Article 59p. 59

NATURAL RESOURCES AND ENVIRONMENTAL LAWS STATUTES and IMPLEMENTING RULES AND REGULATIONS

minimum

expenditure

requirement

herein

provided

may be reduced up to Two Hundred Thousand Pesos

(P200,000.00) per block annually. From the time coal

reserves in commercial quantity have been determined

jointly by the operator and the Energy Development

Board, the operator shall undertake the development

and production of the contract area within the period

agreed upon in the contract and shall be obliged to

spend

in

the

development

and

production

of

the

contract area an amount which shall be determined by

negotiation

between

the

operator

and

the

Energy

Development Board taking into account factors such as

measured reserves, quality of coal, mining method and

location and accessibility to market; Provided, further,

that with the approval of the Board, the operator may

concentrate all the annual work obligations on any one

or more of several contiguous or geologically related

blocks if it is shown that such concentration of work will

be

most

advantageous

and

beneficial

in

the

development

and

operation

of

the

coal

operating

contract

are;

Provided,

further,

that

if

during

any

contract year, the operator shall spend more than the

amount of money required to be spent, the excess may

be credited against the money required to be spent by

the operator during the succeeding years; Provided,

furthermore, that should the operator fail to comply with

the work obligations provided for in the coal operating

contract, it shall pay to the Government the amount it

should have spent but did not in direct prosecution of its

work obligations; Provided, finally, that except in case of

open pit mining, the operator shall drill at least thirty (30)

holes per block and a minimum footage of exploratory

holes before the end of the exploration period as may be

specified in the coal operating contract. The Board may,

however,

taking

into

account

the

geological

and

technical factors involved; allow a lesser number of drill

holes and footage giving due credit to other accepted

exploration methods and practices.

(b) The exploration period under every coal operating

contract shall be for two (2) years. If the operator has

complied

with

its exploration work obligations, the

exploration period may be extended for another two (2)

years. The coal operating contract shall lapse unless coal

of

commercial

quantity

is

measured

during

the

exploration period or at the end thereof in any area

covered

by

the

coal

operating

contract.

If coal of

commercial quantity is measured, the coal operating

contract shall remain in force for development and

production during the balance of the exploration period

and/or for an additional period ranging from ten (10) to

twenty (20) years, thereafter renewable for a series of

three (3)-year periods not exceeding twelve (12) years

under such terms and conditions as may be agreed

upon by the parties.

(c)

All

materials,

equipment,

plants

and

other

installations erected or placed on the exploration and/or

production area of a movable nature by the operator

shall become properties of the Energy Development

Board if not removed therefrom within one (1) year after

the termination of the coal operating contract.

(d) The operator shall be subject to the provisions of laws

of general application relating to labor, health, safety and

ecology insofar as they are not in conflict with the

provisions otherwise contained in this Decree.

Section 12. Full Disclosure of Interest in Coal Operating

Contract. Interest held in the coal operating contract by

domestic

mining

companies

and/or

the

latter's

stockholders may be allowed to any extent after full

disclosure

thereof

and

approved

by

the

Energy

Development Board.

Section 13. Arbitration. The Energy Development Board

may stipulate in a coal operating contract executed

under this Decree that disputes in the implementation

thereof between the Government and the operator may

be settled by arbitration.

Section

14.

Performance

Guarantee.

In

order

to

guarantee

compliance

with

the

obligations

of

the

operator executed under this Decree, the operator shall

post a bond or other guarantee of sufficient amount in

favor of the Government and with surety or sureties

satisfactory

to

the

Energy

Development

Board,

conditioned

upon

the

faithful

performance

by

the

operator of any or all of the obligations under and

pursuant to said coal operating contracts.

Section 15. Transfer and Assignment. The rights and

obligations under a coal operating contract executed

under this Decree shall not be transferred or assigned

without the prior approval of the Energy Development

Board; Provided, that such transfer or assignment may

be made only to a qualified person possessing the

resources

and

capability

to

continue

the

mining

operation of the coal operating contract and that the

operator has complied with all the obligations of the coal

operating contract.

Section 16. Incentives to Operators. The provisions of any

law to the contrary notwithstanding, a contract executed

under this Decree may provide that the operator shall

have the following incentives:

(a) Exemption from all taxes except income tax;

(b)

Exemption

from

payment

of

tariff

duties

and

compensating tax on importation of machinery and

equipment and spare parts and materials required for

the coal operations subject to the following conditions:

1. that machinery, equipment, spare parts and materials

of comparable price and quality are not manufactured in

the Philippines;

2. that the same are directly and actually needed and

will be used exclusively by the operator in its operations

or in operation for it by a contractor;

3. That they are covered by shipping documents in the

name of the operator to whom the shipment will be

delivered directly by the customs authorities; and

4. that prior approval of the Energy Development Board

was obtained by the operator before the importation of

such machinery, equipment, spare parts and materials,

which approval shall not be unreasonably withheld;

Provided, however, that the operator or its contractor

may not sell, transfer, or dispose of the machinery,

equipment, spare parts and materials without the prior

approval

of

the

Energy

Development

Board

and

payment of taxes and duties thereon; Provided, further,

that should the operator or its contractor sell, transfer, or

dispose of these machinery, equipment, spare parts or

materials without the prior approval of the Energy

Development Board, it shall pay twice the amount of the

taxes and duties thereon; Provided, finally, that the

Energy Development Board shall allow and approved

the sale, transfer or disposition of the said items without

tax if made:

(a) to another operator under a coal operating contract;

(b) for reasons of technical obsolescence; or

(c)

for

purposes

of replacement to improve and/or

expand the operation under the coal operating contract.

(c)

Accelerated

Depreciation.

At

the

option

of

the

taxpayer

and

in

accordance

with

the

procedures

established by the Bureau of Internal Revenue, fixed

assets owned by the coal units in the performance of its

coal operating contract may be:

© 2018 Compiled by RGL

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