The Philippine Department of Energy (DoE) is prepared to defend the rules governing its coal auction in court should the Consunji group pursue a legal challenge, Energy Secretary Sharon S. Garin said.

Ms. Garin said the DoE postponed the auction to thoroughly examine its legal, commercial, and energy security implications. "We've been studying it properly how to reconcile all the concerns," she told reporters last week.

The DoE plans to auction three coal areas estimated to hold around 207 million metric tons of coal reserves.

The bidding process has faced repeated delays. The DoE pushed back the original bidding round in April to review and revise its terms and conditions. By August, it had put forward a draft joint administrative order (JAO) developed with the Department of Environment and Natural Resources (DENR), which seeks to establish guidelines for awarding contracts involving natural resources. If finalized, the JAO would set the guidelines under which contracts involving the country's natural resources are awarded.

One of the proposed provisions requires existing coal operating contract holders to turn over their assets, equipment, and facilities to the government upon the expiration of their contracts. For incumbent operators, the clause would determine whether assets built up during a contract's term stay with the company or revert to the state — the point on which the dispute turns.

Semirara Mining and Power Corp. (SMPC), which operates the country's largest coal mine in Antique under a contract set to expire next year, has alleged that the DoE effectively shut it out of the process because of the asset-surrender provision. With its contract expiring next year, SMPC would fall within the provision's scope should the JAO take effect in its current form.

SMPC is a subsidiary of DMCI Holdings, Inc., the listed holding company of the Consunji Group, which has business interests in construction, mining, power generation, water distribution, and real estate.

DMCI Holdings Chairman and Chief Executive Officer Isidro A. Consunji has said the company may contest the government's JAO in court. "If it affects us adversely, we'll probably have to challenge," he said.

SMPC earlier filed a petition for declaratory relief against the DoE, seeking to prevent the agency from compiling an asset inventory to make information available to prospective bidders.

Ms. Garin said the department aims to give all prospective bidders "a fair chance" while maximizing the benefits of the country's coal resources. She added that the government intends to prioritize domestic consumption of locally produced coal to bolster energy security — a policy under which coal extracted in the Philippines would be directed to domestic use rather than export markets.

"Because of the war (in the Middle East), I would rather push for everything we produce or extract within Philippine territory to be used here. We cannot afford to export coal at this time," she added.

The key developments to watch are whether the Consunji group proceeds with a court challenge, whether and when the DoE and DENR finalize the draft JAO, and how the DoE moves forward with the postponed auction — alongside SMPC's pending petition for declaratory relief and next year's contract expiry.

— Sheldeen Joy Talavera, BusinessWorld

Source: BusinessWorld