4.2 Public Engagement and Local Benefit Sharing in the Northwind Bangui Bay Project, Philippines

Jay L. Batongbacal, Esq.294


Abstract

The first wind farm in the Philippines, the Northwind Bangui Bay Project, at the foreshore of the coastal Municipality of Bangui in the Province of Ilocos Norte on the northwestern tip of Luzon facing the South China Sea, benefits not only its operators and the country generally, but more importantly, the local communities and their province. This article examines how the project established ‘social sustainability’ through integration with the affected stakeholders, continuing public engagement, and by assuring that tangible benefits of the operation of the wind farm were concretely and visibly shared.

4.2.1 Introduction

The first wind farm in the Philippines, the Northwind Bangui Bay Project, is located on the foreshore of the coastal Municipality of Bangui in the Province of Ilocos Norte on the northwestern tip of Luzon facing the South China Sea. Unlike some wind-farm projects elsewhere in the world, this one was welcomed by the affected communities without the opposition often associated with wind-farm proposals. The wind farm directly benefits not only its operators and the country generally, but more importantly and tangibly, the local communities and their province. This wind farm offers a case study for establishing ‘social sustainability’, to which relatively less attention has been paid by sustainable development literature.

4.2.2 Description

Among the pillars of Philippine energy policy has been self-reliance and energy independence through diversification of energy sources.295 Since the 1970s, the Philippines pursued a diverse energy mix based on conventional fossil fuels and alternative sources such as geothermal and hydroelectric energy. An acute energy shortage in the early 1990s led to accelerated growth in fossil fuels due to the need for additional conventional thermal plants.296 Renewable energies, however, remained an option, and incentives for the use of ocean, solar, and wind power were available even in 1997.297 Wind power is among these potential resources, and a survey completed in 2001 by the U.S. National Renewable Energy Laboratory confirmed significant potential for the country.298

During an industry conference on electrification in 2000, Neils Jacobsen, a Danish expatriate and entrepreneur, happened to meet Ferdinand Dumlao, a lawyer and resident of Ilocos Norte, an agricultural coastal province in the northwestern tip of Luzon, the second largest island of the Philippines. Jacobsen at the time was promoting the development of wind power, and Dumlao, a close ally of the provincial governor, was interested in the project's potential as a solution to his province's perennial power reliability problems. Ilocos Norte is located so far at the northern periphery of the Luzon power grid that it receives less voltage than the national standard, and must endure periodic fluctuations and outages. There were no power plants in the province because the provincial government did not welcome conventional plants that caused pollution.299 For the next couple of years, the two worked together to secure the governor's support, locate a suitable area, have a wind assessment conducted, organize the Northwind Power Development Corporation (Northwind for short) based in Manila, and prepare proposals for funding by the Danish Development Agency (DANIDA) and to avail itself of the World Bank's Clean Development Mechanism (CDM).

DANIDA eventually approved the proposal as a development assistance project subject to the necessary regulatory compliance. The wind farm is located in the Municipality of Bangui, an agricultural town on the shores of Bangui Bay facing the South China Sea. It occupies a foreshore area 9 kilometres by 100 metres with 20 towers each 70 metres high mounting turbines with blades 82 metres in diameter. The wind farm was planned to be completed in two phases: first 15 towers were erected in 2005, followed by 5 more towers in mid-2008. The area of the first phase traverses the coastal frontage of three coastal barangay (villages) that depend on farming and seasonal fishing; the second phase would extend into two more barangay. A transmission line connects the wind farm to the Ilocos Norte Electric Cooperative (INEC), which holds the franchise for electricity distribution in the province and is located 57 kilometres away.

Since the wind farm was acceptable to the national and provincial levels of government, local social acceptability was the key regulatory issue. These communities are politically represented by the Municipality of Bangui and the five barangay. Social acceptability is an essential threshold to ensure that the affected communities allow the project activity to continue over the long term. Social acceptability hinged on two factors: compliance with the public consultation requirements and local benefits from the project.

Under the implementing rules of the Philippine environmental impact statement (EIS) system, the wind farm was not required to undergo a full-blown EIA, and needed to submit only an Initial Environmental Examination Report.300 But in order to qualify for the Prototype Carbon Fund of the World Bank, a complete EIA was needed under the World Bank's ‘Safeguard Policies’.301 Northwind therefore commissioned a separate and more comprehensive EIA.302 However, regardless of the format and depth of detail, both the Initial Environmental Examination Report and the World Band Safeguard policies required public consultations with the potentially affected local communities. In addition, a consultation requirement for any project that could affect a community's natural environment is embedded in the Philippine Local Government Code.303 The convergence of this consultation requirement from three separate vectors necessitated that Northwind ensure the social acceptability of the project.

The Public Engagement Process

Northwind's approach to public consultations could best be described as simple, down-to-earth, and personal. Neils Jacobsen and Ferdinand Dumlao, as Corporate President and Chairman of the Board respectively of the company, personally went to each of the communities, introduced themselves, and established personal rapport and open communication channels with the key leaders and citizens. They explained every aspect of the project and forthrightly responded to concerns as they were raised. They did this as early as during the wind assessment phase, throughout the hearings and consultations required for the issuance of the government clearances, and every time they visited the area. They had clearly established continuing and direct relationships with the community residents and leadership. The establishment of these relationships qualified as a public engagement, not merely a consultation, process.304 ‘Public engagement’ as used here refers to a broad interactive process that results not only in reaching a decision for a pre-defined issue, but that can itself change the context and scope of issues to be resolved. It also implies that the process will continue beyond the decisions.

As a lawyer and resident of the nearby town of Pasuquin, Dumlao is well-respected in the communities. He spoke the same language as local residents and the establishment of direct personal linkages clearly contributed to the clear communication of the project's intentions and impacts. Today, he acts as the main intermediary between the community leaders and the company. This is a significant function considering that he is also the Chairman of the Board of Directors of the company.

Although a Danish expatriate, Northwind President Jacobsen's regular presence was also important for the community leaders because they were able to directly relate with a real person rather than an abstract corporate entity. Jacobsen also felt that because the two leaders were present locally, the people could see for themselves that they were being open and honest about the project whenever they answered questions.

The establishment of direct relationships allowed the project to be designed with accommodation of local activities in mind. The main concerns raised were the possible impacts on fishing in the bay and the gathering of decorative pebbles from the foreshore area. These concerns were addressed by assuring the community of continued complete unrestricted access to the wind farm. The physical impact of the project was reduced to the areas occupied by the towers' bases. Jacobsen notes that residents of the communities now secure the area on their own, and even use the shadows of the gigantic towers as shades for their livelihood activities on the beach.305

Local Benefit-sharing

As a power-generating company, Northwind does not have a franchise to distribute electricity; this function is undertaken by INEC. Thus, Northwind cannot directly provide electricity to the local community. However, the project has provided other significant benefits to the communities before and after it commenced operations in May 2005.

At the outset, the law requires power development projects to give priority to local residents for jobs during the construction phase. Northwind employed up to 220 people during construction, and now employs 20 people, many of whom are from the locality, for regular operations and maintenance. It has also sponsored the education and training of three engineers from the province who will take over the facility's technical management that is currently provided by foreign contractors.

Under prevailing energy regulations,306 a local government unit hosting a power generating facility is entitled to a royalty of 0.01 peso for every kilowatt hour generated.307 The revenue is to be used for electrification (25 percent), development and livelihood (25 percent), and reforestation, watershed management, health, and/or environmental enhancement (50 percent). The royalty is distributed among the three levels of local government according to a principle of radiating benefits. The three barangay where the facility is actually located receive 25 percent, the municipality retains 40 percent, and the province receives the remaining 35 percent. To the Municipality of Bangui, the project has been worth about 2 million pesos annually. These revenues are indeed significant when one considers that Bangui's net income was only 4.9 million pesos in the year prior to the establishment of the wind farm.308

Pursuant to the same regulations, Northwind has committed to set aside funds for social development projects for Bangui. As of 2006, after the first year of operations, programs in connection with the tourism potential of the area were under consideration. As the first operational wind farm in the country, Northwind has drawn substantial local tourism. Bangui itself is a pleasant and quiet town, next to the already-developed beach destination of Pagudpud located on the northern end of Bangui Bay. Jacobsen noted that to harness the wind energy, they could have arranged the turbines into a compact cluster; however, they deliberately spread the turbines in a line along the coast occupying a visually larger and longer area in order to make it more aesthetically pleasing when viewed against the landscape. This configuration was intended to boost tourism for the municipality. Travelers often stop at Bangui to see the wind turbines, or come by boat from Pagudpud beach resorts. Educational tours for engineering students from the Don Mariano Marcos State University in Batac, another town in Ilocos Norte, have become common. Northwind sees the tourism development as a possible complementary livelihood source for local residents, and thus plans to build a viewing deck, information center, and multi-purpose hall in coordination with the municipal government.

Bangui also benefits directly through the business taxes it has been able to collect from the operation of the turbines. In its second year of operation, Northwind paid its first annual real estate taxes of 3.9 million pesos well ahead of the tax deadline as part of its corporate social responsibility policy. This alone represents more than a sevenfold increase in Bangui's real property tax revenue. Northwind also pays an annual business tax of 500,000 pesos. The increase in local revenues promotes Bangui's classification from a fifth class to a fourth class municipality under the Local Government Code. This is important because a municipality's fiscal performance is used by the national government to determine budgetary allocations, entitlement to foreign and local loans and grants, and allotment of shares in national revenues.309 According to municipal budgeting rules, the real estate tax revenues are divided between the municipality and the host barangay where Northwind's facilities are actually located. So far this has resulted in additional annual revenue of about 120,000 pesos for the each barangay. Village officials plan to use the additional funds to improve their meager public health services and facilities.

The province sees the project as a major strategic gain for its economy. Northwind now supplies 40 percent of the province's electrical needs pollution free and priced at a 7 percent discount. With the stabilization of the electrical output, it is hoped that the province can move forward with its long-term economic development plans that rely on agriculture and light manufacturing. It has also incorporated the project into its recommended tourism site listings, and hopes to attract other wind farms for other suitable areas.310

4.2.3 Evaluation

In this case, the legal EIA requirement was abbreviated by the absence of a full EIA and use of only an Initial Environmental Examination Checklist, which is mainly a questionnaire answerable by ‘yes’, ‘no’, and short explanations in bullet-form. The extended EIA was not part of the public sector decision-making process, but rather a requirement of a financial institution. The absence of a full EIA, however, did not dispense with the obligation to directly interact with the local community through public consultations. As noted, even without the EIA, the local government code would have still required this consultation. Thus, the social purpose of the EIA process, which is to enable the public to become aware of the activity, provide inputs, raise concerns, and establish linkages with the project proponent, was still achieved. While the approach taken by Northwind may be characterized as being personally driven by its leaders, it has established close and direct relationships and long-term engagement between the local communities and the company. This engagement contributed to the company's integration into the community, not merely as another business operation sited within the community's territory.

Northwind, through its executives, was integrated into the local community through the public engagement process. Undoubtedly, the facts that the director of the company was a local resident, and that there was direct and constant interaction between the CEO and the locals, played a key role in bridging the two entities. It should also be noted that from the beginning Northwind was concerned not only with its own profit, but also with benefiting the local community. This is manifest in its initial design decision and its subsequent full and unreserved compliance with the royalty, taxation, and local benefit regulations.

Public participation is generally assumed to be needed to improve the quality of public decision making in order to avoid or mitigate environmental impacts. This is clearly reflected in Principle 10 of the Rio Declaration, which asserts that ‘environmental issues are best handled with participation of all concerned citizens, at the relevant level’, and conditions such participation upon access to information and opportunity to participate in decision-making processes, enforceable by judicial and administrative proceedings if necessary.311 Because it usually happens in the planning stages, public participation is often seen as a component of administrative processes. Much of the literature on public participation revolves around finding the role and procedures for the public to ensure that the decision makers make the ‘right’ decisions in the ‘right’ manner. This concept of public participation is reinforced by the principle of precaution, which also seeks to engage the greater public in environmental decision making to better identify and anticipate the widest possible range of risks and impacts before decisions are made.

The concept of public participation needs to be reconsidered in light of its potential for establishing relationships between communities and entities engaging in activities that affect the environment as well as its contribution to expanding the information base for decisions. This requires a shift in perspective from public consultations, which imply a relatively short-term procedural stage, to public engagement, which is long term and extends beyond procedures. As in the case of Northwind and Bangui, such a perspective allows the consideration of opportunities for partnership and synergy between the project proponent and the host community that can result in decisions that are not only environmentally sound but, more importantly, socially beneficial and relevant.

The principle of public participation should not be limited to contributing to and improving decision making. After decisions have actually been made, public participation should extend to tangible benefits to the public that accrue from such decisions. This ensures that public participation processes do not become merely procedural and bureaucratic mechanisms for legitimizing decisions. If the affected public has a tangible stake in the outcomes, whatever they may be, and beyond simply non-disturbance, they would have a greater interest in substantial and meaningful participation. The realization of such interests establishes a concrete linkage between the activity and continuing community participation and/or consent.

In this case, the Bangui wind farm generates direct benefits to the host community by way of tangible revenues and revenue opportunities. Not only the national government or the company receive the financial benefits of clean power generation, but also the local government units. The revenue benefits that flow to them through royalties, taxation, a trust fund for social development, and an informal partnership with the energy company, directly provide them with tangible and useful economic revenues that can be turned toward social development needs. Even clean technologies and environmentally friendly activities take up space and resources, and to the extent that they do so within any community, they may represent a reduction in the community's useable space and resources. This may be a disincentive for communities to welcome them, unless continuing compensatory and cooperative benefit mechanisms such as those in this case study are present.

4.2.4 Conclusion

The public consultation and engagement process must be seen as an opportunity for integration of a project proponent into the affected host community. Local integration proves social acceptability; becoming part of the local community and the social landscape is the ultimate expression of social sustainability. For sustainable development to equally promote human and social development, there is a need to include benefit-sharing into the concept of public participation. The case of Northwind is a good example of how social sustainability can be established through simple and direct interaction and integration with the affected stakeholders and by assuring that the benefits of an activity are concretely and visibly shared. Social sustainability in turn is vital to rendering environmental policy and management less vulnerable to the dangers of changing political platforms or disempowering bureaucratic habits. Governments can then become more resilient when the stakes in long-term sustainability are embedded in a diverse range of social actors and institutions.

References

Department of Energy Regulations No. 1–94, Rules and Regulations implementing Section 5(i) of Republic Act No. 7638, otherwise known as the ‘Department of Energy Act of 1992’. 1994/05/24.

DENR Administrative Order No. 30, Series of 2003, Implementing Rules and Regulations of the Philippine Environmental Impact Statement (EIS) System. 2003/06/20.

Executive Order No. 462, Enabling Private Sector Participation in the Exploiration, Development, Utilization, and Commercialization of Ocean, Solar, and Wind Energy Resoures for Power Generation and Other Energy Uses. 1997/12/29.

Presidential Decree No. 1586 Establishing an Environmental Impact Statement System, Including Other Environmental Management-Related Measures and for Other Purposes. 1978/06/11.

Republic Act No. 7160, an Act Providing for a Local Government Code of 1991. 5th Regular Session, 1991/10/10.

Administration, Energy Information. Country Analysis Briefs: Philippines [webpage]. Energy Information Administration, 2006/11/30, 2006 04 April 2008. Available from http://www.eia.doe.gov/emeu/cabs/Philippines/Electricity.html

Audit, Commission on. Annual Financial Reports Volume Iii-B: Local Governments, Annual Financial Reports. (Commission on Audit, Quezon City, Philippines, 2005).

The World Bank, The World Bank Operational Manual, Operational Policies Op 4.01: Environmental Assessment [webpage]. (The World Bank, Washington DC, 2007/03/01, 1999). Available at go.worldbank.org/9LF3YQWTP0. (Accessed 20 April 2008).

Bass, S., et al. Participation in Strategies for Sustainable Development (International Institute for Environment and Development: London, 1995).

Pomeroy, R.S., and Berkes, F. ‘Two to tango: The role of government in fisheries co-management’, In: Marine Policy, Vol. 21, No. 5, 1997, pp. 465–480. [CrossRef]

Department of Energy, Philippines. Energy Sector Accomplishments in 2005: Energy Independence (Department of Energy, Philippines, 2006). Available at http://www.doe.gov.ph/EnergyAccReport/Energy%20Independence.htm. (Accessed 4 April 2008).

———. Mandate, Mission, Vision (Department of Energy: Philippines, 2005). Available at http://www.doe.gov.ph/About%20DOE/Mandate,%20Mission,%20Vision.htm (Accessed 5 April 2008.).

———. Philippine Energy Plan 2006 (Department of Energy, Philippines, 2006). Available at http://www.doe.gov.ph/PEP/PEP%202006.htm. (Accessed 4 April 2008.)

Department of Environment and Natural Resources. Revised Procedural Manual for Denr Administrative Order No. 30, Series of 2003. (Department of Environment and Natural Resources: Quezon City, Philippines, 2007).

Elliot, D., et al. Wind Energy Resource Atlas of the Philippines. (National Renewable Energy Laboratory: Golden CO, 2001).

Finance, Bureau of Local Government. Lgu Fiscal and Financial Profile, Cy 2004 Statement of Income and Expenditures. 3 vols. Vol. 1. (Department of Finance: Manila, 2005).

Gaia South Inc., and Northwind Power Development Corporation, ‘Marine Ecosystem Baseline Study for the Northwind Project’. 2 vols. Vol. 1: (unpublished), 2004.

United Nations, ‘Declaration on Environment and Development’, UN Doc.A/CONF.151/5/Rev.1. (31 I.L.M. 814, 1992).


294 Jay L. Batongbacal, Esq., is a JSD candidate at the Marine Environmental Law Institute, Dalhousie Law School, Halifax, Nova Scotia, Email: jbatongb@dal.ca. This case study is drawn from the author's JSD research. The author gratefully acknowledges the assistance provided by the Pierre Elliot Trudeau Foundation based in Montreal for the conduct of fieldwork for this research.

295 See Philippines Department of Energy, Mandate, Mission, Vision available at www.doe.gov.ph/About%20DOE/Mandate,%20Mission,%20Vision.htm, 2005 (accessed 5 April 2008); Also Philippines Department of Energy, Energy Sector Accomplishments in 2005: Energy Independence 2006, available at www.doe.gov.ph/EnergyAccReport/Energy%20Independence.htm, (accessed 4 April 2008); and Philippines Department of Energy, Philippine Energy Plan 2006,available at www.doe.gov.ph/PEP/PEP%202006.htm (accessed 4 April 2008).

296 See Energy Information Administration, Country Analysis Briefs: Philippines (Energy Information Administration 2006) available at www.eia.doe.gov/emeu/cabs/Philippines/Electricity.html, 2006 (accessed 4 April 2008). Originally, the Bataan Nuclear Power Plant constructed under the administration of President Ferdinand E. Marcos was to have borne the additional demand, but the project was mothballed just as it was finished after the Peoples Power Revolution of February 1986

297 Executive Order No. 462, Enabling Private Sector Participation in the Exploration, Development, Utilization, and Commercialization of Ocean, Solar, and Wind Energy Resources for Power Generation and Other Energy Uses, 1997 (Philippines,

298 Elliot, D. et al., Wind Energy Resource Atlas of the Philippines (National Renewable Energy Laboratory: Golden CO, 2001).

299 Personal interview with the Pedro S. Agcaoili, Provincial Planning and Development Officer, Ilocos Norte, 7 March 2007. In a separate personal interview with Jose Ildebrando Ambrosio, Esq., Director and Corporate Secretary, Northwind Power Development Corporation, 15 March 2007, stated that some years prior, the East Asia Power Company offered to establish a conventional power plant in Ilocos Norte, but was refused.

300 See Presidential Decree No. 1586 Establishing an Environmental Impact Statement System, Including Other Environmental Management-Related Measures and for Other Purposes, 1978 (Philippines). DENR Administrative Order No. 30, Series of 2003, Implementing Rules and Regulations of the Philippine Environmental Impact Statement (EIS) System, 2003 (Philippines) and Department of Environment and Natural Resources, Revised Procedural Manual for DENR Administrative Order No. 30, Series of 2003 (Department of Environment and Natural Resources: Quezon City, Philippines, 2007).

301 The World Bank, The World Bank Operational Manual, Operational Policies Op 4.01: Environmental Assessment. (The World Bank: Washington D.C., 2007) available at go.worldbank.org/9LF3YQWTP0, 2007 (accessed 20 April 2008).

302 Gaia South Inc. and Northwind Power Development Corporation, Marine Ecosystem Baseline Study for the Northwind Project, Vol. 1 (unpublished: Northwind Power Development Corporation, Pasig City, Philippines, 2004). Electronic copy available from The World Bank, ‘Philippines: Northwind Bangui Bay Project’ available at web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P087464, 2008 (accessed 21 April 2008).

303 Republic Act No. 7160, An Act Providing for a Local Government Code of 1991, 1991 (Philippines), Sec. 26 and 27.

304 The literature on public participation often posits a continuum of actions for the public ranging from merely being informed on one end, to actually taking part as a decision maker on the other. Consultation is usually located somewhere in the middle ground between the two. See for example, Bass, S., Dalal-Clayton, B. and Pretty, J. Participation in Strategies for Sustainable Development (International Institute for Environment and Development: London, 1995). The continuum of public participation methods have also been adapted for the community-based comanagement framework, such as that elucidated in Pomeroy, R.S., and Berkes, F. ‘Two to tango: The role of government in fisheries co-management’, Marine Policy. Vol. 21, No. 5, 1997, pp. 465–480.

305 Personal Interview with Neils Jacobsen, President, Northwind Power Development Corporation, 15 March 2007.

306 Department of Energy Regulations No. 1–94, Rules and Regulations implementing Section 5(i) of Republic Act No. 7638 of 1992, otherwise known as the Department of Energy Act of 1992.

307 As of April 2008, US$1 was equivalent to 42 Philippine pesos

308 Commission on Audit, Annual Financial Reports Volume III-B: Local Governments, Annual Financial Reports (Quezon City: Commission on Audit, Philippines, 2005), p. 258.

309 Municipalities are divided into six classes depending on their income, with the sixth being considered the poorest. See Republic Act No. 7160, an Act Providing for a Local Government Code of 1991, 1991 (Philippines), Sec. 284–288; and Bureau of Local Government Finance, LGU Fiscal and Financial Profile, CY 2004 Statement of Income and Expenditures, Vol. 1 (Department of Finance: Manilla, 2005), pp. 42–43.

310 Earlier, another wind farm had been proposed in the neighboring town of Burgos, also on the shores of Bangui Bay, but it was not implemented prior to Northwind's operation.

311 United Nations, ‘Declaration on Environment and Development’, UN Doc.A/CONF.151/5/Rev.1. (31 I.L.M. 814, 1992).

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