Republic of the

Philippines v. Province of
Palawan
GR No. 170867, January 21, 2020

Casumpang, Charlotte P.
Is the Province of Palawan entitled,
under Article X, Section 1 of the
Constitution and Section 290 of the
Local Government Code, to a 40%
equitable share in the proceeds from
the Camago-Malampaya Natural Gas
Project?
FACTS

On December 11, 1990, Republic entered into

Service Contract No. 38, with Shell Philippines
Exploration B.V. and Occidental Philippines.
FACTS
SERVICE CONTRACT NO.
38
• 20-year contract
• Drilling of the natural gas reservoirs in the
Camago-Malampaya area
FACTS
SERVICE CONTRACT NO.
38
• A 60-40 production sharing scheme for the
sale of petroleum
• 60% for the National Government
• 40% for Shell Philippines Exploration B.V.
and Occidental Philippines, as service
contractors.
FACTS
The service contractors were replaced by a
consortium of Shell B.V., Shell Philippines
LLC, Chevron Malampaya LLC, and PNOC
Exploration Corporation (Shell Consortium).
FACTS
On February 17, 1998, President Ramos
issued Administrative Order No. 381.
FACTS
Administrative Order No.
381.
• Per the Local Government Code, part of
the national government's 60% share
would be given to the concerned LGUs.
FACTS
Section 290 of the Local
Government Code
Local government units shall, in addition to the internal revenue
allotment, have a share of forty percent (40%) of the gross collection
derived by the national government from the preceding fiscal year
from mining taxes, royalties, forestry and fishery charges, and such
other taxes, fees, or charges, including related surcharges, interests,
or fines, and from its share in any co-production, joint venture or
production sharing agreement in the utilization and development of
the national wealth within their territorial jurisdiction.
FACTS
Administrative Order No.
381.
• Province of Palawan was "expected to
receive about US$2.1 billion from the total
government share of US$8.1 billion"
throughout the contract's 20-year period.
FACTS
On July 30, 2001, Finance Secretary
Camacho sought the legal opinion of then
Justice Secretary Perez on whether the
Province of Palawan had a share in the
national wealth from the proceeds of the
Natural Gas Project.
FACTS

DOF’s position: NO. A local government

unit's territorial jurisdiction was only within
its land area and excludes marine waters
more than 15 kilometers from its coastline.
FACTS

The National Government did not grant the

province's expected US$2.1 billion share.
FACTS
On May 7, 2003, the Province of Palawan
sought a judicial declaration that it has
territorial jurisdiction over the Camago-
Malampaya natural gas reservoirs, entitling
it to an equitable share in the proceeds from
the Natural Gas Project.
FACTS
On February 9, 2005, pending litigation,
DBM and DOF executed an Interim
Agreement with then Palawan Governor Joel
T. Reyes.
FACTS
• Partial release (50% of the 40%) of fund
shall be made, provided that it be used on:
1. development and infrastructure projects
2. environment protection and conservation
3. electrification of 431 barangays, and
4. establishment of facilities to enhance the
exclusive economic zone's security.
FACTS
• Partial release of funds would be without
prejudice to the outcome of Special Civil
Action No. 3779.
• Once the case is decided with finality in favor
of either party, the shares already received
would be treated as financial assistance.
 ARGUMENT OF
POP
• The reservoir’s area is located within the continental shelf of the
Municipality of Kalayaan, over which the province exercises territorial
jurisdiction under Presidential Decree No. 1596.
• Since the Municipality of Kalayaan has territorial jurisdiction over its
continental shelf, it extends to the Camago-Malampaya area, which
is barely 51 nautical miles from the municipality.
• Both Republic Act No. 7611 and Administrative Order No. 381
recognize Malampaya as part of Palawan 's continental shelf.
DECISION OF SC
UNDER THE LAW CREATING THE PROVINCE OF PALAWAN

• The Province of Palawan, previously known as the Province of

Paragua, was created under Act No. 422.88 Section 2 of the Act, as
amended.
• It provided the Province of Paragua's specific metes and bounds,
which includes its municipal waters.
DECISION OF SC
Under the LGC, MUNICIPAL WATERS are defined:
• It includes not only streams, lakes, and tidal waters within the municipality, not
being the subject of private ownership and not comprised within the national
parks, public forest, timber lands, forest reserves or fishery reserves, but also
marine waters included between two lines drawn perpendicularly to the general
coastline from points where the boundary lines of the municipality or city touch
the sea at low tide and a third line parallel with the general coastline and
fifteen (15) kilometers from it. Where two (2) municipalities are so situated on
the opposite shores that there is less than fifteen (15) kilometers of marine
waters between them, the third line shall be equally distant from opposite
shores of their respective municipalities
DECISION OF SC
Under the Philippine Fisheries
Code
SECTION 16. Jurisdiction of Municipal/City Government.— The
municipal/city government shall have jurisdiction over municipal waters as
defined in this Code. The municipal/city government, in consultation with
the FARMC shall be responsible for the management, conservation,
development, protection, utilization, and disposition of all fish and
fishery/aquatic resources within their respective municipal waters.
DECISION OF SC

The area is beyond the province's territory when the 15-

kilometer boundary of the Local Government Code and
the Philippine Fisheries Code is strictly applied.
DECISION OF SC
Under PD 1596

It established the Kalayaan Island Group. Included in the metes and

bounds of the Municipality of Kalayaan are the seabed, subsoil, continental
margin, and air space over this territory. This is consistent with Article
76(1) of the United Nations Convention on the Law of the Sea.
DECISION OF SC
Under PD 1596
This interpretation is more consistent with the Republic's manifestations on
Reed Bank in asserting its sovereignty over the Kalayaan Island Group:
1.RP has sovereignty and jurisdiction over the Kalayaan Island Group
2.Even while the Republic of the Philippines has sovereignty and
jurisdiction over the KIG, the Reed Bank where GSEC 101 is situated
does not form part of the "adjacent waters," specifically the 12 M
territorial waters of any relevant geological feature in the KIG either
under of the Sea (UNCLOS);
DECISION OF SC
Under PD 1596
It is, thus, inaccurate to declare that a local government unit's territory,
and by extension, its territorial jurisdiction, can only be over land that is
contiguous. When the territory consists of one (1) or more islands,
territorial jurisdiction can also be exercised over all waters found inland, or
in any area that is part of its seabed, subsoil, or continental margin, in the
manner provided by law.
DECISION OF SC
Under PD 1596
While the Municipality of Kalayaan is indeed within the Province of
Palawan's territory, there is nonetheless no law granting the province
territorial jurisdiction over the continental shelf between these areas,
where Camago-Malampaya is located.
DECISION OF SC
Under PD 1596
It includes in its Environmentally Critical Areas Network the
following components:
SECTION 8. Main Components. — xxx
(2) Coastal marine area — This area includes the whole coastline
up to the open sea. This is characterized by active fisheries and
tourism activities: and xxx
DECISION OF SC
Under PD 1596
Local chief executives, together with representatives of national
government, are tasked with protecting and preserving environmentally
critical areas in Palawan. These duties necessarily include the exercise of
jurisdiction beyond the Province of Palawan's land mass.
DECISION OF SC
Under PD 1596
However, strictly applying Republic Act No. 7611 to determine the Province
of Palawan's territory poses a problem:
It excludes several municipalities that have always been part of the
province, namely Balabac, Cagayancillo, Busuanga, Coron, Agutaya,
Magsaysay, Cuyo, Araceli, Linapacan, and Dumaran.
DECISION OF SC
Under PD 1596
This results in a substantial alteration of its boundaries, an act that can
only be done through a plebiscite called for that purpose.

Thus, Republic Act No. 7611 cannot be the basis to prove that the
Camago-Malampaya reservoirs are within the Province of Palawan.
 ARGUMENT OF
POP
Since the Republic has used the island of Palawan as the
reference point to mark its maritime entitlements in the South
China Sea dispute, it has already recognized the province's
unique geological features as comprised of islands. They
contend that this Court made "a fundamental and
irreconcilable contradiction" in declaring that international law
was inapplicable.
DECISION OF SC

The provisions of a treaty or the UNCLOS apply to the sovereign state, not
a local government unit. Thus, the rights over the state's continental shelf
pertain to the sovereign state, not to any of its local government units. The
Republic also maintains that Article X, Section 1 of the Constitution does
"not require that every portion of the Philippine territory be made part of
the territory of a local government unit."
 ARGUMENT OF
POP
It is entitled to its 40% share on the basis of equity, since it is
the nearest local government unit that "is capable of
rendering the necessary and immediate assistance and
services regarding any issue or concern within the area.
DECISION OF SC
Any environmental or socio-economic impact the Natural Gas Project may
have has been addressed by the Environmental Compliance Certificate
issued to the Shell Consortium, which provides:
• The proponent shall set up an Environmental Guarantee Fund (EGF) to
cover expenses for environmental monitoring and the establishment of
a readily available and replenishable fund to compensate for whatever
damage, may be caused by the project, for the rehabilitation and/or
restoration of affected-areas, the future
abandonment/decommissioning of project facilities and other activities
related to the prevention of possible negative impacts.
 ARGUMENT OF
POP
State can be estopped when it promulgated issuances
recognizing Camago-Malampaya as part of the Province of
Palawan and granting it its 40% share in the proceeds of the
Natural Gas Project.
DECISION OF SC
The Republic cannot be estopped since the Province of Palawan was
neither misled nor injured by the State's prior declarations. This
entitlement was "based on a mistaken assumption" from the prior acts of
the Republic.
DECISION OF SC
However, the Province of Palawan, cannot be faulted for relying on the
Republic's prior repeated recognition that it was indeed entitled to its
claimed share.

In 1998, then President Ramos expressly recognized in Administrative

Order No. 381 that the Province of Palawan would partake in the Republic's
share in the net proceeds of the Natural Gas Project.
DECISION OF SC
It is to be recalled, however, that Executive Order No. 683 authorized the
release of funds from Natural Gas Project's proceeds to the Province of
Palawan, to be used for development projects for the people of Palawan,
without prejudice to the final outcome of this case.

It was clear with the Executive Order that the national government did not
commit itself to perpetually share the proceeds from the Natural Gas
Project.
DECISION OF SC

However, it was also clear that the Province of Palawan was not required to
reimburse the national government for the funds received should there be
a final ruling in this Resolution.
SUMMARY
SUMMARY

1.The area is beyond the province's territory when the 15-

kilometer boundary of the Local Government Code and the
Philippine Fisheries Code is strictly applied.
2.None of the maps on record could conclusively prove that the
Province of Palawan has territorial jurisdiction over the
Camago-Malampaya natural gas reservoirs.
SUMMARY
3. While the Municipality of Kalayaan is indeed within the Province of
Palawan's territory, there is NO LAW granting the province territorial
jurisdiction over the continental shelf between these areas, where
Camago-Malampaya is located.
4. Republic Act No. 7611 cannot be the basis to prove that the
Camago-Malampaya reservoirs are within the Province of Palawan. By
strictly applying RA 7611, it excludes several municipalities that have
always been part of the province, namely Balabac, Cagayancillo,
Busuanga, Coron, Agutaya, Magsaysay, Cuyo, Araceli, Linapacan, and
Dumaran.
SUMMARY
5. UNCLOS or treaty's provisions apply to the sovereign state,
not a local government unit.
6. Principle of equity does not apply here. Any possible damage
that the Natural Gas Project may cause the environment has
already been addressed by the Environmental Compliance
Certificate issued to the Shell Consortium.
7. Province of Palawan need not return the P600 million it
received under Executive Order No. 683.
Therefore, the Province of Palawan is not entitled to a
40% equitable share in the proceeds from the
Camago-Malampaya Natural Gas Project.
Thank
you.