Police identified the gang leader as Atto Sumagayan Daing, eldest son of Datu Daing, a key leader in the MNLF force in the second district of Lanao del Sur.
Halley, 57, was reportedly shot dead Tuesday afternoon in a failed kidnap attempt in Malabang town.
"This was an attempted kidnap for ransom. There was apparently no political motivation, " Maj. Gen. Teofilo de los Santos of the regional military command said.
De los Santos said he asked Halley some weeks ago to accept armed escorts but the priest declined, saying he felt safe.
Halley belonged to the Columbian congregation which has missions in the Catholic dioceses of Marawi City and Iligan City, and was popular among the townsfolk of the second district of the province for his humanitarian activities.
Halley was driving his motorcycle on his way to his convent after attending an inter-religious dialogue in nearby Balabagan town when a World War II-vintage military-type truck blocked his path on a dirt road in Barangay Diamaro in Malabang.
Sensing danger, Halley tried to flee but was shot in the head with an M-16 Armalite rifle. He died instantaneously.
Another report quoted witnesses as saying they saw Halley talking to his attackers who tried to drag him into their vehicle, but the priest resisted, prompting his would-be kidnappers, who were wearing ski masks, to shoot him.
Senior Superintendent Omar Ali, operations chief of the Autonomous Reion in Muslim Mindanao (ARMM) police, said Halley even pushed one of his assailants before he was shot.
Columbian district head Fr. Bernard Mulkerins said Halley had been trying to break down barriers between Muslims and Christians in Mindanao.
Having worked in Mindanao for over 20 years, Halley was fluent in several local dialects.
The priest whipped up a controversy last year when he refused to officiate Masses inside military camps at the height of the military campaign against the separatist Moro Islamic Liberation Front, a breakaway faction of the MNLF.
Fr. Richard Pankratz, acting supervisor of the Columbian priests in Mindanao, said Halley will be buried in Mindanao.
Pankratz said there are about 30 foreign missionaries from the Columbian order in Mindanao, mostly from Europe, with only three or four from the United States.
Senior Superintendent Akmad Omar, director of the ARMM police, said the suspects were seen heading toward the hinterland Ugnayan area regarded as a haven for criminal elements.
Police said they have also mobilized dozens of civilian volunteers led by former Malabang Mayor Anwar Balindong to help track down the killers.
Sources from the Army’s intelligence community said they were looking into reports that a suspected kidnapper belonging to the Maranaw tribe identified as Faisal Marohomsar, who carries a P1-million bounty on his head, could have masterminded the kidnap attempt on Halley.
Marohomsar has reportedly admitted responsibility for about a dozen kidnappings in Cotabato City and other parts of Central Mindanao.
He claimed, however, that the abductions were conducted in protest of alleged government failure to fulfill its promise of livelihood projects for him and his followers.
The MNLF signed a peace agreement with the government in September 1996. Under the accord, the government would provide livelihood projects and other forms of assistance to enable the former separatist rebels to rejoin mainstream of society.
In a statement, Quevedo said the "brutal and unconscionable murder of Halley is a great tragedy."
"The killing of an innocent person is tragic enough. The killing of a respected, much-loved priest and man of God, in the person of Halley, is compounded tragedy," Quevedo added.
With the death of Halley, who was loved by both Muslims and Christians alike, Mindanao lost another peacemaker. — Paolo Romero, Sandy Araneta, Roel Pareño, John Unson