Tanzania - Sixth Power Project : Management Response

29263 THE WORLD BANK/IFC/M.I.G .A. RECEIVED TME PANEL DATE: July 18, 1995 TO: Mr. Ernst-Gunther Broder, Chairman, The Inspection Panel FROM: Gautarri S.Kaji, Acting President, EXC Approved by: Gautam S. Kaji Date: EXTENSION: 81384 /’ SUBJECT: - Tanzania Power VI Project (Credit 2489-TA) Management Response to Request for Inspection 1. Reference is made to the Memorandum, dated June 16, 1995, to the President of L International Development Association (IDA), by which the Chairman of the Inspection Panel requested IDA Management to provide the Panel with written evidence that it has complied, or intends ‘tocomply, with the relevant policies and procedures in the implementation of the above- captioned Project. 2. While the Panel requests IDA Management’s statement on the merits of the Request, it is the view of IDA’s Management that: (a) the Request does not meet all the eligibility requirements set forth in Resolution No. IDA 93-6, dated September 22, 1993 (hereinafter “the L Resolution”), and (b) one of the allegations in the Request is not admissible under the Resolution. This response therefore deals with those issues. For your information, attached hereto is an Annex commenting on the specific alleged violations by the Management of IDA’S policies and procedures. Eligibility of the Requesters: L 3. In accordance with paragraph 12 of the Resolution, the Panel shall receive requests from an af€ected party in the territory of the borrower who is not a single individual (Le. a community of persons such as an organization, association, society or other grouping of individuals), or by the local representative of such party. Any such representative must present written evidence to the Panel that he is acting as agent of the party on behalf of which the request is made. It is the view of IDA’s Management on the basis of the reasons specified below, that the Requesters do not meet these requirements. 4. The Request is signed by Mr. Reginald John Nolan and others specisring their postal addresses (and in one case a residential address), but without any indication of their residence status in the territory of the borrower or any evidence as to their identity. In the view of IDA’s Management, merely being present in or mailing a letter from the territory of the borrower concerned, would not meet this eligibility criterion; a substantial presence would seem to be the requirement rather than a “fleeting” presence in the country concerned. Thus, in our opinion, the Requesters must demonstrate that they have at least a substantial presence in Tanzania.  -2- 5. We note that, while registering the Request, the Panel has not accepted the designation of Mr. Reginald John Nolan as representative of the Requesters, because no appropriate written evidence of representation has been submitted to the Panel. Further, the Supplement to the Request was only signed by Mr. Nolan and not any of the other Requesters. We agree with the Panel’s decision and expect that the Requesters will be required to provide such written evidence. 6. With respect to the requirement that the affected party should not be a single individual, but a group of individuals with a commonality of interests, the following submissions are made. It should be noted that the “commonality of interests” alleged by Mr. Nolan in the Supplement to the Request is derived through Tannol Holdings Ltd., which is a Tanzania registered company with it own separate legal identity, and is not a Requester. There is also a disparity between the interests of Mr. Nolan, an owner, whose rewards are derived through dividends paid to h im by Tannol Holdings Ltd. as opposed to the other Requesters who are allegedly employees of Tannol t Holdings Ltd. In addition, it is not clear that all the Requesters are employees of Tannol Holdings Ltd., since the Supplement to the Request refers to “several of the Requesters“ and not to all the Requesters. In short, the Request fails to demonstrate clearly a “commonality of interest” among the Requesters. 7. The Resolution provides further that the affected party must demonstrate, that its rights or interests have been or are likely to be directlv affected by an action or omission of IDA as a result o f a failure to follow its operational policies and procedures. It is the view of IDA’S L Management that the Request and its Supplement refer principally to the effect of IDA’s Management’s alleged actions or omissions on Tannol Holdings Ltd., the company, which is not a Requester, rather than to the Requesters. On page 1 of the Request, it is stated that “But for IDA’s improper intervention, Tannol Holdings Ltd. would have developed a comparable Emergency Power Project (EPP) using private capital”. On page 2 of the Request, reference is made to the fact that “the approval of the loans [for this project (i.e. the Emergency Power Project to be financed from the on-going Power Vi Project)] will have a material effect on L Tannol who have already and will continue to suffer great financial loss and injury”. Further the request made by Tannol Holdings Ltd. to E lectrical Technologies Inc. ( E n )(page 2 of the Request) to play a lead role in constructing and operating the EPP, was not made by the alleged affected individuals but by the company. On page 4 of the Request, reference is made to the fact that “TannoVETI was .ifomally advised by the Government of Tanzania that it would be given a Government mandate to go forward with the EPP about January 2 1, 1995.” Other references in the Request and the Supplement leave no doubt that the party alleged to be directly affected is Tannol Holdings Ltd. and not the Requesters. 8. The only reference to any adverse effect on the Requesters relates to the deprivation of the Requesters from significant employment opportunities and profits to the owners, who include Mr. Nolan. In the view of IDA’s Management, these alleged adverse effects on the Requesters are therefore secondary and not direct as required by the Resolution. Further, there was also no guarantee that Tannol Holdings Ltd.’s offer would have been accepted by the Government, and thus generated the employment opportunities referred to by the Requesters. The inability of a company to obtain contracts does not entail any claim to be exercised by the employees or shareholders of the company concerned. L  -3- 9. With respect to the claim that the Tanzania Electric Supply Company Limited (TANESCO) plan “creates a logistics nightmare” and that the risks of breakdowns and accidents represents a “significant toxic spill exposure to the Requesters, as well as, subjecting them to unnecessary noxious noise, dust and smoke pollution”, IDA’s Management considers that no evidence has been produced by the Requesters to substantiate their claim and to meet the burden of proof that a causal link exists between IDA’s alleged failure and the potential material harm envisioned by the Requesters. No evidence is adduced for instance that the Requesters live, work or carry out activities along the route that the trucks are likely to take, in the transportation of the fuel to the Ubungo facility. As described in paragraphs B. 1 through 5 of the attached Annex, the Government of Tanzania has taken all necessary action with respect to the environmental assessment as required in IDA’s operational directives. 10. On the basis of the foregoing, it is the view of IDA’S Management that the Requesters have not met the eligibility requirements set forth in the Resolution. Admissibility of the Request 11. The Section of the Articles of Agreement referred to by the Requesters provides that IDA shall not provide fínancing if, in its opinion, such financing is available from private sources on terms which are reasonable for the Recipient. This Section raises an issue as to the admissibility of this particular claim, which is related to the decision-making powers of the Executive L Directors, rather than to IDA’s operational policies and procedures with respect to the design, appraisal andor implementationof a project financed by IDA. It relates instead to one of the considerations IDA takes into account, when it decides whether or not to provide fínancing to a particular project. Decisions taken by the Executive Directors with respect to matters subject to their judgment, e.g. whether the borrower will be in a position to meet its obligations under the loan anti whether the project can otherwise be financed on reasonable terms, do not fall within the ambit of the Resolution, nor within the powers of the Panel. These are discretionary powers vested in the Executive Directors for the exercise of which they are accountable to the Board of L Governors, not the Inspection Panel. In this case the decision to approve the amendment to the IDA Credit was made by the Executive Directors, upon the President’s Recommendation and with full knowledge of the alternative financing mentioned in the Request. 12. The assessment of the Government, the Tanzania Electric Supply Company L imited (TANESCO) and their advisers, with which IDA agreed, was that the terms of the proposed fínancing from Tannol Holdings Ltd.were unreasonable, and that its proposal was not justified on technical, financial or economic grounds, as explained further in Section A. 1 of the Annex.  ANNEX L Comments On Alleged Violations A. Articles of Agreement of IDA 1. Alleged violation of Article V, Section 1 (c) of the Articles of Agreement of IDA: “in that IDA funding for a government-ownedpower plant was being provided, when a superior private sector power project could be constructed and operated with financing from privates sources”. (a) In order to put the Tannol Holdings Ltd.’s proposal for the Emergency Power Project into context, the Panel should be aware that within Tanzania’s Master Plan for the energy sector, the next least cost expansion project for the power sector, is to utilize indigenous gas for the generation of electricity. Consequently, the Government has over the last two years been in discussions with a Canadian consortium for the development of the proposed Songo Songo Gas Development Project. This project, which is part of the least cost expansion plan, is being prepared with the assistance of L IDA and other co-financiers. In order to address the damage to the economy caused by power outages (estimated at about $170 million) in 1994 and to respond to higher than forecast demand growth, the Government decided to advance the purchase and installation of the turbines, which were to be installed as part of the Songo Songo Gas Development Project. The purchase and installation of these turbines was designated by the Government as the Emergency Power Project (EPP). These turbines will be converted from more expensive imported fuel to indigenous gas, once the Songo Songo Gas Development Project is completed. L (b) Prior to the receipt of the Tannol Holdings Ltd.proposal, the Government with the assistance of IDA’S Management (during the period from May to November 1994), had sought solutions to the funding of the EPP, including several private sources. Approaches had been made to potential suppliers to determine immediate availability of a thermal plant, including approaches to suppliers in Norway, South Africa and Scotland. Following these approaches, there was an offer fiom ROTEK, a South African company, which included a proposal for commercial financing, structured by Bankers Trust Company and involving the use of relatively short t erm money. It L relied on a sell and buy back scheme of Tanzania’s gold reserves to secure payments, and Government having reviewed this offer, found the commercial terms to be too onerous. (c) The Government on December 2, 1994, sent a letter to IDA’S Management requesting that the Power Vi Project be restructured to finance the necessaq generating plant. Management responded by sending a mission to review the situation with the Government and TANESCO and to find an appropriate solution. (d) The Tannol Holdings Ltd. proposal dated December 15, 1994, was to install a single 109 megawatt (MW) turbine, which was found to be inappropriate given the relatively small size of TANESCO’s generation system (380 MW). This proposal was reviewed by the Government, TANESCO and by their engineering, economic, financial and legal consultants (Acres International and Hunton and Williams) and found to be technically unsound. The main reason for this conclusion was that a failure of this turbine could trigger the collapse of the entire national electricity grid. ûther technical deficiencies, included an unrealistic implementation schedule; Tannol Holdings Ltd.’s inability to provide any information that it had experience operating as an L  -2- , I independent power producer; and the fact that Tannol Holdings Ltd. had not secured their proposed site at the Dar es Salaam Port nor demonstrated that they had undertaken an environmental assessment on the site. This last fàctor was important, as Tannol Holdings Ltd.’s proposal was to burn residual fuel, which generates large quantities of toxic sludge that would require adequate means for disposal. (e) The proposed financial terms (power purchase agreement and fínancial arrangements) were also judged to be too onerous by the Government, as well as, being unreasonable and unrealistic. In order to finance a 109 MW machine at a cost of about $50 million, Tannol Holdings Ltd. required that the Government make a down payment of $5 million, open an irrevocable letter of credit in dollars for $14 million for a period of eight years, a letter of credit in Tanzanian Shillings with a term of 15 years, having a íùnded value of two months of payments of the guaranteed annual monthly minimum charge for electricis generated (approximately $8-10 I- million) and a Government guarantee that Tannol Holdings Ltd. could externalize its payments in foreign exchange. It should be noted that Tanzania has no credit standing in the international finance community,no access to international bank loans or capital markets on an unsecured basis, and is off-cover with all major export credit agencies. (cf. CS First Boston Report dated October 12, 1994). Further, Tannol Holdings Ltd. was unable or unwilling to provide any concrete details of its financial status or the project’s financing plan. (0 On page 3 of the Request, the Requesters state that Bankers Trust Company, which was L retained by Government to compare the Tannol Holdings Ltd. offer and the TANESCO EPP proposal, in its report concluded that the TannoYETI proposal had a “much higher likelihood to meet” the Government’s “current implementation objectives”. In the view of IDA’S Management, this quotation is taken out of context. First, Bankers Trust had prefaced their report by stating that the restricted t h e frame had affected the degree of due diligence and economic analysis they could undertake. Second, Bankers Trust compared the TannoVETI proposal with the proposed Songo Songo Gas Development Project and not the EPP. The full quotation from the Banker’s Trust L report reads, “In view of the emergency situation which obtains and the uncertainties surrounding the WB [World Bank] financing solution, we believe, based on the information we received and have analyzed in this short time frame, that the TANNOLíELECTROGEN EPP has a higher likelihood to meet GOT’S current implementation objectives. We would urge GOT, if it decides this path, to ensure that the WB [World Bank] nevertheless continues its preparations for EPP ñnancing and equally important for the overall Songo Songo project.” Subsequently, the Government, in its letter dated February 15, 1995, reiterated its request to IDA to proceed with the revision of the Power VI Project in order to finance the EPP. (g) With regard to the economics of the proposal, an analysis was undertaken by Acres International for the Government to assess the impact of introducing a new power generation company using imported fuel, on the continued development of the proposed Songo Songo Gas Development Project, which is the next least cost investment consistent with Tanzania’s Master Plan for the energy sector. The results of the analysis was that TANESCO’s least cost power expansion plan over the next decade, required the utilization of indigenous gas over more expensive imported fuel and that the Tannol Holdings Ltd. proposal, as structured, was not part of the least L cost power expansion option.  -3- 2. “The announcement of the IDA financing was made prior to a recommendation of a competent committee, made after a careful study of the merits of the proposal Article V, Section 1 (d) of IDA’s Articles of Agreements.” IDA’s practice is to announce a tentative lending program for each country, which identifies proposed projects in the context of a country assistance strategy. The actual financing of any specific project included in the program is subject to the approval of the Executive Directors. The Section of the Articles referred to here states that IDA shall “not provide financing except upon the recommendation of a competent committee, made after a careful study of the merits of the proposal”. While modifications of existing projects are not subject in the Bank’s practice to the review of the “competent committee” provided for in the Articles, an exception was made in this particular case in view of the size of the amount involved and the fact that it covers a component which could be seen, for purposes of the Articles’ requirement, as a separate project. Prior to the presentation of the proposed revision of the Power VI Project to the Executive Directors, a recommendation of such competent commiW w as reviewed and signed by all the members, namely the expert appointed by the Governor for Tanzania, the Regional Vice President, Africa, and the Acting Senior Vice President and General Counsel . (A copy is attached as Attachment I .) 3. “The funding is being improperly diverted from the Power VI hydro-electric project and this diversion of funds appears to be the result of political or non-economic influences. Article V Section 1 (g), IDA Articles of Agreement”. L There is no evidence adduced by the Requesters to substantiate the claim that Management’s actions or the decision of the Executive Directors were in any way influenced by political or noneconomic influences. The revision of the Power VI Project to provide for the financing of the EPP was approved by the Board on the basis of technical, financial and economic information contained in the President’s Memorandum, TANZANIA:Power VI Project (Credit No. 2489-TA), Proposed Amendment to the Development Credit and Project Agreements, IDA/R95-54, dated April 18, 1995. B. Environmental Reauirements “IDA has failed to follow its operating policies contained in OMS No. 2.36, Environmental Aspects of Bank Work, para 9 (c) and (h) and OD 4.01, Environmental Assessment, Paras 2,14-22, because the funding of the OTC Project threatens to unduly compromise the public health and safety by selection of an unsound site for the Project; and no Environmental Assessment has been performed in or were any consultations with affected individuals or NGOs conducted”. 1. It should be noted that the link between the Requesters and alleged action or inaction on the part of IDA’s Management has not been demonstrated (see paragraphs 7 and 8 of the Response). It is the view of IDA’S Management t hat all applicable policies and procedures with respect to environment-related matters were followed prior to the approval of the revisions to the Power VI Project.  -4- 2. The Requesters refer to paragraphs 9 (c) and (h) of OMS 2.36 and to certain provisions of OD 4.01. The paragraphs of OMS 2.36 which are referred to, provide that “IDA will not finance projects that unduly compromise the public’s health and “safes” and “endeavors to ensure that projects with unavoidable adverse consequences for the environment are sited in areas where the environmental damage is minimized, even a t somewhat greater initial costs”. The Tanzanian Government b o k this principle into account in the siting of the turbines for the EPP. The Ubungo facility, which TANESCO has selected as the site of the new thermal general units,is an already existing power generation site which has been in operation for over 25 years. There are presently two gas turbines and six diesel engines operating on the site. The two additional turbines to be installed at Ublungo as part of the EPP, are part of the above-mentioned proposed Songo Songo Gas Development Project, which are being advanced to address the emergency situation referred to in paragraph A. 1 (b) above. 3. As part of the preparation of the Songo Songo Gas Development Project, an i Environmentali Assessment consistent with O.D. 4.01 was undertaken for the Government and completed in December 1994. A summary was circulated to the Executive Directors on January 25, 1995 (SEC M95-91) (hereinafter, ‘%e EA), as required by OD 4.01 and a copy ofthe summary is attached as Attachment 2. The environmental assessment reviewed, inter alia, the delivery of natural gas up to the Ubungo facility from Kinyeresi, which had originally been the proposed site for the construction of the power plant (including the installation of the turbines). A decision was tlhen taken by Government and TANESCO to install the new turbines w ithin the existing boundiaries of the Ubungo facility, rather than the new site proposed i.e. Kinyeresi, as it L would have taken too long to develop the Kinyeresi site. Furthermore, in designing the EPP the same environniental standards normally applied in the USA and Canada were applied, in terms of noise and emission standards.The air emissions at the Ubungo facility are presently being and will continue to be monitored by the National Environment Management Council. It should be noted, that in carrying out the environmental assessment, key affected persons were consulted, including interviews witlh knowledgeable persons in Government, parastatals organizations, NGOs and local authorities (see pages 126-128 of the environmental assessment). I, 4. In preparing the EPP, in addition to the environmental assessment referred to above, the following environment related actions were taken by the Government and TANESCO. To mitigate any preexisting conditions at the Ubungo facility, the Government commissioned a Regulatory Review and Compliance Audit, which was completed in April 1995. In addition, the Government commissioned an environmental site audit, the draft field summary of which was completed by the consultants in June, 1995. 5. With respect to the transportation of fuel, the Requesters state on page 2 of the Supplement to the Request, that two large tanker trucks an hour will be required to carry fuel through Dar es Salaam, 24 hours a day and that this creates a logistics nightmare, and further that “the risk of brlmkdowns and accidents represents a significant toxic spill exposure to the Requesters . . .”. The first clarification to be made is that the tanker trucks do not go through Dar es Salaam. Instead, the route taken involves a trip from the Dar es Salaam port on a dual carriage highway leading out of the city, with only a 2-3 kilometer stretch of urban development from the highway to the übungo facility. The trucks do not travel through the center of D ar es Salaam , I which may be the impression given by the Requesters. 6. In addition to the activities mentioned in paragraph 4 above, in preparing the EPP, an analysis was carried out for TANESCO concerning the number of trucks and trips that would be required to meet the fuel demand of the existinp; and planned generation plant at the Ubungo facility. The analysis indicates that, even based on a very high plant capacity factor of 95%, a maximum number of seven trucks, with a capacity to hold 40 cubic meters of fuel, would make three trips per day, six days a w ee k.This amounts to 21 trucks a day not 48, as alleged by the Requesters. Further, the trucks presently being used, and those planned to be used, are specifically designed for the transportation of fuel. Equally important, the number of trips will be reduced to less than half of the present trips, once gas is brought by pipeline into the Ubungo facility in about two years. Attachments: M:\BETTY\ TAWANEL9.DOC  . - Attachment 1 W C O >I ;LIES D AT I O N O F STATCTO RY C OM MITTEE L . . To: The President. Internarional Development.i\ssociation Recommendation of the Committee under Section 1 (d) of Article V of the Articles of Agreement on the proposed Amendments to the Development Credit Agreement for Credit No. 7489-T.A (Sixth Power Project) to the United Republic of Tanzania. The undersigned Commi'ttee constituted under Section 1 (d) of Article V of the .kticles of Agreement of International Development Association (the Association hereby L hubmits its recornmenciation pursuant to said Section in respect of the proposai to amend the Development Credit /Igreement. dated July 76. 1993. between the United Republic of .. Tanzania (the BorroLver) and the Association for the above-mentioned Project in order to include in the Project a component for the acquisition of urgently needed thermal generation capacity and to reallocate part of the proceeds of the Credit for such purpose. I. The Committee has carefully studied the merits of this proposal and is of the opinion that the proposed amendments are consistent Lvith the objectives of the Project as stated in the Recommendation of the Statutory Committee. dated .\Dril 15. 1993. atid that the Prolect. as L amended. toward the financing of which the proceeds of the Credit are to be applied comes within the purposes of the Association as set forth in Article I of said Articles of Agreement. and is designed to promote the economic development of the United Republic of Tanzania and is of high developmental priority in the light of the needs of the United Republic of Tanzania. . . * , . I í Sixth Power Project i í Amendment -. 7 Accordingly. the Committee finds that said Project. as amended. merits financial assistance from the Association. and hereby recommends said Project. as amended. for such assistance. COMMITTEE L +&& - ie., Acting Senior Vice President and General Counsel L Nominee selected by Governor for the United Republic of Tanzania wg/ I, President. Ainca ’Jt- Dated at Wasliington D.C. A p r i l 18, 1995 ' , . I . % __ ..i-. ... . .... .. .. Attachment 2 i, I . SWM95-9 1 FROM: Vice ;President and Secretary January 24, 1995 U " E D REPUBLIC OF TANZANIA L - SONGO SONGO GAS DEVELOPMENT AND POWER GENERATION PROJECT .. Environmental Assessment Summarv 1. Attached is a summary of the Environmental Assessment Study @AS) for the proposed Songo Songo Gas Development and Power Generation Project. The EAS and the full report filed, have been prepared by the Borrower. Circuiation of the EM does not si@ its evaluation or endorsement by the Bank. The Environmental Assessment is subject to possible change during the appraisal process. \i 2. Quest~onsmay be referred to the Task Manager, Ms. Karen Rasmussen (AF2EI), extension 34168. The draft report is available upon request from the office of the Director, Eastern Africa Department. L Distribution: Executive Directors and Alternates Office of the President Senior Management, Bank, iFC and MIGA L  Environmentai Irnoact Assessmenr of the Proposed Songo Songo December 1994 Gas Developmerir Project Page (i) EXECUTIVE S U M M A R Y INTRODUCTION The Governmerit o f Tanzania, specifically the Ministry of Water. Energy and Minerais (MWEIM) has funded an Environmentai Impact Assessment (EIA) of the proposed Songo Songo Gas Development Project. The g a s field is located on Songo Songo Island approximately 220 km s o u t h of Dar e:; Salaam. The project involves production, processing and transportation of natural g a s from Songo Songo Island t o a thermal electric power generation facility in Dar es Salaam, connection t o the existing electrical grid, and the local distribution of g a s t o industrial customers (Figure 1 . l 1. The construction of facilities is expected t o take approximately 18 months. T h e purpose of this study is t o provide an environmental impact assessment and a mitigation management plan. Since Tanzania d o e s not have environmental assessment guidelines or 'L environmental cischarge crtteria, this environmental assessment follows internationel environmental protection guidelines from the World Bank and Canada. POLICY, LEGAL AND ADMINISTRATIVE FRAMEWORK s responsible to t w o distinct levels of legal The Songo Solngo Gas Development Project i structure. The project should comply with Tanzania's National Environmental Management policy and legislation. The project is in part funded by the World Bank (International I/ Development Association) and musr also comply with their Operational Directives and Policy for natural resource management and environmental protection. Based on this study, management of environmental matters a t the legislative levei is not well defined. At present, t h e Ministry of Tourism, Natural Resources and Environment is responsible for developing and implementing a n environmental impact a s s e s s m e n t process and L ensuring that enforcement i s also in place. However, they have no legislative instrument to support or facilitate t h i s initiative. The development of a new National Environmental Management Policy is a positive action. The National Conservation Strategy for Sustainable Development (NCSSD) is being coordinated through t h e National Environmental Management Council ( N E M C ) . This policy is intended t o provide t h e framework f n r national environmental management iriitiatides. For this project, w e have adopted internationally accepted standards for environmental management practices typical o f similar development projects in Canada and abroad. The mitigation measures recommended for this project have been developed to also meet the standards of development as outlined in the operational directives, policies and updates of the World Bank. Mitigatjon measures as defined for wildlife and protection of land shall ensure that the objectives of the legislative instruments which d o support the EIA requirements are met. The process for land acquisition is also very well defined, however, this is not always well understood or fully implemented by the participants.  SONGO SONGO GAS DEVELOPMENT PROJECT 1 HBT A G R A Limited Songo Songo to Dar es Salaam G a s Pipeline 1- Engineering & Environmental SwAces Study Area Location Map .Ga-c.m CGi7015 FIGURE 1.1  I enviconmenta impacr Assessment of the Proposed Songo Songo December 1994 Gas Development Project Page (iii) The Ministry responsible for environment is the Ministry of Tourism, Natural Resources, and Environment, specifically the Department of Environment. The current system is very new and the staff have limited experience in this field. There is a requirement for greater coordination and collaboration t o encourage a multidisciplinary approach t o the Environmental Assessment. This would facilitate the development and enforcement of practical and realistic environmental objectives such as air emission and effluent discharge standards and an effective communication system within and between departments. There is a requirement for a dedicated group that c a n be held responsible for t h e implementation and enforcement of an environmental a s s e s s m e n t process. For this project, it is recommended that the responsibility t o coordinate and implement the recommendations presented in this €IA report will be the Ministry responsible for energy. This ministry should also be responsible for the dissemination of this material t o t h e other Ministries, t h e World Bank and t h e general public. PROJECT DESCRIPTION L The proposed development will produce approximately 35 t o 100 MMcf/d over a 20 year period from wells located on and near Songo Songo Island (Novatech, 1994). Natural gas is a mixture of saturated hydrocarbons and small amounts of water, hydrogen, nitrogen and carbon dioxide. The ga&,will be processed at a plant on Songo Songo Island t o remove produced water and condensates. The g a s h a s sufficient reservoir pressure such that compression is not required. The g a s will be transported via a 30 c m (12 in) diameter pipeline, 25 km ( 1 6 mi) to t h e mainland. The mainland buried pipeline, 1 9 2 krn (120 mi) long, will occupy a 30 m ( 1O0 ft) wide right-of-way during construction. The maintained right-of- i l way will be reduced t o . 20 m (66 ft) during operations. Much of t h e mainiine will be constructed through already disturbed, agricultural land. However, s o m e of the right-of-way may traverse coastal forest stands. The mainline pipeline will involve one major river crossing - the Rufiji River. The proposed power plant will be located on agricultural land west of the City of Dar e s L Salaam and will consist of three 20 MW turbine generators. The power will be delivered initially b y 132 kV overhead lines (with provision for 220 kV lines in the future) 12 km (7.5 mi) north to the existing Tanesco (Tanzania Electric Supply Company Ltd.) grid. Natural gas will be delivered to t h e existing Ubungo power plant by a 15 cm (6in) diameter pipeline from the new power plant. Additional small diameter natural g a s pipelines will be used to distribute g a s to the Tanzania Portland Cement Company and in the future t o smaller industries in Dar es Salaam. ENVIRONMENTAL IMPACT ASSESSMENT The potential impacts were identified by superimposing project elements o f the pipeline and power plant on existing natural conditions and applying standard (internationally accepted) mitigative measures. An underlying assumption of this method is that the project will be designed, constructed and operated, with due care for s a f e t y and environmental matters using current and practical engineering practices. Wherever possible, major upsets and deviations  i Environmental Impact Assessment of the Proposed Songo Songo December 1994 Gas Development Project Page iiv) from normal operational conditions have been taken into account in the assessment of L potential environmental impacts. impacts on t h e Biophysical Environment The baseline biophysical information w a s collected from a variety of sourcI-s including a literature review, maps, air photos and a n earlier feasibility report. This w a s supplemented by a route reconnaissance using helicopter, fixed wing and truck transportation. As well, knowledgeable personnel in government agencies and private organizations were interviewed. Impacts and Mitigative Measures The impact of t h e air emissions from t h e plant site are expected t o be neutral because t h e gas is sweet, ¡.e. it does not contain any sulphur hence there will not be any sulphur di&de t emitted. The exhaust stacks on t h e g a s turbines will be sized such that ground level concentrations of nitrogen dioxide d o not exceed ambient air quality guidelines. The concentrations of carbon dioxide, carbon monoxide and unburned hydrocarbons are generally small and rapidly dispersed- in t h e atmosphere. The marine pipeline route from Songo Songo Island to t h e mainland traverses shallow ( 1 O to 40 m ) water and will p a s s beside s o m e coral reefs and eel grass beds. There is a large variety of fish species in the vicinity of the reefs. Pipeline construction (June t o October) will cause L some minor and temporary siltation in t h e vicinity of t h e reefs. The tidal and near shore currents will rapidly disperse and dilute t h e suspended sediment t h u s minimizing a n y impact to t h e marine organisms and coral reefs. * The soils along the majority of t h e route are well drained sandy loams developed on undulating t o rolling topography. Imperfectly drained clay textured soils occur in t h e Rufiji River L . floodplain and south t o Ndundu. Right-of-way clearing and pipeline construction may cause low soil erosion impacts, but these will be minimized by rapid implementation of drainage and erosion control measures. The major river crossing will be the Rufiji which is the largest in Tanzania draining 20% of t h e country. The other. rivers including Mohoro, Ruhoi, Luhute, Mbezi,Mringa and Msimbazi are much smaller and often have limited flow during the dry season. Local surface water resources will be protected b y undertaking rnainiine pipeline construction during t h e dry season, and by timely implementation of drainage and erosion control measures. Produced water from the g a s wells on Songo Songo Island will be treated t o remove liquid hydrocarbons before release into t h e s e a . S e w a g e from the gas plant will also be treated before release into the sea. All hydrocarbons and other chemicals will be handled in a safe and secure manner, and employees in both t h e g a s and power plant will be trained in spill prevention and control. Emergency shutdown valves will be located throughout t h e pipeline system. L-  Environmental Impact Assessment Songo Songo of the Proposed December 1994 Gas Development Project Page (VI The major part of t h e pipeline route is located on land already used for agriculture. During the i- final route selection process measures will b e taken t o avoid or minimize clearing of native coastal forest. In areas where forest removal is unavoidable, a biological inventory of species composition will be m a d e prior t o clearing. The large diversity of wildlife in the eastern coastal area has been affected by human presence over severa4 centuries. Elephants, hippopotamus, wild pigs, baboons, monkeys, crocodiles and large numbers of bird species still occur. The Rufiji River has a large number of fresh water fish with u p t o 27 species recorded. Potential impacts t o wildlife and fish will be minimized by confining clearing t o project a r e a s , land pipeline and river crossing construction during the dry s e a s o n and preventing project personnel and contractor employees from hunting or fishing. Disruption of agricultural activities will also be minimized by construction during the dry t- season. Arrangements for compensation will be part of the right-of-way acquisition programme. 'Where necessary, temporary crossing of open pipeiine ditches will be provided, and temporary fencing will be used t o prevent people and animals from falling into the open ditch. Conclusions Methane, the major component of natural g a s is odourless, volatile and has a low solubility , I in water. Methane h a s been shown t o be relatively harmless t o living organisms and readily broken down by bacteria in t h e soil. In t h e e v e n t of a pipeline leak t h e release of natural g a s into soil would have little consequence as it would rapidly dissipate in t h e air. Therefore, it is concluded that t h e construction and operation of t h e proposed project is expected t o have low negative to neutral impacts on t h e biophysical environment. The final route selection will allow for the identification of the exact areas of native coastal forest and their associated L biodiversity. It i s recommended t h a t low-level air photos b e obtained during the final route selection stage. These photos should be interpreted to identify any areas of coastal forest along the route. The route should then be refined to avoid t h e s e forest stands as much a s possible. For those s t a n d s that cannot be avoided, a complete biological field inventory should b e conducted b y qualified personnel prior t o clearing. An overview of t h e proposed development activities, mitigative measures and residual impact of the rating for parameters of t h e biophysical environment is presented in Table 1.  Environmental Impact Assessment of the Proposed Songo Songo December 1994 Gas Developmen1 Project Page (vi) TABLE 1 impacts and Mitigative Measures of the Proposed Gas Development on Biophysical Environment BiûphpicaI Development Mitigative - 0, Parameter Activity Measures Air Qualiry Nitrogen oxide Emissione less than ambiant ground Neutral emissions from power Iewl air qualicy guidalinas plant iCO.05 pprnlannurn) Buffer zona around plant such that Neutral Noisa from power pla-nt noise levels at boundary fence do not excead 45 dB Marine Erosion and Pipeline routing to avoid coral reefs Lowlnegauva, s h w t L- Environment sedimentsoon during Careful construcuon to minimize term pipeline construction siltation -- Geology and Erosion o f s3il following Drainege and erosion control measures Lowlnegauve. short Soils COnStNCUO6 Reciametion plans tem Mitigation management plans Water Resources Siltation end pollution Rufiji River crossing during low flow LowlnegaPva, short - t erm during pipeline , (Sept Oct) ConttNCtIon Drainage and erosion control L Mitiganon management plan Fuel storage rod spill contingency plan. Vegetation Clearing of natural Pipeline rouung to ovoid or minimize Low /negative, long vegetation during area of coastal forest tem COnStNCdOn Confine clearing t o project area plan Reclamet~on Wildlife Hebitar loss and L Pipeline rouung to avoid or minimiza Low/negaove, long disturbance dunng wildlife habitat term construction and Confine cleennc t o protect afee operation No hunting. or trapping b y project personnel Fish SiltaUon end pollution Rufiji River crossing in Sept-Oct to & w /negative, sh o n dunng pipeline avoid fish migration temi co'nstnicuon Drainege end erosion control Mitipanon management plan No fishing by project personnel Fuel storaoe and soill conunaancv d a n Land Use DiSNPbOn O f OgflCUltUral Power plant site location t o avoid Low/nepetive. long activities during concentrated agncultural use tem construction and Pipeline construcuon otter harvest ope ration where possible Compensaoon plans Mitipetion maneaement plan  Environmental impact A s s e s s m e n t of the Proposed Songo Songo December 1994 Gas Development Project Page Ivii) Impacts on t h e Human Environment L The quantitative baseline socio-economic information w a s compiled from a literature review of existing, published administrative repons. This quantitative information w a s supplemented by a key stakeholder consultation process to interview knowledgeable persons in selected government ministries, parastatals and NGOs t o verify key issues and add qualitative perceptioris .and impressions. As well, the baseline w a s supplemented by route and facility site reconnaissance using helicopter, fixed wing aircraft and truck transportation. Impacts aiid Mitigation Measures The most important socio-economic issue which the project will face is related t o acquiring the rights t o t h e land for t h e pipeline and power transmission line rights-of-way and plant sites. The existing legislation and the land rights acquisition process provides for a fait and well-established means of settling the issue. However, there is a lack of understanding on the part of the general public a s t o their rights, and the current rate schedule of compensation entitlements appears OUT, of date in terms of reflecting t h e value of land (and its productivity) a s real property. It is recommended that a comprehensive land rights investigation followed by early arid full consultation with identified icterested parties be conducted t o facilitate fair negotiations for land rights and compensation. These s t e p s should be carried out as oart of t h e final mute selection orocesg so that potential problem areas (especially homes and long gestation agricultural crops such as coconut, c a s h e w nut, and mango trees, etc.) can be L avoided. In practical terms, rights negotiations will need t o take place very quickly after the land rights investigation s o a s t o limit exposure t o speculation and abuse. The consultation task should be incorporated in a n on-going public information and consultation programme. This will be the most important mitigation strategy. It should consist of i3 two-way flow of timely and accurate information about the project between the proponents and the potentially affected publics. This will enable cooperation toward common L impact management objectives. It i s recommended that a comprehensive project information and consultation programme be developed and implemented to provide this critical communication link on all project issues. This process shoyld be undertaken by the project operator so that it can take advantage of t h e existing experience that both t h e Tanzanian and external investors c a n contribute. Tanesco arid TPDC understand the local context and legal requirements. The investors are familiar with a consultative approach to land rights negotiations and the positive effectthis can have on detailed pipeline route and site selection. To ensure actual and perceived fairness in the proc,ess, a n independent process 'monitor' should be appointed t o advise t h e panies and publicly repon results. Given mitigation of this nature, the residual impact O f the project on human resettlement should be low.  Environmental impact Assessment of theProposed Songo Songo December 1 9 9 4 Gas Deveiopment Project Page íviii) The project will result in benefits on a local and national scale. The enhanced electrical L infrastructure and a c c e s s to gas energy by industry will generate indirect public service and economic spiri-off benefits. These will be most pronounced in Dar es Salaam. A significant local economic benefit of t h e project will be opportunities for training and employment. Due t o the t y p e of skills and experience necessary for the pmject, t h e spatial distribution of t h e Tanzanian labour force and t h e fact that a significant ponion of the project activity will be locat'ed in the Dar e s Salaam Region, most of t h e s e benefits will tend t o accrue to residents of Dar es Salaam. Most of t h e s e employment opportunities will occur during the construction phase and will only be temporary in nature. The operations phase of t h e project will also generate employment and training opportunities which will be smaller in number bct of a longer term nature. Songo Songo Island will also realize a significant local benefit. This will result from the L availability of excess potable water and electricity a t the g a s plant. Additionally, it would not be unreasonable for residen& in the vicinity of the pipeline, power plant and transmission lines t o also expect that t h e project may result in enhanced access to energy for themselves, either in t h e form of g a s or powe;: There may be good economic and engineering reasons w h y this mav be impractical but t h e y will be unconvincing and will s e e m illogical t o many. Mitigation for this natural increased level of expectation is open and honest communication a b o u t the limits t o local energy distribution combined with a vigorous programme of delivery of other project-related economic benefits a t t h e local level. This programme should also include an i l ongoing awareness component t o highlight t h e extreme and potentially deadly danger of attempts t o acquire use of the high pressure natural gas on a "self-serve" basis. As mitigation, a local benefit programme could be developed and implemented. Further community consultation is required t o determine the programme's feasibility, particularly regarding the involvement of the communities along the pipeline route in the long-term L maintenance and security of t h e right-of-way. This could result in an on-going, mutually beneficial relationship between the project proponent, local communities and individual land o w n e r s h s e r s . As an integral part of t h e land acquisition negotiations, farmers and other local interests could be monetarily compensated for any unavoidable immediate and long-term damage t o cropping ability, and for full and unrestricted access t o and u s e of rhe right-of-way for pipeline construction. In addition, they could also be allowed t o re-crop the right-of-way (with cenain restrictions against large trees and deep root crops) on a condition of long-term free a c c e s s by t h e project proponent for security and maintenance. The cropping. or locally managed alternate revegetation, would provide long-term soil, slope and pipe stability and would limit a c c e s s by outsiders t o mitigate both environmental degradation and security concerns. If this agreement were t o incorporate some annual fee for maintenance and security (perhaps regular foot patrols by local residents), it would also provide a needed service t o the project proponent and engender a sense of local 'ownership' in the project and its well-being.  Environmental Impact Assessment of t h e Proposed Songo Songo December 1 Y94 Gas Development Project Page (ix) National economic benefit of the project accrue from t h e expenditures on supply and service ‘L contracts within the local business community, particularly during construction. The challenge is t o deliver t h e maximum amount of business to local suppliers (in all regions, not just Dar es Salaam) which is consistent with t h e project’s requirements for competitive pice and quality, with t w o provisos. The f i r s t is that t h e project should endeavour not t o encourage speculative investment in new capacity that c a n not b e sustained beyond the short-term construction phase. The second is that, through its local purchases, it should not cause shortages, and ’related possible disruption and price inflation. particularly in critical sectors such a s food supply and transportation. T w o mitigation strategies are available to optimize local business content. First, include specific provisions in the primecontracts t o facilitate delivery of local sub-contracts. Second, the project proponent could split-off certain specifically identified components from t h e main contract and procure these directly. This may be more difficult in some respects but it Would L enable a more flexible response to t h e time and capacity constraints that some local suppliers may face, ¡.e., componénts such as the pipeline right-of-way and facility site clearing and preparation could be started sooner and spread o u t over a longer period. It would also facilitate t h e encouragement of specific joint ventures or capability expansions that wouid enhance the objective & technology transfer. The extent t o which construction c a m p s will be used to h o u s e t h e temporary workforce is an important element of the construction plan. If a secure, self-sufficient worker accommodation L facility is provided, then local communities will b e s o m e w h a t insulated from potentially harmful interaction with outsiders (construction workers and their recreational activ¡ties/spending are often associated wlth social impact). If workers are accommodated in local communities or live-in c a m p s which are serviced a n d supplied by local communities, then this may increase t h e risk of s u c h interactive impact, but it will be accompanied by a higher potential economic spin-off benefit. It is presumed there will be a c a m p facility on L Songo Songo Island, a s well as t w o or three mainline pipeline construction camps. However, it is anticipated that there will be no need for a c a m p a t the Kinyerezi power plant site d u e to its proximity t o Dar es Salaam. It is assumed that the construction contractors would provide workers with appropriate daily transportation t o and from t h e Kinyerezi site (¡.e.. buses). This a s s e s s m e n t did not identify any significant known historical resources/sites in t h e vicinity of the project facility sites or the pipeline corridor. However, the areas between Dar es Salaam and Songo Songo Island are very rich in t e r m s of cultural resources. A continuous archaeological surface survey should be undertaken a s the pipeline route is finalised. Any promising areas could then be t h e subject of test pit digs t o determine archaeological potential. In addition, a n important component of t h e project information and consultation programme will include interviews with local informed s o u r c e s s u c h a s village elders and leaders t o discover if there are c a n y cultural resources sites in the vicinity of t h e route. Continuous archaeological monitoring of trenching for t h e gas pipeline should b e undertaken t o salvage a n y archaeological materials that have not b e e n anticipated by the s u r f a c e survey and which might be encountered. ' C tnvironmencai impacr ASSeSSment of the Proposed Songo Songo December 1994 Gas Development Project Page (XI Conclusions s expected t o have l o w negative The construction and some operation of the proposed project i t o neutral impacts on the human environment with issues such as land rights and resettlement. However, there will also be positive, moderate impacts on the human environment as a result of this project, specifically in the issues of employment and entrepreneurial opportunities. ~. It is recommended that a pre-acquisition land rights investigation be completed along the entire length of the pipeline route and in the vicinitv of all project facility sites t o determine the ownership of the land and identify all interested parties t o be involved in any compensation negotiations. It i s also recommended that a historical resources survey be conducted prior t o final alignment selection t o identify any currently unknown significant areas t o be avoided. L An overview of the proposed development activities, mitigative measures and residual impact of the rating for each parameter of the human environment is presented in Table 2. ' \ Environmental Impact Assessment of the Proposed Songo Songo December 19. Gas Development Project Page ( TABLE 2 L Human Environment D a d o p n r n t A&* Oparioonr employment and Right-of-way, Maimrnincr and Modarm/~or~t~va. L training sacumy rgraammtr long t a m Racmnmant of naff during conmctmn b n i u u c t i o n empioymont and toninurnon phaea training training parmana Rural n c N i r W n t .CCO*i riming to avoid bcai agneuhral labow demand p.&. WhaN Local pmcunmem porribk A8ama8 bC.1 c i p i b i l h a and mmeh to proj.ci n o d a L Early nama to businosa communw incemirrr to prime comraaor for Local content = r derignatad dimct subcontranon from bsal i fm Timing and bcaoon of ell pmjact Continuou8 muRi-paW Neutral eCtlblClû8 infomatton and ConauRatton Uncartainry and n~imanco to pmgremwu ae propet planning lc change and impl.momnion tool Enwnmnnunral dsmaga due to and Envimnmancat orian~atmn Nemal crralaarnass or poor c o n m c t m n training prooramma PrKtKe and roaal imoKt Local purchasing nd W t r wmout chona~es/inflatton Gowmment planning t o meet reauiremmntr - Damaga to hirroncil amfacts Final pipolina alionmont 8UN.y Lowlnegatiw. ihon form ditching and 81x0 to avod significant area- tom dawbomont tonnnicwn phasa monnoring e and .v g l. .  Environmental Impact Assessment of *>e Proposed Songo Songo Decemoer 1096. Gas Development Project Page (xi¡) MITIGATION MANAGEMENT PLAN L The mitigatian management plan describes the basic or generic environmental protection procedures for t h e construction and operation of all a s p e c t s Of the project. The plan focuses on specific protection measures that must be applied in t h e field. The pian is a stand alone document for use by field personnel and the procedures outlined in the plan should be implemented t Q minimize potential adverse environmental impacts. The World Bank has identified a list of porrntial k e y issues that should be addressed during the environmental a s s e s s m e m and mitigation. Our assessment focussed on the following key issues for the purposes of this study: 1) Biological Diversity: 2) Coastal and Marine Resources: L 3) Wetlands; 4) Involuntary Resettlement: and 5) Cultural Properties. In general, the construction.and operation of the proposed project is feasible, and impacts are expected to be negative but manageable and of shon duration or neutral. There are also some positive impacts related to. socio-economic issues that are likely t o be realized for the operational life of t h e project. However, in order for t h e mitigation management plan to be L effective, w e recommend that t h e following be completed a s part of the final route Selection process: 1) aerial photography prior to finalize pipeline alignment and facility site selection; 2) a comprehensive land rights investigation, and .a negotiation and compensation programme; and L 3) a detailed and focussed archaeological survey. The mitigation management plan is organized according t o site specific facilities (¡.e., gas plant, power plant, pipelines, a c c e s s roads) and specific activity (¡.e., general procedures, construction, operation, preventative procedures, clean-up procedures, emergency spill contingency, and reponing). The document is written using suitable terminology for it to be directly incorporated into contract documents. An environmental monitoring Plan h a s also been prepared t o provide feedback on the environmental protection measures and the problems encountered, and t o provide a mechanism to adjust and alter the mitigation management plan t o achieve the desired results. The monitoring programme details requirements and procedures for necessary personnel and their education and t h e specific environmental parameters that require monitoring. Additional information regarding t h e training requirements and c o s t s h a s been included. This .includes the approach and rationale behind institutional strengthening programmes t h a t have been  Environmental impact Assessment of the Proposed Songo Songo December 1994 Gas Development Project Page ( x i $ recommended t o provide a formal avenue for a transfer of technology t o Tanzania in the L environmental assessment and management process. Acknowledaements This repon on the environmental impact assessment of the Songo Songo Gas Development project has been:prepared by AGRA Earth & Environmental w i t h assistance of a wide variety of people. in Tanzania and Canada. Assistance from the following organizations and individuals for advise, assistance and report preparation is acknowledged: O Ministry of Water, Energy and Minerals; e Tanzania Petroleum Development Corporation; e Tanzanian Electrical Supply Company Limited; O Ocelot Tanzania Inc.; L e Trans-Canada Pipelines Limited; e Mr. B. Benno, University of Dar es Salaam - Marine Environment; O Or. R. ûesha, University of Dar es Salaam - Socio-economic Baseline; e Mr. K. Kulindwa, bniversity of Dar es Salaam - Economic Baseline; e DI. K. Howell, University of Dar es Salaam - Wildlife; - Mr. R. Tarnatamah, University of Dar es Salaam Fisheries; and e Mr. C. Saanane, University of Dar es Salaam - Historical and Cultural.