San Beda University, College of Law

1st Sem SY 2022-23

Subject: Natural Resources and Environmental Law
Prof: Comm Wilhelm D. Soriano
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Article XII, Section 2 – All lands of the public domain, waters, minerals, coals,
petroleum, and other mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna, and other natural resources are
owned by the State

With the exception of agricultural lands, all other natural resources

shall not be alienated

The exploration, development, and utilization of natural resources shall

be under the full control and supervision of the State

The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens

Such agreements may be for a period not exceeding twenty-five years,

renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law

In cases of water rights for irrigations, water supply, fisheries, or

industrial uses other than the development of water for power, beneficial use
may be the measure and limit of the grant

The State shall protect the nation’s marine wealth in its archipelagic
waters, territorial sea, and exclusive economic zone, and reserve its use and
enjoyment exclusively to Filipino citizens

The Congress may by law, allow small-scale utilization of natural

resources by Filipino citizens, as well as cooperative fish farming, with
priority to subsistence fishermen and fishworkers in river, lakes, bays, and
lagoons

The President may enter into agreements with foreign-owned

corporations involving either technical or financial assistance for large-scale
exploration, development, and utilization of minerals, petroleum, and other
mineral oils according to the general terms and conditions provided by law,
based on real contributions to the economic growth and general welfare of the
country. In such agreements, the State shall promote the development and use
of local scientific and technical resources

The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution

1. All Lands of the Public Domain

The term public domain is synonymous to public dominion or public ownership, as

distinguish from private ownership. Which means that the phrase “lands of the
public domain” categorically declares that land, as the single biggest major natural
resource of the nation, belong to the State
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Under Section 3 of Article XII, lands of the public domain are classified into;

1) Agricultural; 2) Forest or Timber; 3) Mineral; and 4) National parks

Agricultural lands are simply known as farmlands, Land devoted principally to the
planting of crops for food. Any land that is susceptible for cultivation for agricultural
purposes

Forests land refers to a large tract of land covered with natural growth of trees and
underbrush

Timberland refers to a large tract of land planted with trees that can be processed
for woods or lumbers

Mineral lands are those that contained deposits of minerals that are economically
valuable, useful, or precious, in such quantities as to justify expenses to extract them

National Parks are those areas of land by which, by reason of their scenic, historical
or cultural, and scientific value and importance are set aside and declared by law as
national parks

Waters as natural resources must be potentially useful. Uses of water include

agricultural, industrial, household, recreational, and environmental. All living things
needs to water to grow and reproduce. (97% of the water on earth is salt water and
only 3% is fresh water)

Mineral, as a natural resource means a “solid inorganic substance of natural

occurrence”

As a noun, mineral is defined as “an inorganic substance occurring naturally in the

earth and having a consistent and distinctive set of physical properties”

Mineral is either Metallic or Non-Metallic

Coal is a combustible black or brownish-black sedimentary rock usually occurring in

rock strata in layers or veins called coal beds or coal seams

Coal is composed primarily of carbon, along with variable quantities of other

elements, such as hydrogen, sulfur, oxygen and nitrogen

Coal is a fossil fuel that forms when dead plant matter is converted into peat, which
in turn is converted into lignite, then, sub-bituminous coal, and lastly anthracite.
This involves biological and geological process that takes place a million years

Petroleum is an oily naturally occurring liquid that is a form of bitumen or a mixture

of various hydrocarbons; used as a fuel or separated by distillation into gasoline

Petroleum shall include any mineral oil, hydrocarbon (natural) gas, bitumen,
asphalt, and, mineral gas

Other Mineral Oils are obtained from mineral other than petroleum

Other forces of potential energy is an encompassing term that would include not yet
known source of energy at the time of the promulgation and ratification of the
constitution, such as solar energy, wind energy, geothermal energy, hydrogen
energy, tidal energy, wave energy
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Fisheries or aquatic products include all other products of aquatic living resources
in any form

Wildlife traditionally refers to undomesticated animal species, but has come to

include all plants, fungi, and other organisms that grow or live wild in an area
without being introduced by humans

Wildlife can be found in all ecological systems

The term flora refers to the plant life that exists in a particular place at a particular
time. This typically includes all indigenous plant life. Flora, which sounds like
flowers was coined by French-Swiss Botanist and Geologist Jules Thurmann

Fauna refers to animal life that exists in a particular place at a particular time. The
word “Fauna” was coined by Swedish Zoologist Carl Linnaeus

Flora and Fauna are umbrella terms that refer to many different types of life. What
is counted as flora and fauna is dependent upon the specific region, climate or time
period

Other natural resources is known as the “catch all phrase”

Article XII, Section 2 – declares that all natural resources are owned by the
State

In the 1935 Constitution, particularly, Section 1, Article XII, it provides that all
natural resources of the Philippines belong to the State. In the 1973 Constitution,
under Article XIV, Section 8, it declares that all natural resources of the Philippines
belong to the State

The framers of the 1987 Constitution abandoned the word belong because belong
simply means possession, whereas, “own” clearly declares not only possession but
also ownership

The basis by which the framers of the 1987 Constitution changed the word “belong”
to the word “owned” is the Regalian Doctrine, also known as “Jura Regalia”. It is a
fiction of Spanish Colonial Law that has been applied to all the colonies of Spain,
which refers to feudal principle that all lands found within the territory of the
Monarch is owned by the King. Ownership of the entire Philippines Islands passes to
the Spanish Monarch by virtue of the Discovery and Conquest

Dominium is the capacity of the State to own or acquire a property. Dominium,

which was the foundation for the early Spanish decrees embracing the feudal theory
of Julia regalia that all lands are owned by the monarch, is also the foundation of
Section 2

Adopted in a republican system, however, the medieval concept of jura regalia has
been stripped of royal overtones: ownership is now vested in the State. As an owner,
the State can exercise the attributes of ownership, such are;

a) Jus possidendi - the right to possess

b) Jus utendi - the right to use
c) Jus fruendi - the right to the fruits
d) Jus abutendi - the right to consume
e) Jus disponendi - the right to dispose
f) Jus vindicandi - the right to recover
g) Jus accessiones - the right to accessories
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While dominium necessarily includes the power to alienate what is owned, Section 2
limits the power of the State to alienate the natural resources of the public domain.
Only agricultural lands of the public domain may be alienated. All other natural
resources shall not be alienated

“With the exception of agricultural lands, all other natural resources

shall not be alienated”

Natural resources, particularly the mineral resources, which constituted a great

sources of wealth, while declared owned by the State, belonged not only to the
present generation but also for the succeeding generations and consequently should
be conserved for them

The framers expressed the fear that to allow alienation, some of the mineral lands
after they had become private property through the grant of a patent might
eventually get into the ownership or control of foreigners to the prejudice of Filipino
posterity

The framers, as well as, the Filipino people who ratified the constitution, decided to
state clearly in Section 2 that natural resources shall not be alienated in order that it
may have the stability and permanency that its importance requires. It is written in
our constitution so that it may neither be the subject of barter nor be impaired in
the give and take of politics

With our natural resources, our sources of power and energy, our public lands, and
our public utilities, the material basis of the nation’s existence, in the hands of aliens
or foreign countries, over whom the Philippine Government does not have full
control, the Filipinos may soon find themselves deprived of their patrimony and
living as it were, in a house that no longer belong to them

“The exploration, development, and utilization of natural resources shall be

under the full control and supervision of the State”

In the case of Miners Association of the Philippines vs DENR Sec Factoran, (240
SCRA 100,104-106, 1995) the Supreme Court declared that upon the effectivity of
the 1987 Constitution on February 02, 1987, the State had assumed a more dynamic
role in the exploration, development and utilization of natural resources of the
country. Article XII, Section 2 of the said constitution explicitly ordains that the
exploration, development and utilization of natural resources shall be under the full
control and supervision of the State

Full control in political aspect – meant that the State reserved the power to overrule,
reverse, or modify policies/decisions made by the entity undertaking the activities

Control in the corporate practice – meant the control of the Board of a private
corporation, whereby, the Board may appoint officers and managers and delegate
the management and operations of the company and implement the policy of the
Board

What Section 2 provides is that whenever natural resources are involved,

particularly, in the case of inalienable natural resources, the State must always have
some control of the exploration, development and utilization regardless if the
individual or corporation engaged in the undertaking is a Filipino or a foreign entity
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In the words of Delegate Davide – no license, permit or concession can be

exclusively granted to any Filipino citizen nor Filipino corporation, more so, to any
foreign-owned corporations

“The State may directly undertake such activities, or it may enter into
co-production, joint venture, or production sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens”

“Such agreements may be for a period not exceeding twenty-five years,

renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law”

Consonant therewith, the exploration, development and utilization of natural

resources may be undertaken by means of direct act of the State, or it may opt to
enter into co-production, joint venture, or production sharing agreements, or it may
enter into agreements with foreign-owned corporations involving either technical
or financial assistance for large-scale exploration, development and utilization of
minerals, petroleum, and other mineral oils according to the general terms and
conditions provided by law, based on real contributions to the economic growth and
general welfare of the country

Joint Venture – is a business arrangement in which two or more parties agree to

pool their resources for the purpose of accomplishing a specific task. In a Joint
Venture, the Government and the contractor organize a third company with both
parties having equity shares, and share in the gross output

Co-Production – is a joint undertaking between two or more different parties for

the purpose of conducting an specific activities, where the parties pool their
respective resources and share the associated financial risks. In a Co-Production, the
Government provides inputs other than the mineral resources

Production sharing agreements – a production sharing agreements is a

contractual relationship between the host government (owner) and a private
individual, or corporation/association (investor), whereby the host government
contracts with the private individual, corporation or association to carry out oil and
gas exploration and production activities in a designated/defined area for a definite
period of time. The host government remains the owner of the minerals, although
title to a share of the produced oil and gas is transferred to the investor at a
contractually agreed delivery point to compensate the investor for the exploration
and production activities it has undertaken

Among the 3 mentioned agreements, the Government participates the least in a

mineral production-sharing agreement (MPSA). The MPSA contractor provides the
financing, technology, management and personnel necessary for the mining
operations

In an MPSA, the Government grants the contractor the exclusive right to conduct
mining operations within the contract area and shares in the gross output (The total
government share in an MPSA is the excise tax on mineral products under R.A.
No.7729 (An Act Reducing the Excise Tax Rates on Metallic and Non-Metallic
Minerals and Quarry Resources amending Section 151(a) of the NIRC
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“The President may enter into agreements with foreign-owned

corporations involving either technical or financial assistance for large-scale
exploration, development, and utilization of minerals, petroleum, and other
mineral oils according to the general terms and conditions provided by law,
based on real contributions to the economic growth and general welfare of the
country. In such agreements, the State shall promote the development and use
of local scientific and technical resources

The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution”

The above provision authorizes the President of the Philippines to enter into an
agreement with foreign owned corporation involving either technical or financial
assistance on a large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils

This agreement, known as the “Financial and Technical Assistance Agreement” is

subject to Constitutional conditions, which are;

1) The agreement must involve only technical and financial assistance

2) It must be for large-scale mining activities involving minerals, petroleum,

and other mineral oils

3) The exploration, development and utilization of the minerals must be

under the full control and supervision of the State

4) The President shall notify Congress of the agreement within thirty (30)
days from its execution

5) The provisions of the agreement must be in accordance with the general

terms and conditions provided by law

6) The agreement must promote the development and use of local scientific
and technical resources

Again, take note that, whenever the State enter into an agreement either with
Filipino corporations or foreign-owned corporations, the project must always be
under the full control and supervision of the State

Service contract is no longer allowed in the 1987 Constitution. Section 2 authorizes

the President to enter into an agreement with a foreign owned corporation
involving either financial or technical assistance for large-scale exploration,
development and utilization only of minerals, petroleum, and other mineral oils,
because these are the areas where local financial and technical resources are
inadequate

Take note that the President may enter into Financial and Technical Assistance
agreement with foreign corporation involving large-scale exploration only on three
kinds of natural resources, minerals, mineral oils, and petroleum, thus, beyond the
reach of such agreements with foreign owned corporations are the timberlands,
forests, marine resources, fauna and flora, water resources, wildlife and national
parks
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Case Study: La Bugal B’laan Tribal Association vs DENR Sec Victor Ramos, G.R.No.
127882, January 27 2004

The petition for Mandamus and Prohibition assails the constitutionality of;

1) R.A. No. 7942, aka The Philippine Mining Act of 1995, Approved on March 03,
1995 but took effect on April 09, 1995, along with the Implementing Rules
and Regulations, DENR Administrative Order No. 96-40, and

2) The Financial and Technical Assistance Agreement entered into on March

30,1995 by President Fidel V. Ramos with the Western Mining Corporation
of the Philippines, Inc., a corporation organized under Philippine laws, (but
owned by Western Mining Company Resources International Pty
Limited, a wholly owned subsidiary of Western Mining Corporation
Holdings Limited, which is a publicly listed major Austrialian mining
and exploration company) covering an area of 99,387 hectares in South
Cotabato, North Cotabato, Sultan Kudarat, and Davao del Sur, with a
Committed Capital of Fifty Million US Dollars (US$50Million)

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction

1) In signing and promulgating DENR Administrative Order No. 96-40,

implementing R.A.No. 7942, the latter being unconstitutional in that it allows
fully foreign-owned corporations to explore, develop, utilize and exploit
mineral resources in a manner contrary to Article XII, Section 2 of the 1987
Constitution

2) In recommending approval of and implementing the Financial and Technical

Assistance Agreement between President Ramos and Western Mining
Corporation of the Philippines Inc. because the same is illegal and
unconstitutional, being violative of Article XII, Section 2 of the 1987
Constitution

Note: It was alleged that at the time of the filing of the petition, there are 100 FTAA
applications filed with the DENR covering an area of 8.4 million hectares, 64 FTAA
applications comes from foreign-owned corporation covering an area of 5.8 million
hectares, and one foreign-owned corporation over offshore areas

In the January 27, 2004 Decision, the Supreme Court voided the FTAA entered
into between the Philippine Government with WMC Philippines, Inc, on the ground
that it is a “Service Contract”, not allowed in the 1987 Constitution. And also
Declared R.A. No. 7942, aka The Philippine Mining Act of 1995, unconstitutional on
the ground that it is contrary to Section 2 of Article XII

The first majority decision was a literal interpretation and strict assumption of the
intent of the framers, and that is to do away with “service contract” in the
exploration, development, exploitation and utilization of the natural resources, by
not only deliberately omitting the term “service contract” but by intentionally
declaring in Section 2, Article XII, that the exploration, development and utilization
of all natural resources shall be under the “full control and supervision of the State”
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On December 01, 2004, acting on the Motion for Reconsideration, the new majority
supporting the argument of Justice Artemio Panganiban (Ponente), reversed the
January 2004 Decision and Declared the Financial and Technical Assistance
Agreement entered into between President Fidel Ramos with the Western Mining
Corporation of the Philippines as “Valid and Constitutional”

Justice Panganiban declared that the agreement was not in violation of section 2 of
Article XII, but rather in compliance with the provision of the 1973 Constitution,
particularly section 9 of Article XIV, which provides – “the Batasang Pambansa, in
the national interest, may allow such citizens, corporations, or associations to enter
into service contracts for financial, technical, management or other forms of
assistance with any foreign person or entity for exploration, development,
exploitation or utilization of any natural resources”