G.R. No. 170867 - Republic vs. Provincial Government of Palawan

On December 11, 1990, the Republic, through the Department of Energy, entered into Service Contract No. 38 with a Shell–Occidental consortium for the exploration, development, and production of petroleum (including natural gas) in the Camago-Malampaya area offshore Palawan.
Service Contract No. 38 prescribed a production‐sharing scheme: the National Government received 60% of net proceeds; the contractor 40%. The reservoir lies some 48–93 km from Palawan’s shoreline.

Administrative Order No. 381 (February 17, 1998) projected Palawan’s 40% share to be about US$2.1 billion over 20 years and deferred part of the payment for the first seven years.
Negotiations between Palawan and the Departments of Energy, Finance, and Budget & Management failed; in March 2003, Governor Reyes formally demanded Palawan’s 40% share under Section 290 of the Local Government Code.

On May 7, 2003, Palawan filed for declaratory relief to confirm its right to 40% of national‐government proceeds from October 16, 2001, under AO 381, RA 7611 (Strategic Environmental Plan for Palawan), LGC § 290, and Provincial Ordinance No. 474.
RTC Decision dated December 16, 2005 declared Palawan entitled to 40% share; RTC Amended Order of January 16, 2006 froze Palawan’s share, ordering full accounting and escrow of 40%.

On February 16, 2006, the Republic filed a Rule 45 petition in the Supreme Court, challenging the RTC’s December 16, 2005 Decision and January 16, 2006 Amended Order.
While the petition was pending, the parties executed an Interim Agreement (February 9, 2005) and later a Provisional Implementation Agreement (July 25, 2007) to release 50% of the disputed 40% for Palawan development projects.

Bishop Arigo, Sarino, Dr. Socrates, and Roque filed before the Court of Appeals (CA-G.R. SP 102247) a certiorari petition challenging EO 683 (December 1, 2007) authorizing release of funds under the PIA. The CA dismissed it for procedural defects and prematurity.
They elevated their challenge to the Supreme Court (G.R. No. 185941). On June 23, 2009, G.R. Nos. 170867 and 185941 were consolidated for final resolution.

Whether, under the Constitution and Local Government Code, Section 290 grants Palawan 40% of government receipts from the Camago-Malampaya project.
Whether the phrase “within their respective areas” includes offshore fields beyond land mass or only onshore territories.

Whether EO 683 and the Provisional Implementation Agreement unconstitutionally diverted funds that should automatically be released to LGUs under Article X, Section 7 of the Constitution and LGC § 290.
Whether petitioners have legal standing and whether their CA petition was ripe for adjudication.