As Semirara Mining and Power Corp.’s 50-year coal-operating contract with the government for Semirara Island in Antique approaches expiration next year, a number of questions have been raised by SMPC about the propriety of auctioning the Semirara coal blocks.
In February, the government rejected SMPC’s bid to extend its coal operating contract for an additional 13 years, after the Department of Justice opined that constitutional and legal limits cap the maximum duration of such natural resource agreements at 50 years.
Following the DOJ opinion, the Department of Energy announced that it is placing the 10 coal blocks on Semirara Island up for competitive bidding.
Now, the Consunji-led SMPC is accusing the DOE of disregarding established bidding procedures in the Semirara coal mine auction, alleging, among other things, opaque rules and an asset-surrender requirement that, according to the company, effectively bars the incumbent operator from competing.
It also questioned the DOE’s decision to replace technical capability with the highest financial bid as the sole basis for awarding the contract, saying the highest bidder with zero mining experience will most likely produce zero coal output and zero government share.
SMPC, which operates the country’s largest coal mine, supplies 95.4 to 97 percent of domestic coal output and exports a significant portion of its volume to Asian markets like China, South Korea, India and Brunei.
According to the company, the planned auction will kill billions of pesos for no gain. “Why kill the golden goose for zero gain,” it said.
As SMPC’s nearly 50-year operating contract expires in July 2027, we can’t help but ask: what has the country actually gained from almost half a century of mining one of its most valuable energy resources?
SMPC says that over its 29 years of operation, it has paid P70.5 billion to the government and contributed another P600 million annually to the town of Caluya in Antique, transforming it into one of the country’s wealthiest municipalities, not to mention supporting over 4,000 jobs.
Staggering numbers, no doubt – but relative to what? After all, the operator is required by law to pay a government share of three percent of FOB gross sales or 30 percent of net proceeds, excluding the royalty itself and corporate taxes. About 60 percent goes to the national government while 40 percent is shared by the host local government units. Thus, operators must remit this amount by law.
With respect to the host communities. SMPC’s own disclosures show that nearly P22 billion in government royalties has been allocated to the Caluya municipality and Barangay Semirara since 1997. That is a substantial sum for a relatively small island community, but much was spent on better health care, education, infrastructure and other essential services and how much was allocated to benefit SMPC’s own mining operations in terms of access roads?
SMPC operates a 15-bed infirmary on Semirara Island. But how do residents who need emergency surgery or specialized medical treatment get care? How accessible are hospitals on the mainland, particularly during emergencies?
Similar questions arise over the cost of basic goods, access to education and the overall quality of life on the island. Have decades of mining revenues made a measurable difference?
These are not necessarily shortcomings attributable to SMPC because local governments and national agencies are responsible for delivering many public services. But that makes a proper accounting of both company spending and government royalty allocations all the more important.
The company’s own social development commitments also warrant examination. How much has been spent, which projects have been completed, and what lasting benefits have they produced?
Beyond community development, there is the question of how the coal business itself is accounted for.
Industry observers note that SMPC operates the Semirara mine and owns coal-fired power plants in Calaca, Batangas, which in the past traded most of its capacity in the spot market instead of actively and competitively seeking power supply contracts with electric cooperatives and distribution utilities such as Meralco. Given these related operations, what independent mechanisms verify coal shipments, transfer values and the accuracy of government royalty computations?
While the country imports coal for its energy needs, SMPC exports most of its coal production. How is that helping the country’s energy security?
All these questions lead back to the impending bidding. SMPC argues that its decades of experience give it an advantage over potential competitors. That may be true. Mining requires technical expertise, substantial capital and an understanding of the risks involved.
But experience should also make performance easier to evaluate. After nearly 50 years, the government should have enough information to determine whether contractual obligations have been met, how the resource has been managed and what benefits have accrued to the public.
That assessment should help shape the next coal operating contract, regardless of who wins.
The government needs an operator capable of sustaining production, investing in the mine, meeting environmental obligations and ensuring that host communities receive lasting benefits. It also needs clear reporting requirements and enforceable commitments, not merely assurances based on past performance.
More importantly, the country needs an operator that can commit to sharing the economic benefits of Semirara coal with Filipino consumers through lower electricity prices and a higher government share in the returns from the mining operation. Such an outcome should come from an open, non-discriminatory bidding process for proven energy resources.
Competitive bidding need not mean dismantling a productive operation. It is an opportunity to determine whether the country can secure better terms for a resource that ultimately belongs to the Filipino people.
After nearly five decades, surely that question deserves an answer before another long-term contract is awarded.
For comments, email at maryannreyesphilstar@gmail.com.