The Department of Environment and Natural Resources (DENR) has issued DENR Administrative Order No. 2007-12 (DAO 2007-12) providing for a new fiscal regime for Financial or Technical Assistance Agreements (FTAA) entered into by mining contractors and the State in accordance with the provisions of the Philippine Mining Act of 1995 (Republic Act No. 7942). This latest issuance effectively amends DAO 1999-56.

Philippine mining laws allow foreign mining companies to own up to one hundred percent (100%) equity in large-scale exploration, development and commercial utilization of mineral resources under an FTAA regime, provided that the initial capital therein should be at least USD 50 Million, to include infrastructure and development costs.

The new fiscal regime under DAO 2007-12 intends to strike a balance between a mining contractor's reasonable expectation of return on its investments and the government's equitable share from the utilization and development of the country's mineral resources.

Under the previous fiscal regime under DAO 1999-56, three (3) options were available for contractors of FTAA projects: Cumulative Net Cash Flow Option, Additional Profits Option and Net Mining Revenue Option. Under the new fiscal regime, only the 50%-50% sharing of the Net Mining Revenue was retained in the determination of the Total Government Share from the FTAA project.

According to the DENR, the benefit-sharing scheme between the FTAA proponent as contractor and the State as owner of minerals is in response to the 2005 Supreme Court decision in La Bugal-B'Laan Tribal Association, Inc., et al. v. Ramos, et al., which upheld the constitutionality of the FTAA provisions of the Philippine Mining Act.

DAO 2007-12 likewise requires mining contractors to submit an FTAA project's marketing contract(s) for government approval. The mandatory approval process aims to guarantee that the sale of minerals and mineral by-products reflect actual market conditions and prices and ensure that the government receives an equitable share from the utilization and development of the country's mineral resources.

In a related development, DENR has announced that the period for processing FTAA applications would be reduced from eight (8) months to five-and-a-half (5 ½) months at the DENR level. The same shall thereafter be endorsed to the President for approval. In similar procedural reforms, FTAA marketing contracts shall be deemed approved within fifteen (15) days upon receipt thereof if not acted upon by the DENR.

The Biofuels Act of 2006 also expressly repealed Section 148 (d) of the Tax Reform Act of 1997 imposing excise tax on denatured alcohol.