DOE takeover of private oil companies in emergencies valid – SC

MANILA, Philippines — The Department of Energy (DOE) may take over the operations of private entities in the oil industry during emergencies upon the instruction of the president, according to the Supreme Court.

In a 37-page decision promulgated in February 2023 but published only on Monday, the high tribunal overturned the “incorrect” ruling of the Court of Appeals, which declared unconstitutional Section 14(e) of Republic Act No. 8479 or the Downstream Oil Industry Deregulation Act.

The provision states that “in times of national emergency, when the public interest so requires, the DOE may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the industry.”

According to the Supreme Court, the provision was a “proper delegation of takeover power” to the DOE.

“Absent any actual proof from respondents that the exercise of this provision has caused it harm or injury, we hold that the challenge claiming the provision unconstitutional must fail,” the high tribunal said in a decision written by Senior Associate Justice Marvic Leonen.

The case stemmed from the certiorari petition filed by Pilipinas Shell Petroleum Corp. challenging the validity of former President Gloria Macapagal Arroyo’s Executive Order No. 839, which mandated oil industry players to maintain the prices of their petroleum products following the onslaught of Typhoons “Ondoy” (international name: Ketsana) and “Pepeng” (international name: Parma) in 2009.

Shell filed a petition for prohibition, mandamus, and injunction (with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction) in a regional trial court against former Executive Secretary Eduardo Ermita, the joint task force of the DOE and Department of Justice, and then Energy Secretary Angelo Reyes.

Lower court decision

The company assailed Arroyo’s executive order and Section 14(e) of RA 8479, saying that these “formed an unreasonable, oppressive, and invalid delegation of emergency powers” to the executive branch.

In a 2010 decision, the lower court granted Shell’s amended petition and declared the provision void. This was upheld by the Court of Appeals in 2013 as it also denied the plea and motion for reconsideration filed by then Executive Secretary Leandro Mendoza and other officials, prompting them to elevate the case before the Supreme Court.

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Citing the 2019 case of the Philippine Institute for Development Studies vs. Commission on Audit, the high court said that the President may carry out his or her functions through the heads of executive departments.

“The secretaries of each department function as the President’s alter egos; however, they are not given complete discretion over how to exercise the delegated authority. The doctrine dictates that the President retains control, having the authority to ‘confirm, modify or reverse the action taken by department secretaries,’” it said.

“Thus, Section 14(e), as it currently stands, is constitutional,” the high court added.