E385 v13 WORLD BANK LAO PDR HYDROPOWER ­ STRATEGIC IMPACT ASSESSMENT FINAL REPORT November 2004 Date of issue 15.10.04 Prepared by : NORPLAN A/S Checked by : Jens Laugen Approved by : Erik Børset World Bank Lao PDR Strategic Impact Assessment Final Report ii EXECUTIVE SUMMARY 1.1 Hydropower Sector LaoPDR is situated in the Lower Mekong Basin. The country has the largest hy- dropower potential in the region but only a small percentage of it has been devel- oped to date. A policy objective of Government of Lao PDR is to develop its hydropower re- sources for the benefit of the country in order to: · Provide reliable and affordable power to cover the national demand and thereby promote economic and social development. · Develop part the hydropower potential to generate export income for the country by selling power to neighbouring countries. 1.1.1 Demand Forecasts The domestic demand has been increasing at a high rate the last decade even though there was a period of economic recession in the region. This high level of growth is expected to continue over the next 15 years with a slight decrease at end of this period. The demand forecast used as a basis for the Power Sector Development Plan is shown in Table1 and is based on the governmental policy of providing electricity to 90 % of the households by 2020. The rather high growth rate for the period of 2002 to 2005 is mainly due to the assumed start up of the Xepon copper mine (40 MW) and the cement plant at Mahaxai (20 MW), both of which will require considerable power. Irrigation schemes are estimated to reach a load demand of 10 MW in 2020. Table 1. PSDP Energy and Peak Demand Forecast (Meritec et al 2004) Unit 2002 2005 2010 2015 2020 Energy Consumption GWh 937.0 1,924.5 3,061.0 4,026.4 5,332.8 Av. annual growth % 27% 10% 6% 6% Peak Load (MW) MW 186.4 378.3 548.6 721.8 956.1 Av. annual growth % 27% 8% 6% 5% Export power demand cannot be modelled in the same way as the national de- mand, since external factors and uncertainties are too great for any precise pre- diction of the long-term demand or optimization of sequencing and timing. Some determining factors will be: · The future cost difference between hydropower and other energy sources · Progress in regional transmission systems and power grids · Availability of capital · Progress in competing hydropower plans in neighbouring countries The PSDP presents two development scenarios for export projects: a base sce- nario and an optimistic scenario (Table2). World Bank Lao PDR Strategic Impact Assessment Final Report iii Table 2. Export Generation Scenarios (Meritec 2004) Base Export Scenario MW Optimistic Export Scenario MW 2006 2007 2008 Theun Hinboun Ext. 150 Theun Hinboun Extension 150 Nam Mo 100 2009 Nam Mo 100 2010 Nam Theun 2 1000 Nam Theun 2 1000 Xe Kaman 3 250 2011 Xe Kaman 3 250 2012 2013 Xe Kaman 1 468 2014 Xe Kaman 1 468 2015 Xe Kong 5 348 2016 2017 Xe Kong 5 348 Nam Ngum 3B 580 2018 2019 Nam Ngum 2B 183 2020 Nam Ngum 3B 580 Total capacity 2796 2979 The sequence of the scenarios shown above is based on the professional judgement of the consultant, taking into consideration the following factors: · Project profitability and quality of the site · Substance and sincerity of the sponsor · Market conditions, including demand growth, reserve margin and political sup- port for power trading · Capacity of Lao institutions to manage the current implementation of multiple projects Export projects dominate the 15-year development plans in Lao PDR. The total projected capacity demand of the export projects is about three times the modelled national demand for the same period. Taking into consideration the uncertainties in the development of export projects, it is very challenging to determine the overall generation scenarios for hydropower development in the country. 1.1.2 Hydropower Project Development Plans The hydropower sector is one of the most thoroughly planned sectors in Lao PDR from an economic and technical point of view. Over the last decades a number of studies have been carried out to establish a realistic list of projects and the most economic viable sequence for their construction. The definition of what is a feasi- ble project and the principles of project ranking have, however, been constantly changing. A large number of potential hydropower projects have been identified in Lao PDR, but both the projects and their technical specifications included in World Bank Lao PDR Strategic Impact Assessment Final Report iv these "long lists" have changed over the years due to the collection of additional data and changing socio-economic and technical frame conditions. In addition to EdL's own ranking of projects (Electricité du Lao Generation Expan- sion Plan, 2005­2020) the following 6 hydropower ranking studies have been car- ried out in Lao PDR over the last 7 years: · Hydropower Development Plan for Lao PDR (HDP) in 1997 · Power System Planning in the MIH (PSP) in 1997 · Nam Theun 2: Study of Alternatives (NT2SOA) in 1998 (Lahmeyer & Wor- ley) · Se Kong, Se San and Nam Theun River Basins Study in 1998 (Halcrow et al.) · Hydropower Development Strategy Study (HDSS) in 2000 (Worley & Lah- meyer) · Power System Strategy Study (PSSS) in 2002 (Electrowatt & PA) · Power System Development Plan (PSDP) in 2004 (Meritec & Lahmeyer) The list of projects analysed in this study (Table 3) are partly based on projects for domestic consumption ranked by EdL and partly on the most promising export generation projects from the PSDP ranking. It thus contains the projects that are considered the most likely to be built in the next 15 year in Lao PDR. Table 3. EdL Generation Expansion Plan (2004-2020) for domestic projects and the most promising export projects (PSDP). No. Project Year of Installed Level of study commissioning capacity (MW) 1 Nam Mang 3 2005 (domestic) 35 FS 2 Xeset 2 2006 (domestic) 76 FS 3 Nam Lik 2007 (domestic.) 100 FS 4 Xepon 2008 (domestic.) 74 I 5 Theun Hinboun Ext. 2009 (export) 105 MoU / FS 6 Nam Mo 2009 (export) 100 CA /FS /EIA 7 Nam Theun 2 2009 (dom./exp.) 75 + 1000 CA /FS /EIA 8 H. Lamphan Gnai 2010 (domestic) 60 I 9 Xe Kaman 3 2010 (export) 250 Constr./MoU/FS 10 Nam Ngum 5 2012 (domestic) 90 PFS 11 Thakho 2013 (domestic) 36 MoU /PFS 12 Xeset 3 2014 (domestic) 20 FS 13 Xe Kaman 1 2014 (export) 468 CA / FS 14 Nam Ngum 4A 2015 (domestic.) 55 I 15 Nam Kong 3 2016 (domestic.) 25 I 16 Nam Pot 2017 (domestic.) 38 I 17 Xe Kong 5 2017 (export) 248 MoU / I 18 Nam Bak 2B 2018 (domestic.) 116 MoU / I 19 Nam Ngum 4B 2019 (domestic.) 56 I 20 Xe Xou 2020 (domestic.) 59 I 21 Nam Ngum 3E 2021 (export) 580 CA /FS /EIA 22 Nam Ngum 2B 2022 (export) 183 CA / I (FS) MoU=Memorandum of understanding, PFS=Pre-Feasibility study, CA=Concession agreement; I=Initial study. World Bank Lao PDR Strategic Impact Assessment Final Report v 1.1.3 Financing and Development Sequence There is a growing acceptance that the capital required to expand the power systems in order to keep pace with demand are far higher than the financial ca- pacity of both the Lao PDR Government and the multilateral or bilateral financial in- stitutions. So far only two privately financed hydropower projects based on a Build-Own-Operate-Transfer (BOOT) agreement have been built in Lao PDR, the Theun-Hinboun and the Houay Ho hydropower plants. A number of MOUs between the Government of Lao PDR and private developers have been signed both before and after the Theun-Hinboun and Houay Ho were initiated. Only a few of these have yet reached the stage where it is possible to foresee a time schedule for implementation. The most advanced project in terms of preparation is the Nam Theun 2 where financial closure is expected in 2005. The involvement of private investors, as is the case in Lao PDR, has resulted in a partial breakdown of the system of ranking and selection of projects for develop- ment by least cost criteria, as promoted by the World Bank and the Asian Devel- opment Bank and modelled in the recent Sector Development Plans. In the system of public and donor financing, least cost planning is able to allocate investments to the "best" projects. With the private investors in the lead such scheduling has manifested itself as being very difficult to apply, as governments have little influ- ence on project preparation and financing processes. 1.2 Legal and Administrative Setting and the Implementation of Environ- mental and Social Safeguard Measures The Environmental Protection Law (1999) is the most important piece of environ- mental legislation in the country. It was further elaborated by an implementation decree in 2002. A general framework entitled "Regulation on Environmental As- sessment in Lao PDR" was issued in 2000. Based on this regulation the Depart- ment of Electricity of Ministry of Industry and Handicraft (MIH) developed and is- sued their own environmental and social assessment regulations in the period 2001 - 2003. These regulations are broadly consistent with international safe- guard regulations and guidelines. The environmental and social safeguard institutions responsible for the hydro- power sector at central level are the Social and Environmental Management Divi- sion (SEMD) of the Department of Electricity in MIH and the Department of Envi- ronment under the Science, Technology and Environment Agency (STEA). Of these two, STEA, through the provisions in the Environmental Protection Law, has an overall responsibility for the environmental safeguard system and thus the duty to oversee all issues in relevant sector ministries, including MIH. The Social and Environmental Management Division in MIH is more directly involved in the supervi- sion of the different EA processes. The Division is involved at an early stage in determining the level of assessment needed, in the development of ToRs for Initial Environmental Evaluation and in review and approval of the various EA and EIA documents. A comprehensive and modern system of addressing environmental and social im- pacts of hydropower development in Lao PDR is now in place. The implementation of this advanced set of environmental and social regulations for the hydropower sector is, however, dependent on the capacity and competence of SEMD and STEA as well as on their administrative and political "strength" to bring their influ- ence to bear on developers and the promoters of hydropower projects in the Government. Presently staff capacity and resource scarcity within these two in- stitutions appears to be the most urgent constraint to address when it comes to World Bank Lao PDR Strategic Impact Assessment Final Report vi securing appropriate implementation of environmental and social safeguards in the hydropower sector. 1.2.1 EIA Experiences A brief assessment has been made of the quality the EIAs for 3 completed pro- jects, Theun Hinboun, Houay Ho and Nam Leuk, and their adequacy compared to today's requirements. Most of the experiences with environmental and social as- sessment in connection with hydropower development are from a time when the national standards were not yet in place. The NT2 is a special case were the EIA processes started more than 10 years ago and has continued throughout a period where the EIA regulations both in Lao PDR and in the International Funding Institu- tions have been constantly strengthened. In summary, it may be concluded that the EIA reports have assisted the planning for "better" projects, identifying needs for mitigation and compensation, and in- creasing the general understanding and knowledge of the environmental and so- cial situation in Lao PDR. However, several shortcomings and problems were identified. The most important of these are: · Crucial information and analysis were only available after the construction had started or PPAs signed so that project design and operation could not be modified as a mitigation measure. · In general EIA studies have tended to underestimate both environmental and social impacts and their mitigation costs. · The negative impacts in connection with influx of workers and camp follow- ers have in general been inadequately addressed and planned for. · Consultation and public involvement processes have for the most part been inadequate in relation to the present internationally accepted safeguard pro- cedures. · Compensation and resettlement needs were underestimated and insufficiently planned and budgeted for. 1.3 Potential Environmental and Social Impacts The study has made an assessment of the combined impacts of the 21 hydro- power projects planned for implementation before 2020. Some of the assumed impacts and impact indicators for the studied projects are summarised in Table 4. World Bank Lao PDR Strategic Impact Assessment Final Report vii Table 4: Summary of project characteristics and key impacts. Project Installed Type of Active Inundated Resettle-ment: Interference capacity project storage land No. people with protected MW Mill m3 Km2 areas Nam Mang 3 35 S 45 9.5 750 Xeset 2 76 RoR 0 1.5 0 Close to forest CA Nam Lik 100 S 826 42.2 0 Xepon 75 S 361 29.5 1500 Close to NBCA Theun Hinboun 105 S, IT 2870 126 1220 Inside prop. Ext. NBCA Nam Mo 100 S 264 10.8 0 Nam Theun 2 1074 S, IT 3510 450 6224 Border of NBCA H. Lamphan Gnai 60 S 89 3.5 0 Inside prop. NBCA Xe Kaman 3 250 S 109 5.2 0 Nam Ngum 5 90 S 252 14.6 300-500 Thakho 36 RoR 0 0 0 In important bio- diversity area Xeset 3 20 RoR 0 1.3 0 Xe Kaman 1 468 S 3340 222 >800 In NBCA Nam Ngum 4A 55 S 332 14.5 1470 Nam Kong 3 25 S 299 36.9 1550 Nam Pot 38 S 71 6.1 0 Xe Kong 5 248 S 2210 70 980 In NBCA Nam Bak 2B 116 S, IT 119 4.8 0 Nam Ngum 4B 56 RoR 0 0.5 0 Xe Xou 59 S 1710 113 500 In NBCA Nam Ngum 3E 580 S 983 26.5 500 Nam Ngum 2B 183 S 150 7.5 1000 Total 3,849 17,540 1,195.9 >16,700 Legend: S = Seasonal Storage, RoR = Run-of-River, IT = inter basin transfer It is likely that the negative impacts on primary forest and unique wildlife found in the mountainous areas of Lao PDR will be significant. Three of the short-listed projects are located inside NBCAs and 2 others are located in areas that have been proposed as NBCAs. In addition, some projects are located close to areas of documented biodiversity value thus contributing to increased pressure on these vulnerable areas. A characteristic feature of most of the planned projects is the long distance be- tween the intake at the reservoir and the discharge point back into the river; 9 projects have a diversion distance of more than 5 km and 14 more than 1 km. River-based biodiversity and fisheries will thus be lost and water use for irriga- tion, water supply, transport, etc., may become severely restricted. In general the dams proposed are high. Only Xeset 2 and Thakho have dams or intakes of a height less than 15 m while 14 projects have dams of more than 50 m and 8 with more than 90 m. This implies that dam safety is an issue for most pro- jects and that the dams will effectively stop all upstream migration of fish. According to available information the total land area that will be inundated in con- nection with the construction of reservoirs and intake headponds adds up to ap- proximately 1200 km2. The majority of the projects have reservoirs of small or moderate size, with Nam Theun 2 (450 km2), Xe Kaman 1 (222 km2), Theun Hin- boun Extension (126 km2) and Xe Xou as (113 km2) being exceptions. World Bank Lao PDR Strategic Impact Assessment Final Report viii The available studies indicate that 12 of 21 projects will include resettlement, add- ing up to a total figure of more than 15,000 people. It should be noted that this is likely to be a minimum figure. Some of the data are old and the populations will have grown and, in addition, there is a general tendency to underestimate reset- tlement needs in the initial phases of project preparation. In 12 projects the num- ber of resettled people will exceed 200 and thus trigger a demand for a Resettle- ment Action plan according to both World Bank and Lao PDR guidelines. Most of the projects are located in the higher reaches of the river basins where the majority of the local people belong to ethnic minority groups. Given their de- pendence on the natural resource base and their general low degree of integra- tion into the mainstream economy, ethnic minority groups tend to be more vulner- able to the effects of hydropower development than other population groups. It is likely that the development will accelerate the ongoing process of integration of ethnic minorities into the mainstream Lao culture. The loss of waterfalls is men- tioned as a feature of 2 of the planned projects, but is likely to be a feature of more projects. To what extent this is considered a loss of a potential tourist at- traction is not known. Most of the projects are located far from areas presently visited by tourists. The experience from the Nam Ngum 1 reservoir shows that, in this country which is deficient in natural lakes, reservoirs might be of significant value as tourist and recreational sites. The most likely candidates for attracting tourists will be Nam Theun 2 and the Theun-Hinboun Extension (Nam Theun 3). Except for Nam Mo all proposed hydropower development projects are located on rivers draining into Mekong, thus having a potential of impacting on the reach shared with Thailand, the downstream areas in Cambodia and the Mekong Delta in Vietnam. The determining parameter for the downstream changes in river flow is active storage, which, for the total of all planned Mekong Basin projects in Lao PDR, will be about 17,400 mill. m3. 1.4 Recommendations There are actions that can be taken to avoid, minimize or compensate for potential negative impacts of planned hydropower schemes. In general these include miti- gation and compensation related to construction and operation and to compensa- tory programmes. Environmental flow and construction of erosion prevention structures belong to the first category while compensatory programmes includes, forestation plans, catchment protection programmes, fisheries development plans and social development plans, including Ethnic Minority Development Plans (EMDPs) and Resettlement Action Plans (RAPs). The experiences gained from the Nam Theun 2 Project should be of great value for the development of future compensation and management arrangements for large hydropower projects in Lao PDR. An audit of the lessons learned in the preparation of the NT2 safeguard plans and of the experiences gained in imple- mentation should thus be carried out. This would enable future studies to be more streamlined and more focussed on key problems and challenges. The experiences with Nam Theun 2 will also support refinement of existing regulations and guide- lines, especially in the field of consultation, compensation and resettlement. Certain issues should be addressed specifically in order to enable better safe- guarding of the biodiversity and social values in connection with hydropower de- velopment. These are listed in the table below. Adequate human and institutional capacity is implicit as a pre-requisite in most of these issues in terms of having qualified personnel with the right understanding and appreciation of the issues and with the ability to make scientific assessments and informed decisions. Table 5: Recommendations World Bank Lao PDR Strategic Impact Assessment Final Report ix Issues Recommendations Construction and Operation Oxygen depletion in reser- 1) Clearing of vegetation in the reservoir prior to inundation. voir water 2) Construction of aeration structures. Downstream riverbank and 1) Riverbank protection structures. reservoir erosion 2) Appropriate discharge and operational regime. Reduced water flow Construction of weirs in the river. Loss of fisheries Fish breeding and propagation of local species for stocking of reservoirs avoiding introduction of exotic species. Environmental flow 1) Inclusion of specific assessment of minimum flow requirements in the EIA. 2) Development of guidelines by responsible authorities for set- ting environmental flow requirements. Erosion and land slides Construction of erosion structures, re-vegetation and land- scaping. Dust, noise, air and water Incorporation of "best professional practice" in concession and pollution contract documents. Management Programmes NT2 experiences 1) Close follow up of NT2 Programmes to make use of experi- ences and "best practice" examples for refining and develop- ing existing regulations and guidelines. 2) Ensure provision of funds for monitoring and follow up. 3) Utilisation of the SEMFOP to make the case for funding of biodiversity and conservation initiatives by hydropower devel- opers. Integrated Water Resource Management Integrated water resource 1) Carefully evaluate experiences with ongoing Nam Ngum test planning project and development of a realistic and methodological ap- proach to be implemented nationwide. 2) Building of capacity for IWRM. Intact River Protection 1) Carry out an investigation of natural qualities in remaining un- touched rivers in Lao PDR resulting in recommendations as to which rivers qualify for protection from major physical changes. 2) Assessment of present status values versus potential devel- opment values as a basis for reaching final decision on protec- tion. 3) Clarification and putting in place of legal requirements for in- tact river protection with administrative protection as a prelimi- nary measure if necessary. Assessment of Hydropower Development Least-cost implementation 1) Implementation of a least cost strategy for hydropower devel- system opment through simulation of a least cost development plan and introduction of competitive bidding. 2) Alternatively introduce competitive bidding before simulation studies to generate a least-cost development plan. World Bank Lao PDR Strategic Impact Assessment Final Report x Award of MOUs 1) Preferably abandon the MOU awarding system based on ne- gotiations and introduce competitive bidding to secure more transparency and better integration of EIA findings and tech- nical planning. 2) Alternatively standardise the content MOUs to include envi- ronmental and social requirements. 3) As a minimum develop a comprehensive document outlining environmental and social requirements in laws and regulations for up-front presentation to prospective Developers. Award of Licences Standardisation of concession licenses to include social and environmental requirements in order to ensure that they are le- gally binding for the Developer. Enforcement of regula- 1) Ensure that STEA is fully invested with regulatory powers to tions enforce environmental and social obligations on the part of the Developer and other responsible parties. 2) Develop and ensure the capacity of STEA to take on en- forcement responsibilities. Resettlement planning 1) Identify and develop clearer criteria for assessment of loss of and implementation livelihoods and assets for the project-affected population. 2) Incorporate and utilise the experiences provided by the NT2 Resettlement Process and Plans in the work to develop sup- plementary and more detailed resettlement guidelines and standards. Development Opportuni- The Government should take the lead in linking social and eco- ties nomical development plans to hydropower planning to create benefits for local communities. NBCA status 1) Investigate the present state and biodiversity values of the parts of NBCAs planned for hydropower development and de- cide if the areas are eligible for total protection. 2) Carry out a zoning of all NBCAs to identify all areas that should be classified as "Total Protection Zones" where hydro- power is ruled out. Definitions of Impact Develop clear guidelines for defining impact zones, especially Zones for downstream impacts. Environmental and social Establish databases and support systems for data storage and monitoring systems dissemination, both for reporting on the general state of the environment and for special issues, such as hydropower pro- ject assessments. Monitoring of environ- Establish a clear system of indicators and criteria for good envi- mental performance ronmental and social practice against which implementation re- sults can be measured. Consultation and public 1) Develop more elaborate and comprehensive guidelines to se- involvement cure a standardisation of consultation and public involvement processes. 2) The guidelines should pay special attention to prescribing consultation procedures for ethnic minorities to ensure real participation World Bank Lao PDR Strategic Impact Assessment Final Report xi Training and Capacity Building Funding mechanisms 1) Ensure sufficient and adequate resources for STEA and SEMD to enable them to carry out their assigned tasks and duties through prioritization and GOL ­ donor agency coop- eration. 2) Consider the setting up of a fund for capacity building to facili- tate and speed up necessary training and institution strength- ening. Capacity building focus 1) Improve over-all knowledge of environmental subjects and re- view of EIA documents and plans for STEA and SEMD staff. 2) Training on management, monitoring and reporting skills for staff involved with monitoring and implementation of mitigation measures on central and province/district level. 3) Improvement of English language skills for all staff involved with review of EA documents and implementation of social and environmental plans. 4) Training of planners and implementers on gender sensitive and participatory working approaches. 5) Training of planners and implementers on ethnic minority con- cerns and culturally sensitive approaches. Training Methods 1) Arrange workshops for well-defined and limited topics. 2) Conduct on-the-job-training with local and international experts for more process oriented tasks like development of EIAs and monitoring methods and procedures. 3) Arrange in-service courses with utilization of Internet based courses and tailor-made courses in cooperation with national and regional learning institutions. World Bank Lao PDR Strategic Impact Assessment Final Report xii TABLE OF CONTENTS 1 BACKGROUND...................................................................................................................1 1.1 Introduction.........................................................................................................................1 1.2 Nam Theun 2 Project...........................................................................................................1 1.3 Environmental and Social Studies .......................................................................................1 1.3.1 Project-specific Environmental and Social Studies ............................................................. 1 1.3.2 Cumulative Impact Assessment: ..................................................................................... 2 1.4 Hydropower Sector Planning ...............................................................................................2 1.5 Strategic Impact Assessment...............................................................................................2 2 LEGAL AND INSTITUTIONAL SAFEGUARD FRAMEWORK.................................................3 2.1 International Law and Treaties ............................................................................................3 2.1.1 International Law .......................................................................................................... 3 2.1.2 Mekong River Commission.............................................................................................. 3 2.1.3 ASEAN Membership ...................................................................................................... 3 2.1.4 International Conventions and Treaties............................................................................. 4 2.2 Safeguard Policies of International Financial Institutions......................................................4 2.2.1 World Bank Safeguard Policies ....................................................................................... 5 2.2.2 Asian Development Bank Safeguard Policies..................................................................... 6 2.3 National Safeguard System for Hydropower Development. ..................................................7 2.3.1 Legal Framework........................................................................................................... 7 2.3.2 Institutional Framework.................................................................................................10 2.4 EA Process for Hydropower Development Projects ............................................................11 2.4.1 Comprehensiveness of Legal Framework .........................................................................12 2.4.2 Implementation Capacity...............................................................................................12 2.5 Consultation and Public Involvement.................................................................................13 2.5.1 Consultation with Project Affected People........................................................................13 2.5.2 Involvement of Other Stakeholders.................................................................................13 2.5.3 Civil Society Development.............................................................................................15 2.6 Vulnerable Groups and Cultural Integrity ...........................................................................15 2.7 Development Opportunities and Benefits...........................................................................16 3 HYDROPOWER PROJECT EIA ­ LAO EXPERINECES.....................................................17 3.1 Theun-Hinboun .................................................................................................................17 3.1.1 Project Description.......................................................................................................17 3.1.2 EIA Process ...............................................................................................................17 3.1.3 Resettlement and Consultation Process ..........................................................................18 3.2 Houay Ho..........................................................................................................................18 3.2.1 Project Description.......................................................................................................18 3.2.2 EIA Process ...............................................................................................................18 3.2.3 Resettlement and Consultation Process ..........................................................................19 3.3 Nam Leuk..........................................................................................................................19 3.3.1 Project Description.......................................................................................................19 3.3.2 EIA Process ...............................................................................................................20 3.3.3 Resettlement and Consultation Process ..........................................................................20 3.4 Common Characteristics and Lessons Learned .................................................................20 3.4.1 Timeliness ..................................................................................................................20 3.4.2 Comprehensiveness.....................................................................................................21 3.4.3 Consultation and Public Involvement...............................................................................21 3.4.4 Resettlement Planning and Implementation ......................................................................21 4 LAO PDR HYDROPOWER DEVELOPMENT......................................................................23 4.1 Lao PDR Power Development Priorities and Goals ............................................................23 4.2 Power Use and Demand Forecasts....................................................................................23 World Bank Lao PDR Strategic Impact Assessment Final Report xiii 4.2.1 National Power Demand ................................................................................................23 4.2.2 Export Power Demand ..................................................................................................24 4.2.3 Distribution Networks....................................................................................................25 4.3 Regional Power Demand Growth.......................................................................................26 4.4 Existing Power Production in Lao PDR ..............................................................................26 4.5 Existing Transmission Lines and Development Plans.........................................................27 4.6 Power Production and Development Situation in the GMS.................................................28 4.6.1 Generation Expansion Alternatives.................................................................................28 4.7 Hydropower Sector Plans and Strategies...........................................................................30 4.7.1 General......................................................................................................................30 4.7.2 Long List of Projects....................................................................................................30 4.7.3 Development Plans and Strategies .................................................................................30 4.7.4 Projects for Analysis in SEA..........................................................................................31 4.8 Technical Description of the Major Projects........................................................................32 4.9 Project financing................................................................................................................36 4.9.1 Private Financing of Hydropower Development..................................................................36 4.9.2 Developers and Investors .............................................................................................37 4.10 Preparation and Implementation of Plans..........................................................................39 4.10.1 Least Cost Planning.....................................................................................................39 4.11 The Power Market and Regional Coordination...................................................................40 5 BASELINE SITUATION.....................................................................................................41 5.1 National and Regional Key Issues.....................................................................................41 5.1.1 Introduction ................................................................................................................41 5.1.2 Water Resources.........................................................................................................41 5.1.3 Terrestrial Biodiversity..................................................................................................45 5.1.4 Aquatic Biodiversity and Wetlands..................................................................................46 5.1.5 Population ..................................................................................................................47 5.1.6 Ethnic Minorities..........................................................................................................47 5.2 Description of Areas of Major Hydropower Development ....................................................48 5.2.1 Nam Ngum Basin .........................................................................................................48 5.2.2 Nam Theun Basin.........................................................................................................49 5.2.3 Sekong Basin..............................................................................................................50 6 ENVIRONMENTAL AND SOCIAL IMPACTS.......................................................................51 6.1 Generic Description of Potential Impacts............................................................................51 6.1.1 Introduction ................................................................................................................51 6.1.2 Impacts Caused by River Changes.................................................................................51 6.1.3 Impacts Caused by Construction....................................................................................53 6.2 Summary of Environmental and Social Impacts of Planned Projects ..................................53 6.2.1 Introduction ................................................................................................................53 6.2.2 Impacts on Biodiversity ................................................................................................56 6.2.3 Downstream Loss of River Ecosystems...........................................................................56 6.2.4 Irrigation, Water Supply, etc..........................................................................................56 6.2.5 Flood Protection ..........................................................................................................57 6.2.6 River Blockage............................................................................................................57 6.2.7 Land Take and Inundation.............................................................................................57 6.2.8 Resettlement...............................................................................................................57 6.2.9 Interference with Ethnic Minorities..................................................................................57 6.2.10 Tourist Attractions and Scenic Waterfalls ........................................................................58 6.2.11 Downstream Mekong Hydrology and Water Use. ...............................................................58 6.2.12 Downstream Impacts in Vietnam.....................................................................................59 7 ALTERNATIVES................................................................................................................60 7.1 Alternative Energy Resources............................................................................................60 7.1.1 Primary Energy Sources ...............................................................................................60 7.1.2 Conclusion..................................................................................................................61 7.2 Alternative Power Development Plans ...............................................................................61 7.2.1 Other Strategies and Alternative Rankings.......................................................................61 7.2.2 Ad hoc Development ....................................................................................................62 7.3 Export Alternatives ............................................................................................................62 World Bank Lao PDR Strategic Impact Assessment Final Report xiv 7.4 Demand Side Management...............................................................................................63 8 RECOMMENDATIONS FOR MITIGATION, MANAGEMENT AND TRAINING.......................65 8.1 Introduction.......................................................................................................................65 8.2 Mitigation and Compensation Related to Construction and Operation................................65 8.2.1 Water Related Mitigation ...............................................................................................65 8.2.2 Land Based Mitigation ..................................................................................................67 8.3 Compensatory Development and Management Programmes.............................................67 8.4 Initiatives for Integrated Water Resources Management ....................................................68 8.4.1 Catchment Management and Integrated Water Resources Planning .....................................68 8.4.2 Intact River Protection..................................................................................................68 8.5 Planning and Assessment of Hydropower Development ....................................................69 8.5.1 Implementation of Least Cost Strategies .........................................................................69 8.5.2 Award of MOUs for Developers ......................................................................................69 8.5.3 Award of Licenses .......................................................................................................70 8.5.4 Identified Needs for Clarification of Regulations................................................................70 8.5.5 Consultation and Public Involvement...............................................................................72 8.6 Training and Capacity Building ..........................................................................................73 8.6.1 Funding Mechanisms....................................................................................................73 8.6.2 Capacity Building.........................................................................................................74 8.6.3 Training Methods .........................................................................................................74 8.7 Summary of Recommendations .........................................................................................75 9 ENVIRONMENTAL AND SOCIAL MONITORING................................................................78 9.1 Introduction.......................................................................................................................78 9.2 Monitoring to Establish Baseline........................................................................................78 9.3 Monitoring Construction Activities and Compensation Measures ........................................78 9.4 Long Term Environmental and Social Monitoring ...............................................................79 World Bank Lao PDR Strategic Impact Assessment Final Report xv LIST OF TABLES Table 1: PSDP Energy and Peak Demand Forecast (Meritec and Lahmeyer 2004).....................24 Table 2: Export Generation Scenarios (Meritec and Lahmeyer 2004)..........................................24 Table 3: Lao PDR Sub-regional Requirement, in MW (MRCS 2001).............................................25 Table 4: Regional Power Demand Forecast (MW)........................................................................26 Table 5: Installed Capacity in each Region (MRCS 2001)............................................................27 Table 6: Installed Generation Capacity in the GMS Countries (Norconsult 2002).........................28 Table 7: EdL Generation Expansion Plan (2004-2020) for Domestic Projects and the most Promising Export Projects (PSDP)................................................................31 Table 8: Summary of Key Technical and Economical Data (incl. Local and Global Environmental Cost)...................................................................................................35 Table 9: Status of IPP Mandates in Lao PDR (Meritec and Lahmeyer, 2004)..............................37 Table 10: National Biodiversity Conservation Areas in Lao PDR (DoF 2000)................................45 Table 11: Summary of Project Characteristics and Key Impacts...................................................55 Table 12: Recommendations ......................................................................................................75 LIST OF FIGURES Figure 1: Organisational Setup and Staffing of Social & Environmental Management Division of Department of Electricity.......................................................10 Figure 2: Environmental Assessment Process for Electricity Projects ...........................................12 LIST OF MAPS Map 1: Existing and Planned Hydropower Projects in Lao PDR...................................................34 Map 2: Land Use and Forest Cover in the Nam Ngum and Sekong River Basins.........................42 Map 3: Land Use and Forest Cover in the Nam Theun / Nam Kading River Basin .......................43 Map 4: Distribution of Ethnic Groups in Lao PDR ........................................................................44 World Bank Lao PDR Strategic Impact Assessment Final Report xvi LIST OF ABBREVIATIONS/ACRONYMS ADB Asian Development Bank AIDS Acquired Immunodeficiency Syndrome ASEAN Association of Southeast Asian Nations BDP Basin Development Plan BOOT Build, Own, Operate and Transfer BP Bank Procedures CA Concession Agreement CDB Convention on Biological Diversity CIA Cumulative Impact Assessment CITES Convention on International Trade in Endangered Species DOE Department of Electricity DSM Demand Side Management EA Environmental Assessment EdL Electricité de Lao EGAT Electricity Generation Authority of Thailand EIA Environmental Impact Assessment EMMU Environment Management and Monitoring Unit EP Environmental Programme EPL Environmental Protection Law GHG Greenhouse Gasses GMS Greater Mekong Sub-Region GOL Government of Lao PDR GWh Giga Watt hour HDP Hydropower Development Plan for Lao PDR HDSS Hydropower Development Strategy Study HIV Human Immunodeficiency Virus HPO Hydropower Office in MIH IEE Initial Environmental Examination IFIM In stream Flow Incremental Model IPP Independent Power Producer IWMU Integrated Water Management Unit IWRM Integrated Water Resources Management kV Kilo Volt kWh Kilo Watt hour LNMC Lao National Mekong Committee m a.s.l Meter above sea level MAF Ministry of Agriculture and Forestry MIH Ministry of Industry and Handicraft MoU Memorandum of Understanding MPH Ministry of Public Health MRC Mekong River Commission MRCS Mekong River Commission Secretariat MTPC Ministry of Transport, Post and Communication MW Mega Watt NBCA National Biodiversity Conservation Areas NEA Nepal Electricity Authority NEC The National Environment Committee NGO Non Governmental Organisation NT2 Nam Theun 2 Hydropower Project NT2SOA Nam Theun 2: Study of Alternatives NTPC Nam Theun 2 Project Company OD Operational Directive OP Operational Policy PFS Pre-Feasibility study World Bank Lao PDR Strategic Impact Assessment Final Report xvii PSDP Power System Development Plan PSPC Provincial State Planning Committee PSSS Power System Strategy Study RAP Resettlement Action Plan RDO Rural Development Office RoR Run of River hydropower project (no storage) SDP Social Development Plan SIA Strategic Impact Assessment SEM Strengthening Environment Management SEMD Social and Environmental Management Division Sida Swedish international development cooperation agency SPC Special Purpose Companies STD Sexually Transmitted Diseases STEA Science Technology and Environment Agency STEO Provincial Science Technology and Environment Offices STENO Science Technology and Environment Organisation TA Technical Assistance WBG World Bank Group WRCC Water Resources Coordination Committee WUP Water Utilisation Plan World Bank Lao PDR Strategic Impact Assessment Final Report 1 1 BACKGROUND 1.1 Introduction Strategic Impact Assessment (SIA) is a tool that allows for analysis of broader environmental and social issues not covered comprehensively by a project spe- cific EA and supports integration of environmental and social concerns into long term planning. Development of the Lao Hydropower Sector has significant environmental and social impacts and benefits, and their management is currently constrained by policy, regulatory and institutional weaknesses. The Lao Hydropower Sector SIA was prepared to identify, at the sector level, the numerous strategic opportunities to avoid impacts and improve environmental and social management. It comple- ments hydropower sector planning under the recently updated Power System Development Plan by providing recommendations to Lao PDR Government institu- tions, donors, private investors and other stakeholders, to further improve deci- sion making, develop mitigation measures and improve policy, legal and institutional aspects of the sector. It is also intended to complement the preparation of the pro- posed Nam Theun 2 Hydropower Project, a large project that may have sector- wide implications and provide ideas, lessons and precedents for improvement in the sector. 1.2 Nam Theun 2 Project The Government of the Lao People's Democratic Republic (Lao PDR) seeks to un- dertake the proposed Nam Theun 2 Hydropower Project (NT2) in cooperation with Nam Theun 2 Project Company (NTPC), The proposed project is being considered for financial support from the World Bank Group (WBG) and the Asian Development Bank (ADB) thus bringing their in- stitutions environmental and social safeguards principles into play. The Nam Theun 2 Project is located in Khammouane and Bolikhamsay provinces in Central Lao PDR. As currently configured, the project includes the development, construction, and operation of a thousand-Megawatt hydropower facility primarily for export of power to Thailand. The project includes a 450 km2 reservoir on the Nakai Plateau and will divert water from the basin of Nam Theun to the Xe Bangfai Basin. 1.3 Environmental and Social Studies 1.3.1 Project-specific Environmental and Social Studies Over a planning period of more than 10 years several studies have been prepared to evaluate the project-specific impacts and risks of the NT2 Project. These stud- ies form the basis for a comprehensive environmental and social mitigation and compensation program. The main components of the program are: (i) the reset- tlement and restoration of livelihoods of more than 6,000 people from the reservoir area; (ii) the provision of funding for the management and protection of the Nakai- Nam Theun National Biodiversity Conservation Area (NBCA) and the adjacent Cor- ridors; (iii) mitigation programs for the downstream effects, particularly in the Xe Bangfai area; (iv) environmental monitoring and management measures including the operation of the dam and wildlife management on the Nakai Plateau. World Bank Lao PDR Strategic Impact Assessment Final Report 2 1.3.2 Cumulative Impact Assessment: A Cumulative Impact Assessment (CIA) is being undertaken to assess the impacts of the NT2 Project combined with the potential impacts of existing, planned and proposed developments in the NT2 Project area and in the Greater Mekong Sub- region. The purpose of this study is to identify impacts beyond the ones covered in the project specific impact assessments and to enable Lao PDR and other countries in the region to effectively enhance the benefits and reduce the negative impacts from such developments. 1.4 Hydropower Sector Planning A number of development plans and strategy documents have been prepared for the Lao PDR power sector over the last 10 years (see Chapter 4). Many of these studies have incorporated environmental and social criteria in choosing alternative plans and have made recommendations for strengthening environmental and so- cial aspects of the development. An update and revision of these studies is cur- rently underway with World Bank assistance. The Power System Development Plan for Lao PDR (Meritec and Lahmeyer 2004) outlines an ambitious program for addressing energy supply, power generation and strengthening of the legal, regulatory and institutional framework. 1.5 Strategic Impact Assessment Both the hydropower development plans, and the proposed Nam Theun 2 Project will have sector-wide implications including environmental and social impacts. A strategic approach to management of environmental and social impacts in the sector has therefore been asked for. Consequently, the Strategic Impact As- sessment (SIA) has been prepared in order to consolidate, update and expand previous work related to hydropower and environment and to clarify the broader issues faced on account of planned hydropower development in Lao PDR. The purpose is to advise GoL Ministries, Local Governments, donors, regional institu- tions, private sector developers and others, in their efforts to improve environ- mental and social aspects of hydropower projects. Recommendations are given for strategic actions for improvement of environmental and social management. The Strategic Impact Assessment will cover planned hydropower developments in Lao PDR in a 20-year perspective. The SIA will contribute to the understanding of the impacts of hydropower development in Lao PDR and recommend measures strengthening the sector in order to reduce impacts and manage the sector in an environmentally and socially sustainable manner. The report is organised similar to a regular EA report. Chapter 2 gives an over- view of the relevant legal and administrative framework; Chapter 3 summarises experiences of EIA processes for 3 hydropower projects on Lao PDR; Chapter 4 describes the hydropower development situation and existing development plans; Chapter 5 gives a general description of the environmental and social conditions in the regions where hydropower development is planned; Chapter 6 gives a sum- mary of assumed combined social and environmental impacts of the proposed de- velopment plans. Chapter 7 discusses alternatives to hydropower development and alternative hydropower strategies; Chapter 8 summarises the conclusions and gives recommendations for mitigation, management improvements and train- ing; and finally Chapter 9 gives guidance to environmental and social monitoring. World Bank Lao PDR Strategic Impact Assessment Final Report 3 2 LEGAL AND INSTITUTIONAL SAFEGUARD FRAMEWORK 2.1 International Law and Treaties A number of international laws and treaties impinge on hydropower development in Lao PDR, imposing limitations on how transboundary water resources can be utilized as well as demanding measures to avoid and limit the negative environ- mental effects of hydropower development. 2.1.1 International Law The "UN Law of the Non-Navigational Uses of International Watercourses" is of relevance to hydropower development as it seeks to regulate a state's use of its trans-boundary rivers and water courses in terms of water extraction for hydropower, irrigation etc. As a member country of the United Nations, Lao PDR is obliged to abide by its 3 main principles: · to do no significant harm to other states, and to mitigate damages arising from exploitation. · to use the water resources of an international watercourse in an equitable and reasonable manner taking into account the interests of other riparian states. · to giver prior notification to other riparian states when utilization may have adverse transboundary environmental effects. As a general principle the Law demands that a State should exercise caution in any activity that it is contemplating, unless there is scientific certainty about the outcome of its actions. It should be noted that one of the implications of this pre- cautionary principle is that it imposes the burden of proof on the project developer. In a hydropower context this implies that transboundary effects on flow regimes and water availability should be included as a part of the studies carried out as a part of the Environmental Impact Assessment. 2.1.2 Mekong River Commission Lao PDR is one of the four signatory parties to the 1995 Agreement on the Coop- eration for Sustainable Development of the Mekong River Basin and one of the members of the Mekong River Commission (MRC). The primary purpose of the Agreement is to promote economic and social well-being of the people in all the ri- parian countries through the protection of the environment, improvement of navi- gation and the cooperation in the maintenance of flows and intra- and inter-basin diversions. MRC has initiated several basin-wide planning and research pro- grammes, including the Water Utilisation Plan (WUP), the Environmental Programme (EP), the Basin Development Plan (BDP) and the Fisheries Programme. 2.1.3 ASEAN Membership Lao PDR became a member of the Association of Southeast Asian Nations (ASEAN) in 1997. One of the ASEAN initiatives is the agreement on the Conserva- tion of Nature and Natural Resources. However, the agreement has been ratified by only three countries since it was adopted in 1985, and is therefore not in force and unlikely to have any significant impact. ASEAN also has provisions to assist member countries to establish transboundary nature reserves. This has relevance for future hydropower development, as establishment of joint protected areas World Bank Lao PDR Strategic Impact Assessment Final Report 4 may have bearing on the conditions for construction projects in nature reserves and other protected areas. 2.1.4 International Conventions and Treaties Convention on Biological Diversity (CDB) Lao PDR acceded the CDB in 1996 and followed up its obligations by putting in place necessary legislation and establishment of a system of National Biodiversity Conservation Areas (NBCA). The convention is legally binding and aims to protect whole ecosystems and all their various forms of life. The Convention recognizes that ecosystems, species and genes must be used for the benefit of humans but prescribes that this should be done in a way and at a rate that does not lead to the long-term decline of biological diversity. In relation to hydropwer development the Convention thus puts demands on limitation and mitigation of negative effects on terrestrial and aquatic ecosystems in the project influence area. Convention on the protection of World Cultural and Natural Heritage This Convention was ratified by GOL in 1987. The convention addresses the pro- tection of both cultural and natural objects and sites of high national and interna- tional value. The Convention thus puts limitations on the use and exploitation of culturally valuable areas, including exploitation in connection with hydropower de- velopment. Convention on International Trade in Endangered species (CITES) Hydropower development can open up a previously remote area, and lead to an influx of people. This may contribute significantly to an increase in illegal hunting and trade of wildlife. Lao PDR's ratification of CITES in 2004 obliges the GOL to take measures against illegal trade of wildlife. It should be noted that prior to the ratification of the Convention the Ministry of Agriculture and Forestry (MAF) is- sued a regulation that banned all hunting for trade. International Convention on the Elimination of All Forms of Racial Discrimination Lao PDR acceded this convention, which obliges member countries to work to abolish all forms of discrimination, in 1974. In connection with hydropower devel- opment it has relevance as areas inhabited by ethnic minorities are often affected. International Covenant on Economic, Social and Cultural Rights Lao PDR is a signatory to this covenant (2000), which calls for the preservation of social and cultural integrity for the various ethnic groups within a country. It thus has a bearing on the way resettlement and livelihood restoration in connection with hydropower development is carried out. 2.2 Safeguard Policies of International Financial Institutions In addition to the more general requirements international laws and treaties impose on Lao PDR, involvement of international financial institutions in hydropower de- velopment brings with it another set of more specific environmental requirements. This means in practice the safeguard policies of World Bank (WB) and the Asian Development Bank (ADB) as these are the international funding institutions pres- ently active in the hydropower sector. Other financial institutions that in the future might get involved are likely to adopt environmental requirements similar to those of WB and ADB. In the following an overview of the most important safeguard policies is given. It should be noted, however, that only an indication of their purpose and content World Bank Lao PDR Strategic Impact Assessment Final Report 5 can be provided in these brief summaries. A more complete overview with the full text of the policies can be found on the websites of the World Bank and the Asian Development Bank. 2.2.1 World Bank Safeguard Policies The World Bank's set of safeguard policies consist of a number of Operational Policies (OP), Operational Directives (OD), and Bank Procedures (BP) which are considered to be particularly important in ensuring that Bank supported projects are environmentally acceptable and that negative environmental and social im- pacts are minimised or mitigated. Environmental Assessment (OP/BP 4.01) This is considered to be the umbrella policy for the Bank's safeguard policies and sets out specific requirements for environmental and social investigations that must to be carried out in connection with large infrastructure projects including hydropower development. The policy requires Environmental Assessment to be undertaken of all supported projects in order to ensure that they are environmen- tally sound and sustainable, and to improve the basis for decision making. Natural Habitats (OP/BP 4.04) The policy aims to ensure that projects apply a precautionary approach to natural resource management to ensure opportunity for sustainable development, prevent significant impacts to critical natural habitats and minimize or compensate for losses in natural habitats. Pest Management (OP 4.09) The Pest Management Policy supports promotion of biological or environmental methods of controlling pests and reduced reliance on synthetic chemical pesti- cides in Bank financed projects. The policy has a relevance for hydropower de- velopment as pesticides may be used to control disease vectors in reservoirs, for clearing of vegetation and for agricultural activities in connection with resettle- ment. Cultural Property (OP 4.11) The policy aims to ensure that projects contribute to the preservation of cultural property and seeks to avoid their elimination. If projects cannot avoid affecting cultural property negatively the policy requires mitigation activities to be under- taken to limit the adverse impacts as far as possible. Involuntary Resettlement OP/BP 4.12 The policy aims to avoid involuntary resettlement where feasible and to minimize it where it cannot be avoided. If resettlement is necessary the policy seeks to en- sure that the whole process is designed and implemented as a sustainable devel- opment program, providing sufficient investment resources to enable the persons displaced by a project to share in its benefits. ensure that people affected by a project have their standard of living improved, or at least maintained on the same level. World Bank Lao PDR Strategic Impact Assessment Final Report 6 Indigenous Peoples (OD 4.20) This operational directive is intended to ensure that indigenous peoples and ethnic minority groups are consulted and benefit from WB funded operations in a cultur- ally appropriate way, and that adverse impacts on them are avoided, or where not feasible, minimized or mitigated. Forests (OP 4.36) The Forestry Policy aims to harness the potential of forests to reduce poverty in a sustainable manner, integrate forests effectively into sustainable development and protect the vital local and global environmental services and values of forests. Safety of Dams (OP/BP 4.37) For large dams (15 meters or more) it is a requirement that the borrower adopts and implements certain dam safety measures for the design, bid tendering, con- struction, operation and maintenance of the dam and associated works. International Waterways (OP/BP 7.50) The policy seeks to ensure that all concerned and affected riparian countries on an international waterway, are notified about hydropower development and other water-use projects and invited to express their view on the project for the Bank to consider. Public Disclosure While the safeguard policies prescribes that the key stakeholders are systemati- cally identified and involved in project planning and implementation the World Bank Policy on Disclosure of Information seeks to secure that all interested parties can access information on specific projects. 2.2.2 Asian Development Bank Safeguard Policies The ADB social and environmental and social safeguard system contains many of the same elements as in the WB system. The Environment Policy The recent environmental policy was approved in 2002 and aims to incorporate social and environmental considerations in all ADB operations. Indigenous People The ADB Policy on Indigenous People aims to ensure that indigenous peoples have opportunities to participate in and benefit equally from development projects funded by the Bank and that negatively affected indigenous peoples and ethnic minority groups are adequately compensated. Involuntary Resettlement The ADB Policy on Involuntary Resettlement dates from 1995 and aims at minimis- ing the need for resettlement and to secure that in cases where population dis- placement is unavoidable proper compensation for loss of assets and livelihood is provided. Environmental Assessment Guidelines ADB's Environment Policy is further elaborated in the new Environmental Guide- lines that were issued in 2003. The guidelines provide practical requirements for the EIA process in connection with hydropower development. World Bank Lao PDR Strategic Impact Assessment Final Report 7 2.3 National Safeguard System for Hydropower Development. 2.3.1 Legal Framework A number of laws, regulations and decrees, some general and other more spe- cific, impinge on, and impose demands for, environmental and social safeguarding in connection with hydropower development in Lao PDR. They have all been passed or issued since the middle of the 1990s up till present. Together they con- stitute a comprehensive set of requirements for environmental and social impact assessment and mitigation planning for the hydropower sector. The Forestry Law The Forestry Law of 1996 gives general provisions for management of all forest related resources, including all plants, wildlife, watercourses, etc. It thus regulates logging of reservoir areas and provides the legal basis on which the GOL, throught the Department of Forestry, Ministry of Agriculture and Forestry, allocates the use of forest land for hydropwer development. The Electricity Law The Electricity Law of 1997 contains a number of clauses that in general terms sets out environmental requirements for the hydropower development process. Article 14 requires the Developer to submit environmental and social studies and management plans. Article 15 deals with conditions for approval of licences for hydropower development and states that hydropower projects should not ad- versely impact the environment. In Article 18 obligations of the licensee are speci- fied. However, the environmental requirements are only stated in general terms. The Water and Water Resources Law The Water and Water Resources Law was adopted by the by the National As- sembly in 1996 and became effective in March 1997. The Law seeks to ensure sustainable use of water resources and defines 3 categories of utilisation: small, medium and large scale. Hydropower projects that seriously disrupt water- courses fall in the large-scale category, whereas run-of-the-river projects in- volving no inter-basin transfer of water might be classifies as medium-scale use. Micro- and mini-hydropower projects normally fall in the medium-scale category. Article 18 specifies that projects in the large-scale category require a feasibility study, an EIA and management plans defining mitigation measures. Article 19 states that Developers of hydropower shall obtain GOL approval in the form of a licence as defined by the Electricity Law. Article 24 requires that Developers con- tribute to the cost of watershed management and protection while Article 25 de- mands that hydropower projects must be planned and built in a manner that pro- tects the environment. The Law also demands that the Developer must fund and assist in resettlement of people replaced by the project. Finally, logging in catch- ments is, according to Article 31, prohibited for individuals, juristic entities or or- ganisations. The Land Law The Land Law of 1997 provides the legal basis for allocating land and awarding deeds and titles for resettlers in connection with hydropower development. The Ministry of Agriculture and Forestry are responsible for administering the Law. The Environmental Protection Law The Environmental Protection Law, passed by the National Assembly in 1999 and further elaborated by an implementation decree in 2002, requires that all projects and activities that have an impact on the environment, including social impacts, World Bank Lao PDR Strategic Impact Assessment Final Report 8 goes through an assessment process prior to approval and implementation. Article 8 deals with EIA procedures and requires that relevant line ministries develop their own EIA guidelines and standards. These guidelines are to be followed up and approved by the Science and Technology Environment Agency (STEA). Late 1999 STEA advised the Ministry of Industry and Handcraft (MIH) that it should de- velop and implement EIA regulations for hydropower projects. Article 15 deals with biodiversity issues. Disaster protection is dealt with in Arti- cle 19. It obliges owners of dams and managers of reservoirs to maintain safe structures and cooperate with the National Disaster Protection Committee in plan- ning and executing responses to disasters. Article 24 to 28 deals with mitigation and restoration of the environment while en- vironmental management and monitoring are described in article 35 to 41. How- ever, the provisions are not detailed and are kept in a general form so that it is un- clear how they apply to the hydropower sector. Article 30 and 31 provides the basis for the setting up of an Environmental Protec- tion Fund with "development projects" including hydropower projects as prospec- tive funding sources. Regulation on Environmental Assessment In line with the provisions in the Environmental Protection Law, STEA issued a Regulation on Environmental Assessment in 2000 followed by an Implementation Decree in 2002. The Regulation provides guidelines and standards for the carrying out of environmental assessments and provides a framework within which line ministries can develop their own set of standards and guidelines for EIA proce- dures. Prime Minister's Decree No. 164 PM Decree No.164 was issued in 1993 and provided the legal basis for the estab- lishment of the National Biodiversity Conservation Areas in Lao PDR. The Regula- tion on Management of National Biodiversity Areas, Aquatic and Wild Animals (2001) gave more detailed guidelines for directions for management of the areas and the wildlife. The administrative responsibility for the management of the NBCAs was placed at the Ministry of Agriculture and Forestry (MAF). A number of NBCAs are situated close to, or have existing or planned hydropower projects within their boundaries. Decree on the Establishment and Management of Protected Areas and Wildlife in LaoPDR This Decree supersedes Decree No. 164 and gives more specific definitions of protected areas. The term National Park is introduced and considered to be syn- onymous with the term National Biodiversity Conservation Area. It is furthermore stated that protected areas, including NBCAs, may be divided into zones to ac- commodate differing management priorities within a single protected area. The dif- ferent types of zone are identified in the Forestry Law as: "Total Protection Zone", "Controlled Use Zone" and "Corridor Zones". Controlled Use Zones are further sub-divided into 4 categories including a "Permit Zone" which in the Decree is de- scribed as a zone within which designated non-extractive commercial activities are permitted. Tourism and hydroelectric project facilities are mentioned as exam- ples of commercial activities. World Bank Lao PDR Strategic Impact Assessment Final Report 9 National Resettlement Policy The National Resettlement Policy was first issued in issued in 1997 as a draft, later to be followed by a Draft Regulation. The Policy states that losses shall be compensated for at replacement cost and that consultation with and participation of the affected population in planning shall be an integral part of the resettlement process. All land loss shall be compensated by provision of equivalent areas of land. The Policy also prescribes that all impacts resulting from project activities are the responsibility of the project developer. The Resettlement Regulation specifies the surveys and data collection that must be carried out in connection with com- pensation and resettlement. Decree on Resettlement and Compensation This Decree dates from June 2003 and builds on and complements the previously issued National Resettlement Policy and Resettlement Regulation. It's stated objec- tives are to: · help integrate social dimensions and mitigation measures into development projects with special focus on vulnerable groups; · ensure that provisions for mitigation measures in other applicable laws, de- crees and the national policy on resettlement and compensation are adhered to, and; · ensure that the project affected population share in the benefits of the devel- opment project and that their livelihoods and living standards are restored to at least pre-project level. With regard to ethnic groups and their culture the Decree states that their cultural and religious practices shall be respected and that the restoration development options and benefits they are offered shall be in accordance with their cultural preferences. Environmental Assessment Guidelines for Electricity projects A number of documents make up the environmental assessment guidelines and standards for Electricity Projects. These documents were issued by the Depart- ment of Electricity over the period 2001-2003 subsequent to STEA's request to MIH in late 1999. The EA Standards consist of the following documents: · The Power Sector Environmental Policy (MIH/DoE, 2001) · Regulation on Implementing Environmental Assessment for Electricity Projects in Lao PDR (447/MIH, 2001) · Environmental Management Documents for the Department of Electricity (582/MIH.DOE, 2001) · Department of Electricity Environmental Records Management (583/MIH.DOE, 2001) · Environmental Impact Assessment for Electricity Projects (585/MIH.DOE, 2001) · Environmental Management Plans for Electricity Projects (584/MIH.DOE, 2001) · Environmental Management Standard for Electricity Projects (366/MIH.DOE, 2003). Together the environmental assessment documents for electricity projects con- stitute a comprehensive and partly overlapping set of guidelines that in quality and scope are compatible with the standards and safeguard regulations of the World Bank and the ADB. World Bank Lao PDR Strategic Impact Assessment Final Report 10 2.3.2 Institutional Framework The 2 primary institutions in Lao PDR with regard to environmental assessment and safeguarding associated with hydropower development are; the Social and Environmental Management Division under Department of Electricity (DOE), Ministry of Industry and Handicraft (MIH); and the Department of Environment under the Science Technology and Environment Agency (STEA). A more limited role is played by the environmental Management Unit under the Electricité du Lao (EdL). STEA STEA is an agency under the Prime Ministers Office and its Department of Envi- ronment is responsible for evaluating and approving IEE's and EIAs for hydro- power development projects. STEA consists of 5 departments plus one research institute. The Department of Environment has responsibility for environmental assessment in connection with all infrastructure projects including hydropower development projects. Presently the Department of Environment has a staff of 16 persons divided between 6 divi- sions whereof 7 persons are working with environmental and social assessment. These are divided between the EIA (5 staff) and SIA (2 staff) divisions. Over the last few years provincial Science Technology and Environment Offices (STEO) have been established in all provinces. These offices are charged with follow up of environmental regulations and monitoring of hydropower development projects inside the province boundaries MIH/DOE The Department of Electricity under the Ministry of Industry and Handicraft is re- sponsible for initiating and overseeing the environmental assessment process in connection with planning and construction of new hydropower projects. DOE acts through its Social and Environmental Management Division (SEMD) which is composed of 4 units as shown in Figure 1. The SEMD is thus the most crucial institution for the implementation of the pre- scribed EA process for hydropower projects. Having been created in 2002 it is still in the process of being built up and finding its role. It presently consists of only 5 staff that have responsibility to follow up the relatively large number of hydro- power projects already underway and planned in the near future. Chief/Deputy Chief of Division Staffing: 2 SIA/RAP Unit Environmental Regulations Environmental Staffing: 1 Monitoring Unit and Research Database Unit Staffing: 1 Unit Staffing: 1 Staffing: none Figure 1: Organisational Setup and Staffing of Social & Environmental Manage- ment Division of Department of Electricity World Bank Lao PDR Strategic Impact Assessment Final Report 11 EdL The state enterprise Electricité du Lao under the MIH, is also involved in the envi- ronmental assessment and implementation of action plans through its Environ- mental Management and Monitoring Unit, officially formed in 1999. Its limited num- ber of staff takes part and assists in socio-economic and asset surveys as well as in implementation and monitoring of resettlement activities. 2.4 EA Process for Hydropower Development Projects The DOE initiates the environmental assessment process by an initial screening of a hydropower project's potential environmental impacts. The screening is done on the basis of a Project Description and used to decide if the potential impacts are significant enough to warrant further environmental assessment. This exercise is normally conducted at a project's identification stage. If the project according to a set of defined criteria is found to have impacts that warrant further EA the Project Owner is obliged to carry out an Initial Environmental Examination (IEE). If the pro- ject is expected to have "immeasurable or insignificant environmental impact" an IEE is not required. DOE subsequently submits this decision to STEA and STEA is- sues an Environmental Certificate for the project. If deemed necessary by the DOE the Developer carries out an Initial Environmental Examination (IEE) and subsequently an Environmental Impact Assessment (EIA) as required by the EA guidelines and the severity and magnitude of project impacts. The decision whether an EIA will be needed or not depends on the outcome of the IEE. An EIA cannot proceed without an IEE. If DOE decides that an EIA will not be required an Environmental Management Plan (EMP) is worked out and submitted to STEA for approval along with the IEE. If STEA approves both DOE's decision and the IEE/EMP an Environmental Certificate for the project is issued. If DOE decides that an EIA is necessary a Terms of Reference (TOR) for the EIA studies and investigations is worked out on the basis of the IEE and submitted to STEA for approval. It is a requirement that the EIA is carried out by independent experts, either local or international. When a project is expected to be controver- sial the Project Owner/Developer, in consultation with STEA and DOE, is obliged to establish an independent advisory panel to monitor all aspects of the EIA. When the Developer has conducted the EIA, and DOE has endorsed it, the EIA is submitted to STEA for approval. If it is found to be of sufficient quality and scope, STEA approves the EIA along with its EMP and issues an Environment Certificate. If not satisfactory STEA may reject the EIA report or require further studies. The EA process is illustrated in Figure 2 World Bank Lao PDR Strategic Impact Assessment Final Report 12 Project Owner Agency Conducts EIA Review &Comment STEA Rejects Agency EIA Review & Report Comment TOR EIA Approved submitted to STEA for EIA review TOR Agency Project EIA STEA requires Review & Owner Required IEE DOE Submits additional Comment conducts Submitted decision to study. IEE to DOE STEA EIA not Required IEE EMP Required EIA/EMP Endorsed by Project EMP DOE & Description Project DOE submits Approved Approved by (Project Screening decision to STEA STEA Owner) (DOE) No IEE Required STEA issue STEA Issues STEA issues Environment Environment Environment Certificate Certificate Certificate EMP Implementation EMP Implementation Project EMP Project Project Design/Construction Design/Construction Design/Construction Monitoring Monitoring Monitoring Figure 2: Environmental Assessment Process for Electricity Projects 2.4.1 Comprehensiveness of Legal Framework The legal framework that underpins the environmental safeguard system for hy- dropower development in Lao PDR today appears sufficiently comprehensive and covers most eventualities and environmental issues that may arise. There are a number of clauses in the Electricity Law, the Environmental Law and the Water and Water Resources Law that oblige Developers to carry out environmental in- vestigations and to propose mitigation measures in connection with hydropower development projects. While the environmental requirements in the basic laws are kept in general terms more detailed provisions are given in the environmental stan- dards and guidelines issued by the Department of Electricity. These are compre- hensive and specific enough to meet international standards and requirements for environmental and social safeguard documents. There are, however, still a few areas and shortcomings that may have to be looked into and amended by supple- mentary regulations. These are taken up and discussed in Chapter 8. 2.4.2 Implementation Capacity Given the many existing and planned hydropower projects in the country it ap- pears that STEA and SEMD are under-resourced and understaffed in relation to their mandates and tasks. For the hydropower sector the understaffing in the SEMD is most crucial as the Division bears the main burden of following up and ensuring the quality of the EA process and the EIA documents that are produced. Concerning staff capacity and qualifications it appears that both STEA and the SEMD are constrained in their activities and operation by the fact that the staff have limited experience and background in environmental assessment and subject matters. For instance, the majority of the SEMD staff have a technical education background. Therefore, considerable training and capacity building in the field of World Bank Lao PDR Strategic Impact Assessment Final Report 13 social and biological issues appears to be necessary to enable the staff to prop- erly carry out their tasks. The strength of STEA and SEMD is that most of the staff has university degree background, something that indicates ability and readiness to receive and absorb training. Once the environmental and social mitigation plans required according to the EA guidelines have been established, government agencies at provincial and district level will, to a large extent, be responsible for their implementation. The capacity and competence of these units is crucial for an acceptable outcome of social and environmental mitigation activities. Experiences from hydropower projects already completed indicate that lack of both technical and managerial capacity is a con- straint for appropriate implementation. Few of the managerial and technical staff have any background in environmental and social issues. Managerial and admin- istrative qualifications have also proven to be a constraint. Recommendations in relation to institutional capacity and function are given in Chapter 8. 2.5 Consultation and Public Involvement 2.5.1 Consultation with Project Affected People Consultation with project affected people and communities are a basic prerequi- site for incorporating their concerns and preferences into project plans, most im- portantly resettlement plans, including livelihood restoration and development strategies. Consultations with affected communities can also provide inputs and data that enable planners to minimise environmental and social impacts through choice of technical solutions and modifications of design. To make this possible consultations have to be undertaken at an early stage of project planning ­ pref- erably as early as the pre-feasibility or feasibility stages. Early participation of the project affected population does not only increase their influence on planning outcomes but it will also contribute to better implementation outcomes through fostering a sense of ownership to programmes and activities. Finally, from the perspective of human rights, consultations are fundamental as the UN Universal Declaration of Human Rights articulates and emphasises the right to self-determination and the right to consultation in matters that affects peoples' lives. 2.5.2 Involvement of Other Stakeholders In addition to the active involvement of the affected population in project planning, consultations in connection with hydropower development also encompasses the public sphere where other stakeholders need to be informed about environmental and social impacts of a project at the local, regional, national and international lev- els. Public consultation and disclosure may thus include a number of groups and interested parties such as community based and civil society groups and NGOs. Involvement of these groups has an important transparency and control function in hydropower project planning and implementation. The national safeguard documents in Lao PDR requires consultations to be carried out in connection with hydropower development and gives some directions as to how and when they should be carried out The "Regulation on Implementation Environmental Assessment for Electricity Pro- jects in Lao PDR" allocates responsibilities for carrying out consultations and pub- lic involvement processes. In its Article 7: "Public Involvement Procedures" it is stated that public involvement activities is the responsibility of the project owner World Bank Lao PDR Strategic Impact Assessment Final Report 14 during the IEE and project implementation stages while STEA and the project owner, with the assistance of the Department of Electricity, shares the responsi- bility during the conduct and approval stage of an EIA. Public involvement is furthermore specified to include the following activities: · Notification of affected parties, · Dissemination of information about the project and its impacts, · Consultation with affected parties regarding their opinions, · Responding to the affected parties' concerns during project planning and im- plementation, · Opportunity for public comment at the time of project approval, and · Participation of affected parties in the implementation of the project. Finally, Article 7 states that public involvement shall be conducted in accordance with approved criteria (standards/guidelines) developed for the implementation of Public involvement activities. Some more directions are given in "Environmental Impact Assessment for Electric- ity Projects" (585/MIH.DOE), which requires that in undertaking an EIA a public in- volvement process shall be undertaken and that the process shall be scoped during the Initial Environmental Examination (Requirement 9). It is furthermore em- phasized that the public involvement process needs to be flexible and adapted to each project situation. However, the above-mentioned general requirements to the public involvement include: · The involvement of all stakeholders including all project affected peoples (di- rectly and indirectly), village and community groups, Lao Women's Union, gov- ernment ministries, departments and organisations, provincial governments, district and village administrations, Non Government Organisations working in the project area or have an interest in the project or the type of project, and project donors, business community and service providers; · Formal and informal activities to involve all stakeholders to ensure they are adequately informed and able to participate in the consultation and decision making processes; The activities shall be adapted to the stakeholders identities and backgrounds as well as the type of projects and its potential impacts and may include; Participatory Rural Appraisals, surveys, displays and exhibits, public hearings, notifications, village committees, household and individual meetings and discussions, workshops and briefings, etc. Furthermore, it is required that the EIA determines and identifies the further public involvement activities required during the projects implementation phases (con- struction, operation and closure). Public involvement is also briefly addressed in "Environmental Management Stan- dard for Electricity Projects (366/MIH.DOE) which refers to the safeguard docu- ments mentioned above and specifies the minimum information to be included in a RAP. Finally, the Decree on Resettlement and Compensation addresses consultation and public participation in Article 13 and 14 which briefly states that a consultation process shall be carried out so that all stakeholders are fully informed, and that a grievance mechanism and grievance redress committee shall be established by the project proponents. World Bank Lao PDR Strategic Impact Assessment Final Report 15 Although consultation and public involvement are covered to some extent in the national safeguard documents it must be concluded that the directions given are not very extensive and detailed as specifications and requirements in total are contained on less than 2 pages. In addition, as referred to above, the directions are general and it is left relatively open as to as to what type of methodology and approach shall be used during consultations. Little is said about the scope and extent of consultations other than that they shall provide "adequate opportunity to provide their opinions on and input into the planning and implementation of the project". Recommendations concerning consultation and public involvement process are given in chapter 8. 2.5.3 Civil Society Development As mentioned above other stakeholders than the project-affected population have an important role to play in hydropower planning. Public involvement is intended to contribute to more accountability and transparency in the planning and decision processes for hydropower projects. Civil society and independent organisations can speak on behalf of the wider society and represent the interests of social groups that otherwise would not be heard and taken into consideration. As stakeholders that are not directly affected the present safeguard documents men- tion village and community groups, government agencies on the central, provincial and district levels, party mass organisations, NGOs working in the project area, development agencies, the business community and service providers. However, it cannot be claimed that these groups represent genuinely independent organisa- tions. Because the right to free association is restricted in Lao PDR civil society is presently underdeveloped and national NGOs do not exist. There are, however, a few local NGO-type organisations. 2.6 Vulnerable Groups and Cultural Integrity The issue of vulnerable groups and hydropower development is related to a num- ber of factors. Firstly, most of the potential hydropower development sites are lo- cated in relatively isolated, mountainous or forested areas where many of Lao PDR's ethnic minorities are located. Given the fact that hydropower development may bring about rapid change in the communities it impacts, minority groups my experience considerable social, cultural and economic change. One should con- sider: · Reliance on natural resources in a project area may be threatened by popula- tion influx from outside and resource restriction policies in catchment areas. Attention should be paid to land use and conservation issues in NBCAs. · The degree of integration of some ethnic minority groups into the mainstream economy is limited and sudden changes from a primarily subsistence econ- omy to market economy may be disorienting and lead to exploitation by other groups and potentially a marginalisation or further marginalisation of minorities. · The dominant lowland Lao culture (Lao Loum) tends to spread rapidly into ar- eas where large infrastructure projects are carried out, such as hydropower or roads, leading to exposure to different cultural values, such as Buddhism, Lao language, different social systems, different attitudes to women and other aspects. · A lack of familiarity with many of the aspects of hydropower development and the larger Lao society as well as a lack of political representation make it challenging for minority groups to participate in consultations and influence World Bank Lao PDR Strategic Impact Assessment Final Report 16 project design and to become project beneficiaries on an equal level with their lowland neighbours. · Most vulnerable groups and ethnic minorities are illiterate and special provi- sions and efforts will be necessary to address language issues, including lit- eracy programmes, consultations in minority languages and training in skills and management to encourage participation in decision-making (capacity building earmarked for specific groups). · Special provisions are also needed to address cultural heritage issues in or- der not to negatively impact local communities ­ these may include allow- ances for conducting necessary rituals and ceremonies in relation to reloca- tion, moving religious structures, changing the landscape and disturbing grave sites. 2.7 Development Opportunities and Benefits Beyond ensuring that resettlement and compensation for directly affected people are carried out in an appropriate and socially responsible way, the present poli- cies and thinking among international financial agencies encourages national gov- ernments and developers to share benefits with affected and local communities through various development programmes. The World commission on Dams Report (WCD, 2000) also emphasizes the development aspect of hydropower develop- ment and identifies "recognizing entitlements and sharing benefits" as one of the 7 strategic priorities for future dam projects. Examples of benefits for local communities often associated with hydropower de- velopment are; local electrification, expanded irrigation, improved road access, safe water supply and improved social services. An important rationale behind treating hydropower development as a development opportunity for local commu- nities is to compensate for the impoundment of a local resource that pre- development was freely accessed. Another aspect is compensation for the in- conveniences and social changes hydropower development entails, such as in- creased traffic and risk for vehicular accidents, increased in-migration and higher exposure STDs, increased pressure on social services, higher crime rates etc. Finally, creation of long-term social benefits for local communities also plays an important role in legitimizing and justifying hydropower development, making it more acceptable and countering the negative image hydropower development has suffered from in the past. In Lao PDR hydropower sponsored development for local communities has only been carried out to a limited extent. Only in recent years has the idea of sharing of benefits with local communities led to concrete plans for wider social and eco- nomic development programmes. The most relevant example here is the Nam- Theun 2 Project that incorporates a regional health programme and plans for basic irrigation structures that will enable a larger scale development if additional fund- ing becomes available. The Social and Environment Management Framework and Operational Plan (SEMFOP) for the Nam-Theun Watershed, with its focus on agri- cultural and social development can also be seen as a programme designed to distribute benefits locally. World Bank Lao PDR Strategic Impact Assessment Final Report 17 3 HYDROPOWER PROJECT EIA ­ LAO EXPERINECES With the relatively recent establishment of national regulations and guidelines, their adequacy and efficiency in producing international standard EA processes and mitigation plans has yet to be properly tested out. So far, they have been applied to only a few hydropower projects, none of which has yet been completed. The Xe Kaman 3 Hydropower Project currently under preparation with Vietnamese funding will, provide one important test case. Experience with environmental and social assessment in connection with hydro- power development before the national standards were put in place, has been linked to projects where international funding have been involved. In the flowing are presented in some detail the EIA processes and experiences related to three allready commissioned hydropower projects in Lao PDR. 3.1 Theun-Hinboun 3.1.1 Project Description The Theun-Hinboun Hydropower Project was the first private sector Build-Own- Operate-Transfer (BOOT) hydropower development in the Lao PDR. It is located on the Nam Theun River, approximately 100 kilometers upstream of the confluence of the Mekong and the Nam Kading/Nam Theun River. Construction of the Theun- Hinboun project commenced in November 1994 and electricity generation started in April 1998. 3.1.2 EIA Process An Initial EIA was prepared in 1993 concluding that the head pond would not in- volve resettlement and that the construction of the powerhouse, switchyard, transmission line and tailrace canal would involve limited compensation for loss of agricultural land only. No negative health impacts were foreseen. The report high- lighted positive aspects such as potential improved fisheries, improved agriculture, better navigation, improved services and infrastructure and employment opportu- nities. Initially it was agreed that the developer should pay one million USD to cover all social and environmental mitigation measures, including construction of the regulating pond and other infrastructures. Due to public pressure and NGO criticism a new series of studies were commis- sioned in 1995 in order to re-examine social and environmental impacts. The as- sessment occurred after ADB financing had been approved and construction was one and a half years advanced and was therefore too late to influence de- sign, although recommendations were incorporated into mitigation measures. The findings highlighted the impacts on fish migration and the loss of vegetable garden along both the Nam Hai and within the head pond area. Further studies in 1999 proposed a rural development plan for irrigation in the Nam Hai to offset negative impacts in that region and to enhance benefits from the available water in the tailrace canal. Furthermore, a study was commissioned to produce a final compensation and mitigation plan in an attempt to redress the shortcomings of previous studies. World Bank Lao PDR Strategic Impact Assessment Final Report 18 3.1.3 Resettlement and Consultation Process Even if the Project did not involve any relocation of people the follow up-studies identified several negative impacts on the local communities. These included the loss of fish in downstream areas, the loss of dry season vegetable gardens and the lack of adequate drinking water. The fact that the original EIA did not report potential losses and assumed that there would be an increase in fish catches proved to be an obstacle for proper mitigation of the impact. Original estimates on mitigating social impacts were seriously underestimated and there was a lack of good baseline data for fish migration in particular. In general, downstream of the dam impacts were not considered until operation commenced and impacts were felt on downstream communities. Without baseline data it has been impossible to estimate impacts and, thus, difficult to mitigate these impacts and reach closure in terms of budget, monitoring and compensation. Moreover, the consultations process and the handling of the influx of population and internal movement of population within the project area provide some impor- tant lessons for future hydropower development in the country. The consultation process was initially carried out only for determining the extent of compensation and not in terms of possible development benefits or identification of indirect or possible long-term impacts. Compensation for rice fields lost was the main con- cern and there was only a very limited dialogue with villagers for this. Only after it became apparent that there were many other types of impacts as mentioned in the paragraph above did meaningful consultation commence in earnest. At the start of construction there was considerable movement of population within the project area to roads and to project camp areas. This spontaneous movement of people caused many practical problems of hygiene and traffic congestion as well as several vehicular accidents. There was no overall plan to handle this and a `reactive' rather than a `preventative' approach was adopted at first. However, it did not take long before project management realized that this was not achieving results, and hence a change of attitude took place that resulted in communal wa- ter supply systems, security patrolling, setting up an organized camp followers area, setting up a school and other measures were adopted. 3.2 Houay Ho 3.2.1 Project Description The Houay Ho Hydropower Project is located on the Boloven Plateau, 160 kilome- ters east of Pakse and 30 kilometers northwest of Attapeu. The catchment of 191.7 km2 is located on the eastern side of the Plateau. A dam across the Houay Ho River creates a reservoir that covers an area of 37.5 km2. Turbinated water is released into the Xe Kong River, leading to the drying up of the Houay Ho for some four kilometers downstream of the dam. One village (Ban Than Ngao), about 8 kilometers down-stream has been severely impacted by the loss of water and fishing opportunities. 3.2.2 EIA Process The developer, Daewoo, conducted the pre-feasibility study in April 1994 (Report on Environmental & Socio-Economic Studies, Houay Ho Hydropower Project), not- ing the major environmental and social impacts of the project and suggesting probable mitigation measures. However, statistics on socio-economic conditions were too general for planning and it appears that no information was gathered from the impacted villages or the surrounding areas. The Preliminary EIA also rec- ommended a Resettlement Plan, watershed management and environmental moni- toring. Only the first recommendation was followed up by the GOL. One obvious World Bank Lao PDR Strategic Impact Assessment Final Report 19 shortcoming is that the Preliminary EIA was conducted after construction had commenced, eliminating the possibility of integrating mitigation measures in project design and participatory planning with the affected communities. 3.2.3 Resettlement and Consultation Process The Preliminary Environmental Impact Assessment identified the two impacted vil- lages that were recommended for relocation: Ban Thang Ngao due to loss of fish- eries and Ban Nam Han due to inundation. However, the resettlement plan as it was implemented deviated substantially from the recommendations of the Houay Ho EIA. In the end all villages in the Houay Ho catchment area, together with all of those in the catchment of the adjacent proposed Xe Pian-Xe Namnoy hydropower scheme, were relocated to a resettlement site at Houay Kong, some 30 kilometers to the west of the Houay Ho dam. This major resettlement effort resulted from a GOL designed plan to combine its Focal Zone development strategies with the re- settlement of affected villages in connection with the Houay Ho and the Xe Pian- Xe Namnoy Hydropower Project. The Focal Zone strategy combines the aims of reducing shifting cultivation with relocation of villages to the proximity of roads to provide services and to promote national integration. The Pakxong District Focal Zone came into effect after the project had already been designed and it appear that the provincial government attempted to utilize project funds for establishing coffee plantations on the Boloven Plateau. The Provincial Rural Development Committee drew up a Resettlement Action Plan outlining major strategies for relo- cation, land allocation, infrastructure and service improvements and the promotion of coffee production, utilizing approximately 57 percent of the Rural Development Funds for the whole province. The resettlement involved the relocation of 12 Nya Heun villages into an area adja- cent to Lavaen villages. The mixing of these groups has created tension and con- flict over land. The Nya Heun is a very small ethnic group (4,200) and have been classified as `vulnerable' due to their small population, relative isolation and reli- ance of forest resources for subsistence. Relocating them outside of their tradi- tional forests has had a significant negative impact on their culture and traditional way of life. The consultation process was weak and involved discussions with leaders only ­ most people did not want to relocate and leave their homes unnec- essarily. Lack of adequate funds and planning resulted in food shortages that were only remedied by food donations by an international NGO. There were inadequate pro- visions for potable water and capacity building for local authorities, and an over- reliance on cash compensation, cash crop production and providing services and infrastructure. Despite the recommendations of the EIA consultants and the fact that livestock rearing has been a key element of their livelihood systems, no provision for live- stock or grazing areas were made at the new resettlement sites, in the hope that villagers would sell off their animals. Animals remain in the catchment area near original villages. 3.3 Nam Leuk 3.3.1 Project Description The Nam Leuk Hydropower Project is located within the Phou Khao Khouay Na- tional Biodiversity Conservation Area. It involved the construction of a 45.5 m high rock-fill dam on the upper reaches of the Nam Leuk, and the diversion of a small tributary of the Nam Leuk, the Nam Poun, for the creation of a storage reservoir of 12.8 km_. World Bank Lao PDR Strategic Impact Assessment Final Report 20 Construction work commenced in late 1996 and start-up of electricity generation was in April 2000. Nam Leuk was constructed to meet national power demand with some future export opportunities. 3.3.2 EIA Process Efforts were made from the start to make the Nam Leuk Hydropower Project into a model for future hydropower planning and implementation in the Lao PDR. The objective of minimizing environmental and social impacts, by respectively limiting the acquisition of land and by claiming no resettlement, was highlighted from the beginning. An EIA was prepared in 1996 and a Social Action Plan was produced in 1997 after the original EIA was rejected in 1992 by the ADB due to a number of shortcomings. In the 1996 EIA, the developers claimed that there would be no resettlement as no villages were located within the future reservoir. However, additional investiga- tions addressed the issues of compensation and land acquisition for the power- house site. A plan for the relocation of the Hmong village of Ban Nam Leuk (16 households) was also produced. The reason for the relocation was primarily loss of swidden land as a result of the construction of the reservoir. 3.3.3 Resettlement and Consultation Process The Project opted for cash compensation in instalments and this created some confusion and a misunderstanding about how compensation was to be paid out. This practice did not conform to World Bank guidelines as these advise against cash compensation for purchasing land. Resettlers were informed about the move in 1997, shown various sites and given payments to arrange for their relocations and the building of houses. Purchasing of land at the new site did not occur as planned due to a slow release of budg- eted funds and the escalation of land prices. Consultations were held at several points during the planning and implementing stages of the project but there was not a specific overall plan. Stakeholders in- volvement occurred at various times depending on the perceived needs of the project. The project allowed the resettlers to choose their own locations but did not inves- tigate the viability of that choice in relation to livelihood and the host communities' use of existing resources. No upgrading or improvement of the capacity of gov- ernmental institutions responsible for resettlement and livelihood restoration was undertaken. 3.4 Common Characteristics and Lessons Learned 3.4.1 Timeliness One of the most important aspects of an EIA is to enable the Developer to modify design in order to minimise resettlement, and social and environmental costs and impacts. The experience with the EIA process described above is that the EIA studies appears to have had little influence on the project design and technical solutions. This was due to the fact that important EIA plans and studies were concluded after the start of construction. Both in the case of Theun Hinboun and Nam Leuk additional investigations of social impacts were undertaken one year after start of construction activities. For Hoay Ho standard procedures for con- ducting EIA and resettlement planning were followed, but only after dam con- struction was nearly completed and after resettlement of the affected people. World Bank Lao PDR Strategic Impact Assessment Final Report 21 3.4.2 Comprehensiveness In general the EIA studies have tended to underestimate both environmental and social impacts and their mitigation costs. In the case of Theun-Hinboun social im- pacts were underestimated in the initial EIA. Social planners were thus unable to introduce preventative measures and enhance benefits, having only enough funds for compensation of losses. Effects on livelihoods in terms of loss of fish- eries and vegetable gardens along both the headpond and downstream areas were only recognised as significant negative impacts after the commissioning of the hydropower plant. The negative impacts in connection with influx of workers and camp followers have also in general been inadequately addressed and planned for. As noted un- der 3.1.3 the Theun-Hiboun construction activities attracted a considerable num- ber of people and led to social problems including poor sanitary conditions and vehicular accidents. These impacts were not addressed in any pre-existing plans and had to be dealt with as they arose and became to severe to ignore. 3.4.3 Consultation and Public Involvement Consultation and public involvement has been a part of the EIA process in all 3 projects but has for the most part been inadequate in relation to the present inter- nationally accepted safeguard procedures. The Houay Ho resettlement process, which was handled and planned by the Government involved only consultations and discussions with community and village leaders. In connection with the Nam Leuk Project a number of consultations were held but no overall consultation plan was developed. One positive aspect with this consultation process was that people were given the opportunity to chose their own locations at the resettlement site. In the case of Theun-Hinboun consultations were initially carried out to determine compensation needs and limited to those farmers that lost paddy land. A more comprehensive consultation was only carried out when it became clear that the Project would entail wider impacts. In terms of a more comprehensive involvement of interested parties and organisa- tions none of the 3 projects carried out any process of public consultation. How- ever in the case of Theun-Hinboun international NGOs engaged themselves and pushed for better assessment and planning thus helping to ensure that environ- mental and social issues and concerns were properly addressed. In that way NGOs played a role in ensuring fair compensation and accountability. In terms of transparency and follow up external monitoring has been a part of both the Theun-Hinboun and the Nam Leuk resettlement and compensation proc- esses. It did not feature as an integral part of the follow up of the environmental and impacts of the Houay Ho Project, resulting in considerable negative criticism by some international NGOs and development agencies. 3.4.4 Resettlement Planning and Implementation A common characteristic of all 3 EIA processes referred above is that compensa- tion and/or resettlement needs were underestimated and insufficiently planned and budgeted for. This has resulted compensation and resettlement processes that were inadequate and not in conformity with international safeguard stan- dards. The Houay Ho EIA lacked proper socioeconomic baseline data and the Developer did not take responsibility for any part of the resettlement planning and implemen- World Bank Lao PDR Strategic Impact Assessment Final Report 22 tation, leaving it to the Government to both plan and finance the resettlement. which was integrated and combined with the creation of a new Focal Zone for which there was insufficient government funding. The outcome was therefore unsatisfactory including increased danger for assimilation and disappearance of a small ethnic group (the Nya Heun) poor livelihood development planning disre- garding present reliance on livestock and non-timber-forest-products and with an over-reliance on uncertain cash crop production (coffee). In addition planning did not consider household composition and splitting, such that 20-30 percent more house lots were needed than foreseen or financed. In the case of Nam Leuk the resettlement arrangements involved cash compensa- tions in instalments that because of delayed release of funds created problems for the resettlers with respect to purchase of land and building materials for the new houses. Given the past track record on resettlement and hydropower, it appears that much needs to be done in terms of policy development and capacity for planning, imple- menting and monitoring of resettlement as a viable, sustainable and transparent process. World Bank Lao PDR Strategic Impact Assessment Final Report 23 4 LAO PDR HYDROPOWER DEVELOPMENT 4.1 Lao PDR Power Development Priorities and Goals Lao PDR is the country in the Lower Mekong Basin with the largest hydropower potential. Only a small percentage of this potential is yet developed. In addition the country has significant undeveloped coal recourses. The policy of Government of Lao PDR is to develop these resources for the bene- fit of the country through the two primary strategies: · To provide reliable and affordable power to cover the national demand and thereby promote economic and social development. · To develop part of the hydropower potential to generate export income for the country by selling power to neighbour countries. As for the national demand Lao PDR is still in an early stage of development. The Governments ambitious policy is to increase the electrification of households from the present 35% to 90% in 2020. The provision of inexpensive electricity is as- sumed to increase the competitiveness of the industry and commerce and to im- prove the livelihood of urban and rural communities. Bilateral trading of power is already well developed in the region and Lao PDR has been a "pioneer" in this trade by already having two export oriented power plants in operation. Agreements have also been reached on future delivery. Intergov- ernmental MOUs have been signed between Thailand and Lao PDR for the supply of 3,000 MW of power by the year 2010, between Vietnam and Lao PDR for sup- ply of 1,500 MW ­ 2,000 MW of hydropower by year 2010, and between Cambo- dia and Lao PDR for power sector cooperation in the areas along their common border. However, the prospect of Lao PDR being able to benefit from further export of electricity, based on its vast hydropower resources will depend on; the general regional economic development situation; the competitiveness of hydropower generation in Lao PDR compared to other alternatives for power generation in the region; and the ability to attract foreign investment needed to develop these re- sources. 4.2 Power Use and Demand Forecasts 4.2.1 National Power Demand In Lao PDR the growth in energy consumption was maintained at high rates throughout the years of economic recession in the late 1990's, even though the overall economic growth was reduced from 6-8% per annum to only 4-5% per annum. The prime basis for the preparation of demand forecasts has been the govern- mental goal to increase the electrification ratio from today's 35% to 90% in 2020. This goal is supposed to be met by a combination of off-grid developments and grid extension programmes. In addition the plan included the expected demand resulting from planned industrial development in the central part of the country (served by Central II grid). World Bank Lao PDR Strategic Impact Assessment Final Report 24 The high level of growth is expected to continue in the next 15 years, with a fal- ling tendency towards the end of the period. The demand forecast used as a ba- sis for the recent Power Sector Development Plan (PSDP) is shown in Table 1. The extreme growth indicated for the period 2002 to 2005 is mainly caused by the assumed start-up of the electro winning process at the Xe Pon copper / gold mine (40 MW) and the cement plant at Mahaxai (20 MW). Irrigation schemes are esti- mated to reach a load demand of 10 MW in 2020. Table 1: PSDP Energy and Peak Demand Forecast (Meritec and Lahmeyer 2004) Unit 2002 2005 2010 2015 2020 Energy Consumption) GWh 937.0 1,924.5 3,061.0 4,026.4 5,332.8 Av. annual growth % 27% 10% 6% 6% Peak Load (MW) MW 186.4 378.3 548.6 721.8 956.1 Av. annual growth % 27% 8% 6% 5% 4.2.2 Export Power Demand The export power demand cannot be modelled in the same way as the national demand. The external factors and the uncertainties are too large for any precise prediction of the long-term demand or optimization of the sequence and timing of projects. The determining factors will be i.a.: · The future cost difference between hydropower and other energy sources. · Progress in regional transmission systems and power grids. · Availability of capital. · Progress in competing hydropower plans in neighbouring countries. The PSDP presents two development scenarios for export projects; one base scenario and one optimistic scenario (Table 2). Table 2: Export Generation Scenarios (Meritec and Lahmeyer 2004) Base Export Scenario MW Optimistic Export Scenario MW 2006 2007 2008 Theun Hinboun Extension 150 Theun Hinboun Extension 150 Nam Mo 100 2009 Nam Mo 100 2010 Nam Theun 2 1000 Nam Theun 2 1000 Xe Kaman 3 250 2011 Xe Kaman 3 250 2012 2013 Xe Kaman 1 468 2014 Xe Kaman 1 468 2015 Xe Kong 348 2016 World Bank Lao PDR Strategic Impact Assessment Final Report 25 2017 Xe Kong 5 348 Nam Ngum 3E 580 2018 2019 Nam Ngum 2B 183 2020 Nam Ngum 3E 580 Total capacity 2796 2979 The sequence of the scenarios above has been based on the professional judgement of the consultant and on the following factors: · Economic of the project and quality of the site. · Substance and sincerity of the sponsor. · Market conditions including demand growth, reserve margin and political sup- port for power trading. · Capacity of Lao institutions to manage the implementation of multiple projects. Taking into consideration the uncertainties of the development of export projects the tables above show that the export projects dominate the 15 year development plans in Lao PDR. The total projected capacity demand of the export projects is about 3 times the modelled national demand for the same period (956 vs. 2796 MW). 4.2.3 Distribution Networks The power system in Lao PDR comprises four major networks (Table 3). The area-wise distribution of the country's power demand forecasts are summarised in the same table. Table 3: Lao PDR Sub-regional Requirement, in MW (MRCS 2001). Supply Area Peak Load Share of load demand 2000 % Northern Area 4.2 2 Central Area I 120 70 Central Area II 29 17 Southern Area 19 11 These networks are not interconnected. At present, 36% of the population is con- nected to one of these networks. In addition to these systems there also exist a number of smaller isolated systems. The Central Area I accounts for 70% of the consumption, of which the municipality of Vientiane alone consumes close to 60%. Central Area I with Vientiane and Luang Prabang will in the planning period continue to dominate the country's de- mand, but to a lesser degree than before. The other areas show increasing shares, reflecting lower initial degree of electrification and the Government's electrification policy, and in the case of Central 2, industrial development. World Bank Lao PDR Strategic Impact Assessment Final Report 26 4.3 Regional Power Demand Growth As mentioned above the export projects form the largest part of the total power development plans in Lao PDR. Thus the development and policies of the neigh- bouring countries are of great importance. Various forecasts for the Greater Mekong Sub-region (GMS) as a whole and for the countries individually have been prepared in the past. As expected, there are variations between the forecasts. Table 4: Regional Power Demand Forecast (MW) Year 2000 2005 2010 2020 Yunnan 5 257 7 554 10 227 16 231 Cambodia 114 280 529 1 156 Lao PDR 167 280 442 784 Thailand 14 918 21 222 28 912 51 359 Vietnam 4 890 7877 12 589 28 739 Total demand 25 346 37 213 52 699 98 269 Source: Norconsult 2002. The demand development figures shown in Table 4 are very high. The reason for this is a large, unsatisfied need for more energy in Thailand in particular. The in- creased demand is planned to be served mainly by new thermal power plants fuelled by gas and coal. Gas fuelled power plants in Thailand today provide for 64% of the total installed capacity, whereas hydropower contributes 13%. For all other GMS countries hydropower is the dominant source of electricity. New hy- dropower plants will be valuable for peak power generation for Thailand. The majority of the populations in Vietnam, Lao PDR and Cambodia are still without access to electricity. Measures like demand side management are cost-effective means of easing the situation. However, in a situation where only a part of the population today has access to electricity, there will inevitably be a growth as long as the electrification programmes are effective and the electricity tariff is low. It should be remembered, however, that the forecast includes system losses, which are very high in the region, and that there are significant inefficiencies and overuse in households, irrigation, as well as in industry and commerce. There is, therefore, large potential for savings by reducing system losses, applying more energy-efficient equipment and processes within the countries and by using a tariff differentiation as a tool to promote energy savings. This potential should be considered as "a source of supply" alongside investments in new generation ca- pacity. Increased system and user efficiency will have implications for the de- mand for power in general, including the need for developing hydropower, which, is often used to meet peak power requirements where the potential for savings can be significant. 4.4 Existing Power Production in Lao PDR The dominating generation source of the 4 power systems in Lao PDR is hydro- power. In addition a number of small diesel plants are used in the isolated sys- World Bank Lao PDR Strategic Impact Assessment Final Report 27 tems and some small areas in the Central and Northern parts are supplied with im- ports from Thailand and Vietnam. For domestic supply the main hydropower plants are Nam Ngum (150 MW) and Nam Leuk (60 MW) in the Central Area I and Xeset 1 (45 MW) in the South. See map No 1 showing the major existing hydropower plants in Lao PDR. In addition there are three small hydropower projects; Selabam (2 MW), Nam Phao (1 MW) and Nam Dong (1 MW). There are 13 diesel plants, the biggest being Sokpaluang in Vientiane (8 MW). The total installed capacity of these diesel plants are 14 MW, but the annual production is small, only 2.8 GWh, whereas the hydropower plants supply about 1450 GWh/yr. The installed capacity in different regional supply ar- eas is presented in Table 5. Table 5: Installed Capacity in each Region (MRCS 2001) Region Load Centres Hydro Diesel Total Domestic Export MW MW MW MW Northern Phonsaly, Lpang, 1.4 1 Namtha Central I Vientiane, Luang Pra- 222 200 11.1 22.5 bang Central II Savannakhet, Thakek 1.0 1 Southern Champassak, Savane 57 148 0.9 51 Total 279 348 14.4 642 Hydro generation exceeds domestic demand most of the time and excess genera- tion is exported to Thailand. An implication of this is that imports from Thailand to other areas in Lao PDR can be viewed as "power wheeling". In addition there are two power stations dedicated to exports to Thailand: Theun Hinboun (run-of-river, 210 MW) and Houay Ho (storage, 150 MW). Lao PDR has a right to withdraw 1.5 MW from Houay Ho and 10.5 MW from Theun Hinboun for domestic consumption. 4.5 Existing Transmission Lines and Development Plans As mentioned there are four separate distribution networks within Lao PDR. How- ever, there are several interconnections with the Thai grid for local supply in Lao PDR. In addition to the short medium voltage interconnections there are 5 high voltage lines (115/230 kV) crossing the border and transmitting power to Thailand from the existing hydropower projects Xeset, Houay Ho, Theun Hinboun, Nam Leuk and Nam Ngum. All these lines are linked to the EdL distribution network for local sup- ply. Between Lao PDR and Vietnam there are two isolated connections on medium voltage level, one in the northeast and one in the south. The future construction of transmission lines depends on the implementation order of the hydropower projects. The projects are located somewhat concentrated in three major basins and therefore the following interconnections might be ex- pected: World Bank Lao PDR Strategic Impact Assessment Final Report 28 · A 500 kV line from NT2 towards Savanakhet and further into Thailand. Later this line might be extended in different directions, towards Vientiane, towards Vietnam and to the south, linking the main demand centres in Lao PDR. · A 230 kV line will be constructed from Nam Mo towards Vietnam. · A 500 kV line will be constructed from the sub-station Na Bang close to Vien- tiane. From this sub-station there will be several 230 kV transmission lines to- wards Nam Ngum 2, Nam Ngum 3 and Nam Ngum 5 and one towards Thailand. · If the Hongsa lignite power plant is developed there will be a separate 500 kV line towards Thailand. · Further north the 500 kV transmission line from Yunnan will pass through Lao PDR. 4.6 Power Production and Development Situation in the GMS The existing power generation capacity in the Greater Mekong Sub-region is based on a number of energy sources. The dominant sources are gas (mostly imported) and hydropower. Table 6 gives an overview of installed capacity at the beginning of 2001. Table 6: Installed Generation Capacity in the GMS Countries (Norconsult 2002) Installed Capacity (MW) Source Thailand Lao Cambodia Vietnam Yunnan Myanmar GMS PDR Total Hydro 2886 628 1 3291 5150 360 12316 Coal 645 2419 3064 Lignite 2625 2625 Fuel oil 238 71 573 815 1697 Gas 13941 1338 15279 Diesel 230 14 57 828 65 1194 Small Power 1613 1613 Plants Import 340 340 Total 21873 642 129 6675 7569 1240 38128 4.6.1 Generation Expansion Alternatives The Indicative Master Plan on Power Interconnections in GMS (Norconsult, 2002) discusses the alternatives for expansion of the generation capacity in the region. The presentation below is extracted from this study. The main candidates for future supply in Thailand are: · Import of hydropower from Lao PDR, Yunnan Province of PRC and Myanmar. · Thermal plants based on imported coal. · Combined cycle gas plants based on domestic and imported gas. Environmental concerns make the use of coal questionable. With gas as the most realistic thermal alternative, Thai generation would depend heavily on gas by for World Bank Lao PDR Strategic Impact Assessment Final Report 29 about 75 to 90 % of its installed capacity in 2020, the level depending on the con- tribution of imports, primarily of hydropower. · In Cambodia the assumed sourced for satisfying the power demand are: · Oil and gas based thermal generation in Phnom Penh and Sihanoukville · Development of the hydropower potential in west and north-east · Import of power from Vietnam and Thailand In Cambodia there are some projects that might be suitable for export to Vietnam, notably Lower Se San 2 and the 465 MW Sambor diversion project. In the south- western part of Cambodia, close to the border between Thailand and Cambodia, there are also a few promising hydropower projects. In Vietnam many alternatives for future generation are available: hydro, coal, oil and gas and geothermal heat. Vietnam also contemplates the use of nuclear power in the last part of the planning period. Most of the hydropower capacity is located in the north of the country and import from Lao PDR and Cambodia is planned for delivery to the southern part. Yunnan province, PRC, is rich with energy resources. Presently only 5 % of the estimated 400 TWh hydro resources have been exploited, leaving a huge devel- opment potential. Of this potential, 15,500 MW is planed for development in the lower and middle reaches of the Lancang (Mekong) River with an estimated average annual gen- eration of 73.8 TWh. Important projects for export are Jinghong (1500 MW) and Nuozhadu (5500 MW) on the Lancang River, and Malutang (460 MW) close to the border with Vietnam. In addition an alternative is generation based on the consid- erable coal resources in Yunnan. Myanmar is also rich in energy resources, comprising some coal, oil, gas and hy- dropower. The main source for future generation is hydropower. In addition the intention is to build some gas-based generation plants. Information on the situation in Myanmar is limited. However, the 3600 MW Tasang hydropower project is planned for export to Thailand. Apart from Myanmar and the northern part of Vietnam most of the hydropower potential is found in the Mekong River Basin. The total theoretical potential for hy- dropower production in the Mekong basin is estimated to be about 53,000 MW. Of this the potential in the four Lower Mekong countries is estimated to be about 30,000 MW, where 13,000 MW has been identified on the Mekong's mainstream and the remainder is found on the tributaries mainly in Lao PDR. Compared to the huge theoretical potential for hydropower production only a minor part has been developed so far. Only 5 percent (some 1,600 MW) of the Lower Mekong's hydro potential has been developed. All of these projects are on the tributaries. There are great differences between the countries. While Thailand has developed most of its potential on the tributaries, Lao PDR has developed only a few of its many possible projects. Cambodia has yet to construct its first hy- dropower project within the Mekong basin. Vietnam has prepared plans for a full development of its hydropower potential, and the first in a series of plants has re- cently been commissioned. PR China has ambitious development plans for main- stream projects. As for the structure of the future power generation system in GMS the Master Plan Study (Norconsult, 2002) assumes that the countries are likely to increase World Bank Lao PDR Strategic Impact Assessment Final Report 30 their share of renewable energy. This expectation is based on the requirements of the Climate Change Convention, which is signed by all GMS countries. Also in- creased energy efficiency will become highly prioritized in the countries. Norconsult concluded that there is a great potential for saving in total investments and for reduced system operating costs in the region through a co-ordinated de- velopment of the transmission system, connecting all major load centres to the ar- eas of existing and potential larger generation facilities. It seems probable that the long term development of the power sector in South-east Asia will follow a path of integration, but the pace of progress will depend on political decisions and, not least, models and sources for financing and operation of the main transmission lines between the countries. A central question of importance for the development of hydropower projects in Lao PDR will be whether regional large-scale generation will be dominated by each county's own sources or by more cost efficient sources in other GMS countries. 4.7 Hydropower Sector Plans and Strategies 4.7.1 General The hydropower sector seems to be one of the most thoroughly planned sectors in Lao PDR from an economic and technical viewpoint. It can be observed, how- ever, that over the last two decades the definition of what is a feasible project and the principles of project ranking have changed substantially. It seems for in- stance that the original plans for cascades of large power plants on mainstream Mekong are no longer considered realistic options, and none of the potential Lao/Thai projects on the joint mainstream reach are expected to materialise. At the moment Lao PDR has one mainstream project in the pipeline. This is Thakho, a small run-of-river project, which plans to utilise a minor part of the water flow in the Khone Falls, near the border to Cambodia. 4.7.2 Long List of Projects Over the years a large number of potential hydropower projects have been identi- fied in Lao PDR. Both the projects and the technical specifications included in these "long lists" have changed over the years. As the planning process pro- ceeds to the next level more technical data are collected. Together with changes in economic conditions this is likely to result in new technical alternatives or modi- fications. Hence, project identified several years ago are today often found not to be environmentally and economically feasible. Thus the changing lists reflect the changing economic and technical conditions and the social and environmental concerns at the time when the lists were prepared. 4.7.3 Development Plans and Strategies In addition to EdL's own ranking of projects (Electricité de Lao Generation Expan- sion Plan, 2005­2020) the following 6 hydropower ranking studies have been car- ried out in Lao PDR over the last 7 years: · Hydropower Development Plan for Lao PDR (HDP) in 1997 · Power System Planning in the MIH (PSP) in 1997 · Nam Theun 2: Study of Alternatives (NT2SOA) in 1998 (Lahmeyer & Worley) · Se Kong, Se San and Nam Theun River Basins Study in 1998 (Halcrow et al.) World Bank Lao PDR Strategic Impact Assessment Final Report 31 · Hydropower Development Strategy Study (HDSS) in 2000 (Worley & Lah- meyer) · Power System Strategy Study (PSSS) in 2002 (Electrowatt & PA) · Power System Development Plan (PSDP) in 2004 (Meritec & Lahmeyer) The latest of these studies included environmental and social parameters as fac- tors in ranking and sequencing of the projects. The NT2SOA and the HDSS used the same system of multi-criteria ranking based on a scaling and weighting (MOSES) methodology. The following "disciplines" were covered, each with a set of issues or indicators: social, regional develop- ment, environmental, technical, economic, financial and state of preparedness. The weight factor given to the three first disciplines (environmental aspects in the broad sense) is 41% out of 100 percentage points. The PSSS comments on the general weaknesses of multi-criteria decision support models, as used in the NT2SOA and HDSS and underlines the lack of transpar- ency and problems of weighting disciplines and indicators. Thus, as a contrast the PSSS adopts a simplistic approach for integrating environmental and social is- sues. In the PSSS an overall environmental ranking is given to each individual project based on two measurable indicators: · km2 inundated land per produced GWh, and · relocated people per produced GWh. Recognising that this method can only give a first impression and that more stud- ies are needed at a later stage, they conclude that these indicators give a good and easily understandable sense of the potential environmental impacts. The classification of social and environmental impacts based on these indicators was used to modify the ranking based on production cost alone. ThePSDP applies a very ambitious method for including environmental and social aspects in ranking. By addressing about 1200 parameters (SESAMEE model) us- ing different techniques of determining the costs and benefits in monetary terms the "Global Market Net Project Value" and the "Local Market Net Project Value" is translated into a value in million of USD for each project. It is difficult to judge the quality of this method as only the final summary figures have been published and the uncertainties in the basis data are not discussed. The ranking in these studies have some similarities: Nam Theun 2, Nam Mo, Xe Kaman 3 and Nam Ngum 2 are in all studies among the highest ranked export pro- jects. The Theun Hinboun Extension (which includes NT3) has also a high ranking in the latest studies. In earlier studies NT3, as a stand alone project, came out with a lower rating. According to EdL's ranking of the domestic projects Nam Mang 3, H. Lamphan Gnai and Xeset 2 seems most promising. 4.7.4 Projects for Analysis in SEA The list of projects analysed in this study (Table 7) is partly based on projects for domestic consumption ranked by EdL. The most promising export generation projects is taken from the PSDP ranking. The list contains the projects most likely to be built in the next 20 year in Lao PDR. Table 7: EdL Generation Expansion Plan (2004-2020) for Domestic Projects and the most Promising Export Projects (PSDP). No. Project Expected year Installed Level of study of capacity (MW) commissioning World Bank Lao PDR Strategic Impact Assessment Final Report 32 1 Nam Mang 3 2005 (domestic) 35 FS 2 Xeset 2 2006 (domestic) 76 FS 3 Nam Lik 2007 (domestic.) 100 FS 4 Xepon 2008 (domestic.) 74 I 5 Theun Hinboun Ext. 2009 (export) 105 MoU / FS 6 Nam Mo 2009 (export) 100 CA /FS /EIA 7 Nam Theun 2 2009 (dom./exp.) 75 + 1000 CA /FS /EIA 8 H. Lamphan Gnai 2010 (domestic) 60 I 9 Xe Kaman 3 2010 (export) 250 Constr./MoU/FS 10 Nam Ngum 5 2012 (domestic) 90 PFS 11 Thakho 2013 (domestic) 36 MoU /PFS 12 Xeset 3 2014 (domestic) 20 FS 13 Xe Kaman 1 2014 (export) 468 CA / FS 14 Nam Ngum 4A 2015 (domestic.) 55 I 15 Nam Kong 3 2016 (domestic.) 25 I 16 Nam Pot 2017 (domestic.) 38 I 17 Xe Kong 5 2017 (export) 248 MoU / I 18 Nam Bak 2B 2018 (domestic.) 116 MoU / I 19 Nam Ngum 4B 2019 (domestic.) 56 I 20 Xe Xou 2020 (domestic.) 59 I 21 Nam Ngum 3E 2021 (export) 580 CA /FS /EIA 22 Nam Ngum 2B 2022 (export) 183 CA / I (FS) MoU=Memorandum of understanding, PFS=Pre-Feasibility study, CA=Concession agree- ment; I=Initial study. The PSDP is based on a least cost expansion priority and partly adjusted to the domestic demand (size of project). The result of the study is a prioritised list of about 30 projects. The priority list of domestic projects found in EdL's plan differs somewhat from the least cost ranking of the PSDP. Although least-cost expansion might be the best strategy in macro-economical terms, the ranking list of EdL is a more practical list as it is based on level of planning and financing. In short, a list with a higher probability of realization. In the cases where the evaluation is based on a pre-feasibility study or only a reconnaissance study there might be a long way to go before the project is constructed. As mentioned in the PSDP, an effective planning process is difficult to achieve if the government lacks control over the financing and implementation processes. 4.8 Technical Description of the Major Projects The main technical features and economical parameters related to the projects planned for the next 20 year in Lao PDR, are presented in Table 8 and their loca- tion is shown in Map 1. The data are to a large extent based on the "Project Catalogue" published as an annex to the Hydropower Development Strategy Study (Worley and Lahmeyer 2000). This annex is again based on a number of sources of varying detail and focus from inventory to feasibility study level. Consequently the quality of the in- formation and the issues covered are not on an equal level for all projects. An ad- ditional problem is the constant change in project layout and operational mode pre- World Bank Lao PDR Strategic Impact Assessment Final Report 33 scribed for some projects. The figures for energy production must therefore be read with caution. There might have been significant changes in the production estimates depending on, e.g., which assumptions have been made earlier regard- ing upstream development, and on updating of hydrological records. The data have been checked with the technical data presented in the later PSSS report (Electrowatt, 2002) and, in order to get updated economical data, the spe- cific cost is based on the PSDP-study (Meritec & Lahmeyer, 2004). The specific costs are also presented including the estimated local and global environmental cost. It is important to recognize the uncertainties in the technical specifica- tion, estimated time of commissioning and consequently the social and environmental impacts of the individual projects and of the combined hydropower development. The description is based on the latest over- all development plans but the plans, conditions and priorities are con- stantly changing. Key environmental impacts are presented in Chapter 6 and Table 11. World Bank Lao PDR Strategic Impact Assessment Final Report 34 Map 1: Existing and Planned Hydropower Projects in Lao PDR 0 200000 400000 600000 000 000 4002 4002 000 000 2002 2002 (d! (d! (d! (d! (d! (d! (d! 000 (d!(d! 000 0002 (d! (d! (d! (d! 0002 (d! 000 000 8001 8001 (d! (d! 000 µ (d!(d!(d! (d! (d! 000 6001 (d! (d! (d! 6001 0 50 100 Km (d! 0 200000 400000 600000 Legend NORPLAN AS, Norway (d! Existing HP Existing and planned Hydropower November 2004 (d!Planned HP Projects (HP) in Lao PDR WGS 1984 - UTM Zone 48S NBCA Source: MAF/HPO World Bank Lao PDR Strategic Impact Assessment Final Report 35 Table 8: Summary of Key Technical and Economical Data (incl. Local and Global Environmental Cost). Weighted generation cost2 Ref. Full Min. Waterway Access Trans- Net Design Plant Energy No. Power plant Average Total supply reserv. Surface Dam Tunnel and road mission Head1 flow1 capacity PSSS PSDP incl. incl. Map inflow storage level Level at FSL height penstock lines techn. techn. local global m3/sec Mm3 m a.s.l. M a.s.l. km2 m m m km km M m3/sec MW GWh ¢/kWh ¢/kWh ¢/kWh ¢/kWh 1 N Mang 3 4 59 749 742 9.8 22 900 3200 40 28 529 8 35 134 4.38 2 Xeset 2 14 9 813 812 1.5 16 7600 1200 15 17 263 14 76 252 8.02 8.30 3 N Lik 89 1206 300 270 42.2 99 90 270 45 81 63 180 100 390 4 Xepon 17 405 580 560 29.5 36 8700 650 21 127 273 30 74 301 6.2 5 Theun Hinb. Ext 110 4870 540 510 125.6 119 5200 900 28 86 228 55 105 908 1.88 2.44 2.46 6 Nam Mo 10 291 1320 1280 10.8 82 5500 1300 44 830 14 100 581 2.54 2.47 2.75 2.77 7 N Theun 2 240 3910 538 525.5 450 48 2000 500 84 130 342 330 1074 5936 1.48 1.49 1.56 1.65 8 H. Lamphan Gnai 10 100 840 800 3.5 65 3400 1000 28 44 672 10 60 354 4.02 3.46 4.00 4.10 9 X Kaman 3 35 141 960 925 5.2 99 6000 1090 33 478 63 250 983 3.55 2.69 2.75 2.77 10 N Ngum 5 23 318 1100 1060 14.6 97 6200 860 32 77 292 36 90 430 4.17 4.95 5.41 5.33 11 Thakho 6704 - 74 74 - - 25 2 144 17 240 36 290 5.37 5.18 7.19 18.74 12 Xeset 3 9 - 1022 1022 1.3 11 4900 15 20 165 14 20 72 8.03 8.50 13 X Kaman 1 161 17400 280 250 222 184 400 250 33 33 170 319 468 1925 2.82 2.75 3.10 3.32 14 N Ngum 4A 27 443 1040 1010 14.5 65 3600 200 21 28 158 40 55 250 6.44 15 N Kong 3 34 320 540 520 37 62 400 120 Na 64 77.5 37 25 142 8.24 16 N Pot 2 79 1145 1127 6.1 38 1100 2900 22 14 706 6 38 97 5.47 3.42 4.59 5.13 17 X Kong 5 86 4750 500 462 70 205 290 40 11 195 147 248 1183 4.28 3.10 3.22 3.30 18 N Bak 2B 15 186 1030 1000 4.8 77 8000 1400 45 24 624 20 116 563 5.11 5.40 5.62 5.75 19 N Ngum 4B 29 5.6 880 880 0.5 33 10000 310 35 13 155 40 56 256 6.61 20 Xe Xou 77 2750 180 160 112.9 62 360 90 61 58 118 59 277 6.18 21 N Ngum 3E 106 1320 720 660 25.6 217 10000 320 68 165 322 270 580 2654 3.88 4.05 4.12 4.15 22 N Ngum 2B 189 >150 280 7.5 90 200 66 320 183 830 3.15 2.82 3.29 3.35 Notes: 1) Estimated based on gross head and normal losses. If not available, the power plant flow has been estimated based on installed capacity, net head and normal efficiency. 2) Weighted technical cost from Power System Development Plan (PSDP). Environmental cost are included by i) local environmental cost and ii) global environmental cost World Bank Lao PDR Strategic Impact Assessment Final Report 36 4.9 Project financing 4.9.1 Private Financing of Hydropower Development There is a growing acceptance that the capital required to expand the power systems to keep pace with demand is far higher than financial capacity of both the Lao PDR government and the multilateral or bilateral financial institutions. The only alternative has been to rely on private financing in one way or another. Only two privately financed hydropower projects have so far been realised in Lao PDR and both are based on a Build-Own-Operate-Transfer (BOOT) principle. The projects are: Theun-Hinboun, a 210 MW run-of-river project on the Nam Theun River, and Houay Ho, a 150 MW seasonal storage project on a tributary to the Se Kong. Both projects are owned and operated by special purpose companies (SPCs) established for the projects. EdL is a shareholder in both companies, with a 60 % share in Theun-Hinboun Power Company Ltd. and 20 % share in Houay Ho Power Company Ltd. Theun-Hinboun is based on project financing, which means that the future reve- nue of power sales from the project secures the loans. Houay Ho was funded by balance sheet financing, meaning that the investor was able to finance the whole project directly through their bank account or credit. The project financing used in Theun-Hinboun proved, as experienced elsewhere, to require a time consuming preparatory process. In the end however, it has lead to what appears to be a fi- nancially successful project. The balance sheet financing used for Houay Ho al- lowed for a much shorter preparatory phase. The construction actually started during project preparations, on the basis of incomplete and uncertain technical, environmental and financial information. As a consequence, the project will pro- vide the Government of Lao PDR with less foreign exchange earnings than origi- nally expected. A large number of MOUs between the Government of Lao PDR and private devel- opers have been signed both before and after the Theun-Hinboun and Houay Ho were initiated. Only a few of these have so far reached the stage where it is possible to foresee a time schedule for implementation. In most cases, problems in putting together financing packages have delayed the projects. The present status of IPP mandates in Lao PDR is shown in Table 9. It should be noted, however, that this list is constantly changing. Several MOU are inactive and might eventually be cancelled or taken over by other developers. Also in the active projects the project sponsor might change or new development consortia be established. As can be seen from the table, there is little resemblance be- tween the projects contained in this list and the project short-listed for develop- ment according to the PSDP. World Bank Lao PDR Strategic Impact Assessment Final Report 37 Table 9: Status of IPP Mandates in Lao PDR (Meritec and Lahmeyer, 2004) Project Type of Signing Project sponsor Status agreement date Theun Hinboun CA 13.10.94 THPC Operating Houay Ho CA 23.09.93. Tractabel Operating Nam Ngum 3 PDA 15.11.97 GMS Power MOU superseded by PDA Nam Ngum 2 CA 17.03.98 Shlapak MOU superseded by CA Nam Mo PDA 18.11.99 Mahawong/Harza MOU superseded by PDA Nam Theun 2 CA 16.11.98 NTPC EGAT PPA negotiated Xe Kaman 3 MOU 25.07.03 Viet-Lao PDR Feasibility study submitted Xe Kong 5 MOU 0.04.00 Sondel S.P.A. Inactive MOU expired Nam Tha 1 MOU 07.10.95 SPD Inactive Xe Pian-Xe Namnoy CA 17.08.94 K&L MOU re-assigned Xe Kaman 1 CA 15.11.97 ALP Mgt / ANSCAN In process of cancellation Nam Theun 3 PDA 01.08.94 THPC Concession transferred to THPC Nam Theun 1 MOU 11.11.94 Gamuda. (Malaysia) Transferred Nam Ou 8 MOU 11.11.94 Pacific Rim Energy Inactive Don Sahong MOU 23.08.01 EP (Malaysia) MOU Extended Nam Ngum 5 MOU 10.09.96 Melkyma Intention to cancel notified Xe Kong 4 MOU 21.01.94 Modular Intention to cancel notified Nam Pha MOU 29.08.02 Statecorp Holding P/L Feasibility study ongoing Nam Bak 2B MOU 1997 Engineering Con. Survey Planned Nam Beng MOU 16.12.02 International Blaster Feasibility study ongoing Nam Ngew MOU 29.11.02 Hongkham Construction Feasibility study ongoing Nam Sim A MOU 15.0.03 Energy Development Feasibility study ongoing Nam Ngiep 1 MOU 09.05.03 Nippon Koei Active Houay Lamphan Gnai EOI 2003 Ratchaburi/EdL 4.9.2 Developers and Investors Internationally, two types of developers have shown interest in BOOT projects for financing of hydropower. One type is the institutional investor, either with a back- ground from the power sector or a pure investor looking for long-term return on his investment. The other type consists of contractors and manufacturers who have their strongest interest in the construction phase. The first type of investor will be interested in the lowest possible construction cost in order to receive as high a return as possible on his investment, based on the operation of the project. The second type will be more interested in an initial high mark-up on the construc- tion contracts rather than the profit for the Special Purpose Company (SPC) during the period of concession. It seems clear that the interests of the pure investor will be more in line with the interests of the country, since a lowest possible con- struction cost will give the highest revenue to the country through taxes on the 0 200 000 400 000 600 000 0000042 0000042 0000022 0000022 ! ( d ! (d ! ( ! (d d ! (d ! ( ( d !d !( (! dd ! ( ( d !d 0000002 ! (d! (d ! ( d 0000002 0000081 ! ( d 0000081 ! ( d µ ! ( d !( (! ! d d d ( ! ( ! ( d d ! ( d 0000061 ! ( d 0000061 0 50 100 Km ! ( d 0 200 000 400 000 600 000 Legend NORPLAN AS, Norway ! ( d Existing HP Existing and planned Hydropower November 2004 ! ( d Planned HP NBCA Projects (HP) in Lao PDR WGS 1984 - UTM Zone 48S Source: MAF/HPO World Bank Lao PDR Strategic Impact Assessment Final Report 38 SPC's profits and as dividends on a possible government equity participation in the SPC. The policy of Lao Government has been to participate in the SPCs with a share of the ownership. This policy has been criticised for blurring the principle of sepa- rating the ownership interest and the regulatory functions of Government. As general principle, however, state ownership in power production, is commonly practised both in developed and developing countries. From an environment and social perspective governmental ownership might have both positive and negative impacts. It is likely that a governmental unit will have more understanding and care better for the people and nations environmental quality than a foreign investor. On the other hand, the economic interest of the governmental body might create a force on the regulating units to be lax in their control and enforcement duties. How this will turn out in the end will be determined primarily by the "political power structures", not by the regulations and guidelines. Least Cost Development and Private Investors Even with the strong support from the international financing institutions in apply- ing a least-cost strategy for hydropower development in Lao PDR, the implemen- tation of the plans and proposed development sequence has been unsatisfactory. This has resulted in ad hoc development, which has lead to less than optimal de- velopment seen from a national socio-economic point of view. The main reason for this is the strong involvement of the IPPs. They have picked up project ideas and signed MOUs on an ad hoc basis often without any upfront timetable or any realistic financing plan. This means that the ranking and selection of projects for development by least cost criteria is not effective, unlike what would have been feasible under a regime of public financing. It is, however, possible to use this principle in combination with private participa- tion. This requires that a least-cost expansion plan be simulated by the responsi- ble public entity, resulting in candidate schemes ranked in a time sequence. Private investors can then be invited to bid for specific. Such a system is similar to what is used by the Nepal Electricity Authority (NEA). Another important challenge in handling private sector involvement in hydropower development is to safeguard state of the art environmental and social quality of the projects and to adopt the principle of transparency throughout all the phases of development. Some private developers might be less conscious or concerned about the environmental and social aspects of the development, which is imbed- ded in the least cost sequence. Unless these requirements are made clear up- front, it might be neglected in the Developers detailed planning. Award of MOUs for BOOT Developers The present model for development is based on signing of MOUs between pro- spective private developers and GOL represented by the Committee for Invest- ment and Management of Foreign Economic Cooperation (CIFEC/FIMEC) under the Prime Ministers Office, is non-transparent and non-competitive, and as far as is known, the content and format of the MOU document is not standardised. There- fore, environmental and social requirements seem not to be incorporated. The MOU gives the Developer a sole mandate over the project site for proceeding with engineering, environmental and social studies, but unless strict requirements in line with the present EA regulations are included in the MOU, there is nothing that obliges the Developer to adapt technical designs to EIA findings and other- wise minimise environmental and social impacts. GOL has announced a policy that requires Developers to chose project sites that entails the least possible envi- World Bank Lao PDR Strategic Impact Assessment Final Report 39 ronmental and social impacts and to submit EIAs on schedule. However, past ex- periences with BOOT projects have shown that this policy has been inconsis- tently applied and not secured timely submission of EIAs and mitigation and action plans. Award of Licences As is the case for MOUs the awarding of concession licences appears not to be a standardised process. Ideally, and according to the presently professed hydro- power development implementation model, award of a concession licence is sup- posed to be subsequent to, and contingent on, the signing of a MOU and approval of EIA studies and plans. However, as far as can be ascertained there exists no mechanism that ensures incorporation measures identified in the EIA studies into the concession licence. 4.10 Preparation and Implementation of Plans 4.10.1 Least Cost Planning In the least cost planning process the construction cost of each project will be es- timated on a common unit cost basis. Environmental "cost" will be included and fi- nancial parameters calculated. The ranking of the projects are based on the final cost pr unit (US¢/kWh), where the energy produced in kWh is adjusted by as- suming a value of secondary energy reduced compared to the value of primary energy. The latest ranking studies (HDSS, PSSS, PSDP) are very comprehensive and am- bitious as they try to bridge specific environmental and financial issues. These studies have probably reached a higher level of accuracy compared to earlier studies, but there are uncertainties in the methodology, which should not be dis- regarded. These are: · The input data is based on projects at different planning stages. A project on a reconnaissance level has not been optimised and detailed to the same level as a project that has reached the feasibility stage. · Environmental costs are difficult to calculate. Some valuation of environ- mental goods and services are possible based on market prices, willingness to pay studies, etc. But in many cases the figures obtained only reflects part of the "real value" as some features of nature are basically impossible to quantify in monetary terms (spiritual values, biodiversity, scenic beauty, etc). Setting price is particularly difficult in regions where the population are not integrated in a market economy. However, the efforts so far indicate that the environmental cost will normally not significantly change the ranking based on financial criteria only. Environmental costs in most cases are much lower than the project cost (5-20%). · Energy production figures have been based on "stand alone" production pre- sented in the project specific studies and to a lesser degree on basin-wide energy benefits. A hydropower project with a large reservoir would normally be very beneficial for all downstream hydropower plants, e.g. the ranking might have changed if the energy gained further downstream had been in- cluded and the design of the downstream projects taken upstream reservoirs into account. This limitation can only be mitigated by carrying out a full River Basin Study simulating the operation of different combinations of hydropower projects in the basin. The Vietnam Hydropower Master Plans can serve as an example of such an effort. World Bank Lao PDR Strategic Impact Assessment Final Report 40 4.11 The Power Market and Regional Coordination At present four main power markets exist in the Greater Mekong Region. These markets are Yunnan, Thailand/Lao PDR, Vietnam and Cambodia. The dominating market is Thailand with close to 60% of the total demand. Its share is expected to decline due to demand growth in the other countries, in particular Yunnan, Viet- nam and Cambodia. Consumption in Myanmar and Lao PDR are at present con- strained by the lack of generation capacity, or by constraints in the transmission and distribution systems. Several studies1 have concluded that there is a large potential for savings in in- vestment and generation cost for the GMS region as a whole, by implementing a least-cost generation and transmission expansion plan covering the whole region. The potential savings from taking a wider perspective can be ascribed to: (i) the avoidance of parallel investments in transmission systems; (ii) reduced needs for total installed capacity (sharing of reserve capacity, peak demand occurring at dif- ferent hours, etc.); (iii) saving in or postponement of investments in new genera- tion facilities; and (iv) reduced system operating costs. A general consequence of basin-wide least-cost planning and implementation would, according to the World Bank study (1999), be a more rapid development of the hydropower potential in the basin and a lower growth in thermal production capacity, compared to national power development plans based on minimum crite- ria for self-sufficiency. Until a regional system is in place power trading will be based on bilateral agree- ments between neighbouring countries, as is the case today. In all countries it is expected that a regional grid will have to be complemented with smaller isolated grid systems. Small hydropower plants and diesel plants will be needed for such isolated systems. 1See for instance Power Trade Strategy for the Greater Mekong Sub-Region. World Bank, March 1999. Regional Indicative Master Plan on Power Interconnections in GMS, (Norconsult 2002) World Bank Lao PDR Strategic Impact Assessment Final Report 41 5 BASELINE SITUATION 5.1 National and Regional Key Issues 5.1.1 Introduction In the national perspective there are certain natural and social aspects or char- acteristics of particular relevance for hydropower development in Lao PDR. Sev- eral of these are issues that might mobilise one of the World Bank safeguard di- rectives and consequently have to be carefully addressed in project preparation if World Bank support is sought. Lao PDR is a landlocked country with an area of 236,800 km2. The population was in 2000 estimated to 5,218,000, which gives a population density averaging 21 people per km2. This is the third lowest of the ASEAN counties. The most in- tensely cultivated and the most densely populated areas are found on the flood- plains along Mekong and the major tributaries. Most of the land area is mountain- ous and about 47 % of the land is covered with forest. 5.1.2 Water Resources Lao PDR is rich in water resources. The average annual rainfall is high, 1650 mm/year. On the Boloven plateau in the south east of the country an average rainfall of 3700 mm/year is registered. The Lao PDR part of the Mekong catchment contributes in average 8500 m3/sec of the Mekong flow, which is about 35 % of the total Mekong flow measured at the Delta. A network of rivers criss-crosses the county but there are no natural lakes of significant size. Being landlocked, all rivers originating in Lao PDR can be classified as international rivers. Most of the land area drains towards Mekong, with Cambodia, Vietnam and to some extent Thailand as downstream countries. Some catchments in the North East drain directly into Vietnam. All hydropower development in Lao PDR therefore have a potential of transboundary impacts. As a signatory party to the Mekong Agreement, Lao PDR is required to notify the other member parties on any development plans with potential downstream impacts. The Mekong and the major tributaries experience regular flooding. The traditional land-use and the ecological conditions are adapted to, and benefits from, the nor- mal seasonal flooding. The flooding is, in particular, important for wet season rice production and for the very important floodplain and backwater fish breeding. World Bank Lao PDR Strategic Impact Assessment Final Report 42 Map 2: Land Use and Forest Cover in the Nam Ngum and Sekong River Basins " " " " " " " "" " " " " " " " " " " " " " " " " " " " "" "" " " " " " "" " " " " " " " " " " " " " " " " " " " " "" " " " " " " " "" "" " " "" " " " " " " " " " " " " " " " " " """ " " " " " " " "" " " " " " " "" " " " " " " " " " " " " " " " " " " " " " "" "" " " " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" Nam Ngum River Basin " " " " " 0 20 40 Km " " " " " " " " " " " " " " " " " " " " "" " " " " " " " " "" " " " " " " " " " " " " " "" " " " " " " " " "" " " " " " " "" " " "" " " " " " " " " " " " " " """" " " " " " " " " "" " " " " (d(d!! " " "" " " " " " " " " " " Nam"Ngum"4B " " " " " " " " " " " " "" "" " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" " "" " " " " " " "" " " " " " " " " """ " " " " " " " " " " " " " " " " """ " " Nam Ngum"" 4A " " " " " " " " " " " "" "" " " " " " "" " " " " " "" "" " " " " " " " " " " " " " "" " " Nam Ngum 5 " " "" " " " " """ "" " " " " " " " " " " " " " " " " " " " " " " " " " " " "" " " """ (d! " " " " " " " " " " " " " "" " " " " " " " " "" " "" " " " " " " " " " " " " " " "" " " " "" "" " " """ "" " " " " " " " " "" " " " " " " " " " " " " "" " "" " " " "" " " " " " " " " " " " " " " " "" " " " " " " " " "" " " " " " " Nam Pot " "" " (d! " " " " " " " " " " " " "" " " " " " " " " """" """"" " " " " """ NamMo(d! " " " " " " " (d! " " " " " Nam Ngum" 3E " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" """ " " " " "" " " " " " " " " "" " " " " """ " " "" " " " " " " "" " " " " " " " " " " "" " " " " " " " """" " " "" "" " " " " " " " " " " "" " " " " " "" " " " " "" " " " " " " " " " " " " " " """ " "" " " " " " " " " " " " " " " " " " " NamBak2 " " " " " " (d! " " " " " " "" " Nam Ngum 2(d! " " " " " " " "" " " "" "" " " " " " "" " " " " "" " " " " " " " " " " " " " " " " " " " " "" " "" " " " " " " " " " " "" " " " " " " " " " " " " " " " NamLik " " (d! " " " "" " """ " " " " " " " " " " " " " " " " " " " " " " " " " " "" " """ " " " " " " " " " """ " " " " " " " " " "" " (d! " " " " "" " " " " " Nam Kading " """ " " " " " " "" " " " " " " " """ " " " "" """" " " " " " " " " " " NBCA " " " " " " "" " "" """ " " """" " " " " """ "" " " "" " " "" " " "" " Nam Ngum 1 "" "" " " " " " " " " " " " " " " " " "" " " " " " " " " " " " " "" " " " " " " " " " " " NamLeuk " " " " "" (d! " " " " " " " "" " " Nam Mang 3 "" " "" " " "" (d! " " " " " " " " " Land use " " """" " " """ " " " "" " " " " "" "" " " " " " " " " " "" " " " " " " " " " """ " " " " """ " " " "" " " " " " " " " " " " " " "" " " " " "" "" " " " " " " " " " " " "" "" "" " "" "" " PhuKhao " " " " " " " "" " " " " " " " " " " """ " " " """ " " " " " " " " " " " " " " " " " " " KhoayNBCA " " " " "" " " " Primary forest " " " PhuPa " " " " " " "" " " " " " " " " " " " "" " " " " " " " " " " " " Nang NBCA "" "" " " " " Plantations, scrubland and savannah " " " " " " " " " " " " " " " " " " " " " " " "" """ " " " "" " " " " " " " " " " " " " " " " " " " " " " " "" " " " " " " "" " " " " " " " """" " " " " " " " Unstocked forest " " " " " " " " " " " " " " """ " "" " " " """ " """ "" " " "" "" " " "" " " " " " "" """" " " "" " " " " " "" " """ " " " " """ " " "" " " " " " " " " " " " (d! " " "" "" "" """ """"""" """ " " " " " " " "" " """"" " " " "" " " "" " " " " " " " """" """"" " "" " " " " " " "" "" " " " "" " """ " " " " " """" " " " "" "" " Sekong River Basin " "" " " " " " " " " " " " " " " " " " " "" "" " "" "" " " """ " " Agricultural land " " "" " " """"" " " "" " """ " " " " " " " """" " " """""" "" " "" " " " "" """ " " " " " " " " " " " " "" " " """ """"""" " "" "" " " " "" " " "" " "" " "" " "" "" " " " " " " " " " " " " " " " " " " " " " " " "" " " " " " " "" "" " " " "" " " " " " " " " " " " " """ " " " " " " " " " " "" " "" " Water bodies " "" " "" " " " " " "" " """" " "" " " " " " "" " " " " """ "" " """ " "" """ " " " " " " "" " " " " " " " " " "" " " " " " "" Xe Sap NBCA " " " " " " " " " " " " " " " " " " " (d! " " " " " " " " " " " " " " " " " "" "" " """" """ " " " " " """ " " " " " " " "" "" " Se Kong 5 "" " " " " " """ " " " "" " " " " "" " """" " "" " " " " " " "" "" " "" " " " " " " " " " " " " " " " " " " " "" "" " "" " """ " " "" " " " " " " " " " "" " " " " """ " " " " "" " " """"" " " " " """" " "" " " """" " "" " " "" "" " " " Xe Bang Nouan NBCA " " " " " " " """ " " " "" " " " " " " "" " " " " "" " " " " " " " " " " " " " " " " "" " " " " " " "" " " " "" " " " " " " " " "" " " " " "" " " "" " " "" """ " " " " " "" " " " " " "" " " """ " "" " " """" " " " " " " " " " " "" """" " " " " """" """ " " """ " " " " " "" "" "" "" " " " "" "" " " "" "" " " "" " "" """" "" " " " "" " """ " " " " " """ " " """ " " " "" " " "" " " """ " " """" " "" " "" " " " " " " " " """" " " "" " " " " " " """ """ " " " " " " " " " " " " " " " "" " "" " " "" "" " " " " " " " "" " " "" " "" " " """ " " " " " " """""" " "" """ " " " " """ " " " "" """ " "" " " " " """" " " " " " " " " "" " " " " " """ "" """" """ " " " " "" " " " (d!d " " " "" " " "" """ " " """"" "" " " "" " " " " " " " " " " Xe" Set"1 """ " " " " " " "" "" " "" "" " " " " " "" " " "" " "" " " "" " " " "" " " " " "" "" " " " "" """ "" " "" " " " " (d! " " " "" " " """ "" " " " " " " " " " " " "" "" " " " " " " " "" "" "" " """"" " Phu Xiang " " " "" " """ "" " " " "" " "" "" "" " " " " Xe"" Kaman""3 "" "" "" " " " " """ """" " " " """ "" " " "" " " " """ "" " "" "" "" " " (d! " " " " (d! " "" " "" Xe Set""2"" " " """ " " "" " " Thong NBCA "" "" " "" " " "" "" " " " " " " " " "" " " " "" " " " " " "" " " "" " "" "" " " " " """"" " """" "" " " "" " " " " "" " µ """"" " " " " "" " "" " " Xe" Set 3 " " " " """" " " " "" """ " " " " " """ " " " " " """ " "" """" " " " " " " " " " "" " " "" "" "" " " " " " " """" """ "" " " " " "" Houay Lampan" Gnai " " " " " " " " " " " """ " " " " " " " " " " " " "" " " " " " " " " " "" " " " " " "" " " " """ " " " """ " " " " " " " " " " " " "" " " "" " " " "" " " " " " " "" " " " " " " "" " " " "" " " " "" " " " """""" " " " " " "" " " " "" "" """" " "" " "" "" "" " " " " " """" "" "" "" """ "" "" " " """ " " """ " " "" " " " " " """" " " " " "" "" "" " " """ " " " " " "" " " """ " " " "" "" " " """" " " " """ " "" " " " " " "" """" "" " " """ " "" " "" " " " "" " " " " " """ " "" "" "" """ " """"" """" " " """ " " """ " " "" " " """ " " "" "" " " "" " " " "" " """ " " " " " " "" " " " " " " " " " " " "" """"""""" " "" " " " " " " " " " "" " " """ Dong Hua " " "" " "" """ " "" " "" " " "" " (d! " " " "" " " " " " " " " " Xe" Kaman 1 " """ " " " Sao NBCA " " "" " """ " " " " " "" (d! Dong Ampham " " " " " " "" Houay Ho "" " " " " """" " " " " "" " " " " " " NBCA " "" " """ " "" " " " " " " " " " " " " " " " " "" "" " "" " "" " " " " "" "" " " " """" "" "" """"" " " " " " " (d! " " " """ "" """ " " " " " " " " " """ """" "" " """ " " " " " " " """ "" " " " " " " Xe Xou " "" " " " " " " "" " " " " " " " " " " " " " " " " " " "" " " """ " " " " "" " " "" " " " " " """"" " "" " "" "" " " " " " "" " " " " """ " " " " " " " " " " " " " " " " " " " " "" " " " " """ " "" " " " " " " " """" " """" "" " " " " " " " " (d! " " " " """" " " " " " "" " "" Nam Kong 3 " " " "" " " " " " " " "" " " " " " " " " " "" Xe Piane NBCA " " " " " " "" "" " " """ " " " " 0 25 50 Km " " " " " " " " " " " """"" "" " " " " " " " "" " " " """""" " " " " " " " " " Legend NORPLAN AS, Norway (d! Existing HP November 2004 (d! Land use / forest cover Planned HP WGS 1984 - UTM Zone 48S NBCA Source: MAF/HPO World Bank Lao PDR Strategic Impact Assessment Final Report 43 Map 3: Land Use and Forest Cover in the Nam Theun / Nam Kading River Basin Nam Theun / Nam Kading River Basin Land use Primary forest Plantations, scrubland and savannah Unstocked forest Agricultural land Water bodies " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" "" " " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Nam Kading " " " Theun Hinboun Ext. " NBCA (d! " "" " " " " " " " " """ Theun Hinboun " " " " " " " " " " " " " " " " " (d! " " " """ " " " " " " " " " " " " " " " " " " " " " " " " " "" "" " "" " " " " " """ "" " " " " " " " " " " " " " " """ " " " " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " " "" " " "" " " """" " " "" "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " """ " " " " "" "" " " " "" " " " "" " " " " " " " " " " " " " " " """ " (d! " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Nam Theun 2 " " " " " "" " "" " " " " " " " " " " "" " Nakai" - Nam Theun"" " " " "" " " " " " " " " " " " " " NBCA " " """" " " " Phu Hin Poun " " " " " " " " " " " " " " " " " NBCA """ " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" " "" " " " " " " " " "" "" " " " " " " " " " " " " " " "" " " µ " " """ " " " " " " " " " " " " " " " " " " " " " " " " " " """ " "" " " " " " " " " " " "" " " " " " " """" " """ """ " " " " """""""" " " " " " " " " " " " " "" " " " " " " " " " " """" " " " " " " " "" " " " " " " "" "" " "" " " " " " " " " " " " " "" "" " " " " """ " "" " " " " " " " " " " " " " " " " " " " " "" " " " " " " " " " " " " "" " " " " " " " " " " " " "" "" " " " "" " "" " " " "" "" " " " " " " " " " " " " " " " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " " " """ " " " " " "" " " " " Hin Namno "" " " " " " "" "" """" "" " " " " """ " " " " " " " " " " " "" " " " " " " " " " " " """ " " " " " " " " " " " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " "" " """" " " " " "" " " " """ " " " " " "" " " " "" " " " " " "" " " " 0 20 40 Km " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" " " " " " " " "" "" " " " " " " " " "" " " "" " " " " " " " " "" " " " " " " " " "" " " " " " " " " " " " " " " " " " " "" " " " " " " " " " " " " " " " " " " "" " " " Legend NORPLAN AS, Norway (d! Existing HP November 2004 (d! Land use / forest cover Planned HP WGS 1984 - UTM Zone 48S NBCA Source: MAF/HPO World Bank Lao PDR Strategic Impact Assessment Final Report 44 Map 4: Distribution of Ethnic Groups in Lao PDR 0 200000 400000 600000 Linguistic group 000 Austro-Asiatico 000 4002 Miao-Yao 4002 Other Linguistic Groups Sino-Tibetan Tai-Kadai Unknown 000 Very Low Population Density 000 2002 2002 (d! (d! (d! (d! (d! (d! (d ! 000 (d!(d! 000 0002 (d! (d! (d! (d! 0002 (d! 000 000 8001 8001 (d! (d! µ (d!(d ! (d ! (d! 000 (d! (d! 000 6001 (d! 6001 (d! 0 50 100 Km (d! 0 200000 400000 600000 Legend NORPLAN AS, Norway (d!Existing HP November 2004 (d! Ethnicity / linguistic groups Planned HP WGS 1984 - UTM Zone 48S Source: Mekong River Comission World Bank Lao PDR Strategic Impact Assessment Final Report 45 5.1.3 Terrestrial Biodiversity The hilly areas of Lao PDR and Vietnam are unusually rich in biodiversity. The high and isolated mountains have created wide variations in climate, soils, and ecological niches, leading to locally adapted and diverse fauna and flora. One of the largest relatively unspoiled rain forest areas in the world, and some of the least studied, are found in Lao PDR. The recent discovery of new species of large mammals in the border area between Lao PDR and Vietnam underlines the global significance of the region's rich biodiversity. The most prominent species discovered in the 1990s are the ungulates Saola and the Giant Muntjac. Other new mammals have also been observed but their validity as new species are still to be confirmed. Biodiversity is protected through the establishment of 20 protected areas, called National Biodiversity Conservation Areas (NBCAs) (Table 10). The protected ar- eas comprise 12-14 percent of the country's total land area. The establishment has been based on criteria developed by the IUCN. Twelve of the NBCAs have received international funding support to establish integrated management plans for the protected areas, but in general the capacity and competence for manage- ment and control is not sufficient to protect the values in the NBCAs. The planned Nam Theun 2 development has proactively addressed the biodiversity values in their upstream catchment which, for most part, belongs to Nakai-Nam Theun NBCA. A Social and Environment Management Framework and Operation Plan(SEMFOP­ GoL 2003) has been developed and the NT2 Project will provide the Nakai-Nam Theun NBCA with annual funds of US$ 1 million. This will be an im- portant contribution to protect this globally important NBCA against further en- croachment from loggers and poaching. In addition to the centrally designated protected areas, large areas have been designated as protection or conservation forests at the provincial and district lev- els, some hopefully to be upgraded to official protected area status in the future. Together, the protected areas and the provincial and district conservation and protection forests cover 8 million ha or 76 percent of forest land. Table 10: National Biodiversity Conservation Areas in Lao PDR (DoF 2000) Name of NBCA Year Area (ha) Provinces covered Dong Amphan DAP 1993 200,000 Attapeu, Xekong Dong Hua Sao DHS 1993 110,000 Champassak Dong Phou DPV 1993 197,000 Savannakhet Hin Namno HNN 1993 82,000 Kammouan Nakai Nam Theun NNT 1993 353,200 Kammouan, Bolikhamsay Nam Et NET 1993 170,000 Houaphan Nam Ha NHA 1993 222,400 Luang Namtha Nam Kading NKD 1993 169,000 Bolikhamxay Nam Phui NOI 1993 191,200 Sayaburi Nam Xam NXM 1993 70,000 Houaphan Phou Daen Din PDD 1993 222,000 Phongsaly " " " " " " "" " "" " " " " " " " " " " " """ " " " " " " " " " " " "" " " " " " " " """" " " " " " " "" " " "" " " " " " " "" " " "" " " " " " " " " " " " " " " " " " " "" " " " " " " " " """ "" Nam Ngum River Basin " " " " "" " " " " " "" " " "" " " " 0 20 40 Km " " " " " " " " "" " " " " " " " " " "" " " " " " " "" "" " " " " " " " " " " " " " " " " " " " " " "" " " " " " " " "" " " " " "" " " " " " " " " " "" " " " " " " " " " " " " " " " " Nam"Ngum 4B""" " " " "" " """ " " " " " " " " " " "" " " " " " " " " " " "" " "" " "" " """""" " """ "" " "" " " " " "" " " " " " " " " " " " " ! " " " " ( " " " " " d " " " " "" " "" " " " " "" " " " ! " (Nam " " " " " " " d " " " " " " " " " " " " " " " " " " " " " " " " " " " Ngum" 4A"" " " " " " " " "" " "" " " " " " " " " " " " " """ "" " " " " " " " " " "" "" " " " " " " " " " " " " " " " " " " " " " " " " " """""" " Nam Ngum 5 " " " " " " " " " " "" " " " " " " " " " " "" "" " " """ " " "" " " " " " " " " " " " " " " " " " """" ! ( d " " " " " " " " " " " "" " " " " " " " " " " " " " "" " " " " " " " " " " " " " " " " "" " " """ " " " " " " " " " " " "" " " " " "" " " " " " " " "" """ " " " " " "" " """ " " " " "" " " " " "" " " " " """ " " " " " "" " " " " "" " " " " " " " " " " "" " " Nam Pot" """ " "" " "" " " ! ( " d" "" " " " Nam Mo " " " " """""" """ " "" " " " " " " " """ " " " ! " " " " ( " " " " " Nam Ngum 3E " d " " ! " " " ( " d " " " "" " " " " " " " "" " " " " " " " " " """ "" " " " " " " " " "" " " " " " " " " " """ " " """ " " "" " " " " "" " " " " " " " "" " " " " " " " " " " "" "" " " " " " """"" " " " " " " " """ " " " "" " " "" "" " " " " " " " " " " " " " " " " " """ "" " " " " " " " Nam Bak 2 " " " " " " " " " " " " " """ " " ! " " " ( " " " " " """ """ Nam Ngum 2 " d " " " ! ( " " d " " "" " " " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " "" " "" " Nam Lik " " " " " "" " "" " " " " " " " " " "" " " " " " " " " " """" " " " " " " " " " " " " " " " " " " " " " " " " " " Nam Kading " " " " " " " " "" ! ( " " " " " " d " " " " "" " " " " " """ " " NBCA " " " " "" """ " "" "" " " " " """" ! """ """ " " "" " ( " " "" d " "" """ "" " " """ " " " " " " "" " " " " " " " "" " " " " """" """ " " " " " " " " " " """ """ " "" " " " " """ " Nam""Ngum 1 " " " " " " """ " " " " " " " " " " " " " " " " " "" " " " " Land use "" " " " " "" " "Nam Mang 3 Nam Leuk " " "" " " " " "" "" " ! " " ( " " d " " """"""" " "" " " ! " ( """ " " " " " " d " "" " " "" " " "" " " " " " " " """"""" """ "" " " " " " " " """" " " " " " " " """ " " " " " " " " " " " " " "" " " " " " "" " " " " " " " " " Primary forest " " " " " " " " " " "" "" " " """" Khoay NBCA Phu Khao "" " """" " "" " "" " " " "" """ " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " "" " Nang NBCA Phu Pa " " " " " " " " " " " " " " " " " " " " " " " """ " " " " " Plantations, scrubland and savannah " " " " " " " " "" " " " " " " " " "" " "" " " " " " " " " " " " "" """ " " " " " """ "" " " " " " "" " " " " " " """ " " " " " " " " " " " Unstocked forest " " "" " " " "" " " "" " " " " " " " " " " " " " " " " " " " " """ " "" " "" " " " " "" " " """" " " " " " "" " "" " " " " "" " " " "" " """ """" """ " " " " " """""" """ "" " "" " "" " " "" "" " """""" " " " " " " " " Sekong River Basin " " " " " "" "" " " " " " " " " " """ "" " " """ "" """""" " " " " " "" " "" " ! ( " " " " "" " " " " " "" " d " " " " " " " """ " """ " Agricultural land " """ " " " """ """ "" "" " " " "" "" " " "" " " " " " " " " " " " " " " "" "" "" """" """ " """ """"" " "" " " "" " " "" " " " "" " " " """""" " " " " "" """ "" " " "" "" " " " " "" " " " "" " " " " " "" " """"""" " " " " "" " " "" "" " "" " """ " """ " "" " " " " " " " " " "" " " " " " " " " " " Water bodies " "" " "" " """ "" "" " " "" " " " " " " " " "" " " " " " " " " " " " " " """ " "" " """" "" "" " " " " "" " Xe Sap NBCA" " " " " "" """ " "" """" " " " " " "" """" " "" " " " "" " "" " " """ " " """ "" " " "" "" " " " " " "" "" " " " " " " " " " " " " " " " " "" " "" "" " "" " """"""" Se Kong 5""" ! ( """" " " """ " " """" " " " """ " " d " """ " " " " """ " " " " " " " """""""" " " " " " " " " " " " "" "" "" "" " " " " "" " """ " " " " "" " " "" " "" " " " " "" " "" " " " " " " " " " " " " " " " " " "" " " " " " """ " " " """"" """ """" " " " """" " """ """ " """" "" Xe Bang"Nouan NBCA" " " " " " " " "" " " "" " " "" " " " " " "" " " " " " " " "" " " " " " " " " " "" " " " " "" " "" " " " " """ " "" " " " """" " " " """ " " " "" " " " " " """ " "" " " " "" " " """ " " "" """"" """ " "" " " " " " "" " " "" """ " " " "" " " " " " " "" " " " "" "" " " """""" "" "" "" "" """ " "" " " " " " """ " " " " "" " " " " " "" """ """""" " " "" " " "" """" """" "" " """" " "" " """""" "" """"" """" " " " " """ "" "" "" " " """" " " " " " """" " " " "" " " " " " """ " " " " " " " " """ """ "" " "" " " " "" "" "" "" " """"" " " " " """ "" " "" "" " " "" """ "" " """" "" " " " " """"" " " "" """" " " " " " " " " " """" " "" " " """ " " """ " "" " " """"" """" " " "" " "" " ! """""""" "" " " Xe""""Set" 1"" """" " ( "" "" " " " " " " dXe "" "" "" " "" " " " " """ " " " " " "" "" "" " " " " " " "" " " " "" "" "" " " " " "" " " " " " " " """" " " " " " "" ! ( "" " """ "" " " ""Xe"""Kaman 3 d " " "" """"""" """"" """ """" "" """ " " "" " "" Thong NBCA""""" Phu Xiang""""""""" "" "" " "" " """" " """"" " "" "" " " " " " " " """"" " "" " Set""2""" """ """" " " " " " " "" " " " "" "" "" " "" "" """ " " " " " "" " """" " "" " " " " " " " " ! " ( d " " " " "" " """" "" d " " " " " "" ! " """ " "" """ "" ( " " " " "" " "" " "" " " " " "" " " " " "" " " " Xe"Set"3" " " "" "" " """ " " " """ " " """""""""" """" " "" " " """ "" " " " " " " """ " " " "" " """ "" "" " " " " "" "" "" " " " """ " Houay Lampan"""Gnai" " " " " "" " " " " " " " " " " " " " "" " " " " " " " "" "" " " " " " " " " """ " " "" " " " "" " " " " " "" "" "" " " " "" "" " " "" " " " " " "" " " " """" "" " " " """ " " " " """ " " "" " " " " " " " µ "" """"" " " "" "" " " " " " " " " " " " "" "" """ """ " "" " "" " " " " " " " "" "" """" """""" "" " " "" """"" " " " " " " """""" "" "" "" " " " " " " " "" " " " " " " " "" " " "" "" " " " """" " "" " "" "" " " " " " "" " " " "" " " " "" " " " " """""""" " " "" "" "" """""" """"""""""" " "" """"" """ " " " "" " " " "" " " """ " """ Dong Hua " " " " " """" """" " " " " " "" " " """"" """"" "" " """"" """ """"" " " " " " " "" " " "" " " " " " " " "" " " "" " " " "" " " " "" " """ " " " " " """" "" "" "" " " " "" " " " " " " dDongNBCA Ampham " " Xe"Kaman 1 " ! ( " "" " Sao NBCA " " "" " "" " " "" " " "" " " "" " " " " " "" "" ! " " "" " ( " " Houay Ho d " " """ " " " " " " " " " " " " " " " " " " " " " " " " " " """" """ "" "" " " " " " " "" " " " """ " " "" " " "" """""""" " "" " " " """ """"" "" " "" """ " " " "" """ " " " " " " " " """" " """ """ "" "" "" " " " Xe Xou ! ( " """"" """" " " " " d " " "" " " " " " " " " " " " "" " " "" " " " "" " " " " """" "" " "" " " " " """"" " " """"" " "" " " " "" "" "" " " " " " " " " " " """ "" " " " " "" " " " " " " " " "" " " " "" """ "" " " " " " " " "" """" " " """ " "" "" " "" " " " " "" " Xe Piane NBCA " " " "" " " ! " "" " " Nam Kong 3 ( " d " " " "" " " " " " " " " " " " " " " " " " "" " "" " " " " "" "" " " 0 25 50 Km "" " " " " " """" " " " " """ """"" "" " " " " "" " " " "" " """"" "" "" "Legend " " " " " NORPLAN AS, Norway !( d Existing HP November 2004 !( d Planned HP Land use / forest cover NBCA WGS 1984 - UTM Zone 48S Source: MAF/HPO World Bank Lao PDR Strategic Impact Assessment Final Report 46 Phou Hin Phoun PHP 1993 150,000 Kammouan Phou Khao Khouay PKK 1993 200,000 Vientiane, Bolikhamxay, Xaisombun Phou Loei PLI 1993 150,000 Houaphan, Luang Phabang Phou Phanang PPN 1993 70,000 Vientiane Phou Xang He PXH 1993 109,900 Savannakhet Phou Xiang Thong PXT 1993 120,000 Champassak, Salavan Xe Bang Nouan XBN 1993 150,000 Salavan, Savannakhet Xe Pian XPN 1993 240,000 Attapeu, Champassak Xe Sap XSP 1995 133,500 Salavan, Xekong TOTAL 3,313,596 Lao PDR has until recently been sheltered from many of the forces acting to re- duce biodiversity. However, as the economy of Lao PDR expands this situation might change and threaten the country's biodiversity resources. Illegal or uncontrolled logging is a serious problem. Destruction of the forests has a dual negative impact. It reduces the biodiversity value of the area and endan- gers rare or threatened species and at the same time destroys the flood buffering and soil protection capacity of the river catchment. 5.1.4 Aquatic Biodiversity and Wetlands Mekong and its tributaries are extremely rich in fish and other aquatic species. More than 1,300 fish species are found in the Mekong basin. From a biodiversity standpoint the most spectacular species are: the giant catfish, giant Mekong barb, Irrawaddy dolphin and Siamese crocodile. All these are threatened by extinction. The number of species found in the different Lao Mekong tributaries is not know but it is indicated that 300-500 fish species can be found in some of the larger rives. The Irrawaddy dolphin is not able to pass the Khone falls and is not found in the Lao part of the Mekong but a small population of dolphins is found in Lao PDR territory in the Se Kong tributary. It has been established that several of the key species and important parts of the fish production are dependent on specific flood patterns, minimum flows and mi- gration opportunities to maintain life cycles and reproduction. The taxonomic and ecological knowledge of the fish fauna in Mekong River Basin is however, still only rudimentary. The capture fishery is an important element in rural households in terms of nutri- tion and income generation in the region. Approximately 71% of rural households (2.7 million people) in Lao PDR rely on fishing to a varying degree as a livelihood strategy. Fish is thus an important part of the staple diet, and the most important source of protein in many parts of Lao PDR. The total freshwater fish catch in Lao PDR was for year 2000 estimated at 133,000 tons. This translates to a consump- tion of 26 kg/person/year but with much higher average consumption in lowland and floodplain communities than among mountain and forest dwellers. Wetlands along the Mekong and on some of the major tributaries are of very high biodiversity value. They are inhabited by a large number of rare and threatened species and play a critical role as stopover sites for migratory birds and are key breeding areas for some of the economically important fish species. The regular Nam Theun / Nam Kading River Basin Land use Primary forest Plantations, scrubland and savannah Unstocked forest Agricultural land Water bodies " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" " " " " " "" " " " " " " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Nam Kading " " " " " " " NBCA " Theun Hinboun Ext. " "" Theun Hinboun " ! ( d " " " " " "" " " " " " " " " " " " "" " " " " " " " " " " " " " "" ! ( " " d " " " " " " " " " " " " " " "" " "" " " "" " " "" "" " """ """ " " " " " " " " " " " " " " " "" " " " " " " " " " "" " " " " " "" " " " """ " " " " " " " " " " " " " " " " """ """ " " "" " """"" " "" " " " " " "" " " " " " " " " " "" " " " " " " " " " " " " " " " " " " " " " " " "" "" " " " " " " "" " "" "" " " """ " " " " " " " " " """" " " " """ " ! (Nam " " " " " d " " "" " Theun 2 " " " " " " " " " " " " " " " " " " " Nakai"-"NBCA Theun Nam" " " " " " " " """ " " " " " " "" " " " " " " " "" " "" " " "" " " " " " " " " " " " " " " " " """" " " Hin "" " " " " " " " " " " " " " " " PhuNBCAPoun " " """ """ " " " " " " " " " " " " " " " " "" " " "" " " " " " " " " " " " " " " " " " " " " " " " " " "" "" " " " " " " " " " " " " " " " " "" " " " " " " " """ "" " " "" " " " " " " "" " " " " " " " " " " " " " " " " " " " " """ "" " """"" " " " µ " " " " """ " " " " " """" " """"" " " " "" " " """""" " " " " "" " " " " " """"" " " " " " " "" " " " " " "" "" " " " " " " " " " " """ "" " """ "" " " " "" " "" " " " " "" " " " " " " "" " " " """ " " " " " " " " " "" " " "" "" "" " " " " " " " "" " " " " " " " " "" " " " " " """ "" " " " " " "" " "" " " " " """ "" " " " " " " " " " Hin Namno " "" " " " " " " " " " "" " " " " " "" " " " " " " " " " "" " " " " " " " """" """ " " " " " " " """""" "" " " " " " "" " """ "" " " """ " " " " " " " " " " " " " " " "" " " """ " " " " " " " "" " " " " " " " " " " "" " " "" " " " " "" " " " " " " " " " " " " "" " """ " " " " " " " " "" " " """ " 0 20 40 Km " " " " " " """ " " " " " " "" " " " " " " " " " " " " """ " " " " " " " " " " " " " "" " " " " " " " " " " """ " " " "" " " "" " "" " " " " " " " " " " " " " " " " "" " " " " " " " " " " " " " " " "" " " " " " " " " " "" " " " " " " " " " " " " " " " " " Legend " " " " " " " " " " " "" " NORPLAN AS, Norway !( d Existing HP !( d Planned HP Land use / forest cover November 2004 NBCA WGS 1984 - UTM Zone 48S Source: MAF/HPO World Bank Lao PDR Strategic Impact Assessment Final Report 47 flooding of the wetlands is a key factor for the fish production in the basin. Few of these valuable wetlands are protected and there is no regional wetlands policy or strategy prepared. The most prominent wetlands in Lao PDR are: · Attepeu wetlands on the Sekong floodplain. This wetland area has been se- lected as a Demonstration Site for the Regional GEF project "Mekong River Basin Wetland Biodiversity Conservation and Sustainable Use Program". A number of globally threatened species of mammals, birds and reptiles are found here. The large array of water birds includes the only known site of the Giant Ibis, which was rediscovered here in 1993. · Siphandon Wetlands on Mekong. This wetland contains a 14 km wide com- plex of perennial and seasonal channels and small islands formed by Mekong just upstream of the Khone falls. It serves as a passageway for migrating fish and is a critical habitat for many fish species, waterfowl and other wetland flora and fauna. None of the NBCAs have been established for wetland protection per se, but several contain river reaches and wetland areas. Parts of the Attepeu wetland are incorporated in existing NBCAs. The Siphandon Wetlands is not formally pro- tected but is suggested as a World Heritage Site because of its conservation value. In Cambodia downstream of the Khone falls, is found the Stung Treng wetlands, which has been given the status of Ramsar site for its importance as wildfowl habitat and as a key breeding area for many Mekong fish species. 5.1.5 Population Compared to other countries in the South East Asia, Lao PDR is sparsely popu- lated. This is in particular the case for the mountain forest areas along the Vietnam border. In large areas there are no road connections and the few scattered vil- lages survive mostly on subsistent farming (swidden cultivation) and collection of forest products. The river valley plains and flood plains are the most densely populated areas in the region. Consequently, resettlement and compensation for loss of land and in- come opportunities are key problems when land is taken for reservoirs. The hu- man production systems, like fisheries, agriculture and aquaculture are also in many cases closely adapted to the river flow volumes, the seasonal changes in river flow and flooding. Hydropower development, which might interfere with natural flow regimes or the inundation of flood plain areas, can therefore affect a large number of people. 5.1.6 Ethnic Minorities There are in Lao PDR officially 49 main ethnic groups and over 100 sub-groups. These comprise 4 ethno-linguistic groups, Tai-Kadai, Mon-Khmer, Sino-Tibetan and Hmong-Iumien. The Tai-Kadai ethno-linguistic constitutes about 66% of the popu- lation and comprises the largest ethnic group, the lowland Lao. The second larg- est group is the Mon-Khmer comprising around 23% while the Sino-Tibetan and the Hmong-Iumien accounts for the remaining 11%. The smaller Lao-Tai sub- groups, the Mon-Khmer, the Sino-Tibetan and the Hmong Iumien are commonly re- garded as ethnic minorities. 0 200 000 400 000 600 000 Linguistic group Austro-Asiatico 0000042 Miao-Yao Other Linguistic Groups 0000042 Sino-Tibetan Tai-Kadai Unknown Very Low Population Density 0000022 0000022 ! (d ! ( d ! ( d ! ( d ! ( d ! ( ( d ! d !( (! dd ! ( ( d ! d 0000002 ! ( ! ( d d ! ( d 0000002 0000081 ! (d 0000081 ! ( d µ ! (d ! d ( ! ! ( d d ( ! ! d ( ( d ! ( d 0000061 ! ( d 0 50 100 Km 0000061 ! ( d 0 200 000 400 000 600 000 Legend NORPLAN AS, Norway !(d Existing HP November 2004 !( d Planned HP Ethnicity / linguistic groups WGS 1984 - UTM Zone 48S Source: Mekong River Comission World Bank Lao PDR Strategic Impact Assessment Final Report 48 Residing mostly in the uplands and mountainous parts of the country, where most of the hydropower development projects are planned, ethnic minorities are prone to be more seriously affected than the lowland Lao groups. In comparison with the majority lowland Lao population ethnic minorities are less integrated into the mainstream economy because of their reliance on the forest for livelihood both in terms of collection of non-timber-forest-products and areas for slash and burn agriculture. Because of this lack of economic integration combined with low rates of numeracy and literacy ethnic minorities are disadvantaged when it comes to utilizing economic opportunities presented by development projects. 5.2 Description of Areas of Major Hydropower Development The majority of the planned hydropower projects are located within 3 river basins; the Nam Ngum (upstream of the Nam Ngum reservoir); Nam Theun; and Sekong Basins. Below is a brief description of the natural and human environment in these three basins. 5.2.1 Nam Ngum Basin Nam Ngum river basin is located in Xaisomboun Special Zone, and the provinces of Xiangkhouang and Louang Phrabang. The altitude of the basin ranges from about 200 m.a.s.l. at the Nam Ngum reservoir to almost 2500 m.a.s.l. further north. The lower part of the basin is very sparsely populated, and large tracts of forest are still in a fairly undisturbed state (see Map 2). The upper part of the basin has a much larger population, and most of the natural vegetation in this area has been cleared and the land converted into agricultural land, secondary forest and sa- vannah. According to WWF, the Nam Ngum basin is located within an eco-region named Luang Prabang montane rain forests (IM0121). This eco-region is globally out- standing for its diversity of bird species, even though more than 70 percent of the original forest has been lost as a result of shifting cultivation. Despite the loss of habitat, this eco-region still contains large tracts of untouched forest that shelter several large mammals, including endangered species like tigers, Asian elephants, wild dogs, Asiatic black bears, Francois' leaf monkeys, gaurs and others. There are no NBCAs located within the Nam Ngum river basin, but Phu Khao Khoay NBCA is located near the southern shore of the Nam Ngum reservoir. (Nam Ngum 2 and Nam Bak 2 are located about 25 km north of Phu Khao Khoay). This does not, however, imply that the proposed projects do not have any impacts on the biodiversity. Within the river basin, there are still large areas of high biodiver- sity value due to low population density and lack of infrastructure, especially in the lower part. A total of 65 villages are located less than 5 km from the main river or its tributar- ies (including non-affected tributaries), the majority of these are found in the up- per part of the basin (near Nam Ngum 4A and 4B). In relation to population, the area contains a mix of different ethnic groups, representative of the country as a whole. In lowland areas, Lao, Phuan and Tai groups are dominant (Lao-Tai linguis- tic group), while the hills are inhabited by a number of ethnic minority groups in- cluding the Hmong (Hmong-Iumien linguistic group), some of whom have been re- settled in these regions as part of Government programmes, and Khmu (Mon- Khmer linguist group), the indigenous peoples of the area. World Bank Lao PDR Strategic Impact Assessment Final Report 49 5.2.2 Nam Theun Basin The Nam Theun / Nam Kading river basin is located in the central part of Lao PDR. Most of the river basin is located within the provinces of Khammoune and Bolik- hamsay, while the extreme north of the basin belongs to Xiangkhouang Province. The river basin covers an area of almost 18 000 km2, and the altitude ranges from about 150 m.a.s.l. at the confluence with Mekong, to almost 2300 m.a.s.l. in the eastern part near the border with Vietnam. There are several major tributaries along Nam Kading / Nam Theun, of which Nam Gnouang, Nam Mouan and Nam Phao are the most important. The hydropower projects Theun Hinboun (existing) and Nam Theun 2 (planned) are both located on the main Nam Kading / Nam Theun river (see Map 2). Except for the Theun Hinboun Extension, there are, at present, no other major hydropower projects planned in this river basin. The central part of the Nam Theun / Nam Kading river basin is most developed. The Lak Xao area has for a long time been a major hub for the timber industry in this region. The effects of the timber industry is evident on Map 2. Most of the original forests in this area have been cleared, and larger tracts of primary forests are now only found in the north-western part of the basin and along the Lao ­ Vietnamese border. According to WWF, the Nam Kading / Nam Theun basin overlaps with two eco- regions: Northern Annamites rainforest (IM0136) and Northern Khorat Plateau moist decidous forests (IM0138). The Northern Annamites Rain Forests ecoregion lies largely in Laos, but with a significant area across the crest of the Annamite Range in Vietnam. This area is of international importance when it comes to biodi- versity. Almost each new survey turns up new species of mammals, birds, fishes, reptiles, butterflies or plants. Of the 134 mammals now known from the ecoregion, three are near-endemic species and four are endemic. More than half of these are recently described species; therefore, it is very likely that several species could be added to this list as surveys continue. The Northern Khorat Pla- teau Moist Deciduous Forests are located in the middle Mekong River Valley, along the border of Thailand and Laos. Like many productive habitats that lie along river plains, much of the natural habitat has been cleared for agriculture. Several en- dangered species (asian elephant, wild dog, sun bear, cluded leopard, etc.) still persist in small numbers, while others (tiger, gaur and banteng) are no longer found in most or all parts of this ecoregion. Both eco-regions are under severe threat due to logging, hydropower development and illegal hunting and trade in wildlife. There are also several NBCAs located within or near this river basin. Nakai - Nam Theun NBCA near the Lao ­ Vietnamese border, Phou Hin Pou NBCA (Kham- mouane Limestone) in the south-western part of the basin and Nam Kading NBCA a little bit further north. In addition, Nam Chat / Nam Phan Provincial Conservation Forest and a corridor connection Nakai ­ Nam Theun NBCA and Phou Hin Poun NBCA have been gazetted. Around 550 settlements/villages are found within the river basin. Most of these are located along the main river or it's major tributaries. There are very few set- tlements in Nam Kading NBCA and the north-eastern part of the basin. Most set- tlements are found in the vicinity of Lak Xao and along Route 8A. A number of ethnic minority groups are represented in the Nam Theun Basin. In the upper part of the catchment which is largely corresponds to the Nakai-Nam Theun NBCA , the Brou (So/Makong) predominate along with Vietic groups. The Brou make up a little more than 50% of the population while the Vietic groups rep- resent around 25%. The Brou belongs to the Mon-Khmer ethno-linguistic group practising various types of livelihoods ranging from hunting and gathering com- World Bank Lao PDR Strategic Impact Assessment Final Report 50 bined with swidden cultivation to wet rice farming. The Vietic groups are the old- est known inhabitants in the area and predates all other ethnic groups. They were originally hunter-gatherers but have adopted other livelihoods such as swidden agriculture. Other minor groups in the Nam Theun watershed include the Sek and the Tai Sin and Phu Tai which all belong to the Lao-Tai ethno-linguistic group. Also on the Nakai Plateau the Boru is the largest ethnic group constituting around 45% of the total population Other ethnic minority groups on the Plateau are the Tai Bo, various other Tai groups and the Vietic population which account for around 12% of the population. The middle part of the Nam Theun Basin, the part that drains to the reach between the planned NT2 dam at Sop Hia and the Theun-Hinboun dam largely consist of the sub-catchments of the Nam Phao, the Nam Kata, the Nam Nyaung and the Nam Ao. The rural riverside villages in these sub-catchment are mainly inhabited by various Tai and Vietic ethnic groups. There are also a number of Hmong communi- ties that are mostly located on the upper slopes and ridge-tops. 5.2.3 Sekong Basin Sekong river basin is located in the southern part of Lao PDR, where the river crosses the border with Cambodia before joining the Mekong below the Khone falls. Most of the river basin is located within the provinces of Xekong, Attapu and Champasak. The altitude of the basin ranges from about 100 m.a.s.l. in the ex- treme south to more than 2000 m.a.s.l. near the border with Vietnam. There are several major tributaries of the Sekong, and most of the planned hydropower projects are located on these tributaries (see Map 2). Due to the large size of this river basin, it covers a wide range of land use cate- gories and ecosystems. As Map 2 shows, there are still large areas of intact for- est within this basin, while the forest in other areas (parts of the Bolovens Plateau and the south-eastern part of Xekong Province) have been logged and converted into agricultural land and degraded forest. According to WWF, the Sekong basin overlaps with three eco-regions: Southern Annamites montane rainforest (IM0152), Central Indochina dry forest (IM0202) and Southeastern Indochina dry evergreen forest (IM0210). The details of the Southern Annamites montane rainforest plants and animals are poorly known, but recent discoveries have shown that the region's biodiversity is globally outstand- ing. All eco-regions are under severe threat of habitat destruction due to logging. There are also several NBCAs located within or near this river basin. Xe Sap NBCA and Dong Amphan in the largely mountainous areas along the Lao ­ Viet- namese border, and Xe Piane in the south along the border with Cambodia. Both the Se Kong 5 project and the Xe Xou project is located within NBCAs, which makes them particularly controversial considering the globally outstanding biodi- versity values in these NBCAs. The lower floodplains of Sekong (the Attepeu Wetlands) are of unique biodiversity value. The biodiversity values of these plains are adapted do the natural flood regime that can be altered by the cumulative im- pacts of upstream hydropower development. 288 villages are located less than 5 km from Sekong river and it's main tributaries. The vast majority of these villages are ethnic minorities belonging to the Mon- Khmer group, consisting of Laven, Gnaheun, Brao (Halang), Sadang (Duan, Kayong), Suey and Oi among others. The majority of these groups retain their own language and traditions that are different from the dominant majority Lao cul- ture. World Bank Lao PDR Strategic Impact Assessment Final Report 51 6 ENVIRONMENTAL AND SOCIAL IMPACTS 6.1 Generic Description of Potential Impacts 6.1.1 Introduction The fact that hydropower projects in addition to their economic and social benefits also might have significant negative impacts is well-established knowledge. This is reflected in most countries' environmental legislation where it is mandatory to have hydropower projects undergo comprehensive impact assessments. The main reasons for the strong awareness and focus on hydropower impacts seems to be the fact that changes in hydrology and ecology might be felt for long distances both upstream and downstream and that the development often takes place in re- mote and pristine areas where the local people have to bear the negative impacts but might see little of the benefits of increased power production. The impacts of hydropower projects are diverse but for simplification the most im- portant are related to either: · Direct or indirect impacts caused by changes in river morphology and hydrol- ogy, or · Direct and indirect changes caused by large-scale construction work. A brief summary of the character of these impacts is given below. 6.1.2 Impacts Caused by River Changes Dam or intake weir A reservoir dam or an intake weir will create a blockage for upstream movements of fish and other active swimming animals. This issue is particularly important if fish migration is part of a regular breeding cycle. Fish ladders or similar devices can be effective in mitigating the problem, but such structures have shown to be of limited value for the fish species found in this region. Reservoir or intake head pond Upstream the intake a smaller or larger reservoir or intake pond will be estab- lished. In most cases this will result in the transformation of a river ecosystem to a lake ecosystem, resulting in changes in aquatic biodiversity and fishing opportu- nities. The reservoir might experience oxygen deficiency in the deeper water lay- ers and thus in the discharge water from the power plant. The problem is deter- mined by a combination of factors like; amount of organic materials in the inun- dated area (vegetation), oxygen and nutrient load in inflowing water, residence time in the reservoir, and thermal stratification. For larger reservoirs the issue about land-take is often important. There might be the loss of valuable natural forests or wetlands or loss of agricultural land and human settlements. The need for resettlement of individuals or whole communities and the loss of agriculture land (the most productive land is often found close to rivers) are normally the most difficult and controversial aspects of hydropower development. On the benefit side, a reservoir might provide new opportunities for development and economic activities. Conditions might be created for more pro- ductive fisheries than the original river fisheries. The reservoir might also give more stable conditions for domestic water supply and irrigation and tourist and recreational activities might be attracted to the new lake. World Bank Lao PDR Strategic Impact Assessment Final Report 52 Diversion Except for plants where the turbines are built in the dam itself (as in Nam Ngum 1), there will be a stretch between the intake and the powerhouse where the river might become more or less dry. Unless any requirements for environmental flow are agreed upon, this reach will loose its aquatic life and remove water use op- portunities for the people living nearby. Depending on the operation of the plant and the water release, the river might return to an almost normal status below the discharge channel of the powerhouse. A particular case emerges when the scheme includes the diversion from one river to another. Modern tunnelling techniques have made it possible to utilise the height potential by diverting water from an intake in one river to a powerhouse in a dif- ferent basin. In such cases significant changes to the normal hydrology, aquatic ecosystems and downstream water use will be experienced both in the dis- charging and in the recipient rivers. Water storage There are two basic different categories of hydropower plants seen from the water storage perspective; Run-of-River (RoR) projects and seasonal storage project. The RoR projects have no or very limited reservoir storage capacity, as it is based on producing electricity out of the natural flow in the river on a daily (or a few days) basis. The project might include a high dam, with a substantial amount of water behind, but such reservoirs are not used for storing water over long peri- ods but for creating head for increased power potential. A seasonal storage project is designed for storing water in the wet season to al- low for power production in the dry season. This will in all cases require a reser- voir with a large storage volume. Depending on the landscape this might appear as a narrow and deep or a wide and shallow lake. The fluctuations in water level will be a dominant feature of such a reservoir. Both categories can, depending on the operation, create daily or weekly fluctua- tion in downstream water flow. It is however, only the seasonal storage plants that have the capacity to change the seasonal pattern of downstream flow, and thus increase the minimum flow in the dry season and reduce the flow in the in the wet season. Such seasonal change in flow pattern might have both positive and negative impacts on river ecosystems function and water related use. There might be negative impacts on fish reproduction and migration but on the other hand damaging flood incidents can be reduced and more water will be available for water supply and irrigation in the dry season. Operation mode A number of potential negative impacts and downstream use opportunities are related to the operation of the plant. The most decisive factor is if the plant is op- erated for base load (constant) production or if it is operated for production of peak load electricity. Extreme peeking operation will result in a fluctuating flow in the downstream river as the turbines and the discharge are running or shut down, this being a 6+18 hour, 12+12 hour, or other daily sequences. Unless water balancing measures are included in the project the "water pulse" might cause serious ecological and water use problems and sometimes dangerous situations at some distance downstream. World Bank Lao PDR Strategic Impact Assessment Final Report 53 A run of river project operating for base load will not create any significant changes in water regime downstream the tailrace discharge. 6.1.3 Impacts Caused by Construction Land take In addition to the land occupied by the reservoir the construction of the plant will require land for rig sites, camps, workshops, quarries, spoil tips, etc. In total the impact on the land might be significant and even though some of the land might be deserted and reclaimed after the construction is finished there might be permanent damages and eyesores in the landscape. Access As hydropower development often takes place in remote mountainous areas with weak infrastructure, there is often a need to build new or upgrade existing roads. Improved road conditions can be positive for districts lagging behind in social and economic development. On the other hand, in the case of remote mountain for- ests, the improved access might open the area for unsustainable logging and land use and also be a threat to biodiversity values and ethnic minorities vulnerable to outside pressures. Workforce influx / social impacts Hydropower projects typically initiate a construction "boom". This will to some extent give opportunities for paid work for local people but there will always be an influx of outside workforce and followers (families, traders, etc.). This influx might impose a serious threat to the local communities' social and cultural fabric, which might be under additional stress from uncertainty related to resettlement and loss of land. Pioneer settlements like this are also associated with increased risk for spread of HIV/AIDS and other STDs. The increased population in the project area will constitute a pressure on the available natural resources like fuel wood, drinking water, etc. but on the other hand create a market for local products and services which might trigger local de- velopment. Pollution, noise and accidents All larger construction activities have the potential of causing pollution and other hazards for their neighborhood. Pollution of soil and water, noise problems, blasting accidents and vehicular accidents and nuisance because of heavy truck traffic are commonly felt. An application of "best practice" procedures will mini- mize the problems. A particular problem might be downstream silt load in the period of clearance of the dam site and other project areas. This might cause a dramatic setback for aquatic fauna and flora and create problems for downstream water users. 6.2 Summary of Environmental and Social Impacts of Planned Projects 6.2.1 Introduction Annex 1 gives a short description of some of the environmental and social issues related to each of the projects included in the 20 year development plans for hy- dropower in Lao PDR. World Bank Lao PDR Strategic Impact Assessment Final Report 54 The description is to a large extent based on the "Project Catalogue" published as an annex to the Hydropower Development Strategy Study (Worley and Lahmeyer, 2000). The Project Catalog has compiled data from a number of sources of vary- ing detail and focus. In a few instances environmental impact studies have been prepared, in other cases only reconnaissance or map studies are available. Con- sequently the quality of the information and the issues covered are not on an equal level for all projects. An additional problem is the constant change in project layout and operational mode prescribed for the project. New project alternatives are generated continu- ously, which might in some cases fundamentally change the potential environ- mental and social impacts. The environmental studies do not always keep up with these changes and there are risks that the impacts indicated below might no longer be valid or that new ones should have been added. In particular the fig- ures for resettlement requirements have to be read with caution, as there may have been significant changes in the relevant population since the estimates were made. One example of changing project and impact characteristics is the Nam Theun 2 Project where steadily progressing studies and planning over a number of years have seen an increase in the number of resettlers from less than 3,500 (630 households) in the earliest surveys in 1995 to more than 6,200 today. Another example of uncertain project data is the project called Theun Hinboun Extension. The PSDP and this SIA has analyzed an alternative including a large reservoir. The Developer underlines, however, that no final decision has been made and also alternatives without new reservoirs are presently considered. A summary and analysis of data for the projects included in the Hydropower De- velopment Plans for Lao PDR as described in Chapter 4, is given below. Again it must be acknowledged that the information for these summary predictions is to some extent sketchy and incomplete. There may also be cases where the design of a project has recently been changed and the data given are no longer repre- sentative. Some of the assumed impacts and impact indicators for the studied project are summarised in Table 11. World Bank Lao PDR Strategic Impact Assessment Final Report 55 Table 11: Summary of Project Characteristics and Key Impacts. Project Installed Type Active Inun- Resettle- Distance Number of Ethnic Minorities Interference with capacity of pro- storage dated ment to near- villages in 5 affected protected areas (MW) ject (Mill m3) land (People) est road km radius (Km2) form damsite Nam Mang 3 35 S 45 9.5 750 Mostly EMs Xeset 2 76 RoR 0 1.5 0 2.5 4 Near EM villages Close to forest CA Nam Lik 100 S 826 42.2 0 Near EM villages Xepon 75 S 361 29.5 1500 7.6 15 All EMs Close to NBCA T. Hinboun Ext. 105 S, IT 2870 126 1220 12.9 4 Majority EMs In prop. NBCA Nam Mo 100 S 264 10.8 0 6.0 0 N/A Nam Theun 2 1074 S, IT 3510 450 6224 9.5 0 Majority EMs Close to NBCA H. Lamphan Gnai 60 S 89 3.5 0 4.8 0 Near EM villages In prop. NBCA Xe Kaman 3 250 S 109 5.2 0 7.7 Near EM villages Nam Ngum 5 90 S 252 14.6 300-500 7.0 0 Majority EMs Thakho 36 RoR 0 0 0 0.5 6 Near EM villages In important area Xeset 3 20 RoR 0 1.3 0 1.9 Near EM villages Xe Kaman 1 468 S 3340 222 >800 0.1 0 Majority EMs In NBCA Nam Ngum 4A 55 S 332 14.5 1470 Majority EMs Nam Kong 3 25 S 299 36.9 1550 Majority EMs Nam Pot 38 S 71 6.1 0 Near EM villages Xe Kong 5 248 S 2210 70 980 18.9 2 All EMs In NBCA Nam Bak 2B 116 S, IT 119 4.8 0 Near EM villages Nam Ngum 4B 56 RoR 0 0.5 0 Near EM villages Xe Xou 59 S 1710 113 500 All EMs In NBCA Nam Ngum 3E 580 S 983 26.5 500 0.1 0 Some EMs Nam Ngum 2B 183 S 150 7.5 1000 Some EMs Total 3,849 - 17,540 1,195.9 >16,700 - - - - Legend: S = Seasonal Storage, RoR = Run-of-River, IT = Inter basin transfer World Bank Lao PDR Strategic Impact Assessment Final Report 56 6.2.2 Impacts on Biodiversity Baseline information is not available to give a clear assessment of the projects' impact on biodiversity. It is likely, however, that the negative impact on the primary forest and the unique wildlife found in the mountainous areas of Lao PDR will be significant as most of the projects are located in mountain forest areas. 3 of the short-listed projects are located inside NBCAs and 2 others are located in areas that have been proposed as NBCAs (ref. Map 1). Other projects are located close to areas of documented biodiversity value and might thus contribute to in- creased pressure on these vulnerable areas. The combined impacts on the water flow regime by a number of hydropower projects located in the Sekong basin (see Chapter 5) might have an impact on the biodiversity and ecosystem function of the Attepeu Wetlands. Of particular con- cern are the cumulative impacts of seasonal storage of upstream projects, which will change flooding and dry season flow pattern on which the wetland produc- tivity and unique biodiversity are dependent. Upstream seasonal storage projects might also have an impact on the Siphandon Wetlands upstream Khone falls but the impact of Lao developments will be rela- tively small compared to the total flow in Mekong. A special case is the Thakho Run of River project at Khone falls, which seems to cause minimal negative im- pacts except for the potential negative effect on Irrawaddy dolphin habitat. Using the NT2 project as an example it should be noted that hydropower develop- ment creates an opportunity for mobilising funding for better management of NBCAs. 6.2.3 Downstream Loss of River Ecosystems A characteristic feature of most of the planned projects is the long distance of water diversion between the intake at the reservoir and the discharge point back into the river (length of tunnel and penstock). 9 projects have a diversion distance of more than 5 km and 14 more than 1 km. In most cases the distance of dry or minimum flow river reach will be longer than the diversion distance as the tunnels contrary to the rivers, tend to be straight. Also downstream of the tailrace discharge point loss or reduced value of the aquatic ecosystems might be experienced. It is assumed that most of the hydro- power plants will be operated in a peaking mode. Unless this fluctuation, in water release, is mitigated by a buffer-reservoir, significant negative impacts might ex- perienced. Both permanently dry and periodically dry river reaches will lose much or all of their value as aquatic ecosystems. River based biodiversity and fisheries will be lost. The final assessment of such downstream impacts can only be made when con- ditions for minimum release flow and the operational regime of the power plant have been decided. 6.2.4 Irrigation, Water Supply, etc. The loss of water flow in certain reaches, as described above, will also cause negative impacts for water use for irrigation, water supply, transport, etc. The operation of seasonal storage plants, which constitutes the majority (17) of the projects, will, however, result in downstream increased water availability in the dry season. Additional water in the dry season might help the development of dry World Bank Lao PDR Strategic Impact Assessment Final Report 57 season irrigation and improve the health situation through better water supply. Also the established reservoirs might provide improved and stable conditions for irrigation and water supply for local communities. Downstream power plants with larger storage reservoir the oxygen content of discharged water might be reduced for a certain distance. This might have a negative impact on river ecology and fisheries and well as the waters suitability for human consumption. Cascades, aeration structure, etc. will mitigate the prob- lem. 6.2.5 Flood Protection By operation of the seasonal storage plants the peaks of downstream floods might be modified, reducing risks of loss of human life and economic damages. The efficiency of the reservoirs as flood protective devices can be significantly enhanced if focus and priority is given to this aspect in the operation of the power plants. 6.2.6 River Blockage In general the planned dams are high. Only Xeset 2 and Thakho have dams or in- takes of a height less than 15 m which is the definition of large dams in Bank OP/BP 4.37 "Safety of Dams". 14 projects have dams higher than 50 m and 8 higher than 90 m. The highest one is Nam Ngum 3E which is planned with a dam height of 217 m. This implies that dam safety is an issue for most projects. The dams will also effectively stop all upstream migration of fish. To some extent the passage of fish can be helped by technical measures like weirs, channels and fish ladders. However, such measures have shown limited success in the Me- kong basin. Few of the migrating species found in this region are able to negotiate such structures. 6.2.7 Land Take and Inundation According to the information available the total land area that will be inundated in connection with the construction of reservoirs and intake head ponds adds up to about 1200 km2. The majority of the projects have reservoirs of small or moderate size, with Nam Theun 2 (450 km2), Xe Kaman 1 (222 km2), Theun Hinboun Exten- sion (126 km2) and Xe Xou (113 km2) as clear exceptions. 6.2.8 Resettlement It is recorded that 12 of 21 projects will include a component of resettlement. The total figure given is about 16,000 people but this is likely to be a minimum figure. In all the 12 projects the number of resettled people will exceed 200 and thus be above the number where the Lao PDR and World Bank requirement of a Resettle- ment Action Plan will be triggered. The existing data shows that Nam Theun 2 is the project with far the largest resettlement component as more than 6000 will be required to relocate. 6.2.9 Interference with Ethnic Minorities Most of the projects are located in the higher reaches of the river basins where the majority of the local people will belong to ethnic minorities (ref Map 3) and thus, most of the people in need of resettlement will be of this category. Given their de- pendence on the natural resource base and their general low degree of integra- tion into the mainstream economy, ethnic minority groups tend to be more vulner- able to the effects of hydropower development. For instance, if the projects entail resettlements and loss of traditional livelihoods, ethnic minority groups may face World Bank Lao PDR Strategic Impact Assessment Final Report 58 serious problems in relocation and adapting to a new and different way of life in- cluding the adoption of different agricultural technology and loss of possibilities to hunt and gather forest products. Unless special measures (pro-active in nature) are taken it is likely that cultural diversity will be reduced as a result of hydro- power project development. The Xepon project seems to be particularly critical in this respect as the project is planned in the heartland of the 15,000 people belonging to the Pako group. However, there are innovative measures being considered for a number of pro- jects, including Nam Theun 2 where resettlement is within indigenous spirit territo- ries, rights to land and resources are secured and sustainable livelihood develop- ment is taking place in situ. To what extent the hydropower development will force these groups to change lifestyle and contribute to the loss of their cultural identity, is difficult to identify be- fore detailed studies have been carried out. It is likely that the development will accelerate the ongoing process of integration of ethnic minorities into the main Lao culture. 6.2.10 Tourist Attractions and Scenic Waterfalls The loss of waterfalls is mentioned as a feature of 2 of the planned projects, but is likely to be a feature of more projects. To what extent this is to be considered a loss of a potential tourist attraction is not known. Most of the projects are located far from areas presently frequented by tourists. The experience from the Nam Ngum 1 reservoir shows that, in Lao PDR which is deficient in natural lakes, reservoirs might be of significant value as tourist and recreational sites. The most likely candidates for attracting tourists will be Nam Theun 2 and the Theun-Hinboun Extension (Nam Theun 3). In addition to the at- traction of the reservoir itself other interesting natural areas may also be made accessible by the roads constructed in connection with the power project. 6.2.11 Downstream Mekong Hydrology and Water Use. Except for Nam Mo all proposed projects are located on rivers draining to Mekong and thus have a potential of impacting on the Mekong reach shared with Thailand, downstream areas in Cambodia and the Mekong Delta in Vietnam. The determining parameter for the downstream changes in river flow is the active storage of the planned projects. The combined active storage of the planned projects in the Lao PDR part of the Mekong Basin projects is about 17,300 mill. m3. If all these projects are implemented the result at the Kratie monitoring station in Cambodia, will be a reduction in average annual maximum discharge of about 4% (reducing the average maximum flow from 35,250 m3/s to 33,860 m3/s). This will have small positive impact of reducing the risk for flood damages. However, high flood levels are positive for the reproduction of fish on floodplains and in The Great Lake (Tonle Sap). The reduced maximum flow will result in an average re- duction in Lake level of about 17 cm, compared to an annual variation in maximum level of about 2,5 ­ 3 m, and thus potentially cause a minor reduction in fish pro- duction capasity. The storage will also result in an increase of the dry season discharge. The dry season discharge at Kratie will be increased by 36% in February, March and April. This increase will have a slight positive impact by supporting irrigation and reduce salt intrusion in Mekong Delta. World Bank Lao PDR Strategic Impact Assessment Final Report 59 6.2.12 Downstream Impacts in Vietnam Nam Mo is one of the tributaries to Song Ca discharging into the Gulf of Tonkin at Vinh. No assessment seems to have been carried out to cover environmental im- pacts in Vietnam. It is not likely, however, that the Nam Mo project will cause any significant negative transboundary impacts. World Bank Lao PDR Strategic Impact Assessment Final Report 60 7 ALTERNATIVES 7.1 Alternative Energy Resources 7.1.1 Primary Energy Sources The Hydropower potential in Lao PDR is described in detail in Chapter 4. Below is given a brief overview of the availability and potential of other primary energy sources. The information is summarised from the Hydropower Development Strategy Study (Worley and Lahmeyer, 2000). Oil and gas Exploratory drilling, geophysical mapping and investigation have been carried out in central and southern Laos. The results are not available but if positive there might be a potential for power production in the long-term (10-15 year) perspec- tive. Lignite A major resource is located at Hongsa in northwest Lao PDR. It contains 810 mil- lion tonnes of proven reserves of which 530 million tonnes are found to be eco- nomically recoverable. The sulphur content is relatively low (0.7 -1.1%). The re- serves are sufficient to cater for power production of about 2,000 MW installed capacity. A 300 MW base load thermal plant has been planned at the Hongsa site but the development has stalled because of difficulties in obtaining lenders support. The reason being relatively high generation costs as well as environmental concerns. Coal Several fields of coal, mostly anthracite, are found throughout Lao PDR and fur- ther exploration is going on. To date the proven reserves are about 100 million tonnes. The current annual production is about 130,000 tonnes, used by local enterprises or exported. It is estimated that there is a long-term option for electric- ity production of about 500 MW installed capacity. The Viengphouka 50 MW project has been evaluated as part of the Power System Development Strategy (Meritec and Lahmeyer, 2004). The project was not among the priority projects but it is interesting since it has a reasonable good economy and would supply the northern provinces, which have few hydropower alterna- tives. Uranium There are no known reserves of uranium in Lao PDR. Geothermal No significant potential is known. Biomass There are significant resources and production potential of biomass in Lao PDR. At present this has not been utilised for electricity production but the use of fuel wood counts for about 88% of the total energy consumption in the country. World Bank Lao PDR Strategic Impact Assessment Final Report 61 The infrastructure for large-scale biomass fuelled power plants is not yet avail- able in the country. Organic waste can, however, be used for internal and local supply of heat and power in some industries (wood processing, food processing, etc.). Solar The annual solar radiation received in Lao PDR corresponds to the situation in southern Europe. Small-scale photovoltaic units are in common use, in particular in remote areas. At present the cost of power produced from large-scale thermal or photovoltaic power units is much higher than hydropower and fossil fuel alter- natives. Wind The mean wind speed at Louang Prabang and Vientiane is around 1 m/s and it is assumed that some of the mountainous regions have a somewhat higher average. However, this would still be well below the levels where wind is a competitive alternative for power generation. 7.1.2 Conclusion There are significant resources of lignite and coal available in Lao PDR, which to some extent can provide an alternative to the hydro-based power production. Utilisation of the resources has been discussed both for domestic supply and for export power generation but the generation cost and environmental concerns have so far halted development plans. In any case hydro provides a larger tech- nical and economical potential than the present fossil alternatives. There is also potential for solar and biomass power generation. This might be of local importance, in particular for locations outside the main grid systems. How- ever, the generation and cost and scale of these sources make them an insignifi- cant alternative to hydropower for delivery to the main grid and for power ex- ports. 7.2 Alternative Power Development Plans 7.2.1 Other Strategies and Alternative Rankings As described in Section 4.7 several hydropower development plans and project rankings have been prepared over the last decade in Lao PDR. The basic ap- proach for the development of these reankings is relatively similar. The starting point has been a "long-list" (30-50) of potential projects, which based on technical and cost parameters, has been reduced to a short-list. The short-listed projects have then undergone a more detailed assessment and ranked, based on a number of technical, economic, and environmental criteria. The ranking of projects or "pri- orities" in a least-cost sequence of development show many similarities. For in- stance, Nam Theun 2 is ranked at the most "attractive" project in all the recent studies. Slight differences in ranking occur resulting from adjustments in eco- nomic assumptions, new design or operational concepts, inclusion of environ- mental parameters in the ranking process and to what extent the progress of fi- nancing arrangement and seriousness of the developer is taken into considera- tion. The main difficulty and weakness of the present plans (as also mentioned in Sec- tion 4.10) is that the projects are ranked individually. Since many of the planned projects are located in river basins with many project alternatives, the interactions between the different projects are crucial for the project economy and the envi- World Bank Lao PDR Strategic Impact Assessment Final Report 62 ronmental and social impacts. Thus an optimisation of the development and opera- tion of a cascade of project might result in a different priority than when the pro- jects are judged one by one. As concluded in Section 7.1 there are limited alternatives to hydropower for power production in Lao PDR. The relevant authorities have therefore not seri- ously considered or presented fundamentally different strategies as alternatives to the hydropower based development strategies. A strategy dominated by coal based power generation would for instance have had different environmental and social impact structure than a hydro-based strategy. The main uncertainty related to future power development and thus to the potential and extent of social and environmental impacts, is the development of a regional power export market. 7.2.2 Ad hoc Development A possible alternative to the implementation of the least-cost development plans, as described above and analysed in this study, is that the development takes place more or less on an ad hoc basis. Such a "development alternative" would make it almost impossible to give an overview of the combined environmental and social impacts of future projects. The means and ways to secure a development based on least-cost plans are discussed in Chapter 8. Success in that respect is important both for optimising the benefits of power development and to maintain a positive political and public attitude towards hydropower as the preferred power development alternative in Lao PDR. 7.3 Export Alternatives The hydropower developments plans of Lao PDR for the next 20 years are domi- nated by export to Thailand and Vietnam. The situation for such export is de- pendent on development on both the demand side and on the generation side in the recipient countries. It is also dependent on the development priorities and generation costs in the countries "competing" with Lao PDR for delivery of power for export, i.e. Cambodia, Myanmar and PR China (Yunnan) The general situation for the countries in question is indicated below: In Thailand the future power generation development will largely be based on ex- ternal resources. The main candidates for production are hydropower import from Lao PDR, Yunnan and Myanmar, combined cycle gas plants based on do- mestic and imported gas, and thermal plants based on imported coal. The use of coal is controversial due to environmental concerns. With gas as the only thermal alternative, Thai generation would depend heavily on gas for between 75 and 90 % of its installed capacity in 2020. In Vietnam many alternatives for future generation are available; hydro, coal, oil and gas and geothermal. Vietnam also considers development of nuclear power. The demand is, however, rapidly growing and agreements have been reached with Lao PDR for import. Similar arrangements are being discussed with Cambodia and Yunnan. The future Cambodian power generation will be based on oil and gas thermal gen- eration in the main cities and hydropower in the west and northeast. Import from Vietnam and Thailand might be considered in some regions. At the same time Cambodia are also considering the development of projects for export to Vietnam. In the southwest there are a few promising hydropower projects. They could po- World Bank Lao PDR Strategic Impact Assessment Final Report 63 tentially form the basis for power exchange cooperation between Thailand and Cambodia. Yunnan Province, PRC, is rich in energy resources. At present only about 5 % of the estimated 400 TWh hydro resources have been exploited and they have alter- natives in considerable coal resources. Power export to Thailand and Vietnam is planned. Myanmar is rich in coal, oil, gas and hydropower. It is expected that the main source for future generation will be hydropower. In addition, the intention is to build some gas-based generation plants. Myanmar is today exporting gas for power production in Thailand. Export to Thailand from the planned 3600 MW Ta- sang hydropower project, has been considered. Further development of hydropower in the region will very much be dependent on the definition of external cost for thermal alternatives. Practice so far has been not to take explicitly into account the costs of greenhouse gas and pollutant emis- sions when comparing hydropower and thermal production in the riparian coun- tries. On the other hand, there is often a "benefit bias" built into evaluations of hy- dropower projects, since unmitigated environmental and social costs of hydro- power do not lend themselves easily to quantification and valuation tends to be given less weight in the overall assessment. For the near future the power export agreements have been established through Memoranda of Understanding with neighbour countries. An agreement was signed between Lao PDR and Vietnam in 1995 for Lao PDR to supply 1,500 to 2,000 MW by 2010. A similar MoU is signed with Thailand for delivery of 3,000 MW by 2010. However, from the status described above it is clear there exists a number of alternative future paths for power development and power exchange in the Greater Mekong Sub-region. The demand for and economy in, hydropower export from Lao PDR will be dependent on how the total regional picture in demand and generation cost (including environmental and social considerations and policies) develops in the region. The Thai Government has recently announced that a condition for signing power purchase agreements, with developers in other countries, is that international standard environmental and social assessment has been prepared and environmental management plans developed. Thus, for future export contracts it will be important for Lao PDR to document that their environmental and social safeguard systems are in place and operated efficiently. Assuming the radical (and unrealistic) alternative that the new export market of hydropower from Lao PDR totally disappears, the Lao PDR 20 year Power Devel- opment Plan will have to be reduced from a total of 4366 MW to only 840 MW. 7.4 Demand Side Management The power demand in Lao PDR is growing at a rapid rate, presently about 11 % per year. Behind such growth lies large, unsatisfied needs for more energy. In developed countries an important element in reducing the demand and thus the need for new generation projects, will be demand side management (DSM). However, the large majority of the population in Lao PDR is still without access to electricity. In such a situation, the primary concern of the Government and EdL will be to provide more energy. Although measures such as DSM are cost-effective means of easing the situation, the contribution they can make in a situation where less than 20% of the population has access to electricity will be limited. In addi- tion, there are barriers to implementing DSM interventions with prospects for any World Bank Lao PDR Strategic Impact Assessment Final Report 64 significant impact on consumption. With few institutional and financial resources, it must be recognised that the main focus of the country will be on capacity ex- pansion. Over time, however, this should change. World Bank Lao PDR Strategic Impact Assessment Final Report 65 8 RECOMMENDATIONS FOR MITIGATION, MANAGEMENT AND TRAINING 8.1 Introduction This chapter revisits some of the problems and challenges in hydropower devel- opment described in earlier chapters and discusses potential measures to improve the situation and reduce the identified problems. The recommendations address several levels of problems with different parties responsible for follow up and im- plementation. These parties include government institutions involved with environ- mental management and protection as well as policy makers and political bodies that passes legislation and sets the frame conditions for the environmental and hydropower sector. The presentation is organised in 5 Sections: · Mitigation and compensation related to the construction and operation of hy- dropower schemes; · Supplementary management initiatives · Systems for improved integrated management; · Improvement of system for planning and assessment of hydropower projects; · Institutional strengthening and training. 8.2 Mitigation and Compensation Related to Construction and Operation A number of measures and actions can be taken to avoid, minimise or compensate for potential negative impacts of planned hydropower schemes. Below is de- scribed some of the measures that should be observed for hydropower projects in Lao PDR. The list is a generic description of measures. Some of the measures might be relevant for some projects and other projects might end up with a differ- ent set of mitigation measures. The EIA regulations require the preparation of a specific mitigation and environmental management plan for each project. In this Strategic Impact Assessment it is not possible or appropriate to prepare or indi- cate any "combined mitigation plan" for all the projects included in the 20-year de- velopment plan. 8.2.1 Water Related Mitigation General Issues Water related mitigation measures will focus on the protection of biodiversity and integrity of the ecosystem in the impacted parts of the water system, and mitigate the potential damage to fisheries and other water related use (irrigation, water supply, transport, etc.). In this region there is a common problem with oxygen depletion in the reservoir water, causing problems downstream of the power plant. The problem can be reduced with clearance of the reservoir vegetation before inundation and by technical measures like discharge structures, aeration cascades, etc. Clearing the vegetation will also help reduce the generation of Greenhouse Gasses (GHG) from the reservoir. The problems of downstream riverbank and reservoir erosion can be counter- acted by appropriate discharge and operational regime of the power plant, and by riverbank protection work in critical reaches. World Bank Lao PDR Strategic Impact Assessment Final Report 66 Control and treatment of domestic and industrial waste water discharge should be considered as compensatory measures in the cases where the development cause reduced flow and thus reduced recipient capacity in the water body. The protection of some of the ecological features of the reaches with heavily re- duced or no water flow (often found between the dam site and the tailrace dis- charge point) can be achieved through constructing a cascade of low weirs. This might also have a positive impact on surrounding wildlife and water supply and maintain the visual impression of a river reach in an otherwise dry riverbed. Building fish passage structures can compensate the loss of fisheries. This has proven to be efficient to maintain salmon and trout migration in Europe and North America. In this region however, the construction of fish passage has shown to be of limited value. It seems that most species are not able to negotiate such structures. Fish propagation measures are relevant in the cases where new reservoirs have been constructed and opportunities for new fisheries have been established. It is advised, however, to avoid the introduction of exotic species for this purpose. Environmental Flow The most important measure for mitigation of the negative impacts to river ecology caused by changes in the natural river flow regime is the implementation of a minimum flow regime. The definition of environmental flow is the minimum flow re- quired downstream of the project site necessary to maintain specified valued features of the river ecosystem or certain specific water uses such as require- ment for irrigation water, migration or breeding of valuable fish species, water for dilution of polluting discharges, etc. Different names have been used: Environ- mental Flow, In-Stream Flow, Minimum Flow Requirements, Riparian Flow, etc. The environmental flow requirements can be specified in a number of different ways. It can be a simple continuous water release figure, daily and seasonal varied flow regime or combination of stable flow and short-term flood releases to mimic high flow situations, etc. The internationally most used system and the system easiest to manage, is a stable flow release or one "dry season" release and one "wet season" release. For countries, like Lao PDR, with weak systems of environmental control and en- forcement and sketchy baseline data for ecological parameters, it is advisable to have a realistic and simple, methodological approach in setting Environmental Flow standards or requirements. The preparation of EIA for hydropower projects should include specific assessments of the minimum flow requirements in reaches impacted by the hydropower development. It is crucial that such studies are done at an early stage in Project preparation, so that the findings can be integrated into the design and operational agreements. There is an urgent need for an initiative from the environmental and licensing authorities to develop general guidelines specifying the principles of setting envi- ronmental flow requirements and what studies will be required by the developer for assessment of the such requirements. The final decision on flow require- ments should rest on the licensing authorities and the conditions should be speci- fied in the concession documents. World Bank Lao PDR Strategic Impact Assessment Final Report 67 8.2.2 Land Based Mitigation In an erosion or landslide prone environment the project must include measures to reduce or halt such problems. This might include erosion control structures, pro- tective re-vegetation and reforestation, etc. Larger changes in the landscape from quarries, tunnel spoil tips, etc. should be landscaped and replanted, both to reduce erosion problems and to reduce the visual impact of the construction. The construction activities will always cause some degree of negative impacts and risks (dust, noise, air - and water pollution, traffic, etc.), which might affect local communities and natural qualities. These impacts can be minimised by ap- plying the principle of "best professional practise". It will be necessary, however, to define these principles in detail in the concession and contract documents. Un- less the specified requirements are included in legally binding documents, there will inevitably be problems in implementing the "best practise standards". Thus the requirements have to be spelled out clearly in the concession document between the licensing authority and the developer and in the contract between the developer and the contractor. 8.3 Compensatory Development and Management Programmes Many of the potential impacts of hydropower development cannot be mitigated or directly compensated in cash or kind. To protect the natural values that are under stress from the development and safeguard the livelihood of the local communities it is customary to establish development or management programmes paid by the developer. The content of such programmes will depend on the social and natural environment impacted by the project. Examples of such programmes include: · Forestation plans · Catchment protection programmes · Fisheries development plans · Nature protection and compensation plans · Infrastructure development programmes · Social development plans · Ethnic minority development plans In Lao PDR Nam Theun 2 is the hydropower development project that has devel- oped the most detailed and comprehensive Development and Management Pro- grammes. These include programmes and activities contained in the Environmental Management Plan, the Ethnic Minority Development Plan, the Resettlement Action Plan and the Social and Environmental Framework and Operational Plan (SEMFOP). The planning processes in connection with NT2 have provided "best practice" ex- amples that to a large degree are reflected in today's regulations and guidelines for environmental and social management mitigation plans, including resettlement and compensation. The implementation of the environmental and social pro- grammes will provide important experience and learning for further refinement and development of complementary guidelines and regulations. A close monitoring and follow up by external monitors and responsible government agencies (STEA /SEMD) is therefore necessary. Given the resource situation STEA and SEMD cur- rently faces, it is recommended that funds for monitoring and follow up of the im- plementation of environmental and social programmes is sought and secured. TheSEMFOP, which is concerned with the preservation and conservation of the Nakai-Nam Theun NBCA including the Nam Theun watershed, is of particular im- World Bank Lao PDR Strategic Impact Assessment Final Report 68 portance as it will create a precedence for establishing a system of having hy- dropower developers contribute to the conservation and protection of NBCAs and other protected areas in the river basin. The example and momentum created by the SEMFOP should be utilised to put the linking of hydropower development and biodiversity and conservation more firmly on the agenda. It would appear impor- tant that this issue is considered when deciding the terms for awarding of con- cessions for hydropower project that affects protected areas and NBCAs. 8.4 Initiatives for Integrated Water Resources Management 8.4.1 Catchment Management and Integrated Water Resources Planning The advantages of "Integrated Water Resources Management" (IWRM) and "River Basin Management" have been promoted as tools for better planning and control of activities in rivers by the community of water professionals and international organisations, including the World Bank. Many case studies and models have shown that integrated management of the quantitative and qualitative aspects of water in a particular river or river basin, can make water use more effective and reduce water management conflicts. This is particularly valid for hydropower op- tions as such a system allows for a more balanced and upfront assessment of the benefits and costs of a certain development than can be provided for by a regular EIA process. Without a river basin plan and an authority to enforce it, there is a risk that up- stream projects/developers are likely to operate their power plant for maximisation of their own income from power sales without consideration of downstream pro- jects or other water needs. If successfully organised these authorities could be given the task of analysing and preparing a set of reservoir operation rules by which developers must abide. Calculation of compensation from upstream devel- opers to downstream users for lost income would be a part of such a duty. In this effort the work started in Lao PDR through the establishment of the Water Resources Co-ordination Committee (WRCC) needs support. The key challenge will be to coordinate the development of a river basin water resource planning system, including detailed procedures and roles for WRCCs and river basin com- mittees, and other key participants. The plans are expected to serve as guidelines for provinces, local authorities and other central agencies to conduct detailed project planning in a coordinated manner. The plans will also indicate agency re- sponsibilities, including the responsibility for monitoring plan implementation. The results from ongoing test projects have to be carefully evaluated and a realis- tic organisational and methodological approach implemented nationwide, including building a sustainable capacity for IWRM. The issues to be addressed include clarification of issues like: policy and legislation, integrated planning and coordina- tion, data and information management, training, awareness building and consulta- tion. To undertake this significant task the WRCC requires a strong, dedicated and ex- perienced secretariat. This can only be achieved by sustained support from do- nors and commitment from the top levels of government. 8.4.2 Intact River Protection From an aquatic biodiversity and reference perspective the protection of certain rivers from major construction work and hydrological changes, would be desir- able. Systems of "protected rivers" or "intact rivers" are established in many countries but have so far not been seen as a part of the nature protection system in Lao PDR. World Bank Lao PDR Strategic Impact Assessment Final Report 69 The main regulatory system for nature protection in Lao PDR is the area protection as NBCAs. This system is primarily focussed on protection of the terrestrial val- ues and is not designed for the protection of rivers along their full length in order to safeguarde the river as an intact hydrological system. In fact some of the ex- isting and planned hydropower comprise construction work and establishment of reservoirs inside existing or planned NBCAs. An investigation of the natural qualities in remaining, untouched rivers in Lao PDR should be carried out and recommendations should be given as to which rivers qualify to be protected from major physical changes and construction work. Be- fore any final decision on protection is made, an assessment of both the natural and present status values, as well as the values of potential developments, has to be made. The legal basis for river protection may need to be established. In an interface be- fore such systems are in place, however, it might be sufficient to enforce the protection as an administrative decision by the relevant central authorities. 8.5 Planning and Assessment of Hydropower Development 8.5.1 Implementation of Least Cost Strategies Even with the strong support from the international financing institutions in apply- ing a least-cost strategy for hydropower development in Lao PDR, the implemen- tation of the plans and proposed development sequence has been unsatisfactory. This has resulted in ad hoc development, which has lead to less than optimal de- velopment seen from a national socio-economic point of view. Even with the known problems of implementing the least-cost planning principles, it is possible to maintain the methodology also in combination with private partici- pation. This requires that a least-cost expansion plan is simulated by the respon- sible public entity, resulting in candidate schemes ranked in a time sequence. Pri- vate investors can then be invited to bid for specific projects based on a certain number of project specific criteria. Such a system is similar to what is used by the Nepal Electricity Authority (NEA). Alternatively, bids may be solicited from private developers before the simulation studies are performed, to help determine the least-cost plan. An approach com- bining least-cost simulation plans and private participation is relevant for countries that prefer a phased approach to privatisation, or for those that see value in using the models for indicative planning. 8.5.2 Award of MOUs for Developers As described under Section 4.9.2 it appears that MOUs are not standardised to include environmental and social obligations. There are different options for ad- dressing this shortcoming. The most fundamental would be to abandon the system of awarding MOUs based on an unsolicited expression of interest and negotia- tions, and introduce a system of least cost development planning and competitive bidding as noted under 8.5.1. If the necessary EIA studies, as a part of this sys- tem, could be carried out prior to tendering this would contribute to a better inte- gration of the technical planning and environmental and social concerns. Financing of the required EIA studies could for instance come from a fund established with assistance from international development agencies or donors. The successful bidder should then be required to redeem the costs of the EIA studies. This proce- dure would demonstrate for prospective developers and investors that a particu- lar project would entail certain environmental and social obligations and costs. World Bank Lao PDR Strategic Impact Assessment Final Report 70 The alternative would be to keep the present negotiation system but ensure the incorporation of environmental and social requirements through standardisation of the content of the MOU. A comprehensive document outlining the whole environ- mental legal framework pertaining to hydropower development and environmental requirements should be compiled in order to alert potential developers and inves- tors to their obligations. 8.5.3 Award of Licenses Since the inclusion of environmental and social obligations into concession terms seem not to be secured under the present system (4.9.2) it is recommended that this is done thought standardisation of the content of licenses. The Electricity Law, that provides the legal basis for awarding of licences, only deals with envi- ronmental requirements in general terms. For instance, Article 14 requires the De- veloper to submit social and environmental studies and action plans while Article 15 briefly states that projects should not adversely impact the environment. Thus, it will be necessary to develop more detailed and specific environmental and so- cial terms for award of licences. This can be achieved through additional regula- tions and guidelines that amends and Electricity Law and the Licensing Decree. 8.5.4 Identified Needs for Clarification of Regulations Although there has not been much experience with the implementation of the new set of laws and regulations for carrying out environmental and social assessment in Lao PDR, it is possible to point to a few areas and shortcomings that need to be addressed. Emergency Procedures The Regulation on Implementing "Environmental Assessment for Electricity Projects in Lao PDR" (447/MIH) provides an opening for a dispensation from the require- ments for EIA studies. Article 18 states that "if emergency circumstances make it necessary to plan and construct and operate a project without following the re- quirements of the regulation, the MIH/DOE and STEA shall consult with each other about alternative arrangements". It is not specified what type of emergency cir- cumstances would allow a deviation from the requirements. It would undoubtedly strengthen the regulation if some criteria for invoking the "Emergency Procedures" could be given. Presently the provisions in the Regulation can easily be overridden by political considerations and pressure from vested interest groups. It is recom- mended to consider developing criteria for identifying emergency situations that justify application of Emergency Procedures. STEA and DOE should carry out this revision in cooperation. Enforcement of Regulations Measures should be taken to secure a uniform application of laws, regulations and decrees pertaining to social and environmental safeguards for hydropower development. At present, it is difficult to gain a full overview of what needs to be done to achieve this goal. One issue relates to the mandate of STEA, given in the Environmental Protection Law. According to article 36 STEA is only given the right and the duty "to cooperate with authorised concerned sectors in giving orders to adjust, suspend, remove or close down any activities that cause adverse impacts to human health, human life, animals, plants and the environment". It thus seems that STEA is not invested with regulatory powers or the right to enforce the provi- sions in the environmental legal framework. It should be noted that a step in the right direction is already being made as the National Assembly has made a decision to elevate STEA to sub-ministerial level. However, to legally assign regulatory powers to the organisation an amendment World Bank Lao PDR Strategic Impact Assessment Final Report 71 to the Environmental Protection Law would probably be needed. If STEA is given a regulatory function, which is highly recommended and now appears to be a pos- sibility, there is a need for the agency to further develop both its environmental and social safeguard capacity and also make the necessary structural adjust- ments and adaptations. It would be important to focus considerable efforts on this objective in the future. Resettlement Planning and Implementation Although the present body of decrees, regulations and guidelines for environ- mental and social safeguarding, undoubtedly is comprehensive and largely com- patible with international standards, previous experiences and a review of exist- ing resettlement regulations indicate a need for developing more detailed guide- lines. In particular there is a need to identify clearer criteria for assessment of loss of livelihoods and assets for the project affected population in order to de- termine compensation entitlements in a more standardised and just way. The Decree on Resettlement and Compensation designates STEA as the regula- tory agency for resettlement and compensation, also giving it the authority to issue requisite additional Implementation Regulations and Resettlement Technical Guide- lines in support of the Decree. It is therefore recommended that STEA reviews the present resettlement regulations and issues additional guidelines. A special em- phasis should to be given to compensation and livelihood issues in order, as soon as possible, to amend the weaknesses pointed to above. This will have a crucial significance for how compensation and livelihood restoration is handled in the many other planned hydropower development projects in Lao PDR. The Nam Theun 2 project will in this process be able to provide valuable experi- ences and "best practice" examples in that its resettlement plan is in accordance with international standards (ADB and WB Safeguard Policies). It has already pro- vided a model in connection with the drafting of the National Resettlement Policy and contributed to improving the capacity of various government institutions, such as STEA, in dealing with the challenges of resettlement. Development Opportunities As noted under 2.7, hydropower development represents an opportunity to bring development to and create benefits for local communities. In order to achieve more development focus in hydropower planning, it is necessary at an early stage to incorporate government plans and goals into the project context. This requires in- tegrated planning on the one hand, but also a clear division of responsibilities in terms of tasks and funding. Even if this appears to be difficult in the present con- text of Lao PDR where local and regional governments often lack the resources and experience, it is recommended that the government take a lead role in regional development linkages with hydropower planning in connection with future pro- jects. NBCA Status According to the "Decree on Protected Areas" hydropower development may be allowed in NBCAs provided it takes place within a designated "Permit Zone". If hydropower project is planned within a "Total Protection Zone" it will conflict with the provisions in the Decree and the Forestry Law, which prohibits exploitation of any kind. It is not presently known to what degree a zoning of NBCAs has been carried out. Presumably very few have been subdivided into zones. If so, it would be important to investigate the natural and biodiversity values and status of the parts of the NBCAs in which hydropower development is planned. This investiga- tion could form part of the EIA studies or be carried out in advance as a separate study. The result of the study would then form the basis for deciding if the areas World Bank Lao PDR Strategic Impact Assessment Final Report 72 should be classified as a "Total Protection Zone" or a "Controlled Use Zone" ("Permit Zone"). Classification as a Total Protection Zone would rule out hydro- power development in that part of the NBCA. Zoning of NBCAs should be carried out as soon as possible. Such zoning should be done with the participation of NBCA inhabitants and reflect local communities' use of the natural resources, particularly concerning what could be considered as customary rights. This would clarify the status of different parts of NBCAs and their eligibility for hydropower development. It would also give better protec- tion status to those areas that are most intact and have the highest biodiversity values and where is found indigenous ethnic minorities living mostly isolated from mainstream society. Priority should be given to those NBCAs that are most likely to be impacted by hydropower development plans. Definitions of Impact Zones During consultations on this strategic impact assessment the issue of the extent of compensation and mitigation responsibilities on the part of the developer has been raised. This relates in particular to the delineation of Impact Zones, which the present EIA regulations largely leaves undefined. Impact Zones are only indirectly addressed by the guideline " Environmental Assessment for Electricity Projects in Lao PDR" (447/MIH, 2001). Here it is stated: "The EIA shall describe the overall environmental study areas for the project. This shall include all areas within which the impacts must be considered and include those areas that the project may have a short term and long term influence on". It would represent a strength- ening of the EIA regulations if some criteria could be provided for determining Im- pact Zones more precisely, particularly for downstream impacts. This may prove a challenging task but it is nevertheless considered worthwhile. 8.5.5 Consultation and Public Involvement Regulation Development The "Regulation on Implementation Environmental Assessment for Electricity Pro- jects in Lao PDR" (447/MIH.DOE) clearly indicates that more elaborate guidelines for conducting consultations and public involvement processes is deemed neces- sary. A general reference is made to other "approved criteria developed for the implementation of public involvement activities". Development of such additional criteria is therefore recommended as a way of standardising the consultation and public involvement process. Past experiences with consultations and public involvement in connection with hydropower development are mixed. The EIA processes described in Chapter 3 predates the present safeguard regulations but showed the importance of carry- ing out consultations in a timely and comprehensive manner. However, the con- sultation process in connection with the Nam-Theun 2 Hydropower Project may provide "best practice examples" that should inspire and provide important les- sons for future consultation and public involvement processes. Consultations started at an early stage of project planning in 1996 and have continued to date on a local, regional and international level. The process has been very comprehen- sive and important experiences with methods and approaches and participatory planning have been gained. This should be utilised in the development of specific guidelines for consultation and public involvement. Part of the basis for developing the guidelines should be a thorough review of the Nam-Theun 2 consultations and other regional and interna- tional experiences. The development process should result in guidelines that pre- scribe a set of requirements for information collection and dissemination method- World Bank Lao PDR Strategic Impact Assessment Final Report 73 ologies as well as for scope, timing and number of consultations that need to be undertaken. Given the situation and vulnerability of ethnic minorities discussed under 2.6 and 6.2.9 it will be of particular importance to include in the guidelines specific pre- scriptions for procedures for consultation and involvement of affected ethnic mi- norities. These prescriptions could for instance include use of certain anthropo- logical approaches as well as provisions to ensure that enough time is spent with the affected communities at an early stage of project planning. Civil Society As noted under 2.5.3 civil society can play an important role in promoting trans- parency and accountability in connection with planning and implementation of hy- dropower projects. Although Lao PDR have had a cautious approach to allowing independent organisations outside the Government and Party to evolve, there are presently some noticeable positive development trends. A number of community service groups as well as a range of private training centres and professional and vocational associations have emerged over the last years, indicating a lager tolerance and space for private sector organisations. A change in policy towards civil society may be under way as the Government has publicly stated that the preparation of a legal framework for independent organisations is under consid- eration. The Governments international development partners should support and encourage this development. 8.6 Training and Capacity Building 8.6.1 Funding Mechanisms In the present situation staff capacity and resource scarcity appears to be the most critical factors when it comes to securing appropriate implementation of envi- ronmental and social safeguards in the hydropower sector. Currently the avail- ability of resources for new positions, salaries, training and field travel is a factor that critically constrains the performance of both STEA and the SEMD. Resource scarcity is an inherent constraint within the whole Government system. There are no easy solutions to this fundamental problem but it is important to acknowledge the importance of the social and environmental safeguarding. The hydropower sector holds the potential to substantially improve the economy of Lao PDR and it is crucial that this potential is developed in a sustainable manner and that benefits are distributed in a socially equitable manner. The social and environmental safe- guarding is also one of the keys to obtain international financing for hydropower development. It can therefore only be recommended that the GoL and its develop- ment partners address the resource shortage within the national safeguard agen- cies as soon as possible. One possible approach to improve the funding mechanism for capacity building would be to set up a fund that the Government could draw on in their efforts to put in place an environmental and social safeguard system for the hydropower sector. In the present situation the Government is dependent on funding from vari- ous separate projects and development assistance agencies where allocation and release of funds are subject to an array of different approval and reporting requirements. Setting up a sort of "basket fund" would contribute to speeding up the necessary capacity building process and enable the Government to better plan and carry out training without having to request funds and negotiate terms for each separate training event. World Bank Lao PDR Strategic Impact Assessment Final Report 74 8.6.2 Capacity Building STEA/SEMD The SEMD and STEA staff has a mixed background with many having technical backgrounds of bachelor degree level. This suggests that there is a need for cre- ating more understanding and knowledge about environmental and social issues. Furthermore, as SEMD and the EIA Division of STEA is responsible for ensuring the quality of the EA process, training on review of EIA documents and monitoring of implementation should be considered as a priority. Finally, for monitoring and reporting purposes a good database is a prerequisite and training on database establishment and operation should therefore be another issue for capacity build- ing efforts at central level. Province and District Level The most urgent training needs for province and district level relates to implemen- tation of mitigation activities and the monitoring of outcomes. The provincial offices of STEA, which has been established quite recently, will need time to build up the capacities of their staff. On district level the leaders of the administration, the line ministry offices and the mass organisations have in general lower technical qualifications and less management experience and skills. It is therefore recommended that leaders on district level receive a more comprehensive training package than those at province level. Language Skills A generally identified need, valid for all organisations and agencies involved in en- vironmental and social safeguarding is the need for English language training. This arises from the fact that hydropower development in Lao PDR mostly involves in- ternational actors like investors, financing institutions and consultants. There is thus a need for most of the staff to read and understand documents and reports written in English as well as being able to correspond and give comments and evaluations of reports in writing. It is recommended that language training is given over the longer term and that the training can be combined with the staff's normal function and work. Working Approaches A feature that still seems to be prevalent within government agencies is the tendency to think and operate in a traditional top-down manner in their dealings with grass root communities and people affected by hydropower development. In order to instil more participatory attitudes and practices it is therefore recommended that training on public consultation approaches and participatory planning and implementation is made an important part of the training for all staff on different levels of technical line agencies that are involved in planning and implementation of mitigation activites. The training should especially emphasize gender sensitivity and culturally appropriate approches for working with ethnic minorities. 8.6.3 Training Methods In general future training should be composed of workshops, on-the-job-training, in-service formal courses, and to a certain degree, awarding of scholarships for university degree and certificate studies. World Bank Lao PDR Strategic Impact Assessment Final Report 75 Workshops are best suited for well-defined and limited topics such as presenta- tion of environmental guidelines and regulations and should be limited in duration (2-3 days) and in the number of participants. On-the-job training can be utilized in the cases where experienced staff, national and international, can act as coaches and trainers in connection with more proc- ess-oriented tasks like for instance appropriate environmental management meth- ods and monitoring procedures. In-service formal courses have the advantage that they do not remove valuable and much needed staff from the organisation for a long period of time. There are presently an expanding number of regional universities, institutes, schools and international NGOs that can offer courses in relevant technical subject matters on a part time basis that allows the student to stay at home and continue work. These possibilities can be expected to expand in the future, especially in the form of internet-based courses in different technical subjects, including environmental and social assessment. Future capacity building projects should also fully make use of the possibility to tailor courses in cooperation with national and regional learning institutions as well as utilising the possibilities of Internet based training. Full time degree and certificate studies at national, regional or overseas universi- ties and institutes are an option that will have to be considered for a selected number of well-qualified and motivated staff. This will require the staff member to be absent for one or two years and should only be offered to the staff with the highest potentials. 8.7 Summary of Recommendations Some of the key recommendations mentioned in this chapter is summarised in Table 12 below. Table 12: Recommendations Issues Recommendations Construction and Operation Oxygen depletion in reser- 3) Clearing of vegetation in the reservoir prior to inundation. voir water 4) Construction of aeration structures. Downstream riverbank and 3) Riverbank protection structures. reservoir erosion 4) Appropriate discharge and operational regime. Reduced water flow Construction of weirs in the river. Loss of fisheries Fish breeding and propagation of local species for stocking of reservoirs avoiding introduction of exotic species. Environmental flow 3) Inclusion of specific assessment of minimum flow requirements in the EIA. 4) Development of guidelines by responsible authorities for set- ting environmental flow requirements. Erosion and land slides Construction of erosion structures, re-vegetation and land- scaping. Dust, noise, air and water Incorporation of "best professional practice" in concession and pollution contract documents. Management Programmes World Bank Lao PDR Strategic Impact Assessment Final Report 76 NT2 experiences 4) Close follow up of NT2 Programmes to make use of experi- ences and "best practice" examples for refining and develop- ing existing regulations and guidelines. 5) Ensure provision of funds for monitoring and follow up. 6) Utilisation of the SEMFOP to make the case for funding of biodiversity and conservation initiatives by hydropower devel- opers. Integrated Water Resource Management Integrated water resource 3) Carefully evaluate experiences with ongoing Nam Ngum test planning project and development of a realistic and methodological ap- proach to be implemented nationwide. 4) Building of capacity for IWRM. Intact River Protection 4) Carry out an investigation of natural qualities in remaining un- touched rivers in Lao PDR resulting in recommendations as to which rivers qualify for protection from major physical changes. 5) Assessment of present status values versus potential devel- opment values as a basis for reaching final decision on protec- tion. 6) Clarification and putting in place of legal requirements for in- tact river protection with administrative protection as a prelimi- nary measure if necessary. Assessment of Hydropower Development Least-cost implementation 3) Implementation of a least cost strategy for hydropower devel- system opment through simulation of a least cost development plan and introduction of competitive bidding. 4) Alternatively introduce competitive bidding before simulation studies to generate a least-cost development plan. Award of MOUs 4) Preferably abandon the MOU awarding system based on ne- gotiations and introduce competitive bidding to secure more transparency and better integration of EIA findings and tech- nical planning. 5) Alternatively standardise the content MOUs to include envi- ronmental and social requirements. 6) As a minimum develop a comprehensive document outlining environmental and social requirements in laws and regulations for up-front presentation to prospective Developers. Award of Licences Standardisation of concession licenses to include social and environmental requirements in order to ensure that they are le- gally binding for the Developer. Enforcement of regula- 3) Ensure that STEA is fully invested with regulatory powers to tions enforce environmental and social obligations on the part of the Developer and other responsible parties. 4) Develop and ensure the capacity of STEA to take on en- forcement responsibilities. Resettlement planning 3) Identify and develop clearer criteria for assessment of loss of and implementation livelihoods and assets for the project-affected population. 4) Incorporate and utilise the experiences provided by the NT2 Resettlement Process and Plans in the work to develop sup- plementary and more detailed resettlement guidelines and standards. Development Opportuni- The Government should take the lead in linking social and eco- ties nomical development plans to hydropower planning to create benefits for local communities. World Bank Lao PDR Strategic Impact Assessment Final Report 77 ties nomical development plans to hydropower planning to create benefits for local communities. NBCA status 3) Investigate the present state and biodiversity values of the parts of NBCAs planned for hydropower development and de- cide if the areas are eligible for total protection. 4) Carry out a zoning of all NBCAs to identify all areas that should be classified as "Total Protection Zones" where hydro- power is ruled out. Definitions of Impact Develop clear guidelines for defining impact zones, especially Zones for downstream impacts. Environmental and social Establish databases and support systems for data storage and monitoring systems dissemination, both for reporting on the general state of the environment and for special issues, such as hydropower pro- ject assessments. Monitoring of environ- Establish a clear system of indicators and criteria for good envi- mental performance ronmental and social practice against which implementation re- sults can be measured. Consultation and public 3) Develop more elaborate and comprehensive guidelines to se- involvement cure a standardisation of consultation and public involvement processes. 4) The guidelines should pay special attention to prescribing consultation procedures for ethnic minorities to ensure real participation Training and Capacity Building Funding mechanisms 3) Ensure sufficient and adequate resources for STEA and SEMD to enable them to carry out their assigned tasks and duties through prioritization and GOL ­ donor agency coop- eration. 4) Consider the setting up of a fund for capacity building to facili- tate and speed up necessary training and institution strength- ening. Capacity building focus 6) Improve over-all knowledge of environmental subjects and re- view of EIA documents and plans for STEA and SEMD staff. 7) Training on management, monitoring and reporting skills for staff involved with monitoring and implementation of mitigation measures on central and province/district level. 8) Improvement of English language skills for all staff involved with review of EA documents and implementation of social and environmental plans. 9) Training of planners and implementers on gender sensitive and participatory working approaches. 10) Training of planners and implementers on ethnic minority con- cerns and culturally sensitive approaches. Training Methods 4) Arrange workshops for well-defined and limited topics. 5) Conduct on-the-job-training with local and international experts for more process oriented tasks like development of EIAs and monitoring methods and procedures. 6) Arrange in-service courses with utilization of Internet based courses and tailor-made courses in cooperation with national and regional learning institutions. World Bank Lao PDR Strategic Impact Assessment Final Report 78 9 ENVIRONMENTAL AND SOCIAL MONITORING 9.1 Introduction Environmental and social monitoring in connection with hydropower development might support several functions. The adequate organisation and responsibility for the monitoring will be determined by the function it is supposed to support. 9.2 Monitoring to Establish Baseline The quality of project specific EIAs in Lao PDR are to a large extent constrained by the limitation of baseline information and data time series. The information about present status and development trends are needed for good predictions of im- pacts. The problem is in particular true for natural phenomena where there are fluctuations from year to year. Fish biodiversity and fisheries are typical exam- ples of issues where several years of study are needed for a reasonably precise assessment of the impacts. For water quality a few ad hoc samples might pro- duce a totally wrong picture of the situation. Long term monitoring can normally not be catered for in the frame of a specific EIA and thus upfront monitoring would be necessary. The EIA experiences from Lao PDR have shown that upfront studies and monitor- ing for the following themes would have been of particular value for better as- sessment of future hydropower projects: · Fish biodiversity, fish ecology and the economic and social importance of fisheries are one of the weakest point in impact assessments of hydropower. · Systematic monitoring of water quality is needed. The most important pa- rameters would be sediment transport, oxygen status, nutrients and in some specific cases heavy metals. · Regular updating of lands use map in a GIS format, in particular concerning forest cover and status. · Regularly updated population data combined with socio-economic data. It is recommended that initiatives are taken to assess the feasibility of setting up an environmental and social monitoring system and establishment of databases as well as support systems for data storage and dissemination. Such systems might be established for collecting data for general State of the Environment reporting but it can also be more thematically focussed to cover issues of special relevance for hydropower project assessment or restricted to river basins or regions where hydropower developments are most likely to take place. The financing of such monitoring will be the responsibility of governmental bodies. Governmental bodies or institutions on central or provincial level can execute the monitoring. Monitoring can also be contracted to research institutions or private companies, which possess the required competence and capacity. It might also be possible to organise elements of such monitoring as a part of MRC environ- mental monitoring programmes. 9.3 Monitoring Construction Activities and Compensation Measures A normal part of a hydropower concession is to organise a comprehensive moni- toring programme for overseeing the environmental performance of the contractor for the construction work and the parties responsible for resettlement plans, and World Bank Lao PDR Strategic Impact Assessment Final Report 79 other management plans. This monitoring can be seen as a regular assessment of to what extent the Developer fulfils his obligations according to the concession. A unit independent of the Developer should carry out the monitoring but the Devel- oper will in most cases have to cover the costs. The character of the potential impacts (as identified in the EIA report) will deter- mine the exact outline of the monitoring programme. Normally included elements are: · Monitoring of construction performance. I.e. checking that the prescribed safeguard measures are taken to avoid accidents on site and downstream. · Controlling that good environmental practise and contractual conditions are followed for avoiding pollution of water and air, nuisances of heavy traffic and competition with local peoples for water, fuel wood and other natural re- sources, etc. · Monitoring the implementation and efficiency of resettlement plans, livelihood improvement plans, and other development plans prescribed for the project. As a basis of this monitoring a system of indicators and criteria for good environ- mental and social practice should be defined and the monitoring should be related to these indicators and fulfilment of these criteria. The indicators will differ from project to project. 9.4 Long Term Environmental and Social Monitoring Both with and without the existence of an upfront monitoring system as described in section 9.2, it is important to carry out some elements of long-term monitoring in the area impacted by hydropower development. Such monitoring might have at last two functions: · Monitoring for verification of the impact predictions of the EIA. This is impor- tant for improvement of the general knowledge and understanding of the im- pact mechanisms and the changes in social and ecological situation caused by the implementation of a hydropower project. The use of monitoring data and post implementation assessments would help establishing a better basis for future environmental and social impact assessments. To some extent the financing and organising of such monitoring can be placed on the Developer but it is likely that the main responsibility will have to be carried by relevant governmental bodies and institutions. · Basis for revision of concessions. The concession system should allow for revision of concession details after a certain period of time. With such an op- portunity some of the details can be revised based not only on predictions but on real life experiences. The reason for revision might be that the upfront as- sessments (EIAs) were inaccurate or that new issues have emerged. The result from the monitoring might for instance result in changes in environ- mental flow requirements and operational details of the power plant or a re- visit of the assessment of compensation for downstream users of land and water. Again the character of the potential impacts of the specific project will determine the exact outline of the monitoring programme. However, in Lao PDR it will be of particular value to collect information on: · Long-term impacts on fish biodiversity and production. · Impacts on downstream agriculture. World Bank Lao PDR Strategic Impact Assessment Final Report 80 · Impacts on forest status and terrestrial biodiversity. · Impacts on social development and livelihood. · Impacts on ethnic minorities. World Bank Lao PDR Strategic Impact Assessment Final Report 81 REFERENCES/BIBLIOGRAPHY ADB, 2000: Strengthening Social and Environmental Management in Lao PDR", TA 3133 ADB, 2001: Energy and Transport Socio-Environmental Management, TA 3535 ADB, 2002: Electrowatt-Ekono and PA Consulting Group: "Power System ADB, 2004: Capacity Building for Environmental and Social Mitigation for NT2 and other Hy- dropower Projects in Lao PDR (Draft Final Report -unpublished) EcoLao, 2000: Lao Environmental, institutional and Background Research Project (Report for Stockholm Environment Institute under the ADB TA 5783: Strategic Environ- mental Framework for the Greater Mekong Sub-Region) Electricité de Lao: Generation Expansion Plan 2005­2020 Electrowatt-Ekono and PA Consulting Group, 2002: Power System Strategy Study (PSSS) GOL/Danida, 2002: Regulative Framework within the Natural Resources and Environmental Sector, Summary Report GOL/Danida, 2002: Regulative Framework within the Natural Resources and Environmental Sector, Appendixes 1-4 Halcrow et al., 1998: Se Kong, Se San and Nam Theun River Basins Study Lahmeyer and Meritec, 2004: Power System Development Plan for Lao PDR Lahmeyer and Worley, 2000: Hydropower Development Strategy for Lao PDR Lahmeyer and, Worley, 1998: Nam Theun 2 - Study of Alternatives (NT2SOA) MIH, 2001: Regulation on Implementing Environmental Assessment for Electricity Projects in Lao PDR (447/MIH) MIH, 2001: Standard on Department of Electricity Environmental Records Management (583/MIH.DOR) MIH, 2001: Standard on Environmental Impact Assessment for Electricity Projects (585/MIH.DOE) MIH, 2001: Standard on Environmental Management Documents for the Department of Elec- tricity (582/MIH.DOE) MIH, 2001: Standard on Environmental Management Plans for Electricity Projects (584/MIH.DOE) MIH, 2003: Environmental Management Standard for Electricity Projects (366/MIH.DOE) MIH/DOR, 2001: Power Sector Environmental Policy (581/MIH.DoE MRCS, 2001: MRC Hydropower Development Strategy Norconsult, 2002: Indicative Master Plan on Power Interconnection in GMS SIDA/STEA, 2002: Strengthening Environmental Management Project, Evaluation Report STEA, 2002: Annual Report of the Science Technology and Environment Agency World Bank Lao PDR Strategic Impact Assessment Final Report 82 World Bank, 1999: Power Trade Strategy for the Greater Mekong Sub-Region.