Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Nineteenth Congress
First Regular Session

House Bill No. 3615

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
PROVIDING FOR THE NATIONAL ENERGY POLICY AND FRAMEWORK
FOR THE DEVELOPMENT AND REGULATION OF THE PHILIPPINE
MIDSTREAM NATURAL GAS INDUSTRY, AND FOR OTHER PURPOSES:

EXPLANATORY NOTE

‘The Malampaya gas field accounts for around 20-30% of the country’s electricity
needs. As a fuel source, the gas field is able to displace as much as 1.35 million kilograms of
CO? per hour compared to emissions if coal or oil were used as the fuel source.

The Malampaya gas field, however, is expected to be depleted completely by the first
quarter of 2027. Unless we can find alternative indigenous sources of natural gas within the
next six years, the country will face an even bigger power crisis than it is now facing. For
perspective, Malampaya accounts for some 60% of the power sourced by the Manila Electric
Company, making it the most dependable energy source for Metro Manila.

Drilling could nonetheless take more time than just six years. The period from
discovery of reserves (1989) to first flow of gas (2001) took twelve years, with commercial
production taking another year. The addition of two new wells (2013) took another twelve
years.

These timelines indicate that a similar period of investment is required before the
country can explore and exploit reserves of natural gas within its territory or exclusive
economic zone.

‘As such, we will need to diversify our sources of natural gas. and a regulatory
framework that enables the development of crucial infrastructure, business ecosystem, and
competition is a key policy prerequisite towards this direction.

This bill aims to foster the development of the Midstream Natural Gas Industry by

creating a legal and regulatory framework to govern the promotion and development of the
natural gas industry, foster a competitive market for natural gas, encourage the flow of

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investments for industry development, and protect midstream end users by mandating
transparent and fair rate-setting mechanisms.

The bill aims to set the regulation, terms of use and access, rate-setting. and other
relevant processes for the establishment, operation. and maintenance of natural gas
infrastructure, most crucially liquefied natural gas (LNG) terminals.

The bill also sets the legal treatment of transmission pipelines. Consistent with the spirit
of the Public Service Act, natural gas transmission systems are considered public utilities under
this bill, while dedicated pipelines are not.

The bill also aims to curb anti-competitive behavior in the natural gas sector. The
Philippine Competition Commission will be tasked to decide competition cases arising from
this bill, subject to complementary powers of investigation and recommendation exercised by
the DOE and ERC, respectively. The bill also makes unbundling of prices for natural gas
transmission mandatory, making the monitoring of price abuses easier.

In view of the foregoing. the passage of this bill is earnestly soug!

ARTE SALCEDA

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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Nineteenth Congress
First Regular Session

5005,

House Bill No.

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
PROVIDING FOR THE NATIONAL ENERGY POLICY AND FRAMEWORK
FOR THE DEVELOPMENT AND REGULATION OF THE PHILIPPINE
MIDSTREAM NATURAL GAS INDUSTRY, AND FOR OTHER PURPOSES:

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

Chapter I
GENERAL PROVISIONS

SECTION 1. Short Title. This Act shall be referred to as the “Midstream Natural Gas
Industry Development Act”.

SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to:

(a) Ensure the country's energy security by developing diversification of sources of
primary energy supply to various sectors of the economy:

(b) Promote the role of natural gas as an additional energy source and complementary
fuel to variable renewable energy by creating a legal and regulatory framework that would
govern the promotion and development of the natural gas industry in the country:

(c) Create a regulatory environment that will foster a competitive market for natural
gas;

(d) Encourage the inflow of private capital in the development of the midstream natural
gas industry:

(c) Ensure a safe, secure. reliable, and environmentally responsible operation of the
midstream natural gas value chain to Include personnel and user protection. through the
formulation and adoption of local or International standards on health, safety. security and the
environment; and

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(f) Protect midstream end users by mandating transparent and fair rates, fees. and
charges.

SEC. 3. Scope and Application. — This Act shall apply to the midstream natural gas
industry specifically the aggregation. supply, importation. exportation. receipt. unloading.
loading. processing, storage, regasification, transmission, bunkering. and transportation of
natural gas. In its original or liquefied form, from local or foreign sources, and the systems and
facilities utilized for such. It shall also apply to the location. construction, improvement.
operation, utilization, expansion, modification. rehabilitation, repair, maintenance,
decommissioning, and abandonment of such systems and facilities.

SEC. 4. Definition of Terms. — For purposes of this Act. the following terms shall be
defined as stated below:

(a) Affiliate refers to any natural or juridical person who, singly or jointly with other
natural or juridical persons, directly or indirectly, through one or more intermediaries, controls.
is controlled by, or is under common control with another natural or juridical person. It includes
a subsidiary company, a parent company, and the subsidiaries, directly or indirectly, of a
common parent;

(b) Ancillary reserve refers to the natural gas procured by the natural gas transmission
utility or the NGTSO, whichever is applicable, necessary in the operation of the natural gas
transmission system to regulate fluctuations in its operating pressure and maintain system
stability, safety, and efficiency to ensure the continuous transmission of natural gas to
midstream end-users in accordance with the Natural Gas Transmission Code. It shall be
included in the natural gas transmission fee or the NGTSO fee, whichever is applicable:

(c) Anticompetitive behavior refers to any act enumerated under Section 14 and Section
15 of Republic Act No. 10667. otherwise known as the Philippine Competition Act:

(d@) Ld
marine vessels:

Bunkering refers to the selling of natural gas for use of domestic or foreign

(¢) LNG Bunkering Facilities refers to all infrastructure built and designed for LNG
bunkering;

(f) Capacity refers to the handling design of a system used in the context of its
functionality. expressed in a specific measurement such as volume in cubic meters or flow rate
in normal cubic meters per time unit:

(g) Control refers to the power to determine the financial and operating policies of an
entity to benefit from its activities. It is presumed to exist when the parent entity owns. directly
or through subsidiaries or associates. more than fifty percent (50%) of the voting power of an
entity. It also exists when the parent entity owns fifty percent (50%) of less of the voting power
of an entity. but has any of the following powers:

(1) Power over more than fifty percent (50%) of the voting rights by virtue of an
agreement with other investors.

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(2) Power to govern the financial and operating policies of the entity under a statute
or agreement,

(3) Power to appoint or remove the majority of the members of the board of
directors or equivalent governing body, or

(4) Power to cast the majority of votes at meetings of the board of directors or
equivalent governing body;

(h) Dedicated natural gas pipeline refers to a pipeline exclusively utilized by a
midstream natural gas industry participant or its affiliate for the conveyance of natural gas from
an LNG terminal or a local natural gas production facility to the said midstream natural gas
Industry participant or its affiliate:

(i) Emergency reserve refers to the amount of natural gas. in its original or liquefied
form, which may be contracted by midstream end users based on public interest, sufficient to
ensure a continuous, adequate, and stable supply of natural gas for a period in the event of a
supply disruption. The period shall be determined in this Act's implementing niles and
regulations;

() Importation refers to the bringing of natural gas. In its original or liquefied form,
into the Philippines from foreign sources:

(k) Gas aggregation refers to the activity of pooling together various demands for
natural gas from midstream end users and supplying them with natural gas from one or more
sources;

() Gas aggregator refers to any natural or juridical person who engages in gas
aggregation:

(m) Liquefied Natural Gas (LNG) refers to natural gas which has been cooled to a
cryogenic temperature, converting it to a liquid state:

(n) LNG terminat refers to all facilities located onshore or offshore, that are used to
import, receive, unload, load, process, store, and regasify natural gas. In its original or liquefied
form, from local or foreign sources. It shall include berthing ports, unloading and loading arms.
line packs, eryogenic pipelines, regasification facilities, and storage tanks, among others:

(0) LNG Terminal Development Plan refers to a comprehensive plan prepared by each
LNG terminal owner and operator relating to the location. construction, improvement.
operation. utilization. expansion. modification. rehabilitation. repair. maintenance.
decommissioning, and abandonment of each of its LNG terminals and all its required facilities
and equipment, taking Into consideration, among others. existing and projected demand and
supply of natural gas:

(p) LNG Terminal Regulated Third Party Access Code refers to the compendium of
responsibilities, qualifications, standards, and rules promulgated by the Department of Energy
(DOE) for regulated third party access by one or more third parties to a portion, the entire. or
the unutilized capacity of an rTPA LNG terminal permit holder, and the evaluation of
performance of an LNG terminal with respect thereto:

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(q) Midstream end user refers to any natural or juridical person, requiring the supply of
natural gas, in its original or liquefied form, for resale or own use but excluding the retail use
of natural gas. It inchides power generation plants, industrial and commercial establishments,
ecozones, storage facilities, bunkering facilities, virtual pipelines. and motor vehicles and
marine vessels transporting natural gas:

(8) Midstream natural gas industry refers to the aggregation, supply. importation.
exportation, receipt, unloading, loading. processing. storage, regasification, transmission,
bunkering, and transportation of natural gas. In its original or liquefied form, but shall exclude
the retail of natural gas. It utilizes. among others. LNG terminals, dedicated natural gas
pipelines, natural gas transmission systems, storage facilities. bunkering facilities. virtual
pipelines. and motor vehicles and marine vessels transporting natural gas:

(8) Midstream Natural Gas Industry Development Plan refers to the comprehensive
plan for ensuring safe, secure, and reliable supply of natural gas, in its original or liquefied
form, while establishing the efficient operations of the country’s midstream natural gas
infrastructure and managing demand for natural gas through specific government programs and
policies. It shall include the various LNG Terminal Development Plans and Natural Gas
Transmission Development Plans, and studies on over-all supply and demand. capacity, and
other research necessary in achieving a sound demand and supply projection for natural gas in
the counts

() Midstream natural gas industry participants refer to the supplier or importer of
natural gas; gas aggregator; owner and operator of LNG terminal, dedicated natural gas
pipeline, natural gas transmission system, storage and bunkering facilities, virtual pipelines,
and motor vehicles and marine vessels utilized to transport natural gas; the Natural Gas
Transmission System Operator; third parties: and midstream end users:

(u) Natural gas refers to gas obtained from boreholes and wells consisting primarily of
a mixture of methane, ethane, propane, and butane with small amounts of heavier hydrocarbons
and some impurities, notably nitrogen and complex sulfur compounds and water. carbon
dioxide, and hydrogen sulfide as well as non-conventional gas including gas from bituminous
scale:

() Natural Gas Transmission Code refers to the compendium of rules. procedures.
requirements. regulations. and minimum technical performance standards governing the safe
and reliable location, construction. improvement. operation. utilization. expansion.
modification, rehabilitation, repair. maintenance, decommissioning, and abandonment of ail
dedicated natural gas pipelines and natural gas transmission systems in the country. It also
defines and establishes the relationship of dedicated natural gas pipelines and natural gas
transmission systems with facilities and installations of other midstream natural gas industry
participants, if applicable:

(w) Natural Gas Transmission Development Pian refers to the plan of each dedicated
‘own use pipeline owner and operator, natural gas transmission utility, or the Natural Gas
Transmission System Operator when applicable, for managing dedicated own use pipelines.
natural gas transmission systems or the interconnected natural gas transmission system.
whichever is applicable, through efficient planning for its location, construction. improvement.

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operation, utilization, expansion, modification, rehabilitation, repair, maintenance.
decommissioning, and abandonment:

(x) Natural gas transmission system refers to a network containing pipelines and other
related facilities. owned and operated by a natural gas transmission utility. which convey
natural gas. In its original or liquefied form, from an LNG terminal or a local natural gas
production facility to a midstream natural gas industry participant:

(y) Natural gas transmission fee refers to the amount paid by midstream natural gas
industry participants for the use of a natural gas transmission system. It shall consist of amounts
used to defray the costs of location, construction, improvement, operation. utilization,
expansion, modification, rehabilitation, repair, maintenance. decommissioning, and
abandonment of the system, and provide a reasonable rate of return. It also includes the cost of
operating the system while there is no Natural Gas Transmission System Operator:

(2 Natural Gas Transmission System Operator (NGTSO) refers to a natural or juridical
person responsible for operating and maintaining the interconnected natural gas transmission
system, ensuring the continuous and reliable delivery of natural gas to midstream natural gas
industry participants, and securing the long-term ability of the system to meet demand for the
transmission of natural gas;

(aa) Natural gas transmission utility refers to a natural or juridical person who has a
franchise granted by law to construct, own, and operate @ natural gas transmission system
within a specified area;

(bb) Negotiated Third Party Access (nTPA) refers to a contractual arrangement between
the owner and operator of a dedicated natural gas pipeline or an own use LNG terminal permit
holder and a third party to allow the use and access to such third party of a specific capacity of
a dedicated natural gas pipeline or an LNG terminal with an own use permit for a fee agreed
upon between the two entities. It does not include contractual arrangements entered into by an
‘own use LNG terminal permit holder and a third party pursuant to a declaration of unutilized
capacity by the DOE in accordance with the LNG Terminal Regulated Third Party Access
Code;

(cc) NGTSO fee refers to the amount paid by midstream natural gas industry participants
to the NGTSO for its services in operating and maintaining the interconnected natural gas
transmission system:

(dd) Own use LNG terminal permit holder refers to an LNG terminal whose owner and
operator has been issued an own use permit:

(ee) Own use permit refers to an authorization issued by DOE to the owner and operator
of an LNG terminal to exclusively use or allow its affiliate to use a specific capacity of the
LNG terminal for a specified period of time. subject to LNG Terminal Regulated Third Party
Access Code;

() Permit refers to an authorization issued by the DOE. the Energy Regulatory
Commission (ERC), or the Department of Transportation (DOTr) or its attached agencies.
whichever is applicable. for the aggregation, supply. importation, exportation. receipt.
unloading, loading. processing. storage. regasification. and bunkering of natural gas. or the

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location, construction, improvement, operation. utilization, expansion. modification.
rehabilitation. repair, maintenance. decommissioning. and abandonment of an LNG terminal.
natural gas transmission system, dedicated natural gas pipeline, storage facilities, bunkering
facilities, virtual pipelines, and motor vehicles and marines vessels transporting natural gas for
a specified period of time;

(gg) Permit holder refers to a natural or juridical person who is granted a permit by the
DOE. ERC. or DOTr or its attached agencies whichever is applicable. to engage in the
aggregation, supply. Importation, exportation, receipt. unloading, loading. processing, storage.
regasification, and bunkering of natural gas, or the location, construction, improvement,
operation, utilization, expansion, modification, rehabilitation, repair. maintenance,
decommissioning, and abandonment of an LNG terminal, natural gas transmission system,
dedicated natural gas pipeline. storage facilities. bunkering facilities. virtual pipelines. and
motor vehicles and marine vessels transporting natural gas for a specified period of time:

(hh) Philippine National Standard (PNS) refers to the standards promulgated by the
Department of Trade and Industry (DTI) - Bureau of Philippine Standards (BPS) pertaining to
product specifications, test methods, terminologies, procedures, or practices pursuant to
Republic Act No. 4109, otherwise known as the Standards Act, and other applicable laws. rules
and regulations;

(ii) Regulated Third Party Access (rTPA) refers to a contractual arrangement between
the following:

(1) An rTPA LNG terminal permit holder or a natural gas transmission utility and
a third party to allow the latter transparent, fair, reasonable, and non-
discriminatory use and access of the capacity available to third parties of the
LNG terminal or the natural gas transmission system.

(2) An own use LNG terminal permit holder and a third party pursuant to a
declaration of unutilized capacity by the DOE in accordance with the LNG
Terminal Regulated Third Party Access Code, or

(3) A natural gas transmission utility and a third party pursuant to a declaration of
unutilized capacity by the DOE in accordance with the Transmission Regulated
Third Party Access Code:

(jj) Regulated Third Party Access (rTPA) permit refers to an authorization issued by
the DOE to the owner and operator of an LNG terminal to offer to third parties, the fair.
reasonable, and non-discriminatory use and access of a specific capacity of its LNG terminal
for a specified period of time, subject to the LNG Terminal Regulated Third Party Access
Code:

(kk) Reserve price refers to the undisclosed rate determined by ERC using a
methodology pursuant to Section 6 of this Act that serves as the price ceiling for the natural
gas transmission fee:

(Il) Retail refers to the sale of natural gas to the general public in relatively small
quantities for consumption such as the sale of natural gas to motor vehicles and to households:

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(mm) rTPA LNG terminal permit holder refers to an LNG terminal whose owner or
operator has been issued an rTPA permit;

(nn) Storage refers to the stocking of natural gas for the purpose of regasification.
bunkering, reserve. any combination thereof, or any other purpose consistent with this Act:

(00) Storage facilities refer to any equipment or infrastructure used for storage:

(pp) Supplier refers to a natural or juridical person authorized by the DOE to engage in
supply as defined in this Act;

(qq) Supply refers to the trade of indigenous or imported natural gas, in its original or
liquefied form, and its subsequent sale or transfer to midstream natural gas industry
participants;

(rr) Terminal fee refers to the rates. charges. and other similar considerations imposed
upon third parties for the use and services of any of the following:

(1) The capacity or a portion thereof covered by an rTPA permit of an LNG
terminal, or

(2) The unutilized capacity or a portion thereof covered by an own use permit of an
LNG termin:

(ss) Third party refers to a midstream natural gas industry participant who is not the
owner, operator, or affiliate of the owner and operator of an LNG terminal, dedicated natural
gas pipeline, or natural gas transmission system;

(tt) Transmission refers to the conveyance of natural gas either through a dedicated
natural gas pipeline or a natural gas transmission system:

(uu) Transmission Regulated Third Party Access Code refers to the compendium of
responsibilities, qualifications. standards, and rules promulgated by the ERC for regulated third
party access by one or more third parties to a portion. the entire. or the unutilized capacity of a
natural gas transmission system, and the evaluation of performance of a natural gas
transmission utility with respect thereto;

(vv) Unutilized capacity refers to a portion of the capacity of an LNG terminal, with an
own use permit, an rTPA permit or both, or a natural gas transmission system, set apart for the
use of the LNG terminal owner and operator or a third party with regulated third party access
to the LNG terminal or the natural gas transmission system. which remains unused after a
reasonable period of time and declared as such by the DOE or the ERC pursuant to Sections 5
and 6 of this Act and the LNG Terminal Regulated Third Party Access Code and the
Transmission Regulated Third Party Access Code, whichever is applicable: and

(ww) Virtual Pipelines refer to altemative methods of transporting natural gas using
modules coupled to mobile platforms such as motor vehicles, marine vessels, or rail platforms.

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Chapter II
POWERS AND RESPONSIBILITIES OF GOVERNMENT AGENCIES

SEC. 5. Powers and Responsibilities of the Department of Energy (DOE). ~ In addition
to its functions under Republic Act No. 7638, otherwise known as the Department of Energy
Act of 1992, the DOE shall be the lead implementing agency for this Act. Towards this end. it
shall:

(a) Supervise and monitor the development of the midstream natural gas industry, and
censure the security and sufficiency of the supply of natural gas for local demand:

(b) Require the annual submission of, review, and approve LNG Terminal Development
Plans and Natural Gas Transmission Development Plans: Provided, That the specific
guidelines and timeline for the approval of these plans shall be determined In this Act's
implementing rules and regulations taking into consideration the policy declarations of this Act,
and upon consultation with other relevant government agencies, midstream natural gas Industry
participants, and other public and private stakeholders;

(c) Prepare a Midstream Natural Gas Industry Development Plan based on the various
LNG Terminal Development Plans and Natural Gas Transmission Development Plans within
two (2) years from the effectivity of this Act's implementing rules and regulations, upon
consultation with other relevant government agencies, midstream natural gas industry
participants, and other public and private stakeholders. The Midstream Natural Gas Industry
Development Plan shall be reviewed and updated annually, and integrated into the Philippine
Energy Pian;

(a) Promulgate the PNS or Identify and adopt other international standards adopted as
PNS by the DTI-BPS, together with relevant government agencies and upon consultation with
midstream natural gas industry participants and other public and private stakeholders, within
eighteen (18) months from the effectivity of this Act's implementing rules and regulations, for
the following.

(1) Natural gas, in its original or liquefied form,

(2) Location, construction, improvement, operation, utilization, expansion,
modification, rehabilitation, repair, maintenance, decommissioning. and
abandonment of all LNG terminals,

(3) Storage and bunkering of natural gas and its respective facilities,
(4) Virtual pipelines, and

(5) Motor vehicles and marine vessels transporting natural gas;

(e) Ensure compliance with the health, safety, security, and environmental standards of
the following, together with the Department of Environment and Natural Resources (DENR)},
Department of Health (DOH), and other relevant government agencies:

(1) Natural gas, in its original or liquefied form,

Page 18


(2) Location, construction, improvement, operation, utilization, expansion,
modification, rehabilitation, repair, maintenance, decommissioning, and
abandonment of all LNG terminals, and

(3) Storage and bunkering of natural gas and its respective facilities;

(8 Convene and co-chair with DTI-BPS, within two (2) months from the effectivity of
this Act, a technical working group comprised of relevant government agencies to include the
ERC, DTI, DOTr, DENR, DOH, Department of Labor and Employment (DOLE), Department
of Interior and Local Government (DILG), their respective attached agencies, midstream
natural gas industry participants, and other relevant public and private stakeholders to ensure
consistent and streamlined standards and regulations In the midstream natural gas Industry.
‘The members of the technical working group shall fully cooperate and collaborate in the
creation, promulgation, and streamlining of standards and regulations;

(g) Promulgate the guidelines for the establishment of safety and exclusion zones of
LNG terminals, and determine such safety and exclusion zone for every LNG terminal, in
consultation with the technical working group, relevant government agencies, local
government units, and public and private stakeholders;

(h) Evaluate and act on applications for the location, construction, improvement,
operation, utilization, expansion, modification, rehabilitation, repair, maintenance,
decommissioning. and abandonment of all LNG terminals as well as storage facilities and
bunkering facilities;

) Issue the following
(1) Permits for the aggregation, supply. importation, exportation, receipt,
unloading, loading, processing, storage, regasification, and bunkering of natural
gas, in its original or liquefied form in accordance with this Section, and
(2) Own use and rTPA permits to owners and operators of LNG terminals;

@) Establish a methodology and timeframe for the determination of the unutilized
capacity of LNG terminals, which shall be integrated in the LNG Terminal Regulated Third
Party Access Code, taking into consideration the following:

(1) Reasonable period to use the capacity,
(2) Existing market demand, and
(3) Existing contracts;

(k) Promulgate the LNG Terminal Regulated Third Party Access Code, within one (1)
year from the effectivity of this Act's Implementing rules and regulations, and upon
consultation with other relevant government agencies, midstream natural gas industry
participants, and other public and private stakeholders. and ensure compliance therewith. The

LNG Terminal Regulated Third Party Access Code shall be reviewed and updated regularly.
The following principles shall govern the creation of this code:

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(1) Reliable and continuous supply of natural gas. and
(2) Transparent, fair, reasonable ,and non-diseriminatory use and access:

(1) Declare the unutilized capacity of an LNG terminal and mandate regulated third
party access for such in accordance with the LNG Terminal Regulated Third Party Access
Code;

(m) Determine minimum guidelines to ensure the transparent. fair, reasonable, and non-
discriminatory conduct of competitive selection processes by owners and operators of LNG
terminal: Provided. That these minimum guidelines shall not Include the mode of competitive
selection process;

(n) Approve or disapprove any sale, assignment, or transfer of control to another entity
by a midstream natural gas industry participant with a DOE issued permit within ninety (90)
calendar days from submission of complete documentary requirements. Concomitantly. the
DOE may require from any midstream natural gas industry participant with a DOE issued
permit the prior disclosure of any sale. assignment. or transfer of ownership or direct or indirect,
interests. rights, or participation not amounting to control to another entity. In both these cases.
the DOE may review, modify. cancel, approve. or disapprove any permit it has issued taking
into consideration the legal. technical, and financial qualifications of the purchaser. assignee.
or transferee and its compliance with its own use or rTPA permit or other DOE issued permits
under this Act and existing laws, rules and regulations;

(0) Determine the qualifications of and procedure for the competitive selection of a
single independent NGTSO taking into consideration Section 22 of this Act, upon consultation
with relevant government agencies. midstream natural gas industry participants, and other
public and private stakeholders, and undertake its selection upon the interconnection of natural
fas transmission systems;

(p) Require the submission of the following information from suppliers. importers.
aggregators. and owners and operators of LNG terminals, storage facilities, and bunkering
facilities, whichever is applicable. subject to Section 32 of this Act:

(1) Progress and status reports on location, construction, improvement, operation.
expansion, modification, rehabilitation. repair. maintenance. decommissioning.
and abandonment of LNG terminals and storage and bunkering facilities,

(2) Regular reports on the following:
(i) Compliance with health, safety, security. and environmental standards.

(ii) Utilization of the LNG terminal by its owner and operator, the owner and
operator's affiliates. and third parties, whichever is applicable.

(iii) Compliance with the LNG Terminal Regulated Third Party Access Code to

include compliance with DOE directive to subject an unutilized capacity to
regulated third party access;

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(3) Supply and demand of natural gas with respect to their own facilities or
operations,

(4) Volumes of specific inventories to include levels of importation and emergency
reserve.

(5) Progress and status reports on mitigation measures and responses in relation to
accidents and other emergency incidents,

(6) Mode of competitive selection of third parties for rTPA LNG terminal permit
holders, reports on competitive selection processes undertaken, and status of
utilization by third parties of the LNG terminal with an rTPA permit: Provided.
That the mode for each competitive selection process shall be determined by
each rTPA LNG terminal permit holder: Provided further, That each
competitive selection process shall be transparent, fair, reasonable, and non-
discriminatory, and

(7) Other data and information necessary to the performance of the duties and
functions of DOE:

(q) Determine the necessity of and then direct the interconnection of natural gas
transmission systems based on the Philippine Energy Plan. Midstream Natural Gas
Development Plan, and the Natural Gas Transmission Development Plans. taking into
consideration the maturity of the industry, the existing natural gas transmission systems’
infrastructure, and the cost efficiency of interconnection, and upon consultation with the ERC.
other relevant government agencies, midstream natural gas industry participants, and other
public and private stakeholders:

(r) Ensure compliance with the publication and unbundling of the terminal fee in
accordance with Section 25 of this Act:

(s) Ensure and review compliance with. and investigate. motu proprio or upon
complaint, any non-compliance with this Act including any permit DOE has issued in relation
hereto, its rules and regulations, the LNG Terminal Regulated Third Party Access Code, and
any other issuance promulgated pursuant to the DOE’s powers under this Act. except those
under the jurisdiction of the ERC as provided under Section 6 herein. Thereafter, the DOE may
penalize, suspend, or revoke, after due notice and hearing. any permit it has issued;

(1) Endorse the findings of investigations against midstream natural gas industry
participants. for any of the following:

(1) Anticompetitive behavior before the Philippine Competition Commission
(PCC). or

(2) Violations of the provisions of this Act and other applicable laws, rules, and
regulations before the ERC. other quasi-judicial agencies, or the courts: and

(u) Perform all other acts that are analogous to the aforementioned and in furtherance
of the implementation of this Act.

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SEC. 6. Powers and Responsibilities of the Energy Regulatory Commission (ERC).
In addition to its functions under Republic Act No. 9136. otherwise known as the Electric
Power Industry Reform Act of 2001, the ERC shall have the authority to:

(a) Promulgate the PNS or identify and adopt other international standards adopted as
PNS by the DTI-BPS, together with relevant government agencies and upon consultation with
midstream natural gas industry participants and other public and private stakeholders, within
eighteen (18) months from the effectivity of this Act's implementing rules and regulations, for
the following:

(1) Dedicated natural gas pipelines, and
(2) Natural gas transmission systems;

(b) Ensure compliance with the health, safety. security. and environmental standards of
the following, together with the Department of Environment and Natural Resources (DENR),
Department of Health (DOH). and other relevant government agencies:

(1) Dedicated natural gas pipelines, and

(2) Natural gas transmission systems;

(c) Participate in the technical working group convened by DOE pursuant to Section 5
of this Act;

(d) Evaluate and act on applications for the location. construction. improvement.
operation, utilization. expansion. modification. rehabilitation, repair, maintenance.
decommissioning. and abandonment of dedicated natural gas pipelines and natural gas
transmission systems:

(e) Issue permits for the transmission of natural gas to include certificates of public
convenience and necessity (CPCN) to natural gas transmission utilities;

() Establish a methodology and timeframe for the determination of the unutilized
capacity of natural gas transmission systems, which shall be integrated in the Transmission
Regulated Third Party Access Code, taking into consideration the following:

(1) Reasonable period to use the capacity.
(2) Existing market demand, and
(3) Existing contracts;

(g) Promulgate the Transmission Regulated Third Party Access Code. within one (1)
year from the effectivity of this Act's implementing rules and regulations, and upon
consultation with other relevant goverment agencies. midstream natural gas industry

participants. and other public and private stakeholders. and ensure compliance therewith:

(h) Promulgate the Natural Gas Transmission Code and Transmission Regulated Third
Party Access Code, within one (1) year from the effectivity of this Act's implementing rules

Page | 12


and regulations, and upon consultation with other relevant agencies, midstream natural gas
industry participants, and other public and private stakeholders, and ensure compliance
therewith, The Natural Gas Transmission Code and the Transmission Regulated Third Party
‘Access Code which shall be reviewed and updated regularly. The following principles shall
govern the creation of these codes:

(1) Reliable and continuous supply of natural gas, and
(2) Transparent, fair, reasonable, and non-discriminatory use and access;

(i) Declare the unutilized capacity of a natural gas transmission system and mandate
regulated third party access for such in accordance with the Transmission Regulated Third
Party Access Code:

(j) Determine minimum guidelines to ensure the transparent, fair, reasonable, and non-
discriminatory conduct of competitive selection processes by natural gas transmission utilities;
Provided, That these minimum guidelines shall not include the mode of competitive selection
process;

(k) Approve or disapprove any plan of a natural gas transmission utility, an owner and
operator of a dedicated natural gas pipeline, and the NGTSO to sell, assign, or transfer control
to another entity. Concomitantly, the ERC may require from a natural gas transmission utility,
an owner and operator of a dedicated natural gas pipeline, and the NGTSO the prior disclosure
of any sale, assignment, or transfer of ownership or direct or indirect interests, rights, or
participation to another entity. In both these cases, the ERC may review, modify, cancel,
approve, or disapprove any permit it has issued taking into consideration the legal, technical,
and financial qualifications of the purchaser, assignee, or transferee and its compliance with its
ERC issued permits under this Act and existing laws, rules and regulations;

(I) Require the submission of the following information from the owner and operator
of dedicated natural gas pipelines, the natural gas transmission utility, and the NGTSO,
whichever is applicable, subject to Section 32 of this Act

(1) Progress and status reports on location, construction, improvement, operation,
expansion, modification, rehabilitation, repair, maintenance, decommissioning,
and abandonment of dedicated natural gas pipelines, natural gas transmission
systems, and the interconnected natural gas transmission system,

(2) Regular reports on the following:

(i) Compliance with health, safety, security, and environmental standards,

(ii) Utilization of the dedicated natural gas pipeline and natural gas transmission
system by its owner and operator, the owner and operator's affiliates, and
third parties, whichever is applicable,

(iii) Compliance with the Transmission Regulated Third Party Access Code to

include compliance with DOE directive to subject an unutilized capacity to
regulated third party access;

Page | 13


(3) Supply and demand of natural gas with respect to their own facilities or
operations,

(4) Volumes of specific inventories to include levels of ancillary reserve, when
applicable,

(5) Compliance with health, safety, security, and environmental standards, and
activities in relation thereto,

(6) Progress and status reports on mitigation measures and responses in relation to
accidents and other significant or emergency incidents,

(7) Mode of competitive selection of third parties for natural gas transmission
utilities, reports on competitive selection processes undertaken to include the
natural gas transmission fee, and status of utilization by third parties: Provided,
‘That the mode for each competitive selection process shall be determined by
each natural gas transmission utility: Provided further, That each competitive
selection process shall be transparent, fair, reasonable, and non-discriminatory,

(8) Billed and collected amounts of the natural gas transmission fee and NTSO fee.
whichever is applicable, and

(9) Other documents, data, and Information necessary to the performance by ERC
of its functions under this Act;

(m) Ensure and review compliance with, and investigate, motu proprio or upon
complaint, complaint, or upon endorsement of any government agency, any non-compliance
with this Act including any permit ERC has issued in relation hereto, its rules and regulations.
the Natural Gas Transmission Code, the Transmission Regulated Third Party Access Code, and
any other issuance promulgated pursuant to the ERC's powers under this Act, except those
under the jurisdiction of the DOE as provided under Section 5 herein. Thereafier, the ERC may
penalize, suspend, or revoke, after due notice and hearing any permit it has issued;

(n) Endorse the findings of investigations on any anticompetitive behavior of an owner
and operator of a dedicated natural gas pipeline, the natural gas transmission utility, and the
NGTSO to the PCC;

(0) Exercise its rate-setting power through the determination and regular review of the
following:

(1) Reserve price for the natural gas transmission fee. It shall remain undisclosed
until the winning bidder is declared, and

(2) NGTSO fee:

‘The ERC shall notify and afford relevant stakeholders the opportunity to be heard
in the following

(1) Methodology for the determination of the reserve price, and

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(2) Determination of the NGTSO fee;

(p) Ensure compliance with the publication and unbundling of the natural gas
transmission fee and the NGTSO fee imposed by the natural gas transmission utilities, and the
NGTSO respectively, in accordance with Section 25 of this Act;

(q) Review regularly the performance of natural gas transmission utilities and the
NGTSO, when applicable, including the quality of its service and compliance with its approved
Natural Gas Transmission Development Plan and its powers and functions pursuant to Chapter
V of this Act;

(®) Exercise exclusive jurisdiction over all matters pertaining to rate setting in this Act
taking into consideration the policy of full recovery of prudent and reasonable economic costs
with a reasonable rate of retum or such other principles that promote efficiency and other
internationally accepted rate setting methodology;

(8) Exercise overall regulatory supervision over dedicated natural gas pipelines, natural
.gas transmission systems, and the NGTSO; and

(t) Perform all other acts that are analogous to the foregoing and in furtherance of the
implementation of this Act.

SEC. 7. Powers and Responsibilities of the Department of Environment and Natural
Resources. ~ In addition to its functions under Executive Order No. 192, otherwise known as
the Reorganization Act of the Department of Environment and Natural Resources, and other
applicable laws, the DENR, together with the DOE, the ERC, or the DOTr, shall ensure and
monitor compliance with the environmental standards for the location, construction,
improvement, operation, utilization, expansion, modification, rehabilitation, repair,
maintenance, decommissioning, and abandonment of LNG terminals, natural gas transmission
systems, dedicated natural gas pipelines, storage facilities, bunkering facilities, virtual
pipelines, and motor vehicles and marine vessels transporting, storing or processing natural
gas. In its original state or liquefied form, and all related equipment and facilities.

SEC. 8. Powers and Responsibilities of the Department of Health. — In addition to its
functions under Executive Order No. 317, Series of 1941, entitled Organizing the Department
of Health and Public Welfare, as amended, and Republic Act No. 11223, otherwise known as
the Universal Health Care Act, the DOH, together with the DOE, the ERC or the DOTr, shall:

(a) Ensure and monitor compliance with the health standards for the location,
construction, improvement, operation, utilization, expansion, modification, rehabilitation,
repair, maintenance, decommissioning. and abandonment of LNG terminals, natural gas
transmission systems, dedicated natural gas pipelines, storage facilities, bunkering facilities,
virtual pipelines, and motor vehicles and marine vessels transporting. storing. or processing
natural gas. in its original state or liquefied form, and all related equipment and facilities;

(b) Recommend standards, rules, and regulations in the conduct of health risk
assessment studies in cases of natural gas accidents;

(c) Develop guidelines, policies, and health standards on the treatment and management
of patients affected by natural gas accidents; and

Page | 15



(d) Require health data and Information from LNG terminals, natural gas transmission
systems, dedicated natural gas pipelines. storage facilities, and bunkering facilities. virtual
pipelines, and motor vehicles and marine vessels transporting. storing, or processing natural
gas. in its original state or liquefied form, and all related equipment and facilities.

SEC. 9. Powers and Responsibilities of the Department of Trade and industry - Bureau
of Philippine Standards. — In addition to its functions under Republic Act No. 4109, otherwise
known as the Standards Act. the DTI-BPS. shall act as the Co-Chairperson of the technical
working group created pursuant to Section 5 of this Act, and together with the DOE. the ERC.
or the DOTR, determine, develop, formulate. promulgate. and revise the Philippine National
Standards, or identify and adopt international standards as PNS, for natural gas, in its original
or liquefied form. LNG terminals. dedicated natural gas pipelines. natural gas transmission
systems, storage facilities, bunkering facilities, virtual pipelines. and motor vehicles and marine
vessels transporting. storing. or processing natural gas. in its original state or liquefied form.
and all related equipment and facilities.

SEC. 10. Powers and Responsibilities of the Department of Transportation and its
Attached Agencies. ~ In addition to its functions under Executive Order No. 125, series of 1987
otherwise known as the Reorganization Act of the Ministry of Transportation and
‘Communications, as amended, and other applicable laws, the DOTr or its attached agencies
such as the Land Transportation Office. Land Transportation Franchising and Regulatory
Board. and Maritime Industry Authority. in coordination with the DOE, DENR. DOH. DTI-
BPS. and other relevant government agencies, shall issue the appropriate guidelines and
regulations and the applicable permits, licenses, certificates, or authorizations to virtual
pipelines, motor vehicles and marine vessels transporting, storing or processing natural gas. in
its original state or liquefied form. as well as marine facilities used to import. receive. unload.
load. transport, process. and store natural gas in its original or liquefied form, including those
utilized as offshore LNG terminals. The DOTr shall monitor and ensure compliance therewith.

SEC. 11. Powers and Responsibilities of the Philippine Competition Commission
(PCC). ~ In addition to its functions under Republic Act No. 10667. otherwise known as the
Philippine Competition Act. the PCC shall exercise primary and exclusive jurisdiction over
any anticompetitive behavior of midstream natural gas industry participants.

Chapter IIT
MIDSTREAM NATURAL GAS INDUSTRY PARTICIPANTS

SEC. 12. Responsibilities of Midstream Natural Gas Industry Participants. ~ All
midstream natural gas industry participants shall:

(a) Adhere to all health. safety, security. and environmental standards and all codes.
rules. regulations. and issuances promulgated pursuant to Chapter Il of this Act:

(b) Comply with all obligations and responsibilities under this Act to include reportorial
requirements and submissions pursuant to Chapter II of this Act:

() Participate as a member of the technical working group pursuant to Section 5 of this
Act:

Page | 16



(d) Unbundle their respective fees. if applicable. pursuant to Sections 5. 6. and 25 of
this Act; and

(e) Not engage in any anticompetitive behavior.

Chapter IV
LNG TERMINALS

SEC. 13. Importation and Receipt of Natural Gas through LNG Terminals. — Imported

natural gas, in its liquefied form. shall only be received, unloaded, loaded. processed. stored.

and regasified in, and then transmitted, transported, and conveyed in accordance with this Act.

SEC. 14. Safety and Exclusion Zone. — All LNG terminals shall have a safety and
exclusion zone to be determined by the DOE in consultation with the technical working group
created under Section 5 of this Act, relevant government agencies, local government units, and
public and private stakeholders.

SEC. 15. LNG Terminal Owner and Operator. An LING terminal may have a separate
owner and operator. The LNG terminal owner and operator, should they be separate enti
shall be treated as one and the same entity insofar as permits, licenses, certificates. and
authorizations are concerned. as well as in the exercise of rights and compliance with
obligations, standards. regulations, guidelines, and codes imposed by this Act, its implementing
rules and regulations. and other relevant laws and issuances

SEC. 16. Use and Access of LNG Terminals. — The use and access of LNG terminals
shall be regulated pursuant to this Act, while the terminal fee shall be unbundled In accordance
with Section 25 herein and unregulated. All owners and operators of LNG terminals shall
annually submit their LNG Terminal Development Plan to DOE pursuant to Section 5 of this
Act.

‘The DOE shall issue own use and rTPA permits to owners and operators of LNG
terminals. The owner and operator of an LNG terminal shal] have the option to apply for and
hold an own use permit, an rTPA permit, or both permits simultaneously for each LNG
terminal, and perform the functions of an own use LNG terminal permit holder pursuant 10
Section 18 of this Act and an rTPA LNG terminal permit holder pursuant to Section 19 of this,
‘Act, to the extent of the capacity allowed by and during the length of the time specified in each
type of permit, and in accordance with the LNG Terminal Regulated Third Party Access Code.

Each type of permit shall specify the capacity and length of time covered by the permit
Provided. That the total capacity of all permits held by an owner and operator of an LNG
terminal for each LNG terminal shall not exceed the maximum capacity of such LNG terminal
The unutilized capacity of an owner and operator or its affiliate covered by an own-use LNG
terminal permit shall be opened to third parties through the issuance of an rTPA permit and
pursuant to the LNG Terminal Regulated Third Party Access Code. The unutilized capacity by
a third party covered by an rTPA LNG terminal permit shall be opened to other third parties
pursuant to the LNG Terminal Regulated Third Party Access Code.

SEC. 17. Own Use LNG Terminal. — An own use LNG terminal permit holder shall:

Page | 17


(a) Exclusively utilize the capacity allowed by and during the length of time specified
in the own use permit. and may allow its affiliates to do the same: and

(b) Not enter into an nTPA or any similar arrangement with third parties or otherwise
grant use and access of its facilities to such third parties to the extent of the capacity allowed
and during the length of time specified in the own use permit, subject to Section 17 of this Act
and the LNG Terminal Regulated Third Party Access Code.

SEC. 18. Regulated Third Party Access LNG Terminal. ~ The issuance of an rTPA
permit to an owner and operator of an LNG terminal shall take into consideration the capacity
and utilization of the LNG terminal, current midstream end users, existing market conditions.
and other relevant information with the end in view of enabling competition in the natural gas
industry. The use and access of the capacity covered by an rTPA permit shall be open to all
third parties subject to the payment of a terminal fee. An rTPA LNG terminal permit holder
shall:

(a) Publicly disclose the capacity available to and utilization by third parties in
accordance with the reportorial requirements under this Act and the LNG Terminal Regulated
Third Party Access Code;

(b) Determine the mode of competitive selection of third parties: Provided. That each
LNG terminal shall determine its own competitive selection process which shall be transparent,
fair, reasonable, and non-discriminatory subject to the reportorial requirements under this Act;

(c) Provide regulated third party access to the extent of the capacity allowed by and
during the length of time specified in its rTPA permit; and

(d) Not give any undue preference or advantage to any third party. whether in rates.
terms, conditions, or special privileges.

Chapter V
TRANSPORT AND TRANSMISSION OF NATURAL GAS

SEC. 19. Transport of Natural Gas. ~ Natural gas. in its original or liquefied form, may
be transported within the country through virtual pipelines, motor vehicles, and marine vessels
in accordance with this Act. The use, access, and fees for the transportation of natural gas shall
be unregulated but shall be subject to the permits. licenses, certificates. authorizations.
standards, regulations, and guidelines promulgated pursuant to Chapter I! of this Act.

SEC. 20. Transmission of Natural Gas. ~ Natural gas may be transmitted through
dedicated natural gas pipelines or natural gas transmission systems either from an LNG
terminal or a local natural gas production facility.

SEC. 21. Dedicated Natural Gas Pipelines. — The ownership and operation of a
dedicated natural gas pipeline shall not be considered a public utility and shall not require a
legislative franchise, but shall require a permit in accordance with Section 6 of this Act. [ts use.
access, and fee for use shall be unregulated. but shall be subject to permits, licenses, certificates,

Page | 18


authorizations, standards, regulations, guidelines. codes. and reportorial requirements as
provided in this Act. The owner and operator of a dedicated natural gas pipeline shall

(a) Exclusively utilize the capacity of its dedicated natural gas pipeline or allow its
affiliates to do the same;

(b) Not enter into an nTPA or any similar arrangement with third parties or otherwise
grant use and access of its facilities to such third parties; and

(c) Inform the ERC of its intent to convert its facilities to a natural gas transmission
system simultaneously with its application for a legislative franchise as a natural gas
transmission utility.

SEC. 22. Nanural Gas Transmission Systems. — The use. access. and terminal fee of a
natural gas transmission system shall be regulated. The ownership and operation of a natural
gas transmission system shall be considered a public utility and shall require a legislative
franchise. The issuance of 2 CPCN to a natural gas transmission utility shall take into
consideration its legal, technical. and financial capability.

The use and access to the entire capacity of a natural gas transmission system shall be
open to all third parties for a natural gas transmission fee. subject to the reserve price of the
ERC in accordance with Section 6 of this Act: Provided, That in the case of a dedicated natural
gas pipeline that converts its facilities into a natural gas transmission system. existing contracts
with affiliates for the use of the pipeline at the time of the effectivity of such franchise shall be
allowed to continue until the end of the contract, which shall not be subject to any extension,

A natural gas transmission utitity shall

(a) Regularly disclose to the public the capacity available for and utilization by third
parties in accordance with the reportorial requirements under this Act and the Transmission
Regulated Third Party Access Code;

(b) Determine the mode of and conduct a competitive selection of third parties:
Provided, That each natural gas transmission utility shall determine its own competitive
selection process which shall be transparent. fair, reasonable, and non-discriminatory. subject
to the reportorial requirements under this Act:

(c) Ensure that the winning bid does not go beyond the reserve price determined by
ERC pursuant to Section 6 of this Act:

(é) Provide transparent, fair. reasonable, and non-discriminatory use and access to third
parties:

(e) Not give any undue preference or advantage to any third party, whether in rates.
terms, conditions, or special privileges;

(f) Submit annually its Natural Gas Transmission Development Plan to DOE for review

and approval, or the NGTSO, whichever is applicable. pursuant to Sections 5 and 24 of this
Act:

Page | 19


(g) Assign to the NGTSO the operation and maintenance of its natural gas transmission
system upon direction of the ERC afier the Interconnection of natural gas transmission systems
and the selection of the NGTSO; and

(h) When applicable, inform and coordinate with the NGTSO for the location.
construction. improvement. operation. utilization. expansion. modification. rehabilitation.
repair, maintenance. decommissioning, and abandonment of any pari of the natural gas
transmission system to be undertaken in accordance with its submitted National Gas
Transmission Development Plan.

SEC. 23. Nanwral Gas Transmission System Operator. ~ The DOE, based on the
Philippine Energy Plan, the Midstream Natural Gas Industry Development Plan. and the
various Natural Gas Transmission Development Plans shall determine the necessity of and then
direct the interconnection of natural gas transmission systems pursuant to Section 5 of this Act.
The DOE shall thereafter select a single independent NGTSO. The NGTSO shall not be an
affiliate of any LNG terminal owner and operator, natural gas transmission utility, or any
midstream end-user. The NGTSO shall:

(a) Operate and manage the interconnected natural gas transmission system in
accordance with the Natural Gas Transmission Code and Transmission Regulated Third Party
‘Access Code:

(b) Coordinate with natural gas transmission utilities for the location, construction.
improvement, operation, utilization, expansion, modification. rehabilitation, repair,
maintenance, decommissioning, and abandonment of any part of the natural gas transmission
system in accordance with their submitted Natural Gas Transmission Development Plan:

(c) Furnish midstream natural gas industry participants with sufficient information for
efficient access to the interconnected natural gas transmission system:

(@) Procure ancillary services necessary to support the reliable and continuous flow of
natural gas through the interconnected natural gas transmission system:

(e) Annually prepare a comprehensive Natural Gas Transmission Development Plan
based on the submitted Natural Gas Transmission Development Plans of natural gas
transmission utilities, upon consultation with public and private stakeholders, and submit the
same for review and approval of the DOE:

(® Collect an NGTSO fee. subject to the approval of the ERC: and
(g) Perform other functions and responsibilities determined by the DOE and ERC
pursuant to Sections 5 and 6 of this Act.
Chapter VI
RATES, FEES, AND OTHER CHARGES
SEC. 24. Publication and Unbundling of Fees. — LNG terminals with regulated third
party access, whether through an rTPA permit or a DOE declaration of an unutilized capacity,

natural gas transmission utilities, and the NGTSO shall identify and segregate in their bills to

Page | 20


midstream end-users the components of their terminal fees, natural gas transmission fees, and
NGTSO fee, respectively. and publish the same on their website.

SEC. 25. Other Fees and Charges. ~The DOE. ERC, and other relevant government
agencies may Impose reasonable fees for processing applications and permits as may be
necessary in this Act pursuant to Executive Order No. 292. otherwise known as the
Administrative Code of 1987, and Republic Act No. 9136 otherwise known as the Electric
Power Industry Reform Act of 2001.

Chapter VI
PROHIBITED ACTS AND PENALTIES

SEC. 26. Prohibited
following acts shall be prohi

1s. ~ Without prejudice to civil and criminal liability, the
ited:

(a) For government agencies: failing to comply with the responsibilities under Chapter
11 of this Act, and within the timeframes specified in Sections 5, 6, and 37 of this Act:

(b) For midstream natural gas industry participants:

(1) Engaging in activities without the required permits, licenses. certificates. and
Authorizations under this act, specifically:

i) Engaging in the aggregation, supply. importation, exportation, receipt.
unloading, loading. processing. storage. regasification, transmission,
bunkering, and transportation of natural gas. or the location. construction,
improvement. operation. utilization. expansion, modification, rehabilitation,
repair, maintenance, decommissioning, and abandonment of an LNG
terminal, natural gas transmission system, dedicated natural gas pipeline,
Virtual pipeline, and motor vehicles and marine vessels transporting natural
gas without a permit as defined in this Act from DOE. ERC. or DOTR or its
attached agencies.

(ii) Engaging in any activity as a midstream natural gas industry participant
without a license, certificate, and authorization from DENR. DOH,
Department of Interior and Local Government or its attached agencies, local
government units, and other relevant government agencies,

ii) Operating as an own use terminal without an own use permit,
(iv) Operating as an rTPA terminal without an rTPA permit, and

(¥) Operating a natural gas transmission system without legislative franchise
and a CPCN:

(2) Failure to comply with health, safety. security, and environmental standards,

requirements. and guidelines as well as codes under this Act. whichever is
applicable. specifically:

Page | 21


(i) Failure to comply with the PNS or other International standards adopted as
PNS of the following:

a) Natural gas, in its original or liquefied form.
b) Location, construction, improvement. operation, utilization, expansion,
modification. rehabilitation. repair, maintenance. decommissioning.

and abandonment of all LNG terminals.
©) Storage and bunkering of natural gas and its respective facilities,
d) Virtual pipelines,
¢) Motor vehicles and marine vessels transporting natural gas,
f) Dedicated natural gas pipelines, and
g) Natural gas transmission systems:

(ii) Failure to comply with standards, rules. and regulations in the conduct of
health risk assessment studies in cases of natural gas accidents.

(i) Failure to comply with the Natural Gas Transmission Code,

(iv) Failure to comply with the LNG Terminal Regulated Third Party Access
Code.

(v) Failure to comply with the Transmission Regulated Third Party Access
Code, and

(vi) Failure to comply with the safety and exclusion zone;

(3) Failure to submit or disclose required data. information. and documents.
whichever is applicable. specifically:

(i) Failure to submit an LNG Terminal Development Plan,
(ji) Failure to submit a Natural Gas Transmission Development Plan.

(iii) Refusal or failure to submit the required data and information to the DOE
pursuant to Section 5 of this Act.

(iv) Refusal or failure to submit the required documents, data, and information
to the ERC pursuant to Section 6 of this Act.

(v) Refusal or failure to submit health data and Information to the DOH pursuant
to Section 8 of this Act. |

(vi) Refusal or failure to publicly disclose the following:

Page | 22


a) Capacity available to third parties, and
b) Utilization of capacities by third parties:

(vii) Failure to furnish midstream natural gas industry participants with
sufficient information for efficient access to the interconnected natural gas
transmission system. and

(viii) Failure to inform the ERC of its intent to convert a dedicated natural gas
pipeline to a natural gas transmission system simultaneous with its
application for a legislative franchise;

(4) Failure to comply with the requirements on fees. whichever is applicable.
specifically:

(i) Failure to comply with the publication and unbundling requirement for the
terminal fee, natural gas transmission fee, and NGTSO fee, whichever is
applicable.

(ii) Collecting an NGTSO fee without the approval of ERC,
(iii) Awarding a winning bid beyond the reserve price.
{iv) determined by ERC, winning bid, and

(v) Collecting a natural gas transmission fee higher than the Disclosing the
reserve price before the determined time by ERC:

(5) Failure to comply with the requirements on own use and regulated third party
access, whichever is applicable. specifically:

(i) Allowing a third party to use a portion or the entire capacity of a dedicated
natural gas pipeline.

i) Entering into an n TPA or similar arrangement with third parties or granting
use and access to third parties to the extent of the capacity covered by an
own use permit for LNG terminals,

(iii) Refusal or failure to conduct a transparent, fair, reasonable, and non-
discriminatory competitive selection of third parties for the capacity covered
by an rTPA permit for LNG terminals. or the entire capacity of a natural gas
transmission system.

(iv) Using or allowing an affiliate to use the capacity covered by an rTPA permit
for LNG terminals or a portion or the entire capacity of a natural gas
transmission system without undergoing a competitive selection process.

(v) Giving any undue preference or advantage to any third party, whether in
rates, terms, conditions, or special privileges.

Page | 23


(vi) Failure to provide transparent, fair. reasonable, and non-discriminatory use
and access to third parties, and

(vii) Failure to comply with mandated regulated third-party access for unutilized
capacity;

(6) Failure to comply with other responsibilities as midstream natural gas industry
participants, whichever is applicable. specifically:

(i) Refusal to participate as an Identified member of the technical working
group,

(ii) Failure to cooperate in any investigation conducted by DOE, ERC. or PCC
pursuant to their powers under this Act,

i) Failure to comply with the prior approval requirement of any sale,
assignment, or transfer of control of a midstream natural gas industry
participant with a DOE issued permit to another entity.

(iv) Failure to comply with the directive of DOE for prior disclosure of any sale,
assignment, or transfer of ownership or direct or indirect interests, rights, or
participation of a midstream natural gas industry participant with a DOE
issued permit to another entity.

(v) Engaging in anti-competitive behavior,

(vi) Refusal or failure to assign to the NGTSO the operation and maintenance
of its natural gas transmission system upon directive of the ERC.

(vii) Refusal or failure to inform and coordinate with the NGTSO or the natural
gas transmission utilities, whichever is applicable, for the location,
construction, improvement, operation, utilization, expansion, modification,
rehabilitation, repair, maintenance. decommissioning. and abandonment of
any part of the natural gas transmission system.

(viii) Failure to secure ancillary services necessary to support the reliable and
secure flow of natural gas through the interconnected natural gas
transmission system, and

(Gx) Failure to comply with other responsibilities not otherwise stated in this
Section.
SEC. 27. Penalties. ~ Without prejudice to civil and criminal liability, the following
administrative penalties shall be imposed upon any natural or juridical person for every
prohibited act enumerated below:

(a) Section 26 (a): Fine not exceeding the equivalent of six (6) months’ salary or
suspension not exceeding one (1) year, or removal depending on the gravity of the offense:

(b) Section 26 (b):

Page | 24


(1) First Offense: Fine of not less than Five hundred thousand pesos (P500,000) for
every day of non-compliance, and if applicable, suspension of permits, licenses.
certificates, or authorizations until the violation is corrected.

(2) Second Offense: Fine of not less than One million pesos (P1.000,000) for every
day of non-compliance. and if applicable. suspension of permits, licenses.
certificates, or authorizations until the violation is corrected. and

(3) Third Offense: Fine of not less than Five million pesos (P5.000.000). revocation
of permits, licenses. certificates, or authorizations. and disqualification from
applying for future permits, licenses, certificates, or authorizations. In the case
of natural gas transmission utilities, DOE and ERC shall recommend the
revocation of their respective franchises to Congress. In the case of the NGTSO,
it shall be replaced,

Provided, That the administrative penalty for Section 26(b)(6)(v) shall be pursuant to
Section 29 of the Philippine Competition Act.

Chapter VIII
FINAL PROVISIONS

SEC. 28. Incentives. ~ LNG terminals, storage facilities, bunkering facilities, dedicated
own use natural gas pipelines, and natural gas transmission systems, shall be included in the
Strategic Investment Priority Plan subject to an evaluation process and shall be entitled to the
incentives and for the length of time provided under Executive Order No. 226, otherwise
known as the Omnibus Investments Code of 1987. as amended by Republic Act No. 11534.
otherwise known as the Corporate Recovery and Tax Incentives for Enterprises Act, and other
applicable laws.

SEC. 29. Permits and Licenses. ~ All permits, licenses, certificates, and authorizations
issued pursuant to this Act shall be streamlined and shall be covered by Republic Act No.
11234. otherwise known as the Energy Virtual One-Stop Shop Act. except for those whose
time frames are expressly provided herein.

SEC. 30. Public Access to Information. - The DOE, ERC, and other relevant
government agencies shall allow public access, through its website, to all data and information
submitted in the implementation of this Act: Provided, That such access is compliant with
Section 32 hereto.

SEC. 31. Treatment of Confidential Information. ~ The DOE. ERC. and other relevant
government agencies shall not disclose any proprietary and confidential information to the
public and to other midstream natural gas industry participants unless prior consent of the
source or owner of such information has been obtained by the requesting party: Provided. That
prior consent shall not be required if the proprietary and confidential information is requested
by a government agency and the request is made in performance of its functions: Provided
further, That the requesting government agency shall not disclose the proprietary and
confidential Information to the public and to other midstream natural gas industry participants.

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SEC. 32. Establishment of Dedicated Offices. - The DOE and the ERC shall establish
dedicated bureaus or offices for the effective implementation of this Act. The organizational
structure and staffing complement shall be determined by the DOE Secretary and ERC
Chairperson respectively. with approval of the Department of Budget and Management or the
Office of the President, whichever is applicable. and in accordance with existing civil service
rules and regulations.

SEC. 33. Appropriations. ~ The amount of Seventy-five million pesos
(P75,000,000.00) shall be charged against the current year's appropriations of the DOE and the
amount of Seventy million pesos (P70,000,000.00) shall be charged against the current year’s
appropriations of the ERC, all for the initial Implementation of this Act. Thereafter. such
amounts necessary for the sustainable implementation of this Act shall be included in the
annual General Appropriations Act.

SEC. 34. Congressional Oversight. — The Joint Congressional Energy Commission
(ICEC) shall exercise oversight powers over the implementation of this Act. The DOE, ERC,
and other relevant government agencies shal] submit annual reports to the JCEC no later than
the fifteenth day of September, which shall include the latest relevant data, implementation
review and reports. and policy and regulatory issues

SEC. 35. Transitory Period. — Ail midstream natural gas Industry participants shall
comply with the provisions of this Act within five (5) years from its effectivity: Provided. That
health, safety, security, environmental. construction, operation and other permits. licenses,
certificates, and authorizations issued prior to the effectivity of this which are not inconsistent
herewith shall remain valid.

Natural gas transmission systems existing at the time of the effectivity of this Act shall
be allowed to continue pursuant to the terms and conditions indicated In their franchise and
until the lapse of the period accorded to them in the franchise

SEC. 36. Implementing Rules and Regulations. ~ The DOE and ERC. in coordination
and consultation with the relevant offices. agencies, and instrumentalities of the national and
local government, as well as the public and private stakeholders, shall issue and promulgate
the necessary implementing rules and repulations (IRR) of this Act within six (6) months from
the effectivity of this Act.

SEC. 37. Separability Clause. ~ If any provision of this Act shall be declared invalid or
unconstitutional. such declaration shall not affect the validity of the remaining provisions of
this Act.

SEC. 38. Amendatory and Repealing Clause. — The specific provisions of Republic Act
No. 387, otherwise known as the Petroleum Act of 1949, and Presidential Decree No. 334,
Creating the Philippine National Oil Company, Defining Its Powers and Functions, Providing
Funds Therefor. and For Other Purposes. that are inconsistent with this Act are hereby amended
or repealed accordingly.

All other laws, ordinances. rules, regulations and issuance or parts thereof. that are
inconsistent with this Act, are likewise repealed, amended or modified accordingly

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SEC. 39. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in two (2) newspapers of general circulation,

Approved,

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