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Thailand (EGAT), and a 25-Year Gas Supply Agreement (GSA) with PTT Public Company Limited (PTT)

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Thailand (EGAT), and a 25-Year Gas Supply Agreement (GSA) with PTT Public Company Limited (PTT) Social Safeguards Compliance Audit Report Project Number: 44946 May 2011 THA: Nong Saeng Natural Gas Power Project THA: Nong Saeng Natural Gas Power Project Social Safeguards Compliance Audit Report I. INTRODUCTION 1. The Nong Saeng Natural Gas Power Project (the ‘Project’) entails the construction of a 1,600- megawatt combined cycle power plant in Nong Saeng district, Saraburi Province, 100 km north of Bangkok. The Project’s power station components are located in Nong Saeng District in Saraburi Province while the water reservoir area is located in Pha Chee District, Ayuthaya Province. The Project will be developed and implemented under a 25-year power purchase agreement (PPA) with the Electricity Generation Authority of Thailand (EGAT), and a 25-year gas supply agreement (GSA) with PTT Public Company Limited (PTT). Project construction and operation costs and fuel costs are passed through to EGAT under the PPA. The Project is a public-private partnership (PPP) under the Independent Power Producers (IPP) program that utilizes commercial energy from power plants with capacities greater than 90 MW. An interconnecting pipeline from the plant will connect to PTT’s existing Wangnoi-Kaengkoi transmission pipeline 20 kilometers away. A new transmission line will also be constructed to connect to EGAT’s system 1.5 kilometers away. The Project is owned by Gulf JP NS Company Limited (the ‘Company’). 2. A Mission1 was fielded on 8-10 March 2011 to conduct an environmental and social due diligence of the Project. The Mission visited the Project site including the point of connection of water and gas pipelines, drove along the alignment of the water and gas pipelines, and interviewed affected people. At the time of the site visit, land procurement was completed and ground clearing and grading being undertaken for both the power plan and reservoir sites. This audit report was prepared in compliance with the 2009 ADB Safeguards Policy Statement (SPS), Safeguards Requirements (SR) 4 covering Special Requirements for facilities/business activities that already exist or on-going at the time of assistance consideration. The audit aims to (i) identify past or present concerns related to impacts on involuntary resettlement (physical or economic displacement) and ethnic minorities/Indigenous Peoples; (ii) determine whether actions were in accordance with ADB SPS SR 2 (Involuntary Resettlement) and SR3 (Indigenous Peoples) principles and requirements. II. AUDIT FINDINGS A. Involuntary Resettlement Safeguard 1. Scope of Prior Land Procurement 3. The Project components requiring (i) procurement of land are the power plant station, water reservoir, and water intake structure and water pumping station, earth dike; and (ii) use of existing right- of-way (ROW) are the wastewater discharge pipeline, water supply pipeline route, and gas pipeline route. Currently, the Project has acquired approximately 560 rai or 90 hectares of land out of which, almost 99 percent of land are devoted for the power plant and water reservoir area. Approximately 0.16 hectares of land has also been acquired for the pump station at the water intake point located on the south bank of Pasak River. The water discharge point is located adjacent to the south boundary of the Project site next to a river channel, thus no right-of-way acquisition is required for the water discharge pipeline alignment. 4. The gas and water pipelines route will utilize existing ROW. The water intake pipeline, approximately 15km, will be constructed along the Rapeephat Canal which is a public way and do not pass any private land. The gas pipeline will be constructed along the land of governmental units, namely, the Electricity Generating of Thailand (“EGAT”), the Department of Highway (“DoH”) and Royal Irrigation of Thailand (“RID”) and will not pass any private land. EGAT will construct a transmission line (approximately 2km) to evacuate power from the Project to Pha Chee 2 Substation. Pha Chee 2 1 The site visit mission comprised contingents from the Japan Bank for International Cooperation (JBIC), the Asian Development Bank (ADB), the Mizuho Bank, and environmental and social experts commissioned by lenders and Gulf JP NS. 1 Substation is not an associated facility since it not exclusively used by the Project. It is a large substation that EGAT will construct to connect with Tha Ta Ko and Wang Noi Substations. 2. Applicable National Laws/Regulations Governing Transfer of Land to the Project 5. The purchase and/or the acquisition of any parcel of land in Thailand, in general, are governed by the Thai Civil and Commercial Code and the Thai Land Code. Significantly, the codes reserve the right to own the land in favor of Thais (including a Thai company incorporated in Thailand, in which 51% or more of its share capital is held by Thai person(s)) and provide certain procedures for the transfer of land ownership. For example, the laws require a sale and purchase agreement of land between the seller and the purchaser to be made in writing and registered with the competent land authority where the land is situated. The terms and conditions of the sale and purchase agreement of land normally set forth by the parties under the rule of freedom of contract as long as they are not contrary to the provisions of other Thai laws. While there is no particular law involving the calculation of the land purchase price to be agreed upon by private individuals or companies, the parties could freely indicate the land purchase price which is understood to be reflective of market price and not lower than the appraisal price declared by the relevant authority. However, this is different from the case where the government authority proceeds with the land expropriation where the certain specific factors for calculating the compensation for the land would be taken into consideration by virtue of the Land Expropriation Law. The land possession of the Company for the Project followed the legislations described above. The land utilized for the Project is owned and is titled under the name of the Company. 6. The utilization of land is generally subject to the Town and City Planning Laws which empower the relevant authorities to prescribe the particular provisions of the land utilization in certain areas deemed appropriate by issuing Ministerial Regulations. Accordingly, once the applicable Ministerial Regulations are enforced in any particular area, the utilization of the land must be in compliance with the provisions of such Ministerial Regulations. Prior to procurement, the land parcels to be used by the Project were classified as agricultural. The draft Ministerial Regulations provides for new administrative procedures governing change in land use. However, this regulation will not have retroactive effect on the Project. The Company has procured the land and obtained the Factory License from the Department of Industrial Works on 17 June 2010, therefore, at the time the land was acquired, there was no applicable ministerial regulation covering land utilization. 3. Scope of Involuntary Resettlement Impacts 7. Land for the various project components were acquired through willing buyer-willing seller basis. The Company has appointed an intermediary (it is normal practice in Thailand that a corporation procures land through intermediaries) to negotiate and purchase the land for the Company from private land owners. Land procurement and purchase have started as early 2008 and these were undertaken because these were required by the Project. The procurement price reflects fair market price or even higher following the procedures of applicable national laws and regulations. The transfer of landownership was registered under the Land Registration System of Thailand. 8. Agriculture is a major source of livelihood for most the people in Saraburi and Ayutthaya provinces. Most of the landowners in the area are local people and are well to do. Many of them have large landholdings, which are often leased to renters while the landowners themselves engage mainly in agricultural business. There are also a number of major industries in the area such as gypsum manufacturers, ceramics manufacturers, electronic products manufacturers, automotive parts manufacturers, food manufacturers and power plants, are located. Some landowners work as employees in these factories, while others are local government offices. 9. Detailed information found in Attachment 1 Summary of Main Project Component, Attachment 2 Project Facilities Map, and Attachment 3 List of Land Ownership Prior to Procurement. 10. Prior to land procurement, there were 13 farmers who rented the land parcels for cultivating rice. Many of the renters rent several land parcels in the area other than the land in the Project site to cultivate 2 rice. Thus, acquiring the land does not create significant impacts to these renters because they still have other rented lands to cultivate. The renters requested the Company to pay compensation for lost opportunity. Compensation was paid directly to each renter, and after concluding the purchase of the land, the Company informed the renters that land can still be used until the construction commences. In addition, the Company offered employment opportunities for some of the renters to work for the Project as gardeners. 11. Compensation has also been paid to chicken and mushroom farm owners who were concerned that changes in the environmental condition in the area (i.e. possible elevated noise and temperature level, water quality) would adversely affect their income. While these are technically not involuntary resettlement impacts as defined in the SPS, these are in any case perceived economic impacts due to environmental media and were addressed by the Project in accordance with agreements with the local community. Chicken Farm Owners. Based on earlier assessments, there are two (2) chicken farms within a couple of kilometers radius, and another six (6) within more that two (2) kilometers radius that might be affected by the Project. The farm owners are concerned of the impact of the Project as it becomes operational and may cause elevated noise and temperature level around the area, thus productivity might be affected.
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