An Overview and Analysis of Economic Impact Dr Cielo Magno Mr Anton Ragos Coal Reserves Mineable Coal Reserves as of Dec 2012 Mineable Coal Reserves by area in million metric tons ID: 816808
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Slide1
Coal Mining in the Philippines:
An Overview and Analysis of Economic Impact
Dr. Cielo
Magno
Mr. Anton
Ragos
Slide2Coal Reserves
Mineable Coal Reserves, as of Dec. 2012
Mineable Coal Reserves, by area, (in million metric tons)
as of Dec. 2012
Source: Energy Resource Development Bureau, Department of Energy
Slide3Market Share of Other Areas, including small-scale mining contractors (in %)
Coal Production
Production
s
hare based on mining
a
reas, 2013
Semirara
Island
Other Areas
94.47%
5.53%
Source: Energy Resource Development Bureau, Department of Energy
Slide4Coal: Demand and Supply
Coal
production, importation, and consumption, (in million metric tons) 1977-2012
Production
Importation
Source: Department of Energy
Slide5Coal: Demand and Supply
Coal
production, importation, and consumption, (in million metric tons) 1977-2012
Source: Department of Energy
Production
Importation
Consumption
Slide6*Include: alcohol, sinter, rubber boots, paper and chemical manufacturing, fertilizer production, and smelting processes
Power Generation
Cement Production
Other Industrial Processes*
Coal: Demand and Supply
Coal consumption, by industry, (in %) 2009-2012
Source: Department of Energy
Kessels
, John (no date), Prospects of Coal and Clean Coal Technologies in the Philippines
12.06
(
mmmt
)
13.31
(
mmmt
)
14.23
(
mmmt
)
16.95
(
mmmt
)
2009
2010
2011
2012
Slide7Coal: Electricity Generation
Electricity generation , by source (in
GwH
), 1980- 2010
Renewable
Oil
Natural Gas
Hydroelectric
Coal
Source: World Bank
Slide8Sets out obligations of operators, and incentives to
coal operators and end-users
A
ssigns the operator to conduct the exploration, development,
exploitation, and marketing of coal resources
Introduces the Coal Operating Contract (COC) system
Promotes accelerated exploration, development,
exploitation, production, and utilization of coal
Coal Development Act of 1976
Presidential Decree 972, as amended by Presidential Decree 1174
Source: Presidential Decree 972
Slide9Remaining period of Exploration Phase and/or
Ten (10) year period (additional)
T
en (10) year allowance extension (maximum)Series of three (3) year allowable extensions not exceeding a total of twelve (12) years
Development and Production Phase:
Two (2) year period
Two (2) year allowable extension (maximum)
Exploration Phase:
Coal Operating Contract
Exploration Phase and Development and Production Phase
Source: Presidential Decree 972, as amended
Coal Model Contract
Slide10Coal Operating Contract
Incentives and Privileges
Source: Presidential Decree 972, as amended
Coal Model Contract
Exemption from payment of duties on machinery/equipment importation
Entry of foreign technical personnel
Accelerated Depreciation*
Preference in grant of government loans*
Recovery of Operating Expense
*incentives not set out in the COC but are specified in PD 972 as amended
Exemption from all national taxes except income tax
Slide11Gross Proceeds
Less: Recoverable Cost
Net Proceeds Less: Basic Fees
Special Allowances
Government Share Department of Energy Local Government Unit
Coal Operating Contract
Revenue-Sharing Scheme
100.00
90.00
10.00
4.00
3.00
3.00
1.80
1.20
Basic Fee
Special Allowance
Gov’t Share
Recoverable Cost
Source: Presidential Decree 972, as amended
Coal Model Contract
Coal Operating Contract Accounting Procedure
Slide12Local Government Code of 1991
Utilization of LGU share
Source: Presidential Decree 972, as amended
Coal Model Contract
Divided between province (20%), municipality (45%), and barangay (35%)
Local government units shall receive 40% of gross collection from mining taxes
At least 80% of the said fund shall be used to lower cost of electricity
Remaining amount shall be used for local livelihood projects
Slide13Gross Proceeds
Less: Recoverable Cost
Net Proceeds Less: Basic Fees
Special Allowances
Government Share Department of Energy Local Government Unit
Coal Operating Contract
Revenue-Sharing Scheme
100.00
90.00
10.00
4.00
3.00
3.00
1.80
1.20
Basic Fee
Special Allowance
Gov’t Share
Recoverable Cost
Source: Presidential Decree 972, as amended
Coal Model Contract
Coal Operating Contract Accounting Procedure
Slide14Subject to the Environmental Impact System (EIS) of the Department of Energy and
Natural
Resources. Outside the scope of EIS, coal operators are required to
:
Environmental Regulation
General Provisions
Source: Coal Model ContractRehabilitate affected sites after contract termination
Render comprehensive anti-pollution reclamation plan
Follow government guidelines on: mining procedures to minimize environmental damage
;
water waste control; erosion control; and re-vegetation
Slide15Semirara
Mining Corporation
Coal Revenue, Cost of Sales, and Government Share, (in million PhP
) 2004-2012
Government Share
Net Revenue
Cost of
Sale
Source:
Semirara
Mining Corp. Consolidated Financial Statements, 2006-2012
Slide16Semirara
Mining Corporation
Income Tax
(in
million
PhP), Statutory and Actual Income Tax Rate (in %) 2004-2012
Statutory
32.00
32.50
35.00
35.00
35.00
30.00
30.00
30.00
30.00
Effective
3.34
20.97
33.96
34.06
22.94
3.32
-0.90
-0.36
0.62
Source:
Semirara
Mining Corp. Consolidated Financial Statements, 2006-2012
Slide17Semirara
Mining Corporation
Foregone Revenue from the Income Tax Exemption (in million
PhP
), 2008-2012
Statutory
35.00
30.00
30.00
30.00
30.00
Exemption
11.46
30.62
31.14
30.68
29.97
Source of basic data:
Semirara
Mining Corp. Consolidated Financial Statements, 2006-2012
Slide18Economic Impact
Poverty incidence
in localities of coal operation
Source: Department of Energy
Provincial Poverty Incidence
Municipal/City Poverty Incidence
National Poverty Incidence
Notes:
Gattaran
,
Iguig
,
Danao
City, Imelda, San Miguel,
and
Payao
have two (2) contract operators, respectively
Dalaguete
has three (3) contract operators
Rapu-Rapu
has four (4) contract operators
Slide19Economic Impact
Regression Analysis: Descriptive Statistics
Variable
Obs.
Mean
Std. Dev.
Min.
Max.
HH
Total Income
42,583
107,009.70
135,336.80
1,942.00
4,286,302.00
Coal
share of province (%)
42,732
0.02
0.35
0.00
5.47
Share
from other
nat’l
tax collection (%)
42,732
1.65
6.07
0.00
56.69
HH head
educ
(n
one)
42,732
0.03
0.17
HH
head
educ
(elem. undergrad)
42,732
0.21
0.41
HH
head
educ
(elem. grad)
42,732
0.19
0.39
HH
head
educ
(HS undergrad)
42,732
0.12
0.32
HH
head
educ
(college undergrad)
42,732
0.08
0.27
HH
head
educ
(college grad)
42,732
0.11
0.32
HH members wage
-earners (%)
42,732
0.24
0.25
0.00
1.00
Earns
from farming and gardening
42,732
0.25
0.43
Earns
from poultry and livestock
42,732
0.06
0.24
Earns from fishing
42,732
0.05
0.21
Earns
from forestry and hunting
42,732
0.02
0.14
Earns
from wholesale and retail
42,732
0.20
0.40
Earns
from manufacturing
42,732
0.04
0.20
Earns
from social, community services
42,732
0.05
0.21
Earns
from transportation
42,732
0.07
0.26
Earns
from construction
42,732
0.01
0.08
Earns
from entrepreneurship
42,732
0.02
0.13
Slide20Economic Impact
Regression Analysis: Results
HH
Total Income
Coefficient
Robust
Std
. Err.
Coal
share of province (%)
-
4,420.27*
1,245.47
Share
from other
nat’l
tax collection (%)
-10.44
84.00
HH head
educ
(n
one)
-
52,340.7*
1,608.27
HH
head
educ
(elem. undergrad)
-
44,592.1*
1,232.01
HH
head
educ
(elem. grad)
-
32,630.9*
1,278.75
HH
head
educ
(HS undergrad)
-
28,808.1*
1,477.81
HH
head
educ
(college undergrad)
32,175.5*
2,821.99
HH
head
educ
(college grad)
136,175.6*
3,711.40
HH members wage
-earners (%)
516.844*
29.02
Earns
from farming and gardening
-
2,023.4
1,265.22
Earns
from poultry, livestock raising
-
1,082.14
1,838.96
Earns
from fishing
-
1,639.14
2,564.52
Earns
from forestry and hunting
-
13,289.1*
2,313.41
Earns
from wholesale and retail
27,301.35*
1,814.09
Earns
from manufacturing
7,609.863*
2,461.89
Earns
from social, community services
42,635.01*
4,552.18
Earns
from transportation
19,551.73*
2,629.76
Earns
from construction
92,968.28*
31,020.83
Earns
from entrepreneurship
82,033.83*
12,342.07
(Constant)
87,991.64*
1,496.28
*significant at 1%
Slide21Conclusion
Earmarking for electrification leads to spending constraint among LGU’s
Coal mining operation remains small in some areas
Government is subsidizing coal operation
Existing laws are silent in terms of absorbing negative externalities of coal mining
Coal mining has
negative
impact on household income