DENR Drafting EO to Cap Mining Royalties Amid Delays in Fiscal Regime Law

The Department of Environment and Natural Resources (DENR) is preparing an executive order (EO) to address conflicting policies on mining royalties while the proposed law to simplify the mining industry’s fiscal regime is still being debated in Congress.

At the Mining Policy Forum in Mandaluyong, DENR Undersecretary Carlos Primo David revealed that the EO, being crafted in collaboration with the Department of Finance (DOF), aims to resolve inconsistencies in how mining royalties are interpreted and applied. This includes addressing conflicts in the National Commission on Indigenous Peoples (NCIP) policies and the Local Government Code, which often create confusion for mining investors.

The proposed EO will put a ceiling on mining royalties to ensure they don’t exceed a reasonable percentage. Currently, mining companies operating outside mineral reserves pay a 2% excise tax, while those within reserves face an additional 5% royalty. Companies also pay at least 1% of their gross output to indigenous communities hosting mining operations.

The EO is seen as a temporary measure to provide clarity and stability until the Rationalization of the Mining Fiscal Regime bill is passed, which will implement a new tiered royalty system based on margins, ranging from 1.5% to 5% for operations outside mineral reserves.

David emphasized that the EO is not intended to replace legislation but to resolve immediate regulatory conflicts. Once the new fiscal regime is in place, the EO would be phased out.