Question & AnswerQ&A (DOE DEPARTMENT CIRCULAR NO. DC 2009-07-0011)
Article XII, Section 2, of the 1987 Philippine Constitution states that all forces of potential energy and other natural resources within Philippine territory belong to the State, and their exploration, development, and utilization shall be under the full control of the State.
Republic Act No. 9513 is the Renewable Energy Act of 2008, which establishes the State policy to encourage and accelerate the exploration, development, and utilization of renewable energy resources such as biomass, solar, wind, hydropower, geothermal, and ocean energy sources, including hybrid systems.
The two stages are: (i) Pre-Development Stage, involving preliminary assessment and feasibility study up to financial closing of the RE project; and (ii) Development/Commercial Stage, involving the development, production or utilization of RE resources including construction, installation, and operation of facilities.
Any person, natural or juridical, local or foreign, may apply subject to limitations; however, for most RE Contracts covering all resources, the applicant must be a Filipino or a corporation with at least 60% Filipino ownership. Exceptions apply for geothermal resources and foreign entities authorized under law.
The Blocking System refers to the subdivision of the Philippine territory into meridional blocks of half a minute latitude and longitude with an area of 81 hectares each, used by the DOE to define RE Contract areas for ocean, solar, wind, and geothermal resources.
Obligations include complying with work and financial commitments, observing laws on labor, health, and environment, paying government shares and taxes, giving employment priority to qualified locals, posting performance bonds, maintaining accurate reports and records, and allowing DOE access to the project area and records.
Grounds include non-compliance with approved work program or contract obligations, violation of technical design standards, environmental regulation breaches, tampering with reports, non-payment of financial obligations, and failure to post required performance bonds.
RE Contracts are awarded through either an open and competitive selection process or by direct negotiation under specific limited instances such as Frontier Areas or if no qualified applicant emerges from an open bidding process.
Large-scale geothermal RE projects involving foreign-owned entities shall be governed by Financial or Technical Assistance Agreements (FTAAs) with special terms including investment commitments, financing restrictions, preference for Filipino employment, and presidential approval with Congress notification.
No, biomass RE Developers (including biogas and methane capture) need not enter into Pre-Development Service Contracts but are required to have an Operating Contract for the Development/Commercial Stage. Biomass RE Contracts are exempt from government share payments and are not covered by the Blocking System.