Fuel Security Act

Stati dorie of tie emery TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES 26 MAR 18 A10:25 First Regular Session RECEIVED BY: SENATE S. No. 1993 Introduced by Senator Francis G. Escudero AN ACT ESTABLISHING THE NATIONAL STRATEGIC FUEL RESERVE AND THE TARGETED FUEL RELIEF PROGRAM, AND PROVIDING FUNDS THEREFOR EXPLANATORY NOTE The price of crude oil continues to rise amid the ongoing conflict in the Middle East and the resulting disruption of freight traffic through the Strait of Hormuz. Brent crude has remained above the $100-per-barrel level, while West Texas Intermediate continues to trade near that mark. Recent reports likewise show that Dubai crude, the benchmark relevant to the Philippines, has surged beyond US$150 per barrel. Our dependence on importing oil has left us extremely vulnerable to external shocks and the inflationary pressures they trigger, primarily through higher fuel pump prices, and subsequently through rising electricity, transportation, and food costs. This measure seeks to establish a National Strategic Fuel Reserve to mitigate the adverse effects of severe oil market shocks and supply disruptions. The Reserve shall be equivalent to not less than ninety (90) days' supply and not more than one hundred eighty (180) days' supply. It may be released or utilized only in the event of severe supply disruptions, sharp increases in international fuel prices, a declared State of Calamity or State of Emergency, or for stock rotation, quality

management, and other measures necessary to ensure the usability and readiness of the Reserve. This measure likewise seeks to establish a Targeted Fuel Relief Program to extend direct cash assistance or fuel vouchers, as may be appropriate, to sectors most affected by severe petroleum supply disruptions, sharp increases in international petroleum prices, or a declared state of calamity or emergency, including small farmers and fisherfolk, public transport and delivery drivers, micro and small enterprises engaged in fuel-dependent activities, and other vulnerable sectors to be identified in coordination with relevant government agencies. In view of the foregoing, and in light of the urgent need to protect the country from fuel supply disruptions and volatile oil prices, the immediate passage of this measure is earnestly sought. FRANCIS G. ESCUDERO

Nottier of the enry TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES 26 MAR 18 A10:25 First Regular Session SENATE S. No. _ 1993 Introduced by Senator Francis G. Escudero AN ACT ESTABLISHING THE NATIONAL STRATEGIC FUEL RESERVE AND THE TARGETED FUEL RELIEF PROGRAM, AND PROVIDING FUNDS THEREFOR Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Fuel Security Act."

Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to

promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote fuil employment, economic development 6 and sustainability, improved standard of living, and quality of life for all. Towards this 7 end, in recognition of the country's dependence on imported oil, and the volatility of 8 global fuel markets and their vulnerability to price shocks, supply disruptions, and geopolitical tensions, the State shall establish a system to stabilize domestic fuel supply and prices, strengthen the country's energy security, and sustain economic development.

Sec. 3. Definition of Terms. - As used in this Act:

(a) Crude oil refers to oil in its natural state before the same has been refined or otherwise treated, but excluding water, bottom substances and foreign substances. (b) Days supply refers to the equivalent number of days of in-country stocks of 16 petroleum crude oil and products based on the average daily sales or liftings for the past six (6) months;

(c) Petroleum refers to a naturally occurring mixture of compounds of hydrogen and carbon with a small proportion of impurities and shall include any mineral oil, petroleum gas, hydrogen gas, bitumen, asphalt, mineral wax, and all other similar or naturally-associated substances, with the exception of coal, peat, bituminous shale, and/or other stratified mineral fuel deposits; (d) Petroleum products refers to products formed in the course of refining crude petroleum through distillation, cracking, solvent refining and chemical treatment 8 coming out as primary stocks from the refinery such as, but not limited to, liquified 9 petroleum gas, naphtha, gasolines, solvent, kerosene, aviation fuels, diesel oils, fuer 10 oils, waxes and petrolatums, asphalts, bitumen, coke and refinery sludges, or such refinery petroleum fractions which have not undergone any process or treatment as 12 to produce separate chemically-defined compounds in a pure or commercially pure state and to which various substances may have been added to render them suitable for particular uses: Provided, That the resultant product contains not less than fifty 15 percent (50%) by weight of such petroleum products; (e) Fuel inventory refers to the quantity of crude oil, petroleum, and petroleum products;

Sec. 4. National Strategic Fuel Reserve. - There is hereby established a National

19 Strategic Fuel Reserve, hereinafter referred to as the Reserve, which shall be 20 composed of a stockpile of crude oil, petroleum, and petroleum products to be maintained for the purpose of mitigating the adverse effects of severe oil market shocks and supply disruptions and ensuring the long-term stability of domestic fuel supply and prices.

Sec. 5. Fuel Inventory. - The Department of Energy (DOE) shall be responsible

for the formulation of policies for the establishment, buildup, management, utilization and replenishment of the Reserve, including the determination of the optimal level of fuel inventory to be maintained by the government: Provided, That such level shall not be less than the equivalent of ninety (90) days supply nor more than one hundred 29 eighty (180) days supply, as may be determined by the DOE, taking into account

supply risks, prevailing fuel prices, current storage capacity, and national energy requirements.

Sec. 6. Acquisition of Fuel Inventory. - The acquisition of fuel inventory for the

Reserve shall be undertaken by the DOE, or through Philippine National Oil Company (PNOC) or its subsidiary. For this purpose, the DOE shall adopt commercial strategies and engage in activities to ensure timely, cost-efficient and secure acquisition of fuel 7 inventory including, but not limited to, the following: (a) Spot purchases from domestic or international fuel markets; (b) Government-to-government fuel supply agreements and other similar arrangements; (c) Government shares from domestic fuel service contracts; (d) Transfers from government-owned fuel inventories or assets; (e) Swap arrangements, stockholding agreements, or similar business undertaking; and (f) Such other arrangements as may be determined by the DOE.

Sec. 7. Storage of Fuel Inventory. - The DOE, through the PNOC or its

designated subsidiary, shall be responsible for the construction, management, maintenance, and operation of fuel storage facilities, and the procurement, handling, storage, quality maintenance, rotation and transport of fuel inventory for the Reserve. For this purpose, the PNOC shall utilize its existing facilities, lease storage facilities from the private sector, or construct additional facilities in strategic locations in the country, including the construction of a ninety- (90-) day or one hundred eighty- (180-) day capacity crude oil tank farm in the Municipality of Limay, Province of Bataan.

Sec. 8. Utilization of Fuel Inventory. - The fuel inventory in the Reserve may

be released, utilized or otherwise disposed of by the President of the Philippines, upon the recommendation of the Secretary of Energy, under any of the following circumstances:

(a) In the event of a severe fuel supply disruption as evidenced by at least a 2 twenty percent (20%) decline in the national fuel inventory maintained by the 3 government and private sector from their average levels for a sustained period of 4 seven (7) days, or such other threshold or period as may be determined by the DOE based on the prevailing market conditions and national energy requirements; (b) In the event of a surge in international fuel prices, as evidenced by a twenty percent (20%) increase in the weekly average Dubai Crude Oil Price based on the Mean of Platts Singapore compared to the preceding week, or such other threshold or 9 period as may be determined by the DOE based on the prevailing market conditions and national energy requirements; and (c) In the event of a State of Calamity or State of Emergency as may be declared by the President of the Philippines or the local sanggunian concerned, in accordance with Republic Act No. 10121, otherwise known as the "Philippine Disaster Risk Reduction and Management Act of 2010;" Republic Act No. 11332, otherwise known as the "Mandatory Reporting of Notifiable Diseases and Health Events of Public Health Concern Act;" and other relevant laws, rules, and regulations; and (d) For the purpose of stock rotation, quality management, replacement of aging fuel inventory, and such other activities to ensure usability and readiness of the Reserve; The PNOC or its designated subsidiary shall implement the release, utilization, disposition and distribution of fuel inventory in accordance with the policies, guidelines, and standards promulgated by the DOE.

Sec. 9. Fuel Industry Participation. - The DOE may engage oil companies,

refineries, and other fuel industry participants for any of the following activities in support of the establishment, maintenance and operationalization of the Reserve: (a) Supply of crude oil, petroleum and petroleum products; (b) Lease of fuel storage facilities and refineries; (c) Transport and distribution of crude oil, petroleum and petroleum products; or (d) Such other forms of participation as may be identified by the DOE.

Sec. 10. Targeted Fuel Relief Program. The DOE, in coordination with other

government agencies concerned, shall establish and implement a Targeted Fuel Relief Program to provide assistance in the form of direct cash assistance or fuel vouchers, as the case may be, to sectors adversely affected by severe fuel supply disruption, surge in international fuel prices, or state of calamity or emergency, including, but not limited to the following: (a) Small farmers and fisherfolks registered under the Registry System for Basic Sectors in Agricuiture; (b) Drivers of public utility vehicle, taxi, tricycle, and full-time ride-hailing and 10 delivery services nationwide as identified and validated by the Land Transportation 11 Franchising and Regulatory Board; (c) Operators of micro and small enterprises engaged in importation, 13 exportation, transportation, logistics services, and other fuel-dependent activities as 14 may be determined by the Department of Trade and Industry; and (d) Other vulnerable and affected sectors as may be identified by the DOE in consultation with other government agencies concerned.

Sec. 11. Sound Fiscal Management and Housekeeping. - Taking into

18 consideration fiscal prudence, cost-efficiency and long-term financial sustainability, the 19 DOE, in coordination with the Department of Finance and the Department of Budget 20 and Management shall ensure that: (a) The acquisition of fuel inventory for the Reserve shall be undertaken in a cost-effective manner, taking into account prevailing international fuel prices, market conditions, and optimal timing of purchases; (b) The acquisition, maintenance, rotation, and disposition of fuel inventory shall be phased and aligned with available fiscal resources, storage capacity, and national energy requirements, and shall be undertaken in a manner that avoids undue financial losses and promotes value preservation and sustainability; (c) The utilization of funds for the Reserve and the Targeted Fuel Relief Program shall be subject to appropriate financial controls and safeguards;

(d) Mechanisms shall be established to minimize fiscal risks, including exposure 2 to price volatility, storage costs, and potential losses from inventory rotation; (e) The Targeted Fuel Relief Program shall be implemented to ensure that 4 intended beneficiaries are served and that duplication or overlap with existing subsidy 5 or assistance programs are avoided; and (f) All expenditures and financial transactions under this Act shall be subject to existing budgeting, accounting, and auditing laws, rules, and regulations.

Sec. 12. Reporting. - The DOE shall submit to Congress an annual report on

9 the implementation of this Act. The report shall contain the following information: (a) The current level of fuel inventory in the Reserve, expressed in days supply; (b) The location, capacity, and operational status of fuel storage facilities; (c) The acquisition, utilization, rotation, and replenishment of fuel inventory during the preceding year; (d) The financial status and utilization of funds allocated for the Reserve and the Targeted Fuel Relief Program; (e) The implementation status of the Targeted Fuel Relief Program, including the number of beneficiaries and the amount of assistance provided; (f) Policy recommendations, including the proposed funding levels for the 19 Reserve and the Targeted Fuel Relief Program for the succeeding year; and (g) Such other information and recommendations as may be required by Congress or may be deemed necessary by the DOE.

Sec. 13. Congressional Oversight. - Upon the effectivity of this Act, the Joint

Congressional Energy Commission (JCEC), formerly known as the Joint Congressional Power Commission (JCPC), under Section 62 of Republic Act No. 9136, otherwise known as the "Electric Power Industry Reforms Act of 2001," shall exercise oversight powers over the implementation of this Act.

Sec. 14. Implementing Rules and Regulations. - Within sixty (60) days from

the effectivity of this Act, the DOE, in consultation with PNOC and other government

and private stakeholders concerned, shall promulgate the rules and regulations to effectively implement the provisions of this Act.

Sec. 15. Appropriations. - The initial amount of Sixty Billion Pesos

(P60,000,000,000.00) shall be appropriated for the construction of the necessary facilities identified in Section 7 of this Act. The other amounts necessary for the implementation of this Act shall be included in the annual General Appropriations Act.

Sec. 16. Separability Clause. - If any provision or part hereof is declared

unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in full force and effect.

Sec. 17. Repealing Clause. - All laws, acts, decrees, executive orders,

issuances, and rules and regulations or parts thereof which are contrary to and inconsistent with this Act are hereby repealed, amended or modified accordingly.

Sec. 18. Effectivity. - This Act shall take effect after fifteen (15) days following

its publication in the Official Gazette or at least a newspaper of general circulation. Approved,