Report No. PIC4820

Project Name -Xiaolangdi Multipurpose Project Stage II (#)

Region East Asia and Pacific

Sector Hydro / Natural Resource Management

Project ID CNPE34081 Public Disclosure Authorized Implementing Agency Water & Hydropower Development Corp. (YRWHDC) Ministry of Water Resources Contact: Mr. Wang Xianru, Vice General Manager Xiaolangdi Site, City Province P. R. China Tel. 86 379 390 5221 Fax. 86 379 390 5247

Environmental Category A

Date Prepared February 14, 1997 Public Disclosure Authorized Projected Appraisal March 10, 1997

Projected Board Date June 2, 1997

1. Sector Background The Yellow River is the second longest water course in China and traverses nine provinces (Qinghai, Sichuan, Gansu, Ningxia, Inner Mongolia, Shaanxi, Shanxi, Henan, and Shandong). The catchment area accounts for 7T of China's total land area and supports the agriculture of 130 million people over a cultivated area of 12.7 million ha. (139 of the total cultivated area of China). Some of the most fertile and densely populated lands (2 million ha) in China are in the lower reaches of the Yellow River mainly in Henan Public Disclosure Authorized and Shandong Provinces. Floods in the lower reaches have brought severe destruction to farmlands and cities killing thousands of people and causing billions of dollars of damage. In addition, because of the young geomorphology of the loess plateau, soil erosion in the mid- regions of the river has resulted in enormous sediment being transported into the river (1.6 billion cum per year), depositing about W of this silt in the lower reaches of the river, which has caused the river bed to rise 3-5 meters higher than the surrounding ground. Historically, flood calamities in the lower reaches have affected 12 million ha and 70 million people in the provinces Henan, Shandong, and parts of Anhui, Hebei and Jiangsu. An enormous effort in fighting floods has been going on in the lower reaches for several centuries by building up the levees. However, despite these efforts floods have caused damage three Public Disclosure Authorized out of every four years.

2. Since 1955 the government has made great strides in developing a master plan for water resources which consists of a proposal to build 27 major for harnessing and controlling the Yellow River for hydropower, irrigation, municipal and industrial (M & I) water supply, mainly for the upper and middle reaches of the river. The master plan also proposes to implement comprehensive soil conservation measures to reduce silt flowing into the river. Seven major dams (of the 27 planned) have been built across the river.

3. The upper reaches of the river, which contribute 60t of the water resources, are now fairly well regulated. However for the lower reaches the only constructed (Sanmenxia) has had to be modified (resulting in only partial regulation of flood waters) to cope with large volumes of silt which filled the reservoir area within two years after its completion. The lower reaches of the Yellow River are currently protected only by flood levees. These have to be raised every 10 years at a cost of about $2 billion each time, and have to be maintained every year at a cost of $100 million. The levees at present do not provide adequate protection for the 103 million people below them, some key cities (Zhengzhou, Kaifeng, Xinxiang, Jinan, Heze, Liaochang, Dezhou, and Jining) and vital industries like the Shangli and Zhongyuan oilfields which produce about one fourth of the crude oil for China. In addition, because of the lack of regulation of water in the lower reaches, adequate irrigation water is available only once every three years, as against possible perennial irrigation for about 1 million hectares, and water supplies for cities (Beijing, Tianjin, Qingdao, Zhengzhou, Kaifeng, etc.) and for industries is very limited. Several cities such as Qingdao have to shut industries several hours every day because of lack of water. In order to solve some of these problems, the master plan recommends that the most cost effective solution will be the construction of Xiaolangdi Dam near Zhengzhou in Henan

4. Project Objectives The objectives of the project are: to provide flood protection for 103 million people in the North China Plain in rural areas, several large and medium cities and major industrial centers; to control sediment accretion in the lower reach of the Yellow River for a period of about 20 years; to generate much needed hydropower; and to supply irrigation water (and increase the reliability of irrigation) for some 2 million hectares and ensure more stable water supplies for downstream cities and industries.

5. Project Scope The project will finance the second stage in the construction of a dam and hydroelectric power plant on the Yellow River. The first stage, which consisted of the Xiaolangdi Multipurpose Dam Project and the associated Xiaolangdi Resettlement Project, was approved by the Bank Board in April 1994. The main features of the Xiaolangdi Multipurpose Project are (a)_a rockfill dam, 154 m high, with a crest length of 1,370_m; (b) a common intake structure, feeding nine large-diameter tunnels and a surface spillway for river diversion, flood handling and sediment management; and (c) a with six power tunnels with turbine and generators with an installed capacity of 1,800 MW (6 x 300_MW). Civil works have been under construction since 1994

-2 - under three contracts awarded following international competitive bidding procurement procedures. The contracts have an estimated total value to completion of US$883.2 million equivalent and the first-stage World Bank loan (Ln. 3727-CHA) financed US$386 million of this amount. The proposed second- stage project will provide Bank funding for (a) completion of the civil works contracts; (b) training in operation and maintenance (O&M)of the dam, powerhouse and related facilities; (c) planning and personnel training for operation of the project in the interests of flood control, sediment management, irrigation and water supply; and (d) creation of a flood forecasting system including training and equipment. As reviewed below, the implementation of stages 1 and 2 of the dam project will entail the resettlement of 200,000 people, which has been supported under a separate project.

6. Project Cost and Financing The total costs of the project are estimated to be $2,522 million equivalent, of which $1,140 million (45 percent) represents the foreign exchange component. These estimates exclude the costs of the resettlement program, totaling $821 million, financed under a separate project. The project base costs are in January 1997. Project financing would be provided as follows: $1,208 million from government contribution, $286 million from local bank loans, $138 million from export credit and $460 million and $430 million from the first and second Bank loans.

7. Implementation The project implementation period is 5 years (1997-2001). The Ministry of Water Resource (MWR) has overall responsibility for implementing the Xiaolangdi Project. A Central Project Leading Group, established under the leadership of the State Council consisting of a vice- minister of MWR and directors from the Ministry of Finance, the State Planning Commission, and Vice Governors of Henan and Shanxi Provinces, to oversee project management, resolve policy matters and solve interdepartmental/interagency problems.

8. Project Execution: The executing agency for implementing the project is the Yellow River Water and Hydropower Development Corporation (YRWHDC). YRWHDC has appointed an independent engineer Xiaolangdi Engineering Consulting Company (XECC) to be responsible for construction supervision of the project. YRWHDC will coordinate with the provincial Project Management Offices of Henan and Shanxi Provinces on matters relating to resettlement and land acquisition. YRWHDC is a state-owned enterprise whose main function is to build, operate and maintain the dam and power station. The general manager of YRWHDC reports to MWR. These organizations have performed well in implementing the first-stage project and will remain in place for the proposed second-stage project.

9. Project Sustainability The design of the dam is based on similar upstream dams functioning under large silt loads,

-3 - and the designs have been tested by prototype technical studies. The safety factors used were conservative. The sustainability of technical operation of the project is therefore as certain as possible, given state-of-the-art technology in design of large dams. Project charges for power and water supply needed to recover the capital costs and to finance operation and maintenance are not excessive, making financial sustainability reasonably certain.

10. Environmental Aspects This project is classified as a category A project requiring a full environmental impact assessment (EIA). An EIA covering both stage 1 and stage 2 was carried out in 1993 by the Reconnaissance Planning and Design Institute (RPDI) with assistance of 20 design institutes for different aspects of the project and from international consultants. A copy of the complete EIA was sent to the Project Information Center (PIC) in March 1993. An update of the EIA was completed in February 1997 and will be submitted to the Board and PIC in early March 1997 prior to appraisal departure. The major environmental threat in the lower Yellow River region is catastrophic flooding. Xiaolangdi Project will offer virtually complete protection in the downstream reaches against the 1-in-1,000-year flood. Due to the initial sediment trapping and longer-term sediment regulation operations in Xiaolangdi, the project will also defer dike raising and strengthening for 20 years and reduce the magnitude of dike reconstruction thereafter.

11. The major social and environmental impact related to the project is resettlement of 200,000 mostly rural residents to be displaced by the reservoir. The resettlement program is comprehensive and represents a pioneering effort in project resettlement in China. The resettlement program is designed to ensure that the population subject to resettlement, both relocatees and hosts, should not only maintain current standards of living but should share in project benefits. The resettlement program is discussed in more detail in paras. 14- 16.

12. Three other potential environmental issues are raised by the project: dam safety; salvage of archeological relics; and public health and disease control. The dam has been designed to ensure its integrity in the event of earthquakes, and the results of detailed dam break analyses of both Sanmenxia and Xiaolangdi have been incorporated into Xiaolangdi's design. Offsetting plans have been developed specifically for the salvage of cultural relics and protection of public health. As a result of the environmental assessment of the project, an overall Environmental Management Plan (EMP) has been developed. The EMP covers the full implementation period from 1994 to 2010. Since the environmental impacts overlap with the Xiaolangdi Resettlement Project, some activities of the EMP have been incorporated into the resettlement project. The agencies participating in the EMP and the cost and duration of the required activities are described in the EIA summary

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13. A Environmental Management Office (EMO), with responsibility for monitoring all environmental protection measures, was established in YRWHDC in June 1994. During the past 2 1/2 years, YRWHDC has: employed an international panel of independent experts to review and make recommendations in respect of the EMP; maintained its EMO with competent staff in adequate numbers and with responsibilities and functions acceptable to the Bank to manage, coordinate and monitor the implementation of the EMP; made sure that all activities under the Project comply with environmental standards and guidelines satisfactory to the Bank, including those relating to dam safety, the preservation of archaeological relics and public health and disease control; ensured that all necessary measures are being taken to mitigate adverse environmental impacts caused by the construction, and that the EMP is implemented in a timely manner.

14. Land Acquisition and Resettlement Aspects The project requires the resettlement of about 200,000 people, which is being financed by a US$110 million IDA Credit (Cr. 2605-CHA). The people will be moved in four stages, between 1992 and 2011. About 9,900 people were resettled in 1994 and a further 46,000 will be resettled by May 1997. The main objective of the resettlement plan is that both resettlers and host communities affected will not be disadvantaged by the project. Resettled families are being established in a new location where the house, yard and amenities will be at least as good as the family's previous situation; the family's new earning potential will be at least as good as previously; and the family's expenses and loss in income in making the transition will be duly recognized and accounted and compensated for. These objectives will be achieved by provision of investment funds and technical assistance for economic development, housing, amenities and public services, and social and cultural effects.

15. Several socio-economic surveys have been undertaken during the past 2 1/2 years to track the welfare of resettlers after resettlement. In aost all cases, more than 95t of resettlers were very satisfied with the resettlement process. These surveys indicate that incomes have risen quite dramatically, from Y485 per capita in 1993 to Y1,104 per capita in 1995 (see table below).

Income Y Number of Families Number of Families before resettlement after resettlement

<300 35 42.7 19 23.2 300-500 20 24.2 11 13.4 500-800 16 19.5 15 18.3 800-1000 3 3.7 10 12.2 >1000 8 9.8 27 32.9

-5 - 16. Project Benefits The primary motivation for the Xiaolangdi multipurpose reservoir project is flood and sediment control. Xiaolangdi reserves 4.1 billion m3 of long- term reservoir storage for major flood control in the wet season, and, in the dry season, 2 billion m3 for downstream ice management. In the first 20 years of Xiaolangdi's operation, 7.5 billion m3 of coarse sediment can be trapped in reservoir dead storage, and, after the reservoir reaches long- run equilibrium, it can be operated so as to pass floods (with the exception of major floods) and their sediment loads, together with all of the sediment accumulated during the nonflood season, through the reservoir and the lower reach. Secondary benefits of the project are substantial, primarily from power generation and irrigation. The discounted incremental economic benefits of the project at full development include Y 8,737 million for flood control, Y 4,170 million for sediment control, Y 5,700 million for power generation, and Y 21,236 million for improved irrigation. The present value of the economic benefits of the project, discounted at 12 percent to the present, is Y 39,8439 million ($4,800 million). The economic rate of return is 23 percent.

17. There are also significant social and environmental project benefits. In particular, flood control will substantially reduce the risk of loss of life in the case of a major dike breach. Xiaolangdi's control of sediment deposition also reduces the risk of dike failure. Finally, Xiaolangdi's operation will substantially reduce the social and environmental risks attendant on uncontrolled flooding and diversion of a substantial portion of the total Yellow River flow over a new course perhaps 800 km to the sea.

18. Program Objective Categories: (a) Natural Resource Management: The project will protect a vast area in the lower Yellow River Reach from floods. It will also stabilize the greatest regional water deficit in China today, which has resulted in massive lowering of water tables and depletion of rivers, some beyond the possibility of recovery. The project will also stabilize the Yellow River siltation in the river bed for a period for 20- years during which period the soil conservation measures can take effect. (b) Removing Infrastructure Bottlenecks: Regional water shortages is a critical constraint to future agriculture and industrial development. The project would significantly assist in breaking that bottleneck. In addition, the project would support the Government in its ongoing efforts to carry out policy and regulatory reforms in the water sector.

Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454

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Note: This is information on an evolving project. Certain components may not necessarily be included in the final project.

Processed by the Public Information Center week ending March 14, 1997.

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