Bangsamoro  –  Open  for  Business?      After   years   of   negotiations,   the   Philippine   government   and   the   Moro   Islamic  Liberation   Front   (“MILF”)   signed   the   Comprehensive   Agreement   on   the  Bangsamoro   (“CAB”)   on   27   March   2014   that   seeks   to   end   more   than   four  decades  of  Muslim  secessionist  movements  and  violence  in  Mindanao.  The  CAB  includes   the   Framework   Agreement   on   the   Bangsamoro   earlier   signed   on   15  October  2012,   the  four  annexes  (normalization,  revenue  generation  and  wealth  sharing,  transitional  arrangement  and  modalities),  and  other  agreements  signed  by   both   parties   during   the   course   of   the   17-­‐year   peace   negotiations.     The  documents  describe  and  justify  the  Bangsamoro  as  an  identity,  a  territory  and  as  a   new   political   entity,  which  will   have   its   own   distinct   political,   economic   and  social  systems  suitable  to  the   life  and  culture  of   the  Bangsamoro  people.   It  will  enjoy  political  and  fiscal  autonomy    The  Regalian  Doctrine  and  the  Bangsamoro  Right  to  Self  Determination    The  concept  of  jura  regalia  where  the  Regalian  Doctrine  was  derived  states  that  private  title  to   land  must  be  traced  to  some  grant,  whether  express  or   implied,  from   the   Spanish   Crown   or   its   successors,   the  American   Colonial   government,  and   ultimately,   the   Philippine   Republic.     By   virtue   of   the  Treaty  of  Paris  of  10  December  1898,  Spain  ceded  to  the  United  States  of  America  all  rights,  interests,  and   claims   over   the   national   territory   of   the   Philippine   islands   for   a  consideration   of   US$20   million   whose   colonial   government   then   pursued   the  Spanish   policy   of   requiring   settlers   on   public   lands   to   obtain   deeds   from   the  government.  When   the   1935   Constitution  was   passed,   the   issue   then  was   the  conservation   of   the   national   patrimony   for   the   Filipinos,   which   impelled   the  framers  of   the   fundamental   law  to  entrench  the  Regalian  Doctrine  wherein  the  State   asserted   ownership   over   lands   of   the   public   domain   and   all   natural  resources   found   therein,   as   further   reiterated   in   the   1973   and   1987  Constitutions.      Professor  Miriam  Coronel   Ferrer,   now   the   Philippine  Government   Peace   Panel  Chair,  in  her  book  “Costly  Wars,  Elusive  Peace”  premised  that  while  landlessness  has  fed  rural  unrest  in  all  parts  of  the  country,  the  issue  of  landlessness  assumed  an  ethnic  dimension  in  Mindanao.  The  Moro  insurgencies  are  thus  sustained  by  domestic  inequities  and  state  failure  to  provide  redistributive  measures.  Rather  than   a   war   over   religion,   Moro   resistance   is   basically   a   Bangsamoro   (Moro  people/nation)   nationalist/national   liberation   struggle   to   free   Muslims   in   the  Philippines   and   their   claimed   homeland   from   Filipino   colonialism   and  oppression.   In   this   regard,   Muslim   resistance   organizations   have   invoked   the  United  Nations-­‐recognized  principle  of  the  right  to  self-­‐determination.    The  Resource  Potential  of  Bangsamoro    There   have   been   no   extensive   mineral   exploration   or   mining   activities   in  Bangsamoro.   These   can   be   attributed   to   the   security   risks   associated  with   the  prolonged  civil  strife  arising  from  violence  between  the  military  and  rebel  forces.  However,  the  Center  for  Energy  Sustainability  and  Economics  estimated  mineral  

deposits  in  Mindanao  island  at  $312  billion.    With  respect  to  petroleum  potential,  the  Sulu  Sea  basin  and  Cotabato  basin,  where  the  Liguasan  Marsh  is  located,  are  within   the   territorial   limits   of   Bangsamoro.   The   Sulu   Sea   basin   extends   to   the  northeast  portion  of  Sabah  where  there  has  been  gas  discoveries  and   is  part  of  the  prolific   circum-­‐Borneo  deep-­‐water   trend.  The  Cotabato  Basin,   on   the  other  hand,   is   an   onshore   northwest-­‐trending   trough   in   south   central   Mindanao  covering   an   area   of   14,000   sq.   km.   It   is   considered   a   frontier   area   in   terms   of  level  of  exploration  maturity.    The   Department   of   Energy   (“DOE”)   calculated   the   resource   volumes   in  accordance   with   the   Philippine   Petroleum   Resource   Classification   System.   For  the   Sulu   Sea   basin,   the   hypothetical   (mapped)   resources   are   estimated   at   109  million   barrels   of   oil   equivalent   (“MBOE”)   while   the   speculative   (unmapped)  resources   are   94  MBOE   for   a   total   of   203  MBOE.   ExxonMobil   in   a   consortium  with   BHP   Billiton   Petroleum   and   Malaysian-­‐based   Mitra   Energy   drilled   four  wells   in   the  6,460-­‐sq  km  Service  Contract  56   in   the  Sulu  Sea  Basin  as  part  of  a  $400  million  exploration  campaign.  But  while  the  company  hit  gas  with  three  of  the   four  holes,  ExxonMobil   said   the  quantities  were  noncommercial.  According  to  the  Petroleum  Economist  (2011),  while  ExxonMobil  resigned  as  operator  and  pulled  out  of  its  deep-­‐water  block  in  the  Sulu  Sea,  its  campaign  had  been  lauded  as  a  success  by  some  industry  observers  and  had  generated  significant  interest  in  the  potential  of  the  Sulu  Sea.      

 Sulu  Sea  –  East  Palawan  Basin  

   In   the   Cotabato   Bain,   exploration   results   have   shown   that   it   is   mainly   an   oil-­‐prone  area.  Based  on  resource  assessment  studies  made  by  the  DOE,  the  basin  is  estimated   to   contain   some   158   MBOE,   of   which   45%   is   gas.   Any   oil   or   gas  discovery  made  within  the  Cotabato  Basin  can  be  produced  economically  due  to  their  proximity  to  residential,  industrial  and  commercial  sites.        

 Cotabato  Basin  

   Bangsamoro  Transition  Commission  and  the  Bangsamoro  Basic  Law    Since  1996,  the  Philippine  Government  and  the  MILF,  which  formally  broke  away  from   the   Mindanao   National   Liberation   Front   in   1981,   have   been   engaged   in  peace   talks.   On   27   July   2008,   their   respective   peace   panels   finalised   a  Memorandum   of   Agreement   on   Ancestral   Domain   (“MOA-­‐AD”),   creating   the  Bangsamoro   Juridical   Entity   as   an   independent   State   or   a   near-­‐independent  State.    

DRY WELL, P&A DRY WELL w/ oil shows, P&A

DRY WELL w/ gas shows, P&A DRY WELL w/ oil & gas shows, P&A OIL SEEP

 However,  on  4  August  2008,  the  Supreme  Court  issued  a  temporary  restraining  order   (“TRO”)   preventing   its   signing   by   both   parties.   The   TRO   was   issued  pursuant   to   the  Petition   for  Mandamus  and  Prohibition   filed  with   the  Supreme  Court   on  23   July   2008,   docketed   as  G.R.  No.   183591,   by   the  Province   of  North  Cotabato   and   its   Vice-­‐Governor   Emmanuel   Piñol,   questioning   the  constitutionality   of   the   MOA-­‐AD.   On   14   October   2008,   the   Supreme   Court  declared  the  MOA-­‐AD  unconstitutional.      A   year   later   the   Parties   resumed   negotiations   and   on   15   October   2012,   the  Philippine  Government  and   the  MILF  signed   the  Framework  Agreement  on   the  Bangsamoro   (“FAB”)   at   Malacañang.     In   December   2012,   President   Benigno  Simeon  Aquino  issued  Executive  Order  No.  120,  which  created  the  Bangsamoro  Transition   Commission   (“BTC”),   a   body   authorized   to   draft   the   Bangsamoro  Basic   Law   (“BBL”)   for   the   new   Bangsamoro   political   entity.   The   President  certified  the  draft  BBL  as  an  urgent  bill.  In  relation  to  its  task  to  draft  the  BBL,  the  BTC  is  also  mandated  to  recommend  to  Congress  or  the  people  amendments  to  the  1987  Philippine  Constitution,  if  it  deems  such  necessary.      According   to   the   119-­‐page   draft   BBL   submitted   to   Congress   on   10   September  2014  and  filed  as  House  Bill  4994  in  the  House  of  Representatives  and  Senate  Bill  2804   in   the   Senate,   the   powers   of   government   are   vested   in   the   Bangsamoro  Parliament,  which  shall  set  policies,  legislate  on  matters  within  its  authority  and  elect  a  Chief  Minister  who  shall  exercise  executive  authority  on  its  behalf.        The  BBL  shall  be  subject  to  a  plebiscite  scheduled  for  first  quarter  of  2015  to  give  the  people  the  choice  to  ratify  the  BBL.    Ratification  by  the  people  in  a  plebiscite  shall  make  the  BBL  effective  and  will  confirm  the  BBL  as  the  fundamental  law  of  the   Bangsamoro.   Provinces,   cities,   municipalities   and   barangays   wherein   the  majority  of  voters  have  ratified  the  BBL  will  form  part  of  the  Bangsamoro,  which  will   replace   the   Autonomous   Region   of   Muslim   Mindanao   (“ARMM”).   Upon  ratification   of   the   BBL,   the   Bangsamoro   Transition   Authority   (“BTA”)   shall  perform  the   functions  of  an   interim  Bangsamoro  government  until   the  election  and  assumption  of  the  members  of  the  Bangsamoro  Assembly  and  the  formation  of  the  Bangsamoro  government  in  2016.  The  future  Bangsamoro  will  be  the  only  region  in  the  country  that  will  run  a  government  through  parliamentary  means  and  have  an  “asymmetric  relationship”  with  the  Central  or  National  Government,  “reflective  of   the  recognition  of   their  Bangsamoro   identity,  and  their  aspiration  for   self   governance”   in   accordance   with   the   Constitutional   provisions   on   the  creation  of  autonomous  regions.    The   Bangsamoro   government  will   be   granted   authority   to   govern   its   financial  resources  and   levy   taxes  appropriately  as  prescribed   in   the  BBL.   In  addition  to  taxes   already   being   collected   by   the   ARMM,   the   Bangsamoro  may   also   collect  capital   gains   tax,   estate   tax,   documentary   stamp   tax   and   donor’s   tax.   All   the  revenues   from   these   taxes   will   form   part   of   the   Bangsamoro   treasury.   From  national  taxes,  fees  and  charges  collected  in  the  Bangsamoro,  75%  shall  go  to  the  Bangsamoro  and  25%  to  the  Central  government.    

The   Bangsamoro   shall   have   the   authority   to   contract   loans,   credits   and   other  forms   of   indebtedness   with   government   or   private   banks   and   lending  institutions   except   those   requiring   sovereign   guaranty.   The   Bangsamoro   may  also  avail  of  overseas  development  assistance  (“ODA”)  for  priority  development  projects.  Other  sources  of  revenue  include  shares  of  government  income  derived  from   Bangsamoro   government-­‐owned   and   controlled   corporations,   financial  institutions,   economic   zones,   and   freeports   operating   within   the   Bangsamoro  territory.  It  may  receive  grants  derived  from  economic  agreements  entered  into  or  authorized  by  the  Bangsamoro  Assembly  such  as  donations,  endowments  and  other   forms  of  aid,   subject   to   the   reserved  powers  of  Central  government  over  foreign   affairs.   Grants   and   donations   may   be   received   directly   by   the  Bangsamoro  government  to  be  used  solely  for  the  purpose  for  which  they  were  received.    Ownership  and  Management  of  Natural  Resources    According   to  Nasser  Marohomsalic   in  his  paper   “The  Framework  Agreement  on  the   Bangsamoro:   Towards   Hurdling   the   Constitutional   Obstacle   to   Moro   Self-­‐determination”,   the   FAB   unlike   the   MOA-­‐AD,   does   not   directly   vest   in   the  Bangsamoro   government   the   joint   jurisdiction   with   the   National   Government  over  natural  resources  in  the  territory  of  the  Bangsamoro  Government.  Neither  does   it   vest   in   the   Bangsamoro   government   jurisdiction   and   control   over  strategic   mineral   and   other   sources   of   energy   including   their   exploration   and  exploitation.    However   under   the   BBL,   income   from   the   exploration,   development   and  exploitation  of  all  the  natural  resources  within  the  Bangsamoro  shall  be  allocated  as  follows:    

a.     For  non-­‐metallic  minerals  such  as  sand,  gravel  and  quarry  resources  within  the  Bangsamoro,  revenues  shall  belong  to  the  Bangsamoro  and  its  local  government  units.  

 b.     For   metallic   minerals   within   the   Bangsamoro,   seventy-­‐five   percent  

(75%)   shall   belong   to   the  Bangsamoro,   and   twenty-­‐five   (25%)   shall  go  to  the  Central  government.  

 c.     For  fossil  fuels  such  as  petroleum,  natural  gas  and  coal,  and  uranium,  

there   shall   be   equal   sharing   of   income   between   the   Central   and  Bangsamoro  governments.  

 Understandably,  the  resource  management  provisions  under  the  BBL  are  fraught  with  legal  and  fiscal  issues  and  uncertainties  that  might  impede  their  successful  applications.   Foremost   of   these   is   the   power   of   veto   by   the   Bangsamoro  government   over   development   projects   in   mining,   energy   and   power   entered  into   or   granted   by   the   Philippine   government   similar   to   the   festering   issues  experienced  under  the  Local  Government  Code  and  the  Indigenous  Peoples  Rights  Act.    

As  there  are  legislated  sharing  agreements  in  resources  development  contracts,  there   is   then   an   urgency   to   review   petroleum   and   coal   services   contracts,  renewable  energy  service  contracts,  and  mineral  agreements  and  FTAAs  under  the  Philippine  Mining  Act  of  1995.    The  same  is  true  in  the  power  sector  as  there  is  a  need  to  harmonize  the  provisions  of  RA  9136  or  the  Electric  Power  Industry  Reform  Act   (“EPIRA”),  Energy  Regulations  No.  1-­‐94   or   the  Rules  and  Regulations  Implementing  Section  5  (i)  of  Department  of  Energy  Act  of  1992   (“ER  1-­‐94”)  and  the   Local Government Code on Royalty Tax (or National Wealth Tax) and Government Share. There   is   also  a  need   to  determine  with   certainty   the   role  of  indigenous   peoples,   the   free   and   prior   informed   process,   and   the   royalties  extended  to  IPs  under  the  Indigenous  Peoples  Rights  Act.  Perhaps  the  Bangsamoro  can  start  from  a  clean  slate  learning  from  the  successes  and  mistakes  in  resource  management  from  the  National  Government.  To  begin  with,   the   Bangsamoro   can   tap   ODAs   for   comprehensive   resources   potential  assessment  and  the  establishment  of  a  centralized  data  base  system  for  mineral  and   petroleum   resources   that   will   be   accessible   to   resource   developers.  Depending  on  the  outcome  of  the  final  resource  management  structure  with  the  Central   Government   under   the   BBL,   the   Bangsamoro   government   can   then  implement  a  transparent  mineral  tenement,  energy  service  contract,  and  power  contracts  management  system.      Of  course,  there  are  apprehensions  that  the  Bangsamoro  during  its  early  stages  of  existence  is  incapable  of  conducting  the  required  administrative  and  financial  know-­‐how  in  resource  management.  There  is  an  urgent  need  to  build  its  capacity  and  knowledge  in  handling  public  financial  resources  and  improve  the  quality  of  governance.      Law   enforcement   and   maintenance   of   peace   and   order   shall   be   the   primary  function   of   the   police   force   for   the   Bangsamoro.   It   remains   to   be   seen   if   the  Bangsamoro   will   be   able   to   fully   secure   its   territorial   jurisdiction   particularly  from   lawless   elements,   warlords,   local   militias,   break-­‐away   rebel   factions   and  communist  insurgents,  which  have  been  the  scourged  of  resources  developers  in  Mindanao  island.        The  BBL  provides   that   the   privileges   already   enjoyed  by   the   local   government  units   (“LGUs”)   under   existing   laws   shall   not   be   diminished   unless   otherwise  altered,  modified  or   reformed   for   the  purpose  of   good  governance  pursuant   to  the   provisions   of   a   Bangsamoro   local   government   code.   Policy   issues  encountered  with  LGUs  are  expected  to  be  encountered  within  the  Bangsamoro  although  at  a  greater  and  more  complicated  scale.    Conclusion    Despite  the  assurance  by  the  negotiating  parties  of  its  constitutionality,  the  BBL  bill   is   expected   to   encounter   severe   scrutiny   in   Congress.   As   soon   as   the   BBL  becomes   law,   its   constitutionality   or   other   legally   controversial   provisions  will  most  likely  be  challenged  before  the  Supreme  Court.    When  the  dust  has  settled,  the  Bangsamoro  governance  structure  will  surely  pave  the  way  for  the  region  to  

realize   its   full   economic   and   development   potential   utilizing   the   untapped  mineral  and  energy  resources.  Bangsamoro  administrators  through  transparent  management  must  assuage  the  lingering  fear  that  resource  development  will  not  pave   the   way   for   environmental   degradation   or   an   inequitable   distribution   of  wealth  thereby  negating  the  opportunity  to  improve  the  well  being  of  their  Moro  constituents.    The  resources  industry  must  share  in  the  responsibility  to  ensure  that  inclusive  growth  will  be  achieved.    

   Fernando “Ronnie” Penarroyo is the Managing Partner of Puno and Penarroyo Law (fspenarroyo@punopenalaw.com). He specializes in Energy, Resources and Environmental Law, Business Development and Project Finance.