1. Blast
from
the
past:
the
myth
of
Velasco’s
energy
legacy
Of
all
the
economic
policies
and
programs
initiated
by
the
Marcos
government,
none
has
been
much
vilified
and
demonized
than
the
energy
development
program
implemented
by
former
Energy
Minister
Geronimo
Z.
Velasco
under
Martial
Law.
What
comes
to
mind
as
history
judge
the
program
are
the
accusations
of
corruption
in
the
Bataan
Nuclear
Power
Plant,
human
rights
violations
in
the
Chico
River
Dam
project,
and
the
lack
of
transparency
in
the
awarding
of
government
contracts
with
the
appurtenant
largesse
to
favored
cronies.
In
Velasco’s
memoirs
contained
in
Trailblazing:
The
Quest
for
Energy
Self-­‐
Reliance
(Anvil,
2006),
he
prided
in
the
fact
that
he
steered
the
state-­‐owned
Philippine
National
Oil
Company
(“PNOC”)
during
his
stint
as
President
and
CEO
to
become
the
only
Filipino-­‐owned
corporation
ever
to
become
listed
on
Fortune
magazine’s
Top
500
Companies
outside
the
United
States
from
1978
to
1981.
When
the
international
consulting
firm
Arthur
D.
Little
made
an
evaluation
study
funded
by
the
Asian
Development
Bank
for
the
Petroleum
Authority
of
Thailand
in
1985,
among
its
recommendations
was
for
the
latter
to
follow
the
organizational
pattern
and
system
of
PNOC.
At
the
helm
of
the
Ministry
of
Energy,
Velasco
earned
the
plaudit
of
the
World
Bank,
which
lauded
the
Philippine
energy
program
as
a
model
for
Third
World
countries.
Martial
Law
and
Velasco’s
Energy
Machinery
Velasco
admitted
that
he
worked
in
a
highly
centralized
decision-­‐making
and
rigid
political
environment
during
Martial
Law
and
it
did
not
matter
to
him
if
he
had
to
shortcut
administrative
processes
to
attain
his
single
objective
of
reducing
the
country’s
dependence
on
imported
oil.
Under
the
specter
of
an
oil
shortage,
President
Marcos
was
able
to
impose
rationing
of
oil
products
during
the
1973
oil
crisis
by
issuing
General
Order
41,
directing
PNOC
to
assume
supervision
over
the
sale
and
distribution
of
all
available
stocks
of
crude
oil
and
oil
products,
whether
imported
or
produced
by
the
local
oil
refineries.
Velasco
used
his
closeness
to
President
Marcos
so
that
PNOC
can
be
exempted
from
civil
service
rules
and
government
audit.
In
a
span
of
six
years,
from
1974
to
1980,
Velasco
and
his
management
team
created
twenty-­‐three
PNOC
subsidiary
companies
that
focused
on
three
areas:
petroleum
refining
and
marketing;
transport
and
logistics;
and
energy
exploration
and
development,
the
creation
of
which
in
such
a
short
time
would
not
have
been
possible
were
it
not
for
Martial
Law.
At
PNOC,
Velasco
basically
learned
the
ropes
of
energy
diplomacy
by
negotiating
government-­‐to-­‐government
oil
supply
contracts
with
Saudi
Arabia,
Indonesia,
United
Arab
Emirates
and
others,
which
was
then
perceived
to
reduce
the
nation’s
reliance
on
oil
being
imported
by
the
multinational
oil
companies.
Velasco
was
so
powerful
then
that
he
concurrently
controlled
a
government
energy
regulatory
agency
and
a
state
energy
machinery
being
regulated
by
the

2. same
regulatory
agency.
He
believed
that
the
centralization
of
decision
making
under
the
Marcos
administration
was
conducive
for
building
the
energy
infrastructure
as
quickly
as
possible
unlike
the
current
democratic
political
system,
which
poses
obstacles
in
planning,
decision-­‐making,
and
action.
Oil
Industry
Special
Fund
Velasco
was
also
able
to
have
President
Marcos
establish
a
special
fund
of
one
centavo
per
liter
imposed
on
the
retail
prices
of
petroleum
products,
to
be
used
for
energy
development.
In
April
1974,
the
then
Oil
Industry
Commission
ruled
that
Php
0.01
per
litter
would
be
added
to
pump
prices
for
the
purpose
of
creating
the
Oil
Industry
Special
Fund.
The
special
fund
helped
PNOC
finance
the
procurement
of
its
tanker
fleet
and
initiate
projects
related
to
energy
exploration
and
development.
In
fact
Velasco
was
able
to
convince
an
initially
reluctant
President
Marcos
to
release
Php
15
million
from
the
Oil
Industry
Special
Fund
for
the
construction
of
the
National
Institute
of
Geological
Sciences
at
the
University
of
the
Philippines
(“UP”).
Velasco
was
able
to
make
arrangement
for
the
construction
of
a
nonconventional
energy
research
building
in
the
UP
Diliman
area
and
in
the
process
tapping
the
expertise
of
the
UP
College
of
Engineering.
And
Velasco
was
not
even
an
alumnus
of
UP
but
of
the
Mapua
Institute
of
Technology!
Development
of
Technical
Capability
Velasco
being
the
visionary
recognized
during
that
time
that
there
was
an
appalling
lack
of
consolidated
data
on
different
energy
sources.
He
commissioned
scientific
and
technical
studies
to
aid
the
creation
of
a
systematic
inventory
of
indigenous
energy
sources
for
oil,
coal,
geothermal,
hydro
and
others.
To
be
able
to
develop
a
comprehensive
energy
policy,
Velasco
believed
that
it
was
imperative
to
set
up
such
an
inventory.
One
of
his
legacies
was
the
establishment
of
an
Energy
Data
Center,
which
continues
to
be
accessible
to
all
stakeholders
at
the
present
Department
of
Energy.
He
also
believed
that
PNOC
should
make
a
conscious
effort
to
hire
the
country’s
top
geologists,
engineers,
physicists,
and
other
scientists
to
help
carry
out
his
mission
for
energy
independence.
Velasco
enticed
scientists
and
technologists
from
UP,
fresh
from
graduate
studies
in
top
international
universities,
to
join
government
and
challenged
these
young
idealists
to
contribute
and
enhance
their
knowledge
in
the
quest
for
energy
self-­‐reliance.
Hits
and
Misses
Velasco
most
lasting
legacy
was
generating
power
from
geothermal
energy
where
the
country
vaulted
to
be
the
second
largest
producer.
Of
the
alternative
energy
programs
that
the
government
embarked
on
in
response
to
the
oil
crisis,
geothermal
development
yielded
the
most
substantial
results
in
the
shortest
possible
time.
Velasco,
realizing
the
importance
of
foreign
risk
capital,
wanted
to
liberalize
the
entry
of
foreign
firms
and
allow
them
full
control
of
geothermal

3. operations
similar
to
upstream
petroleum,
instead
of
being
limited
to
partnership
with
government
or
private
local
corporations.
However,
the
President
Marcos
disagreed
and
reminded
Velasco
that
his
idea
then
was
against
the
1973
constitution.
Velasco
also
accelerated
the
coal
development
program
by
requiring
small-­‐scale
coal
miners
to
unify
their
coal
landholdings
into
sizeable
coal
blocks
of
at
least
1,000
hectares,
and
enter
into
new
operating
contracts
with
the
government
patterned
after
petroleum
service
contracts.
The
program
also
called
for
the
conversion
of
the
fuel
base
of
the
cement
industry
from
petroleum
to
coal
and
the
establishment
of
a
nationwide
logistics
system
consisting
of
an
infrastructure
network
of
coal
terminals,
ports,
relay
stations,
and
blending
and
off-­‐loading
facilities.
However,
the
alcogas
and
the
coco-­‐diesel
programs
were
learning
experiences
for
PNOC
and
the
Ministry
of
Energy.
Technical
difficulties,
access
to
raw
materials
and
lack
of
economies
of
scale
cause
these
projects
to
fizzle.
Also
the
abrupt
change
in
government,
which
caused
policy
discontinuity,
hastened
the
demise
of
the
fuel
substitute
projects,
as
they
require
long
lead
times
in
the
production
process.
In
hindsight,
Velasco
understood
the
shortcomings
of
the
projects
but
it
was
incomprehensible
why
PNOC
did
not
learn
the
lesson
when
later
on
it
attempted
to
embark
on
a
jatropa
biofuel
project.
Ironically,
it
was
two
politically
controversial
projects
of
Velasco’s
National
Power
Corporation
(“NPC”)
-­‐
the
Bataan
Nuclear
Power
Plant
and
Chico
River
Basin
Development
Project,
which
were
partly
instrumental
in
bringing
down
the
Marcos
government.
Dismantling
the
Marcos
Energy
Infrastructure
Velasco
revealed
that
his
greatest
disappointment
was
that
the
hard
work
put
in
at
PNOC
and
the
Ministry
of
Energy
went
down
the
drain
when
President
Corazon
Aquino
shortly
after
assuming
the
presidency,
issued
Executive
Order
20
abolishing
the
Ministry
of
Energy
and
placing
all
its
attached
offices,
agencies,
and
corporations
under
the
administrative
supervision
of
the
Office
of
the
President.
Velasco
accused
Cesar
Buenaventura,
then
the
head
of
Anglo-­‐Dutch
Shell
operations
in
the
Philippines,
of
advising
Mrs.
Aquino
to
shut
down
the
Ministry
of
Energy
and
close
the
nuclear
facility
permanently
because
Velasco
alleged
that
the
nationalist
policies
under
Marcos
“threatened
to
erode
the
oil
companies’
position
in
the
energy
market.”
Velasco
blamed
high
energy
prices
and
looming
power
shortages
to
the
three
biggest
mistakes
of
President
Marcos’s
successors:
the
mothballing
of
the
Bataan
Nuclear
Power
Plant,
the
sale
of
Petron,
and
the
break-­‐up
of
NPC,
which
he
believed
“were
rooted
in
lack
of
understanding
and
appreciation
for
energy
issues,
lack
of
foresight
and,
most
important
of
all,
provincialism
in
politics.”
Mike
Billington
of
the
Executive
Intelligence
Review
(2006)
theorized
that
the
hysteria
induced
at
that
time
against
the
Marcos
regime
was
to
no
small
extent

4. the
result
of
an
international
campaign
by
neo-­‐conservatives
headed
by
the
International
Monetary
Fund
and
the
London/New
York
banking
houses
against
nuclear
power,
aimed
at
undermining
the
energy
independence
of
sovereign
nations.
Prof.
Randy
David,
a
self-­‐professed
oppositor
to
the
Bataan
Nuclear
Power
Plant,
writing
his
2007
eulogy
for
Velasco
in
the
Philippine
Daily
Inquirer,
summed
up
Velasco’s
memoir
of
the
Marcos
years
as
“not
all
about
primitive
accumulation
through
corruption
but
about
the
painful
attempts
of
nameless
public
servants
to
expand
the
country’s
productive
base
and
build
an
economy
based
on
modern
industry
and
technology.”
Velasco
lamented
that
other
presidents
have
not
done
any
better,
undoing
past
achievements
and
prioritizing
political
careers
in
making
decisions
on
energy
matters.
Former
Energy
Secretary
to
President
Fidel
Ramos,
Francisco
Viray
takes
exception
to
Velasco’s
statement
that
the
post-­‐Marcos
administration
did
not
have
a
comprehensive
energy
development
plan.
He
argued
that
the
plans
and
programs
of
the
Ramos
administration
were
built
on
the
achievement
mentioned
in
Velasco’s
memoirs
by
continuing
the
policies
on
the
development
of
indigenous
energy
resources,
renewable
energy
and
energy
conservation.
More
importantly
Viray
added,
“the
policy
on
deregulation
and
liberalization
of
the
oil
and
power
industry
are
policies
called
for
in
the
current
form
of
political
governance”
but
which
Velasco
debunked
in
his
memoirs
as
a
ruse
for
the
foreign
control
of
sovereign
nations.
Lessons
for
Resources
Bureaucrats
Velasco
reigned
in
an
era
where
achievements
are
measured
by
barrels
of
oil
produced
and
megawatts
of
electricity
put
on
stream.
He
was
neither
a
mouthpiece
of
private
energy
companies
nor
a
slick
power
point
presenter
harping
on
energy
contracts
awarded
and
media-­‐hyped
band-­‐aid
solutions
to
power
shortages
and
oil
price
hikes.
He
built
a
formidable
team
of
highly
educated
technocrats
and
professional
managers
who
scrutinized
and
vetted
every
data
and
information
submitted
by
energy
contractors
to
the
government
for
possible
flaws
and
misrepresentations.
The
Ministry
of
Energy
on
its
own,
produced
data,
information
and
reports,
and
did
not
rely
entirely
on
what
the
service
contractors
submitted.
Velasco
and
his
team
knew
where
they
were
going
and
how
to
get
there.
While
present
resource
bureaucrats
spend
most
of
their
time
lobbying
for
the
passage
of
investments
laws
and
implementing
policy
rules,
declaring
them
as
achievements
of
their
administrations,
these
were
no
big
deal
to
Velasco.
After
all,
he
had
the
legislative
backing
of
President
Marcos
under
Martial
Law!
Understandably,
the
Martial
Law
energy
machinery
has
its
inherent
flaws
on
issues
of
transparencies
and
accountability,
and
prone
to
corruption.
It
would
have
been
highly
likely
that
it
could
have
sputtered
without
a
strongman
at
the
helm.
Velasco
operated
under
a
legal
regime
where
there
are
no
or
limited
laws
on
environment,
social
acceptability,
indigenous
peoples
rights,
protected
areas,
land
access
issues,
local
government
devolution,
which
present
resources
bureaucrats
have
to
contend
with.
In
fact
most
of
environmental
and
social
legislations
were
brought
about
by
the
abuses
of
the
authoritarian
regime.

5. Perhaps,
the
private
energy
companies
were
not
comfortable
with
the
“incestuous”
relationship
between
Velasco’s
companies
and
the
Ministry
of
Energy,
which
hastened
the
privatization
of
the
state
owned
energy
and
power
companies.
Velasco
himself
admitted
that
any
current
move
in
the
direction
of
energy
self-­‐
reliance
to
be
significant
must
have
to
operate
under
a
host
of
constraints
that
were
not
present
in
his
time.
Whatever
Marcos’s
“sins”
were,
Velasco
believed
that
the
late
president
could
claim
energy
development
as
a
single
achievement.
We
could
hardly
disagree.
Fernando
“Ronnie”
Penarroyo
is
the
Managing
Partner
of
Puno
and
Penarroyo
Law
Offices
(fspenarroyo@punopenalaw.com).
He
specializes
in
Energy,
Resources
and
Environmental
Law,
Business
Development
and
Project
Finance.
He
is
a
trustee
of
the
International
Geothermal
Association,
the
National
Geothermal
Association
of
the
Philippines
and
the
Philippine
Mineral
Exploration
Association.