CHEVRON Philippines Inc. said on Wednesday that its lease contract with a subsidiary of state-led National Development Co. (NDC) had been beneficial for both the government and the company, with the deal entered into “in compliance with all Philippine laws and regulations.”

The company, the local unit of US energy firm Chevron Corp., made the statement after the Department of Finance (DoF) said on Tuesday that it had found “onerous” provisions in the contract as Chevron Philippines is paying lower-than-market value in rental fees on a state property in an industrial park in San Pascual, Batangas.

On Wednesday, the department said in had recommended to the board of NDC to shut down its subsidiary Batangas Land Co., Inc. (BLCI), with which Chevron Philippines forged the contract, by 2021 to allow the government to take back its 120-hectare or 1.2 million square meter (sq. m.) property.

The DoF said the “sprawling” Batangas property is now valued at around P4.9 billion to P5.3 billion. Chevon Philippines is using the property as an oil import terminal, it said. It called the company’s 74 centavos per sq.m. monthly lease as “measly” for being only 4% of what it said to be the current monthly fair market rental estimate of P17.90 per sq. m.

Chevron Philippines, formerly Caltex (Philippines), Inc., said that as “one of the pioneer energy companies in the Philippines which has been operating here for over a hundred years, our commitment to the Philippine market remains strong.”

“We will maintain open communication with the Government, an important and valued partner, on this matter,” it added.

Based on data from the Department of Energy, Chevron Philippines is the country’s third largest oil company based on market share. As of the first half 2019, it had a share of 7.56% in terms of petroleum products.

The DoF said the NDC had heeded the recommendation of Finance Secretary Carlos G. Dominguez III and decided in December 2019 to terminate the corporate life of property lessor BLCI in 2021.

The department said Mr. Dominguez, as a member of the NDC board, made the recommendation after the DoF uncovered supposed onerous provisions in BLCI’s more than four-decade-old lease contract with Chevron Philippines.

It quoted the secretary a saying that shortening BLCI’s corporate life would finally allow the government to exercise “full ownership, control, and rights over” the lot and other real estate properties occupied by Chevron Philippines. He described the property as prime and strategically located for the country’s future energy projects.

Mr. Dominguez said the government should have exercised these rights as early as 1975, but Chevron Philippines was able to secure preferential treatment to continue occupying and using these properties under the then-Marcos administration.

He said the properties — including the Batangas property — should have been turned over to the government as early as the 1970s, “not only legally speaking but, more importantly, based on the principle that these properties should truly benefit the Filipino people.”

“These companies were given sufficient time to transition and pass on full ownership to the government. It is now high time for the government to exercise its rights,” Mr. Dominguez said.

The DoF said it also found out that the rentals paid by Chevron Philippines over the 44-year period covering 1975 to 2019 amounted to only P146.51 million or about P3 million per year, in addition to real property taxes paid by it under the lease agreement.

The department said US company Caltex was able to acquire the Batangas lot and other prime properties owned by the government under the 1946 Bell Trade Act passed by the United States Congress.

It said 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 had allowed American companies to own land in the Philippines just like Filipinos,” it said.

“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,” it added.

It 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 lot.

It also said a Letter of Instruction issued by then President Ferdinand E. Marcos required the lease-back of the properties occupied by Caltex for a maximum of 50 years from 1975, at minimum rates of 1.5% to 2.5% of the property’s valuation in 1974. — VVS and Beatrice M. Laforga