Petroleum Act of 1949

Article 10

Concessions may be any of the following kinds and have the following respective objects: a. Non-Exclusive Exploration Permit, which grants to the permittee the non-exclusive right to conduct geological or geophysical exploration on specified areas. b. Exploration Concession, which grants to the concessionaire the exclusive right to explore for petroleum within specified areas. c. Exploitation Concession, which grants to the concessionaire the exclusive right to develop petroleum production within the specified areas. d. Refining Concession, which grants to the concessionaire the right to manufacture or refine petroleum, or to extract its derivatives. e. Pipe Line Concession, which grants to the concessionaire the right to provide and operate pipe line systems for transporting petroleum.

Article 11

Subject to the fulfillment of the formalities and requirements provided for in this Act, the granting of the following concessions shall be obligatory upon the Government: a. Exploitation Concession, to the holder of an Exploration Concession, for such parcels as he may select for exploitation and to the holders of Petroleum Drilling Leases issued under the Petroleum Act Numbered Twenty-nine hundred and thirty-two, or of petroleum mining claims located and held under the Act of Congress of July first, nineteen hundred and two, which are existing and in force at the time of the enactment of this Act, when said holders shall apply to have the same governed by the provisions of this Act, and be given the privileges granted thereby; b. Refining Concession and/or Pipe Line Concession, to the holder of an Exploitation Concession, when the manufacturing or transportation is directly related, although not necessarily restricted, to the Exploitation Concession; and c. Refining Concession, to the holder of a Pipe Line Concession, or Pipe Line Concession to the holder of a Refining Concession, when the two concessions are directly, although not restrictively, related. The foregoing, however, shall not apply in the case of any concessionaire who is in arrears in any payments due the Government arising out of or in connection with any petroleum concession, lease, or mining claim, until such arrears have been paid, or, if in dispute, until a cash or surety bond has been posted, sufficient to cover all arrears in dispute. The rights and obligations conferred by concessions which are obligatory under this article are to be regarded as following from the initial concessions which, under the provisions of this Act, include the right to receive such subsequent concessions.

Article 12

For purposes of this Act, the Secretary of Agriculture and Natural Resources, after due study of the different prospective petroleum lands of the Philippines, may divide them into a number of prospective petroleum regions, delimiting their extent and boundaries, and issuing the order and notice establishing such regions.

Article 13

Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President of the Philippines may set apart petroleum reservations, and shall, by proclamation, declare the establishment of such reservations and the boundaries thereof. The Government may explore, develop, and exploit such petroleum reservation either by itself or through its instrumentalities, or through competent persons under a contract of service, in accordance with article five of this Act. Proposals by qualified persons to carry out such work for the Government as independent contractor or contractors shall be filed with the Director of Mines who shall forward the same with his findings and recommendations to the Secretary of Agriculture and Natural Resources who, in turn, shall submit the same with his recommendations to the President of the Philippines. The President is hereby authorized to take such necessary action as he may deem proper on such proposals and for this purpose, may execute the necessary contract or contracts for and in behalf of the Government. In the event such contract is executed, the same shall be submitted to the Congress of the Philippines for its approval. No petroleum reservation may be established over any areas covered by application for Exploration or Exploitation Concession already filed or granted. If at any time after the establishment of a petroleum reservation, the Secretary of Agriculture and Natural Resources, after due investigation, should find it to the best interest of the Government, that any area within the reservation should be opened to Exploration or Exploitation Concession under the provisions of this Act, such area or areas may be recommended to be released from the reservation and declared open to Exploration or Exploitation Concession under this Act by an executive proclamation of the President concurred in by a joint resolution of the Congress of the Philippines.

Article 14

All lands within the territorial limits of the Philippines including those submerged beneath seas, bays, lakes, rivers, lagoons, or the territorial waters, or on the continental shelf, or its analogue in an archipelago, but which are not within the National Reserve Areas, or Petroleum Reservations, or covered by valid and existing Exploration or Exploitation Concession, or Petroleum Drilling Leases acquired under the Petroleum Act (Act No. 2932), or of petroleum mining claims located and held under the Act of Congress of July first, nineteen hundred and two, as amended, are called Free Areas and as such are open to application for Exploration Concession by any duly qualified person. Application for said areas shall be filed with the Director of Mines in accordance with the provisions of article twenty-eight of this Act.

Article 15

Areas which have been included in any Exploration or Exploitation Concession but which have been subsequently given up by the concessionaire voluntarily or in accordance with the requirement of articles fifty and fifty-three of this Act; or areas covered by Exploration or Exploitation Concession which have expired or have been cancelled; or areas which have been included within any of the two kinds of concession but which are found to be in excess the maximum areas allowed by this Act for such concessions, are called National Reserve Areas, and as such may be applied either for Exploration or Exploitation Concession by duly qualified persons only after the Secretary of Agriculture and Natural Resources shall have first announced by means of notices published in the Official Gazette and in one daily English newspaper of general circulation published in the City of Manila, at least once a month for three consecutive months, that said lands duly described are ready for disposition and that application therefor may be filed within a certain date fixed in the notice. Application for such areas shall be filed with the Director of Mines in accordance with article twenty-eight of this Act, and the concession may be granted by the Secretary of Agriculture and Natural Resources in favor of the applicant whose offer shall be found best to serve the interest of the Government.

Article 16

All lands covered by concessions granted under this Act shall be subject to public easement established or recognized by existing or future laws: Provided, That the rights of the petroleum concessionaire to search, prospect, and drill for, produce, extract, transport, store, process, and treat petroleum on, under, and from said lands, and other rights granted to him under this Act are recognized: And provided, further, That in case public easement shall be established after the effective date of the concession contract the concessionaire shall be paid just compensation for actual damages that he may suffer as a consequence thereof. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 17

The operations of the concessionaire under the provisions of this Act shall be subject to existing mining rights, grants, permits, leases, and concessions in respect of substances other than petroleum and to existing petroleum rights, grants, leases, or concessions.

Article 18

Concessions granted under this Act are subject to the right of the Government to establish reservations other than petroleum reservations, to grant mining rights, permits, leases, and concessions in respect of substances other than petroleum, and to grant rights other than mining rights in, on, or under any of the lands covered by the concession granted under this Act, provided that the rights of the petroleum concessionaire to search, prospect, and drill for, produce, extract, transport, store, process, and treat petroleum on, under, and from, said lands, and the other rights granted to him under this Act are not impaired or unreasonably interfered with.

Article 19

In the disposition of the National Reserve Areas and in case of conflicts of applications for concessions, the Secretary of Agriculture and Natural Resources may require additional benefits to the Government over and above the minimum requirements provided for in this Act. These additional benefits may include, but shall not be restricted to, bonuses or cash payments made singly or on installments over a period of time; or increased royalty on the quantity of oil produced; or undertakings in addition to those required by law for the promotion of education, public health, social welfare and amelioration, and other public services; or increased work obligations on the concession.

Article 20

Exploration and exploitation concessionaires are granted the right to enter upon private lands covered by their concessions for the purpose of conducting geological or geophysical studies, with the right to use all instruments and apparatus necessary to carry out such studies, subject to the obligations to indemnify the owner or legal occupant of the land for all material damage suffered by the property, its annexes or appurtenances as a result of such studies, provided that in no case shall the occupancy of private buildings, yards or gardens be authorized against the will of their owner. In the event that the right granted in this article shall be denied by the owner of the private land or by its legal occupant, the concessionaire may apply for and, upon posting such bond as may be fixed and approved by the Court of First Instance of the province where the land is situated, the court shall issue an order allowing such right pending the final determination of the proper amount that shall be paid by the concessionaire to the landowner or legal occupant.

Article 21

When easements of temporary occupancy over private lands are needed by a concessionaire for the purpose of carrying out any work essential to his operations under the provisions of this Act, he may enter into the necessary agreement with the owner or legal occupant of such private lands. If no agreement could be reached, or if the owner or legal occupant refuses to grant such easement, or in general, when any obstacle of whatever nature exists to the immediate and certain acquisition of the necessary surface area, or of any right indispensable to the concessionaire for the purpose of the concession, the Court of First Instance of the province where the land is situated shall, upon application of the concessionaire and posting of the necessary bond, grant to the said concessionaire authority to use and occupy the land needed by him in his operations, pending final determination of the case which shall include among others the reasonable value or rental of the land to be occupied and the compensation for any resulting damage that the landowner or legal occupant may suffer as a result of such occupation. When the occupation of a private land is needed by the concessionaire in connection with his concession, for the purpose of constructing, maintaining, operating, and drilling oil wells, tanks, reservoirs, waterways, pipe lines, roads, railroads, tramlines, telephone and telegraph lines,rfields, radio stations, powerhouses, transmission lines, pumping stations, wharves, piers, and terminals, which are hereby declared to be for public use or benefit, the right of eminent domain may be exercised by the Government through the concessionaire, in accordance with the applicable laws on the matter. In all cases of voluntary agreement between the concessionaire and a private landowner, as referred to in this article, a copy thereof shall be furnished to the Secretary of Agriculture and Natural Resources. For the purpose of this article the necessity of the work will be presumed in the cases of well drilling and auxiliary works, construction of pipe lines, tanks, pumping plants, power systems, warehouses, shops, and means of transport and communication.

Article 22

When easement or right of temporal occupancy over public land is needed by a concessionaire for the purpose of carrying out any work essential to his operation under this Act, such right may be granted by the Secretary of Agriculture and Natural Resources with due regard to prior rights of third parties and subject to applicable laws and regulations. The easement or temporary occupancy over public highways, roads and bridges by a concessionaire for the purpose of carrying out any work essential to his operations under this Act may be granted, upon such terms as may be deemed proper in the public interest, by the Secretary of Public Works and Communications who shall see to it that such easement or temporary occupancy shall cause the least inconvenience to the general public. The presumption of necessity stated in article twenty-one applies likewise in this case. (Amending Article 22 of R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 4889, [June 17, 1967])

Article 23

Concessionaires under this Act shall have the gratuitous right to utilize for exploration work within his concession, timber, water, and clay from any public lands within such concession, all subject to existing prior rights thereto, to the regulations issued under this Act and to other laws and regulations on the matter. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 24

Work corresponding to concession granted under this Act shall be commenced with reasonable promptness and prosecuted with reasonable diligence in accordance with good oil field practice; provided, that in the case of Exploration or Exploitation Concession, the performances of the corresponding work, in compliance with the provisions of this article, successively in various areas included in the concession, in accordance with an efficient and economic program determined by the concessionaire and submitted to the Secretary of Agriculture and Natural Resources will be construed as reasonable diligence in regard to the total area included in such concession; conforming with accepted good practices in connection with modern and scientific methods of exploration, drilling, equipping and operating wells to enable maximum economic production of petroleum; avoiding hazards to life, health and property; avoiding the pollution of ther, and of public or private land or waters. Non-compliance with the provisions of this article may be the cause of the imposition of penalties under the provisions of this or other laws; or of court action to compel compliance therewith; and continued non-compliance shall constitute cause for cancellation of the concession.

Article 25

Concessionaires shall submit to the Secretary of Agriculture and Natural Resources all information that the latter may require from time to time, particularly but not limited to, reports on the results of geological and geophysical examinations including a complete history of each well formation record; electric logs, and result of all tests; production reports showing all pertinent production data, etc. , in the form and manner and at intervals prescribed by the regulations.

Article 26

Concessionaires under this Act are obligated to give preference to Philippine citizens in all types of employment within the country, insofar as such citizens are qualified to perform the corresponding work with reasonable efficiency and without hazard to the safety of the operations; and are obligated likewise to maintain effective programs of training and advancement commensurate with the demonstrated abilities of such citizens to perform satisfactorily the various types of operations involved in working the concession. The concessionaires, however, shall not be hindered from using employees of their own selection and without restriction for executive or technical work and for all other work which, in their judgment, and with the approval of the Director of Mines, requires highly specialized training or long experience. Each concessionaire shall submit to the Government annual report giving statistical and descriptive information relevant to the provisions of this article, as provided in the Regulations, and shall be obligated to demonstrate to the satisfaction of the Secretary of Agriculture and Natural Resources, upon request, that these provisions are being complied with. In the event that, in the opinion of the Secretary of Agriculture and Natural Resources, such provisions are not complied with, he is empowered to require the concessionaire to take such steps as may be necessary to effect such compliance; without prejudice, however, to the right of the concessionaire under the exception provided in the last sentence of the first paragraph of this article.

Article 27

Failure on the part of the concessionaire to fulfill any of the terms and conditions provided by this Act or its regulations or by other relevant laws shall not be deemed a breach of such obligation on the part of the concessionaire insofar as such failure results from force majeure, including the act of God, war, insurrection, riot, civil commotion, strike, tide, storm, flood, lightning, explosion, fire, earthquake, and any other happening which the concessionaire could not reasonably prevent control or avoid: Provided, That if during the term of any concession obtained under this Act, including any extension thereof, the concessionaire is prevented from fully exercising its rights granted under this Act during any extended period of force majeure resulting from act of God, war, insurrection, riot, or civil commotion which the concessionaire could not reasonably prevent or control or avoid, such periods shall be excluded in computing the period of time chargeable to the term of the concession or any extension thereof, when, within six months from the time such period of force majeure is considered to have ended, the concessionaire has formally applied to the Secretary of Agriculture and Natural Resources for recognition that such period of force majeure did exist and that the concessionaire is entitled to the consideration herein provided. The extension shall be granted under the same terms and conditions as those contained in the original concession, subject, however, to the provisions of Articles forty-seven and forty-nine of this Act. No further renewal shall be allowed to any exploration concessionaire at the end of the second extension. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 28

Application for concession under this Act shall be filed with the Director of Mines who shall examine and pass upon the same as well as upon the qualifications of the applicant. If he finds the application in order and the applicant duly qualified, he shall forward the said application, together with his findings and recommendations thereon, to the Secretary of Agriculture and Natural Resources who may, unless otherwise provided for in this Act, publish a notice thereof at least once a week for three consecutive weeks in the Official Gazette and in any newspaper of general circulation, published in English in the City of Manila. At any time during the period of publication of the said notice, an adverse claim stating the nature and grounds thereof, may be filed with the Director of Mines. If no adverse claim is filed within the said period of publication, it shall be conclusively presumed that no such adverse claim exists and thereafter no objection from third parties to the granting of the concession shall be heard; and the contract of concession shall be executed by the Secretary of Agriculture and Natural Resources for the Republic of the Philippines, and the concessionaire, in accordance with existing laws and regulations for the conveyance of leasehold rights, which contract of concession shall state definitely the principal rights and obligations of the parties concerned.

Article 29

Adverse claims based upon applications filed at any time after the first date of publication of the notice mentioned in article twenty-eight shall not be considered. Adverse claims based upon conflict of applications shall be disposed of in accordance with the provisions of article thirty hereof. Adverse claims based upon other grounds shall be decided by the Secretary of Agriculture and Natural Resources.

Article 30

In case an adverse claim is filed in accordance with article twenty-eight of this Act, covering areas in conflict and the adverse claimant is found to be duly qualified to apply for concession under this Act, the Director of Mines shall inform the applicant and the adverse claimant of the existence of such conflict and of any additional benefits to the Government which the Secretary of Agriculture and Natural Resources may require in accordance with the provisions of article nineteen of this Act, whereupon each of them shall, within sixty days from the date of the receipt of such information, submit to the Director of Mines an amended application stating therein such additional benefits to the Government as he may desire to offer for the area in conflict. The Secretary of Agriculture and Natural Resources may accept such application which, in his opinion, will best serve the national interest. The right of any aggrieved party to appeal to the courts as in ordinary cases is hereby recognized.

Article 31

Applicants for concessions under this Act shall have the following qualifications: In case of an individual, he shall be a citizen of the Philippines, be of legal age, and have the capacity to contract obligations. In case of an association of individuals, it shall be either a partnership or a corporation duly organized and constituted under the laws of the Philippines, at least sixty per centum of the capital of which is and shall at all times be owned and held by citizens of the Philippines. During the effectivity and subject to the provisions of the ordinance appended to the Constitution of the Philippines, citizens of the United States and all forms of business enterprises owned and controlled, directly or indirectly, by citizens of the United States shall enjoy the same rights and obligations under the provisions of this Act in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines. Any applicant shall present satisfactory evidence showing that sufficient finance, organization, resources, technical competence, and skills necessary to conduct the operations to be undertaken under the concession being applied for, in a manner which is in accordance with the best method known to the industry, are available to such applicant.

Article 32

Officials and employees of the executive branch of the Government connected with the administration and disposition of mineral resources including petroleum, shall not be allowed, directly or indirectly during their incumbency and for five years thereafter, to apply or acquire concessions, or to be interested, in anywise, in any application filed, or concession acquired, under this Act.