Dominguez flags Chevron’s contract for Batangas property

Published January 21, 2020, 12:00 AM

by manilabulletin_admin


The local unit of American multinational energy firm Chevron Corp. is paying a “minuscule” rental fee to the government for more than four decades to occupy a state-owned land in Batangas, the Department of Finance (DOF) said yesterday.

Finance Secretary Carlos G. Dominguez III said the lease contract allowing Chevron Philippines to use a 120-hectare state property in San Pascual, Batangas contained “onerous terms,” which are “grossly disadvantageous” to the government.

Dominguez said the a lease contract between Chevron, formerly Caltex Philippines, and Batangas Land Co., Inc. (BLCI) only imposes a monthly rental fee of just 74 centavos per square meter, way below the current fair market rental value of ₱17.9 per square meter.

If the month rental fee is adjusted to current fair market rates, Dominguez said Chevron should pay BLCI ₱20 million a month, or ₱257.76 million per year.

“[This is] another government contract with onerous provisions,” Dominguez told reporters, noting the BLCI, a subsidiary of the National Development Co. (NDC), is losing an estimated ₱247.1 million annually because of the lease contract’s “onerous” provisions.

Based on documents submitted to the NDC, the rentals paid by Chevron over the 44-year period covering 1975 to 2019 totaled to only ₱146.51 million or about ₱3 million per year, in addition to real property taxes paid by the oil firm under the agreement.

According to Dominguez, “some offices” have recommended to the Privatization Council to grant the request for renewal of the BLCI and Chevron deal.

Based on DOF’s data, the BLCI property’s current market value is estimated at around ₱4.9 billion to ₱5.3 billion, therefore the government’s rental yield from the Chevron contract is only about 0.2 percent of the property’s value.

“Based on current standards that 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 explained.

Despite the rental terms being subject to negotiation as early as 2000, he also noted that it was not until 2010 that the lease rate was increased to the current rental amount of ₱10.66 million per year, which is still way below fair market rental rates in the province.

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 US$800-million war damage claims to the Philippines.