DOF uncovers ‘onerous’ land lease with Chevron

posted January 21, 2020 at 07:10 pm
by  Julito G. Rada
The Finance Department said it uncovered an “onerous” land lease contract between Chevron Philippines (formerly Caltex Philippines) and a subsidiary of the National Development Co. that allowed the former to pay a monthly rent of 74 centavos per square meter on a 120-hectare property in Batangas province.

Finance Secretary Carlos Dominguez III said in a statement that comparative data from NDC appraisal reports and other official sources showed that the current fair market rental value in that area should be around P17.90 per sq. m. a month.

He said that under the terms of the lease contract with NDC subsidiary Batangas Land Co. Inc., Chevron was paying a “minuscule rental fee” to the government for the 1.2-million-sq. m. industrial park in San Pascual, Batangas that it uses as an oil import terminal.

He said that at P10.66 million per year since 2010, Chevron shelled out only around 4 percent of the P257.76 million per year that the current fair market rental rates in the area would suggest.

Dominguez, an NDC board member, described the lease deal as “another government contract with onerous provisions.”

“Definitely, we have to implement a totally transparent method of getting the best deal for the rental of all government properties,” Dominguez said.

He said the request for renewal of the deal was recommended by some offices to the Privatization Council, which found the contract grossly disadvantageous based on current fair values.

The DOF-attached Privatization and Management Office, in compliance with the guidelines set by the Privatization Council, compared the lease terms of the BLCI-Chevron deal with the fair market value of the land in the Batangas area, using data from appraisal reports of NDC and the asset pool of the PMO. The PMO the discovered the alleged onerous provisions of the deal favoring Chevron.

Documents submitted to the NDC board also showed that the rentals paid by Chevron over the 44-year period covering 1975 to 2019 totaled P146.51 million or about P3 million per year, in addition to real property taxes paid by Chevron under the lease agreement.

The property’s current market value is estimated at about P4.9 billion to P5.3 billion―translating into a rental yield of only about 0.2 percent of the property’s value.

Dominguez said that “based on current standards that the State imposes on similar contracts, to have a rental yield of less than 1 percent is surely grossly disadvantageous to the government and the Filipino people.”

The department said that despite the rental terms being subject to negotiation as early as 2000, it was not until 2010 that the lease rate was increased to the current rental amount of P10.66 million per year, which was still below fair market rental rates in the province.

It said that if the amount was adjusted to current fair market rates, the rental rate by now should be above P20 million a month or P257.76 million annually.

The American oil company was able to acquire the Batangas lot and other prime properties owned by the government under the 1946 BellTrade 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 $800 million war damage claims to the Philippines.

Parity rights allowed American companies to own land in the Philippines just like Filipinos.

These parity rights were extended for 20 years through the Laurel-Langley Agreement signed in 1955 by then-Senator Jose Laurel and Sen. James Langley. Such parity rights ended in 1974.

The DoF said with the expiration of the 1946 Bell Trade Act, Caltex, and now its subsidiary Chevron Philippines, was granted preferential treatment in continuing to occupy and use various real properties, including the Batangas industrial park.

Topics: Department of Finance , DOF , ‘onerous’ land lease , Chevron Philippines , National Development Co. , Finance Secretary Carlos Dominguez III
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