PH9800008

Mt. APO GEOTHERMAL PROJECT: A LEARNING EXPERIENCE IN

SUSTAINABLE DEVELOPMENT

By: Leonardo M. Ote and Agnes C. de Jesus*

Abstact

The Mt. Apo GeothermalProject, a critical component of the Philippine Energy Program met
stiff opposition from 1988-1991. Seemingly unresolvable legal, environmental and cultural issues
between the government developer, the Philippine National Oil Company-Energy Development
Corporation (PNOC-EDC) and various affected sectors delayed the project for two years. The
paper discusses the efforts undertaken by the developer to resolve these conflicts through a
series of initiatives that transformed the project into a legally, environmentally and socially
acceptable project. Lastly, the PNOC-EDC experience has evolved a new set of procedures
for the environmental evaluation of development project in the Philippines.

INTRODUCTION

The Mt. Apo Geothermal Project, also known as the Mindanao I Geothermal
Project, is an undertaking of the Philippine National Oil Company-Energy
Development Corporation (PNOC-EDC), a government-owned corporation
mandated to accelerate the development of indigenous energy resources.

Located in Kidapawan, North Cotabato, the geothermal power project

started commercial operations in March this year, serving the Southern part of
the island with an initial output of 47 MW. Development works are ongoing for
an additional 48 MW which will be ready by 1999. PNOC-EDC operates the
power plant with an American- Japanese consortium under the BOT scheme as
it still has to hone its in-house capability for power generation. However, after
a ten year cooperation period, PNOC shall .be taking over the power plant
operations fully.

The geothermal project has actually contributed in addressing Mindanao's

concern on supply security. Up until a few years back, Mindanao was about 90%
dependent on hydro- energy. This heavy dependence on hydropower left the
island vulnerable to continuous threats of drought and siltation.

*LM. Ote is Environment and External Relations manager of the PNOC-Energy Development Corporation; A.C. de Jesus
is the manager for Environmental Management, PNOC-EDC
 In 1991, severe siltation of Lanao and Agus rivers and the prolonged
drought drastically reduced hydropower capacity from 90% down to 50%. This
reduction resulted in up to 18 hours of blackouts a day which were estimated
to have caused a loss of 6.8 billion pesos to the economy.

Meanwhile, the peak load capacity of the island had grown annually by 7-
8%. Thus, the need for additional generating capacity was clearly established.
Since there was preference for non-hydro resources, the balance needed to
come from the island's abundant indigenous geothermal and coal resources.

As early as 1988, geothermal was determined to be the best energy source

that could supply the electricity requirements for the projected demands from
1992 onwards. The Mt. Apo Geothermal Project was projected to provide cheap,
clean and stable power to meet the economic growth of Mindanao.

CONCERNS RAISED AGAINST MT. APO GEOTHERMAL PROJECT

The Mt. Apo geothermal project is considered as one of the more

controversial' development projects in the Philippines with public concerns
focused on three issues: a) legal, b) environmental and c) cultural.

The project is located within a national park and an ASEAN heritage area.
Mt. Apo is also considered the ancestral home by indigenous cultural communities
who believe that their God lives in the mountain. The sensitivity of the area plus
the heightened environmental awareness that began to sweep the country,
became the root of many concerns.

Groups opposing the project since 1988 lobbied with government

executives and legislators, foreign-based environmental organizations and
international funding institutions.

These activities were carried out with media support greatly aiding the
mobilization of sectors against the project.

It took the government, through the Department of Environment and

Natural Resources, 18 months to resolve all issues and to finally give a go signal
to project. As a result, the project was delayed for two years.
RESOLUTION OF LEGAL ISSUES

For the project to be considered by the National government, the legal

question first had to be resolved. The project was charged with violating Philippine
park laws and the country's international commitment to ASEAN as Mt. Apo was
declared a ASEAN Heritage Park. The question of the national park and ASEAN
heritage status of the proposed site was referred to the Department of Environment
and Natural Resources (DENR) and the Department of Foreign Affairs (DFA) for
resolution.

The DENR as the implementing agency, affirmed thatthe Philippine Forestry

Reform Code (Presidential Decree 705) "does not expressly disallow mining and
energy development in parks" (DENR 1983). This opinion preceded the Mt. Apo
controversy of 1988.

On the ASEAN Heritage issue, the Department of Foreign Affairs stated that
the "ASEAN commitment is not in the category of an executive agreement. The
commitment does not preclude the Philippine government from undertaking
development activities. A harmonious resolution of all thrusts must be sought
without compromising national interest". In addition, according to the Rio Declaration
on Environmental and Development during the Earth Summit of 1992, "States
have in accordance with the charter of the United Nations and the principles of
international law, the sovereign right to exploit their own resources pursuantto their
environmental and developmental policies" (UNCED 1990).

RESOLUTION OF ENVIRONMENTAL AND CULTURAL ISSUES

The resolution of the legal issue paved the way for the environmental review
of the the Mt. Apo Geothermal Project.' Because of the extent of the concerns
raised on the project and the environmental awareness that swept the country
since 1989, the project was subjected to the strictest and most comprehensive
environmental review in the the history of the country. New rules and procedures
were developed by government for the evaluation of the project form 1990-1992:

a. Participation of concerned sectors in developing the scoping guidelines for

the environmental assessment studies.
 The scoping guidelines for the project's Environmental Impact Assessment
(EIA) were developed in July 1990 with various sectors consisting of concerned
tribal groups and its NGO support groups under a coalition called Task Force
Sandawa. Agreements on the parameters for the environmental study superseded
the government's EIA guidelines for geothermal projects which have been in
operation since 1988.

b. Third party EIA by the Academe.

Governor Rosario P. Diaz of the host province of North Cotabato relayed her
preference for the conduct of the EIA by a third party from academe. Although
PNOC-EDC has its own environmental organization created in 1978 which
conducted in-house environmental studies for the company, the company acceded
to the Governor's request and had to seek a waiverfrom the Office of the President
to award the EIA work to a group from academe.

Due to the controversial nature of the project, PNOC-EDC entered into an

agreement with the EIA consultants emphasizing their total independence to truly
surface the project impacts. This was a prerequisite imposed by the academicians
for their involvement as they were environmentalists and NGO members in their
own rights. The agreement deletqd the standard PNOC-EDC's contract provision
on confidentiality on this specific undertaking.

c. Multisectoral information drives

PNOC-EDC assessed that most negative sentiments aired in 1988-1989

were chiefly due to lack of accurate technical information about the project. Hence,
mutlisectoral consultations and information drives were accelerated from 1990-
1991. PNOC-EDC met a total of 102 groups and 4,000 individuals from the local
governments, tribal groups, academe, socio-civic organizations, environmental
groups, business, media and resident communities. The people only needed
information, an element lacking at the height of the opposition in 1989-1990.

d. Tribal dialogues

The company received conflicting petitions on the project from tribal groups
but there was commonality in their belief on Apo Sandawa, their mountain God.
Hence, in November 1990, PNOC-EDC conducted tribal consultations with
legitimate tribal leaders within and outside the project site. With the company
officials serving as resource persons, the dialogues were facilitated by a local
university (Ateneo de Davao) and were witnessed by DENR, Office of the Peace
Commissioner (OPC), Office for Southern Cultural Communities (OSCC), the
Municipal Government and the Presidential Management Staff (PMS).

Tribes within the project site approved the project and requested PNOC-
EDC for proper indemnification for crop damages, prioritization in employment and
installation of environmental measures. The tribes outside the project endorsed
the project subject to two conditions: a) PNOC-EDC to endorse an ancestral
domain law and b) PNOC-EDC to pay one centavo (US$.00038) per kilowatt-hour
as royalty for the recognition of their rights over their ancestral land. The company
endorsed the bill of Congressman William F. Claver on ancestral domain while
DENR included the royalty payment as a term in the Environmental Compliance
Certificate (ECC) for the project in 1992.

e. Resolution from local government units

•>

Resolution from Local Government Units consisting of the provincial,

municipal and barangay levels were secured. These endorsements were given
after comprehensive dialogues and site inspection of existing PNOC-EDC projects
by the respective fact-finding teams of the LGUs.

f. Special EIA Review Committee and Public Hearing

PNOC-EDC submitted its EIA study in January 1991. To ensure impartiality,

a third party technical review committee was commissioned by DENR to assist its
Environmental Management Bureau on the evaluation of the project. On PNOC-
EDC's initiative, about 78 copies of the 10-volume EIA were issued to concerned
sectors namely DENR, legislators, academe, regional development councils, the
provincial government, municipal government, the barangays , NGO networks,
Church and the media. The study was released 40 days before the public hearing
attended by 5,000 residents and interested parties in April 1991.

Noting the technical data presented in the environmental study and the
process undertaken by PNOC-EDC, the third party Special EIA Review Committee
endorsed the issuance of the Environmental Compliance Certificate .
 Still another round of consultations with the PNOC-EDC and NGOs on the
permit conditionalities were undertaken, this time by DENR, from May18-December
24,1991. Finally, on January 14,1992, the permit, crafted with concerned groups
was issued with 28 very stringent conditionalities. With the environmental
feasibility of the project confirmed, a geothermal resource area of 701 hectares
was declared as a geothermal watershed reserve on January 30, 1992, by
President Corazon C. Aquino.

PERM1TING AND PNOC POLICIES

The conditions of the environmental permit were intended to convert the Mt.
Apo Geothermal Project into a model for sustainable development. Several
PNOC-EDC policies and directives which have evolved as a result of the Mt. Apo
experience and permit conditions. These were later adopted by government as
procedures for the review of other development projects. The more important
ones include:

(1) Zero Discharge

Development projects including geothermal have always been allowed to

discharge to the public waterways as long as the discharges comply with effluent
standards and water quality criteria. In the case of Mt. Apo Geothermal Project,
DENR imposed a closed wastewater management system. This was addressed
through the construction of line sump systems to contain drilling fluids, recycling
of drilling fluids and early reinjection of geothermal brine. DENR adopted the zero
discharge strategy as a national policy for all other industries through an order
dated July 1993.

(2) Forest Cover, Bio-diversity and Land Use

Mt. Apo Park was promulgated through a Presidential Proclamation in 1936

with an area coverage of 52,262 hectares. Another presidential proclamation by
President Corazon C. Aquino in January 1992 set aside 701 hectares of the Mt.
Apo Park for geothermal development. Of the 701 hectares PNOC-EDC used
ony 112 hectares made up of 84 hectares grasslands and cultivated areas and 28
hectares forested areas.
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 Mt. Apo Park is among the lastforest stands in the country where diverse rare
flora and fauna are found. It was feared that the geothermal project would lead to
clearcutting of this forest and would encourage encroachment of the park.

Forest openings were avoided by siting 84 hectares of the development in

already opened areas since the 1970s. Only about 28 hectares of the project,
mostly well pads, were sited in forests due to the specificity of the geothermal
resource. Of the 28 hectares of forest stand which were developed, PNOC-EDC
committed to undertake replacement reforestation of 50-100 hectares per year
during the 25 year project operation.

Bio-diversity concerns were addressed through total inventory of the sites to

be opened and the construction activities were limited only in areas where identical
rare species and ecosystems could be found in other intact habitats. Rare species
from areas that cannot be avoided due to the site specificity of the geothermal
resource were to be transplanted or cultured. Construction activities also avoided
clearcutting to allow corridors for animal migration and seeds/pollen dispersion.

Disturbance of the surface was minimized through the USB of existing roads,
multi-well pads (3-5 wells per site) and directional drilling to avoid critical land uses.

Forest patrols are conducted daily. Communities inside the PNOC watershed
reservation were organized in November 1992 and have been provided alternative
livelihoods to reduce pressure on the forest.

(3) Risk Assessment

To complement the EIA, an Environmental Risk Assessment (ERA) was

undertaken with two objectives: a) to characterize the risks of the geothermal plant
from its exposure to environmental natural hazards and the risks of the environment
from plant-generated hazards and b) to formulate the guidelines to strengthen
the risk management and response capability of PNOC-EDC and the concerned
government agencies. The Mt. Apo project was the first project to be required
the risk assessment study.

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(4) Relocation

PNOC-EDC's relocation policy was formalized and improved upon as a

result of the Mt. Apo Geothermal Project. It provides for the replacement of lost
structures and lost amenities, augmentation of basic services to complement
those provided by the government and the development of long-term livelihoods.
PNOC-EDC adopted the World Bank resettlement guidelines (World Bank,
1990).

Physical and economic dislocation of residents were avoided in this project.

Of the 300,000 reported tribal residents, only 68 families were directly affected by
the project out of 146 families occupying the area in 1991. Negotiations were
conducted and 125 families agreed to transfer to their permanent houses in
Sayaban Village located at the Mt. Apo foothills after receiving the PNOC-EDC's
crop damage and disturbance compensation package. However, 21 families
opted to accept the company's offer to give them individual houses and lots at the
relocation site near Lake Agco provided with water and sewage system, recreational
facilities and meeting hall in addition to the livelihood program. All of these were
done through a series of dialogues and consultations in October 1992 and the
houses and lots were turned over in April 1993.

(5) Multisectoral Monitoring and Public Information

A multisectoral monitoring task force composed of local government units,

non-government organizations, the DENR and PNOC-EDC was created for Mt.
Apo Geothermal Project on May 26,1993 for the regular monitoring of the project
and the resolution of concerns. A visitors' program was also initiated by PNOC-
EDC in November 1992. Almost 12,000 guests have so far been recorded as of
2nd quarter this year. Visitors on a regular basis consist of government personnel,
academe, religious groups,local NGOs, international media, business, youth,
policy groups, environmentalists and tribes.

RESOLUTION OF CULTURAL ISSUES

Cultural matters dominated the concerns of the project. As recommended

by the tribes within the project site, a propitiatory rights and ceremonies called
'PAMAAS" in the local Manobo dialect was conducted at Lake Agco on March 10,
1992. The ritual was led by a tribal elder with the purpose of seeking approval from
the Mountain of God for the project. It involved placing chicken blood on the
ceremonial table amidst prayer chants and tribal music to PNOfc-EDC officials,
local and national government officials, tribal leaders and community members.

An Environmental and Tribal Welfare Trust Fund was also required from
PNOC-EDC to preserve and enhance the forest environment and the unique bio-
diversity fo the Mt. Apo park which is the ancestral domain of the tribes. The fund
is also envisioned to uplift the socio-economic well-being of the tribes, including
their culture, arts and crafts. The fund will come from the collection of one centavo
per kilowatt-hour of generated power. But because the power plant was not to be
ready for another 3 years, PNOC-EDC advanced seed money of 4 million pesos
for this trust fund in 1993.

Consequently, the Mt. Apo Foundation, Inc. (MAFI), a non-profit corporation

was created with multisectoral representation from the Office of the President,
DENR, Dept. of Energy, local government, the Cotabato Tribal Consultative
Council, NGOs and PNOC-EDC to undertake environmental, cultural and social
services projects using the ETW trust fund. In terms of area coverage, the work
of the MAFI extends beyond the geothermal reservation up to 10-km radius to
include 29 barangays in the lowlands.

MT. APO: AFTER THE ODDS

The accelerated socio-economic development in the Mindanao island is

evident. But more notable is the boom in Kidapawan which has become a bustling
beehive of economic activity. A directconnection from the geothermal power plant
for the town of Kidapawan was a special arrangement the local government
officials fought for earlier and now, with a stable and reliable supply of power, the
town has attracted many investors.

The people of North Cotabato, likewise, now enjoy a basket of benefits from
the Mt. Apo project. Under the Local Government Code, the host province,
municpality and barangay will have a direct share of geothermal royalty which
PNOC and Napocor will have to pay every year. This amount, which runs to over
P2M a year, is on top of the P3.9 M guarantee fund paid to the MAFI foundation
every year as specified in the ECC.
 Under the DOE law, other benefits will accrue to host communities such as
the reduction in electricty cost from the application of 80 % of the royalty share.
There will be missionalry electrification for remote barangays and communities.
The host province will have prioritiy dispatch for power when there are shortages
in the Mindanao grid.

Other benefits include skills development programs for local residents;

giving them priority employment, and preference in the procurement of local
supplies and services.

RESULTS OF MOUNT APO PROJECT INITIATIVES

The Mt. Apo geothermal field is easily the most modem of its kind today. In
fact, it is a source of deep pride for us in PNOC to point at the Mt. Apo geothermal
project as a monument of Filipino expertise, artistry and ingenuity because unlike
the earlier geothermal fields in the Philippines which were constructed with some
foreign technical guidance, the Mindanao geothermal field was planned, designed
and constructed purely by PNOC-EDC.

But more importantly, it is through the Mt. Apo project that PNOC begun to
put into practice many systems and facilities demanded by an environmentally-
conscious government and society.

The rules and procedures prescribed for the Mt. Apo Geothermal Project
were precedent-setting and their operationalization in the project facilitated
acceptance as feasible policies for adoption by the government for other
development projects.

Very clearly, the objective was to transform the Mt. Apo project from a mere
infrastructure projet to one which is socially- responsible and environmentally-
sustainable. While it will provide powerfor business and industries in the lowlands,
it will also provide resources for the upliftment of the upland dwellers to help relieve
the forest from social pressure. While it will provide millions of pesos for the
protection of the national park, it will also support the aspirations of the indigenous
cultural communities in and around Mt. Apo.

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 PNOC-EDC realizes that it must not only be a beneficiary of nature but must
be a steward which must judiciously utilize and manage nature's resources forthe
benefit of all. The obligation of protecting the Mt. Apo park is not the proponent's
alone but is the collective task of all sectors.

The positive response of PNOC-EDC to environmental advocacy and the

genuine concern of various sectors on the Mt. Apo Geothermal Project slowly
brought goodwill and openess between PNOC-EDC and majority of the concerned
sectors.

And the ultimate resolution of all issues in the project led to integrated
efforts that would transform the Mt. Apo Geothermal Project into a model for
sustainable development.

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