DoE appeals ruling on Malampaya firms’ taxes

20150830bd7e0THE Department of Energy (DoE) wants the Commission on Audit (CoA) to reconsider and set aside its decision that affirmed over P50-billion tax underpayments of the consortium that developed the Malampaya natural gas field in offshore Palawan.

THE Malampaya oil platform off the coast of Palawan is seen in this file photo. — BW FILE PHOTO
“We already filed a Motion for Reconsideration on the CoA decision regarding the tax issue of the Malampaya consortium,” Zenaida Y. Monsada, officer-in-charge for the Energy secretary, told reporters on the sidelines of LPG Philippines Forum 2015 last week.

The official said the DoE objects the CoA decision, which contradicts underlying laws that guide the country’s upstream oil industry.

Ms. Monsada noted that such move of the CoA could also affect the long-term interest of investors — both local and foreign — that are interested in the country’s petroleum prospects.

The CoA Board of Commissioners, in a decision dated April 6, rejected the petition for review filed by the DoE with Shell Philippines Exploration B.V., Philippine National Oil Co. Exploration Corp., and Chevron Malampaya LLC to appeal its earlier audit findings on the Malampaya project.

A 2009 CoA report on the DoE found P53.14 billion of underpayments involving corporate income taxes due from the exploration companies.

The DoE said in its earlier petition these liabilities are already covered by the 60% share being remitted by the agency from 2002 to 2009, the duration of the exploration project. But the state auditors maintain that they underpaid their taxes.

A copy of the motion for reconsideration dated June 16 and released to the media over the weekend showed that the DoE “respectfully assail and take the most serious objection to the… decision.”

Cited as basis to its objection was “the fact that it is in contravention of the existing laws and jurisprudence.”

In particular, the DoE said the decision was an “undue inference to the powers of the DoE” to implement Presidential Decree No. (PD) 87 and 1459 — two laws that set out the powers of the DoE Secretary and outlined guidelines in the developing the country’s upstream petroleum sector.

The DoE said the CoA decision “overstepped and exceeded the legal bounds of CoA’s constitutionality mandated functions tantamount to a gross abuse of discretion.”

It added that such affirmation of the 2009 ruling “simply misconstrued, misapplied and, ultimately, disregarded Section 18 (b) of PD 87 and Section 1(a) of PD 1459.,” the agency said.

Both provisions state that the share of the government from the net revenues of exploration projects, including all taxes, should not be less than 60%.

The DoE further said that the enforcement of the notice of charge issued by the CoA would lead to “violation of the principle of non-impairment of contractual obligations.”

“The decision, if not reconsidered and set aside, will cause irreparable harm to the country’s long-term interest as it will further erode the confidence of foreign petroleum industry investors in the stability and certainty of our rules and regulations,” the motion stated.

The DoE also cited the risk, huge capital and high technical capability needed to develop the country’s petroleum industry.

The Philippine government in 1990 granted Service Contract 38 to the Malampaya consortium, which developed the gas-to-power project.

Currently, the gas field — located in waters northwest of Palawan — fuels three natural gas plants: the 1,200-megawatt (MW) Ilijan; 1,000-MW Sta. Rita; and 500-MW San Lorenzo plants in Batangas.

These plants account for a third of Luzon’s power supply requirements.

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