UNCONSCIONABLE MINING CONTRACT	June 6, 2008

The monetary benefits of mining investments and operations in the Philippines is now being questioned as the provincial government of Nueva Vizcaya has taken a bold step to stop OceanaGold mining company from its earth moving operations in Didipio for failing to pay Twenty Five Million Pesos (P25,000,000) in local taxes.

Contrary to what Secretary Atienza of the DENR has been promoting, the promised income from the mining project seems to be a mere pipe dream. That the local government of Nueva Vizcaya needs to resort to legal action to collect taxes appears to be a red light signaling the great possibility that the Philippines will not benefit at all from this mining project.

The Legal Rights and Natural Resources Center has always maintained that the DENR crafted a seriously flawed mining fiscal regime (DAO 07-12). Under this department order, the state’s revenue collection from a Financial or Technical Assistance Agreement (FTAA) is limited to (1) the contractor's corporate income tax, (2) excise tax, (3) special allowance, (4) withholding tax due from the contractor's foreign stockholders arising from dividend or interest payments to the said foreign stockholder in case of a foreign national and (5) all such other taxes, duties and fees as provided for under existing laws.

The enumerated items merely represent the “inherent” and legal right of the state to collect taxes from businesses, in exercise of its taxation and police power. These are the very same taxes collected in other types of businesses operating in the country, not necessarily involved in the exploitation and destruction of the country’s national wealth. 

What has not been explicitly spelled out in the DENR policy is the nation’s share in the profits of mining operations. If the DENR equates the above tax items to represent the governments share, it sadly miscomprehends the meaning of governmental share in the exploitation of the national patrimony. 
Our position and understanding is that an FTAA is a corporate undertaking done by the state in partnership with a private mining corporation and a foreign capitalist for that matter. Had it been the state that operated the mining operations, it would benefit from the profits wholesale.

Entering into a business venture, it is simply logical that the state should partake in the profits of that business venture aside from exercising its regulatory functions such as taxation.

The more questionable provision is that government’s share in the FTAA shall commence only after the FTAA contractor has fully recovered its pre-operating expenses, exploration, and development expenditures and other expenditures that may be added as part of. A case is now pending in the Supreme Court to question the unconscionable FTAA contract and its unconstitutionality.

The flawed fiscal regime is further highlighted in the case of Lafayette’s mining project in the Bicol region. The government received less than one percent of the PhP 3.6 billion worth of minerals extracted in 3 years of operation. The company has now stopped its operations.

What makes matters worse is that the natural destruction accompanying mining operations place communities at risk of severe hunger and intensified disasters. The OceanaGold Project has converted the fertile rice lands in Didipio into its mining operations and runs the risk of contaminating water sources in the agricultural provinces of Nueva Vizcaya, Cagayan Valley, Isabela and Central Luzon together with the other two pending large-scale mining projects also in the same province’s Royalco Phils. in Barangay Pao and FCF-MTL Metals in Barangay Runrunno.

Nueva Viscaya hosts 3 watershed areas - 2 proclaimed: Dupax Watershed Reservation (Proclamation 720) covering 425 hectares, and the Casecnan River Watershed in Dupax del Norte and Dupax del Sur, (Proclamation 136) covering 85,519 hectares , and 1 unproclaimed: Magat River watershed. These watershed areas serve approximately a total population of 400,000 including neighboring provinces such as Cagayan Valley, Isabela and northern parts of central Luzon. At least two of these watershed areas are in proximity to the mining site.

It is elementary that if these watershed areas are compromised due to contamination of the water, it will greatly affect the agriculture production in the said provinces that will contribute more to the worsening situation of our food production.

OceanaGold’s open pit mining method and tailings dam for mine waste disposal will be susceptible to seepage and collapse that will greatly affect the rivers and waters in the province. Ironically, DENR Secretary Atienza himself identified the province of Nueva Vizcaya as part of the typhoon belt area.
The negative impacts of mining projects in the Philippines outweigh its envisioned benefits. You cannot find any single mining operation in the Philippines that has brought progress to local communities, only a devastated environment, and an impoverished community. The people of Marinduque can tell us their experience; Marcopper mining operations has inundated two major rivers in their province. Mayor Hagedorn of Puerto Princesa has taken the position against mining operations for clearly understanding the negative impacts.

For further questions and inquiries please contact us at +63 2 926-4409, +63 2 434-4079, +63 917-548-1674 (Ronald/Campaigns/Paralegal) or visit us at 87B Madasalin St., Teachers Village, Diliman, Quezon City.

Ronald A. Gregorio
Campaigns/ Paralegal
LRC-KsK/FoEI
Luzon Regional Office

87 B Madasalin St., Teachers Village
Quezon City
telefax: +63 2 434-4079
mobile: +63 917 548 1674