SR12 Public Disclosure Authorized CHINA Public Disclosure Authorized HUIZHOU COMBINED CYCLE GAS TURBINE THERMAL POWER PROJECT (P108516) SAFEGUARDS DUE DILIGENCE REPORT November 2007 Public Disclosure Authorized Public Disclosure Authorized 1 TABLE OF CONTENTS 3 Executive Summary Section A Environmental Assessment Procedures and Documentation 6 A.1 Overview 6 A.2 Huizhou CCGT Power Plant 6 A.3 Connected Facilities 8 Section B Environmental Assessment Issues 10 B.1 Nitrogen Oxide (NOx) Emissions and Air Quality 10 B.2 Thermal Plume Monitoring and Modeling 11 B.3 Daya Bay Water Quality Classification and Ecological Zoning 12 Section C Natural Habitats 13 Section D Resettlement 14 Annex 1 Environmental Assessment Procedures and Documentation 20 Annex 2 Environmental Management Plan (EMP) 23 Annex 3 Public Consultations for the Huizhou CCGT Power Plant 27 Annex 4 Confirmation Letter on the Safety Measures and Designs by the 32 National Safety Production and Supervision Bureau (In Chinese) Annex 5 Safety Standards Used for the Huizhou Power Plant 33 Annex 6 Standards for Safety, Health, Environmental Risk, and Emergency 36 Situations Annex 7 Standard of Management for Control of Emergency Plan and 37 Response (In Chinese) Annex 8 SEPA Approval of LNG Terminal and Gas Pipeline (In Chinese) 50 Annex 9 Approval of LNG Terminal and Pipeline Design (In Chinese) 54 Annex 10 LNG Terminal and Regasification Plant - Cover Pages for the 65 Emergency Response Plan (In Chinese) Annex 11 Sample Inspection Records for the LNG Pipeline 66 Annex 12 Approval Letter for the 220 kV Transmission Line (In Chinese) 68 Annex 13 Map of Daya Bay Ecological Core Zones and CCGT Thermal 70 Plume Characteristics 2 WORLD BANK SAFEGUARDS DUE DILIGENCE REORT EXECUTIVE SUMMARY Background information As the trustee of the Netherlands Clean Development Mechanism Facility (NCDMF), the World Bank intends to purchase Certified Emission Reductions (CERs) to be generated by the Huizhou Gas-fired Combined Cycle Thermal Power Plant from 2008 to 2012. The exact amount of CERs eligible for purchase and the price of CERs will be defined in an Emission Reduction Purchase Agreement (ERPA) to be negotiated and signed between the Guangdong Huizhou LNG Power Company Limited (GHLPCL), the plant owner, and the Bank, on behalf of the NCDMF. ERPA payments will be made annually based on verification of actual CERs by a Designated Operational Entity (DOE), an independent technical expert, accredited by the Executive Board which supervises the CDM for UNFCCC Parties. The World Bank’s role is limited to purchasing emission reduction credits created by the project. The Huizhou Gas-fired CCGT Power Plant comprises of three combined cycle units. At International Standards Organization (ISO) conditions, the total installed capacity is 1,170 MW (3 x 390 MW). Based on gas availability, the latest estimates of annual electricity generation is 3,674 GWh. The electricity generated by the plant is delivered to the Southern China Power Grid (SCPG) which relies mostly on coal-fired power plants. The natural gas is supplied from a re-gasification terminal located near Shenzhen, which receives the LNG from Australia, under a take-or-pay agreement with the Guangdong Dapeng LNG Co. Ltd. This report discusses the findings and conclusions of World Bank due diligence review of the Huizhou Gas-fired CCGT Power Plant and connected facilities (gas pipeline, LNG Terminal and power transmission line), from the perspective of World Bank Safeguards Policies. The report summarizes the findings of World Bank missions to the Huizhou CCGT Power Plant site in March, August and October 2007, and the World Bank task team’s exchanges with GHLPCL, its parent company Yudean Group, and various local and provincial authorities. Safeguards Due Diligence Conclusions The conclusions of the World Bank due diligence review are summarized below: Environment 3 • All Chinese EA requirements were properly satisfied for the construction and operation of the Huizhou CCGT Power Plant. An EIA was approved by the State Environmental Protection Agency (SEPA) in 2001 and plant construction started in 2004. Agreement was reached with GHLPCL to implement an Environmental Management Plan (EMP) satisfactory to the World Bank. • All aspects of CCGT Power Plant operation regarding plant worker and public safety are in strict accordance with Chinese regulations. Furthermore, GHLPCL management is fully committed to environmental protection and plant safety and maintains an organizational structure to manage both in a manner consistent with Western standards. • The connected facilities, namely the LNG Terminal, gas pipeline and power transmission line, were in built and operated in compliance with Chinese EA regulations. To the extent that information was released by owners/operators of these facilities, and based upon actual site visits by the task team, it is believed that these facilities were also built and are operating in strict accordance with Chinese regulations for environment, worker and public safety. • Nitrogen oxide impacts from Huizhou CCGT Plant operation are insignificant. Ambient air quality measurements of nitrogen oxides (NOx) in the vicinity of the Huizhou CCGT Power Plant are all well within Chinese air quality standards. State of the art NOx control technology (LOW NOX Burners) is being used with emission levels well within Chinese emission standards. Flue gases are released through a high stack further reducing the possibility of any significant impacts. • A comprehensive evaluation by Chinese authorities, acting in strict accordance with their regulatory mandate, resulted in an ecological zoning of Daya Bay into specific core zones that effectively protects the natural habitats of endangered and threatened species and allows for economic development outside these core zones. • The only outstanding issue remaining is the potential impact of the cooling water discharge from the Huizhou CCGT Power Plant in meeting Chinese standards and influencing the natural habitats of protected species in Daya Bay. To resolve this issue, GHLPCL agreed to: (a) revise the thermal plume modeling effort to reflect changes in the Huizhou CCGT Power Plant design and operating parameters, and (b) verify the revised modeling effort with a field monitoring program. If the cooling water discharge modeling and field verification program indicate significant impacts in the ecologically sensitive areas of Daya Bay or a violation of Chinese effluent standards, GHLPCL agreed to implement any additional mitigating measures to reduce these impacts to acceptable levels. Resettlement 4 • All permanent land acquisition and temporary land occupation for the Huizhou CCGT Power Plant and connected facilities followed relevant national laws and regulations. For both the power plant and LNG terminal site, land acquisition, completed in the 1990s, and the transfer of land use rights from local governments to the project sponsors was done according to the country’s rules and regulations. For the 220kV transmission lines and LNG pipelines, a limited amount of land acquisition was made, and this was completed in early 2005. Compensations of affected people and collectives followed all relevant national laws and local regulations. Among project-affected villages, there are no concentrated ethnic minority populations. Extensive consultations were carried out and compensation has been paid directly to the affected villages and individuals. No outstanding issues or disputes were reported to Bank missions by affected communities. 5 SECTION A – Environmental Assessment Procedures and Documentation A.1 Overview A summary of the Environmental Assessment (EA) documentation for each of the three CCGT boiler units, and the connected facilities (transmission line, gas pipeline, LNG Terminal and re-gasification plant) is presented in Annex 1 (EA Procedures and Documentation). At the time these EA documents were prepared, disclosure was not a requirement of Chinese EA regulations for an EIA document (equivalent to World Bank EA Category A) and no disclosure is required by local Environmental Protection Bureau for projects requiring an “EA Table” (equivalent to World Bank EA Category B). Dapeng LNG Company was not obligated to provide the EA documentation to the World Bank (gas transmission line, LNG terminal and re-gasification plant) and refused to do so. However, the EA Table of Contents was provided and reviewed by the World Bank task team and it indicated that the document was organized to meet World Bank requirements for a Category A project. A.2 Huizhou CCGT Power Plant A.2.1 Environment Environmental Management Plan (EMP) Annex 2 provides the EMP prepared by GHLPCL. Since the construction of the power plant was completed and it is operating, the EMP focuses on environmental issues associated with the operational phase. The EMP addresses key operational environmental issues identified in the EIA and includes a mitigation plan, monitoring plan and institutional arrangements for environmental management. The task team reviewed the EMP and concluded that it is consistent with World Bank EA requirements. As a condition of ERPA, GHLPCL agrees to implement this EMP. Summary of Public Consultation The public consultation for the Huizhou CCGT Power Plant was conducted in March 2000 as part of the Chinese EA requirements for a project requiring a Full EIA. As is the custom for EIA public consultation in China, the consultation is conducted as a questionnaire survey. Annex 3 provides