China - Smallholder Cattle Development Project - environmental assessment summary (Vol. 2 of 2)

E-273 VOL.2 CHINA SMALLHOLDER CATTLE DEVELOPMENT PROJECT (P045264) ENVIRONMENTAL MANAGEMENT AND MONITORING PLAN Prepared by: Task Management Team, EASRD Assisted by: Project Management Office and China Agricultural University Beijing, China July 1999 Revised November 1999   CONTENTS PAGE A~. lntr.otuction ..... . ,,,,,,1 B. Description of Project Activities ....................................,,.,. ..3 C. Environmental Impact Potential .......................o. 10 D. Environmnental Mitigationa Plan, ............................................................ I ,I1 E Envirornental Impact Monitoring ..........................,,...,,.,,,,.,.,,.,,,., .. , 19 F. Capacity Development and Training ................................. ., 21 G. Implementation Schedule and Cost Estimates .. .............................. 22 H. Integration of EMP with Project ...........................,,,......,..,....,....,.. 24 TABLES 1 Breed Improvement Sub-component .............................,.,,.,,,.,.4 2 Phasing of Mineral Block Production Plant ... .5 3 Cattle Flow Diagram from Raising to Processing.................................,,,,,,,.6 4 Phasing of Household and Feedlot Cattle Production ..................................7,,,,,,,,,....7 5 Pilot Cattle Market Establishment by Province ...............................,,,.,,,.,.,,,,,,,,.8 6 Participating Processing Enterprises ........................,.,,,,.,,,,.9 7 Environmental Mitigation Plan for Forage Balance Monitoring .................................. 12 8 Environmental Mitigation Plan for Household Cattle Productior . 13 9 Projected Phasing, Number and Location of Feedlots by Province . 13 10 Environmental Mitigation Plan for Feedlot Production ................................................ 16 11 Estimated Budget for Environmental Mitigation for Feedlot Production ..................... 16 12 Environmental Mitigation Plan for Zoonotic Diseas ControL ..................................... 17 13 Environmental Mitigation Plan for Slaughtering and Processing Enterprises .19 14 Enviromnental Monitoring Measures and Indicators by Project Component ............... 20 15 Environmental Impact Mitigation Training Programs ....................................,.,.,., . 21 16 Environmental M&E Training Implementation Schedule by Province and Budget. 23   Smallbolder Cattle Development Project Environmental Management and Monitoring Plan A. INTRODUCTION Project Overview. The project would assist the government's policy of developing its beef cattle sub-sector in response to emerging market demand for quality beef. The project would put special emphasis on assisting the smallholder level in the inland provinces of Henan, Hebei, Anhui and Shanxi. These areas have surplu.s labor and natural resources, but productvity and quality of cattle are low due to lack of technology and infrastructure. The project aims to increase production and improve quality and marketability of small-holder produced cattle in order to enhance farmer incomes and reduce poverty. These objectives would be achieved through: (a) introduction of improved breeding, feeding and production technologies, (b) development of commercial infrastructure which would provide the linkages between production and markets: (c) increasing value-added to cattle production through processing, (d) strengthening animal husbandry institutions to better provide support services to farmers and (e) upgrading of regulatory services to include market incentive-driven grading and quality control. The project would promote the effective use of existing, low-value crop residues and bther natural resources which are presently going to waste, foster the development of commercial cattle production and encourage the participation of women in production. Environmental Assessment Process. Consistent with the provisions of the Bank's Operational Directive 4.01, Environmental Assessment, the project was assigned to environrmental screening category B due to the generally small scale nature of the investments to be made under the project, the widely disbursed nature of the individual production units across the four participating Provinces, the limited range of environmental impact potentials, the existence of widely available and well understood mitigation measures for these impacts and the fact that, for the more substantive of these impacts, there arm existing and effective regulatory procedures in place within China to deal with them. In accordance with the provisions of the Environmental Protection Law of China, the project has been subject of a full Environmental Impact Assessment Report prepared by the Environmental Impact Assessment Center, China Agriculture Univesity of Beijing which is an A-rated Institute for the purposes of local regulatory procedures. This report, supplemented by additional work carried out by an environmental specialist acting of behalf of the Bank, led to development of the environmental monitoring and management procedures which have been incorporated into the project design. The Report has been rcviewed and cleared by the provincial Environmental Protection Bureaus (EPBs) of all four participating Provinces and the State Environmental Protection Administration (SEPA). Environmental Overview. The project is intended to have envirozunentally beneficial effects in several ways. On the production side, positive effects are two-fold: (a) the diversion of otherwise surplus crop residucs from buming to cattle feeding, and (b) increasing production and recycling of cattle manure as a valuable source of organic fertilizer. On the processing side, the principal positive effect would be the production of safer food for wholesale and retail markets due to improvement in hygiene in the beef processing chain, the quality of the beef produced from the production system and improved meat inspection procedures which will be promoted through the project.  2 Nevertheless, the project also has some adverse environmental impact potentials which, to the extent possible, have been minimized through project design in response to the fldings and recommendations of the environmental assessments. Residual impact potentials will be addressed through the environmental monitoring and management procedures summarized in this report. The main environmental safeguards incorporated into the project design include: Livestock Breeding and Production Systems * the livestock breeding program includes provisions to protect the gene pools of indigenous cattle breeds to ensure that they arc not lost during future development of the sector; * the project will not support range-fed production of cattle so as to avoid any potential to contribute to over-grazing in the project provinces; * the focus of the project will be on small scale, household-based production using crop and other residues (e.g. corn stalks) which, at present are burnt or otherwise disposed in ways which contribute to rural area environmental problems in China. The livestock production system will convert these residucs into meat and livestock waste (manure) which will be collected and to be retumed to the farners' fields; * the entire project design is based on Provincial and county level feed balances which have indicated that crop residue resources will be sufficient to meet projected demands. These balances will be kept under constant review as the project progresses to ensure that the rate of development remains consistent with the availability of residue resources in the field; * small-scale household/village feedlots to be supported under the project must be pre- existing and will be restricted to sizes which are not subject of environmental permitting procedures in the United States'. In addition, the assessment procedures for determining the eligibility of households/villages to participate in the program include provision for preparation of site-specific environmental management plans to provide a basis for detertnination of the acceptability of proposals This procedure is modeled on and exceeds procedures recommended by the US Environmental Protection Agency (USEPA) for regulation of feedlots which fall below the regulatory thresholds set down in the National Pollutant Discharge Elimination System (NPDES); and * provisions have also been included to reduce the transfer of zoonotic diseases to the participating fiam families. Livestock Processing * investments in improved livestock processing facilities will be focused on existing enterprises which are already subject of regulatory control by Chincse Environmental Protection Bureaus (EPBs); * all participating enterprises must be capable of complying with relevant government environmental regulations after project supported investments and no disbursements will be authorized without prior presentation of regulatozy clearances by the relevant EPBs; and * current government-prescribed standards for occupational health and safety must be complied with in all partcipating enterprises. Overnll Project Mansgement * environmental monitoring units and budgets for environmental mitigation are in place at all project management offices and project enterprises. There are presently no onvironmental regulations governing development and operation of concentrated animal feeding operations (CAFOs) in China. In the absence of such rogulatons, the design and regulatory guidelines applied by the US Environmental Protection Agency through the National Pollutant Discharge Elimination System (NPDES) have been followed in development of the project concept.  3 B. DESCRIPTION OF PROJECT ACTIVITIES The description of project activities is based upon the infomation in Annex 2 in the Project Appraisal Document, as amended following appraisal in May, 1999. Project Activities Summary. The Project would support the government's policy of developing its beef cattle sub-sector in response to the emerging market demand for quality beef. The project would have a strong commercial marketing orientation through the production, processing and marketing of quality beef. The project would involve the four project provinces of Henan, Hebei, Anhui and Shanxi, These provinces have a combined population equivalent to that of the United States. In total, 17 prefectures, 73 counties and 326 townships would be directly involved, with a total of 138,488 participating rural households. There are four main components of the project: L Cattle Breed and Feed Improvement Component (USS2.00 million) Breed Improvement Feed Improvement U1. Cattle Production (USS132.53 million) Household Cow-Calf Production Household Cattle Fattening Feedlot Production II. Marketing Development Component (USS25.45 million) Live-Cattle Markets Beef Market Linkages -Slaughterhouse Upgrading -Market Information System -Beef mrading, Quality Assurance and Meat Inspection -HACCP (Hazard Analysis Critical Control Point) lV. Institutional Strengthening Component (USS19.88 million) Animal Husbandry Bureau Strengthening Training Research and Development Strengthcning of PMOs The abovc-listed activities would be implemented as an integrated cattle production system, ranging from breed improvement through production, processing and supported by infastructure development, The Cattle Breed and Feed Improvement Component would ensure a supply of cattle of improved genetic quality for breeding and fattening. Cattle feeding would be heavily dependent on the utilization of crop residues and oilseed cakes (rsidues from vegetable oil production), with only small amounts of com concentrate (8% of total feed quantity) for feeding latepregnant and lactating cows and young calves. Young cattle produced by cow-calf raising households under the Cattle Production Component would ensure that adequate cadle supplies were available for project-supported slaughtering, processing and marketing. The Marketing Linkages Component would support the establishment of commercially-oriented cattle wholesale markets; assist in the improvement of cattle slaughtering and beef processing plants; and support food safety, beef grading, quality assurance and meat inspection progams, The Infrastucture Stengthening Component would support veterinary, extension and AI support services to be delivered to the project by the Provincial Animal Husbandry Bureaus; provide training, support research and development; and support project management through the strengthening of the Project Management Offices.  4 I, BREED AND) FEED IPROVEMENT COMPONENT (USS2.00 MILLION) Breed Improvement The sub-component would support the provincial-level breeding center in Henan and Anhui (the other two provinces alrcady have adequate facilities). Details are provided in Tablc 1. At the Henan Provincial Cattle Breeding Center, the Project would support the expansion of bull housing facilities, equipment for frozen semen production and embryo transfer; forage production facilities and storage; veterinary clinic; power and Dansportationr environmental protection facilities; and training. A total of 22 breeding bulls will be procured under the project. At the Anhui Provincial Cattle Brceding Center, the project would support upgrading and expansion of bull holding facilities; the importation of 20 breeding bulls; and the construction of a liquid nitrogen plant. Table 1- Breed Improvement Sub-component Province Breed Improvement Program PY] to mid-PY2! Haoasn Expansion of Provincial Cattle Breeding Ccnte through; --Construction of additional bull holding facilides; -Addition of scraw semcn ftezing facility --Establishment of embryo tnsfer unit --Institution of household breeding cow scleetion programs -Upgrading of existing indigenous Nanyang cattle herd --Training and TA Activity FYI 2 FY3 FY4 FYS Holding facilities Scrnen freezing facility Embryo transfer unit Nanyang upgrading program ___ Household cow sclectioin Training and TA Anhui PYJ to mid=p2: Expansion of Provincial Cattle Brecding Center through: -Improvement and cxpansion of bull holding facilities --Construction of new liquid nitrogen plant -Importation of 20 brecding bulls --Institution of household breeding cow selection programs --Training and TA Activity FYI FY2 FY3 FY4 FYS Holding facilities Liquid Nitrogen plant Bull procurement Household cow selection Training and TA In order to balance indigenous breed improvement with the importation and crossbreeding of imported cattle breeds, each province is committed to undertake two important activities under the Project, using its own funds. These include (a) the upgrading of existing indigenous cattle breed(s) to serve as a gene pool from which to develop suitable crossbreds, and (b) the development of a crossbreeding strategy which is responsive to producing stock adapted to local conditions. Ihese objectives are already being pursued wivd non-project funds, but the project would support training and TA to ensure that indigenous upgading programs would be in line with the crossbreeding strategies to be undertaken and that an adequate gene pool supply is ensured.  Feed Improvement Sbanxi Mineral Block Plant. The Cattle Industry Services Center (CISC) under the Shanxi Provincial AHB wants to introduce mineral blocks into the cattle production areas, but these are not currently available within the province. Some salt licks are manufactured at a plant in Mongolia and are sold in Shanxi, but the Bureau wishes to research various mineral formulations for beef cattle production. The project would finance the establishment of a small, new pilot- scale 1.5 t/h block-making facility for testing the application of this feed supplement. The production facility would comprise a material store, a processing mill, a boiler room, a laboratory, an office and a toilet. Equipment under the project would be limited to the power, heating and water supply systems at the plant, the 1.5 th mineral block plant and a weigh bridge. The offices would be provided with ofiTce equipment, a computer and internal quality control facilities. The project would provide 2 trucks and 1 man-month of local training At full production, the plant would produce 3,000 tlyear of mineral blocks. Considerable marketing would be required for this new product, veterinary stations, market offices and feed mills would participate as marketing outlets. Boiler emissions would have to be controlled to levels mandated by environmental regulation. Total cost is estimated at $653,000. Table 2 indicates the phasing and production output of the vitamin- mineral block plant throughout the project's life span. Table 2 - Phasing of Mineral Block Production Plant Year 1 Year 2 Year 3 Year 4 Year 5 Total Output at Full Production Cattle Vitamin Mineral O 1,000 2,500 3,000 3,000 3,000 tons of Block Production cattle mineral blocks IL CArILE PRODUCTION COMPONENT (USS132.53 MILLION) This component is divided into three sub-components: (a) Household Cow-Calf Production - 128,156 households; (b) Household-Based Cattle Fattening - 10,332 households; and (c) Feedlot Production - about 130 feedlots. A cattle flow diagram for the Project is presented in Table 3. It should be noted that all of the data presented for the household-based production and fiatteing systems are best estimates based on the feed balances developed for the purposes of project cost estimating and economic and financial analysis. The numbers quoted represent the upper bounds of the development (since there will be insufficient funds to finance a greater level of development). The actual numbers and the distribution of different sized production units will depend on the proposals received from those households wishing to participate in the program and the case-by-case eligibility assessments made by the Project Management Offices based on the acceptance criteria, including environmental criteria, which have already been agreed upon.  6 Table 3 - Cattle Flow Diagram from Raising to Processing (at Full Production) Housebold (BR) Heifer Bull Cattle Beef Production Calves Calves Feedlots Markets Processors (a) Cow-calf Heifer calves Bull calves Finished in To be sold in Purchased by production: weaned Weaned 130 feedlots existing project per year: Per year: markets slaughter 128,156 including 9 houses and Households 142,596 142,596 53,730 pilot project processors: raising per year head head head markets 110,000 head 285,192 at 90% 92,596 Heifers of male and female End use: feedlot to be sold to project cattle calves To be capacity farmers inside fattened by and outside (ave. 2.1 iIs or in End use: project head/HHIyr) feedlots Slaughter and _ processing (b) Fattening HHs: Retained Finished cattle: Processors to witin 110,000 head convert 10,332 HHs project as to project 110,000 Fattening per year Replacement processors project cattle 76,469 heifers: 32,596 head into 23,200 male cattle sold to other tons of (ave. 7.4 50,000 processors dressed beef headlHWyr) head outside the and beef to be purchased project products from cow-calf hhs _ - __ _ Household Cow-Calf Production Sub-component. The Project is designed to support approximately 128,158 households sprcad across all four Provinces in cow-calf raising to achieve Project self sufficiency in young stock supplies. On average, it is expected that a typical parficipating houschold will raise 2 or 3 calves per ye, depending on local circumstances. The household incorporate one or two breeding cows although it would also be possible to include some fattening cattle if so desired. Household participation would be phased to allow for the gradual procurement and availability of breeding cattle, synchronized to a parallel development of support services, forage preparation technology and AI services. In all project provinces, cattle feeding will be based on nutritionally enhanced crop byproducts and other agricultural wastes which would be ensilaged or ammoniated with urea (to increase nitrogen content for conversion into protein) in silo pits covered by agricultural plastic. The .project will finance sub-loans to all participating houscholds for the purchase of breeding or fattening cattle, cattle production equipment, and urea and plastic for straw ammoniation. Indicative household and feedlot (see below) phasing is presented in Table 4. The All China Women's Federation (ACWF) would assist county AHBs attached to local PMOs in selecting suitable households for participation in the Project. The ACWF would provide information to AHBs regarding the financial status of households; their prior experience with livestock or cattle raising; training needs; and availability of savings.  7 Table 4- Phasing of Household Production and Feedlot Cattle Production Cattle Production Unit Year 1 Year 2 Year 3 Year 4 Total Component 1. Households Total 43,933 58,286 24,2I0 1,630 128,156 (Cow-call) Anhui No. 8,220 18,600 10,830 1,630 39,280 Hebei 16,263 16,263 32,526 HUnan 9,450 9,450 9.450 28,350 Shanxi 10,000 14,000 4,000 28,000 2. Households Toial 2,460 2,666 3,109 2,153 10,411 (fattening) Aouia No. 106 312 309 103 830 Hebei 1,389 1.390 2,779 Henan 900 900 900 2,700 Shanxi _ 2,000 2,000 4,000 3. Feedlou Total 30 90 10 0 130 Anhui No. 4 9 4 17 200 head 4 8 4 16 400 head 0 500 head I Hebei No 27 23 S0 100 head 14 13 27 300 hcad 9 10 19 500 bead 4 _ 4 Hienan 100 head No. 51 51 Shanxi 1 500 head No. _ 6 6 12 Household-Based Cattle Fattening Sub-component This sub-component would support about 10,322 households who already have adequate supplies of self-produced cTop by-products to set up small livestock fattening enterprises to enhance their incomes from cattle fattening. Fattening models would vary from one to three fattening cycles per year. These households would purchase yearlings from the cow-calf households and raise them for almost a year for sale to processing plants or cattle markets. The project would support participating households by financing the first batch of fattening cattle; the construction of cattle sheds; production equipment, and forage storage facilities. Feeding regimes would be based on maximizing the utilization of ammoniated or ensilaged crop residues, fortified with oilseed cake. The projected schedule is also shown in Table 4. Small Scale Feedlot Production Sub-component. This sub-component would be instrumental in providing linkages between cattle production and cattle markets and processors. Small-scale feedlots would also provide an important market channel for absorbing young stock sold by households and would sell finished cattle to beef processors. Provision has been included in the project for support to be given to 130 existing feedlots for expansion and/or upgrading. It is expected that about one-third of these will be located in Renan and Hebei while the remaining third will be divided about equally between Anhui and Shanxi. Feedlots would be activated and phased in accordance with increasing cattle supplies and the availability of suitable candidates for development. The estimated distribution of feedlot capacities used for project feasibility assessment, and based on the best assessments of the concemed Animal Husbandry Bureaus, is shown in Table 4. It is expected that the majority (around 60%) of feedlots will be of around 100 head capacity although provision has been included for proposals to be accepted for units of up to 500 head capacity. Proposals for units greater than this size will not be considered. Feedlots may  8 be owned by individuals, registered colloctives or registered enterprises and their existing capacity would be expanded in accordance to proximity to and availability of, project cattle. m. MARKET DEVELOPMENT COMPONENT (USS25.45 MILLION) This component covers the essential linkages betwcn cattle production, marketing and slaughter and processing and the marketing of beef, and includcs the project investments necessary to link producers, cattle markets and commercial meat companies. The component would also ensure that quality assurance and cattle identification and tracking systems (from breeder to producer to slaughterhouse to carcass) are in place to satisfy the industry at all levels. The component would finance the following activities: (a) Live-Cattle Markets (b) Beef Market Linkages (i) Slaughterhouse Upgrading (ii) Market Information System (iii) Beef Grading, Quality Assurance and Meat Inspection (iv) HACCP (Hazard Analysis Critical Control Point) Live Csttle Market Development. This sub-component aims to develop a pilot program for live cattle markets, which would be centers for trade and market information as well as places to access technical knowledge and veterinary services. The project would assist the AHB bureaus to upgrade a small number of existing cattle markets in project provinces, two markets in Anhui, and one in Henan and Hebei and five in Shanxi, The effectiveness of these markets would be assessed at the midterm review, and subject to the results of the review, up to 10 additional markets might then be funded, where feasible. Investnents at each livestock market would include a simple marketing office with a veterinary room and a sale shed, and the construction of water troughs, rails and feed bins for cattle. A weigh scale with a print-out facility would be provided for voluntary use by farmers and dealers. Staff from AHBs would be trained to collect price and market information and track project cattle entering these markets. The establishment of cattle markets is presented in Table 5. Table 5 - Pilot Cattle Market Establishment by Province Province Hengn Ainhui Shanxi Hebei Project Year I 2 3 1 2 3 1 2 3 1 2 3 Pilot markets 1 (3) 2 1 1 Simple uprading 4 (7) Numbers in brackets denote poaible fuhire upgrading following MTR in PY3. Beef Market Linkages Development. This sub-component is designed to ensure that marketing linkages exist between high-grade cattle production and markets for good quality beef products. This sub-component would include three parts; cattle slaughtering and processing, market information system, and beef grading, quality assurances and meat inspection system. Cattle Slaughtering and Processing. The project will finance the establishment, upgrading and/or expansion of five slaughterhouscs as demonstation production operations. All The phasing and start-up production of participating processing enterprises arc outlined in Table 6. Of the five enterprises to be supported under the project, one will be new, three will be upgrades of existing operations and one will be an expansion of an existing operation.  9 In accordance with Chinese environmental regulations, all participating enterprises will be required to secure new operating permits to cover their altered operations. The first stage in the process involves review and clearance of waste treatment systems designs by the relevant EPB and project finds will be noi be disbursed until proof of that clearance is presented to the PMO. Subsequently, the commissioning of the treatment plants requires certification by the EPB and submission of periodic self-monitoring reports is mandatory. oA&ket Information System. The provision of cattle prices and trading information to farmers, processors, feedlots and market managers is of great importance in the successful marketing of cattle and beef products. The ihfonmation collection would involve principally cattle markets, feedlots, processors, and local Bureaus of Animal Husbandry and farmers. Beef Grading, Quality Assurance and Meat Inspection System. Technical assistance will be provided to develop a meat grading system and providc training to meat processors and inspectors. Participating beef slaughtering and processing plants will use their own resources to work towards achieving the RIACCP best practices level. This includes all aspects of enterprise operations and management, including plant hygiene, production flow, management, quality monitoring and evaluation, workers training and working practices, and business practices. The project will finance any equipment necessary to achieve HACCP status and bilateral funds will finance the necessary training and technical assistance required to reach this level. Each Project- supported slaughter house or beef processing enterprise has an in-house environmental monitoring unit. In-house Project-financed technical training in quality control, product handling, business management and marketing, as well as study tours would enforoc quality control and the application of best practices in processing and management. Table 6- Participating Processing Enterprises I___________ Ouitput pe Year (Hd) Total Investment Bank-Supported Present PYl PY2 PY3 PY4 PYS USS million Processors _ _ _ _ _ _ _ _ _ _ _ Hebei Province Qimghuangdao 0 0 0 7,500 30,000 30,000 S8.68 Shanxi Province Lunda Meat Co. 5,000 0 7,500 22,500 30,000 30,000 S4.67 slaughter line, packing line, Henan Province equipment. Zhoukou Meat Co. 30,000 0 5,000 5,000 20,000 20,000 USS4.31 equipment Tang He Meat 23,800 0 0 2,500 10,000 10,000 US$1.60 equipment Anhui Province Yumei Food Group 53,000 0 0 5,000 20,000 20,000 USS4.51 upgrading, equipment, effluent ________________ ________ _______~~~I plant, Cumulative 111,900 111,800 124,300 154,300 221,800 221,800 Total S23.77 Demand I \1 - Catte ReqZcrmetx dircctly due to Bank support. Annual increases arm begt asimacs.  10 IV. INSTITUnIONAL STRENGTHENING COMPONENT (USS20.33 MILLION) This component would provide support for: (a) Strengthening of the Bureaus of Animal Husbandry (AHB) to efficiently provide new and better cattle production-related support services to farmers. (b) Training to participating households, AHB support services personnel, breeding station staff, project management staff, feedlot managers, and meat inspectors; (c) Research and Development. Each project province would, through its agricultural university, academy of science or other research institution, support R&D related to cattle production; (d) Strengthen Project Management Offices by upgrading equipment, facilities and providing technical assistant and training C. ENVIRONMENTAL IMPACT POTENTLAL The project has both beneficial and adverse environmental impact potentials. Regarding beneficial impacts; the overall concept of the project was to simultaneously: (a) support the goveniment's policy of improving standards in the beef production sector which, amongst other things, has significant public health benefits due to reductions in the incidence of un-hygienically processed products passing through to retail outlet2; (b) improve farm household incomes through increased beef production productivity; and, (c) develop productive uses for existing crop production residues which otherwise go to waste or, even worse, are burnt, thus contributing to air pollution which is pervasive throughout China. Regarding (c), the predominant crop residue throughout the project provinces is corn stalks which, if ploughod into the fields, provide a low grade source of organic material and nutrients (mainly phosphorous) or, if burnt, provide a very low grade source of carbon (ash) and potassium (or a very low grade household fuel which is a major contributor to indoor air pollution). If these residues are ammoniated and fed to cattle, they are converted into meat, processing by-products and manure. The manure, when applied to farmers' fields, provides a much-valued source of organic material and nutrients, principally nitrogen, which can significantly enhance soil structure and fertility although, if produced in too large a quantity in any particular place, can also be a source of environmental problems. 2It should be noted that, notwithstanding such benefits, livestock development projects such as this have also been criticized by some NGOs for: (a) contributing to increased beef consumption in China which may adversely affect public health due to an increase in the incidence of circulatoy and related diseases which have been linked to incraue meat consumption; and, (b) diverting grain best used for human consumption to cattle production. Regarding (a); per capita beef consumption in China is Iet than 3% of that in westem countries and, in any event, the type of beef produced under the project will be low-fat due to the lack of grain feeding and rcliance on non-castrated males as store stock for fattening. Regarding (b), project feed balances indicate that 92% of all feed consumed in the project will be com stalks, oilseed cake or bran; none of which are used for human consumption. In any event, gram feeding of cattle in China is not profimble.  21 The main negative impacrpotentials can be summarized as follows: (a) The introduction of formign cattle breeds could contribute to adverse biodiversity impacts due to reduction in the use and maintenance of domestic breeds which are best adapted to local environmental conditions. The project provinces of Henan and Shanxi, which are host to indigenous cattle breeds, would continue to undertake, using non-project funds, indigenous cattle improvement programs, with project support for technical assistance and training. (b) The feed demand generated by cattle raised under the project may exceed the resource production capacity of local environrments which, in turn, may lead to over-exploitation of natural resources. Depending on the types of resources concerned, this could lead to soil erosion or even adverse impacts on biodiversity if the resources being used are under threat. Carefully updated forage balance calculations by project county would be used as the basis for incremental cattle production. (c) Those activities of the project which involve concentrations of cattle (cattle markets and small scale feetlots and processing plants) would create sources of concentrated animal waste production which represent a threat, primarily, to water quality and human health and, to a much lesser extent, air quality. Strict guidelines, backed up by local environmental law enforcement, would ensure that no detrimental effects from waste or effluent conctrations would negatively affect the environment or human health. (d) Concentrations of cattle in household environments present a threat human infection by zoonotic diseases. Site detcrmination for household cattle raising has takcn this potential hazard into account, and all cattle will be monitored for two of the most common zoonotic diseases: TB and brucellosis. (e) Those components of the project which involve manufacturing and/or processing activities (the feed mills and the upgraded slaughterhouses) could lead to production of waste water and air pollutant emissions with attendant impacts. Compliance with the inclusion of budgeted mitigation measures is conditional to subloan approval for such activities and will be monitored closely throughout the project's lifespan. D. ENVRONMENTAL MITIGATION PLAN The project design includes a widc variety of measures which are intended to either completely eliminate or substantially mitigate adverse impact potentials. In the following sections, the project design, environmental management and environmental monitoring procedures proposed to deal with each of the above issues is described. Loss or dilution of indigenous genetic resources. To balance indigenous breed improvenent with the introduction of foreign genetic lines, the project will provide support to participating Provinces in two important activities under the project; (i) upgrading cxisting indigenous breeds to serve as a gene pool from which to develop crossbreeds; and, (ii) developing a crossbreeding strategy to maximize the adaptation of crossbred stock to local conditions. These activities are already being undertaken but the project would support training and technical assistance to strengthen the effectiveness of these programs. Monitoring of progress on these activities will be undertaken as part of routine project supervision by Bank staff. Excessive feed demands. This issue has been addressed primarily through project design. Two strategies have been adopted:  12 (a) It was decided, following initial environmental assessment, that the project should not include activities dependent on the use of natural pastres or exploitation of communally managed land due to the presently over-grazed status of many such areas and uncertainties as to how to define and enforce stocking rates which would be sustainable in the long tern. Thus it was determined that the project should rely totally on stall fed production systems using crop residues which are otherwise unused; and (b) The project design is based on County-based forage and grain balances prepared by the respective Animal Husbandry Bureaus3. These data will be utilized during supervision to ensure that: (i) existing forage balances will support existing and incremental (non- project and project) ruminant populations; (ii) no seasonal imbalancs will result due to project intervention; and, (iii) to plan the addition of participating cattle-raising households. The forage balance table will be included in the Project Implementation Plan (PIP). During implementation, each county AHB would prepare, on a 6-month basis to coincide with supervision missions, updated feed balances. These will be spot-checked by the mission. The Monitoring and Evaluation Units (MEUs) attached to the local PMOs will be responsible for this work. The cost in terms of office support and data collection will be borne from Project counterpart funds assigned for this purpose. The estimated budgets, agencies responsible and monitoring schedules are set out in Table 7. Table 7 -Environmental Mltigation Plan (EMP) for Forage Balance Monitoring Activity Agency(ies) Monitoring Objectives Budget Responsible Schedule Forage and Local AHB rcport at 6 month -adequate crop byproduct supplies Y10,000/ Grain Local MEU intervals -correct project household county/yr. Balance Local EPB distibution Monitoring Superviscd by spot -seasonal crop byproduct supply Source: checks and ex-post sustamability counter- reviews by Bank -verification of crop byproduct part finds misions utilizaion Waste production from household calf production. Environmental mitigation mesures related to household production need to take account of reduction of odors, dust and water pollution. The most important mitigation factors are twofold: (a) the small production size of up to two breeding cows with three or four calves per household; and (b) the continuous disposal of all solid wastes as organic fertilizer of household plots. Disposal of liquid wastes will not be required as such waste drains into the soil, Cattle sheds will not have hard-top flooring, with the exception of households ruising ten or more fattening cattle, which will be required to achieve floor construction standards similar to small-size feedlots. Notwithstanding the small size of individual production units, applicants for the program will be required to provide certain pro-forma data relating to environmental aspects as part of the submissions to participate and these will be reviewed by the environmental staff of the PMO as a routine activity. The mitigation plan is summarized in Table 8. 3 These balances are the foundations of the analysis which produces the very precise livestock numbers included in the project schedules developed by the local implementation agencics.  13 Table 8 - Environmental Mitigation Plan for Household Cattle Production Activity Agency(ies) Monitoring Objectives Budget Responsible Scbedule 1. Apply for I. Househ MonitorinA indicators: Adequate public health Per household PMO, local condidons household permit, government. -Compliance with EPB - Absence of air, water, Per year: 2. Review and 2. PMO, EPA regulations. ground pollution. approve catle - Adequate manure Increased cattle Y500 shed design. disposal. production efficicncy. (S60) 3. Rcview crop 3. AHB, - Number of cattle . Compliance with EPB byproduct household within permitted and Project standards. Source: availability. numbcs. 4. Review 4. AHB, -Location of project manure diBposal household, EPA shed/cattle from human budget. method(s), dwellings. 5. Clear S. PMO, EPA -Completion or status houschold for of training. entry into -Understanding of Project. regulations. 6. Provide 6. PMO -Utilization of crop taining byproducts. 7. Establish 7. PMO, EPA monitoring Monitoringfreuency: indicators. 8. Periodic S. PMO, EPA, -continuous; supervision. Bank supervision missions. 9. Instirume 9. Local compliance and govem=nt, PMO R penalty system -6-month intervals, __ __ __ __ _ I________ _ based on spot checking. ___ Waste production from small scale feedlots, villages markets and veterinary stations. The project would support upgrading of about 130 existing small to medium sized feedlots dispersed across the four project provinces. They will be phased in gradually, based on the gradual increase in incremental projeCt output of young feeder cattle and in response to actual demands. The phasing adopted for the purposes of project scheduling is shown in Table 9 which indicates that about 60% of the feedlots will be very small (100 hcad capacity) while the remainder are distributed fairly evenly between 200, 300 and 500 head units. Table 9 - ProJected Phasi g, Number and Location of Feedlots by Province Feedlots PY1 PY2 PY3 PY4 PYS Total 130 Anhui 17 200 head 4 8 4 16 400 head 0 500 head 1 1 1Hobei - - 50 100 bead 14 13 27 300 head 9 10 19 500 bead 4 4 Henan 100 head 51 51 Shanxi 500 head 6 6 12  14 In the absence of any domestic regulatory procedures covering such enterprises, the project has relied on criteria defined by the US Envirommental Protection Agency to determiine maximum animal feeding operation production unit sizes and otherwise govem the development of procedures for evaluating these proposals as they emerge. The 1972 Amendments to the US Clean Water Act cover regulation of emissions feedlot-type livestock production systems. Within the general class of such "Animal Feeding Operations" (AFOs), a sub-class, referred to as Concentrated Animal Feeding Operations (CAFOs), is identificd for the purpose of determining the need for permitting procedures. A CAFO is defined as: (a) an AFO with a capacity of more than 1,000 animal units: or, (b) an AFO with a capacity of between 301 - 1,000 animal units if it discharges pollutants into surface waters either directly (i.e. the surface waters which actually pass through the facility) or indirectly via a constructed conveyance system (e.g. a pipeline installed for the specific purpose). In general, only CAFOs are subject to permining requirements under the US National Pollution Discharge Elimination System (NPDES) which prescribes the basic conditions under which pollutant discharges may be made under the Clean Water Act. As mentioned, China preserntly has no regulations covering animal feeding operations and, in the absence of such rcgulations, the project design bas applied the US criteria in the following ways: (a) the maximum capacity of AFO permissible under the project will be 500 animal units (the great majority; around 60%, are expected to be of around 100 unit size although this will be determined by individual participants); and, (b) no AFO will be approved for financing undcr the project if; (i) there is a permanent stream passing through the site, and/or (ii) there is already or proposed any hydrological connection between the AFO and any permanent stream. In addition, the project design criteria go beyond the US criteria insofar as all AFOs to be financed through the project will be subject of a project-based permitting process incorporating the supply by applicants of certain prescribed information and the evaluation of these by staff of the relevant PMO in consultation with the relevant EPB'. These applications also apply for village markets and veterinary service stations to be supported under the project. Local PMOs would have ongong responsibility for ensuring that feedlots and market comply with the tenms of their operating permits. 4Under US procedures, this is an opton for AFOs less than 300 animal units in size or for AFOs of between 301 and 1,000 animal units in size which are not classified as CAFOs, depending on pardcular circumstances and at the discreton of the relevant rcglatory authorty.  15 The minimum information to be provided in an application for a feedlot, market or vet station permit is as followse: Assistance should be requested by permit applicants from local EPB staff with the procedures leading to permit approval and subsequent compliance. Local EPB staff to be involved in permit approval and environmental monitoring should receive relevant and adequate training beforehand. (a) A darption of the proposed fedlot, market or veteuiary sation, iluding the numbers of cattle to be maired throughout the year, the feedmg strategy to be employed, the source of feed, te sources of cattle and the likely destination of the finish cattle. (b) A site pla which shoud show the layout aid geeral composition of the feedlot includig:' (i) The general layout of the felot, market or vet staon with respect to adjacent hwusing, roads and ote physical features of note particularly surface waters; (ii) The slope of the site with particular enpbasi on the idenfication of draiage and the way in which water drains off the site; (iii) The important construction features of the feedlot, market or vet station, such as the location of roofed areas and concrete siabs; (iv) The location of manre storage asd handling and the manner in which drainag from this would be coolled; and, (v) The location of any other import fetures of the site such as feed storage areas. (tc) Site Investgats indicating what studies have been made in any site to idetify problem. tha might result from the use of the site. These should include, but not be limited to: (i) Soil characteristics with specific emphais on soil texture (the proportion of sand, silt and clay) and the presence or absence of 6oil horizo (layers) that might impede the vertical movement of water; (ii) Estimates of the water flow off the site as a result of rinfall and of day-to-day wateing and site cleaning activities; and, (iii) Thc location of the chamels through which water would be expected to drain off the site and the final destination of this water, particularly with respect to watr courses. (d) The migation measures that are ircluded in the site design as a result of fte mvestigations undertaken m (iii) above and also any operaional prociedures that would be adopted in order to minimize enviroxnmeal problems. Particular attention must be given to the reduction of potial problems related to odor, flies, noise or dust, (e) A maure and lqid waste managenit pln ihould be provided that identfies: (i) the volumes of mamne and liquid wastes that would be produced through the year; (ii) fte volumes that would need to be stored between field disposal even; OHu) the manner in which the manure would be protecd form direct rainfall and in which drainae from the mare stoage site would be controlled; and, 5 It should be noted ta the PPMO will provide guidelins to each of the PMOs on most of the following so that it will be fairly ey for applcants to ievt* the necessary deuip crileria and fll out the form.  16 (lv) the likely areas for the disposal of th Manure and the arrangemenu might be made with fhrers, or others for he moval of te manure. (f) Public Consuttion. A description of the conrmltadon with adjacem residents and of thir support or rejecdon of the feedlot, market or vet staion development plans. Table 10 summarizes the environ=ental mitiption plin for feedlot producdon whe Table 11 shows the budget allocations. Table 10 - Eavirosemetal Ntlation Plan for Feedlot Production Activity Agency(ies) Monitoring &chedule Objective. Responsible 1 Prepare site 1. Feedlot *Supervie constuction for - No public health or safety plan Applicant compliance with Permit bazard 2. Cary out site 2. Feetlot - Update frage balance for area - No discharge into ponds, investigation. application, with lakes, EPA, PMO and - Prepare phasing in of catlo rivers, roads. local numbers and production government. scbedule - No air or noise pollution. Dept of Health . Inspect completed feedlot - No ground water 3. Develop 3. Applicant floors, dainage, prximity, con on mitigation EPA, PMO oveall building standards measures -Sustainable arangunents - Conduct training course for waste offiake by 4. Prepare 4. PMO, EPA interested parties. manure and - Carry out 6-monthly liquid waste inspections for. solid and liquid -no accumulation of liquid management plan waste disposal or solid wastes. 5. Hae public 5. PMO, . Provide m1tigaion taining to cOnsultation Applicant, local feedlot management and workers governmnent - Cary out periodic spot cbecks. 6. Obain 6. Applicant, cleaace for PMO, local building erMit government I Project budgets for feedlot establishment and management include: (a) construction, (b) training, and (c) M&E during implementalion. Charges are based on feedlot capacity.  17 Table 11- Estimated Budglet fr vironmental to frelot Production Feedlot Size Construction U Triin X2 M&E Total Budget ._ _ Program\Yr. \3 (Yun) \4 100-head Y4,000 Y0oo0 Y1,000 Y9,800 200.head Y6,000 Y800 YL,S00 Y14,300 3WShead Y7,000 Yl,000 Y2,SOO YIO,S00 400.head Y