Article 58p. 58

NATURAL RESOURCES AND ENVIRONMENTAL LAWS STATUTES and IMPLEMENTING RULES AND REGULATIONS

those who have complied with the requirements of

unitization;

Provided,

further

that

those

who

have

unitized may be granted by the Board during the

extension period special operating permits in order not

to disrupt existing coal operations; Provided, finally, that

no further extension shall be allowed after the extension

granted in this decree, and coal permits, leases and

other rights not converted to coal operating contract for

any

cause

by

January

27,

1978

shall

be

deemed

automatically canceled and the area thereby shall be

open for coal operating contract in accordance with

Section 6 thereof.

Section 8. Coal Operating Contract. Each coal operating

contract herein authorized shall, subject to the approval

of

the

President,

be

executed

by

the

Energy

Development Board.

In a coal operating contract, service, technology and

financing are furnished by the operator for which it shall

be entitled to the stipulated fee and reimbursement of

operating expenses. Accordingly, the operator must be

technically

competent

and

financially

capable

as

determined

by

the

Energy

Development

Board

to

undertake

the

coal

operations

as

required

in

the

contract.

Section 9. Obligations of Operator in Coal Operating

Contract. The operator under a coal operating contract

shall

undertake,

manage

and

execute

the

coal

operations which shall include:

(a) The examination and investigation of lands supposed

to contain coal, by detailed surface geologic mapping,

core

drilling,

trenching,

test

pitting

and

other

appropriate means, for the purpose of probing the

presence of coal deposits and the extent thereof;

(b) Steps necessary to reach the coal deposits so that can

be mined, including but not limited to shaft sinking and

tunneling; and

(c) The extraction and utilization of coal deposits.

The

Government shall oversee the management of

operation contemplated in the coal operating contract

and in this connection, shall require the operator to:

(a) Provide all the necessary service and technology;

(b) Provide the requisite financing;

(c)

Perform

the

work

obligations

and

program

prescribed in the coal operating contract which shall be

less than those prescribed in this Decree;

(d) Operate the area on behalf of the Government in

accordance

with

good

coal

mining practices using

modern

methods

appropriate

for

the

geological

conditions of the area to enable maximum economic

production of coal, avoiding hazards to life, health and

property, avoiding pollution of air, land and waters, and

pursuant to an efficient and economic program of

operation;

(e) Furnish the Energy Development Board promptly

with all information, data and reports which it may

require;

(f) Maintain detailed technical records and account of its

expenditures;

(g) Maintain detailed technical records and account of

safety demarcation of agreement acreage and work

areas, non-interference with the rights of the other

petroleum, mineral and natural resources operators;

(h) Maintain all necessary equipment in good order and

allow access to these as well as to the exploration,

development and production sites and operations to

inspectors

authorized

by

the

Energy

Development

Board;

(i)

Allow

representatives

authorized

by

the

Energy

Development Board full access to their accounts, books

and records for tax and other fiscal purposes;

On the other hand, the Energy Development Board shall:

(a) On behalf of the Government, reimburse the operator

for all operating expenses not exceeding ninety percent

(90%) of the gross proceeds from production in any year;

Provided, that if in any year, the operating expenses

exceed ninety percent (90%) of the gross proceeds from

production, then the unrecovered expenses shall be

recovered

from

the

operation

of

succeeding years.

Operating expenses mean the total expenditures for coal

operation incurred by the operator as provided in a coal

operating contract;

(b) Pay the operator a fee, the net amount of which shall

not exceed forty per cent (40%) of the balance of the

gross income after deducting all operating expenses;

(c) Reimburse operating expenses and pay the operator's

fee in such form and manner as provided for in the coal

operating contract.

Section

10.

Additional

Fee.

All valid and subsisting

holders of coal revocable permits, coal leases and other

existing

rights

granted

by the government for the

exploration and exploitation of coal lands or the duly

qualified operators thereof who have organized their

area into a coal unit, subject to conditions imposed by

the Energy Development Board, be granted in the coal

operating contract, in addition to the operator's fee

provided in Section 9, a special allowance, the amount of

which

shall

not exceed forty percent (40%) of the

balance

of

the

gross

income

after

deducting

all

operating expenses.

Coal operating contracts entered into with Philippine

citizens or corporations except those already covered

under the proceeding paragraph, shall be granted a

special allowance the amount of which shall not exceed

thirty per cent (30%) of the balance of the gross income

after deducting all operating expenses; Provided, that

coal operating contracts in which Philippine citizens or

corporations have a minimum participating interest of

forty percent (40%) in the contract area may, subject to

reasonable

conditions

imposed

by

the

Energy

Development Board, be granted a special allowance not

exceeding twenty percent (20%) of the balance of the

gross income after deducting all operating expenses.

"For the purpose of this section, a Philippine corporation

means a corporation organized under Philippine laws at

least

sixty

percent

(60%)

of

the

capital

of

which,

including the voting shares, is owned and held by

citizens of the Philippines.

Section 11. Minimum Terms and Conditions. In addition to

those elsewhere provided in this Decree, every coal

operating contract executed in pursuance hereof shall

contain the following minimum terms and conditions:

(a) Every operator shall be obliged to spend in direct

prosecution

of

exploration

work

not

less

than the

amounts provided for in the coal operating contract and

these amounts shall not be less than the total obtained

by multiplying the number of coal blocks covered by the

contract by One Million Pesos (P1,000,000.00) per block

annually; Provided, that if the area or a portion thereof is

suitable for open pit mining as determined jointly by the

operator

and

the

Energy

Development

Board,

the

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