The key environmental and social issues for this project include the following:
- Environmental and social management system
- Hazardous materials and operation hazard
- Energy efficiency and greenhouse gas emissions
- Land acquisition and resettlement
Koyo 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 and social requirements - the host country laws and regulations and the IFC Environment and Social Performance Standards and the World Bank Group (WBG) environmental, health and safety (EHS) guidelines. The information about how these potential impacts will be addressed by Koyo is summarized in the paragraphs that follow. Further information is provided in the attached ESAP, which is agreed upon by IFC and Koyo and will address the compliance gaps with IFC’s requirements.
1. Social and Environmental Assessment and Management Systems:
Land and natural environment:
Koyo obtained 30.7 ha. land use right in a proposed 30 km2 designated natural gas chemical industry zone in Dazhou, Sichuan Province, China for a green field ammonia/urea plant in 2006. After the relocation of a community from its project site in 2007, the nearest community is approximately 2.5 km from the Koyo plant. The Koyo plant will be surrounded by other chemical plants and roads. According to the Environmental Impact Assessment (EIA), there are no protected areas or protected species at or near the Koyo plant.
Environmental and Social Assessment:
Koyo hired external experts to conduct environmental impact assessment (EIA) for the proposed ammonia/urea project at its Dazhou plant according to Chinese regulatory requirements. Based on IFC requirement, Koyo contracted the external experts to modify the EIA to meet the requirements of IFC Performance Standards and WBG EHS Guidelines, including energy efficiency analysis and greenhouse gas generations.
Environmental, health, and safety management and organization:
There are no designated staffs at Koyo to manage corporate E&S issues. E&S management is handled at each plant site. In accordance with the ESAP, Koyo will set up an effective E&S management system at its corporate level, and ensure the E&S management at both corporate level and Dazhou plant meets all the requirements of IFC Performance Standard 1.
Training, monitoring, and reporting: Koyo is drafting its plan to provide necessary training for all its employees in the field of environmental and social performances related to its operations at Dazhou plant. According to EIA, Koyo will conduct routine environmental, health and safety monitoring for its operations. Koyo will keep its environmental and social performance records through its internal reporting structure, and disclose these records to the nearby communities if appropriate.
2. Labor and Working Conditions:
Human Resources Policy and Management:
Koyo has a Human Resources policy which specifies the terms of employment and working conditions at all plant sites. The human resources function is a corporate function and each plant has a human resources manager appointed. All the employees have access to the human resources policy and procedures. The same human resources policy and procedures will apply to the operations in Koyo Dazhou Plant. Labor inspections are done every year routinely by the local social security authority which desk reviews wages, working hours, national standardized benefits (pension, social security, disabled and unemployment).
HR has a function for coordinating with senior management for proper follow-up on the labor issues. In the meantime, a worker’s union once established at plant level will serve as a grievance mechanism to communicate with senior management. Meanwhile local governmental labor arbitration agency is responsible for settling down any labor-related disputes as a legal process, which becomes easy access and favorable to workers or individuals in recent years.
Working Conditions:
Under the employment terms that strictly followed the national labor law in the Dazhou plant, workers are employed on fixed term contracts which are renewable subject to satisfactory performance and availability of work. Open end contracts will be offered to those who satisfied two renewable terms. All employees work a standard 40 hour week. Overtime work is uncommon and is usually only associated with emergencies. Staffs receive time-off or cash compensation in lieu of any overtime work at rates regulated by the national labor authority. At Dazhou plant, the average salary will be 10 – 20 % higher than the average salary in Dazhou area. All the employees will also enjoy the insurance and pension funds required by the labor law.
Worker’s Organization:
At Dazhou plant, there will be a worker’s union with elected union leaders as required by All China Federation of Trade Unions (ACFTU). Koyo management is committed to keep the union independently from management and allow the collective bargaining.
Non-Discrimination and Equal Opportunity:
There is no evidence of discrimination identified in the appraisal. Koyo management is committed to include non-discrimination and equal opportunity in their HR policy, and promote hiring of female employees at Dazhou plant. Koyo will hire approximately 300 employees and 100 contractors at its Dazhou plant. To promote local hiring Koyo will recruit its entire staff from Dazhou area for positions that do not require college degree While, all the contractor labors will be hired from the relocated communities. The hiring is solely merit-based with preference to candidates from nearby communities.
Retrenchment:
Retrenchment is not expected for this project. Koyo will hire approximately 300 new employees and 100 contract labors for the Dazhou plant.
Protecting the Work Force:
Koyo complies with national law and does not hire workers below the age of 18. No forced labor practices are used by Koyo.
Occupational health and safety (OHS):
Operational health and safety is highly emphasized in the operations at Koyo. There are routine OHS trainings including new employee training and annual refreshers. For the Dazhou plant, all the OHS operation procedures for each position should be prepared three months before the trial production, and all the employees will be trained for OHS procedures based on their positions before the trial production. In accordance with the ESAP, Koyo will also develop workplace air quality/noise monitoring programs, and track the statistical trends of near-miss and accidents.
3. Pollution Prevention and Abatement:
Raw materials and resource consumption:
The major raw material consumption in Koyo Dazhou plant are natural gas (5(108m3/y), water (5.2 million ton/y), and urea packing bags (11 million count/y). Among the natural gas consumption, 8.8(107m3/y is used for boilers and the other is for ammonia manufacturing. The water is drawn from the nearby river. The electricity is from Sichuan provincial grid, which contains approximately 80% hydro power. Koyo Dazhou plant consumes approximately 9.1(107 kwh electricity per year.
Environmental Compliances:
According to the theoretic analysis and modeling calculation of the modified EIA, the air emissions, ambient air qualities, and ambient noise levels meet both local regulatory requirements and IFC EHS guideline limits, with the exception of ammonia process emission, which exceeds World Bank Group (WBG) guideline limit. Since the equipment installation is almost finished, Koyo is committed to install efficient ammonia scrubbers later in the production phase to ensure the ammonia emission meet WBG guideline limit. Koyo Dazhou plant generates approximately300 ton/d process wastewater, which is treated onsite and discharged to the central wastewater treatment plant (CWWTP) in the industrial zone for further treatment. The Koyo effluent qualities meet local regulatory requirement for fertilizer industry, CWWP influent criteria, and IFC guideline limits, with exception of total suspended solids and total nitrogen, which slightly exceeds IFC guideline limits. The effluent from Koyo plant accounts for 1 – 3 % of the treatment capacity of CWWTP.
The project site is located at a hilly area, and the EIA estimates the soil erosion rate is 515 ton/y in the project area. The soil erosion rate will be reduced to 165 ton/y once the project is completed. Koyo is committed to control the soil erosion, following the methods proposed in the EIA, during the construction phase.
Solid and hazardous wastes:
According to EIA analysis, there is no significant industrial solid waste generation at Koyo Dazhou site. The sanitary solid wastes will be collected by local government contractor for disposal. The major hazardous wastes generated onsite are various used catalysts, which are designed to send back to the manufacturers for re-generation or disposal.
Hazardous materials and operation hazard:
Koyo Dazhou plant’s raw material, intermediate products, and products comprise significant amount of hazardous materials. The manufacturing, storage, handling, and transportation of these materials pose dangers to the employees and nearby communities. Operation safety is always among the top concerns for Koyo management. There is central control system for operation safety and emergency response. Ammonia is monitored at critical locations onsite and there is automatic sprinkler system at the ammonia storage tanks. To minimize operation hazard, Koyo will contract external experts to conduct hazard operability (HAZOP) studies once the production processes are stabilized. The HAZOP will be updated when any processes are modified. As indicated in the ESAP, Koyo will install ammonia monitors along its property line and install carbon monoxide monitor at necessary locations. Koyo will also upgrade sprinkler system at the ammonia storage tanks to minimize ammonia escape in case of tank leak. Koyo will also contract external experts to inspect the ammonia tank integrity every year.
Fire prevention and emergency response (ER):
According to the project design, there is adequate fire fighting equipment onsite. There will be a 24-hr onsite clinic for both routine first aid and emergency care. There will be three fire fighting stations in the industrial zone. The nearest one is only 3 km from the site. Fire prevention and emergency response (ER) will be included in new employee trainings and annual refreshers. Koyo Dazhou plant will conduct routine drills for fire fighting and potential chemical explosion/releases.
Greenhouse Gases (GHG) and Energy Efficiency:
Koyo generates approximately 254,500 ton carbon dioxide equivalence GHG per year, which comes from ammonia manufacturing, electricity purchase from grid, and natural gas consumption for boilers. 80% of the electricity form the grid is from hydropower. Urea manufacturing will consume carbon dioxide generated from the ammonia manufacturing. Once the phase II is put into production in 2009, all the carbon dioxide from ammonia manufacturing will be used in the urea manufacturing.
The key equipment was used equipment, purchased from US, which was retrofitted in 2003 to reach the safety, environment, and energy efficiency levels at that time in US. The process energy consumption is calculated at 32.28 GJ/ton ammonia. Prior to installation, Koyo upgraded the equipment, and reduced the process energy consumption to 30.48 GJ/ton ammonia, which meet the IFC EHS guideline requirements and energy consumption guidelines of European Fertilizer Manufacturers Association (EFMA). Koyo plans to further upgrade the synthetic tower during the first year of operation, which will further reduce the process energy consumption to 29.18 GJ/ton ammonia. The process energy consumption for urea is 0.4 GJ/ton, which also meet both IFC and EFMA guideline requirements.
4. Community Health, Safety, and Security:
Community health, safety and security: The nearest community is approximately 2.5 km from Koyo Dazhou plant. According to the modeling calculation in EIA, there is little impact to the community under the normal operation. The major hazardous materials stored onsite is ammonia. Under the worst case scenario, ammonia leak modeling predicts minor impacts to the communities. However, the ammonia leak will have impacts to the neighboring plants in the industrial zone.
The natural gas is transported to the site thorough pipeline. Urea will be transported out to the train station. Most of the ammonia will be piped to a pesticide plant inside the industrial zone. However, there is still a portion of ammonia transported to other plants in Dazhou by road tankers. Under extreme scenario of transportation accident, the ammonia road tankers could pose safety threat to the communities along the transportation route.
Emergency preparedness and response: Koyo is developing emergency response (ER) plans and will conduct routine drills for fire fighting and potential chemical explosion/releases. To protect its own employees and other personnel in industrial zone, Koyo will conduct joint fire fighting and ER drills with other companies in the industrial zone, local fire department and hospital. To protect the communities along the ammonia transportation route, Koyo will only contract with transportation companies that have defensive driving programs, acceptable safe driving records, and sufficient emergency response capacities.
Security personnel: Koyo will hire external agency for plant site security, including routine ID check at the gates and security monitoring. The security personnel will not have any weapon. There will be police station in the industrial zone. For serious security issues, Koyo reports directly to the local police station.
5. Land Acquisition and Involuntary Resettlement:
Land Acquisition, Resettlement, and Compensation:
The project site located inside of a proposed 30 km2 industrial zone. Land use for the project area formerly consisted of mixed rural residential areas and small scale cropping activities. A total of 109 families (386 people) resided in the Koyo lot and the surrounding safety buffer area were all moved out by the end of 2007. Resettlement measures were regulated and are being implemented by the local government authorities. The local government is building a new residential area 3 km away from the industrial zone. The government subsidizes the relocated farmers for purchasing new houses. For the transition period the local government pays for the cost of temporary renting fee to those relocated families before they move into new houses,.
The project site is a hilly area with limited cultivated lands. Farming is not the major income for local communities. The majority of family income is from migration labors. The income loss due to the farm land acquisition is partially compensated by government payment, based on a comprehensive well defined compensation and benefit package. Koyo will also hire approximately 100 contractor labors from the nearby communities to ensure the sustainable livelihood of the relocated communities.
To better understand the detailed land acquisition process, compensation scheme, and sustainable livelihood, Koyo will contract external experts to conduct a post land acquisition assessment. the assessment will also be used to determine measures suitable to vulnerable households to improve their livelihood post land acquisition. Koyo is committed to implement corrective actions identified by the assessment results, to ensure the overall land acquisition process meet IFC Performance Standard 5 requirements.
Consultation and Grievance Mechanism:
As part of the land acquisition process, Koyo had numerous formal and informal meetings with village representatives and individuals. There is an established grievance mechanism channel through village council, local governmental agencies, and households could recourse to the courts should grievances not be satisfactorily resolved through this grievance mechanism. It was reported that there were several cases of grievances and all these had been resolved without recourse to the courts. In the course of the appraisal visit, some informal discussions were held with community representatives who were relocated. The main concerns arisen from discussions are directly related to the job opportunities from the project to maintain or improve their livelihoods. In accordance with ESAP, Koyo will develop and implement a public consultant and disclosure plan to directly communicate with the relocated village regarding job opportunities, recruitment process and earning capacity improvement programs, special attention will be given to assist vulnerable households to re-establish their homes and livelihoods. As agreed, Koyo will establish a grievance mechanism logging system to capture and respond grievance in a manner that is easy for Koyo to access and quicker for villager to receive responds.
