While all Performance Standards are applicable to this investment, IFCs environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
PS 5 – Land Acquisition and Involuntary Resettlement
PS 7 – Indigenous Peoples
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
No protected areas or protected species have been identified at, or near, the project sites and thus Performance Standard (PS) 6: Biodiversity Conservation and Sustainable Management of Living Resources are not applicable. Indigenous Peoples were identified in the project area but limited by number and impact. No issue related to cultural heritage was identified in the project area; thus PS8: Cultural Heritage is not applicable.

None of the urban gas projects involve manufacturing processes. Air emissions and wastewater discharges are limited. All the gate stations are located on the outskirts of urban areas and distances to the nearest residential area meet local regulatory safety requirements. EIAs completed for the existing operations have not identified any natural reserves or protected species at or near any project sites. All infrastructures in the gas distribution networks are carefully selected to avoid residential communities and ecologically sensitive areas. Tian Lun’s historic company development was based on brownfield developments through merger and acquisition transactions. Development of greenfield projects only becomes necessary in recent years. Land acquired for recent developments has been limited and mostly in urban areas, their outskirts, or industrial zones with direct access to existing infrastructure to minimize the need to acquire land.

Among the proposed three LNG plants, two are brownfield which will be built within existing plant boundaries, and one is a greenfield LNG plant project located in an industrial park. Land acquisition for the greenfield LNG plant has been managed by local authorities with a compensation package and livelihood restoration measures to improve livelihoods of those directly affected.

A limited number of specific environmental and social impacts identified during the review can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria.

The key E&S issue related to this proposed investment is effectiveness of Tian Lun’s E&S management system at the corporate level and its implementation at the level of its subsidiaries which are geographically diverse, for a wide range of specific activities.

The key E&S risks and issues include the following:
- Operational hazards, fire prevention, and emergency response
- Occupational health and safety
- Community safety
- Road transportation safety
- Contractor labor management
- Land acquisition and resettlement
- Community engagement

Mitigation measures for the potential E&S impacts have been identified and are incorporated into an ESAP. The potential adverse E&S impacts of this project are therefore few in number and limited to project sites, and may be readily mitigated. This is therefore an E&S Category B project.

The resettlement described in the PS5 section is comparable with similar resettlement programs in other IFC Category B projects in China and the categorization is therefore considered consistent with past IFC practice.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

Corporate Environmental and Social Policy: Tian Lun Gas has developed an E&S management system with a corporate E&S policy and procedures. These emphasize operational safety, compliance with national laws and regulations, and fair working practices. All employees are required to support the principle of continual improvement in corporate EHS performance and their performance is monitored. To ensure national laws and regulation are followed, each project development is required to avoid or minimize the need of land acquisition and physical relocation, ensure affected people’s lives are improved or kept the same as the result of the project development, and keep safe distances to nearby communities and surrounding ecologic system. The corporate E&S policy is first formally introduced to employees through the new employee orientation and induction program. All the Tian Lun Gas subsidiaries follow this E&S policy.



Identification of Risks and Impacts: Tian Lun Gas has an effective oversight of risk identification, labor practices, administration procedure and integration between policies and procedures at the corporate level and has technical support to subsidiaries to ensure continued material compliance with applicable Chinese national and local regulatory requirements and standards. It has an established procedure to guide its E&S due diligence of potential acquisitions. The related E&S departments have authorized powers for project rejection based on E&S considerations.



The company contracts external experts to conduct risk assessments for all new projects, including gas pipeline networks, gate stations for the city natural gas supply, CNG/LNG filling stations, and LNG plants, according to local E&S regulations and corporate E&S policy. The risk assessments include environmental risk assessments, safety risk assessments, fire prevention assessments and the related licensing, earthquake impact evaluations, and lightening/thunder impact assessments. In line with the ESAP, Tian Lun Gas will conduct quantitative risk assessments (QRA) for each type of major flammable gas storage vessels to further understand and mitigate potential operational risks. The review of summaries of current risk assessments shows the E&S performances could meet the requirements of applicable IFC performance standards and World Bank Group (WBG) EHS Guidelines upon successful implementation of the proposed mitigation methods. With potential expansion of Tian Lun Gas operations to new gas distribution fields, the Company agrees to incorporate the environmental and social requirements of IFC’s Performance Standards and applicable WBG EHS Guidelines in the risk assessments for the future projects, including involuntary resettlement, biodiversity preservation, indigenous people, and cultural heritage.



For all merger and acquisition (M&A) deals, Tian Lun Gas conducts E&S due diligence. Its E&S policy forbids M&A deals with historical contamination and outstanding labor
issues.



Corporate Environmental and Social Management and Organization: The EHS management in Tian Lun is set up according to the requirements of ISO 14001 and OHSAS 18001. Tian Lun Gas has prioritized operational safety and has a corporate safety operation department. Large subsidiaries also have their own safety operation units, while the small ones have safety coordinators. The corporate safety operation department leads the EHS management and provides guidance for subsidiaries’ safety units or coordinators. The corporate safety operations department reports directly to the corporate management team. Safety units/coordinators at subsidiaries report to the subsidiary’s management team. The safety units/coordinators of subsidiary companies also report to the corporate safety operation department for all EHS performance issues. IFC considers that the environmental functions within the safety operation department need some strengthening to meet current operational challenges and the potential operation expansion into new gas distribution fields. In line with the ESAP, Tuan Lun Gas will strengthen its environmental management and set up an independent EHS department at corporate level to manage EHS issues for existing operations and potential large projects. The current safety function of the Safety Operation department will be allocated to the new EHS department. Qualified technical staff/consultants for environmental impact management will also be hired.



There are comprehensive health and safety (H&S) management programs and implementation procedures for each operation process, including safety targets, safety procedures and trainings, hazard identification and controls, safety equipment, working permits, checks and improvements, accident handlings, evaluations, etc. EHS training is included in the new employee training program and annual refreshers. The EHS training and refresher hours vary according to positions. All employees must pass training examinations and refreshers as a qualification for work.



Emergency Preparedness and Response: Fire hazard is the main operational risk at Tian Lun Gas and the corporate safety operation department has developed detailed emergency response (ER) procedures. Methane detectors are installed at all critical locations, which are connected to alarm systems. There is enough firefighting water at each site and sprinkler systems are installed according to corporate safety procedures. Each subsidiary company has additional ER procedures for their own operations. The corporate ER procedures consist of various scenarios, and each company is required to undertake a drill for each scenario every year according to their own schedules. Each subsidiary company holds one annual joint ER drill with the local government agencies, fire brigades, hospitals, and local community representatives if applicable.



Monitoring and Review: Tian Lun Gas has EHS performance monitoring procedures. Each subsidiary company
monitors the performance parameters and incidents, which are summarized and reported to the corporate safety operation department at monthly bases. The General Manager of each subsidiary holds monthly safety inspections and safety meetings, while the corporate safety committee also holds quarterly safety meetings to review safety performance. The corporate safety operation department monitors corporate-wide EHS performance through inspection and auditing procedures.



The corporate safety operation department developed its own EHS auditing protocols. It organizes annual inter-subsidiary audits for existing subsidiaries and bi-annual audits for new subsidiaries according to the auditing protocols. When visiting subsidiaries, all corporate staff are required to review major safety issues during their visits according to a simplified safety checklist developed by the corporate safety department. Mitigation methods and implementation timelines are recorded after each audit or inspection for implementation verification. In accordance with the ESAP, Tian Lun Gas will contract external experts for auditing protocol updates and joining the annual EHS audits.



Chance Finds Procedure: The Company E&S policy requires avoidance of all sensitive locations during pipeline construction, including residential areas, ecological zones, etc. China Gas will also develop a chance finds procedure to identify and minimize potential damages to any cultural heritages discovered during the construction of pipelines.

Tian Lun Gas employs a total of about 1,750 full time employees at the headquarter and subsidiaries. Tian Lun Gas has formal corporate wide Human Resources (HR) policies, strategies, principles and best practices. The HR policies on recruitment, promotion, career development, term of employment are established at corporate level consistent with local and national regulatory requirements and IFC PS2 requirements. The policy is included in employment contracts, and addresses working conditions, terms of employment, and wages and benefits, promotion and career development. Labor practices and working conditions, including occupational health and safety, comply with local regulatory requirements and are largely consistent with IFC policies and applicable WBG EHS guidelines for the sector. This information is disseminated in the form of a corporate policy document at the time of induction and is accessible to employees at any time.



HR is managed at the corporate level with oversight of subsidiaries and facilities. HR at subsidiary level is managed by each subsidiary based on the corporate policy and strategy. Workers’ salaries are based on job/skill specifications and are significantly above the regulated local minimum wage and are generally in line with the average for industrial type employment in the local market. The majority of production workers are locals from the same area where the subsidiary is located, with a small number of expatriate workers from other parts of China. Employment contracts have been developed at each subsidiary level according to local requirements and site specific circumstances in line with Tian Lun’s corporate requirements. Employees typically receive a contract of employment when commencing service that provides details such as the contract period, basis of working hours, overtime compensation, insurance, fringe benefits, and leave conditions. All relevant regulations governing the term of contract are clearly listed in the contract. Employees are also provided with job training, as well as company’s general policies on safety and corporate cultural and values.



Programs on career development and training program and other incentive programs serve to increase and maintain the competitiveness of Tian Lun Gas. The Company recognizes non-discrimination must be implemented throughout the practice of all subsidiaries and Tian Lun Gas is in the process of removing non-job related requirements (such as age) in its recruitment document to meet IFC PS2 requirements.



The work force at Tian Lun Gas are free to join union and employees have the opportunity to represent to the management any issues or grievances that they may have. Any employee who dissents or has doubts about any company policy or has complaints against the company management has the opportunity to have the problem resolved either directly by communicating with the line manager, emailing to or delivering letters to the company, or indirectly reporting to
the HR department through worker representatives.



The Company’s expansion in the early days was mostly through acquisition of state-owned-enterprises (SOE), and more recently through greenfield developments. Worker’s unions at the SOEs have been adopted by the Company and function in all subsidiaries. All employees at Tian Lun Gas have choice to join union. The main function of the worker’s union is to improve worker’s welfare, promote an enterprise culture and serves as an additional channel for the grievance mechanism, which is otherwise served by an open door policy at corporate and subsidiary level.



The minimum employment age at Tian Lun Gas is 18 years. Tian Lun Gas ensures that child labor or forced labor is not employed directly or by subcontractors through verification of relevant documents. Wages are paid on a monthly basis. Requirement for overtime is rare and over times are compensated.



Construction of facilities has been either undertaken by Tian Lun’s own construction team or contractors while subcontractors are hired mostly for non-skilled work. All subcontractors are expected to comply with all local labor requirements specified in contractual arrangements.



Occupational Health and Safety (OHS): Tian Lun Gas has routine OHS training, including the new employee training. All employees have to pass exams at inductions and annual refreshers to be able to work at their positions. Air quality and noise levels are monitored for compliance with local regulatory requirements and good international industry practices (GIIP). All employees wear proper personal protection equipment (PPE), including hard hats, gloves, anti-static work clothes, boots, etc. according to their position.



During the appraisal, IFC identified that the OHS management needs improvement according to IFC PS2 and GIIP to prevent serious accidents or fatalities in the future. In accordance with the ESAP, Tian Lun Gas will conducts job hazard analysis (JHA) for all dangerous positions, including gas valve operations, tasks with fire risk, tasks with gas, handling cryogenic liquids, tanker driving, etc. Based on the JHA results and as part of this project, the OHS safety procedures in Tian Lun will be modified for these positions. In line with the ESAP, the Operation Safety Department will draft and implement guidance for recordable accident reporting and management in order to prevent serious accidents or fatality in the future.

Raw Materials and Resource Efficiency: Water is consumed mainly for cleaning and sanitary purposes in this project. The other main resource consumed is electricity for gas pumping, compression, and liquefaction. At the current stage, Tian Lun Gas consumes approximately 0.184 million ton water and 26.66 GWh electricity annually. With the implementation of this project, Tian Lun Gas will consume approximately 1.204 million ton water and 189 GWh electricity annually. Water is supplied by the municipalities or industrial parks and the electricity is from the national grid. Tian Lun Gas has electricity and water efficiency programs with annual targets to improve resource efficiency. The energy efficiency for the planned major LNG plant can reach 0.389 kwh/Nm3, which is lower than the industry norm of 0.4 – 0.41 kwh/Nm3. The energy efficiency for CNG is at 0.20 kwh/Nm3, which is also slightly lower than the industry norm of 0.21 kwh/Nm3.



Pollution Preventions and Compliance: The cleaning and sanitary wastewater at all Tian Lun Gas facilities is discharged to the municipal or industry park wastewater treatment plants. The other point air emission sources are the natural gas based onsite boilers for heating in the winter. The emissions meet both local regulatory requirements and the WBG EHS Guideline limits. The sanitary solid wastes at each site are collected by municipal contractors for recycling and disposal.



Hazardous Materials and Operation Hazard: Tian Lun Gas operations involve large quantities of natural gas, CNG, and LNG. The handling, storage, and transportation of these hazardous materials may pose dangers to the employees and nearby communities. The local regulatory agents designate safety distances for all hazardous storage installations. No residential houses are allowed within the safety distances. As part of this project, QRA will be conducted to estimate the potential impacts and mitigation methods will be proposed if needed. As indicated in the ESAP, Tian Lun Gas will conduct quantitative hazard operability studies (HAZOP) for major natural gas gate stations and LNG liquefaction plants, update HAZOP following each process modification, and improve process the safety management based on the HAZOP results.



Tian Lun Gas prepares detailed procedures to handle these hazardous materials. All the hazardous liquids are stored in above ground tanks with proper secondary containment volumes. There are leak and fire sensors at all critical locations, which are connected to the control rooms. At all storage facilities, operators conduct hourly inspections and conduct the leak test if necessary. For all the storage vessels, external experts are contracted to conduct tank integrity testing according to required timelines. Before each road tanker enters a Tian Lun Gas site for delivery or pickup, security guards will check all certificates for tankers and drivers, and check the tanker safety conditions. Only qualified tankers and drivers
are allowed to enter the sites.



IFC considers that digitalized management is critical for the safety of operations. Tian Lun has started to set up such systems with central control rooms at some subsidiaries to monitor and communicate with pipeline walkers and CNG/LNG tanker drivers. As part of this project, Tian Lun will establish digitalized management for the whole corporation by the end of 2016. All the line workers and tankers will be equipped with GPS devices. Live cameras will be planned at all critical locations of CNG/LNG stations, gate stations, LNG plants etc. The operational control rooms at each subsidiary company should have access to all GPS and camera monitoring signal/videos and can communicate with line walkers, tanker drivers, and operators at critical positions of each facility. All the data from each subsidiary will also be sent to the central control room located at the headquarters, so the safety operation department, and the corporate EHS department in the future, can have access to real-time data across the corporation. The digitalized management system will be evaluated for effectiveness by an independent technical consulting firm.



Greenhouse Gases (GHG): At current time, Tian Lun Gas generates approximately 22,000 tons of CO2-equivalent annually. After this project is implemented, it will generate approximately 151,000 tons of CO2-equivalent annually, mainly from purchase of electricity.



The project will have benefits in terms of dealing with climate change through the expansion of city gas infrastructure and building of CNG and LNG refilling stations. The project promotes the use of natural gas as a cleaner alternative fuel to replace more carbon intensive fuels in the industrial as well as the transport sector. The combustion of natural gas results in virtually no atmospheric emission of sulfur dioxide and particulates, and far lower emissions of nitrogen dioxide (which contributes to urban smog) and carbon monoxide compared with coal, gasoline and diesel. With full implementation of this project, approximately 600,000 tons of CO2-equivalent emission will be avoided annually by cars and trucks using CNG and LNG as alternative fuels.

Community Health, safety and Security: There are no communities adjacent to any existing / planned gas gate stations or LNG plants. The normal operations of these facilities therefore have limited impacts on the communities. There are communities near some CNG/LNG filling stations. Safety distances are enforced, methane levels at all facilities are monitored real-time, hourly inspections are conducted, and periodically ER drills are practiced to ensure the safety of the nearby communities. QRA will be conducted for all large flammable gas/liquid vessels to ensure the significant impact radius will not enclose any residential houses.



All the rural and suburban gas pipelines are inspected by line walkers twice per week; while urban pipelines are inspected daily. All line walkers will be equipped with GPS and the mobile/photo communication equipment. The control centers will also be set up at both the corporate and subsidiary levels to have access to all line walkers. For any safety issue, line walker will be able to communicate with control centers in real time to get it repaired timely. The meter readers are also trained to inspect gas usage safety inside the residential houses. All the houses are required for safety inspection annually. Tian Lun Gas also holds annual safety awareness events in each residential area served.



CNG and LNG are transported by road tankers along major highways by both Tian Lun Gas’ fleets and its contracted transportation companies’. All the road tankers are regularly inspected for safety and license renewal. All Tian Lun Gas’ road tankers have two employees and are equipped with a GPS positioning system. With the establishment of the digitalized management system, the central control rooms at subsidiaries and corporate will have access to each tanker driver and will monitor their movements. As part of this project, Tian Lun Gas will require all drivers to take annual defensive driving training and record all traffic violations.



Emergency Preparedness and Response: Tian Lun Gas has ER plans available, and conducts routine drills for firefighting with related government agencies, fire brigades, hospitals, and community representatives if applicable. Communities are informed of, and involved in the drills for city gas operations. As part of this project, Tian Lun Gas will only contract transportation companies that have defensive driving programs, acceptable safe driving records, and sufficient emergency response methods. Tian Lun Gas will require the transportation companies to report their accident rates periodically.



Security Personnel: Tian Lun Gas has both internal security guards and external security contractors for the site security. The security personnel conduct the routine ID check at the gates and monitor the security. The security personnel do not bear firearms. Tian Lun Gas has a security management plan to ensure the proper conduct of the security personnel.

China is an ethnically-diverse country, with 55 ethnic minority groups officially recognized which make up the non-Han Chinese population. As of 2010, the combined population of officially recognized minority groups comprised 8.49% of the population. All ethnic minorities are considered indigenous to China.



The largest ethnic group in terms of population is the Zhuang at 18 million, followed by the Manchu at 11million, the Uyghur at 11 million, the Hui at 10 million, the Miao at 9 million, the Tujia at 8 million, the Yi at 7.8 million, the Mongols at 5.8 million, the Tibetans at 5.4 million, and the Yao at 3.1 million. The majority of them reside in autonomous regions or autonomous counties in China.



Tian Lun Gas’s operation is being expanded from central China to other regions, including Yunnan province which is known as an ethnically-diverse province. The current development of Tian Lun’s facilities (gas stations and filling stations) requires a total of 65 Mu (5 hectares) of land permanently from a minority ethnic autonomous county in Yunnan province. No physical relocation is expected. Although those minority ethnic groups reside close to town areas are mainstream to the sociality, however, their ethnic identities has been identified by Tian Lun Gas. Tian Lun Gas estimated up to100 ethnic minorities households would be affected by the current land acquisition.



As mentioned in the PS5 section, land acquisition and resettlement is regulated and managed by government authorities, all compensation and livelihood restoration measures including benefit sharing, will be available to eligible households affected by the project, irrespective of ethnic identity. Regulatory requirements on public consultations, disclosures and discussions of compensation and livelihood restoration initiatives with project-affected people include ethnic minorities residing in the project area. Mandatory community engagement consultation requirements include: i) make the consultation process socially/gender inclusive and culturally appropriate, and to incorporate the views of affected ethnic groups; ii) provide adequate time for affected ethnic minorities to engage in collective decision making; iii) use local languages in public consultations and disclosures; and iv) make the process intimidation-free. These requirements reflect a process of good faith negotiation and could constitute the required Free, Prior and Informed Consent as stipulated in Performance Standard7.Tian Lun Gas is committed to develop a formal land acquisition and resettlement tracking system with supplemental measures to ensure these desire outcomes will be achieved.

Tian Lun Gas’s recent greenfield project developments are affecting local communities. Under the government led land acquisition and resettlement process, dialogue and communication with affected communities including public consultation and disclosure of environmental and social impact assessment occurs through procedures established by PRC regulations. As a result, no formal information dissemination activities have been undertaken by the Company so far. Notwithstanding, as part of its environmental and social management program, Tian Lun will establish methods for communicating environmental and social aspects to external interested parties and maintain procedures for receiving, documenting and responding to concerns from any external interested parties relating to the project. As indicated in the ESAP, specific procedures will be developed to incorporate stakeholder engagement strategy, including clear procedure on disclosure and consultation with potentially affected communities, including minority ethnic communities.

No local communities have been significantly affected by the Company and its subsidiaries current operations which are away from any residential communities. The Company actively responds to activities related to corporate social responsibility are implemented at the national and local level by participating in various outreach programs and regional initiatives promoting environmental, social welfare and disaster relief. Provision of job opportunities to locals has been prioritized by Tian Lun Gas as a direct benefit to local, at subsidiary level, majority of staff come from adjacent communities. The Company has not been the subject of any public complaints or litigation related to its environmental or social performance.

Tian Lun Gas will disclose this document together with the ESAP in Chinese at its website (http://www.tianlungas.com/). For inquiries or concerns about the environmental and social impacts of this project please contact:

NAME：Feng Yi
ADDRESS:
4th Floor Tian Lun Group Building
NO.6 Huanghe Dong Road
Zheng Dong Xin District
Zhengzhou , China
Phone:
+86 371 6397 6027
+86 13837170361
Fax:
+86 371 6370 7151

Broad Community Support is not applicable for this project

Tian Lun Gas(35400) Supervision Disclosure Snapshot – Version 2
Description	Anticipated Completion Date	Status	Comments	Completion Date
1. Conduct quantitative risk assessment for major flammable gas storage vessels for the future development to further understand and mitigate potential operation risks.	31-Dec-2015	Completed	Completed	1/4/2016
2. Set up an independent EHS department at corporate level to manage EHS issues for existing operations and potential large projects	31-Aug-2015	Completed	Completed	8/28/2015
3. Contract external experts for EHS auditing protocol updates and joining annual EHS audits.	31-Dec-2015	Completed	Completed	1/4/2016
4. Develop a stakeholder engagement strategy and procedure to include clear procedure on disclosure and consultation with potentially affected communities, including minority ethnic communities.	31-Aug-2015	Completed	Completed	8/28/2015
5. Conduct job hazard analysis (JHA) for all dangerous positions and modify OHS safety procedures based on JHA results and draft guidance for recordable accident reporting and management in order to prevent serious accidents or fatality	30-Sep-2015	Completed	Completed	9/28/2015
6. Conduct quantitative hazard operability studies (HAZOP) for major natural gas gate stations and LNG liquefaction plants, update HAZOP following each process modification, and improve process safety management based on HAZOP results	31-Dec-2015	Completed	Completed	9/28/2015