Republic Act No. 3098

 

 

AN ACT

TO AMEND CERTAIN ARTICLES OF REPUBLIC ACT NUMBERED THREE HUNDRED EIGHTY-SEVEN, OTHERWISE KNOWN AS THE “PETROLEUM ACT OF 1949


Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

 

SECTION 1.  Paragraph (i), Article two of Republic Act Numbered Three hundred eighty-seven is hereby amended to read as follows:

 

“(i) All measurements of distances, width, length, areas, depth and volume, and weight shall be in the system designated by the Secretary of Agriculture and Natural Resources.” 

 

SEC. 2.  Article sixteen of the same Act is hereby amended to read as follows: 

 

“ART. 16.  Lands covered by concessions are subject to public easements.  – All lands covered by concessions granted under this Act shall be subject to public easements established or recognized by existing or future laws:  Provided, That the rights of the petroleum concessionaire to search, prospect, and drill for, produce, extract, transport, store, process, and treat petroleum on, under, and from said lands, and other rights granted to him under this Act are recognized:  And provided, further, That in case public easement shall be established after the effective date of the concession contract the concessionaire shall be paid just compensation for actual damages that he may suffer as a consequence thereof.”

 

SEC. 3.  Article twenty-three of the same Act is hereby amended to read as follows: 

 

“ART. 23.  Use of water, timber and clay.  – Concessionaires under this Act shall have the gratuitous right to utilize for exploration work within his concession, timber, water, and clay from any public lands within such concession, all subject to existing prior rights thereto, to the regulations issued under this Act and to other laws and regulations on the matter.”

 

SEC. 4.  Article twenty-seven of the same Act is hereby amended to read as follows:

 

“ART. 27.  Force Majeure.  – Failure on the part of the concessionaire to fulfill any of the terms and conditions provided by this Act or its regulations or by other relevant laws shall not be deemed a breach of such obligation on the part of the concessionaire insofar as such failure results from force majeure, including the act of God, war, insurrection, riot, civil commotion, strike, tide, storm, flood, lightning, explosion, fire, earthquake, and any other happening which the concessionaire could not reasonably prevent control or avoid:  Provided, That if during the term of any concession obtained under this Act, including any extension thereof, the concessionaire is prevented from fully exercising its rights granted under this Act during any extended period of force majeure resulting from act of God, war, insurrection, riot, or civil commotion which the concessionaire could not reasonably prevent or control or avoid, such periods shall be excluded in computing the period of time chargeable to the term of the concession or any extension thereof, when, within six months from the time such period of  force majeure is considered to have ended, the concessionaire has formally applied to the Secretary of Agriculture and Natural Resources for recognition that such period of  force majeure did exist and that the concessionaire is entitled to the consideration herein provided.

 

“The extension shall be granted under the same terms and conditions as those contained in the original concession, subject, however, to the provisions of Articles forty-seven and forty-nine of this Act.

 

“No further renewal shall be allowed to any exploration concessionaire at the end of the second extension.”

 

SEC. 5.  Article thirty-eight of the same Act is hereby amended to read as follows: 

 

“ART. 38.  Definition of exploration.  – The term “Exploration” means all work that have for their object the discovery of petroleum, including, but not restricted to, surveying and mapping, aerial photography, surface geology, geophysical investigations, testing of subsurface conditions by means of borings or structural drillings, and all such auxiliary work as are useful in connection with such operations. 

 

“Test wells drilled for exploratory purposes may be of such size and type suitable for oil production, but the actual production of petroleum is not included in the term “Exploration,” except that petroleum found during exploration may be freely used by the concessionaire in his operations for exploration purposes only with the same concession:  Provided, That petroleum may be produced and marketed if necessary in the exercise of sound petroleum engineering practices or produced and marketed from wells drilled for the purpose of delineating a discovered petroleum deposit and only after notice to the Secretary of Agriculture and Natural Resources.  When petroleum is produced and marketed under such circumstances, the concessionaire shall pay royalty to the Government in the same manner and form as provided in this Act:  Provided, however, That the right to produce and market petroleum as authorized herein may be terminated by the Secretary of Agriculture and Natural Resources after a hearing and order to that effect.”

 

SEC. 6.  Article forty-three of the same Act is hereby amended to read as follows:

 

“ART. 43.  Size and shape of exploration blocks.  – Exploration concessions may be granted in lots or blocks as compact as possible, and as closely rectangular as possible in shape except when contiguous with the sea, bays, lakes, rivers, lagoons, roads, or with other concessions already granted which are of irregular boundaries.

 

“Each block or lot shall not be more than one hundred thousand hectares nor less than twenty thousand hectares in area, and in no case shall the long dimension of the rectangle be more than five times the short dimension:  Provided, That the Secretary of Agriculture and Natural Resources may, upon hearing and order, grant exception to the minimum area and shape provisions of this article when reasonably required by adjoining concessions, settlement of conflict, or geographical or geological features that render it impractical to conform with such requirements.”

 

SEC. 7.  Article forty-six of the same Act is hereby amended to read as follows:

 

“ART. 46.  Term of exploration concession.  – The initial term of an exploration concession shall be not more than four years counted from the date of its issuance:  Provided, however, That if the concessionaire has complied with the provisions of this Act and the regulations and with the terms and conditions contained in the contract of concession, the concessionaire is entitled to the grant of an extension of the same for a term of three years, for its entire area or for any part thereof, upon application of the concessionaire made prior to the expiration of the original term.  If during the said first extension, the concessionaire has also complied with the provisions of this Act and the regulations and the terms and conditions contained in the contract of concession, upon application of the concessionaire made prior to the expiration of the first extension, the concessionaire likewise is entitled to a further extension of the said concession for its entire area or for any part thereof, for another term of three years. 

 

“The extension shall be granted under the same terms and conditions as those contained in the original concession, subject, however, to the provisions of Articles forty- seven and forty-nine of this Act.

 

“No further renewal shall be allowed to any exploration concessionaire at the end of the second extension.” 

 

SEC. 8.  Article forty-eight of the same Act is hereby amended to read as follows:

 

“ART. 48.  Work obligations on two or more exploration blocks within any one sedimentary basin.  – In case two or more exploration blocks held by the same concessionaire are in the same sedimentary basin, the total amount of work obligations for exploration required therefor in any concession year during the initial term of four years and its extensions may be spent anywhere within the sedimentary basin where such exploration blocks or any portion thereof are located as if said blocks are covered by a single concession.  Any amount spent in excess of the minimum required in any concession year for any of the said concessions herein referred to, may, at the election of the concessionaire, be credited against exploration work obligations in the same year for other concessions in the same sedimentary basin, or carried forward and credited against future exploration work obligations on any of the concession herein referred to:  Provided, That, in the event such excess expenditure is carried forward to the succeeding year or years and credited against the work obligations for other concessions the concessionaire shall be obligated to continue exploration operations in each of the said other concessions to the extent of twenty-five per centum of the minimum amount of work obligations required in any concession year.  Failure to comply with this obligation shall be considered as non-compliance with the provisions of this Act.

 

“However, a concessionaire holding two or more exploration concessions may, upon previous approval of the Secretary of Agriculture and Natural Resources thru the recommendation of the Director of Mines, concentrate the performance of his exploration work obligations required to be performed under Article forty-seven hereof on each of the said concessions held by the said concessionaire by drilling exploratory wells in any one of them whether or not they are located in the same sedimentary basin:  Provided, That such approval shall only be given when at least fifty per centum of the total area of all the concessions held by the same concessionaire had already been covered by geological and/or geophysical investigations and the same had already been completed and report thereon submitted to the satisfaction of the Director of Mines.  And, provided, further, That the concessionaire has complied with all obligations as to all said concessions.”

 

SEC. 9.  Article fifty-three of the same Act is hereby amended to read as follows: 

 

“ART. 53.  Application for exploitation concession covering areas within exploration concession.  – An exploration concessionaire, at any time during the life of his concession, including any extension thereof, may select for exploitation purposes one or more parcels from the area covered by his exploration concession.  Upon application and fulfillment of all the requirements of this Act, and provided that the total area of such parcel or parcels so selected from any one exploration block shall not exceed one-half of the area of such block, an exploitation concession covering such parcel or parcels, shall be granted to such applicant.  Such parcels may be selected by the applicant anywhere within the exploration block, whether contiguously or separately:  Provided, That any parcel or parcels so selected and applied for shall be charged against the total area to which the exploration concessionaire is entitled for exploration.

Provided, That all the requirements of this Act and the regulations have been complied with, an application for exploitation concession filed as provided for in this article shall, pending the issuance of an exploitation concession covering the areas for which application has been made, operate to confer upon the concessionaire all the rights and obligations which are conferred by this Act through an exploitation concession:  Provided, further, That an exploitation concession may also be granted to any person who, without being a holder of an exploration concession, discovers and registers with the Bureau of Mines in accordance with Article sixty-five hereof any natural deposit or seep or natural gas emanation.”

 

SEC. 10.  Article fifty-seven of the same Act is hereby amended to read as follows: 

 

“ART. 57.  Size and shape of exploitation concession.  – The exploitation concession shall be granted in parcel or parcels, rectangular in shape as much as possible, except when contiguous with the seas, bays, lakes, rivers, lagoons, roads, or with other existing concessions of irregular boundaries; or when otherwise approved by the Secretary of Agriculture and Natural Resources. 

 

“The area of any exploitation parcel which may be acquired under a single concession shall not be more than fifty thousand hectares nor less than one thousand hectares, and in no case shall the greater dimension of the rectangle be more than five times the other, nor shall the total area of such parcel or parcels so selected for exploitation concession or concessions within an exploration concession exceed one-half of the total area of the exploration block:  Provided, That the Secretary of Agriculture and Natural Resources may, upon hearing and order, grant exception to the minimum area and shape provisions of this article when reasonably required by adjoining concessions, settlement of conflict, or geographical or geological feature that render it impractical to conform with such requirement.”

 

SEC. 11.  Article fifty-nine of the same Act is hereby amended to read as follows: 

 

“ART. 59.  Rights conveyed under exploitation concession.  – An exploitation concessionaire, his heirs and assigns, has the exclusive right, during the term of the concession, to drill within the boundaries projected vertically downward of the parcel or parcels covered by his concession, to extract within the boundaries thereof the substances referred to in this Act, to utilize them once they are extracted, and to do all acts authorized within the scope of exploitation, as defined in Article fifty-one this Act, subject to the provisions of this Act and the regulations that may be issued by the Secretary of Agriculture and Natural Resources in accordance with powers conferred upon him in this Act. 

 

“In case roads and/or bridges are constructed by the concessionaire in connection with the operation of his exploitation concession, the same shall be available for public use when such use shall not interfere with or destroy the use thereof by the concessionaire in his operation as may be agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire:  Provided, however, That the concessionaire shall have no responsibility or liability to the government or to the public for the condition, construction, or maintenance of such roads and/bridges.”

 

SEC. 12.  Article seventy-three of the same Act is hereby amended to read as follows: 

 

“ART. 73.  Renunciation of areas covered by exploitation concession.  – The holder of an exploitation concession, may, at any time, renounce the whole or any part of the total area covered by his exploitation concession.”

 

SEC. 13.  Article ninety-one of the same Act is hereby amended to read as follows: 

 

“ART. 91.  Procedure for cancellation.  – Before any concession is cancelled for cause or causes mentioned in this Act, the concessionaire shall first be notified in writing of such cause or causes, and shall be given an opportunity to be heard, and to show cause why the concession shall not be cancelled.  If upon investigation, the Secretary of Agriculture and Natural Resources shall find the concessionaire to be in default, the latter shall be given an opportunity to correct such default.  If the concessionaire shall continue to be so in default for a period of ninety days from the date of the decision finding him in default, the concession may be cancelled in an order to that effect, copy of which shall be furnished to the concessionaire, and which order shall become final thirty days from receipt thereof, unless the concessionaire decides to take advantage of the provisions of Article one hundred seven of this Act, in which case the concession shall continue to be in force until, and if, a competent court or board of arbitrators decides otherwise; and then the concessionaire shall have ninety days after any such decision or award to correct the default.”

 

SEC. 14.  After Article ninety-three of the same Act, there are hereby inserted Articles ninety-three A, ninety-three B, and ninety-three C, which shall read as follows: 

 

“ART. 93-A.  Delay in the payment of tax or royalty.  – Where the amount of tax or royalty imposed by this Act or concession contract is not paid on the due date, there shall be collected as part of the said tax or royalty a surcharge of one per centum thereof per month from the due date until they are paid. 

 

“ART. 93-B.  Illegal obstruction to government officials.  – Any person who illegally prevents of obstructs the Secretary of Agriculture and Natural Resources or the Director of Mines or any of their representatives, in the performance of their duties under the provisions of this Act, shall be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months or both. 

 

“ART. 93-C.  Illegal obstruction to concessionaires.  – Any person who illegally prevents or obstructs the holder of any concession granted under this Act in his operation shall be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months or both.” 

 

SEC. 15.  Article one hundred four of the same Act is hereby amended to read as follows: 

 

“ART. 104.  Exploration of petroleum.  – No export tax shall be levied upon petroleum produced from exploitation concessions granted under this Act as well as on equipment, machinery, materials, instruments, supplies and accessories imported and used exclusively in the furtherance of the operations of the concessionaire under this Act if exported any time after such bona fide use thereof.  As to equipment, materials, instruments, supplies and accessories mentioned in this article, in order to qualify for the exemption, the concessionaire shall notify the Secretary in writing before the date of the export and the failure to do so shall constitute a forfeiture of the exemption from the export tax which shall become promptly payable.”

 

SEC. 16.  Article one hundred ten of the same Act is hereby amended to read as follows:

 

“ART. 110.  Rules and regulations regarding conservation of petroleum.  – Rules and regulations may be issued which shall require concessionaires to utilize in their exploration and exploitation operations the latest and most improved methods and devices to prevent waste in petroleum as well as to prevent oil, oil-field brine or other oil-field contamination from causing pollution or otherwise damaging streams, surface or underground water supply, and valuable mineral deposits.  The Secretary of Agriculture and Natural Resources may also issue orders which shall control the rate of production from any well in the interest of conservation of the petroleum resources so as to prevent waste, as elsewhere defined in this Act.”

 

SEC. 17.  Article one hundred twelve of the same Act is hereby amended to read as follows: 

 

“ART. 112.  Transfer and assignment.  – No assignment or transfer in whole or in part of the rights of the concessionaire shall be made without the previous written approval of the Secretary of Agriculture and Natural Resources.  Such approval shall be granted after (1) the proposed assignee or transferee is found by the Secretary to be duly qualified to acquire or hold concessions under the provisions of Article thirty-one of this Act and other applicable laws, and if said assignee or transferee is or has been a petroleum concessionaire, he was or has been diligent in the prosecution of his obligations as such, (2) the concessionaire is found by the Secretary to have complied with all his obligations under the terms of his concession contract, the provisions of this Act and the regulations, and other applicable laws and regulations, and (3) the transferee binds himself to assume all the rights and obligations of the concessionaire:  Provided, That in case retention of unreasonable royalty interest by the assignor, directly or indirectly, is involved in said transfer or assignment, the same shall be examined to protect public interest:  And provided, further, That the proposed transferee or assignee shall not hold a total area under exploration and/or exploitation concessions, including that being transferred to him, of more than the maximum areas allowed under this Act.”

 

SEC. 18.  Reduction and/or moratorium on exploration work obligations and annual exploration taxes.  – Notwithstanding the provisions of Article forty-seven of the Petroleum Act of 1949, the minimum amount of work obligations therein required to be spent by a petroleum exploration concessionaire in his concession is hereby reduced by fifty per centum for two consecutive concession years starting with the current concession year when this Act takes effect:  Provided, That when circumstances warrant, the Secretary of Agriculture and Natural Resources upon recommendation by the Director of Mines, may extend this period of two years for another period of two years:  Provided, further, That upon previous approval by the Secretary of Agriculture and Natural Resources, as recommended by the Director of Mines, said reduced amount work obligation required to be spent for any of the said two concession years may be spent in either of said two concession years. 

 

The Secretary of Agriculture and Natural Resources, upon recommendation of the Director of Mines, may give holders of petroleum exploration concession where the provisions of the Petroleum Act, the regulation and the terms and conditions of the concession contract have been complied with for two or more concession years and where the progress of exploration is such that exploration drilling is the next logical step in the operation in accordance with good petroleum field practice, as indicated by technical reports duly submitted to the Director of Mines showing that adequate geological field work was performed and delineating at least a favorable structure with favorable lithology and with satisfactory paleontological correlations of surface and possibly subsurface rock units, and/or when exploratory drilling is shown to be necessary by satisfactory geophysical survey, a moratorium on work obligations for a period of two concession years from the date of the approval of this Act.  The term “exploratory drilling” shall mean the drilling of wells suitable to the production of petroleum and does not include drilling wells suitable only for stratigraphic information. 

 

SEC. 19.  Right to adopt the provisions of this Act.  – Any holder of a petroleum concession granted prior to the effective date of this Act may, at his option, adopt the provision hereof in toto by notice in writing of his desire to do so, delivered to the Secretary of Agriculture and Natural Resources.  Upon receipt of such notice, the Secretary shall amend the concession contract of such concessionaire in accordance with the amendments to Republic Act Numbered Three hundred and eighty-seven as set forth in this Act.  Other provisions of any such existing concession contract, which are not altered or amended by the terms of the amendments contained in this Act shall remain unaffected by the exercise of such option. 

 

SEC. 20.  Partial invalidity.  – If any clause, sentence, provision or article of this Act should for any reason be held to be invalid or unconstitutional, it shall not affect in any wise the remaining parts of this Act and such remaining parts shall continue in full force and effect. 

 

SEC. 21.  Repeal of laws, rules and regulations.  – All Acts, laws, rules and regulations inconsistent with any of the provisions of this Act are hereby repealed. 

 

SEC. 22.  This Act shall take effect upon its approval. 

 

Approved, June 17, 1961

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