Policy purpose and national interest
- The Decree declares that reducing dependence on imported energy supplies requires accelerating geothermal development.
- The Decree treats identified geothermal resources as a viable and untapped economical source of energy.
- The Decree provides for service contracts allowing qualified domestic and foreign entities to assist the Government through financial, technical, management, or other forms of assistance.
Core definition of geothermal resources
- “Geothermal resources” include all products of geothermal processes, embracing indigenous steam, hot water and hot brines.
- “Geothermal resources” include steam and other gases, hot water and hot brines resulting from water, gas, or other fluids artificially introduced into geothermal formations.
- “Geothermal resources” include heat or other associated energy found in geothermal formations.
- “Geothermal resources” include any by-product derived from geothermal processes and products.
Government exploration and service contracts
- Subject to existing private rights, the Government may directly explore for, exploit, and develop geothermal resources.
- Subject to the same condition, the Government may indirectly undertake exploration, exploitation, and development through service contracts.
- Service contracts must be awarded through public bidding or concluded through negotiation with a domestic or foreign contractor that is technically and financially capable of undertaking required operations.
- If the service contractor furnishes the necessary services, technology, and financing, the contractor may be paid a fee not exceeding 40% (forty per centum) of the balance of the gross value of geothermal operations after deducting necessary expenses incurred in the operations.
- The execution of service-contract activities must be under direct supervision of the Government through the Bureau of Energy Development, including implementation of the work program and accounting procedures agreed upon.
- Service contracts must be approved by the Secretary of Energy.
Geothermal contract areas and access to private lands
- Service contracts may cover public lands, government geothermal reservations, including presently administered or unappropriated areas.
- Service contracts may cover areas covered by exploration permits or leases granted under Republic Act No. 5092.
- Service contracts for exploration and development may cover private lands or other lands subject to agricultural, mining, petroleum or other rights, or devoted to purposes other than the exploration or use of geothermal energy.
- The Decree grants a right to enter private lands and establish easements through court action when there is no voluntary agreement with the private landowner.
- Upon application of the contractor to the Court of First Instance of the province or the municipal court of the municipality where the land is situated, and upon posting of the necessary bond fixed by the court, the court may allow entry and easements subject to payment of reasonable compensation.
Conversion of permits and leases to service contracts
- Holders of valid and subsisting geothermal exploration permits and geothermal leases granted by the Government prior to January 17, 1973, pursuant to Republic Act No. 5092, must enter into service contracts within six months from the effective date of the Decree.
- Failure to enter into the required service contracts results in automatic cancellation: the geothermal exploration permits and geothermal leases are deemed automatically cancelled, and the area reverts back to the State.
- Geothermal exploration permit applications filed under Republic Act No. 5092 are deemed withdrawn and of no effect as of the Decree’s effective date.
Contractor privileges under service contracts
- A service contract executed under the Decree may grant privileges notwithstanding any law to the contrary.
- A service contract may provide exemption from payment of tariff duties and compensating tax on the importation of machinery and equipment, and spare parts and all materials required for geothermal operations, subject to conditions imposed by the Director of Energy Development.
- If the contractor or its sub-contractor sells, transfers, or disposes of the exempted machinery, equipment, spare parts, or materials without prior consent of the Bureau of Energy Development, the contractor must pay twice the amount of taxes and duties not paid due to the exemption.
- A service contract may allow entry—upon the sole approval of the Bureau of Energy Development, which must not be unreasonably withheld—of alien technical and specialized personnel (including their immediate family members), subject to conditions it imposes.
- Alien personnel may exercise professions solely for the operations of the contractor as prescribed in the contractor’s contract with the Government under the Decree.
- Subject to Central Bank regulations, a service contract may provide for repatriation of capital investment and remittance of earnings derived from service contract operations, and for such sums necessary to cover principal and interest of foreign obligations incurred for geothermal operations.
- Additional privileges may be included by applying Section 12 of Presidential Decree No. 87 to geothermal operation.
Exploitation permits for uneconomic or inappropriate cases
- Where discovered geothermal resources are deemed inappropriate for service contract arrangements for economic and/or technical reasons, the Bureau of Energy Development may issue development and exploitation permits.
- The Bureau of Energy Development must formulate the applicable rules and regulations to govern the development and exploitation permits.
Implementing rules and regulations
- The Director of Energy Development must promulgate rules and regulations necessary to implement the Decree.
- Promulgated rules and regulations require approval of the Secretary of Energy.
Repeal of inconsistent laws
- Republic Act No. 5092 and other laws, rules and regulations inconsistent with Presidential Decree No. 1442 are repealed.