EXECUTIVE ORDER NO. 79 by BENIGNO S. AQUINO III, President of the Philippines

President Aquino - Executive Order No. 79, s. 2012

A picture tells a thousand words and the above image courtesy of Rappler says it all.

The much awaited Executive Order on Mining has finally been released, but even as everyone was waiting for the “Official” release the Catholic Bishops were already protesting and had already started a signature campaign calling for a moratorium on its implementation.

That’s right they were protesting even before they knew what they were complaining about!  Malacañang on Sunday appealed to the public to hold their opinions on the EO on mining in check until it is disclosed Monday – “Perhaps it would be better to hold off any comments before seeing the actual EO and seeing what the provisions are,” said Valte amid the early criticisms from Church leaders.

When it was finally released even ardent anti-mining advocate Gina Lopez cheered President Benigno Aquino for making a stand to protect the environment by explicitly identifying the areas banned from mining.

The Chamber of Mines of the Philippines followed suit lauding the new executive order  -“Our members applaud the policy’s directive to ensure consistency of local ordinances with the Constitution and national laws, as well as LGU cooperation”

So let’s take a look at Executive Order 79 for the most part the executive order cites existing legislation or current standing executive orders, so what is different?

Areas Closed to Mining Applications which is the part the Anti-Mining Activists are heralding actually doesn’t have anything new, it is merely citing provisions of law, however having said that President Aquino has issued a separate memo now regarding Palawan, prohibiting any new mining applications for the entire province.

Full Enforcement of Environmental Standards in Mining. Aside from merely citing existing laws, if you read through my previous posts you will quickly see the “Full Enforcement” that the President refers to is the key issue which the Government has been unable to address,  I don’t know how an executive order could possibly change that,  but certainly it will be controversial in it’s implementation (or lack of) when you consider the challenges involved.

There seems to me a conflict between the sections on “Review of the Performance of Existing Mining Operations and Cleansing of Non-Moving Mining Rights Holders” and “Grant of Mineral Agreements Pending New Legislation”

On one hand the Government is reaffirming a previous Executive Order on the review of existing mining claims in an attempt to cleanse inactive mining tenements,  but on the other hand it is saying no new mining tenements will be approved until the new legislation is passed.

This presents existing tenement applications a dilemma in that they can not continue to perfect their claims as until the new legislation is passed they are in limbo as to knowing their obligations and requirements, on the other hand if they do not continue to process their claims they could be deemed to be inactive and cancelled.

Patrick Caoile, treasurer of the Philippine Mine Safety and Environment Association rightly says “the biggest loser from the EO was the $5.9-billion Tampakan project of Glencore-Xstrata in South Cotabato”

However that is the tip of the iceberg he goes on to say “Foreign investors are aghast at how this government could do this to the world’s third largest mining firm and change the rules in the middle of the game especially in a business which requires long-term planning and capital, the government was eager to please every sector with the new EO that it ended up not pleasing anybody.”

So clearly the biggest winners are owners of the existing approved mining claims especially now that it is quite certain the new mining legislation will not pass congress before the next election,  the Executive Order prevents any new foreign investment in the short term and protects existing mining claim holders…does anyone wonder if they were contributors to the the last election campaign?  Quid Pro Quo say no more..

“Their contracts (existing approved mining permits) are as good as gold because we don’t see any new contract will be signed under this administration with Congress miles away from amending the new mining law,” said Patrick Caoile, treasurer of the Philippine Mine Safety and Environment Association.

The establishment of Mineral Reservation areas and the disposition of abandoned ores and Tailings via subsequent opening of these areas through Competitive Public Bidding is another interesting area, of course this can not be implemented until the legislation is passed, which will not happen until after the next election.

So it seems the President is directing the lawmakers (Congress) to draft legislation for this new competitive bidding process…what could possibly go wrong?  Are there examples in recent history of this process in the Philippines? Somehow the words Fertiliser and ZTE-NBN spring to mind.. I wonder why?

The Value adding directive is an important step forward which means the minerals are not only mined and exported in their raw form but are also processed or at least semi-processed in the Philippines.  The only problem with such a clause it creates even more uncertainty for the investor.

The changes proposed in this EO will effectively close down all legal small scale mining, open up large scale mining to international investors but provide for more uncertainty.  Will the new legislation prohibit export of raw minerals is a big question here?

The Indonesians have moved towards this path and I am not suggesting it is wrong, however for an International Investor it does create total uncertainty in any proposed project as the cost of setting up processing facilities and the additional time required to obtain the processing permits is a major factor in determining whether to invest or not.

To illustrate an example if your going to invest in a Nickel Mining Operation it may require reasonably an Investment of some $5-$10 Million USD and if you have applied for a mining permit now on this basis and all of a sudden you have to include processing of Nickel well that changes everything…the investment now required could easily exceed $100 Million dollars.

Which moves us to Section 9 of adding to the existing bureaucratic red tape of DENR, MGB, EMB, NCIP, LGU’s and now a another agency enters the picture with more overlapping legislation to accommodate the  “Climate Change adaption and Mitigation and Economic Cabinet Clusters as the Mining Industry Coordinating Council (MICC).

This council is co-chaired by the Secretary of the Department of Justice, the National Commission on Indigenous Peoples and Union of Local Authorities of the Philippines ! What a bizarre mix under the guise of “Climate Change adaption”?

I say it’s bizarre as in the first instance the NCIP is already part of the decision making process refer my post on this subject here   where before you can mine you must obtain free and prior informed consent from the indigenous community and have it certified by the NCIP.

Next we have ULAP as a co-chair but once again the local authorities have already been part of the process as you require Barangay clearances, municipal clearances and permits and provincial clearances so once again there is an overlap.

Then the most curious of all … the Secretary of the Department of Justice? I remind you we are talking about “Climate Change adaption” and instead of let’s say the Department of SCIENCE and Technology being involved which would make logical sense or DENR/MGB/EMB (Although that would again be overlap) being involved enter the DOJ into the picture?

Some may say well yes the DOJ should be involved to ensure the legality of the operations, however it must be remembered the process of legalizing the mining operations is already determined by the DENR/MGB and associated bodies, in the event of illegal mining operations they would never be even applying for a permit so those issues would not come before this body.

Next we take a look at  SECTION 11. Measures to Improve Small-Scale Mining Activities – The biggest change here is Small Scale mining is now limited to “People’s Small-Scale Mining Areas” or “Minahang Bayan” so effectively the EO is totally eliminating the application of “normal” Small Scale Mining Permits to legalize operations which solves ALL OF THE PROBLEMS with Small Scale Mining and now moving towards the greatest area of problems in the Philippines – the Illegal Small Scale Mining under the guise of “Minahang Bayan”.

Previously a Filipino, DTI Registered Filipino Business or a SEC registered Filipino Corporation could apply for a Small Scale Mining permit,  the benefit of this is once the permit is approved the entire operation is not only legal, but MUST comply with Environmental Standards set out in the ECC (Environmental Compliance Certificate) issued by the EMB and MUST comply with all workplace Safety requirements,  employees must be registered, pay taxes and receive benefits such as SSS, Phil Health etc.   This Executive Order is stopping this! Instead ONLY Small Scale Mining under the pretense of “Minahang Bayan” is allowed now.

I can tell you with enormous certainty any of the illegal mining operations throughout the Philippines that give the entire industry a bad name are all operating under this “Minahang Bayan” theory.  

There are two major downfalls of this theory firstly this is the most difficult to monitor and enforce as it encourages just the kind of illegal mining that has plagued the industry in the Philippines, take a look at any of the illegal mining areas currently for example two of my previous posts are Compostella Valley  and in Zamboanga both operate under the “Minahang Bayan” theory which in reality translates in the Philippines as any mining area producing good gold/silver/chromite deposits are being mined by the locals under a self declaration of “Minahang Bayan”  with or without proper application of the law and certainly without enforcement which has been the greatest challenge.

The second downfall is now the President through his EO and pending legislation has announced NO NEW MINING claims shall be approved until this legislation comes into effect, the result of this is ultimately ALL large scale mining projects are on hold,  ALL LEGAL small scale mining projects are on hold,  the “locals” (Please refer to links on  Compostella Valley and Zamboanga) will now declare all of these areas as “Minahang Bayan” preventing the future investment in mining and even more importantly mining in methods that are extremely hazardous to the environment and lack safety standards further tarnishing the mining industry’s name.

A lawyer I know personally is representing certain groups pushing for “Minahang Bayan” interests within existing large scale mining tenements, on the surface this seems righteous in helping the poor local filipino’s and indigenous community, however a closer look at what is happening is International Investors are being deterred  as they watch years of work in exploration go down the tubes to be surrendered to these interest groups, who in turn then go to typically Chinese financiers to now fund their illegal unregulated mining activity.

Finally again in a dramatic move gold, silver, and chromite are the only permitted minerals to be mined under  “Minahang Bayan”  Operations,  this move is obviously in response to some Nickel mine operators using small scale mining permits to operate whilst their large scale permits were still under process and clearly is to protect the interests of the existing large scale already approved Nickel mines and one could go as far as saying hinder the development of new competitors in the industry.

This exclusion of all other minerals such as Copper, Zinc, Manganese, Lead which are common throughout the Philippines is another case of creating uncertainty in investment.  I know of a number of Small Scale Mineral Processing Permits which are valid for 5 yrs renewable for two periods of 5 years so the permit so long as the operator complies with existing environmental and other laws is valid for 15 years.

This has resulted in a number of such plants being established with investments of near $1 Million USD each, these plants operate and rely on approved small scale mining permits as a source of their input ores,  Small Scale Mining permits are only valid for two years renewable for a further two years (4 years maximum) so now it seems dozens of projects all over the Philippines are in jeopardy.

I say that,  as if new small scale permits can not be approved, all these LEGALLY operating processing facilities which value add to the Philippine Mining industry by exporting refined product instead of raw minerals are likely to be forced to close with this new change.

So in conclusion the winners of this Executive order are the the existing oligarchy holding approved mining permits and the illegal miners which as far as I can see the EO will only encourage more of and the losers are International Investors, Filipino Investors and legal Small Scale Mining under the previous legislation which has been effectively killed off.

One Response to “EXECUTIVE ORDER NO. 79 by BENIGNO S. AQUINO III, President of the Philippines”
  1. noba says:

    nice analysis. Thanks. I need this for our debate on mining…

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