C. Exploration, Development, and Use of Natural Resources

Exploration, Development, and Use of Natural Resources

Concept

Natural resources are owned by the State. Their exploration, development, and utilization remain under its full control and supervision, whether the State undertakes the activities directly or enters into an agreement permitted by the Constitution. (Art. XII, Sec. 2, 1987 Const.)¹

Governing provisions

Article XII, Section 2 of the Constitution supplies the basic rules on State ownership, non-alienation, control, and permissible agreements. The Philippine Mining Act of 1995 governs the exploration, development, utilization, and processing of all mineral resources. Republic Act No. 387 separately addresses petroleum resources and declares natural deposits or occurrences of petroleum or natural gas covered by its State-ownership provision to belong to the State inalienably and imprescriptibly. (Art. XII, Sec. 2, 1987 Const.)¹ (Sec. 1, Rep. Act No. 7942)² (Sec. 15, Rep. Act No. 7942)³ (Art. 3, Rep. Act No. 387)⁴

Requisites / Rules

• The State may directly undertake exploration, development, and utilization, or enter into co-production, joint venture, or production-sharing agreements with Filipino citizens or corporations or associations at least 60% of whose capital is owned by Filipino citizens. State control and supervision remain required. (Art. XII, Sec. 2, 1987 Const.)¹
• Such agreements may last no more than 25 years and may be renewed for no more than 25 years, under terms and conditions provided by law. (Art. XII, Sec. 2, 1987 Const.)¹
• Subject to existing rights, reservations, and prior agreements of all parties, mineral resources in public or private lands, including timber or forestlands, are open to mineral-agreement or financial-or-technical-assistance-agreement applications. Conflicts under this rule are heard and resolved by the panel of arbitrators. (Sec. 18, Rep. Act No. 7942)⁵

Distinctions

Ownership or a right to use land for a purpose other than petroleum exploration, development, or exploitation does not carry ownership of, or a right to explore, exploit, or utilize, petroleum or natural gas deposits in, on, or under that land. Land rights and rights over those deposits must therefore be kept distinct. (Art. 4, Rep. Act No. 387)⁶

Key doctrines

For an LGU’s share in national-resource proceeds, the relevant question is whether the resource or reservoir lies within territorial boundaries recognized by law. In the Palawan litigation, the Court held that the province was not entitled under existing law to a share in the Camago-Malampaya project’s proceeds. (Republic v. Provincial Government of Palawan, G.R. No. 170867, 30 August 2021)⁷

Free and prior informed consent remains an indispensable condition for renewal of a mineral agreement where the Indigenous Peoples’ Rights Act applies. A dispute involving that requirement and the NCIP Certification Precondition was held arbitrable, but the arbitral award was vacated without prejudice to compliance with the consent requirement. (Lone Congressional District of Benguet Province v. Lepanto Consolidated Mining Company and Far Southeast Gold Resources, Inc., G.R. No. 244063, 21 June 2022)⁸

Exceptions

Except for agricultural lands, natural resources cannot be alienated. For water rights concerning irrigation, water supply, fisheries, or industrial uses other than waterpower development, beneficial use may measure and limit the grant. Congress may also allow small-scale utilization by Filipino citizens and cooperative fish farming, with the stated priority for subsistence fishermen and fish workers. (Art. XII, Sec. 2, 1987 Const.)¹

Bar tip

Separate ownership of land from rights over its petroleum deposits, then identify the applicable mode of resource use and the continuing requirement of State control and supervision. (Art. 4, Rep. Act No. 387)⁶ (Art. XII, Sec. 2, 1987 Const.)¹