Republic of the Philippines vs Provincial Government of Palawan

G.R. No. 170867 – 844 Phil. 453 – Political Law – Constitutional Law – National Territory – LGU’s Territory Generally Limited to Land Area – UNCLOS did not amend the Local Government Code provisions on territory

Municipal Corporations – Local Government Code – Creation of a local government unit – Land Area Requirement – LGU Territory

In 1978, PD 1596 was promulgated which defined the Kalayaan Group of Islands as a municipality in the province of Palawan. PD 1596 defined the areas covered by the KIG to include the seabed, subsoil and continental margin near and around it. This included the offshore area of Camago-Malampaya.

In 1990, the the government, through the DENR, entered into an agreement (Service Contract No. 38) with Shell Philippines and Occidental Philippines, Inc. to explore the natural gas reserves in the Camago-Malampaya area (Malampaya Gas Project).

In 1998, then President Fidel Ramos issued AO No. 381 which recognized Palawan’s share from the proceeds of the Malampaya Gas Project. In the same year, the DOE secretary wrote a letter to the Governor of Palawan requesting for the deferment of the payment of Palawan’s share for the first seven years of the project.

In 2001, drilling and exploration began. Thereafter, Palawan demanded its 40% share from the Malampaya Gas Project in accordance with Section 290 of the Local Government Code (LGC) which provides:

Amount of Share of Local Government Units. – Local government units shall, in addition to the internal revenue allotment, have a share of forty percent (40%) of the gross collection derived by the national government from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such other taxes, fees, or charges, including related surcharges, interests, or fines, and from its share in any co-production, joint venture or production sharing agreement in the utilization and development of the national wealth within their territorial jurisdiction.

The Republic denied Palawan’s demand on the ground that the Camago-Malampaya gas fields are 80 kilometers offshore from Palawan; they are outside the territorial jurisdiction of the province and is within the national territory of the Philippines.

As a result, Palawan sued the Republic. The RTC ruled in favor of Palawan, hence, this petition for review on certiorari.

ISSUE: Whether or not Palawan is entitled to share from the proceeds of the Malampaya Gas Project.

HELD: No. Despite PD 1596 defining KIG as part of Palawan, the Camago-Malampaya area is not within the territory of Palawan. The area defined in PD 1596 applies to KIG alone and not to Palawan. A local government’s territory is defined by its charter. Palawan’s charter came before PD 1596 and was not amended (nor is deemed amended) by PD 1596. Territory, insofar as LGUs are concerned, pertain only to their land area. As defined in its organic law, the Province of Palawan is comprised merely of islands. The continental shelf, where the Camago-Malampaya reservoir is located, was clearly not included in its territory.

That the LGUs’ respective territories under the LGC pertain to the land area is clear from the fact that: (a) the law generally requires the territory to be “contiguous”; (b) the minimum area of the contiguous territory is measured in square kilometers; (c) such minimum area must be certified by the Lands Management Bureau; and (d) the territory should be identified by metes and bounds, with technical descriptions.

The LGC now uses the words “land area” in lieu of “territory” to emphasize that the area required of an LGU does not include the sea for purposes of compliance with the requirements of the Code for its creation.

An LGU may have control over the waters but may not necessarily claim them as part of their territory. The exercise of authority does not determine the LGU’s territorial jurisdiction.

It can, thus, be concluded that under the LGC, an LGU’s territory does not extend to the municipal waters beyond the LGU’s shoreline.

An LGU’s territorial jurisdiction refers to its territorial boundaries or to its territory. The territory of LGUs, in turn, refers to their land area, unless expanded by law to include the maritime area. Accordingly, only the utilization of natural resources found within the land area as delimited by law is subject to the LGU’s equitable share under Sections 290 and 291 of the LGC.

But the Republic through the issuances of its past officials already recognized Palawan’s right to the shares in the Malampaya Gas Project, in fact, in other similar projects near Palawan, the national government had been remitting to Palawan its shares. Isn’t the Republic already estopped?

No. Estoppel does not apply to the State. The State cannot be estopped by the omission, mistake or error of its officials or agents. Thus, neither the DoE’s June 10, 1998 letter to the Province of Palawan nor President Ramos’ A.O. No. 381, which acknowledged Palawan’s share in the Camago-Malampaya project, will place the Republic in estoppel as they had been based on a mistaken assumption of the LGU’s entitlement to said allocation.

The Philippines is a signatory of the UNCLOS which provides that the continental shelf is part of a State’s territory. The Philippines also adhere to the doctrine of transformation which provides that treaties are part of the domestic law. Applying these, is it correct to conclude that the continental shelf where the Malampaya Gas Project is being conducted is part of the territory of Palawan hence entitling Palawan to a share from its proceeds?

No. The concept of continental shelf under the UNCLOS does not, by the doctrine of transformation, automatically apply to the LGUs. The UNCLOS did not automatically amend the LGC and the charters of the LGUs. No such intent is manifest either in the UNCLOS or in ratifying law. Instead, the UNCLOS, transformed into our municipal laws, should be applied as it is worded (verba legis).

But Palawan has previously exercised jurisdiction and police power over the Camago-Malampaya area, will that not suffice to prove that it the area is part of its territory?

No. An LGU cannot claim territorial jurisdiction over an area simply because its government has exercised a certain degree of authority over it. Territorial jurisdiction is defined, not by the local government, but by the law that creates it; it is delimited, not by the extent of the LGU’s exercise of authority, but by physical boundaries as fixed in its charter.

Unless clearly expanded by Congress, the LGU’s territorial jurisdiction refers only to its land area.

But may Palawan claim its share based on equity? Is it not only fair to give Palawan its share from the proceeds of the Malampaya Gas Project considering its proximity? That in the event of a disaster, it will be the most affected? That Malampaya’s gas lines even run through Palawan?

No. Philippine courts are courts of law and not courts of equity. If there are applicable laws, equity will not apply. Equity is available only in the absence of law and not as its replacement. The law is: an LGU is only entitled to a 40% share under the LGC if the exploitation of the resource is within its territory. Palawan’s remedy is not judicial adjudication based on equity but legislation that clearly entitles it to share in the proceeds of the utilization of the Camago-Malampaya reservoir.

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