Malampaya Fund (Part 1): Limits to use of multibillion earnings

Metro Manila (CNN Philippines) — For a year now, residents of Sitio Linac in Pampanga have enjoyed electricity supply.

Linac is one of several remote villages that was connected to the power grid because of the Sitio Electrification Program — an activity funded by government revenues from the Malampaya Natural Gas Facility.

The royalties from Malampaya funded other projects as well — including the military modernization program, a subsidy for jeepney drivers when fuel prices spiked during the early years of the Aquino administration, and various short-term loans.

But a Supreme Court ruling two years ago ended funding for all of these.

The court ruled in November 2013 that the fund should be reserved for financing "energy resource development and exploitation" activities.

Malampaya has been supplying natural gas to three major power plants in Luzon and the court decision was sought to safeguard the fund from possible misuse.

Previously, a special audit report cited cases of questionable fund use.

One of these was the P900 million supposedly released to the Department of Agrarian Reform, but was instead allegedly allocated to fake nongovernment organizations. Currently, the Office of the Ombudsman is probing those implicated in in the irregular deals.

The amount of P900 million is but a small portion of the over P42 billion that was released from the Malampaya Fund so far.

As of March 2015, the government has received over P208 billion from the natural gas project since it began earning from it in the early 2000s.

Its balance is still a hefty P167 billion — just a billion pesos short of the Typhoon Yolanda Reconstruction Fund approved by President Benigno Aquino III in October 2014.

But the government has not used the money since last year because of restrictions imposed by the Supreme Court.

"We're being cautious because you know nobody wants to be taken into court at this point," said Energy Secretary Jericho Petilla.

Petilla said that the government may consider a recommendation of the Department of National Defense to buy naval assets using the fund to secure potential oil explorations areas in the West Philippine Sea.

"You cannot exploit or explore if you do not have protection. (I)t's with the President. And I think they're seeking  DOJ's opinion also whether this falls under the Supreme Court ruling," Petilla said.

According to the Bureau of the Treasury, the Malampaya Fund has been growing at around P2 billion a month in recent years.

"You're talking of an income stream it's like a faucet. It's a faucet, it's a fountain, a source of revenue. (F)or as long as we're using electricity, then there is no end to the income," said Prof. Leonor Briones, former national treasurer.

The government's options are limited, though. Even at the expense of important projects such as the electrification program for remote places like Sitio Linac.

"So there's a fund right now, but its use is limited and you don't know where to use it," Petilla said.

But are these funds still intact?

Officials are worried that they may not be able to fund a pending multibillion-peso claim by a province which is asserting its rights to the fund under the law.