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. 3 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