The World Bank Sustainable Hydropower Development Project (P174327) Additional Financing Environmental and Social Review Summary For Official Use Only Date Prepared/Updated: 07/17/2023 | Report No: ESRSC01625 Jul 17, 2023 Page 1 of 10 The World Bank Sustainable Hydropower Development Project (P174327) BASIC INFORMATION A. Basic Project Data Country Region Project ID Parent Project ID (if any) Bhutan SOUTH ASIA P174327 Project Name Sustainable Hydropower Development Project Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date Energy & Extractives Investment Project 3/7/2022 Financing Borrower(s) Implementing Agency(ies) Department of Energy, Druk Green Power Ministry of Energy and Corporation Limited Natural Resources, Royal Government of Bhutan For Official Use Only Proposed Development Objective The Project Development Objective is to strengthen the capacity of the power sector agencies in Bhutan to plan and prepare regional hydropower and transmission line projects following international good practices and to support development of Dorjilung Hydropower Project. Financing (in USD Million) Amount Total Project Cost 4.00 B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No C. Summary Description of Proposed Project [including overview of Country, Sectoral & Institutional Contexts and Relationship to CPF] This grant-supported Sustainable Hydropower Development Project (SHDP) is to provide technical assistance (TA) to update and complete the Detailed Project Report (DPR) for Dorjilung Hydropower Plant Project (HPP) to be consistent with the Bhutan Hydropower Guidelines, including environmental and social (E&S) plans in line with World Bank Jul 17, 2023 Page 2 of 10 The World Bank Sustainable Hydropower Development Project (P174327) Environmental and Social Framework (ESF) and to support capacity building in the power sector in Bhutan. The Project was approved on March 1, 2022 and became effective on May 2, 2022. The TA has two components: Component 1. Preparation Studies/Technical Assistance for Dorjilung Hydropower Plant Project and Transmission Line. The component will support the preparation of Dorjilung HPP and associated transmission lines to be identified during preparation. It will fund Activity 1-1 a – updating the DPR, Activity 1.1 b – additional geotechnical investigations; Activity 1.2 – updating the Environmental and Social Impact Assessment (ESIA) as well as other E&S studies and impact mitigation plans required under relevant government laws and ESF; and Activity 1.3 – project management support and hardware purchase for the DPR update. Component 1 involves the preparation of a 1125 MW run-of-river hydropower on the Kurichhu River located in the Kuri-Gongri Basin in Bhutan and the associated transmission line. The power generated at Dorjilung HPP at 13.8 kV will be stepped up to 400 kV and a transmission line with a length of about 40 km will be constructed to connect to the nearest 400 kV transmission network at the existing Yangbari substation. However, the exact transmission line has not yet been determined. From Yangbari substation, the power may be exported further to India via the existing Yangbri – Rangia/Rowta transmission line but the transmission to India will be identified after the evacuation line is determined. Component 2. Capacity Building for the Sustainable Development of Hydropower. The component will support capacity building of the Department of Energy (DoE) under the Ministry of Energy and Natural Resources (MoENR) For Official Use Only and Druk Green Power Corporation Ltd. (DGPC) for managing the Royal Government of Bhutan (RGOB)'s technical, policy and regulatory framework for hydropower development and management. It will fund studies, technical advice, computerized analytical tools and training for (a) technical and regulatory reviews for major elements of hydropower projects; (b) project management, including a dam safety project review panel (PRP) and an environmental and social risk management panel (ESP). The Project is processing Additional Financing and a restructuring, none of which carry additional E&S risks beyond those identified in the original Project. The Additional Financing consists of an additional grant of US$ 300,000 to cover financing required to meet additional hardware needs of DGPC and additional capacity development activities under Component 2, including enhancing DGPC’s capacity to monitor hydropower plant safety and geotechnical monitoring, regional energy integration activities, participation in hydropower conferences and study tours, and capacity building in the design of hydromechanical equipment. The restructuring will involve a reallocation of funds among activities under Component 1 and 2 and extend the Project closing date from December 31,2023 to June 30, 2024 to accommodate the finalization of the technical and E&S studies. D. Environmental and Social Overview D.1. Detailed project location(s) and salient physical characteristics relevant to the E&S assessment [geographic, environmental, social] Bhutan has considerable hydropower generation potential and sustainable hydropower development is a critical part of Bhutan's socioeconomic development strategy. In line with Bhutan Hydropower Guidelines issued in 2018 with support from the World Bank, the RGOB, through the DoE of the MoENR, requested World Bank assistance in the Jul 17, 2023 Page 3 of 10 The World Bank Sustainable Hydropower Development Project (P174327) preparation of Dorjilung HPP and institutional capacity building with relevant government agencies relating to the development and application of the renewed development framework for hydropower. Dorjilung HPP is located in Mongar Dzongkhag (District) about 450 km east of the capital Thimphu. It is on Kurichhu River, a major tributary of Drangmechhu river basin, upstream of the existing Kurichhu Hydropower Plant, with 5.40 km of reservoir stretch in Lhuentse Dzongkhag. The closest protected area to the project location is the Phrumsengla National Park located approximately 8km from the project area. There is a biological corridor connecting Phrumsengla National Park and Bumdeling Wildlife Sanctuary which facilitates the movement of various wildlife species and supports biodiversity conservation in the region. The future reservoir may be associated with impacts to the biological corridor which will be assessed and management measures proposed as part of the TA Project. There are 17 perennial streams along the dewatered section of about 16 km between the proposed dam location and the confluence of Kurichhu and tailrace. According to IBAT, two Key Biodiversity Areas (KBA) are located within the 10 km of the project area and five more within a 50 km range. The population of Mongar and Lhuentse Dzongkhags is approximately 17,642 and 44,298 respectively. Majority of the people in the project area are farmers, mostly small land holders with about seven acres of dry land on average and about one acre of wet land. However, farming is not the largest source of income owing to less arable land and due to shortage of labor. Citrus fruits and vegetables, dairy and poultry products are increasingly becoming important sources of cash income. For Official Use Only The project pre-feasibility study was conducted by Norplan of Norway in 2011. In 2013, DGPC carried out detailed design studies and produced a DPR, including required E&S plans. D. 2. Borrower’s Institutional Capacity The proposed Project Implementation Unit (PIU) of the TA (SHDP) is the state-owned DGPC, which manages and operates Bhutan's hydropower assets and participates in new hydropower development. Its 1,705 employees oversee operations of 1,615 MW of hydropower and conduct other related water to wire business support services including hydropower project development. Total revenues in 2018 were about Nu. 11,681.98 or about US$154.7 million. DGPC has appointed one environmental and one social specialist from its staff who oversee the E&S aspects of their hydropower projects. They have been operating largely enforcing national policies, and have little experiences applying E&S policies of international organizations. As the main generation operation utility, DGPC aspires to be a world class hydropower company applying international good practices for sustainable hydropower development, including E&S aspects. This TA is designed to support the capacity building within DGPC and other relevant government agencies, including management of E&S issues in hydropwoer development. The TA (SHDP) will be overseen by DoE under MoENR which will also be a beneficiary and participant in the institutional and human capacity building activities of the project. Under the ongoing Project, DGPC has appointed one environmental and one social specialist from its staff to coordinate the E&S aspects of the TA. The DoE has also appointed one of its staff as its E&S focal person for the Project who works in coordination with the PIU’s E&S staff. In addition, the World Bank delivered an in-person training to DGPC on E&S risk management in May 2023 to enhance their capacity on E&S aspects. Similar capacity Jul 17, 2023 Page 4 of 10 The World Bank Sustainable Hydropower Development Project (P174327) development activities are planned throughout the duration of the Project based on a training plan that DGPC and the World Bank have agreed on, and as documented in the Environmental and Social Commitment Plan (ESCP). II. SCREENING OF POTENTIAL ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS A. Environmental and Social Risk Classification (ESRC) High Environmental Risk Rating High While this TA (SHDP) and the Additional Financing only support the preparation of the Dorjilung HPP and institutional capacity building of government agencies, the environment risk is rated High considering the downstream risks and impacts of the ensuing Dorjilung HPP once it is constructed and implemented. The ensuing Dorjilung HPP will involve significant civil works related to the construction of the dam (136.5 m high as per DPR), headrace tunnel (approximately 15 km), power house, access roads, tailrace tunnels and associated facilities and will entail permanent inundation of the reservoir area (gross storage of approximately 44 million m3). The backwater of the reservoir cuts through the biological corridor connecting the Phrumsengla National Park with Bumdeling Wildlife Sanctuary. A 16- km dewatered zone of the Kurichhu River will be created between the intake and the tailrace, and for which there is a need to maintain environmental flows. Large volume of muck is expected to be generated during construction, which will need to be disposed. According to the DPR, about 6,000 workers mainly foreign workers, will be employed during the construction. The works and inundation of the reservoir area are expected to have potential adverse risks and impacts on both terrestrial and aquatic ecosystems and biodiversity, including potential cumulative impacts and For Official Use Only transboundary impacts. Social Risk Rating High The Project (SHDP) provides TA in the detailed design of the project. The TA activities themselves would have little social impacts, but the downstream investment operation will trigger significant social impacts in its construction and operation. The key social impacts and risks of the downstream investment relate to land acquisition, resettlement, labor, gender, gender based violence (GBV), cultural heritage, and stakeholder engagement. Also, considering the large number of foreign workers to be deployed at the site during construction, there would be adverse and significant occupational and community health and safety risks and impacts. Therefore, the social risk of the Project (i.e. TA) is rated High. B. Environment and Social Standards (ESSs) that Apply to the Activities Being Considered B.1. General Assessment ESS1 Assessment and Management of Environmental and Social Risks and Impacts Overview of the relevance of the Standard for the Project: While this TA only involves support for institutional capacity building and to prepare the proposed Dorjilung HPP, if implemented, it would have a series of potentially adverse, significant and long term E&S risks and impacts due to the construction of the dam which will cause permanent inundation and creation of a reservoir, headrace tunnel , powerhouse and required transmission line and ancillary facilities such as access roads and workers camps. Social risks and impacts would include land acquisition, resettlement (DPR screening has identified physical relocation of Jul 17, 2023 Page 5 of 10 The World Bank Sustainable Hydropower Development Project (P174327) only one household), labor influx, occupational and community health and safety, gender, and GBV. Environmental risks and impacts will involve permanent inundation of the reservoir area and permanent changes in landscapes, impacts on terrestrial and aquatic ecosystems, ecosystem services and biodiversity; pollution during construction, vibration impacts from blasting and heavy equipment, changes in hydrology of the Kuricchu river, potential cumulative impacts, etc. Component 1 of the TA includes additional geotechnical investigations such as surface geological mapping and geophysical surveys which may include E&S risks related to occupational health and safety (OHS), noise and vibrations, vegetation disturbance, and accidental spills/pollution from survey-related machinery. But given the small scale nature of activities under the TA, risks and impacts are expected to be localized, reversible and temporary and would be managed by requiring the consultants to prepare an ESMP to address risks and impacts brought about by the investigation works. As noted above, the additional financing and restructuring of the TA Project will not result in additional E&S risks and impacts beyond those identified in the parent Project. The ensuing project's potential E&S risks and impacts are under assessment with support from this TA. The assessments include an ESIA, Cumulative Impact Assessment (CIA), E&S Management Plan (ESMP), Labor Management Procedures (LMP), Stakeholder Engagement Plan (SEP), Resettlement Plan (RP), E&S Management Framework (ESMF) for the transmission line and other relevant instruments required under the ESF. These ESIA and RP terms of reference (TORs) serve as the E&S instruments for this High Risk TA project and they were reviewed and cleared by Environment and Social Practice Managers and the Regional Safeguard Adviser and disclosed prior to For Official Use Only approval of the TA. The implementation of the E&S aspects of the TA have been satisfactory thus far. As mentioned above, the DGPC PIU includes one environmental and one social specialist who are tasked with ensuring that the TA meets the requirements of the ESF and applicable requirements of the Royal Government of Bhutan. In addition to the PIU E&S staff, DGPC has recruited an E&S panel of experts, consisting of one environmental expert and one social expert, who are providing advice on E&S aspects of Dorjilung HPP preparation. Finally, the consultant for updating and completing the E&S assessment and planning was onboarded in December 2022. They have conducted site visits and are currently finalizing the inception report and planning the next stages of the assessments. Areas where “Use of Borrower Framework� is being considered: Borrower's framework will not be used. ESS10 Stakeholder Engagement and Information Disclosure The TA (SHDP) Project activities and the potential ensuing project (Dorjilung HPP) will involve a wide range of stakeholders at regional, national and local levels, from public, private sectors and local communities. It is expected that the stakeholders will have varying interest and influence in the decision-making, design, construction and operational phase of the ensuing project. The ensuing project would have varying impacts upon local stakeholders, particularly the impacted communities and the project workers. Proactive engagement and participation of the stakeholders during this TA Project are critical in the successful design and implementation of the ensuing project. Jul 17, 2023 Page 6 of 10 The World Bank Sustainable Hydropower Development Project (P174327) The stakeholder engagement requirements for the TA project are captured in the ESCP to ensure that the TA activities incorporate stakeholder engagement and information disclosure in a manner consistent with ESS10. The TA project will develop a SEP for the Dorjilung Hydropower project, summarizing consultations and stakeholder engagement during the planning phase and laying out the strategy and plan to continue stakeholder consultation during its implementation. The DGPC has a functioning Grievance Redress System which will be applied to TA activities. A grievance redress mechanism will be designed for the project as part of the SEP. B.2. Specific Risks and Impacts A brief description of the potential environmental and social risks and impacts relevant to the Project. ESS2 Labor and Working Conditions The TA would involve its share of consultants considered as direct workers who will carry out the required project planning assignment. The TOR and contracts for these consultants stipulate safe working conditions and procedures, including on OHS and a code of conduct, to be in place and practiced during the preparation phase. The ESMP to be prepared for the TA activities will also include OHS measures. The DGPC has a functioning Grievance Redress System which will be applied to direct workers under the TA Project. The downstream investment construction is expected to have a workforce of 6,000 at peak time, plus another 6,000 For Official Use Only or so of other people migrating into the project area. This influx could have all labor related issues. This TA will support the preparation of an LMP for the downstream investment including a workers grievance mechanism. The ESMP will include an Occupational Health and Safety Plan. ESS3 Resource Efficiency and Pollution Prevention and Management The potential ensuing project will involve significant civil works and will generate large volume of muck for disposal. It will also require large volume of resources and construction materials and will generate air and water pollutants and potentially nonhazardous and hazardous wastes during construction and operation of the downsteam Dorjilung HPP. Resource efficiency issues, pollution risks and impacts relevant to this standard will be assessed in the ESIA and CIA and relevant measures and plans will be developed accordingly. GHG emissions analysis of the project is also included in the TORs for updating the ESIA. ESS4 Community Health and Safety The TA activities such as fieldwork and geotechnical investigations may be associated with community health and safety risks e.g., noise and vibration. The consultants will develop an ESMP for the scope of geotechnical investigations which will address any community health and safety risks. The construction of the downstream investment will have health and safety implications for communities in the project area from the influx of workers and camp followers, GBV, increased vehicle traffic, vibration impacts, exacerbation of landslide hazards, and risks related to dam failure. These impacts will be assessed and mitigated in the ESIA/ESMP in line with the requirement of this standard. Jul 17, 2023 Page 7 of 10 The World Bank Sustainable Hydropower Development Project (P174327) ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement The construction of the downstream investment will require land acquisition and limited relocation, thus making this standard relevant to the project. ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources The potential ensuing project is expected to have risks and impacts on terrestrial and aquatic ecosystems and biodiversity resulting from civil works, inundation of the reservoir area and extraction of construction materials, among others. The 16-km dewater zone will have impacts on aquatic ecosystems and biodiversity while the dam will affect fish migration in the main river system. The reservoir of the ensuing project, when constructed, may also have risks and impacts on the biological corridor connecting the Phrumsengla Natural Park and the Bumdelig Wildlife Sanctuary. The ESIA prepared by this TA Project will include a comprehensive biodiversity assessment, including natural habitat and critical habitat assessment. The CIA for the Kuri – Gongri Basin will also be updated with any new or additional information on aquatic and terrestrial biodiversity and a summary of the findings will be reflected in the ESIA. A Biodiversity Management Plan (BMP) will be prepared as part of the ESMP following the mitigation hierarchy to ensure that if the ensuing HPP project will significantly affect natural habitats and critical habitats that no net loss will be achieved for natural habitats and net gain will be achieved for critical habitats. If offset is required based on the For Official Use Only assessment, the BMP will propose a framework or an approach for an offset, which will be studied, developed and fleshed out in greater detail during preparation of the ensuing HPP project, if and when Bank decides to support the said project. ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities Project preparation work carried out earlier indicates that there are different ethnic groups or groups speaking different dialects in the project areas. No assessment was conducted regarding the application of ESS7. The TA project is supporting further field surveys and analysis regarding indigenous people and application of ESS7 as part of the ESIA. The ESIA will review and recommend whether there are indigenous communities in the project area per the definition of ESS7 and whether ESS7 would be relevant to the project. If ESS7 is considered relevant, the TA project will carry out the planning work as required under ESS7. ESS8 Cultural Heritage The pre-feasibility and DPR carried out an assessment of possible cultural heritage impacts under the project. It indicated that there would be impacts on tangible cultural heritage, but missed intangible cultural heritage in its assessment. It also indicated that there could be some impacts on local cultural practices. The scope of works under the ESIA includes an assessment of possible impacts on intangible cultural heritage, as well as the long-term and cumulative impacts upon cultural heritage assets and practices in the project area. Based on this assessment, the E&S consultant will develop a cultural heritage management plan to address any potential impacts and include them in the ESMP, including Chance Find Procedures. Jul 17, 2023 Page 8 of 10 The World Bank Sustainable Hydropower Development Project (P174327) ESS9 Financial Intermediaries Not relevant. B.3 Other Relevant Project Risks None. Should "Other Relevant Project Risks" be disclosable? Yes C. Legal Operational Policies that Apply OP 7.50 Projects on International Waterways Yes Kurichhu River on which the proposed Dorjilung HPP is planned is a tributary of Drangmechhu River which flows into India. Thus this policy is triggered. LEGEN will be consulted on the course of action to be taken during the implementation of the TA for the notification of riparian states and LEGEN’s advise will be taken forward accordingly. In addition, the TOR of the ESIA, which will also be supported by this TA, will include examination of any potential riparian issues. OP 7.60 Projects in Disputed Areas No For Official Use Only III. WORLD BANK ENVIRONMENTAL AND SOCIAL DUE DILIGENCE A. Is a common approach being considered? No Financing Partners None IV. WORLD BANK ES OVERSIGHT A Regional Environmental and Social Standards Advisor (RSA) is providing Corporate Oversight. V. CONTACT POINTS World Bank Contact: Fanny Kathinka Missfeldt-Ringius Title: Lead Energy Specialist Telephone No: 5770+1522 / - -2470464 Email: fmissfeldt@worldbank.org Jul 17, 2023 Page 9 of 10 The World Bank Sustainable Hydropower Development Project (P174327) Contact: Dzenan Malovic Title: Senior Energy Specialist Telephone No: 5785+47619 / 90-212-385-3074 Email: dmalovic@worldbank.org Borrower/Client/Recipient Department of Energy, Ministry of Energy and Natural Resources, Royal Government of Borrower: Bhutan Implementing Agency(ies) Implementing Agency: Druk Green Power Corporation Limited Implementing Agency: Druk Green Power Corporation Limited VI. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 For Official Use Only Web: http://www.worldbank.org/projects VII. APPROVAL Task Team Leader(s): Fanny Kathinka Missfeldt-Ringius, Dzenan Malovic Jul 17, 2023 Page 10 of 10