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DoE asks CoA to set aside Malampaya tax ruling

bworldonline.com - Economy, by Victor V. Saulon, September 27, 2016
Web source Address: http://www.bworldonline.com/content.php?section=Economy&title=doe-asks-coa-to-set-aside-malampaya-tax-ruling&id=133975

THE Department of Energy (DoE) has adopted the stand of the past government as it asked auditors to reconsider and set aside their decision to affirm billions of pesos in tax
underpayments of the developers of the Malampaya natural gas project in offshore Palawan.
“We studied everything. I asked for the transcript of the previous discussions. I asked our lawyers to review all the documents, and they said the previous stand of the DoE has to
be sustained. And we supported that,” said DoE Secretary Alfonso G. Cusi in an interview on the sidelines of a Senate budget hearing on Monday.

“We have just submitted our position,” Mr. Cusi said, referring to a letter sent by his department to the Commission on Audit (CoA) last week.

DoE Undersecretary Felix William B. Fuentebella said the letter was in response to a query from the CoA asking the Energy department whether it was adopting the position laid
out by former DoE Secretary Zenaida Y. Monsada.

The DoE on June 16, 2015 filed a motion for reconsideration on the CoA decision regarding the tax issue of the Malampaya consortium. It objected to the ruling, which it said
contradicts underlying laws that guide the country’s upstream oil industry. It cited a possible effect on the long-term interest of local and foreign investors that are keen on the
country’s petroleum prospects.

The move comes after CoA on April 6, 2015 rejected DoE’s petition for review on the audit findings on the Malampaya projects. The Energy department’s plea was backed by
consortium members Shell Philippines Exploration B.V. (SPEx), Philippine National Oil Co. Exploration Corp., and Chevron Malampaya LLC.

A 2009 CoA report on the DoE found P53.14 billion of underpayments involving corporate income taxes due from the exploration companies. The amount has since increased,
although the department has declined to give an exact figure. But CoA has given notice that it was collecting P151 billion covering the years 2002 to 2016.

Under the past leadership, the DoE said the amount was already covered by the 60% share remitted by the agency from 2002 to 2009, the duration of the exploration project. The
state auditors maintain that taxes were underpaid.

Mr. Fuentebella, quoting the letter, cited the “fundamental importance that we observe and honor the principle of sanctity of contracts in our commercial transactions.”

“The DoE anchors this stand on the clear and strong provisions of Section 18 (b) of Presidential Decree (PD) 87 and also Section 1 (a) of PD 1459,” he said.

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The two laws set out the powers of the DoE Secretary and outlined the guidelines in developing the country’s upstream petroleum sector.

He said the letter “formally informs” the CoA that the DoE was “reiterating and adopting its motion for reconsideration dated June 16, 2015.”

In its pleading last year, the DoE said it “respectfully assail and take the most serious objection to the... decision,” which it described as a “contravention of the existing laws and
jurisprudence.”

Mr. Cusi said before he sent the letter to CoA, he presented the issue to the Cabinet’s economic cluster.

“We told them that this is our position. We cannot be changing the rules in the middle of the game. And after that we submitted it to the Cabinet,” he said.

He said CoA has yet to respond to the DoE letter, and that he “would assume we will be having a meeting with them to further discuss” the matter.

SPEx and consortium partners Chevron and PNOC-EC operates Service Contract 38, which supplies gas to several power plants in Batangas and to Pilipinas Shell Petroleum Corp.
for its refinery and compressed natural gas refilling station.

The Malampaya gas field is 850 meters deep offshore of northwest Palawan. It began production in 2001 and its reserves is expected to run out by around 2022 to 2024. The
offshore natural gas project currently delivers up to 20% of the country’s electricity requirements.
As seen online