Report No. 23500

Report No: I074409 <--Please check for duplicates! Integrated Safeguards Data Sheet (Updated) Public Disclosure Authorized Date ISDS Prepared/Updated: 02/14/2002

Section I - Basic Information

A. Basic Project Data Country: Project ID: P074409 Project: SECOND BASIN PROJECT Task Team Leader: Geoffrey Read Authorized to Appraise Date: March 8, 2002 IBRD Amount ($m): 145.00 Bank Approval: June 25, 2002 IDA Amount ($m): Managing Unit: EASUR Sector: US - Urban Environment Lending Instrument: Specific Investment Loan (SIL) Status: Lending

I.A.2. Project Objectives:

Public Disclosure Authorized The development objective of the proposed Second Liao River Basin Project (LRBPII) is to continue to support environmental recovery of the Liao River Basin (LRB) in Province (LP), to provide a safe environmental setting for the sustainable long-term economic growth of main urban areas of Liaoning, and to enhance integrated river basin water resource management and decision making capacity. These objectives would be pursued in the project cities through (a) provision of facilities for collection and treatment of municipal wastewater; (b) a parallel program of industrial wastewater treatment at source; (c) provision of facilities for effluent reuse, aquifer rehabilitation, and the environmentally secure disposal strategies for wastewater sludge; (d) establishment or enhancement of municipal utilities to manage these facilities; (e) infrastructure upgrading; and (f) technical assistance and training. Public Disclosure Authorized The project water quality objective for environmental recovery is to reduce pollution loads on the LRB as part of an overall pollution control program aiming to achieve by 2010 a minimum of Class V water quality (under 75%ile April flow conditions) for key pollutants throughout the basin. The project represents the second stage of LP's efforts and would target specifically key parts of the basin and the adjacent Bohai Sea with sensitive water uses: municipal water supply, agriculture and aquaculture. This would be achieved by a combination of measures, including: (a) priority wastewater collection, treatment and reuse systems in the major cities in the basin; (b) complementary regulation and pollution control of industrial discharges; (c) environmentally secure disposal of sludge generated by wastewater treatment; and (d) other initiatives to reduce per capita water demand including adoption of water conservation measures in the domestic, industrial and agricultural sectors, demand management through economic pricing of water and Public Disclosure Authorized wastewater services, restrictions on water use for certain activities, and wastewater reuse. This proposed project would include prioritized investments in wastewater management treatment in Shenyang (the largest source of pollution in the Basin), in the main urban areas of the basin, and include urban upgrading in Shenyang.

The Liao River Basin Project (LRBP), which was approved by the Board on June 14, 2001, focused on two cities (Panjin and Yingkou) and one paper-making company in the lower reaches of LRB, and one city (Jinzhou) and one paper-making company in an adjacent river basin discharging into the Bohai Sea. That project also included investments in (a) modern data management systems, including GIS-based systems, complementing the current European Union-EU-supported technical assistance initiative to develop a water resources management strategy for the LRB in Liaoning Province, (b) environmental (water and air) quality monitoring, (c) environment sub-projects, and (d) institutional strengthening and training. The LRBP would support prioritized and complementary environmental investments, aimed at reducing about 30t of the pollution load in theLRB.

I.A.3. Project Description: Project investments in the proposed Second LRBP are intended to further assist in meeting the objectives of improving water quality in the LRB to Class V standard for key pollutants, and protecting water resources. These objectives would be achieved through the collection and treatment of municipal wastewater in additional cities in the LRB, and promoting the treatment of all industrial discharges at source. The planned investments under the proposed project would follow on from investments to be made under LRBP and would concentrate on six localities in the LRB (Liao, Hun, and Xi rivers), treating effluent to meet Class V surface water quality standard for the 75 percentile of low season flows. In addition, wastewater flows from two localities (Jinzhou and Yingkou Economic Development Zones) would be collected and treated because of their high pollutant loads, which have an impact on the Liao River and the Bohai sea water quality and marine environment, due to tidal flows. The following project components are proposed for inclusion in the investment project for Bank financing under the Second LRBP: n Panjin City: wastewater collection systems and a treatment plant of 100,000 tons/day, sludge disposal facilities, and a possible water conservation and reuse component; n Fushun City: wastewater collection systems and a treatment plant of 250,000 tons/day, sludge disposal faclities, and a possible water conservation and reuse component; n Shenyang City: a) wastewater investments including wastewater collection system upgrading, a wastewater treatment plant of 400,000 tons/day, and a possible water conservation and reuse component; and b) urban upgrading comprising investments in public open space infrastructure and essential fabric rehabilitation in Beiling Park, North and East Tomb areas, and the area of the Shenyang Palace. Restoration and conservation would be included for selected priority items; n Fuxin City: wastewater collection systems, including a wastewater treatment plant of 100,000 tons/day, and a possible 60,000 tons/day water reuse component; n Jinzhou Economic Development Zone: wastewater investments including a wastewater treatment plant of 20,000 tons/day; n Yingkou Economic Development Zone: wastewater investments including a wastewater treatment plant of 100,000 tons/day; and n Institutional Strengthening, Training and Construction Supervision Services: measures to strengthen provincial government and city government agencies to improve their efficiency in service delivery, training, and consultant services for construction supervision.

-2 - Components: Panjin Wastewater Interception & Treatment Fushun Wastewater Interception & Treatment Shenyang wastewater Interception & Treatment Fuxin Wastewater Interception & Treatment Jinzhou Economic Development Zone Wastewater Interception & Treatment Yingkou Economic Development Zone Wastewater Interception & Treatment Shenyang Urban Upgrading Institutional Strengthening and Training

I.A.4. Project Location: (Geographic location, information about the key environmental and social characteristics of the area and population likely to be affected, and proximity to any protected areas, or sites or critical natural habitats, or any other culturally or socially sensitive areas.) Sector Setting Liaoning is a coastal province in the southern part of and is a key link between China's Northeast economic zone and the Bohai Sea Rim economic zone. The province overlooks the Bohai and Yellow Sea in the south and faces the Korean Peninsula across the Yalu River to the Southeast. Liaoning is a communication hub, connecting with the Eurasian rail bridge into Russia and a vital link for China's Northeast region to conduct foreign trade and international exchange. Archaeological discoveries have shown that the province has been occupied by humans for over 280,000 years. Stone age tools have been discovered along with a variety of cultural relics. Liaoning was the birthplace of the last feudal dynasty of China, the Qing Dynasty which ruled from 1644 until 1911. Liaoning province covers a total area of 145,900 km2 and has a total population of 41 million. The province has jurisdiction over 14 cities, 17 county level towns and 17 counties. The provincial capital is Shenyang. The province enjoys a continental monsoon climate of the North Temperate Zone and has four distinguishable seasons. During the winter, a temperature range of -150 to 5o Celsius is experienced, with January being the coldest month. During the summer temperatures rise to between 22o to 26o Celsius. Annual rainfall averages 715 mm and 70 percent of this precipitation occurs between June and September.

Liaoning is rich in natural resources. More than 100 varieties of minerals have been discovered and the deposits of iron, boron, magnesite, diamond, talcum, jade and solvent-grade limestone rank among the largest in China. The main oil pipeline from the Daqing oilfield in Heilongjiang province to the ice-free port of Dalian in the south of Liaoning traverses the province. More recently, the Liaohe oilfield has been exploited. This now ranks as China's third largest oil and gas field, accounting for 15 percent of China's total oil production. The exploitation of the abundant natural resources within Liaoning has created a major raw materials and industrial base within China. Much of this development has taken place at a rapid pace, with a catastrophic impact on the environment. The water resources within the province have been both badly depleted and polluted by the heavy industries that have been established. One of the worst affected areas lies within the Liao River catchment. This river basin is now recognized as one of the most environmentally degraded within China, and the State Council has identified pollution control and other environmental improvement measures as a key national priority.

The Liao River Basin within Liaoning, covers an area of 42,000 km2 of

- 3- which 27,000 km2 form the Hun/Taizi/Daliao rivers catchment and the remaining 15,000 km2 form the Liao river catchment. The three main rivers (Liao, Hun and Taizi) flow in an approximately Northeast-Southwest direction across the province. In 1995, the gross annual output of the Liao River Basin totalled 305 billion RMB, representing about 60 percent of the total provincial output. Heavy industry contributes more than half of this. The remainder is from over 900 large and medium state enterprises located in the basin. The output from Township and Village Industrial Enterprises (TVIE) has increased rapidly and in 1995 contributed 28 percent of provincial output. The Liaohe Plain is very fertile and has been a major grain producer for many years. Some 2 million hectares of land are under cultivation within the Liao catchment representing 29 percent of the total basin area. The value of the agricultural output in 1995 was approximately 20 billion RMB.

The plain is the home of Liaoning's major cities and most of the province's large industrial base. In total, a population of 22.8 million people live in the Liao catchment within the province and this figure represents about 56 percent of the total Liaoning population.

Environmental Conditions Liao Basin Issues The three major rivers which form the Liao He catchment within Liaoning Province of northeast China are the Liao He, the Hun He and the Taizi He. As a result of intense urban and industrial development over the past fifty years the Liao river basin is recognised as one of the most environmentally degraded regions within the whole of China. The evidence of extreme pollution is widespread and includes pollution of surface water systems, groundwater aquifers and the poor air quality. This not only affects the lives of the residents but also the provincial economy as pollution reduces economic development. The urban population and the industrial complexes that do not have wastewater treatment facilities are the main sources of surface water pollution within Liaoning Province. From a review of data obtained from the Provincial Environmental Protection Bureau (PEPB), it is apparent that with the exception of their upper reaches, all major rivers within the province do not comply with the minimum permitted surface water quality of Category V classification of GHZB 1-1999 Environmental Quality Standard for Surface Water. A brief summary of the current situation within the major rivers of the Liao River Basin is given below.

The West Liao is not heavily polluted as it enters the province from Autonomous Region. However, the East Liao is heavily polluted with oils and phenols as it enters the province from Jilin Province. The situation is worsened by the wastewater discharged by Tieling and, further downstream, Panjin. Above Dahuofang Reservoir the Hun River is of excellent quality. The major sources of pollution are wastewater discharges from Fushun and Shenyang. Below Shenyang, the water quality is poorer than Category V classification, which is the worst category. Above Yinkou, the water quality within the Daliao River is generally poor as a result of the upstream discharges. However, the situation is made worse by the municipal wastewater from Yingkou and the industrial wastewater from Yingkou Paper Factory. The Liao River Basin Schematic on Figure 2.1 shows the municipal wastewater discharges exceeding 10,000 m3/d together with major industrial wastewater discharges

- 4 - exceeding 3 tonnes of COD per day.

Pollution Loads According to the Tenth Five Year Plan, the total organic pollution from the basin discharge is 594,400t/y of which most comes from the industrial cities. There are only ten urban wastewater treatment plant, which can treat 219of the total urban discharge from 29 cities. According to the statistics for 8 provincial controlled cities, industry generates 42t of the urban discharge.

B. Check Environmental Classification: A (Full Assessment) Comments: The project is expected to yield significant positive environment, social and economic benefits. It has been proposed as a Category S2 Project. C. Safeguard Policies Triggered Policy Applicability Environmental Assessment (OP/BP/GP 4.01) Yes Forestry (OP/GP 4.36) Yes Natural Habitats (OP/BP 4.04) No Safety of Dams (OP/BP 4.37) No Pest Management (OP 4.09) Yes Involuntary Resettlement (OP/BP 4.12) No Indigenous Peoples (OD 4.20) Yes Cultural Property (OP 4.11) No Projects in Disputed Territories (OP/BP/GP 7.60)* No Projects in International Waterways (OP/BP/GP 7.50) No *By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

Section II - Key Safeguard Issues and Their Management D. Summary of Key Safeguard Issues. Please fill in all relevant questions. If information is not available, describe steps to be taken to obtain necessary data.

II.D.la. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts. The wastewater treatment plants will substantially improve water quality in the LRB, assisting in achieving compliance with the Class V standards for COD under 75%ile April flow conditions. During the winter months (when temperatures are substantially below zero throughout the day and minimum temperatures are frequently below -20 oC) compliance with standards may not be achieved depending upon natural river flows, which in this period are very low. However, there is little if any direct beneficial use of river water during this period, and the rivers are largely covered by ice.

The water conservation and reuse components of the project will reduce the levels of demand on the very limited and currently heavily exploited water resources of the LRB. This will have the further benefit of reducing wastewater flows and thereby increasing the levels of dilution available in the basin rivers.

The wastewater treatment plants, particularly the very large plant for the city of Shenyang, will generate substantial quantities of sludge that

- 5- will require safe and environmentally sound disposal. The use of sludge as a soil conditioner in agriculture is limited by the adverse winter climate of Liaoning, and therefore the primary sludge disposal route would be by landfill. This will add significantly to the quantities of solid wastes requiring landfill and therefore have significant impacts upon local landfill resources in terms both of capacity and secondary impact (landfill gas and leachate). Reuse of treated wastewater will reduce the demands on the limited water resources of the LRB but poses risks in terms of contamination and health if adequate controls are not in place. These risks would be minimized in any proposed reuse components by additional treatment and by restrictions on types of reuse.

II.D.lb. Describe any potential cumulative impacts due to application of more than one safeguard policy or due to multiple project component. None envisaged at this stage. The project would be highly beneficial, and cause minimum disruption.

II.D.lc Describe any potential long term impacts due to anticipated future activities in the project area. Notwithstanding the limited water resources of the LRB, and Liaoning province overall, LP has ambitious plans for increasing both industrial and agricultural output, to meet economic growth and poverty alleviation goals. Without initiatives to reduce water demands per unit of output, the level of water resource utilization will become unsustainable. Long term benefits of the proposed investments would be distinctly positive, underpinning economic growth, while also restoring degraded waterways, improving water quality, enabling the water depandant fauna and flora to regerate, and making clear progress towards providing a safe environment for agricultural and recreational use in the Basin.

II.D.2. In light of 1, describe the proposed treatment of alternatives (if required) All landfills used for the reception of sludge will need to be designed and operated to international standards of sanitary landfill practice. To reduce the quantities of sludge requiring disposal, sludge treatment options involving either sludge digestion or incineration of dewatered sludge are being evaluated. These would be considered in detail during the next stages of project preparation.

II.D.3. Describe arrangement for the borrower to address safeguard issues Full EA (and RAP, where appropriate) which will be cleared at statutory level in China and review and cleared by the Bank. Detailed sludge management plans will be prepared for review by the Bank and will be required to demonstrate sustainability of disposal routes.

II.D.4. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. Consultation will continue at all levels.

E. Safeguards Classification. Category is determined by the highest impact in any policy. Or on basis of cumulative impacts from multiple safeguards. Whenever an individual safeguard policy is triggered the provisions of

- 6 - that policy apply.

I S1. - Significant, cumulative and/or irreversible impacts; or significant technical and institutional risks in management of one or more safeguard areas [XI S2. - One or more safeguard policies are triggered, but effects are limited in their impact and are technically and institutionally manageable I S3. - No safeguard issues I SF. - Financial intermediary projects, social development funds, community driven development or similar projects which require a safeguard framework or programmatic approach to address safeguard issues.

F. Disclosure Requirements Environmental Assessment/Analysis/Management Plan: Expected Actual Date of receipt by the Bank 2/15/2002 Date of "in-country" disclosure 12/31/2001 Date of submission to InfoShop 2/15/2002 Date of distributing the Exec. Summary of the EA to the ED (For category A projects) 2/22/2002 Resettlement Action Plan/Framework: Expected Actual Date of receipt by the Bank 12/31/2001 Date of "in-country" disclosure 12/31/2001 Date of submission to InfoShop 2/15/2002 Indigenous Peoples Development Plan/Framework: Expected Actual Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Pest Management Plan: Expected Actual Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Dam Safety Management Plan: Expected Actual Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop

If in-country disclosure of any of the above documents is not expected, please explain why. Signed and submitted by Name Date Task Team Leader: Geoffrey Read October 18, 2001 Project Safeguards Specialists 1: Chaogang Wang/Person/World Bank October 18, 2001 Project Safeguards Specialists 2: Chaohua Zhang/Person/World Bank October 18, 2001 Project Safeguards Specialists 3: Sun Chongwu January 18, 2002 Approved by: Name Date Regional Safeguards Coordinator: Glenn S. Morgan October 26, 2001 Sector Manager/Director: Keshav Varma October 18, 2001

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