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

On December 11, 1990, the Republic, through the Department of Energy (DOE), entered into Service Contract No. 38 with Shell Philippines Exploration B.V. and Occidental Philippines for the Camago-Malampaya natural gas project, featuring a 60–40 production-sharing scheme (60% national government, 40% service contractors).
The service contractors were later replaced by the Shell Consortium (Shell B.V., Shell Philippines LLC, Chevron Malampaya LLC, PNOC-Exploration Corp.), and the 20-year contract anticipated US$8.1 billion in government revenues, with Palawan’s share estimated at US$2.1 billion per Administrative Order No. 381 (1998).

In 2003, the Province of Palawan filed Special Civil Action No. 3779 in the Regional Trial Court (RTC) seeking a declaratory relief that it had territorial jurisdiction over the Camago-Malampaya reservoirs and thus a 40% equitable share under the Local Government Code (RA 7160) and AO 381. In 2005, the RTC ruled in Palawan’s favor and awarded the 40% share.
The Republic elevated the case to the Supreme Court as G.R. No. 170867 (petition for review), while taxpayers Arigo, Sarino, Socrates, and Roque challenged Executive Order No. 683 (authorizing release of 50% of the disputed 40% share) in G.R. No. 185941. The two cases were consolidated and orally argued in 2009.

On December 4, 2018, the Court en banc reversed the RTC, holding that Palawan lacked statutory territorial jurisdiction over the Malampaya area (situated on the continental shelf beyond its land boundaries) and was therefore not entitled to any share. It denied the challenge to E.O. 683 in G.R. No. 185941.
Palawan and Arigo, et al. filed motions for reconsideration, arguing (a) that continental shelf jurisdiction is appurtenant to Palawan under P.D. 1596 (Kalayaan municipality) and RA 7611; (b) that the Republic’s prior orders and agreements estop it from denying the share; and (c) that equity warrants a share given environmental risks. The Republic countered that no law grants Palawan jurisdiction over the continental shelf beyond municipal waters and that estoppel and equity are inapplicable.

Whether “territorial jurisdiction” under Article X, Section 7 of the Constitution and Section 290 of the Local Government Code extends to the continental shelf area of Camago-Malampaya, thereby entitling Palawan to a 40% share.

Whether the Republic may be estopped from denying Palawan’s share due to Administrative Order No. 381, interim and provisional implementation agreements, and E.O. 683.
Whether Palawan must return the P600 million released under E.O. 683 if final adjudication is against its entitlement.