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WHEREAS, Section 4 of Presidential Decree No. (P.D.) 87, as amended, otherwise known as the “The Oil Exploration and Development Act of 1972”, allow the Philippine Government (the “Government”) to promote and undertake the  exploration,  development  and  production  of  the  country's  indigenous petroleum through service contracts with contractors;

WHEREAS, Republic Act No. 7638, as amended, otherwise known as “The Department of Energy (DOE) Act of 1992”, mandates the DOE to prepare, integrate, coordinate, supervise and control all plans, programs, projects and activities of the Government relative to energy exploration, development, utilization, distribution and conservation;

WHEREAS, Presidential Decree No. (P.D.) 508 provides guidelines for the development and utilization of small or sub-commercial deposits of natural marsh gas or methane gas and the granting of gratuitous permits;

WHEREAS, the development and utilization of these small or sub-commercial deposits of natural marsh gas or methane gas do not require huge capital investments and highly specialized technical knowledge and consequently are easier to develop;

WHEREAS, the landowner of the area where natural marsh gas or methane gas is deposited shall be given priority for a gratuitous permit;

NOW, THEREFORE, in consideration of the aforementioned premises, the following guidelines shall be observed for the development and utilization of small or sub-commercial deposits of natural marsh or methane gas.

Section 1. Scope of Coverage. This Circular shall apply to all small or sub- commercial natural marsh gas or methane gas deposits found in any public or private lands, not exceeding 1000 feet in depth and not associated with crude oil deposit, within the territorial limits of the Philippines which are within free areas, national reserve areas, and any other areas not covered by valid and subsisting petroleum  exploration  or  exploitation  concessions,  or  by  service  contracts entered with the Government under Presidential Decree No. 87, as provided for in Section 1 of P.D. 508, including small or sub-commercial natural marsh or methane gas deposits, that may be developed for household use or utilized for small-scale industrial development.

Section 2. Definition of Terms.

a)		Natural Marsh gas/Methane gas - a type of biogas which forms in wetland, whose principal component is methane with hydrogen sulfide and carbon dioxide as minor composition produced naturally within some geographical marshes, swamps and bogs. They are characterized as light, odorless, colorless and inflammable
b)		Proponent - an individual or a corporation willing to engage in the exploration and development of a sub-commercial deposit of natural mash gas or methane gas.
c)		Sub-commercial deposit - degree of commitment is not such that the accumulation is expected to be developed and placed on production within a reasonable time frame, which is limited to around 5 years. (Source: Society of Petroleum Engineers).

Section  3.  Who  May  Apply  for  Gratuitous  Permit. Any  citizen  of  the Philippines, of legal age, having the capacity to contract and not convicted of any offense involving moral turpitude, or any association of individuals in the form of partnership or corporations duly organized and constituted under the laws of the Philippines, and at least sixty percent (60%) of the capital of which is and shall at all times be held and owned by citizens of the Philippines may apply for a gratuitous permit to undertake the development and utilization of small or sub- commercial natural marsh or methane gas deposits.

In no case shall any person be entitled to more than one (1) permit for every petroleum region at any one time.

Section 4. Area Open for Gratuitous Permit. A permit area may be validly covered   by   a   subsequent   petroleum  service   contract   entered   with   the Government under Presidential Decree No. 87 but no gratuitous permit shall be issued  by  the  Department  of  Energy  on  any  area  where  natural  marsh  or methane gas deposits are more than 1000 feet deep. The area to be covered by a gratuitous permit application shall be not more than twenty (20) hectares, in a block rectangular in shape, and as much as possible the larger sides of the rectangle shall not be more than five times the shorter sides.

Section 5. Contents of Applications. An applicant shall submit to the DOE the documents listed below:

a)		Application Letter addressed to:
		The Undersecretary In-charge of Energy Resource Development Bureau Department of Energy Energy Center, Merritt Road, Fort Bonifacio Taguig, Metro Manila 1201
	Contents of a Gratuitous Permit Application:
	1.	Full name and post office or business address of the applicant;
	2.	In case of an individual, applicant citizenship, age, sex and civil status;
	3.	In case the applicant is partnership or corporation, the place and the date of organization, registration, and length of authorized organization or corporate life or existence; and location, shape and size in hectares of the area being applied for.
b)		A copy of the Articles of Incorporation or Articles of Partnership duly registered with the Securities and Exchange Commission, if the applicant is a corporation or partnership;
c)		Map and technical description of the area desired to be explored or exploited duly signed by a licensed geodetic engineer;
d)		A work program and budget with timeline to explore and develop natural marsh or methane gas deposit.
e)		Endorsement from the local Barangay Captain and Municipal Mayor.
f)		Proof of payment of application fee amounting to One Thousand Pesos (Php1,000.00).
g)		Proof of minimum operating capital of One Hundred Thousand Pesos (Php100,000.00), whether in cash or in kind. The necessary proof may include financial statements, real property tax declaration, contract of lease of equipment and such other similar proof as would show that applicant has the requisite means and resources to pursue the operations under the gratuitous permit.

Incomplete  applications  will  not  be  accepted  for  processing  and  will  not  be deemed as filed even if delivered for filing.

Section 6. Obligations of the Proponent. All operations authorized under a gratuitous permit issued pursuant to this Circular shall be undertaken by the Proponent under the administration and supervision of the DOE. As such, the Proponent shall have the following obligations:

a)		To undertake the approved work program and budget within the initial two (2) years of operations, in accordance with the terms and conditions of the gratuitous permit;
b)		To allow DOE personnel full access to the area to oversee and monitor the operations covered by the permit;
c)		To submit quarterly reports to the DOE on/or before the tenth day of the start of the following quarter.
d)		To secure all necessary permit required by local government units and agencies
e)		To observe the provisions of law of general application relating to labor, health, safety and ecology in the conduct operations, avoiding hazards to life, health and property, avoiding pollution of air, land and water; and pursuant to an efficient and economic program of operations;
f)		To take reasonable precaution to avoid causing damages to person and/or property and shall pay the Government through the DOE or private owner or legal occupant, as the case may be, compensation for any and all damages to destruction of property caused by the operations hereunder and shall hold  the Government through the DOE harmless from all claims, accounts, damages and/or actions arising out of damages or injury to person and or property resulting from operation.
g)		To ensure that the area covered by the permit shall not be used other than the development and exploitation of the natural marsh gas or methane gas deposit.

Section 7. Rights and Privileges of a Proponent. In accordance with Section 5 of P.D. 508, the Proponent, upon the issuance of a gratuitous permit in his favor, shall have the right to enter any private land covered by such permit to conduct work thereon. As the Proponent may deem appropriate, he may request the assistance of the DOE for the commencement of the necessary expropriation proceedings.

Section 8. Duration of Permit and Extensions. The gratuitous permit issued hereunder shall have an initial period of two (2) years from the issuance thereof, renewable for another two (2) years, provided that the proponent has faithfully complied with the terms and conditions of the permit; provided further that the proponent submits a work program and budget no less than three (3) months prior to the end of the initial two (2) year period.

Should production be attained within the four (4) year period, the permit may be extended for a series of two-year periods each but in no case to exceed a total of fourteen (14) years, if warranted by continuing production.

Section 9. Cancellation or Termination of Permit. The gratuitous permit shall be cancelled or terminated for the following causes: [based on DOE Circular No.
87-03-001 Section 9]

a)		Expiration of its period;
b)		Failure of the Proponent to conduct operations on the area within one (1) year;
c)		Death of the Proponent, in which case the nearest qualified legal heir shall be given priority to apply for a new permit over the same permit area;
d)		Exhaustion of the deposit;
e)		Voluntary relinquishment by Proponent; or
f)		Failure of the Proponent to perform any of its obligations under this Circular.

Section 10. Exclusivity of Permit. The gratuitous permits issued under the Circular may not be assigned, transferred, encumbered or otherwise disposed of in any manner without the prior written consent of the DOE.

Section 11. Separability Clause. If for any reason any section or provision of this Circular is declared unconstitutional or invalid, such parts not affected shall remain valid and subsisting.

Section 12. Effectivity. This Circular shall take effect fifteen (15) days following its complete publication in at least two (2) broadsheet newspapers of general circulation. Copies of this Circular shall be filed with the University of the Philippines Law Center - Office of the National Administrative Register (UPLC- ONAR).

Issued this_______________day of ___________in Taguig City, Metro Manila.