Penalties vs. erring service contractors, DOE officials pushed

Sen. Sherwin Gatchalian has called for the amendment of Presidential Decree (PD) 87 or the Oil Exploration and Development Act of 1972 to include the imposition of punitive action on erring service contractors and Energy officials in the wake of the controversial sale of Chevron’s 45% stake in the Malampaya gas-to-power project to Dennis Uy’s Udenna Corporation.

Gatchalian, who chairs the Senate Committee on Energy, is particularly looking to incorporate criminal and administrative penalties under PD 87 to service contractors that fail to get the required approval under Section 11. 

The proposed amendment likewise seeks to punish Department of Energy (DOE) officials who approved transfer or assignment of rights and obligations in a service contract (SC) to those who did not go through the prior approval requirement and/or approved such transfers to unqualified transferees or assignees. 

Section 11 of PD 87 states that transfers of rights and obligations under a service contract need prior approval from the Petroleum Board, or the present-day DOE, before these can take place. PD 87 was the law that governed Malampaya’s SC38, when it was signed by the late Pres. Corazon Aquino in 1990.

“These amendments should incorporate the effect on the service contract of the service contractor’s failure to comply with the prior approval requirement of Section 11 of PD 87, as well as the effect of a transferee who is not legally, technically, or financially qualified,” Gatchalian said during his privilege speech on Wednesday. 

Gatchalian, in the same speech, urged Energy Sec. Alfonso Cusi and ten other current DOE officials to resign for “railroading” the controversial deal’s approval. The senator also recommended filing of charges against Cusi, the ten officials, and former Energy Asec. Leonido Pulido III. 

The senator said that the DOE not only violated PD 87, but also its own Department Circular, DC2007-04-0003, which was specifically created to provide the department with the procedure to approve any transfer of rights and obligations under the said law. 

“This will ensure that future service contractors and DOE officials will not repeat the same mistakes as those involved in the Chevron-UC Malampaya deal,” Gatchalian said. 

The DOE, back in October 2021, had also called for the amendment of PD 87, saying it has been untouched for almost half a century.

“The Department would like to emphasize that [PD] 87 and DC2007-04-0003 are square pegs in a round hole when applied to a sale of shares of stocks.” it had said.