Republic of the Philippines VS.

Provincial Government of Palawan

G.R. No. 170867
December 4, 2018

I. Ticker
• Territorial jurisdiction (National jurisdiction vis-à-vis Provincial jurisdiction)

II. Doctrine

Note: These doctrines are inapplicable directly to the case herewith, but have been
mentioned for its correlation with the subject matter.

• Regalian Doctrine- refers to the feudal principle that private title to land must emanate,
directly or indirectly, from the Spanish crown with the latter retaining the underlying title.
Lands and resources not granted by the Crown remain part of the public domain over
which none but the sovereign holds rights.

• Federal Paramountcy Doctrine- establishes that where there is a conflict between valid
provincial and federal laws, the federal law will prevail and the provincial law will be
inoperative to the extent that it conflicts with the federal law.

• Archipelagic Doctrine- Under this concept, an archipelago shall be regarded as a single

unit, so that the waters around, between, and connecting the islands of the archipelago,
irrespective of their breadth and dimensions, form part of the internal waters of the state,
and are subject to its exclusive sovereignty.  

• Doctrine of Transformation- holds that the generally accepted rules of international law
are not per se binding upon the State but must first be embodied in legislation enacted by
the law-making body and so transformed will they become binding upon the State as part
of its municipal law. (Isagani Cruz, International Law, 2000)

III. Facts

• This case is a petition for review on certiorari on the decision of the Regional Trial Court
of Palawan dated December 16, 2005, which declared the Province of Palawan entitled to
40% of the government’s earnings derived from the Camago-Malampaya Natural Gas
Project since October 16, 2001.

• On December 11, 1990, the Republic of the Philippines, through Department of Energy,
entered into a Service Contract with Shell Exploration B.V and Occidental Philippines Inc.,
(SPEX/OXY) as the contractor, for the exclusive conduct of petroleum operations in
Camago-Malampaya located offshore northwest of Palawan.

• Service Contract No.38 provides for a production sharing scheme wherein the National
Government was entitled to receive 60% of the net proceeds from the sale of petroleum
operations while 40% of the net proceeds was entitled to the service contractor
(SPEX/OXY).

• Provincial Government of Palawan argued, under Section 290 of the Local Code of the
Government, that since the place of petroleum operations is located within its territorial
jurisdictions, it is entitled to the 40% share of the project.
• The National Government as a response, disputed the claim, arguing that since the gas
fields were approximately 80 kilometres from Palawan's coastline, they are outside the
territorial jurisdiction of the province and is within the national territory of the Philippines.

• Some of the precise arguments of the Republic of the Philippines:

1. An LGU's territorial jurisdiction refers only to its land area.

• Since Section 7 of the Local Government Code uses "population" and "land
area" as indicators in the creation and conversion of LGUs, it follows that the
territorial jurisdiction is the land where the people live and excludes seas or marine
areas.
• "Territory" as used in Section 461 of the Local Government Code and "land
area" as used in Section 7 of the same law, must be attested to by the Lands
Management Bureau which has jurisdiction only over land areas.

2. The area referred to under Section 7, Article X of the 1987 Constitution, which
grants LGUs a share in the proceeds of the utilization and development of national
wealth within their respective areas, refers to the territorial boundaries of the LGU as
defined in its charter and not to its exercise of jurisdiction.

3. The Camago-Malampaya reservoir is outside the territorial boundaries of the

Province of Palawan as defined in its Charter. Under said Charter, Palawan's
territory is composed only of islands.

4. Under the Archipelagic and Regalian Doctrines enshrined in the 1987 Constitution,
the maritime area between Kalayaan and mainland Palawan belongs to the national
territory and does not pertain to any local government unit.

5. The inclusion of the Kalayaan Group of Islands (Kalayaan) to the Province of

Palawan under Presidential Decree (P.D.) No. 1596 did not, by the very fact, make
the waters between Kalayaan and the main island of Palawan part of the territorial
jurisdiction of Palawan.

• Some of the precise arguments of the Province of Palawan:

1. Section 7 of the Local Government Code, on the creation and conversion of LGUs,
does not expressly provide that an LGU's territorial jurisdiction refers only to its land
area.
• Land area is included as one of the requisites for the creation or conversion of
an LGU because evidently, no LGU can be created out of the maritime area alone.
• Another requisite - population - is determined as the total number of inhabitants
within the territorial jurisdiction of the LGU. The law thus aptly uses the phrase
"territorial jurisdiction" instead of territory or land area since there are communities that
live in coastal areas or low-water areas that form part of the sea. If a local government's
territorial jurisdiction is limited to its land area, then these communities will not belong to
any LGU.

2. Section 461 of the Local Government Code does not define the territorial jurisdiction
of a province. It merely specifies the requisites for the creation of a province. In fact,
said provision shows that territory and population are alternative requirements for
the creation of a new province, with income being the indispensable requirement. It
does not necessarily exclude the maritime area over which a province exercises
control and authority, but merely provides that to determine whether an area is
 sufficient to constitute a province, only the landmass or land territory shall be
included.

3. Section 7, Article X of the 1987 Constitution provides that the LGU is “entitled to an
equitable share in the proceeds of the utilization and development of the national
wealth within their respective areas, in the manner provided by law.” The provision
does not state “within their respective land areas.” The word “area” should
accordingly be construed in its ordinary meaning to mean a distinct part of the
surface of something. It, therefore, encompasses land, maritime area and the space
above them.

4. Numerous provisions of the Local Government Code indicate that an LGU's

territorial jurisdiction includes the maritime area. Section 138 speaks of public
waters within the territorial jurisdiction of the province. Section 465(3) (V) authorizes
the Provincial Governor to adopt adequate measures to safeguard and conserve the
province's marine resources. Section 468(1) (VI) empowers the Sangguniang
Panlalawigan to protect the environment and impose appropriate penalties for acts
that endanger it, such as dynamite fishing. More importantly, Section 3, which
provides for the operative principles of decentralization and local autonomy, states
that the vesting of duties in the LGU shall be accompanied with provision for
reasonably adequate resources to effectively carry them out. When the same
provision speaks of ecological balance which the LGUs shall manage with the
National Government, it encompasses the maritime area.
5. Laws other than the Local Government Code recognize that the Province of
Palawan has territorial jurisdiction over the maritime area beyond the municipal
waters.
• R.A. No. 7611 defines Palawan as comprising islands and islets and the
surrounding sea, which includes the entire coastline up to the open sea.
• Based on the coordinates of Palawan provided in Section 3(1) of R.A. No.
7611, the Camago-Malampaya reservoir is within the territorial jurisdiction of the
province.

IV. Issue(s)

• Whether or not the Province of Palawan is entitled to the 40% of the government’s share
in the proceeds of the Camago-Malampaya natural gas project.

• Whether or not the Camago-Malampaya reservoir is within the province of Palawan’s

“area”, to be entitled to 40% of the government’s share.

V. Decision/Ruling

• NO, Province of Palawan is not entitled to 40% of the governments share in the proceeds
of the Camago-Malampaya Natural gas project. Palawan's LGU share cannot be granted
based on equity. Under Section 7, Article X of the 1987 Constitution and Section 290 of the
Local Government Code, allows LGUs to share in the proceeds of the utilization of national
wealth provided they are found within their respective areas. However, existing laws do
not include the Camago-Malampaya reservoir within the area or territorial jurisdiction of the
Province of Palawan, in such case, it will not be possible for the LGU of Palawan to benefit
from the utilization of national wealth.
• NO, Camago-Malampaya reservoir is not within the province of Palawan’s area. There is
no debate that the natural resources in the Camago-Malampaya reservoir belong to the
State. "Territorial jurisdiction" refers to the LGU's territorial boundaries is a construction
reflective of the discussion of the framers of the 1987 Constitution who referred to the local
government as the “locality” that is “hosting” the national resources and a “place where
God chose to locate His bounty.”. It is also consistent with the language ultimately used by
the Constitutional Commission when they referred to the national wealth as those found
within (the LGU's) respective areas. By definition, "area" refers to a particular extent of
space or surface or a geographic region.

• WHEREFORE, the Petition is GRANTED. The Decision dated December 16, 2005 of the
Regional Trial Court of the Province of Palawan, Branch 95 in Civil Case No. 3779
is REVERSED and SET ASIDE. The Court declares that under existing law, the Province
of Palawan is not entitled to share in the proceeds of the Camago-Malampaya natural gas
project.