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REVISED DRAFT Scoping Study on Extractive Industry Governance and Transparency in the Bangsamoro

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REVISED DRAFT Scoping Study on Extractive Industry Governance and Transparency in the Bangsamoro REVISED DRAFT Scoping Study on Extractive Industry Governance and Transparency in the Bangsamoro 1.0 Background The concept of an autonomous region for Muslim Mindanao emanated from the Tripoli Agreement between the Government of the Republic of the Philippines (GRP) and the Moro National Liberation Front (MNLF) signed on 02 December 1976. The creation of autonomous regions, meanwhile, is mandated under the 1987 Philippine Constitution (Sec. 15-21, Art. X). As an enabling legislative act, the Congress of the Philippines formulated the Organic Act to Establish the Autonomous Region in Muslim Mindanao also known as Republic Act (RA) 6734. It was approved by President Corazon C. Aquino on 01 August 1989. In the same year, RA 6734 was submitted for ratification through a plebiscite held in 13 provinces, namely: Basilan, Sulu, Tawi Tawi, Zamboanga del Sur, Zamboanga del Norte, Lanao del Norte, Lanao del Sur, Davao del Sur, North Cotabato, Maguindanao, South Cotabato, Sultan Kudarat, and Palawan, and in all cities situated therein. Out of these 13 provinces, only four provinces: Tawi-Tawi, Sulu, Lanao del Sur, and Maguindanao – ratified RA 6734 and became part of the territory of the ARMM. The final agreement on the implementation of the 1976 Tripoli Agreement between the GPH and the MNLF was signed on 02 September 1996. The Peace Agreement was divided into two phases. Phase I covered a three-year period during which the President would issue an executive order establishing the Special Zone of Peace and Development (SZOPAD), the Southern Philippine Council for Peace and Development (SPCPD), and the Consultative Assembly. In Phase 2, the Philippine Congress shall complete the legislative process that would repeal or amend the Organic Act of the ARMM (RA 6734) to ensure that the points of consensus in the Peace Agreement would be integrated into the new law. The new autonomy law drafted by the Philippine Congress, RA 9054, was however rejected by the MNLF arguing that it watered down the 1996 Peace Agreement. On 31 March 2001, RA 9054 lapsed into law without the signature of the President of the Philippines. In the plebiscite needed for the ratification of RA 9054, held during the same year and in the same provinces as abovementioned, five provinces and one city, namely: Basilan and Marawi City including the four provinces which ratified RA 6734 - Tawi-Tawi, Sulu, Lanao del Sur, Maguindanao---voted for ratification and inclusion in the ARMM. Thus, these five provinces and one city currently make up the present territory of ARMM. 2.0 Legal framework General framework The fundamental legal basis of all laws and policies in the country and all autonomous regions including the ARMM is the 1987 Philippine Constitution. 1 The 1987 Philippine Constitution provides power to autonomous regions the supervision over metallic and other non- energy materials stating thus: “Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws, the organic act of the autonomous regions shall provide for legislative powers over: Xxx. (3) Ancestral domain and natural resources” (Sec 20, Art X). Hence, all legislative acts, administrative issuances, executive orders, judicial decisions and all related policy documents are required to be in line with this basic law of the land. Currently, in the absence of its own legislation related to the exploration, development, utilization and protection of minerals and other natural resources1, the ARMM adheres to existing national laws. These are as follows: Large-scale mining (metallic and non-metallic) . Republic Act 7942, also known as the Philippine Mining Act of 1995 and its Implementing Rules and Regulations (IRR) . Executive Order (EO) 79 Small-scale metallic mining . RA 7076 . PD 1899 . EO 79 Small-scale non-metallic mining . RA 7160 also known as the Local Government Code Under RA 7942 and its Revised Implementing Rules and Regulation including DENR Administrative Order (DAO) Nos. 2010-13 and Consolidated DAO No. 2010-21, mining companies are required to undertake social development, environmental protection and rehabilitation programs as well as establish trust funds that will ensure availability of financing these mandatory expenditures. A summary of these programs and funds is presented below: 1 The ARMM was reportedly (as of January 2015) in the process of crafting a mining law as part of the regional government’s efforts to protect the environment and regulate the entry of mining companies in the region. However the finalization of said law was put on hold due to the conduct of local and national elections. From 2013 to 2015, five large-scale mining companies registered with ARMM Regional Board of Investments (RBOI). The RBOI however announced that there is no official policy welcoming or encouraging mining investments in the ARMM. The existing ARMM policy is that no income tax holiday or incentives are given to mining companies. It was also announced that the regional government wants to avail the full rent and revenue generating potential of investments in the extractive industry. Likewise, the mining investors reportedly are required to get the full consent and social acceptability of the communities they operate in before they are allowed to operate. 2 Mandatory Social and Environmental Programs and Expenditures of Mining Companies Type Description Rate Mandatory Expenditures Annual Environmental Annual Environmental Protection and Under DENR Administrative Protection and Enhancement Program (AEPEP) refers to a Order No. 2010-21, AEPEP cost Enhancement Program yearly environmental management work shall approximate 3-5% of direct (AEPEP) plan. The AEPEP is based on the approved mining and milling cost. Environmental Protection and Enhancement Program (EPEP) covering the life of the mining project. The AEPEP is implemented to achieve the environmental management objectives, criteria and commitments including protection and rehabilitation of the disturbed environment. The AEPEP cost covers the amount of environment-related expenses for the entire life of the project wherein the initial 10% of capital/project cost is derived from the feasibility study which forms part of the Declaration of Mining Project Feasibility. Community Development Community development program refers to 10% of the approved budget for Program the enhancement of the socio-economic the mining company’s two (2) condition of the host and neighboring year Exploration Work Program communities during the exploration activities. Environmental Work EWP refers to the comprehensive and Not applicable Program (EWP) strategic environmental management plan to achieve the environmental management objectives, criteria and commitments including protection and rehabilitation of the disturbed environment during the exploration period. It provides detailed environment projects/activities where the exploration work is proposed to be undertaken. Potential effects are identified as well as environmental management measures to be implemented including the total cost of such projects. Safety and Health Program The program includes standard operating Not applicable procedures for mining and milling operations, management and employee training, housekeeping, environmental risk management including emergency response as well as occupational health and safety management. Social Development SDMP refers to the approved 1.5% of prior year’s operating Management Program comprehensive five-year plan of the expenses (SDMP) contractor/permit holder/lessee 3 Type Description Rate authorized to conduct actual mining and milling operations towards the sustained improvement in the living standards of the host and neighboring communities by creating responsible, self-reliant and resource-based communities capable of developing, implementing and managing community development programs, projects, and activities in a manner consistent with the principle of people empowerment. SDMP is formulated to fulfil social obligations enhancing the development of communities that are directly and/or indirectly affected by the mining project. The 1.5% of annual operating expenditure for SDMP shall be distributed as follows: Program Allocation (%) Social Development & 75 Management (host and neighboring communities) Mining Technology and 10 Geosciences Advancement Information, Education & 15 Communication Environmental Funds Mine Rehabilitation Fund MRF is maintained as a reasonable (MRF) environmental deposit to ensure availability of funds for the satisfactory compliance with the commitments and performance of the activities stipulated in the AEPEP. This is deposited as a trust fund in a government depository bank and shall be used for physical and social rehabilitation of areas and communities affected by mining activities as well as for research on the social, technical and preventive aspects of rehabilitation. The MRF is broken down The MTF covers maintenance and other Mine Monitoring Trust Fund is a into two forms, namely: operating budget for the transportation and deposit of not less than PhP150 a) Mine Monitoring Trust travel expenses, cost of laboratory analysis, thousand. Fund (MTF); and cost of supplies and materials, cost of communication services, cost of consultancy work and other reasonable expenses incurred by the monitoring team. b) Rehabilitation Cash The RCF covers rehabilitation activities and Rehabilitation Cash Fund is Fund (RCF) schedules, including research programs, as equivalent to 10% of the total defined in
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