The Supreme Court (SC) has ruled that the province of Bulacan is not entitled to any share in revenues derived from the use of Angat Dam which is the primary source of Metro Manila’s water requirements.

It granted the petition filed by the Metropolitan Waterworks and Sewerage System (MWSS) as it reversed the 2008 decision of the Court of Appeals (CA) which upheld with modification the 2005 ruling of the Malolos City regional trial court (RTC).

At the time the CA decision was handed down, the province of Bulacan estimated its shares would be about P800 million.

The province of Bulacan filed a complaint for specific performance/payment of national wealth share against MWSS for the use of Angat Dam in Norzagaray town.

It said that since Angat Dam is within the province of Bulacan, the provincial government is entitled to share in the proceeds from the use of the dam under Section 7, Article X of the Constitution.

Section 7 provides that “local governments shall be entitled to an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas, in the manner provided by law, including sharing the same with the inhabitants by way of direct benefits.”

On June 3, 2005, the trial court ordered MWSS to pay the province of Bulacan 40 percent of the concession fees the water agency is and will be receiving under the concession agreements it entered with private entities engaged in water supply to residents.

Among other legal justifications in its decision, the trial court said “the fact that dams and reservoirs are man-made does not remove the water stored in them from being characterized as national wealth.”

On May 30, 2008, the CA affirmed the RTC’s decision with modification that the computation of the share of Bulacan from the utilization and development of the water in Angat Dam should be in accordance with Section 291 of the Local Government Code (LGC) which provides the percentage in the share of LGUs (local government units) from the utilization of national wealth.

The CA ruled that the MWSS is engaged in the utilization and development of national wealth because it has been supplying water for the use of the consuming public; and pursuant to Section 291 of the LGC, the share of the LGU in the proceeds of the natural resource within its area should be the gross receipts of the amount received by MWSS before any deductions for expenses or loan payments.

The MWSS elevated the case to the SC. It told the SC that the location of Angat Dam being in Bulacan “only proves the place of storage of water, but under no circumstance would this show that water is naturally sourced from Bulacan.”

It also said that it was created as a government agency “for the sole and exclusive purpose of ensuring the uninterrupted and sufficient supply and distribution of potable water to its clients; not created to generate income; its functions do not involve the utilization and development of a natural resource as dams and reservoirs are not natural resources; and does not derive profit from the concession agreements it enters with private entities because the amount it receives is only used to pay off loans and utilized as the budget of its office.”

In a full court decision written by Associate Justice Henri Jean Paul B. Inting and made public on March 22, 2024, the SC said:

“To be sure, when water is already taken or diverted from a natural source, it is considered appropriated water -- as in the case of dam water or water already impounded in an artificial receptacle.

“The moment that water from Angat River is already appropriated and impounded into the Angat Dam, it ceases to form part of natural resource. Water already collected through a dam system is separated from its source.

“Further, a careful examination of the concession agreements presently in effect between petitioner (MWSS) and its private concessionaires (Manila Water Services, Inc. and Manila Water, Inc.) also lends veracity to petitioner's averment that it does not derive profit from the concession agreements.

“Water in a natural resource is national wealth. When water is utilized and developed directly from a natural source, the concerned government entity must abide by the constitutional requirement to give the concerned LGU its equitable share in the proceeds of the utilization and development of national wealth.

“However, such circumstance is wanting here because respondent (province of Bulacan) asserts entitlement to a share arising from the use of dam water which is appropriated water already impounded in the Angat Dam, and no longer part of a natural resource.

“Being already appropriated, dam water is no longer subject of national wealth tax because appropriate tax is to be determined and imposed upon the extraction of water from a natural resource and accordingly, prior to the impounding and appropriation of water.

“More, petitioner is not liable to pay respondent a share in its use of dam water because petitioner is created for its regulatory governmental functions. It does not generate income and derives no profit from which respondent may share arising from the utilization and development of dam water.

“All told, the Court finds that the CA erred in affirming the RTC Decision which found petitioner liable to pay respondent a share in the utilization and development of national wealth.

“Wherefore, the petition is granted. The Decision dated May 30, 2008 and the Resolution dated Oct. 24, 2008 of the Court of Appeals in CA-G.R. CV No. 86701 are reversed and set aside.

“Accordingly, the Complaint for Specific Performance/Payment of National Wealth Share is dismissed for lack of merit. So ordered.”