INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE

I. Basic Information Date prepared/updated: 2/12/2013 Report No.: AC3160

1 B . P . tD t . astc rOJCC a a Country: China Project ID: P099224 Project Name: Liaoning Third Medium Cities Infrastructure Task Team Leader: Yanqin Song Estimated Appraisal Date: November 15, Estimated Board Date: November 30,2013 2013 Managing Unit: EASTE Lending Instrument: Specific Investment

Loan Sector: District heating and energy efficiency services (97%)~0il and gas (3%) Theme: Climate change (P) IBRD Amount (US$m.): 191.00 IDA Amount (US$m.): 0.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other fmancing amounts by source:

Borrower 216.93 216.93

Environmental Category: B - Partial Assessment Simplified Processing Simple [X] Repeater 0 Is tb.is project processed under OP 8.50 (Emergency Recovery)

Yes [] No[] or OP 8.00 (Rapid Response to Crises and Emergencies)

2. Project Objectives The project development objective is to improve the energy efficiency and environmental performance of heating in selected areas of participating cities in Liaoning Province.

3. Project Description 1) The project was approved on May 27, 2008 for an IBRD loan of US$ 191 million. The progress towards the achievement of the PDO was rated Unsatisfactory and the overall implementation progress was assessed Moderately Unsatisfactory after the March 2013 mission. As of September 30,2013, after five years in implementation, the disbursement is US$ 70.94 mi)Jjon or 37% of the loan amount. The loan closing date is December 31,2013.

2) Restructuring request from Ministry of Finance was received on October 8 proposing: (i) cancel five subprojects which dropped in the Loan Agreement, (ii) add t\.vo new subprojects: Kangping and Lingyuan, and (iii) one year closing date extension. The two new subprojects, Kangping disctrict heating project and Lingyuan district heating project, with IBRD loan ofUS$35.52 million were proposed for restructuring. This ISDS will focus on the two new subprojects.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

3) The project after restructuring will include: Component 1: Centralized Heating InfraStructure (US$407.94 million equivalent; IBRD US$216.93millionj. This component covers 8 subprojects in seven cities and includes the construction and rehabilitation of centralized heating systems. The eight subprojects are Benxi Steel, Bernd Nanfen, Gongchangling, Huludao, Yingkou Dashiqiao, Yingkou EDZ, Kangping, and Lingyuan. Among which, Kangping and Lingyuan are two newly proposed subprojects for restructuring. The other six are existing subprojects. All of these six subprojects under operation and construction complied with the requirements in EMP and RAP and safeguards implementation status is satisfactory.

Component 2: Institutional Development (US$1.39 million equivalent; IBRD US$1.39 million). The component proposes to include: project management and design review and advisory consultancy services, including follow on training in O&M and pilot project assessments.

4. Project Location and salient physical characteristics relevant to the safeguard analysis

The originally proposed LMC3 project cities are small to medium sized cities located in Liaoning Province in northeast of China. Under the restructuring, Kangping County and Lingyuan city are added. The project service areas for heating project proposals are known. The locations of new heating sources are known.

5. Environmental and Social Safeguards Specialists Ms Xin Ren (EASCS) Mr Jun Zeng (EASCS)

6. Safeguard Policies Triggered Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Mana2:ement (OP 4.09) Physical Cultural Resources (OPIBP 4.11) Indigenous Peo}lles (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on Internationai.Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)

II. Key Safeguard Policy Issues and Their Management

A. Summary of Key Safeguard Issues

Yes No X

x· X X X X

X X X X

1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts:

The project will contribute to the overall reduction in atmospheric emissions of coal combustion products from the residential heating syste~ namely dust and sulfur dioxide, per square meter of connected floor area by replacing small inefficient heat-only boilers

with larger and more efficient boilers utilizing more effective control systems for removal of these pollutants from the flue gases. In order to meet the national air quality requirement and emission standards, emission control technology proposed for the new boilers is to install the bag-filter house for dust collection and the FGD system for S02 reduction. Expected efficiency is 99.7% for TSP and 90% for S02. It is expected that after project, the incidence of respiratory diseases in the two project cities in heating season should be reduced.

During construction, the two new subprojects will have limited and temporary adverse environmental impacts that are reversible. The impacts are primarily associated with the movement of people, machinery and materials (e.g. dust, noise, waste construction material). The EMPs include provision for management of hazardous materials, in particular asbestos, that may be found during preparation works in existing boiler houses, or the removal of old pipelines. Mitigating measures in the EMPs include ~tandard procedures associated with good engineering and construction practices.

During operation, primary impacts are associated with delivery and storage of coal·and sulfur dioxide sorbent, management of ash and spent sorbent, water availability for FGD system operation, and stack emissions of sulfur dioxide and TSP. Boiler houses are sited in areas that are removed from or downwind of any sensitive receptors during the heating season with stacks of sufficient height to assure ground level maximum concentrations of sulfur dioxide and PM10 are within applicable Chinese air quality standards. Gaussian plume D;lodels for atmospheric dispersion verified the appropriateness of the design values for the stack heights. The project design complies with Chinese emissions standards ofS~ and dust for heat only boilers and, if carefully executed, can also meet emission standards of S02 and particulate matters in the WB!IFC EHS Guidelines for Thermal Power Plants. In general, coal and sorbent will be delivered in covered vehicles and storage facilities will be designed to minimize dust generation. Storage and transport arrangements for ash and spent sorbent will also be designed to minimize dust generation. In general these materials will be fully utilized for the manufacture of various construction products (bricks, wallboard etc.)

For the original project, the EMP has been followed during construction. Operation of completed subprojects has shown compliance with applicable environmental requirements and emission standards. The original EMP was proved to be pertinent and practical during implementation. The EMP of new subprojects was thus all modeled after the original EMP approved by the WB. Contracting of a competent external monitor by the PMO proves to have greatly fostered the EMP implementation. The Bank team has also conducted safeguard supervision twice a year and found the EMP implementation for the original project has been satisfactory.

For the two new subprojects (Kangping and Lingyuan), the Abbreviated RAPs and RPF were prepared, and were considered acceptable to the Bank. Local disclosure in Chinese language and disclosure through Infoshop has been conducted. Since the civil works will be conducted along the existing roads alignments, negative social impacts identified are very limited. Land taking of state-owned land is needed and temporary taking of state­owned land is also unavoidable during construction. No structure will be demolished. Livelihood impact on local people is limit~d. The Social Specialist also conducted IP screening during the project preparation for these two newly added projects. It was

confirmed that there was no ethnic minority communities present in or have collective attachment to the project area. The team therefore concluded that the project does not trigger the Bank's OP 4.10 on Indigenous People.

During the new project preparation, measures to minimize resettlement impacts had been taken through alternative analysis. When land taking is needed, priority should be given to use state-owned land and reduce the use of farming land. For instance, selection of a heat transfer station site should consider the area which will bring less disturb for the residential area. It is also encouraged to rebuild the station from the old boiler ·room so additional land taking is reduced. The location for the first-level pipelines will be put along the alignment of existing roads in order to avoid land taking. Through these efforts, all identified substations in these two projects will be constructed on based of old small boilers or old substations. Most of pipelines will be constructed along the alignments of existing roads. Land taking had been minimized.

For original project, the RAP implementation was rated as "Satisfactory". The Bank's mission and external monitor found all resettlement practices had been conducted in line with the prepared RAP, including compensation, livelihood restoration, vulnerable groups assistance and public consultation. Bank's team conducted regular supervision to the project and the external monitor was hired and external monitoring reports on resettlement were submitted regularly.

2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area:

Not applicable.

3. Describe any project altematives (if relevant) considered to help avoid or minimize adverse impacts.

Plant site locations and/or stack heights were designed to minimize environmental impacts on sensitive receptors. Dust removal and desulfurization technologies were selected to provide the greatest removal efficiency and operational reliability for the designed boiler size, sorbent and water availability. In terms of minimizing the impacts associated with involuntary resettlement, efforts have been made during project planning and design. The resettlement impacts have been significantly reduced through optimizing the project design and implementation arrangements. These are described in details in Section 1.3 of Summary RAP and each subproject RAP.

4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described.

As noted above, EMPs and RAPs, where applicable, have been prepared. A RPF has been prepared. The provincial PMO has hired an external environmental monitor to assist in supervision of the EMP implementation in the original project and will cover the two new subprojects as well.

The borrowers have limited experience with Bank Safeguard policies. Training on Bank's social and environmental safeguards policy has been provided and will need additional training on safeguard issues for two new subprojects. An independent resettlement

monitor will be contracted under the project, and semi-annual resettlement monitoring reports for the Bank supervision teams.

5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people.

Following Chinese regulations, two consultations were held for subprojects involving construction of new boilers. One consultation was held for subprojects that did not involve construction of new boilers. The consultations took place either through public hearing or questionnaire. The Chinese language EAIEMPs for newly added subprojects were disclosed locally, May 2011 for Kangping and February 2012 for Lingyuan. The English version of EAIEMP of the two projects was disclosed in the Infoshop on November 28,2013. Based on survey results the local populations support the project. RAPs and RPF were disclosed through local newspapers in April and May of2012. The Infoshop submission date is November 28,2013.

Public consultation and participation was a key element in resettlement planning. The affected residents, business people and district governments participated in the census, inventory and formulation of the livelihood rehabilitation strategy, measures and relocation sites. Their feedback has been incorporated in determining the compensation rates and livelihood rehabilitation measures. The RAP contains a list of major consultation sessions. The participation and consultation process will continue in resettlement implementation. To facilitate active public participation, the following complaint handling mechanism has been established:

Step 1: Displaced persons can appeal by verbal or paper manner to village committee or project demolition implementation institution if they are not satisfied with the resettlement plan. For verbal appeal, village committee and demolition institution should record in written form and solve the problems within two weeks;

Step 2: lfdisplaced persons are still not satisfied with the decision of Phase 1, they can appeal to municipal PMOs/ administration institutions after receiving decision notice and the latter should resolve it within two weeks;

Step 3: If displaced persons are still not satisfied with the decision of municipal PMOs/ administration institutions, they can appeal to subproject leading team or local municipal construction commission after receiving decision notice. The latter should handle the case within two weeks;

Step 4: If displaced persons are still not satisfied with the decision of subproject leading team or local municipal construction commission, they can bring a lawsuit to a civil law court in case of objection to any aspect of the resettlement plan after receiving decision notice.

B. Disclosure Requirements Date Original Environmental Assessment/Audit/Management Plan/Other:

Was the document disclosed prior to appraisal? Yes

Date of receipt by the Bank 09/19fl007

Restructuring

Yes 18 Oct., 2011 14 Dec., 2012

Date of "in-country" disclosure

Date of submission to InfoShop

For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors

Resettlement Action Plan/Framework/Policy Process: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to Info Shop

Indigenous Peoples Plan/Planning Framework: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop

Pest Management Plan: Was the document disclosed prior to apprajsal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop

09/19/2007

09/19/2007

Yes 08/22/2007 08/3112007 09/19/2007

N/A

N/A

2 May, 2011 1 Feb., 2012

28 Nov., 2013 28 Nov., 2013

YES 1 May, 2012 1 Apr., 2012 28 Nov., 2013

* If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why:

C.· Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) ·

OPIBP/GP 4.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the Yes credit/loan? · OPIBP 4.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process Yes framework (as appropriate) been prepared? If yes, then did the Regional unit responsible for safeguards or Sector Yes Manager review the plan? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Yes

Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groW and local NGOs? All afeguard Policies HaV: satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents?

D. Approvals

Signed and submitted by: Task Team Leader: Environmental Specialist: Social Development Specialist Additional Environmental and/or Social Development Specialist(s):

Mr. Yanqin Song Ms.XinRen Mr.Jun Zeng

Name

Yes

Yes

Yes

Yes

Yes

Date

Approved by: ~ Regional Safeguards Coordinator: Mr. Peter Leonard~~ . 1215/2013

Comments: Cleared with the understanding that air quality monitoring \;tibe included in Kangping EMP or a ralionale provided by team not to monitor and that the project Calegorization is based on the initial review of the project

Sector Manager. f1AA 0 I ,_ i\ 'IAA l o /J .f/IA -

Comments: '11\~ 1\.. . L.-1J Ny/dA- 1 f'~ ~ /