The original ERS for this project was previously disclosed in 2001 through the World Bank InfoShop and to the locally affected community for a period of 30 days prior to project consideration by the IFC Board of Directors which took place on 22 October 2001. The Summary of Project Information (SPI) also provides details of where the ERS was made available to the locally affected community. The SPI was also sent to World Bank InfoShop 30 days prior to project consideration by the IFC Board of Directors. The investment was not disbursed in 2001and this revised ERS updates the situation pertaining to the proposed disbursement of the project finance which is due to take place during 2004.

This is a category B project according to IFC’s environmental review procedure because specific impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental information submitted by the project sponsor and technical and environmental appraisal visit. The following potential environmental, health, and safety impacts of the project were analyzed: - site selection(including land ownership and land use); - site environmental conditions; - air emissions; - liquid effluent treatment and discharge; - solid and hazardous waste handling and disposal - fire prevention and emergency response plans; - occupational health and safety programs; and - employee training programs. In 2000 the sponsor prepared and submitted to IFC and the Chinese authorities an Environmental Impact Assessment (EIA) that addressed the impacts and determined the proposed measures to be implemented to ensure environmental compliance with applicable local regulations and World Bank policies and guidelines. This document will be updated to IFC’s satisfaction prior to the second loan disbursement. The measures proposed to address the project’s potential environmental impacts during its implementation are summarized in the paragraphs that follow.

The raw materials, lime, charcoal, and anthracite coal, are crushed, sieved, conveyed to the materials warehouse, and measured before they are sent to the calcium carbide electric arc furnaces. The material is manually discharge from the furnaces, cooled, crushed, measured, inspected, and packaged. The existing two calcium carbide furnaces will be retrofitted with emission controls. In addition, the environmental upgrades include a two-phase flue gas scrubber for the large calcium carbide furnace. Phase I is to install a heat exchange boiler to reduce the gas temperature from 650 C to 180 C, the boiler is used to generate steam. The cooler gas will then be pass bag filters to remove particulates. As part of the environmental upgrades, the furnace flue gases from the production of calcium carbide will be treated and used to generate steam significantly reducing thereby the emissions to the atmosphere. The particulates generated during the crushing of the raw materials and finished products and the furnaces and packaging operations will be controlled prior being released to the atmosphere at levels below the applicable World Bank 50 mg/Nm3 guideline. The SOx emissions from the furnace will be also controlled to levels below 2000 mg/Nm3. The solid waste generated in the calcium carbide process and that collected in the air pollution control devices will be used in the cement plant as raw material. As part of the project, Darong will double its current capacity of calcium cyanamide by increasing the number of furnaces. Calcium carbide produced on-site and externally purchased fluorite are crushed and milled to the required coarseness prior being fed to three nitridizing furnaces where they are sprayed with nitrogen gas. After the calcium cyanamide product is generated, it is cooled and crushed before it is combined with additives and prilled into pellets. The pellets that are too large are crushed and conveyed together with pellets that are too small to the mixer to be processed again. After, the pellets are automated packaged and shipped. Darong anticipates to upgrade two of the furnaces at a later stage, therefore the environmental upgrades on these furnaces will not be conducted immediately. Darong will inform IFC of the anticipated timeframe for these upgrades. The dust emissions generated at crushing, milling, formulation and pilling processes as well as those generated at the nitridizing furnace will be controlled at levels below the applicable 50-mg/Nm3 World Bank guideline. The nitridizing furnace SO2 will be also controlled at 2000 mg/Nm3. The collected particulate matter will be either returned to the nitridizing furnace or use in the production of cement. Darong produces the nitrogen needed for the production of calcium cyanamide. As part of the project, Darong will increase the production of nitrogen and is taking all needed precautions to ensure this operation is safe. The by-product oxygen, will be sold or used as auxiliary fuel for lime kiln and cement production. Cyanamide, which is produced by reacting calcium cyanamide with carbon dioxide and water in the hydrolytic decalcifying tower also, generates particulate emissions during the feeding phase to the tower. These emissions will be controlled to levels below 50 mg/Nm3. This process also produces calcium carbonate as a by-product. This residue will be used in the cement plant as raw material. Dicyanamide is produced by polymerization of the cyanamide. There are crystallization, centrifuging, drying and second purification stages. The air emissions will be controlled to ensure compliance with the applicable World Bank guidelines. As part of the operations, Darong produces lime in two vertical limekilns. The limestone, which is purchased and stored outside, is crushed prior entering the calcining kiln. The emissions generated during crushing and from the vertical kiln will be controlled to levels below 50 mg/Nm3. The lime produced is used in the calcium carbide operation and the carbon dioxide generated will be used in the production of cyanamide/dicyanamide. In addition to the mentioned operations, Darong has built a cement plant, which uses most of the solid wastes generated in the cyanamide and dicyanamide processes. The produced clinker is cooled prior being transported by truck to the cement plant. There, the clinker is crushed, milled with the additives, and stored. The cement plant has air emission controls ensuring that all sources of particulate matter (i.e., crushing, milling, storage, kiln, packaging, etc.) will release less than 100 mg/Nm3. All dust collected in the cement plant will be returned back to the process. After purchasing, the coal is stored on a coal heap. From here, it is moved with a manual pushcart, and conveyed to the warehouse. Then it is milled and stored before it is sent to the calcium carbide kiln. All sources of particulate matter will release less than 50 mg/Nm3. All dust collected will be returned back to the process. The 4 tons boiler which uses coal as fuel is used for heating purpose in the wintertime. Darong will properly operate and control the boiler emissions to the atmosphere to ensure compliance with the applicable World Bank guidelines. Wastewater generated from all operations including lime kiln gas wash waters, wash waters from the cement production, cooling waters, and liquid effluents from the testing laboratory, and domestic waters will be treated in a wastewater treatment plant before being used for irrigation. Darong will ensure that the pH, total suspended solids, BOD, coliforms, as well as other applicable parameters are in full compliance with the applicable World Bank guidelines. Once treated, the wastewaters will be used for irrigation. Darong will continue the forestation plan already in place along factory building perimeters and along roadways. Noise is produced mainly from the use of equipment such as crushers, ball mills, compressors, pumps, etc. The sponsor will install the high noise production equipment in separate building and will control noise levels with sound insulation and noise baffles, will install independent vibration damper foundations on the equipment installations; and use the architectural structure itself to cut off sound waves. It will also install silencers on equipment on which noise is generated by aerodynamics, such as blowers and compressors. The sponsor will ensure that the noise levels in the workspaces as well as outside the property boundary will be in compliance with the applicable World Bank guidelines. Darong will complete an independent health and safety audit and submit it to IFC prior to first loan disbursement. This audit, which will need to be satisfactory to IFC, will include an Environmental Action Plan which will define specific recommendations to significantly improve the overall employee safety conditions, upgrade operations housekeeping, proposed fire prevention measures as needed, and propose emergency response actions. Darong will implement the audit recommendations, conduct occupational health and industrial safety training programs and will establish rigorous procedures for proper handling of chemical substances, in accordance with international standards. Personal protective equipment will be provided to and required to be used by the employees in required areas including handling of raw materials. The plant will be provided with firewater main and foam generating facilities in accordance with international design standards. It will also have extinguishers and spray systems as necessary as well as flameproof electrical equipment and fire detection and alarm systems. Darong will have a well-trained fire brigade to handle fire-related emergencies available at all times. Fire drills will be periodically performed. Darong has identified the main hazard operation areas and has identified recommendations and mitigation actions. Darong is preparing a monitoring plan including ambient air measurements and an air pollution control devices maintenance program. Copies of these programs will be submitted to IFC prior to first disbursement. Darong will have an Environment, Occupational Health, and Safety Officer with requisite qualifications in charge of matters to oversee the implementation and compliance of the environmental and health and safety requirements. By project completion, Darong’s operations will conduct an environmental assessment to demonstrate that the project has been built and will operate in compliance with the relevant World Bank guidelines and policies and with the Chinese environmental standards. Darong will annually submit to IFC a monitoring report to ensure ongoing environmental compliance during the life of the project.

This ERS contains the full environmental and social documentation prepared for the project.

Based on its review of available information regarding potential environmental impacts and proposed mitigation measures, IFC concludes that the proposed project is being designed to meet Government of China requirements, and World Bank policies, and environmental, health and safety guidelines.

IFC will monitor Darong's ongoing compliance with World Bank policies and guidelines during the life of the project by evaluating environmental performance reports submitted annually to IFC by the sponsor and by conducting periodic site reviews during project supervision.