EXECUTIVE SUMMARY OF THE PHASE 2 ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT PROCESS SAKHALIN II PHASE 2 PROJECT November 2005 Sakhalin II Phase 2 Environmental and Social Executive Summary TABLE OF CONTENTS Section 1 Introduction 3 Section 2 Sakhalin Island 5 Section 3 Sakhalin II Phase 2 Project Description 6 Section 4 Benefits to Russia 9 Section 5 HSE Management 9 Section 6 Social Management 10 Section 7 Contractor Management 12 Section 8 Public Consultation and Disclosure 13 8.1 Consultation in Japan 14 8.2 Public Disclosure of Documents 14 Section 9 Phase 2 Project Alternatives 15 9.1 The Platforms 15 9.2 Onshore Processing Facility 16 9.3 Offshore and onshore pipelines 17 9.4 Liquefied natural gas and oil export terminal 19 Section 10 Environmental and Social Impact Assessments 21 10.1 Preliminary EIA and Russian approvals requirements 21 10.2 International-style ESHIA 21 10.3 Environmental and social Addenda 25 Section 11 Impacts, Mitigation and Monitoring 29 11.1 Environmental Impacts, Mitigation and Monitoring 29 11.2 Social Impacts, Mitigation and Monitoring 52 11.3 Addressing Grievances 64 11.4 Social Monitoring activities 65 Section 12 HSESAP 66 Sakhalin Energy Investment Company 2 0000-S-90-04-P-7069-00-E Sakhalin II Phase 2 Environmental and Social Executive Summary Section 1 Introduction This document provides the reader with a summary of the environmental and social impact assessment work that has guided the definition and delivery of the Sakhalin II Phase 2 Project. It provides a summary of the likely impact of the project and what it is expected to bring to the people of Russia. It describes the Company’s approach to the management of Health, Safety and Environment (“HSE”) and socio-economic matters, as well as its requirements from its contractors. A description of the environmental and social impact assessment work that has been done to date follows, starting with a discussion on project alternatives, the impact assessment process, and a concise overview of each of the pertinent environmental and social issues. The document concludes with a description of the Health, Safety, Environment and Social Action Plan (“HSESAP”), which comprises an important synthesis of all pertinent HSE and social commitments that the Company has made in order to ensure the project is delivered safely and with due regard for the environment and the people of Sakhalin Island and neighbouring Japan. The key documents that are referred to in this document are the Environmental, Health, and Social Impact Assessments (“ESHIA”), the Environmental Impact Assessment Addenda (“EIA-A”), social-related documentation and the HSESAP. Together these comprise the main body of environmental and social impact assessment, mitigation and monitoring documentation, and their linkages are presented diagrammatically in Figure 1. The ESHIA, which was published in 2003, consists of seven volumes, each of which describes the impacts and mitigation measures per major project asset, including the infrastructure upgrade project. The ESHIA was prepared during the early design phase of the Project, and for that reason subsequent, more detailed information pertinent to the impact assessment process has been published in the EIA-A and the social-related documentation. Together this material demonstrates the Project’s compliance to Senior Lender policies and procedures. The EIA-A comprises 15 chapters, focused on subjects which include oil spill response planning, rare and migratory birds, marine mammals, waste management, dredging activities, and air emissions. It is supplemented with two standalone documents, namely the Comparative Environmental Appraisal of the Piltun Pipeline Route (“CEA”) and the River Crossings Strategy Report (“RCR”). The social-related documentation comprises of five documents, namely the Social Impact Assessment Addendum (SIA-A), the Resettlement Action Plan (“RAP”), the Sakhalin Indigenous Minorities’ Development Plan (“SIMDP”), Treatment Plan for Objects of Cultural Heritage, and the Public Consultation and Disclosure Plan (“PCDP”) which also incorporates the Public Grievance Leaflet. All of these documents are described in Section 10. In compliance with requirements of the EBRD and the World Bank Group policies on environmental action plans, the HSESAP provides a consolidation of all material environmental, health and social-related commitments derived from the ESHIA and addenda documents. The HSESAP is publicly available on the Company’s websites in Russian and English. Certain parts of the HSESAP, which are deemed relevant to Japan, will be made available in Japanese on the Company’s website in Q4 2005. The HSESAP is set out into two parts and three annexes. Part 1 provides an overview of the Company’s operating philosophy, and the structure and systems in place to manage HSE and social issues, including the management of contractors. Sakhalin Energy Investment Company 3 0000-S-90-04-P-7069-00-E Sakhalin II Phase 2 Environmental and Social Executive Summary It also references the Company’s obligations for public consultation and information disclosure, and sets out the reporting and auditing framework to the Senior Lenders. Part 2 sets out in a themed tabular format the detailed commitments relating to specific HSE and social issues; the mitigation measures to achieve those commitments; timing for the implementation of commitments; and responsible parties. Themes include oil spill response, biodiversity, waste management, erosion control, river crossings and communities. Annex A provides a comparison of how the project meets relevant international standards, in particular pertinent World Bank Group safeguard policies and European Commission directives. Annex B is comprised of four parts. Parts 1-3 provide a narrative against a number of environmental and social related state-level conventions and treaties that the Russian Federation has yet to ratify. Subject to its overriding obligation to comply with Russian law, the Company sees benefit in complying with the spirit and intent of these conventions as far as they are capable of application to private entities. Part 4 of this Annex provides a list of international conventions and treaties that have been ratified by the Russian Federation and are deemed applicable to the Project. By virtue of its commitment to comply with material HSE and social law, the Company is obliged to comply with those provisions of the HSE and social international conventions listed which apply to private entities under Russian law and which are material to the Project. Annex C provides information on the pre-construction and construction environmental monitoring programmes that are being implemented by the Project. Parameters include air quality, water and effluent discharges, marine mammal observations, and noise monitoring. The commissioning and operational monitoring plans will not be developed until Q4 2006, at which point they will be agreed with the Senior Lenders before finalisation. Whilst the detailed plans are still in preparation, Annex C does set out the general types of parameters that will be included in these commissioning and operational plans. An overview of social monitoring activities is also set out in Annex C. The social monitoring programme will be further developed in Q4 2005 in the form of a Social Compliance Monitoring Handbook. Sakhalin Energy Investment Company 4 0000-S-90-04-P-7069-00-E Sakhalin II Phase 2 Environmental and Social Executive Summary Heath, Safety, Environmental and Social Action Plan Summary of commitments Social-related documentation Detailed design phase (2005) Environmental Impact Assessment Addenda Environmental, Health and Early design Social Impact phase (2003) Assessments Figure 1. Environmental, Social and Health documentation linkages A diagram setting out how these documents link to one another is set out in Figure 1. All of these documents are available in Russian and English, and some in Japanese, and are publicly available on the Company’s website www.sakhalinenergy.ru / www.sakhalinenergy.com. Section 2 Sakhalin Island Located in the Russian Far East, just 42 kilometres from the northern tip of Japan, Sakhalin Island stretches almost 1000 kilometres from north to south and covers an area of 90,000 square kilometres. The Sakhalin region is divided into 17 administrative districts, comprising 19 towns and 33 urban-type settlements. Yuzhno-Sakhalinsk is the administrative centre and regional capital. Approximately 600,000 people inhabit Sakhalin Island and although the population is relatively small, the island is home to 170 ethnic groups. These include four that are native to Sakhalin: the Nivkh, Uilta, Evenkh and Nanai. Most of Sakhalin is covered with low and medium altitude mountains. Two major mountain chains spread from the southern part to the central part of the island, namely the West Sakhalin range, which reaches heights of 1,300 metres, and the East Sakhalin range, whose highest peak reaches 1,909 metres. Between them lies the Tym-Poronaisk valley, which is largely agricultural. Sakhalin's environment is highly diverse. The seas around the island are productive, enabling Sakhalin Island to be the third largest producer of fish products in the Russian Far East. There are more than 6,000 rivers and streams on the island, and more than 1,600 lakes with a total surface area of over 1,000 square kilometres. In Sakhalin's forests, wetlands and grasslands, there are more than 700 types of insect and over 350 species of bird. The island is also home to 1,400 different flowering plants. Sakhalin's climate is variable. Winter on Sakhalin lasts between five and seven months and summer between two to three months, making it somewhat climatically severe and abnormal for its latitude. The climate varies considerably between the Sakhalin Energy Investment Company 5 0000-S-90-04-P-7069-00-E Sakhalin II Phase 2 Environmental and Social Executive Summary South and North. For instance, the average monthly temperature in January is around -20oC in the north and -12oC in the south, but temperatures can be more extreme, reaching temperatures as low as -45oC in the north.