CoA junks oil firms, DoE’s appeal on underpaid Malampaya fees

THE Commission on Audit has upheld its decision in directing Shell Philippines Exploration B.V., Chevron Malampaya LLC and Philippine National Oil Co. Exploration Corp. to pay P146.8 billion for the underpaid government’s share of the Malampaya natural gas project.

State auditors junked the separate motions for reconsideration of the Malampaya contractors and the Department of Energy for lack of merit to justify the reversal of the commission’s order in April 2015.

“This Commission denies the motions for reconsideration for failure of the movants to raise any new or substantial legitimate ground or basis to justify the reversal of the assailed decision. The pleadings and documents submitted by the movants, as well as the discussions during the oral arguments, contain no sufficient evidence to warrant reconsideration,” the reversal order read.

In 2015, the CoA issued a notice of charge, invoking the government should receive over P53 billion in income taxes from the Malampaya consortium from 2002 to 2009.

In a decision, CoA said the total amount ballooned to P146.8 billion due to the continued underpayment or “tax assumption scheme” of the consortium from 2010 to 2016.

“If this Commission will not put an end to this illegal ‘tax assumption’ scheme, the government will continue to bleed billions and billions of funds that can and should be used for the very purpose intended by law,” CoA said.

It invoked Presidential Decree No. 910 that revenues from the Malampaya project must bre used “finance energy resource development and exploration programs and projects of the government and for such other purposes as may be hereafter directed by the President.”

It also asserted Presidential Decree Nos. 87 and 1459 requiring government’s share of revenues in the Malampaya project at 60 percent.

At least a share of 40 percent should come from the consortium.

CoA said the contractors violated PD Nos. 87 and 1459 when the income taxes of the consortium was charged against the government’s 60 percent share.

On the other hand, the consortium got its full share.

Because of such, the government’s actual share plunged to 34.03 percent with the contractors getting a 65.97 percent share.

Both SPEX and Chevron disputed the notice of charge “violates the principle of separation of powers,” while the PNOC claimed the contractors paid their income taxes pursuant to the provisions of SC 38.

The Department of Energy through the Office of the Solicitor General said CoA “totally overstepped and exceeded the legal bounds” from its mandate for its decision against the Malampaya contractors.

The energy department said CoA’s order “will cause irreparable harm to the country’s long term interest, as it will further erode the confidence of foreign petroleum industry investors,” and that”it is the policy of the administration of President Rodrigo Duterte to honor the government’s contractual obligations” under SC 38.

“As the guardian of public funds, this Commission sees to it that all collections of the government are correct, proper and complete, and that the best interest of the government is secured and protected,” CoA maintained.

“Certainly, it cannot be said that the government is receiving its fair share under an agreement that is not in accordance with law. This is not an undue interference with the powers of the DOE, but a check on the propriety and legality of the agency officials’ conduct in relation to the management of government funds and property.”

Topics: Commission on Audit , Shell Philippines Exploration B.V. , Chevron Malampaya LLC , Philippine National Oil Co. Exploration Corp.
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