Friday, July 3, 2015

The Pandacan Oil Depot (Police Power vs Capital Power) [First of 2 parts: Ordinance No. 8027 and G.R. 156052]

By Siesta-friendly

At last, the departure of the Pandacan oil depot has been decided with finality by the Supreme Court.  It’s taken a few years – and a few conflicting LGU actions to boot – but the depot has finally been ordered to leave. How did the Supreme Court decide? In explaining most things, it is best to start from the beginning.  To narrow our focus, we will only tackle the 2 clearly conflicting Manila ordinances. Ordinance No. 8027 (2001) and G.R. 156052 The Manila local government enacted Ordinance No. 8027 which became effective on December 28, 2001.  Because this ordinance ordered oil companies to leave the Pandacan oil depot and because tax payers questioned the delay in the implementation of the ordinance, legal issues were eventually raised with the Supreme Court. The Supreme Court issued their Resolution on the issues on February 13, 2008 in SOCIAL JUSTICE SOCIETY v. HON. JOSE L. ATIENZA, JR., (G.R. No. 156052) In resolving the issues in G.R. No. 156052, the Court first cited the pertinent provisions of Ordinance No. 8027:

“SECTION 1. For the purpose of promoting sound urban planning and ensuring health, public safety, and general welfare of the residents of Pandacan and Sta. Ana as well as its adjoining areas, the land use of [those] portions of land bounded by the Pasig River in the north, PNR Railroad Track in the east, Beata St. in the south, Palumpong St. in the southwest, and Estero de Pancacan in the west[,] PNR Railroad in the northwest area, Estero de Pandacan in the [n]ortheast, Pasig River in the southeast and Dr. M.L. Carreon in the southwest. The area of Punta, Sta. Ana bounded by the Pasig River, Marcelino Obrero St., Mayo 28 St., and F. Manalo Street, are hereby reclassified from Industrial II to Commercial I.

xxx                   xxx                   xxx

SEC. 3. Owners or operators of industries and other businesses, the operation of which are no longer permitted under Section 1 hereof, are hereby given a period of six (6) months from the date of effectivity of this Ordinance within which to cease and desist from the operation of businesses which are hereby in consequence, disallowed.” [emphasis supplied]

In simple words, the area where the Pandacan oil depot is located was classified from industrial to commercial and all covered businesses in said area were ordered to leave within 6 months from the ordinance’s effectivity.

Then the Court cited the history and significance of Pandacan and the rationale behind the ordered departure of the oil depot under Ordinance No. 8027 -

Pandacan History

“Pandacan (one of the districts of the City of Manila) is situated along the banks of the Pasig [R]iver. At the turn of the twentieth century, Pandacan was unofficially designated as the industrial center of Manila. The area, then largely uninhabited, was ideal for various emerging industries as the nearby river facilitated the transportation of goods and products. In the 1920s, it was classified as an industrial zone. Among its early industrial settlers were the oil companies. x x x

On December 8, 1941, the Second World War reached the shores of the Philippine Islands. x x x [I]n their zealous attempt to fend off the Japanese Imperial Army, the United States Army took control of the Pandacan Terminals and hastily made plans to destroy the storage facilities to deprive the advancing Japanese Army of a valuable logistics weapon. The U.S. Army burned unused petroleum, causing a frightening conflagration. Historian Nick Joaquin recounted the events as follows:

After the USAFFE evacuated the City late in December 1941, all army fuel storage dumps were set on fire. The flames spread, enveloping the City in smoke, setting even the rivers ablaze, endangering bridges and all riverside buildings. … For one week longer, the “open city” blazed—a cloud of smoke by day, a pillar of fire by night.

The fire consequently destroyed the Pandacan Terminals and rendered its network of depots and service stations inoperative.

After the war, the oil depots were reconstructed. Pandacan changed as Manila rebuilt itself. The three major oil companies resumed the operation of their depots. But the district was no longer a sparsely populated industrial zone; it had evolved into a bustling, hodgepodge community. Today, Pandacan has become a densely populated area inhabited by about 84,000 people, majority of whom are urban poor who call it home. Aside from numerous industrial installations, there are also small businesses, churches, restaurants, schools, daycare centers and residences situated there. MalacaƱang Palace, the official residence of the President of the Philippines and the seat of governmental power, is just two kilometers away. There is a private school near the Petron depot.

Along the walls of the Shell facility are shanties of informal settlers. More than 15,000 students are enrolled in elementary and high schools situated near these facilities. A university with a student population of about 25,000 is located directly across the depot on the banks of the Pasig [R]iver.

The 36-hectare Pandacan Terminals house the oil companies’ distribution terminals and depot facilities. The refineries of Chevron and Shell in Tabangao and Bauan, both in Batangas, respectively, are connected to the Pandacan Terminals through a 114-kilometer underground pipeline system. Petron’s refinery in Limay, Bataan, on the other hand, also services the depot. The terminals store fuel and other petroleum products and supply 95% of the fuel requirements of Metro Manila, 50% of Luzon’s consumption and 35% nationwide. Fuel can also be transported through barges along the Pasig [R]iver or tank trucks via the South Luzon Expressway. (Citations omitted)” 

The Court also cited the following facts which formed the bases for the Committee on Housing, Resettlement and Urban Development of the City of Manila to recommend the approval of the ordinance:

(1)         the depot facilities contained 313.5 million liters of highly flammable and highly volatile products which include petroleum gas, liquefied petroleum gas, aviation fuel, diesel, gasoline, kerosene and fuel oil among others;
(2)         the depot is open to attack through land, water or air;
(3)         it is situated in a densely populated place and near MalacaƱang Palace and in case of an explosion or conflagration in the depot, the fire could spread to the neighboring communities.

The Court added –

“The ordinance was intended to safeguard the rights to life, security and safety of all the inhabitants of Manila and not just of a particular class. The depot is perceived, rightly or wrongly, as a representation of western interests which means that it is a terrorist target. As long as it there is such a target in their midst, the residents of Manila are not safe. It therefore became necessary to remove these terminals to dissipate the threat. According to [Mayor Atienza]:

Such a public need became apparent after the 9/11 incident which showed that what was perceived to be impossible to happen, to the most powerful country in the world at that, is actually possible. The destruction of property and the loss of thousands of lives on that fateful day became the impetus for a public need. In the aftermath of the 9/11 tragedy, the threats of terrorism continued [such] that it became imperative for governments to take measures to combat their effects.”

And based on these findings, the Court made the following rulings:

Ordinance No. 8027 was enacted in accordance with the exercise of police power

The Court acknowledged that the Sangguniang Panlungsod of Manila, as the LGU’s legislature, was vested with delegated police power. The Court reminded us that “[p]olice power is the plenary power vested in the legislature to make statutes and ordinances to promote the health, morals, peace, education, good order or safety and general welfare of the people.” And that police power exists “only if the following requisites are met: (1) the interests of the public generally, as distinguished from those of a particular class, require its exercise and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. In short, there must be a concurrence of a lawful subject and a lawful method.”  [emphasis supplied]

Thus, based on the history of Pandacan, the threats to life posed by the depot’s existence, and the zoning reclassification done by the city legislature, and despite curtailing the property rights of the oil companies, the Court found that -

“Ordinance No. 8027 was enacted for the purpose of promoting sound urban planning, ensuring health, public safety and general welfare of the residents of Manila. The Sanggunian was impelled to take measures to protect the residents of Manila from catastrophic devastation in case of a terrorist attack on the Pandacan Terminals. Towards this objective, the Sanggunian reclassified the area defined in the ordinance from industrial to commercial.”

Ordinance No. 8027 Is Not Unfair, Oppressive Or Confiscatory Which Amounts To Taking Without Compensation

The Court held that Ordinance 8027 is not unfair nor oppressive since it only prohibits the oil companies from operating inside Pandacan and not the whole of Manila. 

And neither is the ordinance confiscatory because “there is a limitation on or restriction of property interests to promote public welfare which involves no compensable taking. Compensation is necessary only when the states power of eminent domain is exercised. In eminent domain, property is appropriated and applied to some public purpose. Property condemned under the exercise of police power, on the other hand, is noxious or intended for a noxious or forbidden purpose and, consequently, is not compensable.”

In upholding the ordinance’s restrictions and effect on the oil companies, their businesses, operations, income and facilities, the Court further explained police power and the social function of property -

“Police power proceeds from the principle that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the right of the community. Rights of property, like all other social and conventional rights, are subject to reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations established by law as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient.’
Ordinance No. 8027 Is Not Partial And Discriminatory

The Court also held that Ordinance 8027 does not violate the Equal Protection clause by not including in its scope “buildings and residences that do not comply with the National Building Code, Fire Code and Health and Sanitation Code.”  The Court explained that the “requirements for a valid and reasonable classification are: (1) it must rest on substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must not be limited to existing conditions only and (4) it must apply equally to all members of the same class.”  

In explaining that there are “real and substantial differences” between, and a “reasonable classification’ of, those included and excluded from the ordinance’s scope, the Court said –

“… what the ordinance seeks to prevent is a catastrophic devastation that will result from a terrorist attack. Unlike the depot, the surrounding community is not a high-value terrorist target. Any damage caused by fire or explosion occurring in those areas would be nothing compared to the damage caused by a fire or explosion in the depot itself.  Accordingly, there is a substantial distinction. The enactment of the ordinance which provides for the cessation of the operations of these terminals removes the threat they pose. Therefore it is germane to the purpose of the ordinance. The classification is not limited to the conditions existing when the ordinance was enacted but to future conditions as well. Finally, the ordinance is applicable to all businesses and industries in the area it delineated.”

Ordinance No. 8027 Is Not Contrary to RA 7638 (DOE Act of 1992) and RA 8479 (Downstream Oil Industry Deregulation Law of 1998)

The Court held that local autonomy as guaranteed under the Constitution, specifically Section 25 of Article II and all of Article X, justify the City of Manila’s valid exercise of police power despite the state policies and the authority given the DOE under RAs 7638 and 8479 -
“Under Section 5 I of RA 7638, DOE was given the power to establish and administer programs for the exploration, transportation, marketing, distribution, utilization, conservation, stockpiling, and storage of energy resources. On the other hand, under Section 7 of RA 8749, the DOE shall continue to encourage certain practices in the Industry which serve the public interest and are intended to achieve efficiency and cost reduction, ensure continuous supply of petroleum products. Nothing in these statutes prohibits the City of Manila from enacting ordinances in the exercise of its police power.”

The Court further clarified -

“The laws cited merely gave DOE general powers to establish and administer programs for the exploration, transportation, marketing, distribution, utilization, conservation, stockpiling, and storage of energy resources and to encourage certain practices in the [oil] industry which serve the public interest and are intended to achieve efficiency and cost reduction, ensure continuous supply of petroleum products. These powers can be exercised without emasculating the LGUs of the powers granted them. When these ambiguous powers are pitted against the unequivocal power of the LGU to enact police power and zoning ordinances for the general welfare of its constituents, it is not difficult to rule in favor of the latter. Considering that the powers of the DOE regarding the Pandacan Terminals are not categorical, the doubt must be resolved in favor of the City of Manila …”

The Court also emphasized that under the Article X Section 4 of the Constitution, the President’s power over LGUs is one of general supervision.  The DOE Secretary, being merely the President’s alter ego cannot control LGUs -

“Thus, the President and his or her alter egos, the department heads, cannot interfere with the activities of local governments, so long as they act within the scope of their authority. Accordingly, the DOE cannot substitute its own discretion for the discretion exercised by the sanggunian of the City of Manila. In local affairs, the wisdom of local officials must prevail as long as they are acting within the parameters of the Constitution and the law.”

So there – based on the Constitution, law and public interest, the Supreme Court held Ordinance No. 8027 to be a valid exercise of police power and ordered the relocation of the Pandacan oil depot.

A happy ending, no? Of course not. We are talking about the Philippines. So, of course, elections were held and a new Manila government came into power and, on May 14, 2009, enacted Ordinance 8187 which repealed Ordinance No. 8027.

[to be continued]