IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental 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. The following potential environment, health and safety impacts of the projects were analyzed. - Hazardous materials management; - Emergency preparedness and response; - Maintenance-related effluent and waste management; and - Employee health and safety.

Under its current status as a railway operator, Severstaltrans has presented plans to address these issues to ensure that they comply with applicable Russian laws and regulations, including the technical standards of the Ministry of Railways (MPS) and the All Russia Railway Research Institute (VNIIZHT), environmental and health and safety laws and rules and World Bank requirements. In the event that the regulatory environment in the Russian railway sector and nature of the operations of the companies change, requiring Severstaltrans group of companies to assume additional environmental responsibilities, Severstaltrans will develop and implement appropriate environment, health and safety management systems (including hazardous materials management programs and transportation plans) consistent with IFC environmental, health and safety guidelines and necessary to manage the additional legal and environmental liabilities that might arise from its activities. The detail about how these issues are addressed by the Company and other responsible parties is summarized in the paragraphs that follow. - Hazardous Materials Management The company transports crude, heavy and refined oil products defined by MPS rules as hazardous, and as flammable dangerous goods by the UN (United Nations, Transport of Dangerous Goods – Model Regulations. 12th Revised Edition. 2001). Considered hazardous or dangerous primarily because of their flammability, these include crude oil, mazut, diesel fuel, benzene, and other petroleum-derived products. Transportation of flammable liquids such as these present risks during loading and loading activities, where overfilling and spillage are the largest hazards. Hazards also arise from the risk of accidents during transport. Transportation procedures are generally consistent with the UN Model Regulations. Tank cars and wagons are designed to meet MPS standards for petroleum products – steel is of appropriate thickness and is coated with an oil-solvent resistant lining. In addition, cars are equipped with additional safety inlet valves, automatic coupler restraining arms and reliable elastomer absorbers mounted on the frames, shelf couplers (to prevent separation in an accident) and end shields, and appropriate top hatch seals and bottom valve controls. All tank cars display labels describing the dangerous properties of the goods being carried ( MPS hazardous index and UN hazardous class) to allow proper handling by transport personnel or emergency services in the event of an accident. Moreover, Russian regulations require tank cars to undergo regular, frequent maintenance and repair in which the entire wagon is disassembled and worn components are replaced or brought to standard. As a freight forwarder and operator, Severstaltrans currently has limited responsibility for managing the hazardous materials in transport. Instead, this responsibility lies with the owner/shipper of the petroleum products from loading through transportation to unloading. The shipper is responsible for monitoring the material during transport, such as inspecting for leaking valves in transit. Notwithstanding, Severstaltrans ensures that the wagons it operates -- both older and newer models -- are well-maintained and meet equipment operating standards. In particular, all tank cars will be equipped with leak prevention tool kits to allow for immediate repair of any leaking valves instead of waiting for repairs to be addressed until scheduled MPS-sponsored maintenance. - Emergency Preparedness and Response Again, owing to its limited responsibility as a freight forwarder and operator, Severstaltrans currently depends on government authorities for accident planning and response. In this capacity, the authorities provides emergency planning and response coordination, emergency response equipment, and appropriate training of its employees. In the event of an accident, Severstaltrans personnel or on-the-scene MPS staff immediately notify MPS emergency management who in turn inform the impacted community in coordination with the Ministry of Emergency Situations (MChS). At the same time, MPS and MChS damage assessment and response teams quickly mobilize and respond to the damage and to eliminate risks posed within a matter of hours. MPS’ procedures also include extensive incident investigation protocols that establish the cause of the accident, impose penalties, if applicable, and identify the steps needed to prevent reoccurrence. To date, Severstaltrans has not been associated with any train derailments or accidents. In addition, there have been no leaks or spills associated with failures of tank car components while in service. - Maintenance-Related Effluents and Wastes Management When commodities are changed or inspection reveals accumulation of sludges on tank bottoms, cars are washed at selected MPS workshops or at facilities owned and operated by private contractors. The insides of the cars are steam cleaned with an aqueous-based cleaning solutions. At MPS cleaning stations, washwaters are collected and treated in oil/water separators, where petroleum products are captured and recycled by use as a substitute fuel for local boilers or selling to oil reclaimers. Effluents are further treated in holding lagoons prior to surface water discharge in compliance with national and local environmental requirements. The tank cleaning contractors employ more sophisticated wastewater management systems, whereby both oils and wastewaters are recycled, and nothing is discharged to the environment. Going forward, Severstaltrans intends to rely exclusively on tank car washing facilities utilizing these zero-discharge wastewater management systems – either by using services offered by contractors, or by establishing and developing their own facilities. Specifically, within four years and to the extent that facilities are available on routes operated by the Company, Severstaltrans will ensure that its entire fleet is serviced by these washing systems. Severstaltrans’ aim is to implement cleaner production practices and realize more efficient use of water and cleaning chemicals while at the same time reducing pollution loads to the environment. Over the same period, Severstaltrans also plans to have its tank cars painted at modernized facilities employing appropriate waste management practices. Employee Health and Safety As a freight forwarder and operator, Severstaltrans currently has no employees involved in workplaces where occupational health and safety pose significant risks or concerns. Instead, such activities are conducted by employees of responsible shippers and government authorities, as appropriate. These parties are responsible for providing the necessary programs and protections for employees in their respective workplaces. Prior to operating its own tank car maintenance stations, Severstaltrans will develop and implement programs to ensure the health and safety of all employees, including pre-employment and periodic medical evaluations, provision of Personal Protection Equipment (PPE), and regular training in hazards, safe work procedures, and emergency response activities.

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

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the appropriate environment, health and safety management systems (including hazardous materials management programs and transportation plans) necessary to manage the additional legal and environmental liabilities that might arise from its activities as a carrier.

IFC will evaluate the project's compliance with the applicable environmental requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: - the status of implementation of additional environmental, health and safety management systems required to become a carrier, and - ongoing performance of project-specific environmental, health and safety activities. Periodic site supervision visits will also be conducted.