Philippine Natural Gas Industry Development Act (Republic Act 12120)

(a) Promote natural gas as a safe, efficient, and govern the promotion and development of the PDNGI; cost-effective source of energy and an indispensable contributor to energy security by establishing the Philippine Downstream (i) Ensure compliance with the PDNGI product and Natural Gas Industry (PDNGI) for the benefit of all segments facility standards on Health, Safety, Security, and Environment of the nation's population and all sectors of the economy; (HSSE) and other applicable rules and regulations under a system of safe, secure, high-quality, and environmentally

(b) Develop natural gas as a reliable fuel for power plants responsible operations and services that afford protection capable of addressing the peaking, mid-merit, and baseload to consumers; demand of the country to help achieve energy security, while progressively transitioning to renewable energy sources; G) Encoui-age the inflow of private capital through equity participation by the private sector in the development of

(c) Promote natural gas as an energy fuel, with the the PDNGI; potential to meet the increasing local demand for fuel, and develop the Philippines as a Liquefied Natural Gas (LNG) (k) Ensure transparent and low-cost pricing of natural trading and transshipment hub within the Asia-Pacific Region. gas pursuant to Republic Act No. 7638 and rates for its In all cases, the State shall ensure the safe, secure, reliable, storage, regasification, transmission, and distribution in a transparent, competitive, and environmentally responsible regime of open and fair competition, with full public operation of the PDNGI value chain, and ensure alignment accountability that shall promote greater operational and with the State's policy on transitioning to a low-carbon future, economic efficiency and enhanced competitiveness in the consistent with the sustainable development goals on increasing global market; the share of renewable energy in the country's energy mix; (1) Develop the necessary technical expertise and skills

(d) Provide a conducive industry environment for the of personnel in government agencies and the private sector to promotion and development of the PDNGI through the issuance support the PDNGI; of regulatory policies, localized codes and standards for products, facilities and its operations based on the Philippine National (m) Promote aggregation whenever economically beneficial Standards (PNS), and plans and programs; for end-users and to contribute to mitigating natural gas supply and price shocks; and

(e) Promote the conversion of existing fossil fuel-operated equipment and facilities to natural gas use: Provided, That (n) Facilitate the development of power and non-power the conversion is technically and financially feasible; end-uses of natural gas which includes commercial, industrial, residential, and transport applications that promote fuel

(f) Promote and hasten the exploration and development diversity: Provided, That the power rates from the utilization of indigenous natural gas resources and facilities, and prioritize of natural gas shall be subject to Republic Act No. 9136, the use of indigenous over imported natural gas to help attain otherwise known as the "Electric Power Industry Reform Act greater energy security without impairment of contracts; of 2001".

(g) Promote the entry of investors under a system of SEC. 3. Scope. - This Act shall provide a framework for competition, transparency and fair trade, and by providing the development of the PDNGI, and its transition from an responsive policy support, with the end goal of attaining low emerging industry into a matUTe industry within a competitive cost energy prices pursuant to Republic Act No. 7638 or the natural gas market. It shall also define the responsibilities of "Department of Energy Act of 1992"; 5 various government agencies and private entities in furtherance combination of purely imported LNG, without any portion of of this national goal. the gas coming from indigenous natural gas sources, shall not be considered Aggregated Gas; It shall apply to the permitting of siting, construction, operation and maintenance, expansion, modification, (d) Anti-Competitive Behavior refers to any behavior rehabilitation, decommissioning, and abandonment of PDNGI and/or agreements in violation of the provisions of Republic Act Facilities for Own-Use or Third-Party Access (TPA). It shall No. 10667, otherwise known as the "Philippine Competition Act"; likewise apply to the accreditation of Participants in the trade of natural gas, including but not limited to the purchase, (e) Bunkering refers to the sale of natural gas by a supply, aggregation, bunkering, reselling, and export of natural Participant known as a bunker trader for use of domestic or gas, and any other activities related to the PDNGI. foreign marine vessels; All activities of the Department of Energy (DOE), Energy (t) Capacity refers to the handling design of a system used Regulatory Commission (ERC), and other concerned government in the context of its functionality and expressed in a specific agencies relevant to the development and regulation of the measurement, such as volume or flow per time unit or PDNGI shall be in accordance with this Act. designated measurement unit; SEC. 4. Definition of Terms. - For the purposes of this (g) Conventional Energy Sources refer to non-renewable Act, the following terms shall be defined as follows: fossil fuel energy sources such as coal, oil, and gas; (a) Affiliate refers to any corporation that directly or (h) Conventional Transportation System refers to a indirectly, through one or more intermediaries, controls, is network of fixed facilities made up of, among others, controlled by, or is under common control of another compressor stations, pipelines, and metering for the purpose corporation. As used herein, "control" shall mean the power of delivering natural gas. This includes both the PDNG to direct or cause the direction of management policies as an Transmission and Distribution Systems; inherent part of decision-making power; (i) Decommissioning and Abandonment refer to the (b) Aggregation refers to procurem-ent of indigenous removal or condemnation of the entire PDNGI Facility natural gas, combining it with imported LNG, and selling the installation or a component thereof that has reached the end aggregated gas to gas buyers in the Philippines or abroad, by of its productive life and, if applicable, the subsequent Participant/s known as aggregator/s. The DOE shall determine restoration of the Facility site to its previous condition; the requirements to be an aggregator as well as the minimum percentage of indigenous natural gas for aggregation and (j) Delivery refers to the transmission or distribution pricing mechanism for aggregated gas, taking into account of natural gas and the supply of natural gas at wholesale consumer welfare, competitive pricing, the production levels of or retail; indigenous natural gas sources, the capacity of existing and future PDNGI Facilities, and other relevant factors to ensure (k) Distribution refers to the transportation of natural gas a stable and reliable supply of natural gas; through a PDNG Distribution System; (c) Aggregated Gas refers to indigenous natural gas that (1) End-tLser refers to any person who will receive the has been combined with or supplemented by imported LNG, delivery of natural gas for final use; pursuant to the required minimum percentage of indigenous natural gas, pricing mechanism and competitive pricing as (m) Indigenous Natural Gas refers to natural gas provided in Section 4(b) of this Act. Gas that is a blend or produced from fields within the territorial jurisdiction of the Republic of the Philippines; 6 7 (n) Liquefied Natural Gas or LNG refers to natural gas (w) Permit Holder refers to a natural or juridical person that has been liquefied by cooling at a cryogenic temperature; who owns the PDNGI Facility and is granted a permit by the DOE to engage in the siting, construction, operation and (o) LNG Storage and Regasification Terminal refers to maintenance, expansion, modification, rehabilitation, all component facilities used to receive, unload, load, store, and decommissioning, and abandonment of PDNGI Facilities for regasify LNG. It shall include, among others, jetty and Own-Use or TPA; unloading/loading arms, cryogenic and non-cryogenic pipelines, storage tanks and pumps, boil-off gas compressors and (x) Philippine Downstream Natural Gas Development re-condensers, vaporizers, control facilities, metering. send-out Plan or PDNG Dev Plan refers to the comprehensive plan for systems, and other relevant components; ensuring a safe, secure, and reliable supply of natural gas and establishing the efficient operations of the PDNGI Facilities (p) Natural Gas refers to gas consisting primarily of a and proper management of natural gas demand through mixture of methane, ethane, propane, and butane, with small appropriate government programs and policies. It shall include amounts of heavier hydrocarbons and some impurities, the various natural gas supply plans, PLSR Terminal Dev consistent with PNS or other applicable internationally Plan, PDNG Transmission Dev Plan, and PDNG Distribution accepted industry standards; Dev Plan. This plan shall be incorporated in the Philippine Energy Plan (PEP); (q) Natural Gas Sales and Pitrchase Agreement or NGSPA refers to any contract or agreement for the delivery and sale (y) Philippine Downstream Natitral Gas Distribittion Code of natural gas by and between sellers, suppliers, and buyers; or PDNG Distribution Code refers to the code formulated by the DOE, which shall set the performance standards for (r) Offshore refers to areas situated at sea, some distance operating a conventional and virtual distribution system; from the shore; (z) Philippine Downstream Natural Gas Distribution (s) Own- Use refers to the exclusive use of the entire Development Plan or PDNG Distribution Dev Plan refers to capacity of PDNGI Facilities by a Permit Holder or its affiliates; a comprehensive plan prepared by the DOE, after modeling and taking into consideration the plans prepared by the Permit (t) Own-Use Permit refers to an authorization issued by Holders of all PDNG Distribution Systems and Virtual the DOE to an Own-Use Permit Holder; Transportation Systems containing, among others, information on their locations, construction, operation and maintenance, (u) Participant refers to a natural or juridical person who expansion, modification, rehabilitation, decommissioning, and engages in the trade of natural gas either as a supplier, abandonment, whichever is applicable. The plan shall likewise aggregator, bunker trader, or reseller; include all studies, programs, and policies for the promotion and development of the distribution sector, which are (v) Permit refers to an authorization issued by the DOE economically beneficial for end-users; for the siting, construction, operation and maintenance, expansion, modification, rehabilitation, decommissioning, and (aa) Philippine Downstream Natural Gas Distribution abandonment of PDNGI Facilities for Own-Use or TPA. It System or PDNG Distribution System refers to a Conventional shall likewise apply to the accreditation of Participants in the and Virtual Transportation System, starting from the receipt trade of natural gas, including but not limited to the purchase, of natural gas from the source of indigenous natural gas, LNG supply, aggregation, bunkering, reselling, and export of natural Storage and Regasification Terminal, or PDNG Transmission gas, and any other activity related to the PDNGI; System up to the receiving facility of the end-user; 8 9 (bb) Philippine Downstream Natural Gas Industry (hh) Philippine LNG Storage and Regasification Terminal Facility or PDNGI Facility refers to the LNG Storage and Code or PLSR Terminal Code refers to the code formulated Regasification Terminal, PDNG Transmission System, and by the DOE, which shall set the performance standards for PDNG Distribution System, and other related facilities; operating an LNG Storage and Regasification Terminal; (cc) Philippine Downstream Natural Gas Industry or (ii) Philippine LNG Storage and Regasification Terminal PDNGI refers to all Permit Holders involved in the siting, Development Plan refers to a comprehensive plan prepru:ed by construction, operation and maintenance, expansion, modification, the DOE, after modeling and taking into consideration the rehabilitation, decommissioning, and abandonment of PDNGI plans prepared by the Permit Holder of all LNG storage and Facilities. It shall likewise refer to Participants involved in the regasification terminals containing, among others, information purchase, supply, aggregation, bunkering, reselling, and export on their locations, construction, operation and maintenance, of natural gas, and any other activity related to the PDNGI as expansion, modification, rehabilitation, decommissioning, and defined in Section 4(bb) of this Act; abandonment, whichever is applicable. The plan shall likewise include all studies, programs, and policies for the promotion (dd) Philippine Downstream Natural Gas Transmission and development of the regasification sector, which are Code or PDNG Transmission Code refers to the code economically beneficial for end-users; formulated by the DOE, which shall set the performance standards for operating a conventional transmission system; (jj) Renewable Gases refer to hydrogen, ammonia, biomethane, synthetic methane, and other gases derived from (ee) Philippine Downstream Natural Gas Transmission renewable sources; Development Plan or PDNG Transmission Dev Plan refers to a comprehensive plan prepared by the DOE, after modeling (kk) Reselling refers to the procuring of natural gas from and taking into consideration the plans prepared by the Permit a supplier or aggregator and reselling it to gas buyers by a Holders of all PDNG Transmission Systems containing, among Participant known as a reseller; others, information on their locations, construction, operation and maintenance, improvement, expansion, modification, (11) Supply refers to the procuring or producing and rehabilitation, decommissioning, and abandonment, whichever selling indigenous or imported natural gas to gas buyers in is applicable. The plan shall likewise include all studies, the Philippines or abroad by a Participant known as a supplier; programs, and policies for the promotion and development of the transmission sector, which are economically beneficial (mm) Third-Party Access or TPA refers to a transparent, for end-users; fair, reasonable, and non-discriminatory access and utilization by a third-party user of the capacity of PDNGI Facilities; (ft) Philippine Downstream Natural Gas Transmission System or PDNG Transmission System refers to a (nn) Third-Party Access Code or TPA Code refers to the conventional transportation system starting from the receipt code formulated by the DOE, which shall set the performance of natural gas from the source of indigenous natural gas standards for TPA; and/or from an LNG Storage and Regasi:fication Terminal up to the receiving facility of the PDNG Distribution System; (oo) TPA Permit refers to an authorization issued by the DOE to a Permit Holder that allows TPA; (gg) Philippine Energy Plan or PEP refers to the overall energy program formulated and updated yearly by the DOE (pp) Transmission refers to the transportation of natural and submitted to Congress pursuant to Republic Act No. 7638, gas through a PDNG Transmission System; as amended; 10 ll (qq) Virtiial Transportation System refers to any (1) Academe; alternative methods of transporting natural gas other than through the conventional transportation system, such as the (2) Trade/Industry; use of land vehicles or sea vessels, with or without an on-site modular regasification unit; and (3) Consumer; (rr) Waterfront refers to facilities that are designated (4) Professional Associations; for the handling, storing, stowing, loading, discharging, or transporting of dangerous cargo, also called a "waterfront (5) Research Institutions; LNG plant". (6) Government Agencies; CHAPTER II (7) Testing Institutions; and POWERS AND RESPONSIBILITIES OF GOVERNMENT AGENCIES (8) Other relevant sectors. SEC. 5. Powers and Responsibilities of the Department (c) Enforce PDNGI compliance with the standards, in of Energy. - In addition to its existing powers and functions, coordination with relevant government agencies, through the the DOE shall have the overall responsibility of supervising issuance of technical regulations implementing the standards, and monitoring the PDNGI and developing the strategies to review of reports, and conduct of onsite inspections. implement the State policies declared under this Act. Toward this end, the DOE shall exercise the following powers and An Inter-Agency Health, Safety, Security, and functions: Environment Inspection and Monitoring Team (IA-HSSE IMT) shall be created to monitor and enforce compliance with (a) Prepare the PDNG Dev Plan, based on modeling, established standards. It shall be co-chaired by the DOE and considering forecasted demand, sttpply, and uses of natural gas the Department of Environment and Natural Resources in the country, taking into account the plans submitted by (DENR), with members composed of representatives from the PDNGI Permit Holders and Participants, after open following government agencies: discussions and consultations with relevant government agencies and public and private stakeholders, within two (2) (1) Maritime Industry Authority (MARINA); years from the effectivity of this Act. The PDNG Dev Plan shall be reviewed and updated every three (3) years after its (2) Philippine Coast Guard (PCG); adoption; (3) Department of Labor and Employment (DOLE); (b) Establish standards on gas quality, facility, and a code of practice for the PDNGI, in coordination with relevant (4) Bureau of Fire Protection (BFP); government agencies. For this purpose, a Technical Committee (TC) shall be created to develop and promulgate the applicable (5) Department of Health (DOH); and PNS for the PDNGI. The TC shall be co-chaired by the DOE and the Department of Trade and Industry-Bureau of (6) Other relevant government agencies. Philippine Standards (DTI-BPS). (d) Approve or issue: The TC shall be composed of representatives from the following sectors: 12 13 (1) Permits for the construction, operation and (h) Endorse to the Philippine Competition Commission maintenance, expansion, modification, rehabilitation, (PCC) for investigation any reported or observed decommissioning, and abandonment of PDNGI Facilities; anti-competitive behavior in the PDNGI; (2) Accreditation of Participants; (i) Require Permit Holders and Participants to submit regular and special reports, and to provide real-time monitoring (3) Acknowledgment of natural gas importation and access to the operation and maintenance activities of PDNGI exportation notifications; and Facilities; (4) Other endorsements or issuances in furtherance of the (j) Publish the list of Permit Holders and Participants development of the PDNGI. along with the status of their projects on the DOE website; The processing and grant of all permits and other (k) Temporarily take over or direct the operation of any endorsements or issuances purs1tant to this Act shall be person or entity engaged in the PDNGI in times of national governed by Republic Act No. 11234, otherwise known as the emergency, when the public interest so requires, as may be "Energy Virtual One-Stop Shop Act". In reviewing applications directed by the President upon the recommendation of the for permits, the DOE shall ensure that the application is National Economic and Development Authority (NEDA); consistent with the declaration of policies in this Act, and that the proposed project is technically and financially viable by (1) Create offices and appoint personnel as may be ensuring, among others, sufficient supply of imported LNG or necessary to efficiently and effectively implement this Act, indigenous natural gas, and clear source of funding for the subject to existing laws, rules, and regulations; project. The EVOSS Steering Committee shall streamline the permitting process for the PDNGI and continue its mandate (m) Develop a comprehensive national strategy, with input under Republic Act No. 11234; from the National Renewable Energy Board (NREB), for integrating renewable gases into the energy mix, and outlining (e) Review, suspend, or revoke permits issued after a the roadmap for their adoption; finding of non-compliance with the provisions of this Act, its implementing rules and regulations (IRR), and related (n) Regulate, as applicable, the quality of service and rates issuances; of TPA conventional transportation systems: Provided, That the rate-setting methodologies shall be based on the policy of (f) Issue a written approval for the assignment or transfer full recovery of prudent and reasonable economic cost with a of permits after determining that the assignee or transferee reasonable rate of return or such other principles that promote has met all the legal, technical, and financial qualifications, efficiency and other internationally-accepted rate-setting has committed itself to assume all existing obligations of the methodology; Permit Holder, and that such assignment or transfer is in accordance with existing laws, rules, and regulations: (o) Ensure compliance with the publication and Provided, That this also applies to sales of shares that would unbundling of TPA conventional transportation system fees, result in a change in control of the Permit Holder or its whether for a PDNG transmission or distribution system; ultimate parent. (p) Develop and establish such other plans and policies (g) Issue the PDNG Transmission Code, PDNG as may be consistent with and in furtherance of the State Distribution Code, the PLSR Terminal Code, and the TPA policies declared under this Act; Code within two (2) years from the effectivity of the IRR of this Act, in consultation with other concerned government (q) Exercise such other powers and functions as may be agencies and the PDNGI stakeholders; necessary or incidental to attain the objectives of this Act; and 14 15 (r) Identify and assess the risk of stranded assets and maintenance, expansion, rehabilitation, decommissioning, associated with natural gas infrastructure development, taking and abandonment of PDNGI Facilities, pursuant to existing into account factors such as declining demand due to the environmental laws, such as Republic Act No. 8749, otherwise energy transition, the emergence of alternative energy carriers, known as the "Philippine Clean Air Act of 1999", as amended, stricter climate policies, and technological advancements in Republic Act No. 7586, otherwise known as the "National renewable energy. The DOE shall develop a transparent Integrated Protected Areas System Act of 1992", as amended methodology for evaluating stranded asset risk applicable to by Republic Act No. 11038, otherwise known as the "Expanded both existing and proposed projects, maintain a publicly National Integrated Protected Areas System Act of 2018", accessible database that tracks these projects and their risk Republic Act No. 6657, otherwise known as the assessments on any identified stranded assets, and regularly "Comprehensive Agrarian Reform Law of 1988", as amended, update this information to serve as foundation for informed and other existing environmental laws, rules, and regulations: policy decisions and regulatory actions. Provided, That, within six (6) months from the effectivity of this Act, the DENR shall establish national standards for To mitigate the risks of stranded assets, the DOE is methane emissions and other pollutants from natural gas empowered to establish and enforce regulations that promote industries not otherwise regulated by existing laws. responsible investment in natural gas infrastructure, and encourage a timely transition to renewable energy sources. SEC. 8. Powers and Responsibilities of the Philippine These regulations may include facilitating the early retirement Coast Giwrd. - In addition to its functions under Republic of high-risk assets through financial mechanisms. Act No. 9993, otherwise known as the "Philippine Coast Guard Law of 2009", the PCG, together with the DENR, shall The DOE shall also coordinate with relevant government determine and monitor compliance with the marine agencies to align natural gas development, national climate environmental protection standards for the offshore and targets, and ensure a smooth transition to a sustainable energy waterfront siting, construction, operation and maintenance, system. expansion, modification, rehabilitation, decommissioning, and abandonment of PDNGI Facilities. SEC. 6. Powers and Responsibilities of the Energy Regulatory Commission. - The powers of the ERC shall be SEC. 9. Powers and Responsibilities of the Department in accordance with the provisions of Republic Act No. 9136 of Transportation (DOT,) through the Maritime Industry on the organization, operation, regulation of the power Authority. - In addition to its functions under Presidential industry, and such other powers as may be given to it under Decree No. 474, otherwise known as the "Maritime Industry applicable laws. Decree of 1974", the MARINA shall have general jurisdiction over the development, promotion, and regulation of all It shall create offices and appoint personnel necessary to enterprises engaged in the business of designing, constructing, efficiently and effectively perform its functions in regulating manufacturing, acquiring, operating, supplying, repairing, and power generated from natural gas, subject to existing laws, maintaining vessels, or parts thereof, including LNG carriers. rules, and regulations. The MARINA shall also provide for the effective supervision, regulation, and rationalization of the organizational SEC. 7. Powers and Responsibilities of the Department management, ownership, and operations of all water transport of Environment and Natural Resources. - In addition to its utilities and other maritime enterprises. functions under Executive Order No. 192, otherwise known as the "Reorganization Act of the Department of Environment and SEC. 10. Powers and Responsibilities of the DOTr and Natural Resources", the DENR, together with the DOE and its Attached Agencies. - In addition to its functions under the PCG, shall determine and monitor compliance with the Executive Order No. 125, series of 1987, otherwise known as environmental standards for the siting, construction, operation the "Reorganization Act of the Ministry of Transportation and 16 17 Communications", as amended, and other applicable laws, (b) Recommend standards, rules, and regulations in the the DOTr or its attached agencies, such as the Land conduct of health risk assessment studies in cases of natural Transportation Office, Land Transportation Franchising and gas accidents; Regulatory Board, and MARINA, in coordination with the DOE, DENR, DOH, DTI-BPS, and other relevant government (c) Develop guidelines, policies, and health standards on agencies, shall issue the appropriate guidelines and regulations, the treatment and management of patients affected by natural and the applicable permits, licenses, certificates, or gas accidents; and authorizations for virtual pipelines, motor vehicles, and marine vessels transporting, storing, or processing natural gas in its (d) Require health data and information from PDNGI original state or liquefied form, as well as marine facilities Facilities, Permit Holders, and Participants. used to import, receive, load, unload, transport, process, and store natural gas in its original or liquefied form, including SEC. 14. Referral to the Philippine Competition those utilized as offshore LNG terminals. The DOTr shall Commission. - Consistent with its functions under Republic monitor and ensure compliance therewith. Act No. 10667, the PCC shall: SEC. 11. Powers and Responsibilities of the Department (a) Promote free and fair competition in all commercial of Trade and Industry-Bureau of Philippine Standards. - In economic activities in the PDNGI; addition to its functions under Republic Act No. 4109, titled, "An Act to Convert the Division of Standards under the (b) Prevent economic concentration in the PDNGI that Bureau of Commerce into a Bureau of Standards, to Provide may have the tendency to control the production, distribution, for the Standardization and/or Inspection of Products and trade, or industry in a manner that would unduly stifle Imports of the Philippines and for Other Purposes", the competition in and lessen, manipulate, or constrict the DTI-BPS, together with the DOE, shall determine, develop, discipline of free markets; and formulate, promulgate, and revise the PNS for natural gas and PDNGI Facilities. (c) Penalize all forms of anti-competitive agreements, abuse of dominant position, and anti-competitive mergers and SEC. 12. Powers and Responsibilities of the Department acquisitions in the PDNGI, to protect consumer welfare and of Science and Technology (DOST). - In addition to its advance domestic and international trade and economic functions under Executive Order No. 128, otherwise known as development. the "Reorganization Act of the National Science and Technology Authority", the DOST shall undertake scientific and All matters involving or suspected by ERC and/or DOE technological research and development for the improvement to involve anti-competitive agreements or abuse of market of new technologies in the PDNGI. power shall be referred to the PCC for investigation and adjudication. Where the act/s referred to the PCC are highly SEC. 13. Powers and Responsibilities of the Department technical in nature, the ERC and/or DOE shall assist the PCC of Health. - In addition to its functions under Executive Order in its inquiry and analysis of the facts. No. 317, series of 1941, titled "Organizing the Department of Health and Public Welfare", as amended, and Republic Act SEC. 15. Powers and Responsibilities of the National No. 11223, otherwise known as the "Universal Health Care Commission on Indigenous Peoples (NCIP). - In addition to Act", the DOH, together with the DOE, ERC, or DOTr, shall: its functions under Republic Act No. 8371, otherwise known as "The Indigenous Peoples' Rights Act of 1997", the NCIP, (a) Ensure and monitor compliance by Permit Holders upon the DOE's endorsement in accordance with the PEP or and Participants with the health standards of PDNGI its certification that the PDNGI project is an energy project Facilities and PDNGI activities; of national significance, shall process the application for the 18 19 certification precondition under Section 59, Chapter VIII of SEC. 20. Compliance with Standards. - The DOE shall Republic Act No. 8371, in accordance with the processes ensure that Permit Holders and Participants, products, provided in Republic Act No. 11234. facilities, services, and systems comply with the standards set by relevant government agencies in terms of quality, design, SEC. 16. Powers and Responsibilities of the Philippine efficiency, safety, structural integrity, and operation and Energy Research and Policy Institute (PERPI). - Pursuant maintenance. Regulations shall be consistent with applicable to Republic Act No. 11572, otherwise known as the "Philippine Philippine and internationally accepted natural gas industry Energy Research and Policy Institute Act", the PERPI shall standards. conduct research and development on renewable gas technologies, including production, storage, and distribution, SEC. 21. Confidential Information. - The DOE, ERC, or with support from the DOST and Philippine National Oil PCC, as applicable, shall determine whether submitted Company (PNOC). documents and reports are confidential or proprietary information. The Government shall not disclose confidential or CHAPTER III proprietary information to the public, other Permit Holders, or Participants unless allowed by the Permit Holder or ORGANIZATION, OPERATION, AND REGULATION OF THE Participant, or when required by laws, rules, and regulations. D0NWSTREAM NATURAL GAS INDUSTRY SEC. 22. AiLthority to Obtain Information. - The DOE, SEC. 17. Aggregation. - The DOE shall be the lead ERC, PCC, and other concerned government agencies may, agency to determine the need for and regulate the development through a valid order, require any Permit Holder or of aggregation in the country. The DOE shall determine and Participant, to provide, within a reasonable specified period, designate the aggregator/s and issue the applicable policies to all information and documents relating to all matters such as implement aggregation, adhering to the principles of economies the permit, rates, and operation of the business and PDNGI of scale, as well as energy transparency, competitive pricing, Facilities, with explanations on the information or documents security and reliability, and consumer welfare. The DOE may submitted, subject to Section 21 of this Act. The failure of a direct any of its attached agencies and instrumentalities to Permit Holder or Participant to provide the required participate in aggregation activities. information or documents without valid reason shall be punishable under this Act. SEC. 18. DOE Permits and Issuances. - The DOE shall have the power and responsibility to evaluate, approve, and SEC. 23. Natural Gas Supply. - The procurement, issue the permits necessary for the siting, construction, delivery, and pricing of natural gas from indigenous production operation and maintenance, expansion, modification, facilities or from importation to the PDNGI shall be rehabilitation, decommissioning, and abandonment of any transparent and secure. If necessary, the DOE, ERC, and PCC PDNGI Facility or activity. shall require the suppliers to submit relevant information pertaining to supply contracting, procurement, pricing, and The DOE shall accredit Participants and acknowledge distribution scheme to users for monitoring purposes. notifications of natural gas importation and exportation. Permits issued to Permit Holders may vary based on their Procurement and utilization of indigenous natural gas, intended use, such as Own-Use Permit or TPA Permit. including without limitation, by gas-fired power plants, shall be prioritized over imported natural gas: Provided, That it is SEC. 19. Compliance with Philippine Laws, Rnles, and Regulations. - Permit Holders and Participants shall comply ' consistent with the State's policy of ensuring energy security and consumer welfare. An indigenous natural gas supplier and with all Philippine laws, rules, and regulations implemented aggregator shall provide fair and open access to its natural by the relevant government agencies. gas supply in a non-discriminatory and transparent manner 20 21 through physical supply, administrative or financial contracts, SEC. 26. Fees. - All concerned government agencies shall or any other arrangements allowed by the DOE. have the authority to prescribe and collect fees and charges relating to the issuance or review of permits, and the Power produced from indigenous natural gas shall have supervision and regulation of the PDNGI. priority over other conventional energy sources. Such prioritization shall cover indigenous natural gas power supply CHAPTER IV contracting, including mechanisms for minimum supply requirements. OPERATION OF DOWNSTREAM NATURAL GAS FACILITIES The DOE shall establish mechanisms for the optimal and SEC. 27. PDNG Transmission and Distribution System full utilization of indigenous natural gas in the generation, and Related Facilities. - The DOE shall issue a license or transmission, distribution, and supply of power, subject to authorization to Permit Holders of PDNG transmission and standards and limitations consistent with the state's policy of distribution systems for the purpose of ensuring safe, efficient, ensuring energy security and consumer welfare. Pursuant and reliable infrastructure and facilities. thereto, the DOE shall formulate mechanisms that shall prescribe a mandated minimum percentage of the electricity SEC. 28. Cross-Ownership. - An entity may hold an demand of generation companies and/or distribution utilities interest in the ownership of upstream and downstream natural to be sourced from indigenous natural gas. Such minimum gas facilities, as well as the supply and aggregation of natural percentage shall be reviewed and adjusted by the DOE as may gas to gas buyers subject to legal prohibitions on be necessary. anti-competitive acts. Such ownership shall be allowed for operational and financial feasibility considerations, subject to Subject to viability, the PDNGI Facilities may be the powers and responsibilities of the PCC under Section 14 designed and constructed to ensure the accommodation of both of this Act. The PCC shall review compliance with Republic indigenous natural gas and/or imported natural gas, pursuant Act No. 10667, specifically to prevent substantial lessening of to the standards determined by the DOE. The DOE shall competition, while the DOE shall review the impact on energy establish measm·es to support the supply and use of indigenous security, the cost of electricity, market stability, and any other natural gas in the domestic downstream natural gas sector. matters concerning the PEP. SEC. 24. Decommissioning and Abandonment of The DOE shall apply relevant laws and regulations to Downstream Natural Gas Facility. - No Permit Holder shall ensure that public interest is protected. abandon or decommission any portion of a PDNGI Facility without prior written authorization from the DOE and absent SEC. 29. Own-Use. - The Own-Use Permit Holder shall its approval of an abandonment and decommissioning plan utilize its entire capacity exclusively for its own use and shall based on Philippine or internationally accepted standards. The not be allowed to enter into TPA arrangements, unless DOE, in coordination with the DENR, shall provide the approved by the DOE. The DOE's approval shall specify the guidelines and regulations for the decommissioning and standards and limitations thereof. abandonment of PDNGI Facilities. The DOE may allow the use by a third party, if SEC. 25. Administrative Rules and Proceditres. - The necessary, to address any issue on the availability of LNG DOE shall issue the administrative rules and procedures for supply which may arise. the discharge of administrative cases and imposition of administrative fines and penalties. The Rules of Court shall The DOE shall provide the rules and limitations on the apply in a suppletory manner. participation of Own-Use Permit Holders in TPA arrangements, taking into account energy security and consumer welfare. 22 23 SEC. 30. Third-Party Access. - A TPA Permit Holder which shall be available to the public, and allow the review shall utilize its entire capacity exclusively for TPA and shall and inspection of their facilities and records for verification. not be allowed to utilize any such capacity for Own-Use, unless approved by the DOE. The DOE's approval shall specify the SEC. 32. Congestion Management. - Whenever a TPA standards and limitations thereof. Permit Holder is no longer able to use or has not released the capacity without justifiable reason, the DOE shall have The DOE may allow a TPA Permit Holder to utilize its the authority to direct its release. capacity for Own-Use, if necessary, to address any issue on the availability of LNG supply which may arise. The procedure and criteria for release shall be governed by the TPA Code. The DOE shall provide the rules and limitations on the utilization of TPA Permit Holders' capacity for Own- Use, CHAPTER V taking into account energy security and consumer welfare. STANDARDSON PRODUCTQUALITY,FACILITY, The TPA Permit Holder shall submit a regular report AND SAFETYPRACTICE on the total capacity, along with all relevant details, to the DOE for monitoring. SEC. 33. Standards on Downstream Natural Gas Facilities. - All PDNGI Facilities shall be required to provide SEC. 31. Third-Party Access Principles. - Adherence to high quality and efficient service, observe stringent safety the principles of transparency, non-discrimination, and safe systems, accord attention to design details and structural practices is the key to the beneficial participation of third-party integrity, and employ best practices in operation and users. In line with this, the following guiding principles shall maintenance. Regulations shall be consistent with both be observed: applicable Philippine and internationally accepted natural gas industry standards. The DOE shall ensure compliance with (a) The TPA shall be transparent, fair, reasonable, and these requirements. non-rliscriminatory with regard to the rates and access to services for the purpose of enhancing efficiency and Applications for DOE permits and for the continued optimization of capacity to avoid overcapacity and encourage operation of the PDNGI Facilities shall be subject to necessary investments in the PDNGI; continuous compliance with these standards. (b) The TPA shall encourage a diverse and sustainable SEC. 34. Standards on Product Quality. - The Permit market for natural gas beyond the power sector; Holder and Participant shall maintain the quality of natural gas supply to gas buyers in accordance with Philippine and (c) The TPA shall be anchored on a safe, secure, reliable, internationally accepted standards, and ensure that the delivery and efficient operation for both the Permit Holder and the of natural gas complies with the purification requirements to third-party users; and guarantee the elimination of associated compounds which are unnecessary or damaging to the PDNGI Facilities. The DOE (d) The TPA Permit Holders shall conduct an open, shall ensure compliance with this requirement. transparent, and sufficient consultation process with both existing and potential third-party users to discuss the available SEC. 35. Standards on Safety Practice. - The Permit capacity; and Holder and Participant shall implement an acceptable health, safety, security, and environmental management system in (e) The TPA Permit Holders shall regularly publish their accordance with applicable Philippine and internationally available capacity, access terms and conditions, and rates, accepted standards. The DOE, DENR, DOH, DOLE, and other 2./ 25 concerned agencies shall ensure compliance with this (g) Allow examiners of the BUTeau of Internal Revenue requirement. (BIR) and Bureau of Customs (BOC) entry to the facility premises and full access to accounts, books, and records for SEC. 36. Safety Standards. - The DOE, in collaboration tax and other fiscal pmposes, in accordance with BIR and BOC with the NREB and PNOC, shall develop and implement safety rules and procedures; standards of natural gas, including renewable gases, in order to address their unique properties and risks. (h) Allow the DOE, IA-HSSE IMT, ERC, PCC, and other government agencies, entry to the facility premises ai:id ~ull CHAPTER VI access to operational records for inspection and momtormg activities, in accordance with the rules and procedures of such RESPONSIBILITIES OF PERMIT HOLDERS AND PARTICIPANTS government agencies; SEC. 37. Responsibilities of Permit Holders. - A Permit (i) Give preference to qualified local talent for hiring, and Holder shall have the following responsibilities: to local companies or agencies in entering into contracts on projects or services which are required in the construction or (a) Align all goals, objectives, and accomplishments with operation of the PDNGI Facility; the declared policies of this Act and the PEP; (j) Hold the DOE, ERC, IA-HSSE IMT, and other (b) Take direct responsibility and accountability for the government agencies, their officers, agents, and employees, free construction, operation, and maintenance of PDNGI Facilities and harmless from and against all suits, claims, demands, or by providing the necessary services, technology, and financing, actions of any nature or kind, arising out of their acts or either by itself or through its duly authorized contractors; omissions in the performance of any activity in connection with the implementation of this Act: Provided, That such acts or (c) Secure a permit before engaging in any activity omissions are lawful and not contrary to the provisions of this relating to siting, construction, operation and maintenance, Act and its IRR; expansion, modification, rehabilitation, decommissioning, and abandonment of PDNGI Facilities; (k) Participate in the development, issuance, and review of plans, protocols, standards, and codes applicable to (d) Comply with regulatory obligations, maintain complete the PDNGI; records, and submit all reportorial requirements and other documents as may be required by the DOE and other (1) Establish and maintain a decommissioning fund at the government agencies pursuant to this Act and its IRR; start of operations of the PDNGI Facility to be utilized for its decommissioning in accordance and consistent with the (e) Comply with the standards on natural gas quality, policies and guidelines of the DENR on the establishment, facility, construction and equipment installation, safety, and maintenance, and use of the Environmental Guarantee Fund security of operations and environmental protection in the to ensure compliance with, among others, decommissioning siting, construction, operation and maintenance, expansion, obligations in all co-located or single projects that have been modification, rehabilitation, decommissioning, and abandonment determined by the Environment Management Bureau to pose I of PDNGI Facilities; a significant public risk; (f) Operate the PDNGI Facility in strict adherence with (m) Unbundle and make available to the public its the scope and limits of the permit, and in accordance with unbundled rates and fees, if applicable; the HSSE best practices and the Philippine and internationally accepted standards; (n) Not engage in anti-competitive behavior; and 26 27 (o) Such other responsibilities mandated by the DOE to CHAPTER VIII ensure the development of the PDNGI. PROMOTION OF COMPETITION CHAPTER VII SEC. 39. Anti-Competitiue Behauior. - In accordance with INCENTIVES Republic Act No. 10667, no Permit Holder or Participant, or any affiliate thereof, may engage in any anti-competitive SEC. 38. Fiscal Incentiues. - In recognition of the behavior or abuse its dominant position. substantial investments needed for the development, construction, lease, operation and/or maintenance of, and SEC. 40. Fair Access to Capital and Off-Taker Market. - conversion to natural gas facilities, all PDNGI Facilities, as The DOE shall issue applicable policies that promote the certified by the DOE, shall undergo an evaluation process for financial viability of the PDNGI and ensure competitive access possible inclusion in and entitlement to incentives under the to both capital and off-taker markets for natural gas. Strategic Investment Priority Plan (SIPP), subject to the incentives provided under Title XIII (Tax Incentives) of the CHAPTER IX National Internal Revenue Code of 1997 (NIRC), as amended by Republic Act No. 11534, otherwise known as the "Corporate FINES AND PENALTIES Recovery and Tax Incentives for Enterprises Act", and any amendments thereto. SEC. 41. Administratiue Fines and Penalties. - The following administrative fines and penalties shall be imposed The purchase and sale of indigenous natural gas, on any Permit Holder or Participant who violates the aggregated gas, and power generated by generation facilities provisions of this Act: using indigenous natural gas and aggregated gas shall be exempt from Value-Added Tax (VAT): Prouided, That the (a) The permit, accreditation, or other approvals issued exemption from VAT for aggregated gas is only to the extent by the DOE under Section 18 of this Act, may be suspended of the amount of indigenous natural gas attributed to be in or revoked, and the DOE shall impose upon the Permit Holder the aggregated gas. This includes the: (a) purchase and sale or Participant a fine ranging from Fifty thousand pesos of indigenous natural gas and aggregated gas by an (P50,000.00) to Five million pesos (P5,000,000.00) per violation, aggregator, reseller, supplier, person authorized by the ERC without prejudice to other appropriate administrative fines and to operate facilities used in the generation of electricity, or an penalties that other relevant government agencies may impose end-user, and (b) purchase and sale of electricity or ancillary on the Permit Holder or Participant: Prouided, That the services produced by a generation facility using indigenous schedule of fines provided in this section shall be increased natural gas and/or aggregated gas by a person authorized to by the DOE every five (5) years, for violations of: (1) operate facilities used in the generation of electricity or ancillary services, (2) sell, broker, market, or aggregate (1) Standards on PDNGI Facilities issued pursuant to electricity to end-users, (3) consolidate electric power demand Section 33; of end-users for the purpose of purchasing and reselling electricity on a group basis, (4) engage in the distribution of (2) Standards on product quality issued pursuant to electricity, or (5) procure or provide ancillary services. These Section 34; shall include all modes of purchase and sale, whether through a supply agreement; a duly authorized market such as, but (3) Standards on safety practices issued pursuant to not limited to, the wholesale electricity spot market or the Section 35; .. ancillary reserves market, financial gas contracts, NGSPA; or through other modes. (4) Responsibilities of the Permit Holder and Participant pursuant to Section 37; 28 29 (5) PDNG Transmission Code, PDNG Distribution Code, SEC. 44. Pending Application. - All applications for any PLSR Terminal Code, and TPA Code; and activity in the PDNGI which are pending before the DOE upon the effectivity hereof shall be covered by this Act. (6) Orders or directives of the DOE in the implementation of this Act. CHAPTER XI (b) The applicable administrative penalty for Section 39 FINAL PROVISIONS shall be pursuant to Republic Act No. 10667. SEC. 45. Assignment or Transfer of Permit. - SEC. 42. Criminal Fines and Penalties. - Appropriate Assignment or transfer of the permit or change of operatorship fines and penalties under existing penal laws shall apply to shall be allowed only upon prior written approval by the DOE any criminal violation committed in the implementation of based on acceptable reasons and compliance by the existing this Act. Permit Holder, the assumption by the assignee of all obligations of the existing Permit Holder, and upon meeting CHAPTER X the minimum legal, technical, and financial qualifications by the assignee: Prouided, That this also applies to sales of shares TRANSITORY PROVISIONS that would result in a change in control of the Permit Holder or its ultimate parent: Prouided, further, That assignments SEC. 43. Existing Systems. - PDNGI Facilities that have or transfers shall not be allowed near the end of life of a been constructed prior to the effectivity of this Act shall PDNGI Facility if the assignee or transferee cannot comply continue to be operated under their existing permits and shall with the guidelines and regulations for the decommissioning comply with additional requirements as applicable. and abandonment of PDNGI Facilities as provided in Section 24 of this Act and if the Environmental Guarantee Fund is The application and implementation of the pertinent not maintained and administered in accordance with the provisions of this Act shall not impair vested rights or policies and guidelines of the DENR. obligations of contracts. Current and subsisting agreements shall remain valid and in force in accordance with the existing SEC. 46. Amicable Settlement. - All parties shall make terms and conditions agreed to by the parties until the their best efforts to amicably settle any dispute arising from expiration or termination thereof. the performance or interpretation of any provision of this Act. All Permit Holders and Participants shall comply with SEC. 47. Congressional Ouersight. - The Joint the provisions of this Act within two (2) years from the Congressional Energy Commission (JCEC) shall exercise effectivity of the IRR of this Act: Prouided, That health, safety, oversight powers over the implementation of this Act. It shall security, environmental, construction, operation, and other conduct a policy review five (5) years from the effectivity of permits, licenses, certificates, and authorizations issued prior this Act, without prejudice to an earlier periodic review to the effectivity of this Act that are not inconsistent herewith as necessary. shall remain valid. The DOE, ERC, and other relevant government agencies PDNG Transmission Systems and PDNG Distribution shall submit to the JCEC, no later than the fifteenth (15 th ) Systems existing at the time of the effectivity of this Act shall day of September each year, annual reports which shall be allowed to continue pursuant to the terms and conditions include the latest relevant data, implementation reviews and indicated in their franchise and until the lapse of the period reports, and policy and regulatory issues. accorded therein. 30 31 SEC. 48. Appropriations. - The amount necessary for the This Act was passed by the Senate of the Philippines as implementation of this Act shall be included in the annual Senate Bill No. 2793 on November 11, 2024 and adopted by General Appropriations Act. the House of Representatives as an amendment to House Bill No. 8456 on November 13, 2024. SEC. 49. Implementing Rules and Regulations. - The DOE shall promulgate the rules and regulations for the effective implementation of this Act within six (6) months after its effectivity. REGINAL SEC. 50. Separability Clause. - If, for any reason, any Secretary General provision of this Act is declared unconstitutional or invalid, House of Representatives the other parts or provisions hereof, which are not affected thereby, shall continue to be in full force and effect. SEC. 51. Repealing Clause. - Any law, presidential decree Approved: JAN O 8 2025 or issuance, executive order, letter of instruction, rule, or regulation inconsistent with the provisions of this Act is hereby repealed or modified accordingly. SEC. 52. Saving Clause. - The provision of Presidential Decree No. 87, otherwise known as "The Oil Exploration and Development Act of 1972"; Republic Act No. 9136, otherwise ~• D_q MARCOS JR. President of, the Philippines known as the "Electric Power Industry Reform Act of 2001"; and Republic Act No. 9513, otherwise known as the lo "Renewable Energy Act of 2008", shall remain applicable and REPUBLIC OF TBE PHILIPPINES shall not in any way be amended or repealed by the provisions of this Act and its rules and regulations. II IIIIIIII1111111111111111 PBBM007170 SEC. 53. Effectivity. - This Act shall take effect fifteen Office of the President (15) days after its publication in the Official Gazette or in a MALACANAN RECORDSOFFlCE newspaper of general circulation. Approved, FRANCIS "CHIZ"G. ESCUDERO President of the Senate