SC Holds Palawan as Not Entitled to Share in the Proceeds of the Camago-Malampaya Project

January 23, 2019

The Supreme Court has declared that the Province of Palawan is not entitled to share in the proceeds of the Camago-Malampaya natural gas project. Palawan premised its claim on the ground that it has territorial jurisdiction over the Camago-Malampaya reservoir.

The Camago-Malampaya natural gas project is covered by Service Contract No. 38 between the Republic or national government and the contractor which was subsequently composed of a consortium of Shell Philippines Exploration B.V. and Occidental Philippines, Incorporated (SPEX/OXY).

In a 94-page consolidated decision penned by Justice Noel Gimenez Tijam, the Court En Banc granted the petition of the Republic in GR No. 170867 to reverse and set aside the December 16, 2005 decision of the Regional Trial Court of Palawan, Branch 95 in Civil Case No. 3779 declaring that Palawan “is entitled to the 40% share” of the government’s earnings derived from the Camago-Malampaya natural gas project since October 16, 2001. The Court also denied the Petition for Review filed by Bishop Arigo Pedro Dulay, et al. in GR No. 185941, which questioned the constitutionality of Executive Order No. 683 of President Gloria Macapagal-Arroyo authorizing the release of funds for development projects in Palawan pursuant to the Provisional Implementation Agreement between Palawan and the national government for being violative of the Constitution and the Local Government Code (LGC), which is the basic issue in GR NO. 170867.

The Court held that there is no debate that the natural resource in the Camago-Malampaya reservoir belongs to the State, noting that Palawan’s claim is anchored not on ownership of the reservoir but on a revenue-sharing scheme, under Section 7, Article X of the 1986 Constitution and Section 290 of the LGC, that allows local government units (LGUs) to share in the proceeds of the utilization of national wealth provided they are found within their respective areas.

The Court, however, found that existing laws do not include the Camago-Malampaya reservoir within the area or territorial jurisdiction of the Province of Palawan. It stressed that “As defined in its organic law, the province of Palawan comprises merely of islands. The continental shelf, where the Camago-Malamapaya reservoir is loated, was clearly not included in its territory.

The Court also held that Presidential Decree No. 1596, which constituted Kalayaan as a separate municipality of the Province of Palawan, cannot be the basis for holding that the Camago-Malampaya reservoir forms part of Palawan’s territory. It declared that the delineation of territory in PD 1596 refers to Kalayaan alone and that the inclusion of the seabed, subsoil, and continental margin in Kalayaan’s territory cannot by simple analogy be applied to Palawan. Likewise, it held that the definition of “Palawan” under Republic Act No. 7611 should not be taken as a statement of territorial limits for purposes of Section 7, Article X of the 1987 Constitution, but in the context of RA 7611 which is aimed at environmental monitoring, research, and education.

The Court also did not subscribe to Palawan’s argument posited by the Province of Palawan that the national wealth, the proceeds from which the State is mandated to share with the LGUs, shall be wherever the local government exercises any degree of jurisdiction. “An LGU’s territorial jurisdiction is not necessarily co-extensive with its exercise or assertion of powers. To hold otherwise may result in condoning acts that are clearly ultra vires. It may lead to, the words of the Republic, LGUs ‘rush(ing) to exercise its powers and functions in areas rich in natural resources even if outside its boundaries) with the intention of seeking a share in the proceeds of its exploration’ – a situation that ‘would sow conflict not only among the local government units and the national government but worse, between and among local government units.’”

The Court pointed out also that Palawan never alleged in which of its municipalities or component cities and barangays the Camago-Malampay reservoir is located, militating against its claim that the area form part of its territory.
The Court further held that 1) estoppel does not lie against the Republic as previous acknowledgments of Palawan’s share were based on the mistaken assumption that it it is entitled to the said allocation, 2) Section1, Article X of the 1987 Constitution did not apportion the entire Philippine territory among the LGUs such that at any one time, a body of water or a piece of land should belong to some province or city, 3) the United Nations Convention on the Law of the Seas (UNCLOS) did not confer on LGUs their own continental shelf as this pertains to the coastal state.

(GR No. 170867, Republic v. Provincial Government of Palawan; GR No. 185941, Bishop Dulay v. Ermita, December 4, 2018)