Inner Mongolia Autonomous Region Environment Improvement Project (Phase II)

Environmental Assessment Report

Summary Initial Environmental Examination Project Number: 40634 September 2008

Proposed Loan and Administration of Grant People’s Republic of China: Inner Mongolia Autonomous Region Environment Improvement Project (Phase II)

Prepared by the Government of Inner Mongolia Autonomous Region (GIMAR) for the Asian Development Bank (ADB).

The summary initial environmental examination is a document of the borrower. The views expressed herein do not necessarily represent those of ADB’s Board of Directors, Management, or staff, and may be preliminary in nature.

SUMMARY INITIAL ENVIRONMENTAL EXAMINATION

A. Introduction

1. This summary initial environmental examination (SIEE) presents the assessment of environmental issues relating to development of the Inner Mongolia Autonomous Region (IMAR) Environment Improvement Project II (the Project). The SIEE was prepared in accordance with the Environmental Assessment Guidelines (2003) and Environment Policy (2002) of the Asian Development Bank (ADB). The total cost of the Project is $398.0 million including the ADB loan of $150 million. The anticipated project implementation period is 4 years. The SIEE is based on 10 separate environmental impact assessment (EIA) reports prepared by five local EIA institutes in accordance with People’s Republic of China (PRC) regulations.

B. Project Description

2. The Project consists of (i) eight district heating supply subprojects, (ii) one natural gas supply (NGS) subproject, and (iii) one comprehensive geothermal utilization (CGU) subproject.

Table A.1: Component A Subprojects Subproject New Boilers Boiler Heating SCADA Heat Supply Small Boiler Heating Type Subtations Pipelines Closures Areaa (No.) (km) (No.) (million m2) Hohhot DHS one 3x58 MW, CGS 94 5 344.1 144 5.89 two 2x29 MW, one 4x29 MW Chifeng DHS 224 53.0 37 28.4 Baotou DHS 239 1 18.0 159 9.76 Keyouqian DHS 3x70 MW CGS 28 1 12.5 11 2.55 Kalaqin DHS 24 1 15.7 0 1.10 Zhalaite DHS 4x29 MW CGS 20 1 9.3 27 2.00 Molidawa DHS 3x29 MW CGS 15 1 9.9 13 1.23 Chenbaerhu DHS 2x29 MW CFB 7 1 6.5 1 0.60 Total 883 MW 651 11 469 392 51.53 CFB = circulating fluidized bed, CGS = chain grate stoker, DHS = district heating supply, km = kilometer, MW = megawatt, No. = number, SCADA = supervisory control and data acquisition. a Includes rehabilitated areas and newly constructed heating areas. Sources: Subproject feasibility reports and environmental impact assessments, project preparation consultants.

3. The NGS subproject in Keyouqian Banner will construct (i) 27.58 kilometers (km) of natural gas pipeline, (ii) a pressure-regulating station, (iii) a compressed natural gas filling station, and (iv) a supervisory control and data acquisition (SCADA) system. The single CGU subproject is located in Reshui town of Ningcheng County, which will include (i) two production geothermal wells and one injection well, (ii) 16.5 megawatts of geothermal district heating, (iii) a 4,000-cubic-meter-per-day domestic wastewater treatment facility, (iv) 9.1 km of roads; (v) 2.67 hectares each for geothermal vegetable greenhouses and hot water aquaculture, and (vi) a hot water distribution network.

C. Description of the Environment

4. Air Quality. Air quality in the subproject urban areas in Hohhot and Kalaqin exceed 2

category II of the PRC Ambient Air Quality Standards1 for particulate matter. The World Bank 2 standards for ambient air quality are exceeded for sulfur dioxide (SO2) in Chifeng and Baotou and for total suspended particulates (TSP) in Hohhot, Molidawa, Chifeng, Baotou, Kalaqin, and Reshui. The major pollutants are SO2 and TSP from numerous small, inefficient, domestic and industrial coal-fired boilers. Background ambient noise levels in subproject areas are within category II of the PRC’s Environmental Noise Standard of Urban Area (GB3096-1993).

5. Water Resources. The major rivers flowing through the subproject areas are the Yellow and Kundulun near Hohhot and Baotou; Xibo and Laoha in Chifeng and south; Zuoer, Guiliu, and Taoer in Xing’an Prefecture; and Nenjiang in the east and Erguna in the west of Hulunber municipality. The Reshui River, which flows through the Ningcheng CGU subproject area, is a seasonal river flowing out of mountains. It is polluted with organic pollutants and fails to meet category III of the PRC’s Environment Quality Standard for Surface Water (GB3838-2002).

6. Ecological Resources. The ecology systems in the vast project areas include mountain grassland, forest grassland, desert grassland, desert, forest, and farmland with various species of trees, grasses, shrubs and herbs, as well as planted forests and crops. The main trees include Xing’an larch, Japanese birch, oak, Mongolian scotch pine, dragon spruce, and Chinese pine. The main species of wild mammals and birds include the, roe deer, Mongolian gazelle, badger, fox, squirrel, Mongolian Lark, hickwall, pheasant, hawk, and vulture. Individual project reports indicate that there are no rare, threatened, or endangered species recorded in the immediate vicinity of the proposed subprojects, which are mainly in urban areas. Therefore, the Project is not anticipated to affect any such species.

7. Social and Economic Conditions. IMAR has 31 national poverty counties and banners, and 29 provincial, with 697,000 people living below the poverty line (2005). There are over 40 ethnic minority groups in the project areas, according to data provided by local authorities. Seven groups were encountered during the household surveys undertaken as part of project preparatory technical assistance: Mongolian, Manchu, Daur (Dawaer), Oroqen (Elunchun), Korean, Hui, and Tujia. The highest proportion of poor households is in Molidawa banner, where 23% of the households in the subproject vicinity (Nierji town) are under the minimum living guarantee program. The next highest is Chenbaerhu Banner, where 12.5% of households are poor. The highest proportion of ethnic minority households is in Chenbaerhu Banner, where 95% of households belong to ethnic minority groups. The next highest is the Hongshan district of Chifeng city, where 27% of households are ethnic minority, followed by Yindeer town of Zhailaite Banner, with 22%. The subproject sites will not encroach on any cultural, historical, archaeological, or environmental protection areas, according to the subproject EIAs. The current cost estimate for the Project is CNY2.704 billion ($398.0 million). The cost related to environmental mitigation is CNY97 million ($13.5 million), about 3.6% of the total estimated cost of the Project. A number of alternatives to coal-fired heat generation were assessed, but, with the exception of geothermal heat in Ningcheng County, alternative heating supplies were determined to be unavailable or uneconomical.

1 Ambient Air Quality Standards (GB3095-1996): Category II is residential, commercial, general industrial, and countryside areas. 2 World Bank Group. 1998. Pollution Prevention and Abatement Handbook. Washington, DC.

D. Anticipated Environmental Impacts and Mitigation Measures

1. Environmental Impacts During Construction

8. The Project’s potential environmental impacts on soil include (i) soil erosion, (ii) soil contamination, (iii) temporary and permanent acquisition of urban and agricultural land, and (iv) impacts from construction machinery operation and traffic. Soil erosion may be caused by (i) the construction of district heating supply (DHS) plants, heat-exchange stations, and natural gas supply stations; (ii) the excavation of pipe trenches and spoil earthworks from pipeline construction; and (iii) demolition and site preparation for construction. Soil contamination may be caused by inappropriate storage and disposal of hazardous materials and waste. Agricultural and urban lands may be acquired for permanent structures and temporary material storage areas and construction camps. Construction traffic may degrade surface soils during construction. The Project’s potential environmental impacts on water include increased sedimentation of adjacent water resources from construction and inappropriate wastewater disposal. Construction will disturb surface soils and has the potential to increase sediment runoff into adjacent waterways. Inappropriate disposal of domestic wastewater from construction camps and of wash-down water from construction equipment and vehicles has the potential to affect adjacent surface water resources. Potential environmental impacts on air quality include dust from construction and emissions from construction vehicles. Fugitive dust may be caused by excavation, demolition, vehicle movement, and materials handling, particularly downwind from the construction sites. Air pollution may be caused by emissions from vehicles and construction machinery. Noise may be caused by construction equipment, potentially affecting nearby residential areas.

9. Inappropriate solid waste storage and disposal has potential impact on soil and groundwater and surface water resources, and consequently on public health. Potential impacts on flora and fauna from the proposed Project includes the removal of vegetation and disruption of the ecosystem during construction. In general, the proposed development will occur in urban areas and is not expected to significantly affect flora or fauna. There are no rare, threatened, or endangered species recorded in the vicinity of the proposed subprojects. Potential social and economic impacts during constructions include traffic congestion; threats to public safety from construction activities and heavy equipment traffic; and the unexpected interruption of municipal services and utilities caused by damage to pipelines for water supply, drainage, heating supply and town gas, as well as to underground power and communication cables. Any one of these disruptions to service can have serious impacts on the economy, industries, and residents’ daily lives. Traffic congestion may worsen with the increase in construction traffic during the rush hour, and roads may be closed during construction, causing temporary delays. Construction may require the relocation of municipal utilities such as sewer, gas, water pipes; communication cables; and power lines, which may require the temporary suspension of services to adjacent communities. Construction sites may be located in residential or commercial areas, threatening public safety. Proposed mitigation measures are in the attached management plan.

2. Environmental Impacts During Operation

10. Potential adverse environmental impacts from the DHS subprojects during operation include (i) air pollution from boiler stacks, (ii) noise, (iii) industrial and domestic wastewater disposal, and (iv) solid waste disposal from the boiler station and the heat-exchange substations. The potential for air pollution from boiler stacks applies to the five proposed subprojects, with boilers at Hohhot, Keyouqian, Zhalaite, Molidawa, and Chenbaerhu. The designs for these boilers include post-combustion emission controls, which use dry multicyclone dust collection for

the initial removal of particulate matter followed by a wet scrubber, which absorbs SO2 and fine particulates. Pollution control waste streams are added to the fly ash and bottom ash for disposal. The emission control equipment reduces emissions to below World Bank Standards (footnote 2). The proposed mitigation measures are outlined in the attached environmental management plan.

Table A.2: Predicted Concentration of Pollutants Emission SO TSP NOx Subproject Scope Proposed Abatement Equipment 2 (mg/m3) one 3x58MW, Cyclone separator and wet scrubber Hohhot DHS two 3x29 MW, (combined dust removal rate of 99.65%) 14.1 30.66 546 one 4x29 MW 3x70 MW Cyclone separator and wet scrubber Keyouqian DHS 14.0 33.75 555 (dust removal rate of 99.65%) Zhalaite DHS 4x29 MW Wet scrubber (98% dust removal rate) 16.1 42.46 589 Molidawa DHS 3x29 MW Wet scrubber (98% dust removal rate) 8.8 44.64 554 Chenbaerhu DHS 2x29 MW Baghouse (99.5% dust removal) 13.4 37.06 725 GB13271-2001 900 200 WB Standardsa 2,000 50 750 SO2 = sulfur dioxide, TSP = total suspended particulates, NOx = nitric oxide, MW = megawatt a World Bank Group. 1998. Pollution Prevention and Abatement Handbook. Washington, DC. Source: Subproject environmental impact assessments.

E. Institutional Arrangements and Environmental Management Plan

11. Implementation Arrangements. The Government of Inner Mongolia Autonomous Region is the Executing Agency (EA) for the Project. A project management office (PMO) has been established under the EA to manage project implementation. The project municipalities and prefectures of Hulunber, Chifeng, and Xing’an, which have more than one subproject in their administrative area, will establish project coordination offices under the municipal/league IMAR DRC to manage their subprojects. The Project has been divided into 10 subprojects, and each will be managed and implemented by a separate implementing agency (IA). Prior to project construction, the PMO will set up an environmental management unit (EMU). The IAs will designate environmental personnel to coordinate environmental management. The IA environmental representative will oversee environmental management during construction and operation. The EMU and the IA environmental representative will ensure implementation of the environmental management plan and environmental monitoring plan during project construction and operation. Construction contractors will be responsible for conducting all environmental impact-mitigation measures during construction. The project construction-supervision team selected by the IA will engage an environmental engineer to supervise the contractors’ mitigation of environmental impacts during construction. The small boilers will be closed and dismantled as the new heating supplies come on line. The PMO will monitor the closure of small boilers and report in on progress in quarterly progress reports. ADB will monitor during annual loan review missions.

12. Environmental Management Plan. The PMO is responsible for ensuring that all environmental standards and procedures are followed. A summary environmental management plan (EMP) is attached, based on the EMPs in the subproject EIAs. This will be updated during engineering design, translated into Chinese, and incorporated into all bidding documents. Contractors will be responsible for preparing EMPs based on the summary EMP and will designate an environmental manager. The IA environmental representative will be responsible for reviewing and approving the EMPs and ensuring contractors’ compliance. The IA

environmental representative will be responsible for ensuring EMPs are updated periodically during construction. The EMPs will be implemented by the contractors under the supervision of the EMU and the IA environmental representative.

13. Environmental Monitoring. Draft environmental monitoring plans are included in the subproject EIAs. Monitoring requirements have been clearly defined, including the parameters to be monitored, the numbers and locations of monitoring points, and the frequency and duration of monitoring. Monitoring will be undertaken by local environment monitoring centers under the supervision of local EPBs. Monitoring costs will be paid for by contractors during construction and by end-user IAs during operation. The EMU will collect environmental monitoring data and reports from the IAs’ environmental representatives and prepare environmental monitoring reports, which shall be submitted to ADB annually.

Table A14.3: Environmental Monitoring Framework Monitoring Monitoring Location Frequency Authority Parameter Construction Air TSP Near construction sites and in the Once a Contractor/Local vicinity of sensitive areas month EMC (residences, schools, kindergartens, hospitals, etc.) Noise Leq Boundaries of construction sites Every 2 Contractor/Local months EMC Waste Visual inspection Waste disposal storage areas Quarter Contractor/Local Disposal of disposal EMC activities Operation Air NO2, SO2, TSP, Flue gas from stack, and in the Twice a year IAs/Local EMC PM10 (continuous vicinity of sensitive areas monitoring) (residences, schools, kindergartens, hospitals, etc.) Noise Leq Along plant boundaries Quarter IAs/Local EMC Surface pH, SS, BOD5, Outlet of wastewater discharge and Twice a year IAs/Local EMC 2+ 2+ Water CODCr, Ca , Mg , outlet of WWTP of geothermal sulfate, phosphate, subproject CI- EMC = environment monitoring center, IA = implementing agency, TSP = total suspended particulates, PM10 = particulate matter <10 micron, NO2 = nitric dioxide, SO2 = sulfur dioxide, SS = suspended solids, BOD5 = biological oxygen demand, CODcr = chemical oxygen demand chromium, Ca = calcium, Mg = magnesium, WWTP = wastewater treatment plant, Leq = equivalent continuous noise level. Sources: Environmental impact assessment reports.

F. Public Consultation

14. Public consultation on the environmental impacts of the Project was held in the subproject areas between November 2007 and January 2008. The consultations consisted of 742 randomly selected respondents to questionnaires. The consultations indicated that most of the affected people have a positive attitude toward the Project and believe it will benefit the local environment, living standards, and economic development. Negative opinions on the Project focused on localized soil erosion, noise, and air pollution associated with the construction and operation of the subprojects. The consultation was used to refine impact assessments and mitigation measures.

G. Conclusions

15. It is anticipated that the proposed Project will have significant positive environmental and social impacts in the project area, including the addition of 39.1 million square meters of heating area, savings of 1.092 million tons of coal annually, improvements in indoor and outdoor air quality, and 1.66 million tons less greenhouse gas generated per year. Potential environmental impacts and environmental risks have been identified. Measures have been developed to mitigate the impacts. Based on the findings of the EIAs and SIEE, the adverse environmental impacts of the Project can be minimized to acceptable levels by implementing adequately funded environmental mitigation.