party to a contract as defined under this Act.

28 d. Extractive Industries refer to the mining, oil, gas, and coal sectors and all
29 other sectors that require the extraction of natural resources for commercial
30 and other uses;

31 Sec. 5. Jnstitutionalization of the PH-EITI. - The Philippine Extractive Industries

32 Transparency Initiative (hereinafter referred to as PH-EITI) is hereby institutionalized

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to ensure that all of what is due to the Filipino people and the Government on account
of the exploration, development, production and utilization of natural resources are
(a) verifiably paid; (b) duly accounted for; and (c) judiciously utilized for the benefit
of all Filipinos and on the basis of intergenerational equity and sustainability.

Sec. 6. Applicability and Coverage. — For the purposes of this Act, the following
sectors shall be covered by and within the scope of the PH-EITI: (a) the mining sector;
(b) the oil and gas sector; (c) the coal sector; and (d) such other sectors as may be
determined by the PH-EITI Multi Stakeholder Group, as defined in the succeeding
section.

Sec. 7. Composition of the PH-EITI Multi Stakeholder Group. ~The PH-EITI shall
be implemented and operationalized through the Multi-Stakeholder Group (MSG)
chaired by the Secretary of the Department of Finance (DOF) and co-chaired in
rotation and by fixed term of the Secretary of the Department of Environment and
Natural Resources (DENR) and the Secretary of Department of Energy (DOE).

Tt shall specifically consist of the following members:

a. Six (6) Government Representatives from the DOF, DOE, DENR
Environmental Management Bureau, DENR Mines and Geosciences
Bureau), Department of Interior and Local Government (DILG), National
Commission on Indigenous Peoples (NCIP).

b. Six (6) Business Group Representatives which shall include, but not be
limited to, a representative from the mineral industry, from the oil and
gas sector, from the coal sector, and other sectors as may be determined
by the PH-EITI MSG; and

c. Six (6) Civil Society Organizations (CSOs) Representatives, which must
include at least one indigenous peoples (IP) representative and one (1)
a Labor Union Representative in the extractive industries.

The Business Group and the CSOs shall each designate six (6) full and six (6) alternate
representatives to the PH-EITI-MSG. Each organization, upon the decision of its
members and through its own independent processes and governance mechanisms,
can at any time replace their representatives in the PH-EITI-MSG; Provided that such
replacement shall only serve for the unexpired term of the representative replaced.



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Permanent and alternate members shall attend and participate in the PH-EITI-MSG

meetings.

Sec. 8. Powers and Functions of the PH-EITI MSG. - The PH-EITI-MSG shall
have the following powers and functions:

a.
b.

Define the strategic direction and scope of EIT] in the Philippines;
Craft, publish, review, and update a work plan in consultation with key
PH-EITI stakeholders and oversee the implementation of the same;

. Procure the services of an independent administrator to perform

reconciliation of payments and mandatory expenditures with receipts by
government and other covered entities, applying international auditing
and professional standards;

|. Require relevant government agencies to disclose to the PH-EITI MSG

all information required by it for the production of regular and annual
reports;

. Produce all regular reports with contextual information about the

extractive industries as may be required by PH-EITI implementation;
Direct and supervise the PH-EITI Secretariat in its various activities and
establish its internal rules of procedure;

|. Conduct outreach activities and road shows to promote better public

understanding of the extractive industries and the benefits of
transparent and accountable governance of our natural resources;

. Identify discrepancies and undertake measures to enhance capacity of

any relevant organ of the Government or local government authority
having statutory responsibility to monitor revenues and payments by all
extractive industry companies to the Government; and

Perform such other functions as may be germane to the purpose for
which it was created and consistent with this Order and the EITI
Principles.

Sec. 9. PH-EITI Secretariat. - The PH-EITI shall be assisted by a PH-EITI
Secretariat whose composition shall be determined by the Secretary of Finance, in
consultation with the PH-EITI-MSG.



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The PH-EITI Secretariat shall be composed of administrative and technical
personnel as the PH-EITI-MSG may deem necessary to assist the PH-EITI-MSG in
efficiently and effectively carrying out its powers and functions. The creation of
plantilla positions and hiring of personnel to carry out the functions enumerated herein
shall be authorized in coordination with, and subject to the approval of the Department
of Budget and Management (DBM).

Sec. 10. Disclosure of Material Information and Reconciliation of Payments. —
Disclosure shall adhere to the open data principles. All contractors shall disclose all
fiscal payments and mandatory expenditures while all government and concerned
entities shall disclose complete, timely and accurate information on receipts to the PH-
EITI MSG for reconciliation for the production of the annual EITI report. Utilization of
shares in national wealth which are subject of special accounts shall be reported to
PH-EITI. It shall be published in the government website and any widely accessible
media, among others.

Sec. 11. Disaggregation of Shares from the National Wealth by Sector. - Local
government units shall report the direct and non-direct payments made by extractive
industries, and shall provide a detailed expenditure report against these collections
and receipts through the Environment and Natural Resources Data Management Tool
(ENRDMT). The report shall include the following:

a) Receipts of shares from national wealth within the LGU’s jurisdiction;
b) Expenditures of LGUs coming from receipts/collections from the
extractive industries and share from national wealth; and
¢) Such other monetary and non-monetary benefits received by LGUs from
extractive industries and shared from national wealth.
The reports shall be submitted quarterly. The ENRDMT data shall be uploaded by all
concerned local treasurers of each respective local government units to the system on
or before the following dates:
i, For the first three quarterly reports: on or before the 30 month
following the end of each quarter; and
ji, For the year-end report: on or before April 30 of the subsequent fiscal
year.



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Sec. 12. Annual Report. - The PH-EITI shall submit an annual report to the
President and Congress, in any case not later than April 30 of each year.

The annual report to be prepared, submitted and published by the PH-EITI shall
include, but not limited to:

a) Report of Payments and Revenues including government spending of these

proceeds;

b) Report and Audit of Contracts and Monitoring Reports;

C) Civil society assessment of the EITI Process.
The annual report shall comply with the international standards of EITI and include
additional reporting requirements as agreed upon by the PH-EITI MSG.

Sec. 13. Beneficial Ownership. — A publicly available register of the beneficial
owners of the corporate entities that apply for, or hold a participating interest in an
exploration or production oil, gas or mining license or contract, including the identities
of their beneficial owners, the level of ownership and details about how ownership or
control is exerted, shall be developed and maintained.

Information about the identity of the beneficial owner should indude, but not
be limited to:

a. Name of the beneficial owner;

b. Nationality;

c. Country of residence

d. Tax Identity Number

e. Date of birth
f. Residential or service address

g. Contact details
Disclosed information on beneficial ownership should also be included in the Annual
Report.

Sec. 14. Penalties. - Non-participation in or non-disclosure of the information
required by PH-EITT shall constitute a breach or violation by extractive companies of
their contracts as defined under this Act, and shall be meted the appropriate penalties,
including suspension or termination of the contract.

Failure of extractive companies to comply with requirements provided by the
PH-EITI MSG shall cause suspension of the pertinent Environmental Compliance

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Certificate (ECC) and non-issuance of Ore Transport Permit and/or Mineral Export
Permit.

Failure of government agencies to comply with the requirements of this Act
shall constitute grounds for disciplinary action against the responsible officer/s under
the Administrative Code of 1987, and shall be penalized accordingly.

Sec. 15. Transitory Provision. — The existing PH-EITI Secretariat created under
Executive Order No. 147, s. 2013 shall continue to operate until such time that the
Secretariat has be constituted under the provisions of this Act.

Sec. 16. Appropriations. — The Secretary of the Department of Finance shall
immediately include in the department's program the implementation of this Act, the
funding of which shall be included in the annual General Appropriations Act.

Sec. 17. Exemption from Confidentiality Clauses. — Confidentiality provisions
stated under the Section 270 of the National Internal Revenue Code and Article 81 of
the Omnibus Investments Code shall not be applicable to extractive companies insofar
as their participation in the PH-EITI process is concerned.

Sec. 18. Implementing Rules and Regulations. - Within sixty (60) days from
the effectivity of this Act, the Secretaries of Finance, Budget and Management,
Environment and natural Resources, Interior and Local Government, and Energy shall
promulgate the necessary rules and regulations for the effective implementation of
this Act.

Sec. 19. 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. 20. 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: Provided, that nothing in this Act
shall be construed as a diminution of local autonomy or in derogation of ancestral
domain rights under the Indigenous Peoples’ Rights Act of 1997.

Sec. 21. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in any newspaper of general circulation.

Approved,