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 and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Environmental and social review of this project consisted of appraising information submitted by the project sponsor and a report prepared by a technical consultant to IFC. This review addressed the compliance status of Comgas' current operations, including right-of-way alignment and land acquisition, and how liabilities such as land contamination and labor obligations associated with pre-privatization operations are managed. Comgas' management system for the environmental, social, and safety aspects of its current and future operations was reviewed, as well as its corporate social responsibility and community development programs.

Comgas has programs in-place or underway to address the impacts of the project and comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. - Environmental Benefits of Natural Gas Currently, Brazil is a net importer of refined petroleum products and liquefied petroleum gas (LPG). To ease reliance on imports of these products, the government plans to increase Brazil’s consumption of natural gas from about 5% currently to approximately 10-12% by the year 2010. Because natural gas burns much more cleanly and releases less carbon dioxide per unit of energy than other hydrocarbon fuels, environmental benefits in the form of reduced pollution and a lower contribution to greenhouse gas generation will result from Comgas' development of the gas market in Sao Paulo. These benefits accrue from substitution of LPG in the residential, commercial and industrial sectors, from the substitution of gasoline in the automotive sector, and from the substitution of diesel and fuel oil in the industrial, cogeneration and power generation sectors. In time, the substitution of diesel in the heavy vehicle transportation sector will also provide significant pollution reduction and public health benefits. Comgas' capital expenditure program will advance the market penetration of natural gas and result in significant reduction over time in the emissions of greenhouse gases that are a contributor to global warming. The magnitude of these benefits will depend on the market sector and the energy source displaced. In the automotive sector, there is an active program in Sao Paulo state for conversion of light vehicles from gasoline to NG, and over 5,000 vehicles are converted annually. In the industrial sector, natural gas will substitute for fuel oil in boilers and energy-intensive processes. Based on gas demand history and projections through 2012, cumulative avoidance of CO2, a greenhouse gas, will be more than 1.2 million tons as a result of these actions. In addition, Comgas' capital investment program is expected to substantially reduce current leakage from old pipe networks. Leakage as a percentage of total gas throughput will drop incrementally as pipe networks are upgraded, and although Comgas' throughput will approximately double by 2012, the quantity of gas lost each year is expected to be less than in 2003 as a result of network improvements. Because natural gas is mainly methane, which is a greenhouse gas with high global warming potential, this will by 2012 represent an annual avoidance of as much as 6.5 million tons of CO2 equivalent. - Environmental Compliance IFC's consultant found that Comgas develops and operates its system in compliance with Brazilian and international gas standards. The existing distribution system is well maintained and appropriate environmental, social, and safety procedures are in place for renovation of the older parts of the network and associated equipment and for system expansions. Comgas outsourcers most of its maintenance and construction activities; it has procedures in place for selection and oversight of competent contractors. Comgas' gas pipelines are normally installed along roads or railways, and few occasions arise where right-of-way acquisition is required. Should right-of-way access be needed (easement or land purchase), the company requests the issue of a decree for compulsory purchase of the property and compensates the owner/occupants for market price. Comgas has not implemented a project that displaced people physically, nor does it expect any projects currently being developed so to do. Potential impacts on cultural and archeological resources are evaluated by a specialized study conducted during the planning stage of every project. At the time of privatization, the predecessor company operated a town gas manufacturing plant fed by naphtha (a light petroleum distillate). Comgas decommissioned and dismantled the plant according to Brazilian law. As part of its operations, the company investigates for the presence of contaminants or other environmental liabilities at its existing facilities and at the locations of system expansions. - Labor Relations Where feasible, Comgas subcontracts support activities, and several functions formerly conducted by employees have been outsourced since privatization. These include activities such as the call center, meter reading and maintenance, gas bill delivery, and vehicle fleet maintenance, as well as construction and maintenance of the gas distribution network. Operations involving worker or public safety are carried out with the oversight of Comgas employees. Workers released as a result of outsourcing and other restructuring were provided with comprehensive severance packages. In addition to severance funds, benefits provided included six-month extensions of healthcare program eligibility, lifelong healthcare for employees with certain pre-existing medical conditions, continuation of educational scholarships, and outplacement services. A variety of training programs were also offered. - Environmental Management Program Comgas' procedures for health, safety and environmental (HSE) issues are detailed in a single document – Management System for Health, Safety and the Environment (SG-SSM). IFC's consultant found the management system to be comprehensive and well-conceived, and fully implemented at all levels of the company. In February 2003, the environment component of the company's SG-SSM achieved ISO 14001 accreditation. Training, communications, documentation, risk appraisal and audit are important elements of the system. All employees receive regular training to ensure that they remain aware of the company’s and their own HSE responsibilities. HSE responsibilities are also promoted throughout subcontracting workforce. Comgas has a comprehensive quality assurance plan based on ISO 9000 requirements, although the plan has not yet been formally accredited by an independent body. It applies to Comgas and to its suppliers and contractors. The company's emergency response procedures are based on the best practices of its two primary shareholders, British Gas and Shell, and are detailed in its - Emergency Action Plan (MG3-PAE). It describes all the operating routines, procedures and actions to be adopted in emergency scenarios. - Comgas Social Programs Comgas’ approach to social responsibility is proactive and comprehensive. The company published its first Social Report in 2002 and complies with the Instituto Ethos Corporate Social Responsibility Principles, as a lead-in to implementation of a fully-fledged CSR process. Programs currently underway include: * Comgas Apprentices – training of young people social projects, focusing on health and the environment. * SP 450 Anos Luz (450 Light Years) – partnering with the city and state to promote a multidisciplinary study of Sao Paulo City. * Corporate Volunteering – staff and suppliers working with Comgas Apprentices to promote a culture of voluntary service. * Environmental Education – promoting awareness and understanding of natural gas at the primary school level. * Social Causes Communication – publicizing selected causes using customer bills, leaflets, fleet car stickers etc. * Traveling Exhibitions – promoting selected topics – in 2000: Rediscovering the Town Square; in 2001: Wildlife Photographer Of The Year; in 2002-03: Comgas 130 Years. * Clean Summer – since 2000 sponsoring the municipal environment department’s campaign. * Restoration of gas lighting – restored gas lighting in the historical center of Sao Paulo City (Pátio do Colégio) in 2001. Comgas also created an Ombudsman's office in 1999 to ensure that the company tailors its products and services to customer needs, enhances its quality of service, and establishes and maintains a channel for dialogue. This office operates in partnership with the company's Call Center, which records and manages customer satisfaction or dissatisfaction with services rendered, including complaints, suggestions, praise, requests for information and service requests.

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.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering ongoing performance of project-specific environmental, health and safety and social activities. Periodic site supervision visits will also be conducted.