GR 170867; (January, 2020) (Digest)
G.R. No. 170867 & G.R. No. 185941, January 21, 2020
Republic of the Philippines, represented by Raphael P.M. Lotilla, Secretary, Department of Energy (DOE), Margarito B. Teves, Secretary, Department of Finance (DOF), and Romulo L. Neri, Secretary, Department of Budget and Management (DBM), Petitioners, v. Provincial Government of Palawan, represented by Governor Abraham Kahlil B. Mitra, Respondent. / Bishop Pedro Dulay Arigo, Cesar N. Sarino, Dr. Jose Antonio N. Socrates, and Prof. H. Harry L. Roque, Jr., Petitioners, v. Hon. Executive Secretary Eduardo R. Ermita, Hon. Energy Secretary Angelo T. Reyes, Hon. Finance Secretary Margarito B. Teves, Hon. Budget and Management Secretary Rolando D. Andaya, Jr., Hon. Palawan Governor Joel T. Reyes, Hon. Representative Antonio C. Alvarez (1st District), Hon. Representative Abraham Mitra (2nd District), and Rafael E. Del Pilar, President and CEO, PNOC Exploration Corporation, Respondents.
FACTS
The Republic entered into Service Contract No. 38 in 1990 for the Camago-Malampaya Natural Gas Project, located about 80 kilometers from mainland Palawan. The contract provided a 60-40 production sharing scheme between the national government and the service contractors. On February 17, 1998, President Fidel V. Ramos issued Administrative Order No. 381, stating that per the Local Government Code, part of the national government’s 60% share would be given to concerned local government units, and that the Province of Palawan was “expected to receive about US$2.1 billion.” Subsequent negotiations between national agencies and the province failed. On May 7, 2003, the Province of Palawan filed a Petition for Declaratory Relief (Special Civil Action No. 3779) before the Regional Trial Court (RTC), seeking a judicial declaration that it has territorial jurisdiction over the gas reservoirs and is entitled to an equitable share. On December 16, 2005, the RTC ruled in favor of the province. The Republic filed a Petition for Review before the Supreme Court ( G.R. No. 170867 ). Meanwhile, on December 1, 2007, President Gloria Macapagal-Arroyo issued Executive Order No. 683, authorizing the release of funds to the province pursuant to a Provisional Implementation Agreement, without prejudice to the Court’s final resolution. Taxpayers (Arigo, et al.) filed a Petition for Certiorari before the Court of Appeals assailing the EO and the Agreement, which was dismissed. Arigo, et al. then filed a Petition for Review before the Supreme Court (G.R. No. 185941). The two cases were consolidated. On December 4, 2018, the Supreme Court rendered a Decision granting the Republic’s petition and denying the taxpayers’ petition, declaring that the Province of Palawan was not entitled to a share in the project’s proceeds. The Province of Palawan and Arigo, et al. filed Motions for Reconsideration.
ISSUE
The primary issue for resolution is whether the Province of Palawan is entitled to an equitable share in the proceeds from the Camago-Malampaya Natural Gas Project under Section 7, Article X of the 1987 Constitution and the Local Government Code.
RULING
The Supreme Court DENIED the Motions for Reconsideration and AFFIRMED its December 4, 2018 Decision.
The Court held that the Province of Palawan is not entitled to an equitable share because the Camago-Malampaya gas reservoirs are not within its territorial jurisdiction. The Court ruled that a local government unit’s territorial jurisdiction is limited to its land area, and requires contiguity. The gas project is located on the continental shelf, which is beyond the territorial jurisdiction of any local government unit. The Constitution does not apportion the national territory among local government units, and the United Nations Convention on the Law of the Sea does not confer continental shelves upon them. The Court also found that the Municipality of Kalayaan’s jurisdiction, as created by Presidential Decree No. 1596, is limited to the land features within the Kalayaan Island Group and does not extend to the surrounding waters or continental shelf. The Court further ruled that the doctrine of estoppel does not apply against the State based on the executive branch’s prior pronouncements (like Administrative Order No. 381) or agreements (like the Interim Agreement and Provisional Implementation Agreement). Finally, the Court held that the claim for an equitable share cannot be granted based on equity, as equity cannot supplant positive law.