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 also 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. The review of this project consisted of appraising technical, environmental and social information submitted by the project sponsor. The following potential environment, health and safety (EHS), social and community impacts of the projects were analyzed: - the compliance of PALGAZ and their subcontractors with Turkish EHS requirements and IFC EHS and social requirements; - the commitment of PALGAZ to quality and to EHS performance including ISO and OHSAS certification; - the emergency response planning and clean-up of contaminated land associated with past operations; and - the environmental benefits associated with the increased use of natural gas.

The project sponsor, Palmet, has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental, health and safety, and social requirements of Turkey as well as the IFC environment and social policies and the environmental, health and safety guidelines. Compliance with Turkish and IFC EHS Requirements: At Gebze, PALGAZ is taking over and expanding the existing BOTAS owned gas distribution system. Air emissions from the systems are very limited and associated with natural gas fired line heaters (NOx emissions) and some nitrogen purging gas. PALGAZ will handle small quantities of hazardous materials (e.g. waste oils, glycol and old batteries) and has developed a management system to address the handling and disposal of hazardous materials. A very small amount of land will be acquired and this is freely and easily available on the open market. With regard to cultural and historic issues, there is a concern about chance finds of historic artifacts particularly during any construction activities. PALGAZ has agreed to prepare a procedure which will meet the requirements of the Government of Turkey and of IFC and will be implemented by PALGAZ and their subcontractors should there be chance finds. PALGAZ will obtain all the necessary environmental permits from the Government of Turkey. In addition the projects will fully comply with Turkish, IFC and international environmental standards. A project of this type raises a number of concerns about occupational health and safety, particularly with regard to the construction activities of sub-contractors. PALGAZ has agreed to supplement their existing OHS system with an IFC approved Occupational Health and Safety Management System (OHSMS), a requirement of IFC’s OHS Guideline. PALGAZ will implement the approved OHSMS for their own operations and will require any sub-contractors to use PALGAZ’s OHSMS or their own system provided it is superior to PALGAZ’s OHSMS. Staff training, performance monitoring and reporting are all part of the OHSMS. PALGAZ and their sub-contractors will fully comply with the Government of Turkey’s OHS requirements. ISO and OHSAS Certifications: It is a requirement of the License Agreement with the Government of Turkey that PALGAZ obtain ISO 9001 (Quality) certification within 18 months of the license issue date (i.e. by August 2005). PALGAZ has committed to prepare both an Environmental Management System (EMS) and OHSMS and have these approved by IFC. However the sponsor is considering the benefits of obtaining both ISO 14001 (EMS) certification and OHSAS 18001 (OHSMS) certification – achieving both certifications would be voluntary on the part of PALGAZ. PALGAZ has given their General Manager overall responsibility for Quality Assurance and Environment, Health and Safety. The General Manager will be supported by a QA&EHS Manager and a number of line Department Managers. PALGAZ has made it clear that all employees have a role to play in these matters and that appropriate training will be provided, performance will be monitored and reporting will occur. PALGAZ has adopted a very proactive approach to EHS issues. Emergency Response and Environmental Liabilities: PALGAZ will focus on prevention and the company will implement programs that meet the requirements of the North American Standard for Leaks (ANSI B 31.8) which exceeds current Turkish requirements. In addition PALGAZ will prepare Emergency Response Plans (ERP) making use of such tools as Mutual Aid Agreements (for dealing with major catastrophes), identification of qualified contractors to be called in the case of an emergency, and identified support contractors who have specialized equipment. The ERPs will be coordinated with local authorities in the two cities, including the Fire and Health Departments. BOTAS, the current owner/operator of the system, has prepared a protocol for the transfer of pipelines and other assets to PALGAZ. This will include details of past operations and any liabilities associated with past practices. PALGAZ will review the information provided by BOTAS and, while indemnified from any liabilities from past action by BOTAS, PALGAZ has agreed to implement a Corrective Action Plan (CAP) should that be necessary to clean-up any site contamination. Based on a preliminary review of the assets by PALGAZ, it does not appear that there are any contaminated sites. Environmental Benefits: There are a number of environmental benefits, particularly associated with improved air quality, to increasing the use of natural gas in Gebze. We are currently working with PALGAZ to quantify the reduction of greenhouse gas emissions (GHGs) associated with switching from coal and fuel oil to natural gas. In addition there has been some discussion with the company on the use of CNG as a transportation fuel, given the very high cost of petroleum products and the very attractive economics associated with conversion to CNG.

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

Accordingly, IFC concludes that the proposed project will meet the applicable Turkish and IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable Turkish and IFC environmental, health and safety, 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 (EHS) and social activities. Periodic site supervision visits will also be conducted.