POLICY ALTERNATIVES ON THE MINING DILEMMA IN NUEVA VIZCAYA

A Power Point Presentation submitted to: Professor Sanjay Claudio

In partial fulfilment of the requirements in MPA 625

Public Policy and Government Administration

By: Lawrence Lerias

MPA Student

October 2013

1.1 Situational Analysis The Mining Act of 1995 (RA 7942) was signed into law by President Fidel V. Ramos as a precondition for the granting of loans by the IMF-

World Bank. It was one of Ramos’s center piece programs under his Medium-Term Philippine Development Plan (MTPDP) that called for trade liberalization, industry deregulation and privatization. The act declared state ownership of the country’s mineral assets and allows these to be expropriated by 100 percent foreign-owned mining companies. Under the act, investors are given a 10-year tax holiday, capital tax exemptions, 100 percent repatriation of profits.

The revenue share of government comes in the form of excise tax, which is limited to two percent (2%) of the mineral production.

According to Justice Carpio, the excise tax is not a share in the product itself, the state as the owner of the product should earn more from the product itself. In these case, the state receives zero to nil from the mineral production sharing agreement. Public sentiments call for a review of the revenue sharing scheme of RA7942.

RA 7942's 16 years of implementation have been marked by ecological destruction and socia.l injustice. As of March 29, 2011, the government has approved 785 mining agreements covering 1,042,531 hectares or 3% of the country's total land area. Two major environmental disaster happened eversince the implementation of RA 7942. The Philex Mining in Benguet and Marcopper Mining in Marinduque disasters proved the impunity from justice of large transnational mining firms in the country.

From 1995 up to now, the public clamor to repeal the law and scrap the mining liberalization policy has taken on various forms: civil society advocacy campaigns, researches, legal and legislative engagements to question the constitutionality of the law, local government mining moratoriums, grassroots and community struggles, direct action, and even armed resistance to the entry and operations of mining firms. To address this concern, President Aquino signed EO 79 which suspended entry of new mining firms and ordered the review of mining agreements.

1.1 Situational Analysis In Nueva Vizcaya, the National Fact-Finding and Solidarity Mission (NFSM) led by Alyansa ng Nagkakaisang Nueva Vizcayano para sa

Kalikasan (ANNVIK) reported cases of harassment and militarization of anti-mining barricaders as well as land grabbing, biodiversity loss, and water pollution of rivers.

Militarization in the areas of mining in Nueva Vizcaya is evident. Local residents put up barricades to prevent the entry of mining equipment, supplies and personnel of mining firms. The military has been deployed and threatened the residents to dismantle the barricades. Local residents were being suspected as members of the NPA. A number of anti-mining leaders were also abducted and found dead. In Runruno town, houses of more than a hundred families were illegally and forcefully demolished by FCF Minerals in preparation to operations for a gold and copper mine.

September. 28 2013, Nueva Vizcaya Rep. Carlos Padilla has sought legal actions against three mining companies in his province for committing human rights violations against local residents. Congressman Padilla sought the immediate deportation of Brennan Lang, general manager of mining company Oceana Gold, Padilla said Lang ordered security guards of Oceana Gold to arrest and detain farmer Eduardo Licyayo for refusing to sell his farm to the mining company. The lawmaker said the company is the same Oceana that was found by the Commission on Human Rights, headed by then Leila de Lima, now justice secretary, to have committed human rights violations against a number of Indigenous People (IP) inhabitants of Dipidio. Congressman Padilla recommended the cancellation of Oceana's Financial or Technical Assistance Agreement (FTAA) which was likewise endorsed by the current CHR Commissioner Etta Rosales.

Congressman Padilla also called on the Bureau of Internal Revenue (BIR) to investigate Oceana Gold for violating the Internal Revenue Code by not declaring the true value of its exports and shortchanging the government in the payment of excise taxes. Congressman Padilla says that even the use of Oceana’s Corporate Social Responsibility (CSR) funds are used for indirectly bribing barangay officials, community leaders and politicians.

Meanwhile, Padilla also called for the immediate cancellation of the exploration permit of another mining company, Royalco Resources, Ltd. He said 10 years of not being able to conduct exploration activities because of the resistance of the resident is sufficient to prove that the people do not want mining in their area.

1.1 Situational Analysis The province of Nueva Vizcaya is now faced with the option to address the issue of mining in accordance with the President’s new

Executive Order 79 or the option to solve the issue on its own and follow what is just for its local community.

To mine or not to mine. The dilemma in the Mining Sector is as broad as it is intertwined with corruption in government, economic development and cultural impact in local communities. For the past years that mining activities had been in operation, no substantial benefit for government and the local community of Nueva Vizcaya has been realized. Instead of development and positive benefits, the provincial government of Nueva Vizcaya was left to deal with environment degradation and rehabilitation of local communities.

Clearly, what we need is more than a new mining EO but a deep and far-reaching reorientation of the mining industry.

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1.1 Situational AnalysisWhat brought about the problem?(Cause)

What brought about the issue, is the policy demand for the provincial government to address the problem of;

1. Environmental degradation (the pollution of Dipidio River, forest denudation)

2. Social injustice/Human Rights violations to individuals of local communities/indigenous people(militarization of areas with mining concessions, abduction of anti-mining leaders)

3. Corruption in government regulation/monitoring-(collusion of state military by allowing its men to be used by large mining firms for its own purposes)

4. Lost revenue potential due to inadequate government policy on revenue sharing scheme.

1.1 Situational AnalysisWhat brought about the problem?(Cause)

1. Environmental Degradation

The Provincial Government of Nueva Vizcaya has to address the environmental degradation of the mining areas to ensure ecological sustainability of the province. It has to address the contamination of the Didipio river which was found contaminated with chemicals used in mining. The river is the source of irrigation fields in the province.

In order to prevent environmental disasters, the provincial government must strictly monitor mining activities and ensure reforestation is being undertaken by the mining firms. It must move to reverse the effects of biodiversity loss in its forests and in the mining areas. Reports of animals that are dwindling in numbers should be given priority.

Mining is not a renewable resource. Strict monitoring and regulation should be exercised to ensure rehabilitation of the environment. The Provincial government has control and access to players in their own backyard, hence it handles the responsibility for monitoring its activities.

1.1 Situational AnalysisWhat brought about the problem?(Cause)

2. Social injustice/Human Rights violations

The provincial government of Nueva Vizcaya must ensure the protection of rights of local residents and indigenous communities that live in the mining areas. Military personnel should not be used by mining firms to coerce local inhabitants into giving up their land. It has to investigate the disappearances of anti-mining leaders in their locality. It should look into cases of land grabbing committed by large scaling mining companies.

The local government must monitor the mining firms to ensure that they perform their corporate social responsibilities. It is the right of the local residents to benefit from the existence of mining firms. Jobs should be extended to local laborforce.

1.1 Situational AnalysisWhat brought about the problem?(Cause)

3. Corruption in government regulation/monitoring

There are instances of collusion between government officials and large mining firms in some aspects of the mining activity, environmental compliances, checks and balances are often overlooked by public officials to facilitate the accomodation of these large scale and powerful mining firms. Complicity of officials is also evident in the existence of small scale mining activities. Although relatively small compared to large scale firm, the proliferation of small scale miners in large numbers contribute to the environmental degradation that is happening in Nueva Vizcaya.

It is therefore, the responsibility of the provincial government to prohibit the proliferation of unregulated illegal small scale mining firms because they pose risk to their workers and the environment.

1.1 Situational AnalysisWhat brought about the problem?(Cause)

4. Lost revenue potential due to inadequate government policy on revenue sharing scheme.

The provincial government of Nueva Vizcaya is entitled to a portion of the taxes the national government earns from the large mining firms that operate in the province. Under the Local Government Code, the province is entitled to Internal Revenue Allocation which will be released automatically. It is also has the right to impose local taxes to the large firms that operate in their area.

If the national government can renegotiate the revenue sharing scheme with large scale mining companies, a substantial increase in IRA will also be allocated to the budget of the province.

Earning nothing from the operation of these large scale miners will undermine the purpose by which the government entered into agreement to expropriate the resources in the province. If the provincial government cannot influence the national government, then they will have to clean up what is left after the large scale miners have depleted the environmental resources of the area.

1.1 Situational AnalysisWhat is the necessity of solving the issue? (Effect/Impact)

Due to the “supposed” relevance of the Mining Industry to the development of the Province of Nueva Vizcaya, many are involved and affected with this issue. Hence, urgency is needed from the Provincial Government to come up with the correct Public Policy to tackle the issue.

Government should address the issue with urgency to; Prevent further deterioration of environment (rehabilitate polluted areas). Bring about peace and community development to affected areas of mining

activities. Prevent alienation and abuse of indigenous communities. Promote positive development of the mining industry in the province. (To realize the potential of responsible mining as an economic booster

favorable for the province of Nueva Vizcaya)

1.2 Stakeholders Analysis The following are the stakeholders involved in the issue of mining . In

order to reach a favorable atmosphere for the development of the mining industry in Nueva Vizcaya, the stakeholders should align their role and responsibility to the attainment of such goal.

1. Large Scale Mining Companies

2. Small-scale miners (informal mining)

3. The Provincial Government Bureaucracy

4. Indigenous Communities/Local Residents

1.2 Stakeholders Analysis How are they involved?

Large Scale Mining Companies

Oceana Gold, Royal Resources Limited, and FCF Minerals Incorporated, are the large scale mining corporations that secured permits from the DENR and the Mines and Geosciences Bureau.

They are the investors (of billions of Pesos) who will be greatly affected by government policy. They took the risk in investing in Nueva vizcaya with prospects of earning profit.

They entered into a contract with government to pay excise tax, provide social services to the local community, and rehabilitate the environment where they are extracting.

In the case of Nueva Vizcaya, these large scale mining firms are the cause of environmental degradation and human rights violation.

1.2 Stakeholders Analysis How are they involved?

Small Scale Mining (Informal Miners)

Informal miners that are relatively small in activity but greater in numbers compared to large scale miners.

A good number of small-scale miners are illegal, therefore, unregulated. They proliferate due to the complicity of local politicians. They pose a great risk to their workers because they utilize unsafe methods of mining.

Small scale mining is the major source of livelihood for local residents

Mining activities of small scale miners contribute to the contamination of rivers in Nueva Vizcaya and environmental denudation in the area.

1.2 Stakeholders Analysis How are they involved?

Indigenous Communities

The local residents of the area of mining activity mostly composed of members of Igorot tribes, they have been resisting the entry of large scale mining companies. They claim that they were manipulated by the local government officials and large scale mining companies to agree into the mining activity.

The Indigenous people/local communities are the supposed recipients of the social service the government mandated the large scale miners to provide with.

Jobs in the mining are created for them.

The entry of large scale mining has resulted in discord between pro-mining and anti-mining local residents.

1.2 Stakeholders Analysis How are they involved?

The National and Provincial Governments

The DENR has the authority to enter into agreement with mining firms. Mines and Geosciences Bureau(MGB) is in charge for mineral land and resources, researches and exploration. The MGB act as rubber stamp that approves the exploration of a mining firm. It recommends the mining application to the DENR which in turn recommends it to the President.

The Provincial government monitors the mining activities of large mining firms and earns from mining activities thru local taxes.

Both are tasked to resolved the mining issues in Nueva Vizcaya.

1.3 Alternative Policy Solutions (APS)

APS # 1 – Enact a total ban on all mining activities for the province of Nueva Vizcaya.

APS # 2 – Enact a selective ban which will allow small scale mining and disallow large scale mining.

APS # 3 – Conform to EO 79, wait for the new enactment of mining law pending in congress.

1.4 Criteria: Efficiency & Cost-Benefit AnalysisWhat courses of action/policies should be pursued to address the problem?

APS # 1 - Enact a total ban of all mining activities in the province of Nueva Vizcaya.

Corruption is evident in government and it can be expected that plans for extensive mining operations in remote areas requiring regulation and monitoring will make it worse. From these findings, we can conclude that for years, the Province of Nueva Vizcaya has not benefitted from mining activities and is now worse because of it. To enact a total ban is to go against the EO 79. However, social responsibility and environmental protection is more valuable than any amount of income mining activities would bring in.

A total ban on mining will ensure its efficiency in addressing the problem of environmental protection. No amount of corruption can circumvent a policy on total ban on mining activity.

The cost for the provincial government for a total ban is minimal. However, a reduction in IRA will result in the closure of mining operations. Unemployment will also be a problem if total ban is effected because local residents rely on mining for their livelihood.

The political viability of the total ban is also in question because the vested interest of the people and the large scale miners will be affected.

There is no economic viability because of the job and income losses that would result from the discontinuation of mining activities.

A positive factor is its administrative operability. With the total ban on mining, the responsibility of the local government to monitor and regulate is lessened.

The benefit would be the preservation of the environment, the security of food supply for the upcoming generations and that is unquantifiable.

1.4 Criteria: Efficiency & Cost-Benefit AnalysisWhat courses of action/policies should be pursued to address the problem?

APS # 2 - Enact a selective ban on mining activity. The provincial government shall adopt a selective ban on mining activity. It will encourage small scale mining activity and terminate large scale mining operations that are in violation of their contract.

This policy alternative also goes against EO 79. The provincial government acknowledges that local communities are dependent on mining activities. Therefore, to totally ban mining operations would be detrimental to these communities. The provincial government shall encourage the development of the small scale mining industry to foster job creation in the province.

The provincial government shall recommend to the DENR the discontinuation of the mining activities of all large scale mining operations in Nueva Vizcaya because of violation of their contract, which is failure to rehabilitate the environment and failure to deliver its social responsibility. It should also cite that local communities are opposed to mining activities in their area as evidenced by barricades put up by local residents.

Budget for the this policy solution will be average. Although three large mining firms will be closed, the encouragement of illegal small mining firms to legitimize their operation will further add to the responsibility of the provincial government to monitor and regulate this newly registered small scale miners.

If corruption of local officials is minimized, and the proliferation of illegal mining activity is reduced, the efficiency of this policy solution will be attained. The efficiency of this alternative policy depends on how much government is willing to be transparent.

The vested interest of powerful large scale mining companies are at stake, hence, political viability is in question and depends on political will of the government.

Administrative operability is achievable. The shift from monitoring and regulating large scale mining firms to prioritization of small scale miners is the same work the provincial government has been doing.

Economic viability will be attained if development of small scale mining industry is realized. The risk factor is the exposure of environmental resources to small scale mining. If monitoring and regulation of this industry fails, the

environmental denudation will be its result. Responsible mining would be achieved in a small scale level.

1.4 Criteria: Efficiency & Cost-Benefit Analysis APS # 3 - APS # 3 – Conform to EO 79, wait for the new enactment of mining law pending in congress.

Reiterate the national government’s thrust to strengthen institutional controls to address problems of the mining sector. The cost for government is minimal. Economic viability is reduced because of the loss in potential income

that should have been earned, the loss of jobs that should have been created, and the loss in opportunity for rapid economic growth. There are other mining firms that are conducting mineral explorations in Neuva Vizcaya, however, their application to initiate mining is suspended by EO 79.

The efficiency of this solution is still unknown. The new law is still pending in congress. Efficiency is dependent on transparency in government.

Local residents will not support this decision because its just a reiteration of the old mining act. The large scale mining firms have their application for mining suspended, so this policy solution is not advantageous for them.

This APS solution is not economically viable because it operates on the same revenue scheme.

With the continuation of large scale mining activities, environmental degradation is still possible if left unmonitored and unregulated by government.

APS COST EFFECIENCY ADMINISTRATIVE OPERABILITY

ECONOMIC VIABILITY POLITICAL VIABILITY ENVIRONMENTAL VIABILITY

1. TOTAL BAN ON MINING

MINIMAL DISCONTINUED GOVERNMENT INTERVENTION

EFFICIENTHI IMPACT ON

ENVIRONMENT

OPERABLEIMMEDIATE

DISCONTINUATION OF GOVERNMENT MONITORING

NOT VIABLELOST INCOME OPPORTUNITY

LOST LOCAL JOB GENERATION

WILL BE OPPOSED BY THE LOCAL COMMUNITY DUE TO

LOST IN INCOMELARGE SCALE MINERS WILL

ALSO OPPOSE THE BAN DUE TO VESTED INTEREST/

FULL ENVIRONMENTAL CONSERVATION

AND PROTECTION

GOVERNMENT WILL NO LONGER HONOR THE

CONTRACT THEY AGREED UPON

2. SELECTIVE BAN MINIMAL COST EFFECIENCY IS DEPENDENT ON

TRANSPARENCY IN GOVERNMENT

OPERABLE BUT ADDED WORK DUE TO

DEVELOPMENT OF SMALL SCALE MINING INDUSTRY

VIABLEABLE TO PROVIDE MUCH NEEDED JOBS BY LOCAL

RESIDENTS

POLITICALLY VIABLEWILL BE ACCEPTED BY

LOCAL RESIDENTS

LOW RISK IN ENVIRONMENT DEGRADATION DUE TO LOW TECH MINING OPERATIONS

EFFECIENCY IS DEPENDENT ON

CORRUPTION AND CONTROL MECHANISMS

ADDED MONITORING DUE TO LEGALIZED MINING

OPERATIONS

THE DEVELOPMENT THRUST WILL BE ACCEPTED BY SMALL SCALE MINERS

OPPOSED BY LARGE SCALE MINERS

3. CONFORM TO EO 79

MINIMAL COST EFFECIENCY IS DEPENDENT ON

TRANSPARENCY IN GOVERNMENT

OPERABLESAME AS STATUS QUO PREPARATION FOR THE

NEW LAW TO TAKE EFFECT

NOT ECONOMICALLY VIABLE

LOST REVENUE DUE TO UNFAIR REVENUE

SHARING SCHEME.

OPPOSED BY LARGE SCALE MINERS BECAUSE IT

PROHIBITS ENTRY OF NEW MINING OPERATIONS

CONTINUED RISK TO ENVIRONMENT IF LEFT

UNMONITORED AND UNREGULATED BY PROVINCIAL

GOVERNMENT

EFFECIENCY IS DEPENDENT ON

CORRUPTION AND CONTROL MECHANISMS

OPPOSED BY LOCAL RESIDENTS DUE TO HUMAN

RIGHTS VIOLATION AND SOCIAL INJUSTICE.

APS Comparison Table

1.5 Policy Recommendation The provincial government of Nueva Vizcaya cannot undermine the benefits of mining to its local residents and the economy. It cannot totally

ban mining as it is hypocritical, the people’s livelihood is dependent on mining, it cannot be discontinued totally unless the government has a solid program to shift the workers that will be displaced from the closure of the mines. For some villagers from Didipio and Runruno, many have been earning from gold panning. They say, the government should instead encourage small-scale mining that is properly regulated to provide local jobs.

Opening the province of Nueva Vizcaya to extensive large scale mining is a high risk gamble. It should not gamble the future of the next generation. They should enter into large scale extractive mining only when they have full control in regulation and monitoring. The time when responsible mining companies comply to international standards and practices in mining, that would be the day.

The cost benefit analysis has shown that APS # 2 is more viable than the other two APS. Although, it will contradict the National governments’ EO 79, the provincial government has the right to contest the mining law at the Supreme Court by citing the violations made by the large scale mining corporations that operate in the province.

APS # 2 addresses the two main concerns of the province, and that is livelihood to the local communities and preservation/rehabilitation of the environment.

APS # 2 is also politically acceptable to two stakeholders, the local community and the small scale miners.

Although the prospects of opening the province of Nueva Vizcaya to extensive mining are good, we cannot undermine the human rights abuses to our own indigenous people and the environmental degradation due to lack of efficient government regulation.

The Mining Act of 1995 does not deliver economic sustainability and environmental protection. The province of Nueva Viscaya is suffering from the National government’s decision to undermine the approval of the local communities of the province.

1.5 Policy Recommendation A new law does not guarantee efficiency in the mining industry. A government with corruption loopholes will always be inefficient.

Total ban on mining is not politically and economically acceptable to the local residents as well. The province of Nueva Vizcaya cannot totally shy away from the advantages of a strong mining industry because it can provide much-needed jobs for the local residents. However, unregulated large scale mining is hazardous to the environment and to the people.

The mineral wealth of Nueva Vizcaya would always be there waiting. The provincial government should wait for the right time to extract it in massive quantities. They should defer extractive mining until the government becomes politically mature to ensure equitable distribution of the national patrimony to the local communities of the province.

According to Christian Monsod, large scale mining can only be advantageous to the country when:

1. the environmental, economic and social costs are accounted for in evaluating mining projects;

2. the country gets a full and fair share of the values of extracted resources;

3. the institutional capabilities of the government to evaluate and regulate mining activities are put in place; and

4. since mining uses up non-renewable natural capital, the money from mining are specifically used to create new capital such as more developed human resources and infrastructure, particularly in the rural areas.

Until such time the factors above are met, the province of Nueva Vizcaya and the country as well, should wait for it before entering into large scale extractive mining.

In the meantime, it is recommended that Nueva Vizcaya discontinue large scale mining until such time when the country or the province has the structures and competent personnel to enforce responsible large scale mining.

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