1. Coal Mining in the Philippines:
An Overview and Analysis of Economic Impact
Dr. Cielo Magno Mr. Anton Ragos

2. Mineable Coal Reserves, by area, (in million metric tons)
Coal Reserves Mineable Coal Reserves, as of Dec. 2012
Mineable Coal Reserves, by area, (in million metric tons)
as of Dec. 2012
Source: Energy Resource Development Bureau, Department of Energy

3. Coal Production Production share based on mining areas, 2013
5.53%
94.47%
Semirara Island
Other Areas
Market Share of Other Areas, including small-scale mining contractors (in %)
Source: Energy Resource Development Bureau, Department of Energy

4. Coal: Demand and Supply Coal production, importation, and consumption, (in million metric tons)
Production
Importation
Source: Department of Energy

5. Coal: Demand and Supply Coal production, importation, and consumption, (in million metric tons)
Production
Importation
Consumption
Source: Department of Energy

6. Coal: Demand and Supply Coal consumption, by industry, (in %) 2009-2012
(mmmt)
(mmmt)
(mmmt)
(mmmt)
2009
2010
2011
2012
Power Generation
Cement Production
Other Industrial Processes*
*Include: alcohol, sinter, rubber boots, paper and chemical manufacturing, fertilizer production, and smelting processes
Source: Department of Energy
Kessels, John (no date), Prospects of Coal and Clean Coal Technologies in the Philippines

7. Coal: Electricity Generation Electricity generation , by source (in GwH), 1980- 2010
Renewable
Oil
Natural Gas
Hydroelectric
Coal
Source: World Bank

8. Coal Development Act of 1976 Presidential Decree 972, as amended by Presidential Decree 1174
Promotes accelerated exploration, development,
exploitation, production, and utilization of coal
Introduces the Coal Operating Contract (COC) system
Assigns the operator to conduct the exploration, development,
exploitation, and marketing of coal resources
Sets out obligations of operators, and incentives to
coal operators and end-users
Source: Presidential Decree 972

9. Coal Operating Contract Exploration Phase and Development and Production Phase
Two (2) year period
Two (2) year allowable extension (maximum)
Development and Production Phase:
Remaining period of Exploration Phase and/or
Ten (10) year period (additional)
Ten (10) year allowance extension (maximum)
Series of three (3) year allowable extensions not exceeding a total of twelve (12) years
Source: Presidential Decree 972, as amended
Coal Model Contract

10. Coal Operating Contract Incentives and Privileges
Exemption from all national taxes except income tax
Exemption from payment of duties on machinery/equipment importation
Recovery of Operating Expense
Entry of foreign technical personnel
Preference in grant of government loans*
Accelerated Depreciation*
*incentives not set out in the COC but are specified in PD 972 as amended
Source: Presidential Decree 972, as amended
Coal Model Contract

11. Coal Operating Contract Revenue-Sharing Scheme
Gross Proceeds
Less: Recoverable Cost
Net Proceeds
Less: Basic Fees
Special Allowances
Government Share
Department of Energy
Local Government Unit
100.00
90.00
10.00
4.00
3.00
1.80
1.20
Gov’t Share
Recoverable Cost
Basic Fee
Special Allowance
Source: Presidential Decree 972, as amended
Coal Model Contract
Coal Operating Contract Accounting Procedure

12. Local Government Code of 1991 Utilization of LGU share
Local government units shall receive 40% of gross collection from mining taxes
Divided between province (20%), municipality (45%), and barangay (35%)
At least 80% of the said fund shall be used to lower cost of electricity
Remaining amount shall be used for local livelihood projects
Source: Presidential Decree 972, as amended
Coal Model Contract

13. Coal Operating Contract Revenue-Sharing Scheme
Gross Proceeds
Less: Recoverable Cost
Net Proceeds
Less: Basic Fees
Special Allowances
Government Share
Department of Energy
Local Government Unit
100.00
90.00
10.00
4.00
3.00
1.80
1.20
Gov’t Share
Recoverable Cost
Basic Fee
Special Allowance
Source: Presidential Decree 972, as amended
Coal Model Contract
Coal Operating Contract Accounting Procedure

14. Environmental Regulation
General Provisions
Subject to the Environmental Impact System (EIS) of the Department of Energy and
Natural Resources. Outside the scope of EIS, coal operators are required to:
Rehabilitate affected sites after contract termination
Render comprehensive anti-pollution reclamation plan
Follow government guidelines on: mining procedures to minimize environmental damage; water waste control; erosion control; and re-vegetation
Source: Coal Model Contract

15. Semirara Mining Corporation Coal Revenue, Cost of Sales, and Government Share, (in million PhP)
Government Share
Net Revenue
Cost of Sale
Source: Semirara Mining Corp. Consolidated Financial Statements,

16. Semirara Mining Corporation Income Tax (in million PhP), Statutory and Actual Income Tax Rate (in %)
Statutory
32.00
32.50
35.00
30.00
Effective
3.34
20.97
33.96
34.06
22.94
3.32
-0.90
-0.36
0.62
Source: Semirara Mining Corp. Consolidated Financial Statements,

17. Semirara Mining Corporation Foregone Revenue from the Income Tax Exemption (in million PhP),
Statutory
35.00
30.00
Exemption
11.46
30.62
31.14
30.68
29.97
Source of basic data: Semirara Mining Corp. Consolidated Financial Statements,

18. Economic Impact Poverty incidence in localities of coal operation
Provincial Poverty Incidence
Notes:
Gattaran, Iguig, Danao City, Imelda, San Miguel,
and Payao have two (2) contract operators, respectively
Dalaguete has three (3) contract operators
Rapu-Rapu has four (4) contract operators
Municipal/City Poverty Incidence
National Poverty Incidence
Source: Department of Energy

19. Economic Impact Regression Analysis: Descriptive Statistics
Variable
Obs.
Mean
Std. Dev.
Min.
Max.
HH Total Income
42,583
107,009.70
135,336.80
1,942.00
4,286,302.00
Coal share of province (%)
42,732
0.02
0.35
0.00
5.47
Share from other nat’l tax collection (%)
1.65
6.07
56.69
HH head educ (none)
0.03
0.17
HH head educ (elem. undergrad)
0.21
0.41
HH head educ (elem. grad)
0.19
0.39
HH head educ (HS undergrad)
0.12
0.32
HH head educ (college undergrad)
0.08
0.27
HH head educ (college grad)
0.11
HH members wage-earners (%)
0.24
0.25
1.00
Earns from farming and gardening
0.43
Earns from poultry and livestock
0.06
Earns from fishing
0.05
Earns from forestry and hunting
0.14
Earns from wholesale and retail
0.20
0.40
Earns from manufacturing
0.04
Earns from social, community services
Earns from transportation
0.07
0.26
Earns from construction
0.01
Earns from entrepreneurship
0.13

20. Economic Impact Regression Analysis: Results
HH Total Income
Coefficient
Robust Std. Err.
Coal share of province (%)
-4,420.27*
1,245.47
Share from other nat’l tax collection (%)
-10.44
84.00
HH head educ (none)
-52,340.7*
1,608.27
HH head educ (elem. undergrad)
-44,592.1*
1,232.01
HH head educ (elem. grad)
-32,630.9*
1,278.75
HH head educ (HS undergrad)
-28,808.1*
1,477.81
HH head educ (college undergrad)
32,175.5*
2,821.99
HH head educ (college grad)
136,175.6*
3,711.40
HH members wage-earners (%) *
29.02
Earns from farming and gardening
-2,023.4
1,265.22
Earns from poultry, livestock raising
-1,082.14
1,838.96
Earns from fishing
-1,639.14
2,564.52
Earns from forestry and hunting
-13,289.1*
2,313.41
Earns from wholesale and retail
27,301.35*
1,814.09
Earns from manufacturing
7, *
2,461.89
Earns from social, community services
42,635.01*
4,552.18
Earns from transportation
19,551.73*
2,629.76
Earns from construction
92,968.28*
31,020.83
Earns from entrepreneurship
82,033.83*
12,342.07
(Constant)
87,991.64*
1,496.28
*significant at 1%

21. Conclusion Coal mining operation remains small in some areas
Earmarking for electrification leads to spending constraint among LGU’s
Government is subsidizing coal operation
Existing laws are silent in terms of absorbing negative externalities of coal mining
Coal mining has negative impact on household income