Key environmental and social issues relating to the project are summarized below, along with specific information about how potential impacts will be addressed by the Company. Upon implementation of the necessary mitigation measures described below and in the attached Environmental and Social Action Plan (ESAP), the project will comply with environmental and social requirements, namely the laws and regulations of Argentina, IFC’s Performance Standards on Social and Environmental Sustainability and Policy on Disclosure of information, and applicable World Bank/IFC environment, health and safety guidelines.
PS1 Social and Environmental Assessment and Management System:
Social and Environmental Management System: Under the supervision of a dedicated EHS manager, the Company is implementing a corporate EHS-MS (Environmental and Health and Safety Management System) that follows ISO 14001 and OHSAS 18001 standards. Key elements of the company’s current EHS-MS include an EHS Policy, an EHS Assessment Process, Legal Requirements, Objectives and Targets, Resources, Tasks and Responsibilities, Communications, Document Control, Operational Control, Emergency Preparedness and Response and Measurement and Analysis and Improvement. The current EHS-MS is applied to all of the Company’s activities in Neuquén, Rio Negro and La Pampa provinces.
As part of the Operational Control component of the existing EHS-MS the Company has also developed several EHS management plans and procedures to address key risks and impacts from its activities. These include, among others, procedures to address occupational health and safety, waste management, fuel management, management of chemicals, transportation safety, equipment inspection and maintenance and management of change.
In order to align the existing EHS-MS with the Performance Standards and applicable IFC EHS Guidelines, a gap analysis will be carried out of the various elements, components and documents in order to close any gaps (see Action 1 and 2 of the ESAP).
In addition, a social component will be developed for inclusion in the existing EHS-MS to align with the Performance Standards. The Social component will include the necessary elements, plans and procedures to address current and future social risks and impacts from the project (see Action 4 of the ESAP).
Social and Environmental Assessment: In order to comply with regulatory requirements, every producing oil and gas project in Argentina must undertake Environmental Impact Assessment (EIA) studies before starting the field development phase. Subsequently, a yearly environmental monitoring report (“Informe de Monitoreo Ambiental Anual” or “IMAA”) that includes an updated EHS Action Plan must be prepared by consultants authorized by the Secretary of Energy. For any new projects the operators are required to conduct new EIA studies to be approved by national and provincial authorities. The EIA must contain a management plan that includes a series of recommended actions to avoid or minimize any potentially significant impact identified in the EIA. Medanito has developed a legal requirement matrix with support from an external legal firm in order to reinforce its full compliance with local regulations. This matrix will be updated on an ongoing basis to reflect any changes in local regulation.
In order to assure compliance of existing environmental and social assessments with IFC’s Performance Standards, the Company will carry out an audit for compliance of the various concessions with the Performance Standards and applicable IFC EHS Guidelines. The Company will address and close any gaps identified (see Action 6 of the ESAP).
In addition, for future activities in existing concessions or in new concessions acquired by the Company, Medanito will develop (either as part of the State required EIA or as a separate document) an ESIA which is compliant with the Performance Standards and EHS Guidelines (see Action 7 of the ESAP).
Management Program: In 2005 the Company started an ambitious plan to improve the environmental and safety management of its oil & gas operations. The plan included, among other actions, erosion control works (such as gabions and drainage systems); elimination of some purge and open pits in the treatment plants; fencing of plants, production stations and wells; implementation of safety signage following local regulations; construction of contaminated soil storage areas; and removal and remediation of areas impacted by old oil spills and leaks. As part of the EHS Management System, several operational control procedures have also been developed to guide staff and contractors on key environmental and health and safety issues, including occupational health and safety, waste management, fuel management, chemicals management, transportation safety and equipment inspections and maintenance, among others.
Organizational Capacity: Since 2007 the Company has had a corporate EHS manager at headquarters and two EHS coordinators in the head office, as well as three EHS coordinators to support the various field operations, including oil & gas fields, gas treatment plants, and forestry facilities. The EHS organization is adequate for the current level of activities.
Currently, the Company manages its community relations activities through the Human Resources Department. The Company will develop the necessary components of the social management system (see Action 4 of ESAP) and will hire additional community relations support to assist in the development and implementation of this system (see Action 3 of the ESAP).
Training: The Company has implemented an EHS training program under which 5,900 man hours of training were completed in 2010. Specialized consultants provided training in key areas including “confined space work”, “firefighting brigades”, and “defensive driving” The Company has an internal website where all applicable EHS procedures are available, and where brief reports on incidents/accidents are posted to share lessons learned. The Company holds awareness activities during the year on environment and safety issues. At the Catriel Gas Complex safety meetings are held twice a week.
A training program is also available for the forestry workers, including training in special machinery operation, PPE (personal protective equipment) use, firefighting procedures, first aid, and avoidance of, or response to, contact with venomous wildlife.
Monitoring: The Company has an active database that keeps track of corrective actions issued, to facilitate follow-up and compliance verification.
The Company has implemented an environmental monitoring program at each of its processing sites (Catriel, Aguada del Chivato, Puesto Hernandez, Cutral-Co and Medianera) and their power generation facility. Currently, monitoring is carried out for air emissions, potable water, process wastewater, noise (in a few areas) and occupational health. Currently the results obtained from the monitoring program are compared to national standards. In other cases (such as for air emission and process wastewater) no provincial standards exist and therefore results are taken as a reference.
The Company will review and update its current performance indicators and Environmental Monitoring Plan to ensure alignment with the requirements of the Performance Standards and applicable IFC EHS Guidelines (see Action 11 of the ESAP).
Reporting: Medanito S.A. reviews its environmental, health and safety performance every three months, based on the outcomes of a series of environmental and safety performance indicators. Every business unit (Gas Treatment, Exploration and Production, Civil Works, Forestry, and Administration) provides information to compile these performance indicators.
External reporting consists of a yearly environmental monitoring report (“Informe de Monitoreo Ambiental Anual” or “IMAA”) conducted by a local consulting company that includes an updated EHS Action Plan.
PS2 Labor and Working Conditions:
Medanito currently has approximately 300 employees. The Company complies with national labor laws, including requirements for non-discrimination and equal opportunity. Medanito offers a competitive benefit package for its employees, including medical and dental insurance. The Company has an excellent level of personal interaction among employees at different organizational levels. Every new employee is required to take a pre-occupational medical test. Employees working in operations are also required to take annual medical examinations.
The Company’s employees in non- managerial positions are enrolled in the Oil Workers Union. The Company has established strong relationships with this union and, to date, there have been no major conflicts. Medanito has also established good relationships with the Wood Workers Union; employees in Veinticinco de Mayo are affiliated with the union.
The Company will review the applicable requirements of Performance Standard 2 and adapt its HR policy accordingly (see Action 9 of the ESAP).
Occupational Health and Safety: Medanito proactively seeks to achieve top safety standards. A procedure for identification and assessment of safety risks is consistently applied in the oil and gas division and in the forestry unit.
In order to maximize driving safety (driving incidents are the main accident risk) the Company has implemented a GPS-based driving tracking system to supervise compliance with safety procedures by its employees and contractors. In addition, check-lists are used to verify the safety and roadworthiness of truck condition, and drivers are provided with maps that highlight driving risks in the Rincon de Los Sauces area. The Company has also developed similar maps for the routes of Cutral-Co to Challaco and Catriel to Challaco. In 2010 the Company had 2 accidents relating to traffic activities.
HAZOP studies were conducted for the Cutral-Co crude treatment plant, Challaco storage and export plant, and Puesto Hernandez crude treatment plant (action plans were subsequently developed to address the identified substandard conditions).
Key operational procedures such as the Permit to Work System, Safety Inspection, and Safety Task Analysis are adequately implemented.
The Catriel Gas Complex handles gas with variable contents of H2S. The Company has minimized the risks of workers being accidentally exposed to this gas by developing training and awareness activities, providing personal H2S detectors, and making autonomous breathing suit systems available at key locations.
The Company has implemented an ambulance assistance plan at various locations to improve its emergency response capacity.
In its forestry operations, the Company has implemented a standard safety manual that covers all the risks associated with plantation field work. In Veinticinco de Mayo the Company has mechanized part of the forestry activities to significantly reduce the exposure of its workers to the risks of personal accidents. The Company regularly trains its employees on safe work procedures, including handling of pesticides.
Management of Contractors: Contractors are required to comply with the requirements and standards of the Company’s EHS Management System. For this purpose the Company offers training to contractors’ personnel. Requirements for health and safety management and environmental management are included in new contracts, as applicable.
New contractors are required to present to Medanito for approval (when applicable) a safety management plan, EHS training plan, and EHS supervisors’ professional background. The Company has implemented a Contractor EHS performance evaluation process to assist with decisions concerning renewal of contracts or providing invitations to contractors to bid in new projects.
PS3: Pollution Prevention and Abatement:
Pollution prevention:
Medanito currently uses oil-based and water-based drilling muds in its drilling activities and is making efforts to switch to using only water-based drilling muds in future drilling campaigns. The Company has adopted the “dry wellpad” technology for well drilling which avoids the use of open pits to dispose of spent drilling muds and cuttings. The cuttings are dried out at a designated location and are then used to fill up and restore old quarries within the oilfield.
Chemical products are stored in areas protected from the weather and with an impermeable floor to avoid soil contamination from spills. All produced water is disposed of by injection, in the Company’s facilities (Aguada Chivato treatment plant) or in third party facilities (neighboring facilities).
The Company will prepare a plan for well abandonment at the Cutral-Co field and implement it to minimize potential environmental risks from these inactive wells (see Action 10 of the ESAP).
Wastes:
Wastes are classified according to Medanito’s operational procedure into oily wastes, oily soils, metallic, plastics, biodegradables, and liquid effluents. Different waste streams follow specific disposal procedures according to local regulations. Hazardous wastes are disposed of by licensed contractors.
Any oil contaminated soils and tank bottoms are recovered and temporarily placed in an approved storage site. These soils along with other hazardous wastes are regularly transported to a licensed facility for solid waste management. The waste management contractor certifies the safe disposal of such wastes. Chemical containers are returned to the supplier for recycling or are sent to the hazardous waste management contractor’s facility in Neuquén.
The Company does not own or operate any transformers which contain PCBs (polychlorinated biphenyls).
Greenhouse Gas Emissions:
None of Medanito’s hydrocarbon fields vent gas for operational purposes. Some maintenance activities require gas pipelines to be depressurized, and in such cases the gas is burned in an appropriate facility under controlled conditions.
A GHG monitoring program will be implemented by the Company as required by Action 12 in the ESAP.
Noise: Operators are required to use hearing protection in areas of high noise levels such as near gas compression units. No communities or households that might be affected by noise are located in the areas surrounding project activities.
Emergency Preparedness and Response: The Company is a member of the “Plan de Emergencias Interempresario del Rio Colorado”, an association of the oil and gas producers of the Rio Colorado river basin (Mendoza, Neuquén, Rio Negro and La Pampa provinces). This association has developed a regional contingency plan for reciprocal assistance in case of a major spill event into the Colorado River.
Contingency plans for current operations include different scenarios such as fire, explosion, medical evacuation and spills. Contingency plans have been developed for the Medanito gas plant in Catriel, Aguada del Chivato – Aguada Bocarey, Cutral-Co and the forestry operation.
Pesticides use: the use of pesticides in forestry operations (poplar plantations) is relatively low because the poplar is not very sensitive to pests and plagues and the tree species and variety planted is well adapted to local conditions. Management of pesticides and agrochemicals follows best practice procedures.
PS4 Community Health, Safety and Security:
Infrastructure and Equipment Safety: Medanito has implemented a safety signage system and a fencing program to safeguard the public from being exposed to safety risks in its operations (well heads, pumping units and compression and treatment plants are fenced).
The operations in the Cutral-Co oil field, and neighboring households, are especially exposed to safety risks due to the presence of an unauthorized dump area that is not associated with the project, but is situated around the Company’s facilities. This dump area is visited by wanderers and informal recyclers who sometimes set fires on the trash. The Company has reinforced safety measures in this location. A proposed long-term solution is to start an awareness program at schools and other local organizations. The Company has agreed to prepare a plan to raise awareness within the community about the aforementioned safety risks associated with this area (see Action 5 of the ESAP).
Security: Unarmed security guards are used at the Company’s operations.
PS5 Land Acquisition and Involuntary Resettlement:
In the areas where the Company operates there are no small farmers or vulnerable households and land generally belongs to the state or to large scale landowners. The large scale land users use the land mainly for sheet and goat raising. All the land acquisition and land use negotiation processes to date have progressed smoothly, and the Company always seeks to achieve negotiated settlements based on market values. The agreements are based on fair negotiations and are properly documented. No cases of physical resettlement have been recorded to date. Impact on land users is compensated based on replacement value. Should any involuntary resettlement be required, the Company will follow PS5 requirements.
The Company will formalize its current land use compensation procedure in accordance with local regulations and PS5 requirements (see Action 13 of the ESAP)
PS6 Biodiversity Conservation and Natural Resource Management:
Medanito recently acquired a 45% share of the Aguila Mora Concession (Canuelas Gas owns 45% and Hidenesa 10%). A portion (approximately 8,500 ha) of the Aguila Mora Concession is located within the Auca Mahuida Provincial Natural Reserve. This amounts to 11% of the 77,020 hectares. This Reserve was established by the Province of Neuquén in 1996 to protect particular arid and semi-arid species of flora and fauna distinct to the region (including flora endemic to the region and fauna characteristic of the Patagonia Region).
The Auca Mahuida Reserve is considered a Category VI protected area – Sustainable Use of Natural Resources under IUCN Classification. Information obtained also indicates that the Reserve is considered a Key Biodiversity Area / Important Bird Area due to the presence of two Near Threatened species; the Lesser Rhea (Rhea pennata) and the Andean Condor (Vultur gryphus).
Exploration and development of oil and gas projects in this type of protected area is permitted by local regulations as long as an Environmental Impact Assessment is prepared and approved by the Neuquén government.
To date, no activities have been carried out by Medanito in their Aguila Mora Concession and there are no immediate plans to carry out exploration or development in the area.
Prior to any future activities by Medanito in this concession, the Company will comply with all local environmental permitting requirements and will follow the zoning recommendations included in the Auca Mahuida Reserve Management Plan prepared by the Province of Neuquén. Also, Medanito will need to develop an ESIA consistent with IFC’s Performance Standards, particularly PS6, including a comprehensive flora and fauna baseline program, impact assessment and, if impacts are mitigable, robust measures to manage any potential impacts from the proposed activities.
No other concessions owned or operated by the Company are located in any provincial or national protected natural areas, Key Biodiversity Area, Important Bird Area or Alliance for Zero Extinction sites.
PS8 Cultural Heritage:
In the areas of Rincon de los Sauces and Cutral-Co (Neuquén province) there have been important paleontological findings that are being studied by national and international research institutions. Both cities have opened museums of natural history to host the main findings. However, no major paleontological sites have been unearthed in the areas of the Company’s operations. The Company will prepare a “chance find” procedure to be applied in the event of any accidental unearthing of paleontological/cultural relics (see Action 14 of the Action Plan).
