City of Batangas vs. JG Summit Petrochemical Corporation

A local ordinance regulating the appropriation, utilization, conservation, and protection of water resources is void for contravening the Water Code of the Philippines, which vests exclusive regulatory authority over water resources in the National Water Resources Board, and a local government unit may not regulate conduct already governed by statute without the Board's prior approval.

The City of Batangas, through its Sangguniang Panlungsod, enacted Ordinance No. 3, Series of 2001, requiring heavy industries along Batangas Bay to construct desalination plants and use desalinated seawater instead of underground freshwater for their cooling systems. JG Summit Petrochemical Corporation, First Gas Power Corporation, and FGP Corporation are heavy industries operating in Batangas City, each holding water permits issued by the National Water Resources Board authorizing the use of underground freshwater. The Water Code of the Philippines (Presidential Decree No. 1067) vests in the National Water Resources Board the control and regulation of the appropriation, utilization, exploitation, development, conservation, and protection of the country's water resources, requiring prior Board approval for any program or project involving water resources conservation or protection.

The City of Batangas, through its Sangguniang Panlungsod, enacted Ordinance No. 3, Series of 2001 on May 28, 2001, requiring all heavy industries along the Batangas City portion of Batangas Bay and other areas declared as heavy industrial zones to construct desalination plants and prohibiting the use of underground freshwater for cooling systems and industrial purposes. The ordinance was motivated by concerns that heavy industries' use of underground freshwater for cooling their machineries was causing salination of the City's aquifers, threatening the supply of fresh water for residents. Under the ordinance, heavy industries were given a five-year grace period to install desalination plants, with exemptions possible upon concurrence of the City Mayor and the Sangguniang Panlungsod based on conditions including a comprehensive groundwater assessment and a public hearing. Violations carried penalties of imprisonment ranging from six months to one year and fines of ₱5,000.00, with an additional administrative fine of ₱5,000.00 per day of violation. The City Mayor was likewise empowered to issue cease and desist orders upon knowledge of any violation.

JG Summit Petrochemical Corporation, which manufactures polyethylene and polypropylene in Barangay Simlong, Batangas City, held a water permit from the National Water Resources Board authorizing the use of underground freshwater. First Gas Power Corporation and FGP Corporation operated natural gas-fired power-generating facilities of 1,000 and 500 megawatts, respectively, in Batangas City. All three corporations filed separate Petitions for Declaratory Relief before the Regional Trial Court of Batangas City, contending that the ordinance contravened the Water Code of the Philippines by usurping the National Water Resources Board's exclusive authority to regulate water resources, and that the ordinance violated their rights to due process and equal protection. JG Summit additionally argued that the ordinance rendered nugatory the water permit it had been granted by the State, while First Gas and FGP contended that singling out "heavy industries" as a classification was unreasonable and bore no connection to aquifer salination.

During trial, JG Summit submitted a position paper without presenting any witness. First Gas and FGP presented expert witness Engineer Joeffrey Caranto, who testified that they engaged in sound groundwater management practices and that Batangas City had sufficient underground freshwater supply lasting until 2070 despite industrial use. The City of Batangas presented Barangay Captains Joel Caaway of Barangay Tabangao Aplaya and Calixto Villena of Pinamucan Proper, who testified that their respective barangays had no water problems until heavy industries were established, after which some deep wells dried up or produced salty, undrinkable water. An ocular inspection by the branch sheriff confirmed that the plant sites of First Gas and FGP were located on the western side of the Calumpang River, 11.9 kilometers from the river, with constant replenishment from the Lagnas and Calumpang Rivers and from a higher groundwater reservoir in Lipa City.

The trial court found no factual necessity for the ordinance, noting that underground water reserves would last 70 years absent increased consumption, and that no public hearings were conducted prior to its enactment. The trial court also found that the ordinance was enacted without consultation with the National Water Resources Board and that Section 8, empowering the City Mayor to issue cease and desist orders without notice and hearing, violated the due process clause. The Court of Appeals affirmed, additionally finding the ordinance unreasonable for lacking scientific study linking heavy industries' freshwater use to aquifer salination, and constituting an undue taking by requiring substantial unforeseen investments in desalination plants.

• General Welfare and Police Power: Petitioner maintained that the ordinance was enacted in the exercise of its police power under the General Welfare Clause of the Local Government Code, aimed at preventing the wasteful use of groundwater by heavy industries for cooling their machinery and preserving it for drinking purposes by present and future generations of Batangas City inhabitants.
• Factual Basis: Petitioner contended that it is a scientific truth that pumping water at a high scale will always exceed recharge, resulting in groundwater overdraft, and that such pumping will surely impact the use of neighboring wells; hence, no scientific study is needed to establish the factual basis for the ordinance.
• Priority of Right to Life over Property Rights: Petitioner argued that the right to life is more important than property rights, and that any substantial investment in desalination plants that heavy industries would make serves the general comfort, health, and prosperity of the state.
• Credibility of Witness Testimonies: Petitioner argued that the trial court and the Court of Appeals erred in disregarding the testimonies of Barangay Captains Villena and Caaway, which tended to prove that the establishment of heavy industries in Batangas City caused the salination of the City's supply of underground freshwater.
• Constitutional Bases: Petitioner cited Article II, Sections 15 and 16 of the Constitution on the right to health and a balanced and healthful ecology as legal bases for enacting the ordinance, arguing that the ordinance has a lawful subject and was implemented through means reasonably necessary to achieve its purpose.
• Incidental Regulation of Water: Petitioner countered that any provisions touching on the regulation or prohibition of groundwater use were merely incidental to the primary purpose of compelling heavy industries to construct desalination plants, and that provisions allegedly violative of the Water Code could be deleted under the separability clause without affecting the valid provisions.

• Contravention of Water Code: Respondents maintained that the ordinance contravened the Water Code of the Philippines, which vests exclusive authority over water resources in the National Water Resources Board, and that the ordinance was not submitted to the Board for review and approval in violation of Article 85. Respondent JG Summit added that requiring desalination plants rendered useless the water permit issued by the National Water Resources Board.
• Due Process: Respondents argued that no public hearings were conducted before the ordinance was enacted, violating procedural due process. The City Mayor's power to issue cease and desist orders upon mere knowledge of a violation denied them notice and hearing. Requiring construction of desalination plants constituted an onerous condition on the right to engage in business, tantamount to an unlawful taking of property without due process of law.
• Equal Protection: Respondents First Gas and FGP contended that singling out "heavy industries" was unreasonable, with no factual or legal basis connecting the regulation of freshwater use by heavy industries to aquifer salination, and no distinction justifying why only heavy industries along Batangas Bay were required to install desalination plants while other industries within Batangas City that also use freshwater were not.
• Mistaken Premise: Respondents First Gas and FGP argued that the ordinance was enacted on the mistaken premise that heavy industries waste groundwater for their cooling systems.
• Local Autonomy Cannot Override State Authority: Respondent JG Summit argued that petitioner could not invoke local autonomy to justify the ordinance, as water resources belong to the national government, and a local government unit may not encroach upon the power of the State, through the National Water Resources Board, to regulate the exploitation, development, and utilization of natural resources.

• Contravention of Statute: Whether Ordinance No. 3, Series of 2001 is void for violating the Water Code of the Philippines.
• Due Process: Whether Ordinance No. 3, Series of 2001 is unconstitutional for being violative of respondents' right to due process of law.
• Equal Protection: Whether Ordinance No. 3, Series of 2001 is unconstitutional for being violative of respondents' right to equal protection of the laws.

• Contravention of Statute: Yes. The ordinance is void for contravening the Water Code, which vests exclusive regulatory authority over water resources in the National Water Resources Board, and the ordinance was enacted without the Board's prior approval as required by Article 85.
• Due Process: Yes. The ordinance is oppressive and void, no scientific proof linking heavy industries to seawater intrusion in the City's freshwater aquifers having been presented, the barangay captains' testimonies being merely anecdotal and proving only correlation.
• Equal Protection: Yes. The ordinance is oppressive for singling out heavy industries when they are not the sole heavy users of groundwater, the Batangas City Water District and households likewise drawing heavily from the City's aquifers.

• Contravention of Statute: The requisites for a valid ordinance, as established in City of Manila vs. Laguio, Jr., include that an ordinance must not contravene the Constitution or any statute. Local government units, while empowered to enact legislation under the General Welfare Clause of the Local Government Code, remain mere agents of the State and cannot regulate conduct already regulated by statute, as the delegate cannot be superior to the principal. The Water Code of the Philippines places the appropriation, utilization, conservation, and protection of water resources under the exclusive control and regulation of the National Water Resources Board, which exercises this jurisdiction by issuing water permits that remain valid until revoked. The ordinance's objective of protecting local aquifers from salination falls squarely within the scope of water resources regulation. While Section 458(5)(vii) of the Local Government Code grants the Sangguniang Panlungsod power to regulate water supply, this power is expressly "subject to existing laws." Article 85 of the Water Code requires prior approval of the National Water Resources Board for any program involving the conservation or protection of water resources. No proof was presented that the ordinance was enacted with such prior approval. The controlling precedent in City of Batangas vs. Philippine Shell Petroleum Corporation had already invalidated the same ordinance as ultra vires for arrogating unto the City the power to control and regulate groundwater use. Being ultra vires, the ordinance is null and void in its entirety, rendering it unnecessary to determine compliance with the other substantive requirements for validity.

• Due Process: The ordinance is oppressive because no scientific proof was presented that heavy industries are causing seawater intrusion in the City's freshwater aquifers. The witnesses presented by petitioner were barangay captains who testified that their barangays had no water problems until heavy industries started operating. These testimonies are merely anecdotal and, at best, prove only correlation, not causation. The trial court's findings, affirmed by the Court of Appeals, established that underground water reserves would last 70 years absent increased consumption, and that the location of some petitioners' plants allowed them to draw from higher groundwater reservoirs with constant replenishment from nearby rivers and from Lipa City's underground reservoir.

• Equal Protection: The ordinance singles out "heavy industries" as the cause of aquifer salination, but heavy industries are not the sole heavy users of groundwater in the City. Citing data from the National Water Resources Board, the Philippine Institute for Development Studies and the Philippine Council for Agriculture, Forestry and Natural Resources Research and Development found that the Batangas City Water District and households likewise heavily draw groundwater from the City's aquifers. If petitioner sought to preserve the quantity and quality of its groundwater, it should hold accountable all who benefit from the aquifers, not just heavy industries. The Court recommended that petitioner coordinate with State authorities — including the DENR, DILG, DPWH, DOH, NWRB, and NEDA — for a comprehensive groundwater quantity and quality study to evaluate available and future groundwater resources and recommend efficient and sustainable usage and management.

• Requisites for a Valid Ordinance — For an ordinance to be valid, it must not only be within the corporate powers of the local government unit and passed according to procedure prescribed by law, but must also conform to six substantive requirements: (1) it must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable. In this case, the ordinance failed the first requisite because it contravened the Water Code, and the second requisite because it was oppressive absent scientific proof of causation.

• Subordination of Local Ordinances to Statutes — Local government units are mere agents of the State and derive their legislative power from Congress. Municipal ordinances are inferior in status and subordinate to state laws. A local government unit cannot regulate conduct already regulated by statute, as the delegate cannot be superior to the principal or exercise powers higher than those of the latter. The ordinance was void because it regulated water resources, a subject matter already fully covered by the Water Code, without obtaining prior approval from the National Water Resources Board as required by Article 85.

• Ultra Vires Ordinances — An ordinance enacted in excess of the powers granted to a local government unit is ultra vires and null and void in its entirety. Once an ordinance is found ultra vires, it becomes unnecessary to determine whether it complies with the other substantive requirements for validity. The ordinance was ultra vires because it arrogated unto the City of Batangas the power to control and regulate groundwater use, which pertains solely to the National Water Resources Board under the Water Code.

• "Local ordinances, however laudable their objectives might be, are not to contravene State-enacted legislation. Local government units merely derive their power from the State legislature; as such, they cannot regulate activities already allowed by statute." — The opening statement of the decision, articulating the fundamental principle that local ordinances are subordinate to statutes and cannot regulate conduct already governed by state law.

• "The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal governments are only agents of the national government. Local councils exercise only delegated legislative powers conferred on them by Congress as the national lawmaking body. The delegate cannot be superior to the principal or exercise powers higher than those of the latter." — Quoted from Magtajas vs. Pryce Properties Corporation, Inc., this passage explains the theoretical basis for the rule that ordinances must not contravene statutes, grounding it in the agency relationship between local governments and the State.

• "There is no doubt, therefore, that the Assailed Ordinance effectively contravenes the provisions of the Water Code as it arrogates unto Batangas City the power to control and regulate the use of ground water which, by virtue of the provisions of the Water Code, pertains solely to the NWRB. By enacting the Assailed Ordinance, Batangas City acted in excess of the powers granted to it as an LGU, rendering the Assailed Ordinance ultra vires." — Quoted from City of Batangas vs. Philippine Shell Petroleum Corporation, this passage directly applies the ultra vires doctrine to the ordinance and constitutes the controlling precedent's ratio decidendi adopted in the present decision.

• City of Manila vs. Laguio, Jr., 495 Phil. 289 (2005) — Cited as the authoritative source of the well-established six substantive requisites for a valid ordinance, providing the analytical framework against which the ordinance was tested.

• Magtajas vs. Pryce Properties Corporation, Inc., 304 Phil. 428 (1994) — Followed for the principle that local government units cannot undo acts of Congress and that municipal ordinances are subordinate to state laws. The case involved ordinances prohibiting casino operations already allowed under PAGCOR's charter, establishing the rule that local councils cannot negate by ordinance the mandate of a statute.

• Batangas CATV, Inc. vs. Court of Appeals, 482 Phil. 544 (2004) — Followed for the principle that where the state legislature has made provision for regulating conduct, a municipality cannot regulate the same conduct. The case held that the NTC had exclusive authority to regulate cable television operations, precluding local government regulation.

• City of Batangas vs. Philippine Shell Petroleum Corporation, 810 Phil. 566 (2017) — Controlling precedent. This case invalidated the very same ordinance assailed in the present petition, holding that the City of Batangas arrogated unto itself the power to regulate water use, which exclusively belongs to the National Water Resources Board under the Water Code. The present decision extensively quoted and followed this ruling, applying its ultra vires analysis to the same ordinance.

• Article 3(d), Water Code of the Philippines (Presidential Decree No. 1067), as amended by Executive Order No. 124-A — Provides that the utilization, exploitation, development, conservation, and protection of water resources shall be subject to the control and regulation of the government through the National Water Resources Board. Applied to establish that water resources regulation is exclusively a national function, precluding local government regulation of the same subject matter.

• Article 79, Water Code of the Philippines — Vests in the Council (now NWRB) the administration and enforcement of the Water Code, including the granting of permits and the imposition of penalties for administrative violations. Applied to show that water permits issued by the NWRB remain valid until revoked by the same body, and that the City could not effectively nullify such permits through a local ordinance.

• Article 85, Water Code of the Philippines — Requires prior approval of the Council for any program or project involving the appropriation, utilization, exploitation, development, control, conservation, or protection of water resources. Applied to show that the ordinance required the NWRB's prior approval, which was not obtained, rendering the ordinance void for contravening a statute.

• Section 16, Local Government Code of 1991 (Republic Act No. 7160) — The General Welfare Clause, empowering local government units to exercise powers necessary for the promotion of the general welfare, including the promotion of health and safety and the enhancement of the right to a balanced ecology. Cited by petitioner as the legal basis for the ordinance, but the Court held this delegated power is subordinate to existing statutes such as the Water Code.

• Section 458(5)(vii), Local Government Code of 1991 — Grants the Sangguniang Panlungsod power to establish and maintain waterworks systems, regulate water supply, and protect the purity and quantity of water supply, but expressly "subject to existing laws." Applied to show that the City's power over water supply is qualified by and subordinate to the Water Code's provisions vesting regulatory authority in the NWRB.

• Article II, Sections 15 and 16, Constitution — Provisions on the right to health and a balanced and healthful ecology. Cited by petitioner as legal bases for the ordinance, but the Court found these constitutional policies did not override the statutory framework of the Water Code, which provides the specific mechanism for water resources regulation through the NWRB.

Lazaro-Javier, M. Lopez, J. Lopez, and Kho, Jr., JJ., concurred.