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FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES —_)
First Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez a
Representative Maximo B. Rodriguez, Jr.

House BillNo. 0477

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
concerns 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 earnestly requested.

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FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES —)
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.
House Bill No. 5477
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 of 2011"

SEC. 2. Deciaration 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 oll and gas by pipeline in the country

SEC. 3. Scope and Application. - This Act shall apply to all 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;

¢) 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 - shail refer to the Department of National Defense;


9) DPWH - shall refer to the Department of Public Works and Highways;

h) Gas Pipeline - shall 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 - shail include natural or juridical person;

!) Petroleum - shall include any mineral oil, 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 II
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 shail 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 Government 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 Government
‘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 eared during the year.

CHAPTER III
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 shail 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 shail 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;

e) 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;

g) 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
concemed 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:

i) 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

li) Advise the NPB of identified routes, zones and/or areas of operations of
particular operators.

¢) 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;

iii) 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
government agencies concerned, 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 () of this Section;

i) 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 concerning 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:
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 VII
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 shall take effect immediately upon publication in at least
two (2) newspapers of general circulation.

Approved.