The government is poised to buy out its joint venture partner in a company involved in an alleged “onerous” lease contract with an American oil firm to pave the way for the takeover of the property.
The move will also lead to the dissolution by 2022 of Batangas Land Co. Inc. (BLCI), the JV formed between the government’s investment arm National Development Corp. (NDC) and Chevron Philippines Inc. for a 120-hectare property in San Pascual town being used by the oil company as its bulk terminal.
Trade Secretary Ramon Lopez, chairman of the NDC board, said yesterday the board of BLCI has approved in a recent meeting the non-extension of the company’s corporate life.
“Government would like to consolidate its ownership of the land and buy out the shares of Chevron,” Lopez said in a text message
According to Lopez, the JV was formed as a result of the expiration of the Laurel-Langley Agreement in 1974, disallowing foreigners to wholly own land in the Philippines.
Lopez said the existing lease term between government and Chevron (then Caltex) started almost 50 y1ears ago and ends 2025, which needs a renegotiation or bidding under the new set up.
The dissolution of BLCI was recommended by the Department of Finance (DOF), which is represented in the NDC board by Finance Secretary Carlos Dominguez after “onerous provisions” were uncovered in a more than four-decade-old lease contract with Chevron.
Lopez said the NDC and the DOF’s technical team has been working on the issue since last year.
The DOF said upon dissolution, government can take back the property now valued at around P5 billion, but which Chevron Philippines Inc. has been leasing for 74 centavos per sq. m. per month, or only four percent of the current monthly fair market rental estimate of P17.90 per sq. m.
Shortening BLCI’s corporate life will finally allow the government to exercise “full ownership, control, and rights over” this prime lot and other real estate properties occupied by Chevron, which are strategically located for the country’s future energy projects, Dominguez said.
Chevron meanwhile said it will “maintain open communication with the government” although it stands firm the lease contract with BLCI was entered into in compliance with all Philippine laws and regulations and has in fact been beneficial also to government.
“As one of the pioneer energy companies in the Philippines which has been operating here for over a hundred years, our commitment to the Philippine market remains strong. We will maintain open communication with the Government, an important and valued partner on this matter,” said Raissa Bautista, Chevron manager for policy, government and public affairs.
Dominguez said government should have exercised its rights over the property as early as 1975, but Chevron was able to obtain preferential treatment to continue occupying and using these properties under the then-Marcos administration.
Dominguez said “these properties should have been turned over to the government as early as the 1970s, not only legally speaking but, more importantly, based on the principle that these properties should truly benefit the Filipino people.”
“These companies were given sufficient time to transition and pass on full ownership to the government. It is now high time for the government to exercise its rights,” Dominguez added.
The “miniscule rental fee” which amounts to only P10.66 million per year for the industrial park is the rate that Chevron has been paying to the government since 2010.
This amount is only four percent of the P17.90 per sq. m. a month or P257.76 million a year that current fair market rental rates in the area would suggest based on comparative data from NDC appraisal reports and other official sources, the DOF said.
The property’s current market value is estimated at about P4.9 billion to P5.3 billion, translating into a rental yield of only about 0.2 percent of the property’s value.
The DOF also found out that the rentals paid by Chevron over the 44-year period covering 1975 to 2019 totaled to only P146.51 million or about P3 million per year, in addition to real property taxes paid by Chevron under the lease agreement.
Dominguez earlier described the lease deal as “another government contract with onerous provisions.”
“Based on current standards the state imposes on similar contracts, to have a rental yield of less than one percent is surely grossly disadvantageous to the government and the Filipino people,” the finance chief said.
Dominguez said the request for renewal of the deal was recommended by some offices to the Privatization Council, which found the contract grossly disadvantageous based on current fair values.
The American firm Caltex was able to acquire the Batangas lot and other prime properties owned by the government under the 1946 Bell Trade Act passed by the United States Congress.
Under this law, American entities were granted “parity rights” on land ownership in the country as a condition for the US government’s payment of $800 million war damage claims to the Philippines.
Parity rights had allowed American companies to own land in the Philippines just like Filipinos.
These parity rights were extended for 20 years through the Laurel-Langley Agreement signed in 1955 by then-Senator Jose Laurel and Sen. James Langley. Such parity rights ended in 1974.
With the expiration of the 1946 Bell Trade Act, Caltex, and now its subsidiary Chevron Philippines, was granted preferential treatment in continuing to occupy and use various real properties, including the Batangas lot.
Issued by then-President Marcos, Letter of Instruction No. 276 required the lease-back of the properties occupied by Caltex for a maximum of 50 years from 1975, at minimum rates of 1.5 to 2.5 percent of the property’s valuation in 1974.
NDC Board, which DTI chairs and has DOF as one of the members, has already directed the National Development Corporation (NDC) to work on the dissolution and non-extension of the life of Batangas Land Corporation Inc. (BLCI), the joint venture between NDC & Chevron. Government would like to consolidate its ownership of the land and buy out the shares of Chevron. The NDC and DOF technical team has been working on this. In fact, the latest board meeting of the BLCI already approved its dissolution.
The joint venture corporation was a result of the expiration of the Laurel-Langley Agreement in 1974, disallowing foreigners to wholly own land in the Philippines.
The existing lease term is one that started almost 50 years ago, and ending 2025, which needs a renegotiation or bidding under the new set up. (I. Isip, A. Celis and J. Macapagal)
