COAL DEVELOPMENT ACT OF 1976 (PD 972)*enacted on July 28, 1976*aims to:1. Promote an accelerated exploration, development, exploitation, production and utilization of coal2. Encourage the participation of the private sector with sufficient capital, technical and managerial resources in the exploitation and production of coal resources3. Upgrade the technical and financial capabilities of the coal industry

Coal Development ProgramCountry is divided into: Coal regions*when there is high concentration of small miners a special coal program shall be formulated.Coal exploration, development and production by the governmentThe government through the Energy Resource Development Bureau shall undertake by itself the active exploration, development and production of coal resources.On December 22, 2006The DOE issued Department Circular2006-12-0014 which provides that the Bureau shall determine prospective coal, or geothermal, or petroleum areas found in the Philippine territory and its maritime zones including the continental shelf.Blocking System*Each coal region shall be divided into: meridional blocks or quadrangles.*Each blocks contains 1,000 hectares, more or less.In opening such contract areas, the Bureau may adopt any of the ff. alternative procedures:1. By offering an area or areas for bids2. By negotiating with a qualified party for a coal operating contract

*No person shall be entitled to more than 15 blocks of coal lands.Preference of existing permittees or leaseholders*All valid and subsiting holders of coal revocable permits, coal leases and other existing rights granted by the government for the exploration and exploitation of coal lands or the operators thereof duly approved by the appropriate government agency shall be given preference in the grant of coal operating contract over the area covered by their permits, eases or other rights subject to their compliance with the conditions and guidelines provided by law.Coal Operating Contract *is one of the authorized ways of active exploration, development and production of coal resources in a specified contract area.*each shall be executed in behalf of the government, represented by the DOE Secretary.*service, technology and financing are furnished by the operator.Operator*is entitled to stipulated fee and reimbursement of operating expenses.*must be technically competent and financially capable to undertake the coal operations as required in the contract.OBLIGATIONS UNDER THE COAL OPERATING CONTRACT*the operator shall undertake, manage and execute the coal operations which shall include:1. Examination and investigation of lands supposed to contain coal2. Steps necessary to reach the coal deposits3. Extraction and utilization of coal deposits*the government shall oversee the management of operation and shall require the operator to:1. Provide all the necessary service and technology2. Provide the requisite financing3. Perform the work obligations and program prescribed in the coal operating contract4. Operate the area on behalf of the government in accordance with good mining practices5. Furnish the Bureau promptly with all information, data, reports which it may require6. Maintain detailed technical records and account of its expenditures7. Maintain detailed technical records and account of safety demarcation of agreement acreage and work areas8. Maintain all necessary equipment in god order and allow access to these as well as to the sites to inspectors authorized by the Bureau9. Allow representatives by the Bureau full access to their accounts, books and records for tax and fiscal purposes*the Bureau shall:1. On behalf of the government, reimburse the operator for all operating expenses not exceeding 90 % of the gross proceeds from production in any year. Provided that when the operating expenses exceeds 90% of the gross proceeds from production, the unrecovered expenses shall be recovered from the succeeding years.2. Pay the operator a fee, the amount of which shall not exceed 40 % of the balance of the gross income after deducting all operating expenses.3. Reimburse operating expenses and pay the operators fee in such form and manner as provided in the coal operating contractMinimum Terms and Conditions of the Contract1. Operator shall be obliged to spend in direct prosecution of the exploration work not less than the amounts provided for in the coal operating contract. (Amount shall not be less than the total obtained by multiplying the number of coal blocks covered by 1 million pesos per block annualy)*of the area or a portion thereof is suitable for open pit mining the minimum expenditure requirement may be reduced up to Php 200,000 per block annualy*should the operator fail to comply with the work obligations provided for in the coal operating contract it shall pay the government the amount it should have spent but did not in direct prosecution of its work obligations.+exception: open pit mining the operator shall drill the at least 30 holes per block and a minimum footage of exploratory holes before the end of the period.2. Exploration period shall be 2 years and may be extended for another 2 years.3. All materials, equipment, plants and other installations erected or placed if not removed within 1 year after the termination of the contract shall become property of the Bureau4. Operator shall be subject to the provisions of laws of general application relating to labor, health, safety or ecology.

Incentives to Operators (the operator shall have the ff. incentives)1. Exemption from all taxes except income tax2. Exemption from payment of tariff duties and compensating tax on importation of machinery and equipment.3. At the option of the taxpayer, fixed assets owned by the coal units may be subject of depreciation4. Right to remit at the prevailing exchange rate such sum as may be necessary to cover principal and interest of foreign loans and foreign obligations5. Government financial institutions shall accord high priority to applications for financial assistance submitted by operators in the performance of coal operating contracts6. Alien technical and specialized personnel may be employed, provided that Filipinos shall be given preference to positions

Incentives to coal users (shall be granted to enterprises/industries which will convert their existing oil fired plants facilities to make the same adaptable for coal burning)1. Tax exemption on imported capital equipment2. Tax credit on domestic capital equipment3. Net operating loss incurred in any of the first 10 years after the start of the implementation of the coal conversion program may be carried over as a deduction from taxable income for 6 years immediately ff. such year loss4. Exemption from income tax on the proceeds of the gains realized from the sale, disposition or transfer of capital assets as the result of the conversion of facilities to a coal burning plant5. At the option of the taxpayer, fixed assets used may be depreciated6. Right to remit at the prevailing exchange rate at the time of remittance such sum as may be necessary to cover interest and principal of foreign loan and foreign obligations7. Preference in grant of government loans

Entry of Private Lands*power of eminent domain may be invoked and exercised for the entry upon prior written notice to the surface owner.*if the owner refuses the coal operator shall notify the Bureau and shall post a bond in the amount fixed by the bureauSurface owner / occupant shall be entiled to the ff. compensation:1. For titled lands Php1 for every ton extracted, plus compensation for the value of improvements damaged or destroyed.2. For untitled lands Php.50 for every ton extracted, plus compensation for the value of improvements damaged or destroyed.3. For Government reserved lands open to coal operating contract compensation due the surface owner shall accrue equally between the supervising agency and the Bureau to be disbursed for conversation measures.

Timber Rights Operator may cut trees or timber within his coal contract area as may be necessary for the exploration, development and exploitation of the area.If the land is covered by timber concessionaire rules and agreement between the operator and the timber concessionaireIf no agreement disposition of the Bureau shall be finalOperator granted the timber right is obligated to perform reforestation works within the coal contract area.

Water Rights Operator may enjoy water rights necessary for the exploration, development and exploitation of the area.Water rights already granted or legally existing shall not thereby be impaired.