OEA Circular No. 89-08-09





It has been observed that it has become a prevailing practice among coal operating contract holders to enter into sub-contracts with other persons or entities with respect to their coal exploration, exploitation, development, extraction or removal of coal mineral from their coal contract areas without the prior approval of the Office of Energy Affairs (OEA).  Pursuant to Section 12a (iii) of Presidential Decree No. 1206 in relation to Section 18 of Presidential Decree No. 972, as amended, otherwise known as the Coal Development Act of 1976, the herein Circular is hereby promulgated by way of amendments to Bureau Circular No. 82-09-09 dated September 9, 1982 for the strict observance, compliance and guidance of all Coal Contractors.


For purposes of this Circular, the term sub-contracting refers to the act of transferring, assigning, conveying or allowing another person(s) or entity (ies) to explore and develop the area or any part thereof previously awarded by the OEA to qualified coal mining operators.


Sub-contracting shall exclude coal mining and other activities directly related to production, and shall include the following, among others:


(a)    Tunneling

(g)     Test pitting

(b)    Trucking

(h)     Trenching

(c)     Shaft sinking

(i)      Stripping

(d)    Road construction

(j)      Dam construction

(e)    Diamond drilling

(k)     Construction of infrastructure such as plants, buildings, etc.

(f)     Auger drilling



(1)      Holders of coal operating contracts shall not transfer, assign, convey, cede, dispose, or subcontract the coal areas awarded to them without the prior approval of the OEA (Section 15, PD 972).  Sub-contracting, transfer or assignment of coal operating contract areas, to be valid and enforceable, aside from the prior approval of the OEA, may be made only to qualified persons, partnership or corporations provided that they possess the necessary financial resources and technical capability to continue the mining operations in accordance with good coal mining practices appropriate to the geological conditions of the area to enable maximum economic production, avoiding hazards to life, health and property, minimizing pollution to air, land and water, and pursuant to an efficient and economic program of operation, provided however, that the act of extracting coal from the area shall be the sole and exclusive obligation of a coal operating contract holder.


(2)      The coal operating contract holder shall be responsible for the safety and technical efficiency of the coal mining operations of the sub-contractor and the compliance of his work obligations and financial commitments under the coal operating contract with the OEA.  In no case, the mining operations of the sub-contractor shall interfere in any way with the major mining plans of the contract holder, particularly in the fulfillment of or compliance with his work and financial obligations under the coal operating contract.


(3)      All existing sub-contract arrangements shall be submitted to the OEA not later than September 30, 1989, for its approval.  All existing sub-contracts not duly registered by this Office as of said date shall be deemed unauthorized and therefore not valid and enforceable.  In addition to this, the coal operating contract holder who sub-contracts his leased area without the prior approval of the BED shall be held criminally liable under Chapter XIV of Presidential Decree No. 463


(4)      All future sub-contracting shall be limited to those mentioned in this Circular and shall be registered with the OEA before any sub-contracting work is implemented, otherwise the cost incurred in the sub-contracting shall not be recoverable as part of its operating expenses.


This Circular shall take effect immediately.


For strict compliance.





August 22, 1989

Makati, Metro Manila

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