Cumulative Impact Assessment for NN3-Laos

Đánh giá tác động tích lũy

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design

Project Number: 40514

February 2008

Lao People’s Democratic Republic: Preparing the Cumulative Impact Assessment for the Nam Ngum 3 Hydropower Project

(Financed by the Japan Special Fund)

Prepared by Vattenfall Power Consultant AB

in association with Ramboll Natura AB and Earth Systems Lao

Stockholm, 29 February, 2008

To:

Asian Development Bank

The Director, SEID

Dr Bernt Rydgren, Team Leader

Vattenfall Power Consultant AB

Box 1842, SE-581 17, Linköping

Sweden

Phone: +46-70-3160920

E-mail: bernt.rydgren@vattenfall.com

TA 4921-LAO: Preparing the Cumulative Impact

Assessment for the Nam Ngum 3 Hydropower Project

Components A, parts 1 and 2

Final CIA Report Main Report

February, 2008 Vattenfall Power Consultant AB

in association with Ramboll Natura AB and Earth Systems Lao

TABLE OF CONTENTS

EXECUTIVE SUMMARY V

BACKGROUND V

DEVELOPMENT SCENARIOS AND IMPACT ZONES USED IN THE ASSESSMENT V

EXPECTED SECTORAL DEVELOPMENTS IN THE NAM NGUM RIVER BASIN TO

THE YEAR 2020 VI

SUMMARY OF IDENTIFIED IMPACTS FOR THE DEVELOPMENT SCENARIOS IX

SUMMARY OF STRATEGIC CONCLUSIONS AND RECOMMENDATIONS XVI

1 INTRODUCTION 1

1.1 OBJECTIVE OF THE TECHNICAL ASSISTANCE PROJECT 1

1.2 CUMULATIVE IMPACT ASSESSMENT AND CATCHMENT-WIDE STRATEGIC ENVIRONMENTAL STUDIES– THEORY AND SELECTED APPROACH 1

1.3 STRATEGIC ENVIRONMENTAL ASSESSMENT OF LAO HYDROPOWER DEVELOPMENT 2

1.4 HYDROPOWER DEVELOPMENT IN LAO PDR 3

1.5 LEGAL FRAMEWORK AND GUIDELINES RELEVANT FOR ENVIRONMENTAL ASSESSMENTS OF HYDROPOWER IN LAO PDR 5

1.6 NOTE ON ADMINISTRATIVE DIVISIONS IN THE NAM NGUM RIVER BASIN AND SPELLING OF LAO WORDS 8

2 ENVIRONMENTAL AND SOCIO-ECONOMIC BASELINE 9

2.1 CLIMATE AND WATER RESOURCES 9

2.2 LAND USE AND AGRICULTURE 11

2.3 ECOLOGY 12

2.4 MINING 14

2.5 PEOPLE AND LIVELIHOODS 14

3 HYDROPOWER IN THE NAM NGUM BASIN 16

3.1 EXISTING AND FUTURE HYDROPOWER PROJECTS IN THE NAM NGUM BASIN 16

3.2 NAM NGUM 3 HYDROPOWER PROJECT 18

3.3 SIMPLIFIED EFFICIENCY INDICATORS FOR THE PROJECTS IN OUR DEVELOPMENT SCENARIOS 18

4 DEVELOPMENT SCENARIOS AND IMPACT ZONES 21

4.1 BACKGROUND 21

4.2 THE SCENARIOS 21

4.3 IMPACT ZONES 22

5 FINDINGS 25

5.1 ESTIMATION OF HYDROLOGICAL IMPACTS OF FUTURE DEVELOPMENTS 25

5.2 ENERGY PRODUCTION IN THE NAM NGUM RIVER BASIN 32

5.3 REVIEW OF THE RIVER BASIN HYDROLOGICAL MODEL MORDOR AND THE HYDROPOWER SIMULATION MODEL PARSIFAL 38

5.4 CLIMATE CHANGE 39

5.5 LAO-THAI WATER TRANSFER 42

5.6 REVIEW OF POLICIES AND LEGAL FRAMEWORK DOCUMENTS SPECIFICALLY FOR SOCIAL AND ENVIRONMENTAL ASSESSMENT OF HYDROPOWER IN LAO PDR 42

5.7 FOLLOW-UP OF RECOMMENDATIONS FROM STRATEGIC ASSESSMENT OF 2004 45

5.8 SECTORAL TRENDS 46

5.9 IMPACT STATEMENTS FOR THE DIFFERENT DEVELOPMENT SCENARIOS 57

6 GENERAL CONCLUSIONS AND RECOMMENDATIONS OF A STRATEGIC NATURE 66

6.1 PRIORITISED RECOMMENDATIONS FOR URGENT IMPLEMENTATION 66

6.2 ENGINEERING HYDROLOGY AND HYDROPOWER PRODUCTION 67

6.3 WATER RESOURCES 69

6.4 WATER QUALITY 70

6.5 LAND MANAGEMENT AND LAND USE 72

6.6 IRRIGATION DEVELOPMENT 73

6.7 POLICY AND PLANNING 74

6.8 AQUATIC ECOLOGY 80

6.9 TERRESTRIAL ECOLOGY 82

6.10 MINING 84

6.11 SOCIO-ECONOMY AND POVERTY ISSUES 85

7 BIBLIOGRAPHY 89

8 ABBREVIATIONS 97

9 PEOPLE CONSULTED 100

10 THE CONSULTING TEAM 103

APPENDICES:

APPENDIX A: BASELINE FOR THE BIO-PHYSICAL ENVIRONMENT

APPENDIX B: PEOPLE AND LIVELIHOODS IN THE NAM NGUM RIVER BASIN APPENDIX C: MONITORING PROGRAMMES

APPENDIX D: HYDROPOWER GENERATION STUDIES

APPENDIX E: DETAILED IMPACT STATEMENT

Acknowledgements

This report has been prepared by Vattenfall Power Consultant AB, in association with Ramboll Natura AB and Earth Systems Lao It has been prepared as a Technical Assistance project with funding from the Asian Development Bank

It is impossible to mention all the people that have assisted us in the preparation of this report The list of people consulted, at the end of this report, provides an attempt at thanking those who have provided assistance, but we know the list is likely incomplete We, therefore, wish

to extend our gratitude to each and everyone who have contributed to this report However, the responsibility for the conclusions drawn rests entirely with ourselves

Some people and organisations have been particularly helpful and deserve special mention here These are, in no particular order: The staff at the Executing Agency for the study – the Department of Electricity, notably its Social and Environmental Management Division under the leadership of Mr Chantho Milattanapheng; The staff of the Nam Ngum River Basin Development Sector Project under the leadership of Dr Alf Birch; The Information Center; IWMU, MAF through Dr Thatheva Saphangthong; ADB staff in Vientiane, Hanoi and Manila; Jeremy Bird, consultant, ADB; The Department of Energy Promotion and Development; the FIPD MAF through Mr Khamma; as well as other staff at MAF; WREA; MRC; WWF; and the WCS

The Technical Assistance project (TA) consists of two components This report deals with component A The implementation of component B is totally separated from the activity described herein, and will not be further commented upon Component A deals with two main tasks, that of: a) a “cumulative impact assessment” for the NN3 project in accordance with the ToR (ADB, 2007c); and b) the design and implementation of a medium-term environmental monitoring programme for the river catchment, focussed on water-quality and aquatic ecology, to be run under project financing until the end of the year 2009

The work is closely related to another ADB project, the Nam Ngum River Basin Development Sector Project (NNRBDSP) and close co-operation between the two activities has been an important mean to achieve the objectives

The theoretical distinction between cumulative impact assessment, as defined by the ADB in the ToR, and strategic environmental assessment (SEA), varies among different experts and organisations The consultant has, in this study, interpreted the overall emphasis of our ToR such that we focus our work on a strategic-level basin-wide study of the social and environmental impacts of hydropower development and related major developments The ToR are very clear on the concept of a basin-wide study, looking at the water resources of the entire Nam Ngum catchment, based on scenarios This is well supported by the approach of the NNRBDSP

Development Scenarios and Impact Zones Used in the Assessment

In co-operation with experts from the NNRBDSP, we have developed three main development scenarios, with attention paid to future changes in hydropower and irrigation They are:

• Scenario 1: Present situation plus Nam Ngum 2 hydropower plant plus 61 000 ha of pumped irrigation, mainly in the Vientiane Plains (down-stream of all hydropower plants included in this study);

• Scenario 2: Scenario 1 plus Nam Ngum 3 hydropower plant and;

• Scenario 3: Scenario 2 plus Nam Ngum 5, Nam Lik 1 and 2, Nam Bak 1 and 2 as well as

39 000 additional ha of gravity-fed irrigation

These scenarios are assessed for two different time horizons; 2013 and 2020, yielding 6 separate scenarios, 1a for scenario 1 in 2013, 1b for scenario 1 in 2020, and so on These years have been chosen because 2013 is the year when most of the additional hydropower,

including Nam Ngum 3, is planned to go on line, and 2020 is the end year of the Lao PDR government’s long-term strategic planning horizon

It is important to recognise that a scenario is usually not a definite plan, or expected outcome

Thus it is not the most likely future development, but rather a range of conditions which are

suitable for analysis of the included parameters Instead, our scenarios are those that best

respond to our need for scenario-based impact assessment at the basin level The goal of the assessment is indicative conclusions on strategic priorities, not an actual prediction of the expected outcome

To facilitate the impact assessment for the scenarios, four impact zones were identified The reason for not using the, in hydropower environmental assessments, standard approach of upstream, downstream and immediate reservoir area as the main impact zones for assessment

is quite straightforward With the number of planned hydropower plants in the basin, we would have ended up with not only an unmanageable number of impact zones, but also overlapping ones Thus, the four adopted impact zones were selected based on the sub-basins identified under the NNRBDSP, with a view to group them according to their natural environments They are shown in a map on the next page The zones are described in detail in the main report, see section 4

Expected Sectoral Developments in the Nam Ngum River Basin to the year 2020

Water resources

The main water users are hydropower and irrigation, with mining, domestic and industrial uses using, relatively speaking, minor quantities The predicted additional (extractive) uses in the hydropower sector (as evaporation from reservoirs), is around 1.5 m3

/s, and the irrigation sector will use an estimate 6 m3/s These figures are additional use (compared to present-day situation) for the entire basin in scenario 3b (scenario 3 in 2020)

Water quality will be affected, severely in many parts, due to the growing number of deep reservoirs with bottom-level intakes

Hydropower

The hydropower sector is developing very fast in Lao PDR The realistic situation in the Nam Ngum catchment in 2020 is between approximately 1 500 and 1 800 MW of installed hydro-electric generating capacity, excluding inter-basin-transfer projects This should be compared with the 255 MW in place at the time of writing, in 2007 This will generate somewhere between 5 500 and 7 000 GWh of electrical energy per year

Land use and irrigation

During the coming decade, as the area of swidden agriculture decreases, it is anticipated that there will be a forest regeneration in fields that were previously cultivated under the traditional rotational fallow system Over time, these regenerating forest areas are expected to revert to more dense forest There will also be an expansion of paddy land and commercial tree planting There will be a moderate increase in grassland (grazing) areas

Map of the NNRB Impact Zones, with existing and future hydropower reservoirs and plant locations

Source: MAF

Irrigation will develop slowly in most parts of the basin, but in the Vientiane plains a somewhat higher rate of development is expected There, wet-season rice areas will increase when irrigation operational efficiency improves Dry-season irrigation will focus on rice and higher-value crops Water availability will not be a limiting factor in irrigation

Aquatic ecology

Increased fish production is considered by the Government of Lao PDR to be an important strategy for contributing to food security Given other expected developments in the Nam Ngum catchment, it is likely that a necessary increase will have to come from aquaculture Water quality in the Nam Ngum 1 reservoir will be significantly affected and key migration routes will be blocked by, primarily, the construction of the Nam Ngum 2 and the Nam Lik hydropower plants The new reservoirs are mainly expected to have moderate (Nam Ngum 2)

to low potential for reservoir fisheries

Forestry and biodiversity conservation

In the coming years, logging will mainly be confined to designated Production Forests, but unplanned timber harvesting outside these areas will still continue, but at a low rate Large areas will be designated as Watershed/Reservoir Protection Forests under ministry’s programme, especially along the Nam Ngum river Tree plantations will expand The forest cover is predicted to be around 45 % in the year 2020 – an increase of about 100 000 ha compared with the present situation

Firewood extraction and charcoal-making will likely remain at approximately the same level, since an increased population is offset by reduced use of such fuels in the growing urban areas

There will be an increase in local people’s involvement in forest and protected-areas management The Forest Resource Development Fund and the Environment Protection Fund will enhance conservation management Villagers’ dependency on wildlife will decrease somewhat as a result of the improvement of alternative production systems and protein being secured from domesticated sources

Mining

Over 6 000 km2

of mine concession areas have been approved in the NNRB, as of 2006 Phu Bia Mining Limited has almost half of that area, and will likely remain a dominant actor Mining activities are expected to intensify in the future A majority of those mining projects that presently are listed as in prospecting and/or exploration stages are expected to move into operation With more mines, the probability for accidents, potentially causing e.g water-quality impacts, increases By 2020, new developments of medium- to large-scale mining activities in the NNRB are expected to slow down as mining concession areas become exhausted However, because of their long life cycles, large mines will continue to affect the environment well beyond 2020

Given that the consequences of large mining accidents can be very serious, the risks associated with large-scale mining operations in close proximity to settlements and water courses have to be regarded as a key element of social and environmental risks in the basin

Socio-economy and poverty

Socio-economic development to the year 2020 is largely dependent on the extent to which the Environmental Management Planning processes in the hydropower and mining sectors have proven successful in mitigating and addressing key concerns, and on the successful coordination between the different developers and owners of those businesses

The future management of the resettlement process for NN2 is a key issue for overall economic and poverty status in a large part of the basin If identified shortcomings have not

socio-been adjusted and provisions made are insufficient, it is most likely that land provisions have

been insufficient, compensation schemes have largely failed to address the issues leading to conflicts developing between resettled and host communities, as well as marginalisation of vulnerable groups and a generally poor uptake of economic opportunities among all but the wealthiest segments of society

The developments are likely to speed the on-going process of integration and assimilation of ethnic minorities into mainstream Lao culture

Urbanisation will likely accelerate but, at the same time, transportation facilities (partly as a direct impact from major development projects) in the rural areas will be significantly improved and formerly remote areas will be connected to the national road system by all-weather roads A number of schools will have been built, and the general educational situation will have improved

Markets are accessible, and some families will benefit from growing newly introduced cash crops, or from the sale of NTFP New technologies and consumer products will have entered the area, making life easier for those who can afford them

Reservoir and natural surrounding, in particular that of the NN2 reservoir, will become of a significant value for recreational purposes, attracting tourism and opening up the opportunity for income-raising for locals, as well as outside investors However, the damming of the Nam Lik will severely limit the eco-tourism potential of that river Provincial consultations have revealed this as a key concern of provincial-, district- and village-level authorities in the area,

Health

The establishment of reservoirs for hydropower-electric power plants could cause higher frequencies of waterborne diseases such as malaria, dengue fever, schistosomiasis etc Improved communication and influx of workers, with camp followers, may cause higher frequencies of sexually transmitted infections, with HIV/AIDS, being the one of most concern

Possible negative impacts on fisheries, especially locally, e.g the Nam Ngum 1 reservoir, might affect the nutritional status of the local population Especially children and pregnant women are vulnerable, and malnutrition is a constant risk factor

Summary of identified impacts for the development scenarios

Below we present summary tables of the impacts for the three scenarios with two time

horizons The table should be read in a cumulative manner, i.e the presented impacts in

scenario 1b (scenario 1 in the year 2020) are those that are different compared to 1a (scenario

1 in the year 2013 Likewise, described impacts in scenario 2a are those that are additional as compared to scenario 1a, and so on

Summary of identified impacts for Scenario 1: Present situation + Nam Ngum 2 hydropower plant, and 61 000 additional ha of pumped irrigation

Upper Nam Ngum (1)

• The human population is increasing, and

there is a high risk for unsustainable use

of land and forest resources

Upper Nam Ngum (1)

• No additional impact as compared to Scenario 1a

Mid Nam Ngum (2)

• The NN2 project creates conflicts over

land use due to in- and out-migration

• The NN2 reservoir acts as a sediment

trap, reducing the suspended sediment

transport into the NN1 reservoir

• Water in the NN2 reservoir has lowered

dissolved-oxygen concentrations,

seriously affecting water quality in the

NN1 reservoir

• Evaporation from the NN2 reservoir

reduces inflows to the NN1 reservoir,

but with reduced spillage, the energy

production in the NN1 hydropower plant

is still increased by approximately 75

GWh/year

• The energy production in the new NN2

will be just over 1 800 GWh/year

• A total of around 8 700 ha of agricultural

land inundated (out of which 500 ha is

paddy land), but about 1 000 ha of

abandoned upland cultivation areas are

regenerating

• Loss of river habitats affects aquatic

species composition negatively, and

alters the abundance Species that are

tolerant to a wide range of physiological

conditions will proliferate

• The NN2 dam is a migration barrier to

species living in the NN1 reservoir

• Fishery in the NN1 reservoir is

significantly affected due to poor water

quality of the NN2 releases and barriers

to migration

• The NN2 reservoir inundates little

forested areas, and no key habitats are

located in the reservoir No NBCAs or

Protected areas are directly affected by

Mid Nam Ngum (2)

• Water quality has improved, and erosion and reservoir sedimentation is reduced as compared to 2013

• Stratification in the NN2 reservoir results in low dissolved oxygen and slightly acidic water affecting the down-stream areas

• Regenerating forests reach an area of over 10 000 ha

• The Nam Ngum river upstream of the NN2 reservoir is likely to contain less migrant river species, with possible local extinctions owing to habitat fragmentation and degradation

• Communities granted access to the NN2 reservoir will obtain moderate benefits from the fisheries

• Significant reduction in productivity and biodiversity in the NN1 reservoir Keng Noi conservation area is no longer expected to be a viable breeding site

• Road transportation in some previously remote areas has improved, causing increased hunting and illegal logging, but improved monitoring/control offsets

the negative impacts to a certain extent

the reservoir

• Transmission lines and roads reduce

forest area, improve access to previously

remote areas, and fragment the

landscape

• The NN2 transmission line will pass

through the Phou Khao Khouay (PPK)

NBCA, which will suffer from habitat

fragmentation

• Approximately 6 000 people will be

resettled to Fuang District in Vientiane

Province

Nam Lik –Nam Xong (3)

• The management plans for addressing

the situation of the approximately 6 000

resettlers from NN2 do not address all

their needs in a satisfactory manner and,

if not rectified soon, will lead to

widespread poverty, conflicts and

economic marginalisation Provided that

these failures are addressed, and the

management plans are implemented in

good order in the near future, the

resettlers are generally expected to adjust

well to new conditions

• However, even with an assumed

successful implementation of proper

mitigation, not all NN2 resettlers are

able to make a living from agricultural

production and will become dependent

on wage labour

• Grievances procedures are not

functioning in a satisfactory manner,

leading to increased conflicts

• Resettled villagers from the NN2 area

develop irrigation schemes, which

increases pressure on local water

resources

• NN2 resettlers encroach into upland

areas of neighbouring villages, leading to

conflicts with the host population

• Resettlers from NN2 convert secondary

forests to upland agriculture, and

increase the pressure on biodiversity

(NTFP, hunting)

• High impact on stress-related diseases

Nam Lik –Nam Xong (3)

• The water demand for irrigation and domestic uses increases by 2020

• Insufficient upland and paddy land cause continued land conflicts in the NN2 resettlement area, between host villagers and the resettlers

• Resettlers’ dependency on forests and biodiversity is decreased, because alternative livelihoods develop (i.a intensified agriculture, agroforestry)

and problems on the resettled population

• Moderate impact on malnutrition, acute

respiratory infections (ARI) and

HIV/AIDS among the resettlers, and

among people who possibly stay in the

area of the NN2 reservoir

Lower Nam Ngum (4)

• Abundant water availability for irrigation

leads to moderate increase in paddy-rice

productivity, and diversification into

• No significant change in energy

production compared with Scenario 1a

Summary of identified impacts for Scenario 2: Present situation + Nam Ngum 2 and Nam Ngum 3 hydropower plants, and 61 000 additional ha of pumped

irrigation

Upper Nam Ngum (1)

• NN3 reservoir inundates some paddy

and grazing land

• Habitat fragmentation due to further

blockage of migration routes upstream

and along main tributaries as a

consequence of the impoundment of

NN3

Upper Nam Ngum (1)

• Weakening of the aquatic fauna gene

pool and extinction of certain species

Mid Nam Ngum (2)

• Stratification in the reservoir results in

the release of water which is relatively

low in dissolved oxygen The water

quality in the NN1 and NN2 reservoirs is

negatively affected by upstream-lying

reservoirs

• NN3 acts as a sediment trap, and reduces

the suspended-sediment transport into

the NN2 reservoir

• Evaporation from the NN3 reservoir

reduces the inflow to the NN2 reservoir

but the annual average energy

production at NN2 still increases by

approximately 35 GWh/year (due to less

spillage)

Mid Nam Ngum (2)

• The living conditions for the villagers resettled as a result of NN3 are improved

• The water quality in the reservoirs improves However, due to the depth of the NN3 reservoir, thermal stratification exists, resulting in lowered dissolved oxygen and cool temperatures in the tailrace water

• The fisheries in the NN2 reservoir have stabilised somewhat, and are moderately productive

• Water quality and fisheries are also

improving in the NN1 reservoir

• Watershed management interventions

• The combined evaporation from the

NN3 and NN2 reservoirs reduces the

inflow to NN1 further, but the annual

average energy production in the NN1

hydropower plant increases by

approximately 80 GWh/year (due to less

spillage)

• The average water levels in the

reservoirs are higher and the water

spillage is reduced

• Just over 1 000 ha of additional

(compared to Scenario 1a) agricultural

land is inundated

• Poor-quality water from the NN3

reservoir inhibits the establishment of

reservoir fisheries in the NN2 and blocks

the migration route upstream from the

NN2 reservoir, affecting spawning etc

• The river reach down-stream of the NN3

dam as far as the power house, is

seriously affected due to extremely low,

or even no flows

• The inundation of the two reservoirs

reduces the forest area However, neither

reservoir is in or near any NBCAs,

Protected areas or key habitats

• The NN2 and NN3 power plants have

separate transmission lines Hence the

PPK NBCA will suffer additional

fragmentation

• An additional 500 people are resettled as

a result of NN3 It is, however, expected

that socio-economic safeguards for this

project will live up to international

standards

• There is a moderate impact on

HIV/AIDS, other Sexually Transmitted

Infections (STIs), malnutrition, ARI,

drowning and stress-related diseases in

the NN3 area

result in minor positive impacts and reduction of timber harvesting, resulting

in improved status of the forests

Nam Lik –Nam Xong (3)

• No additional impacts compared with

Scenario 1a

Nam Lik –Nam Xong (3)

• No additional impacts compared with Scenario 1b

Lower Nam Ngum (4)

• The release of deep-level water from the

Lower Nam Ngum (4)

• No additional impacts compared with

NN3/NN2/NN1 reservoirs affects the

water quality in the lower reaches of the

Nam Ngum river negatively

• No significant change in energy

production compared with Scenario 2a

Summary of identified impacts for Scenario 3: Present situation + Nam

Ngum 2+3+5, Nam Lik 1+2 and Nam Bak 1+2 hydropower plants, and 61 000 additional ha of pumped irrigation as well as 39 000 ha of gravity-fed irrigation

Upper Nam Ngum (1)

-

Upper Nam Ngum (1)

- Mid Nam Ngum (2)

• Evaporation increases from the new

reservoirs

• Approximately 2 000 ha of additional

(compared to Scenario 2a) agricultural

land is inundated

• The regulation of the Nam Bak river

have significant impacts on its water

quality, affecting aquatic fauna and

fisheries This causes a cumulative

negative impact on the NN1 reservoir as

well

• Nam Ngum 5 resettles approximately

400 people

Mid Nam Ngum (2)

• Water quality is improved for all reservoirs in the Middle Nam Ngum Impact Zone However, the release of hypolimnion water with a lower dissolved oxygen content still influences water quality of downstream water

bodies negatively

• Severe and long-term impacts on river habitat and fish productivity The Nam Bak river is no longer a key spawning

area

• NN5 and Nam Bak 1 and 2 reservoirs have poor to moderately productive fisheries

• In NN1 reservoir, there is stocking of exotic fish species, and cage culture

operated by larger companies

Nam Lik –Nam Xong (3)

• Key migration routes blocked Long- and

medium-distance migrant species unable

to migrate up and down the Nam Lik

The only presently intact unregulated

channel from the Nam Ngum basin to

the Mekong is no longer accessible This

causes significant permanent impacts on

migratory species, productivity and

diversity

• A significant resettlement impact is

caused by the Nam Lik 1 project –

potentially over 2 000 people

• The damming of the Nam Lik, primarily

Nam Lik –Nam Xong (3)

• Water quality in the NL1 and NL2

reservoirs is improved

• Considerable impact on livelihoods due

to loss of fish productivity and increased fishing pressure

• The water quality has stabilised in the

NL 1 and 2 reservoirs

• The NL 1 and 2 reservoirs have minimally productive fisheries

that of Nam Lik 1, severely limits the

eco-tourism potential of that river

• Resettled villagers increase pressure on

water resources, e.g diversion of water

for irrigation and domestic use

• The poor water quality released from the

NL2 reservoir causes water quality

problems in the NL1 reservoir

• Nam Lik 1 and 2 inundate over 7 000 ha

of land, out of which close to 3 000 ha is

forest and over 2 000 ha is upland

agricultural land

• The Nam Lik 2 project improves access

to a previously densely forested area,

with potential negative impacts on

logging

Lower Nam Ngum (4)

• Sediment transport below the confluence

of the Nam Ngum and Nam Lik rivers is

significantly reduced

• The NL1 and NL2 projects have

negative impacts on the water quality in

the lower Nam Ngum river

• The wet-season flows in the Vientiane

plains are reduced and the dry-season

flows are increased

Lower Nam Ngum (4)

• Water quality is improved as compared

to the situation in scenario 3a There is, however, a residual negative impact on water quality since Nam Lik water does not dilute the releases from the NN1 reservoir

• Impacts from increased nutrient run off from increased irrigated agriculture is likely to affect the aquatic fauna

negatively

The NNRB Basin

• The energy production in the basin

(excluding the Nam Bak projects)

exceeds 5 600 GWh/year

• The six hydropower reservoirs

completed by 2013 cover a total of

23 000 ha – representing 1.3% of the

total NNRB area A third of the

combined reservoir area consists of

forests The forests inundated by the

reservoirs represent 1% of the total forest

area in the whole NNRB

• The reservoirs do not affect any NBCAs,

Protected areas or known key habitats

• The reservoirs completed by 2013

entirely change the nature of the aquatic

habitats and fisheries Previously

riverine habitats are transformed into a

series of low to moderately productive

natural regeneration

• The water quality will have improved in

all reservoirs

reservoirs

• The projects will have resettled close to

10 000 people

• The hydropower development requires

improved or new infrastructure,

estimated to be 150 km of roads and 350

km of transmission lines

Summary of Strategic Conclusions and Recommendations

The general principle for recommended actions and mitigations is the user/polluter pays, i.e that e.g hydropower and mine operators pay for, and carry the responsibility for, all actions necessary to mitigate impacts caused by their operations

Prioritised Recommendations for Urgent Implementation

The following are our key prioritised overall recommendations coming out of the study These need regular follow-up by WREA and the ADB:

1 Following the urgent establishment of the Nam Ngum River Basin Committee, a committee in the form of a co-operative management entity for the various power-station owners/operators should be formed, to ensure optimised management If possible, this sub-committee should also include the major mine operators in the basin;

sub-2 Environmental flow management needs careful consideration as a national priority There are lessons to be learned from outside the country and from existing projects with environmental flow releases in place (e.g NT2, Theun Hinboun) WREA and DoE to jointly be responsible for a national study to produce binding guidelines for future dam projects This activity could possibly be funded under the water-resources window (if and when established) of the EPF;

3 A comprehensive basin-wide monitoring programme for water quality should be developed and be managed, in the long term, by WREA The objectives would primarily

be to monitor and evaluate the medium- to long-term impact of the very extensive developments planned for the basin in order to assist future management and mitigation programmes On-going work within the WRCCS on a water-quality monitoring network

is a good starting point supported by the monitoring that will be carried out during

2008-2009 as a part of this study;

4 The standards for benefit-sharing between hydropower project sponsors and affected peoples could be improved Practically, this could be done through the Environment Protection Fund A clear focus on regional and local beneficiaries is recommended and

lessons learned from the ADB-supported project on Benefit Sharing Mechanisms for

People Adversely Affected by Power Generation Projects in Viet Nam could serve as an

excellent starting point;

5 A national prioritisation study for aquatic conservation This could ideally be done in operation between WREA, the MRC and one or several of the major conservation NGOs (e.g WWF, IUCN, WCS) active in Lao PDR The goal would be to identify a few key river systems that need total protection from large-scale developments such as hydropower, irrigation dams, large mining projects etc.;

co-6 GoL is recommended to establish independent and empowered monitoring systems (including an impartial grievance mechanism) for all hydropower projects These monitoring systems/programmes will provide much needed quality control of the implementation of socio-economic as well as environmental safeguards The follow-up of this monitoring should be carried out by the appropriate unit within WREA

Engineering Hydrology and Hydropower Production

When all the hydropower plants included in our development scenarios are in operation in

2020, the new reservoirs will cause an increase in dry-season flows in the Vientiane plains by approximately 10%, while the wet-season flows will be marginally reduced

Irrigation-withdrawals of water will reduce the total energy production by approximately 30 GWh/year (analysed for scenario 3b)

The filling-up of the dead-storage volumes in the new reservoirs will cause a total loss of energy production of just over 400 GWh in Nam Ngum 1, and close to 150 GWh at Nam Ngum 2 However, when all the plants/reservoirs are in operation, the energy production will increase by almost 100 (NN1) and just over 50 GWh/year (NN2), respectively

Total generation in the b-scenarios (situation in 2020) of each development scenario (excluding Nam Bak) will be around 2 900, 4 700 and 5 700 GWh/year, for respectively scenario 1, 2 and 3

Greenhouse Gas Emissions Resulting from Reservoir Impoundment

The climate-change impacts from the impoundments is expected to be small compared to alternative means of producing the same electric energy There are no accepted standard approaches to calculating GHG emission from hydropower project (intensive research is on-going in this field) In order to demonstrate the order of magnitude of emissions, we have made a number of assumptions If all vegetation will be cleared from the future reservoirs, but otherwise assuming the worst possible (and extremely unrealistic) conditions, i.e all carbon released as methane, the specific emissions based on 40 years of operation would range from

50 g of CO2-equivalents per kWh (NB2) via 100 (NN3), 400 (NN2) to the extreme case of almost 1 600 (NL2) The latter case, if realistic, would make it highly unsuitable for development If we instead assume that all carbon is released as CO2 (which realistically is closer to the truth), the results would be 2, 5, 18 and 74 instead As a reference, standard life-cycle-based GHG emissions for e.g a combine-cycle natural-gas-fired power plant is just over 400 g of CO2-equivalents per kWh and a modern coal-fired plant around 700 (Vattenfall, 2005) The specific emissions for hydropower varies very much depending on the natural conditions, so a generally applicable figure is impossible to give

Water Resources and Water Quality

A range of management and mitigation measures should be implemented to minimise negative impacts on water resources from the developments described by the scenarios

The Nam Ngum River Basin Committee (NNRBC) which is being established needs to be formalised urgently

It is very important that a co-operative management entity, primarily made up of the various power-station owners/operators under the auspices of the NNRBC, is formed All relevant stakeholder need to be part of this entity, including the DoE This “hydropower-producers’

organisation” would also ideally make room for major mining operators, since important water-resources co-ordination issues between the two industries exist

Environmental flow management needs careful consideration as a national priority There are lessons to be learned from outside the country and from existing projects with environmental flow releases in place (e.g NT2, Theun Hinboun) WREA and DoE to jointly be responsible for a national study to produce binding guidelines for future dam projects This activity could possibly be funded under the water-resources window (if and when established) of the EPF; Key impacts on water quality will likely include: localised increase in total suspended solids (TSS) and turbidity near the reservoir banks; thermal stratification, resulting in limited mixing

of surface (epilimnion) and deep (hypolimnion) reservoir waters; low dissolved oxygen (DO) content and; generation of hydrogen sulphide (H2S) Localised increases in soil erosion is likely, sediment-control structures and re-vegetation of cleared area should be implemented

It will be important for the owners/operators of the planned hydropower installation to address the expected impacts caused by intakes located only at deep levels of the reservoir At least one, but preferably a combination of: aeration structures; airlift pumps and; variable-level water intake structures should be constructed

A comprehensive basin-wide monitoring programme for water quality should be developed and be managed, in the long term, by WREA The objectives would primarily be to monitor and evaluate the medium- to long-term impact of the very extensive developments planned for the basin in order to assist future management and mitigation programmes On-going work within the WRCCS on a water-quality monitoring network is a good starting point supported

by the monitoring that will be carried out during 2008-2009 as a part of this study

Land Management and Land Use

The continuation of the delineation of village management areas and land use zones is a very appropriate approach An issue for the future is the registration of communal village lands to ensure that villagers retain tenure rights

It is recommended to develop a procedure for the integration of the IWMU village land-use zoning and mapping activity and the district-level land-use planning activity

The agricultural models promoted by the NNRBSDP are generally considered appropriate The expansion of potential paddy land areas provides a sustainable food security benefit to villagers, and offers the possibility of diversification to higher value crops in areas where dry-season water is available Similarly the improvement in fodder systems for large livestock is now a well-established practice in parts of upper basin and has potential for expansion in other areas It is likely to be fairly readily adopted by ethnic Hmong villagers given their traditional experience with livestock systems Commercial tree planting is appropriate in areas with access to transportation and marketing Caution will need to be exercised with rubber planting, to ensure that small-holders are not deprived of traditional land and that they enter into equitable contract arrangements if they are involved with development companies Rubber should primarily be considered an agroforestry crop, not a mono-culture plantation crop

The consultants consider the strengthening of village-based development funds, such as savings groups and revolving funds an appropriate way to increase opportunities for villagers

to adopt improved technologies The advantage of these systems is that the poorer segments

of the population have opportunities to evaluate and expand activities gradually with lower levels of risk

Irrigation

It is expected that, due to expanded irrigation, there will be moderate dry-season rice-area increases of 10% for the three time horizons under scenarios 1, 2, and 3 There will be a similar trend for higher-value dry season crops under scenarios 1 and 2, i.e., 10% area increase, but an acceleration to 20% for the time horizons under scenario 3, when the projected wet-season area increases with the addition of gravity-fed irrigation

Water availability will not be a problem, but a potential lack of funds for maintenance, repairs and operation of pumping projects, siltation and control of irrigation canals, and difficulties with irrigation service fee collection pose risks to development

The rehabilitation of existing large-scale pumping and gravity-fed irrigation systems in the Vientiane plains should be a priority

The construction and/or improvement to existing small-scale irrigation systems should receive close consideration, in order to ensure that potential benefits accrue to villagers in upstream Nam Ngum and Nam Lik-Nam Xong locations

The development of paddy land and the provision of adequate irrigation to the Nam Ngum 2 resettlement area in Fuang District should be a matter of priority

Policy and Planning

Strategic Environmental Assessment (SEA), is not mentioned in the key legal-framework documents in Lao PDR and we recommend that SEA is formally put into the legislation and regulations for environmental assessment in general, and for hydropower in particular

The SEA for Lao PDR hydropower carried out in 2004 (Norplan, 2004), needs to be followed

up This would ideally be done on the initiative of DoE with support from the backers of the

2004 study, i.e the World Bank

The standards for benefit-sharing between hydropower project sponsors and affected peoples could be improved Practically, this could be done through the Environment Protection Fund

A clear focus on regional and local beneficiaries is recommended and lessons learned from

the ADB-supported project on Benefit Sharing Mechanisms for People Adversely Affected by

Power Generation Projects in Viet Nam could serve as an excellent starting point

The government is working very constructively to improve the water resources planning and management system in Lao PDR The establishment of the Water Resources and Environmental Agency (WREA) is a highly appropriate organisational step A national water resources strategy will be developed by WREA, along with legal reform and policy development It is important to consider how the various assessments and plans such as EIA, CIA, SEA, and river basin plans will be linked to the national planning process in planning time frames of 5 years and 10 years

The land-use planning and development approach of MAF is good, however overall planning

in the NNRB has not been adequately addressed, and therefore a link is needed between the land-use planning, land use and rural-development activities and the water-management activity, in order to achieve better coordination and impact

Aquatic Ecology

The proposed hydropower schemes on the Nam Lik will permanently cut off a large part of the lower Nam Ngum and Nam Lik-Nam Xong basins, for local and Mekong mainstream aquatic fauna migrants The damming of the Nam Lik will be expected to have considerable local impacts on habitats, species diversity and genetic mixing The existing migration route

to and from the Mekong River is the only remaining, effectively unregulated connecting channel in the Nam Ngum Basin, and used by important migrant species such as Pangasids and Cyprinids (see Appendix A) The Nam Lik river supports a population of over 30 000 people, many of whom have a strong dependence on fisheries

After impoundment of the Nam Ngum 2 reservoir which will close the up-stream migration routes for fish resident in the Nam Ngum 1 reservoir, the connection between the Keng Noi conservation zone in the reservoir, just down stream of the Nam Ngum 2 tailrace, and the Nam Bak river becomes even more critically important The impacts will be felt primarily by the around 1 800 households presently benefiting from reservoir fisheries, but also by people residing up-stream on the Nam Ngum and Nam Bak

From a biodiversity perspective, the river habitat will be irreversibly changed to a series of lacustrine (lake) environments and degraded connecting channels with very low flows likely

to be unable to support existing ecosystem services Riverine species will of course be affected, with species unable to withstand resultant changes being lost from these former river reaches and local migratory species experiencing considerable negative impact as well

Benefits to communities from traditionally-managed wild-capture fisheries and use of other aquatic products are often considerably more equitable than those of reservoir fisheries Subsistence farmers, the poor, the landless, ethnically and otherwise marginalised groups reap significant benefits from aquatic resources With few alternatives, and alongside increasing pressures on these resources, the most vulnerable people are likely to be hit hardest by any impact on habitats and wild captures fisheries However, given other expected developments

in the Nam Ngum catchment, it is likely that a necessary increase in fish production will have

to come from aquaculture Thus, other elements of government strategy may prove to be even more important when considering the broader context of sustainable wild-capture fisheries and sustaining and improving fisheries-based livelihoods Pertinent elements focus upon fisheries legislation and decentralised governance, and whether they will incorporate appropriate management of habitats important to fish life cycles and be targeted more closely

to the active involvement of local people in managing wild capture fisheries

Given the social impacts, the environmental costs and the rather limited electricity-generating capacity (a combined total of only 160 MW), there would have been a clear strategic benefit

to leaving the Nam Lik in its current, effectively unregulated, condition In light of the extensive plans for hydropower in the Nam Ngum Basin, the Nam Lik could have been used

as part of an offset strategy for intact river systems suggested in the GoL’s Hydropower Development Strategy Study, and the approach now taken as a national priority in many other countries The protection of the Nam Lik river was seen by the consultant as a key priority However, at the very end of our study period, the Nam Lik 2 project was cleared for construction, effectively making our prioritised approach impossible to implement Therefore,

we suggest a national prioritisation study for aquatic conservation This could ideally be done

in co-operation between WREA, the MRC and one or several of the major conservation NGOs (e.g WWF, IUCN, WCS) active in Lao PDR The goal would be to identify a few key

river systems that need total protection from large-scale developments such as hydropower, irrigation dams, large mining projects etc

Optimisation of water levels in reservoirs should be agreed on with both down-stream and upstream developers

We recommend the development of a fair and equitable distribution of benefits throughappropriate fisheries co-management systems to manage both reservoir and river fisheries Co-management provides an opportunity for communities to collaboratively manage fisheries for sustainable benefits A partnership must be established between local communities, local government, concession holders and other key stakeholders such as the department of livestock and fisheries Administrative mandates are developing at this time, but the financial support should realistically come from the concession holders contributions to the Environment Protection Fund and community development initiatives

Compensation for loss of fish to communities needs to be worked out in consultation with the communities themselves One option sometimes considered is fish for fish whereas others tend to focus on support to alternative livelihood options through start up funds and capacity building/advisory support, alongside appropriate micro-credit facilities It will be important to learn from the successes of other such compensation schemes in the region, and ensure that any compensation measures are carefully considered and supported over the long term

Terrestrial Ecology

The forests in the seven reservoirs are not of a key conservation concern, and no particularly valuable habitats for terrestrial fauna are known to exist There are no conflicts with NBCAs

or Protected areas The total area of the reservoir-inundated land is 23 000 ha out of which

7 000 ha are forests This represents only approximately 1% of the NNRB forests

Power transmission lines will affect the Phou Khao Khouay NBCA over a total distance of approximately 30 km The impact is predicted to be low to moderate compared to existing disturbances in the park, but does contribute to the fragmentation of PKK

It is recommended to raise the required standard of the terrestrial ecological surveys carried out in connection with major projects and to make sure that key government staff (MAF, NUoL, WREA) are consulted and invited to learn from the work – as a capacity-building effort

Developers of transmission lines and roads, with the aid and control of the appropriate governmental entities, should coordinate their projects with the purpose of minimising negative impacts on forests and biodiversity and maximising positive impacts

Developers of hydropower projects should contribute to the financing of conservation and watershed protection efforts in the river basin One appropriate vehicle for such contribution

is the Environment Protection Fund

Mining

The development of hydropower projects will no doubt affect the current and future mining activities in the NNRB Cumulative impacts from both mining and hydropower development

on socio-economy and the environment can be significant if project owners do not co-operate

To ensure sound development, mining and hydropower projects must work co-operatively to address potential impacts Management and monitoring must be a central part of development for both the mining and the hydropower projects

We recommend careful attention to: water-quality monitoring and maintenance of beneficial uses; the management of water releases to down-stream waterways during reservoir filling and operation to ensure that other down-stream water users and environmental values are not negatively affected; management of hazardous materials and wastes, including the development of Environmental Emergency Response Plans, to respond to incidents involving all reagents used at mines

Both the probability and the consequences of accidents at mines, particularly those located close to human settlements and river courses, are high enough that this should be treated as a major social and environmental management concern in the basin The fact that one major accidental spill has already occurred (at Phu Bhia in 2005) only serves to highlight the need for risk management

While large-scale hydropower and mining projects often develop Environmental Management and Monitoring Plans to address potential issues that might occur, these documents are generally not in the public domain We recommend that GoL, through WREA, makes sure that all EIAs, EMPs and other key environmental and socio-economic documents on hydropower and mining projects are publicly available

The entire NNRB is in urgent need of long-term environmental and socio-economic

monitoring and evaluation activities, co-ordinated by WREA Some of these activities could

be funded through the Environment Protection Fund

Socio-Economy and Poverty Issues

The impact of hydropower development on the rural poor will depend largely on the existence

of concrete mechanism that would guarantee that affected villagers are benefiting directly from the revenue earned by hydropower projects through formal benefit-sharing mechanisms Relocation of communities should be carried out under the guidance of Resettlement Actions Plans that meet internationally accepted social safeguard standards The on-going resettlement activities for the Nam Ngum 2 project are judged to suffer from several key shortcomings, and if these are not urgently addressed, it is most likely that land provisions will prove insufficient and other compensation aspects will also largely fail to address people’s concerns This will lead to conflicts developing between resettled and host communities, as well as the marginalisation of vulnerable groups and a generally poor uptake of economic opportunities among all but the wealthiest segments of society

Resettlement planning and implementation in the basin have, until now, suffered from a lack

of clear criteria for the assessment of losses of livelihoods and assets for the project-affected population There is also widespread mistrust regarding the willingness of developers to fulfil management-document promises The experiences provided by the Nam Theun 2 project should be used as background information for developing improved resettlement-planning documents It is recommended that the NT2 standards are applied at the national level as a requirement

GoL is recommended to establish independent and empowered monitoring systems (including impartial grievance mechanism) for all hydropower projects These monitoring systems/programmes will provide much needed quality control of the implementation of socio-economic as well as environmental safeguards

Large areas of the river basin has a flourishing tourism industry, which to a large extent depends on the free-flowing rivers River rafting is a fast growing industry, and the

construction of some of the hydropower plants, notably the Nam Lik 1, seriously threatens this growing eco-tourism activity This supports the conclusion and recommendation concerning this project in particular, and Nam Lik developments in general, from above

An unwanted impact from large-scale infrastructural projects is often a breakdown of traditional culture and belief systems, with disempowerment of traditional leadership, increased inter-generational conflicts, loss of community identity, disorientation and an increase of socially deviant/risky behaviour as results To protect the rural community’s identity, it is important to combine economic programmes for improved livelihoods with a cultural and community development programme

1 Introduction

This study is based on analyses of secondary information only, due to circumstances beyond the control of the consultants

1.1 Objective of the Technical Assistance Project

The overall purpose of this consultancy assignment is to assist ADB in its preparations for financing of the proposed Nam Ngum 3 Hydropower Project (NN3), located in the Nam Ngum River Basin (NNRB) in Vientiane Province, in central Lao PDR The key outcome is, therefore, a strategic assessment of the entire Nam Ngum basin and the expected cumulative impacts of the extensive hydropower development programme identified for the basin

The Technical Assistance project (TA) consists of two components: a component A – the component which is represented in this report; and a component B which deals with other related issues in the realm of institutional strengthening and Integrated Water Resources Management (IWRM) The implementation of component B is totally separated from the activity described herein, and will not be further commented upon

Component A deals with two main tasks – that of a) a “cumulative impact assessment” (CIA) for the NN3 project in accordance with the ToR (ADB, 2007c) and b) the design and implementation of an environmental monitoring programme for the river catchment, focussed

on water-quality and aquatic ecology, and to be run until the end of the year 2009

The ToR specified a cumulative impact study, to be run in parallel, but separate from, a regular Environmental Impact Assessment (EIA), financed by the NN3 sponsors, GMS Power The ToR further specified that this CIA study should take into account the entire Nam Ngum River Basin (NNRB), from the divide to the confluence with the Mekong river, east of the Lao PDR capital of Vientiane The methodological implications of this is further discussed below According to the ToR, the key CIA tasks are to identify the main environmental and social issues as a result of the construction of the dam and ancillary facilities, establish and convene an inter-ministerial working group (IMWG), further develop

a baseline profile of the basin, review current basin planning and management, identify appropriate basin development scenarios and predict cumulative impacts This work is to be done based on two time horizons and a number of development scenarios to be identified by the TA consulting team

The work is closely related to another ADB project, the Nam Ngum River Basin Development Sector Project (NNRBDSP) and close co-operation between the two activities has been an important mean to achieve the objectives

1.2 Cumulative Impact Assessment and Catchment-Wide Strategic

Environmental Studies– Theory and Selected Approach

The phrase cumulative impact assessment (CIA) can be interpreted in at least two different

ways One is the investigation of the additional impacts brought on by just one particular project, over and above that of a given background, or baseline The other interpretation is that made by the ADB in its “Guidelines on CIA” (ADB, 2007): “By evaluating resources impact zones and the life cycle of effects, rather than projects, the boundaries of cumulative impact assessment can be properly defined”

The theoretical distinction between cumulative impact assessment, as defined by ADB above, and strategic environmental assessment (SEA) is difficult to pin down, and varies between different authors and organisations We have, however, chosen to interpret the overall

emphasis of our ToR such that we focus our work on a strategic-level basin-wide study of the social and environmental impacts of hydropower development and related major developments taking place in the Nam Ngum catchment The ToR are very clear on the concept of a basin-wide study, looking at the water resources of the Nam Ngum in the entire catchment This makes it an absolute necessity to adopt a higher-level strategic approach, based on scenarios This is well supported by the NNRBDSP, which has carried out extensive, detailed studies of appropriate scenarios to be analysed as a key component in their activities Hence it is natural that the ToR focus on a scenario-based study This is also supported by ADB’s guidelines on SEA (ADB, 2007)

This approach is widely supported by other reviews and selected study approaches (e.g MEWD, 2004, MRC, 2007a, King et al., 2007) The ADB explicitly includes SEA in its Environment Policy (ADB, 2002), but while EIAs are not only required, but also subject to public scrutiny, SEAs are not yet mandatory for policies, plans, and programmes

There is, however, one obvious methodological problem with adopting a strategic approach to this study That is the fact that our study is implemented concurrently with the project-level EIA (sponsored by the NN3 investors) This is obviously not methodologically ideal, since the environmental-assessment process is supposed to be iterative, with an SEA (or similar) coming first (IAIA, 2002), constituting the basis on which project-level EIAs are then performed Time constraints outside the control of the authors and the ADB have, however, necessitated the adopted approach

1.3 Strategic Environmental Assessment of Lao Hydropower

Development

The key document is Lao PDR Hydropower – Strategic Impact Assessment (Norplan, 2004)

This very comprehensive study concluded that the Lao experience on carrying out level EIAs showed some shortcomings and problems:

project-• Crucial information and analysis were only available after the construction had started,

or PPAs signed, so that project design and operation could not be modified as a mitigation measure

• In general EIA studies have tended to underestimate both environmental and social impacts and their mitigation costs

• The negative impacts in connection with influx of workers and camp followers have in general been inadequately addressed and planned for

• Consultation and public involvement processes have for the most part been inadequate

in relation to the present internationally accepted safeguard procedures

• Compensation and resettlement needs were underestimated and insufficiently planned and budgeted for

Many lessons have since been learned through the work on NT2 (see below), but several of these still remain to be internalised as standard approaches and tools in other hydropower development projects The recommendations from the Norplan study for improvements to the process in order to enhance the sustainability of the sector were summarised in a table with 46 points (Tables 5 and 12, ibid) These recommendations are reviewed in the Section 5

1.4 Hydropower Development in Lao PDR

The development of the hydropower sector in the Lao PDR is presently in a very expansive phase Scores of projects are under Memoranda of Understanding (MoUs) or other stages of agreement between Government and developers Most of the future projects are run by Independent Power Producers (IPPs) under Concession Agreements (CAs) with the Government Due to a fairly low domestic power demand and the rapidly growing demand for power in other parts of south-east and east Asia (notably Thailand, Vietnam and southern China) most of the power is destined for export The recent seminar on sustainable hydropower, hosted by the World Bank in Bangkok, Thailand provided an example of this; the Lao PDR Energy Minister told the audience that in addition to 5 000 MW already agreed

on in 2006, Thailand and Lao PDR are now discussing export to Thailand of a further 2 000

MW, after 2015 (Bangkok Post, 2007)

Several reports have dealt with the sector in detail (e.g Norplan 2004 and Maunsell and Lahmeyer International, 2004), and it is not our aim here to review and update that information here But, to provide the reader of this report with an overview, the complete list (as of August, 2007) of existing and planned hydropower projects is presented in Table 2.5.1 below

Between the publication of the strategic assessment report (Norplan, 2004) described above and today, one very important development has taken place in the hydropower sector in Lao PDR It is the 1 075 MW hydropower station Nam Theun 2 (NT2) Both the World Bank and the Asian Development Bank have been heavily involved in the preparations for this project, and the social and environmental impacts studies and management programmes have set new standards in the Lao context The projects has its own Environmental Management Unit located within the premises of the environmental regulator’s (WREA, formerly STEA) office, making co-ordination as easy as possible

The Nam Ngum basin is one of the focus areas of this rapid hydropower expansion programme The first major project is located in the basin (NN1) and the NN2 plant is now under construction

The legal and guidance instruments for the social and environmental assessment of hydropower development in Lao PDR are described and commented upon below

Table 2.5.1: Hydropower development plan for Lao PDR

Status Name of Project Location

Province

Installed Capacity (MW)

Progress and Signed Date, MOU

(Planned) Commercial Operation Date

Status Name of Project Location

Province

Installed Capacity (MW)

Progress and Signed Date, MOU

(Planned) Commercial Operation Date

Nam Ngum 3 Vientiane P 460 • CA under Negotiation

• PPA under negotiation

• (tariff concluded)

2013

• PPA under negotiation (tariff concluded)

2013

Theun-Hinboun

Expansion

PPA under negotiation

2011

Nam Theun 1 Bolikhamxay 520 • CA under negotiation

• PPA under negotiation (tariff concluded)

2011

Nam Ngum 4 Xieng

Khouang

Houay Lamphan

Gnai

Khouang

Status Name of Project Location

Province

Installed Capacity (MW)

Progress and Signed Date, MOU

(Planned) Commercial Operation Date

Nam Khan 1 Luang Prabang 115 Research Study

Nam Khan 2 (EdL) Luang Prabang 130 MOU 13.10.2006

Nam Khan 3 (EdL) Luang Prabang 95 MOU 13.10.2006

Nam Seuang 1 Luang Prabang 41 MOU 4.5.2007

Nam Seuang 2 Luang Prabang 134 MOU 4.5.2007

Pak Lay

(Mekong stream)

Xayabuly and Vientiane P

1320 MOU 11.6 07

Tha Kho

(on Mekong creek)

Emun)

Sekong 115

Source: Division of Power Sector Planning, DoE (Information valid as of 30 August, 2007)

Research study means that the demand for electricity from either inside or outside the country is being identified

1.5 Legal Framework and Guidelines Relevant for Environmental

Assessments of Hydropower in Lao PDR

Lao PDR legislation, policies and regulations on environmental assessments are generally strong, and provide powerful tools for the regulating authorities The institutional changes recently implemented, whereby the former regulator STEA was incorporated into the Water Resources and Environmental Agency, WREA, under its own minister, further serves to strengthen the regulatory climate in the country

1.5.1 Important Legal References, Policies and Strategies in Lao PDR

• The Environmental Protection Law (Lao PDR, 2001b) – is the basis for all

environmental conservation concerns in the country The text is quite general, and more specifics are clearly expected to be outlined in regulations developed for specific issues The executing agency for the Law was stated as STEA at the time of writing, but these powers will be vested in WREA in the future, following the institutional change mentioned above The Law stipulates that e.g line ministries develop their own standards for EIA There is such a specific document relevant for the hydropower sector, see below under the next bullet Other important aspects covered in the Law are biodiversity, environmental management and mitigation

• Regulation on Implementing Environmental Assessment for Electricity Projects in Lao PDR (Lao PDR, MIH, 2001a) It outlines recommended procedures for EIA and

stipulates responsibilities, costs and timing It also covers the important issue of public involvement in assessment It stipulates assessment procedures, report content, review procedures and also describes environmental management procedures during project implementation

• The National Policy on Environmental and Social Sustainability of the Hydropower Sector in Lao PDR (Lao PDR, 2007) It is a modern policy similar in content to recent

policies in the field published in other countries It covers relevant policy points such

as integrated planning priorities, strategic considerations of impacts, risks etc and makes a strong statement on the “user pays” principle, meaning the developer/owner is responsible for all costs related to the project

• The Electricity Law (Lao PDR, 1997) – stipulates that the electricity sector should

adopt the most effective use of natural resources possible It prioritises investments in hydropower It also states that investors have the obligation to protect the environment and also specifically mentions flooding below dams as a management priority

• The Law on Water and Water Resources (Lao PDR, 1996a) – stipulates that ownership

of water and water resources resides with the State It determines the catchment as the unit of water resources planning and management Several issues strongly relevant to the hydropower sector are dealt with in the law, e.g.: licensing for hydropower; the establishment of reservoirs; inter-basin transfers, the resettlement of people from a development site; flood and erosion prevention and; the requirement for feasibility and Social Impact Assessment studies for large-scale projects WREA will be the implementing government body in the future

• The Land Law (Lao PDR, 1996b, and amended in 2003) – determines the principles of

land ownership, management, registration and certification, and the right of land use This pertains also to land necessary for e.g resettlement in conjunction with hydropower projects MAF is the implementing ministry

• The Forestry Law (Lao PDR, 1996c, 2005) – The Forestry Law stipulates general

management guidance on all forest-related resources, also including wildlife and water courses DoF in the MAF is the implementing institution It groups forests into several categories with unique management approaches Among these categories are Conservation Forests, Production Forest and Protection Forests in watersheds

The Decree on the Environment Protection Fund (Lao PDR, 2005b) The EPF is set

up to support a variety of activities in the social and environmental sectors It is run by

a Board of Directors supported by an Executive Office responsible for day-to-day

operations The Board has members from across society: line ministries; local authorities, civil society; research institutes etc It draws its funding from e.g grants and loans, the GoL state budget, development projects, and (importantly in the context

of this CIA study and our recommendations), contributions from businesses and other entities The EPF has the potential to be a major vehicle for implementation of several

of the recommendations made in this study, primarily those of a national nature, or where several business entities need to co-operate beyond their respective immediate private interests

The EPF presently has three special financing windows (EPF, 2007): The CBI window (Community and Biodiversity Investment); the PICE window (Policy Implementation and Capacity Enhancement) and; the PC window (Pollution Control) The two first

ones are supported by the World Bank Lao Environment and Social (LEnS) Project)

A Water Resources window has been suggested to be added to the above three If established, this could be an excellent way of channelling funds from hydropower and mining projects towards mitigation, development and general social and environmental management in the water resources field, ensuring independent control

of the funds

• Other important documents are: The National Strategy on Environment to the years

2020 and Action Plan for the years 2006 – 2010 (Lao PDR, 2004a); The National Biodiversity Strategy to 2020 and Action Plan to 2010 (Lao PDR, 2004b) and; The Forestry Strategy to the Year 2020 of the Lao PDR (MAF, 2005)

Beyond these documents, Lao PDR is also a signatory to a number of international treaties and conventions Especially relevant ones include, e.g the 1995 Mekong Treaty, the CBD (Convention on Biological Diversity) and CITES (the Convention on International Trade in Endangered Species)

1.5.2 International Tools and Guidelines for Environmental Assessment of

Hydropower Development

The multi-lateral banks and similar institutions long led the development of environmental safeguards’ criteria for hydropower development The World Bank has its Operational Policies (mainly Ops 4.01 – Environmental Assessment; 4.04 – Natural Habitats, 4.10, 4.12, 4.36 and 4.37) The Asian Development Bank has Policies and Operational Manuals (for Environment, Indigenous Peoples and Involuntary Resettlement) and also guidelines for Environmental Assessment and a Handbook on Involuntary Resettlement These documents are updated as policies change and the development paradigms shift focus

socio-in some areas For more details on Bank standards as they apply to the Lao PDR hydropower sector, please refer to Norplan, 2004b

However, a major shift in the international approach to socio-environmental assessment of hydropower was caused by the World Commission on Dams (WCD, 2000) This massive undertaking, initiated jointly by the World Conservation Union (IUCN) and the World Bank, and supported by scores of bi-lateral and multi-lateral donors, brought a new level of participatory approaches to the policy-making on sustainable hydropower development The WCD based its conclusions on a number of approaches – case studies, thematic reviews (out

of which the one on “Dams and global change” contributed major advances to the change related debate on reservoirs), regional consultations, a large-dam cross-check survey and submissions by individuals

climate-The results of the WCD’s work was a strong shift in paradigm climate-The focus was no longer on assessing impacts, but rather ensuring sustainability during and after dam-project implementation These aspects had been included in earlier approaches too, but the shift in emphasis is vitally important

The problem with the WCD was that it provided major advances on a policy level, but very little, if any, in terms of actual project-implementation guidelines This meant that the hoped for convergence of approaches and opinions among hydropower plant owners, Non-governmental organisations (NGOs), Governments, consultants etc., did not materialise

Following the publication of the WCD report, national processes of more detailed nature took place around the world, first in South Africa, Germany and Sweden This continued effort at operationalisation of the strategic priorities and guidelines outlined in the WCD report took place at the same time as the International Hydropower Association (IHA) developed its own

WCD-initiated and more industry-adapted operational guidelines, Sustainability Guidelines

(IHA, 2004) These are well adapted to the project cycle of hydropower development, and considerable more operational in nature than the WCD

The IHA has recently gone one step farther, in developing a Sustainability Assessment Protocol (IHA, 2006), a considerably more complicated tool, aiming at financiers and owners,

to be used in assessing actual performance against criteria described in the IHA Sustainability Guidelines This tool is presently undergoing a two-year review process including governments, industry and NGOs

The MRC, WWF and ADB are jointly running an effort entitles Environmental Criteria for

Hydropower Development (King et al., 2007) in the south-east Asian region This is a very

ambitious programme, with a broad and inclusive approach which includes projects sponsors, environmental NGOs, government organisations etc The outcome of this activity will hopefully advance the knowledge and understanding of how hydropower can be more sustainable

1.6 Note on Administrative Divisions in the Nam Ngum River Basin and Spelling of Lao Words

The reader should be informed that the information in this report will sometimes seem contradictory in nature as it applies to the number and names of various administrative areas/zones in the Lao PDR The reason for this is the following:

Xaisomboun Special Zone, under military administration, was created in 1994 On September

23, 2004, the Districts Hom and Longsane were merged The new District, retaining the name Hom, was reassigned to Vientiane Province On Jun 27, 2006, the Districts Phoun and Xaisomboun were merged, with the new District still named Xaisomboun On January 13,

2006, the Special Zone was dissolved Xaisomboun District was reassigned to Vientiane Province, while Thathon District went to Xieng Khouang Province All statistical information

on people, health etc., in Lao PDR shows a mixture of assignation, due to the above The reader is asked for an understanding of this condition, which is outside the control of the authors Recalculation of data would, in many cases, be impossible

The transcription of Lao names and words into English varies quite considerably from case to case, and source to source The reader is asked for understanding of this, as it is often logical

to quote a source with the spelling used in the original, rather than choosing and adopting a standard transcription for this publication We have, however, tried to maintain the same spelling for major, frequently occurring places

2 Environmental and Socio-Economic Baseline

For more comprehensive descriptions of the bio-physical and socio-economic baseline situations in the Nam Ngum River Basin (NNRB), the reader is referred to Appendices 1 and

2, and the Nam Ngum River Basin Profile (WRCCS, 2007)

The NNRB is located in north-central Lao PDR, within the Mekong River catchment The Nam Ngum river, with a catchment size of 16 841 km2

is one of the main tributaries of the Mekong River, having the second greatest mean annual discharge among major tributaries originating in Lao PDR (WRCCS, 2007) The total length of the Nam Ngum river is just over

400 km from its source in the Peak District, Xieng Khouang Province, to where it enters the Mekong River The main tributaries to the Nam Ngum are the Nam Lik, Nam Xong and Nam Bak rivers

Figure 2.1.1 provides a map of the NNRB, with the existing Nam Ngum 1 (NN1) reservoir as well as the reservoirs of planned hydropower projects and their incremental catchment areas For an outline of the exact location of the hydropower developments, please refer to Figure 3.1.1

2.1 Climate and Water resources

The climate of the NNRB is subtropical to tropical, with a distinct wet season from April to September, during the south-west monsoon The rest of the year is mainly dry The daily maximum temperature varies between approximately 28 and 34°C, coolest in December and January and hottest in March and April The daily minimum is between 14 and 24°C

Average annual rainfall is around 2 000 mm in the catchment, varying between approximately

1 400 to more than 3 500 mm Generally speaking, the northern and southern parts of the catchment are the driest while the central parts are the wettest The Penman potential evapo-transpiration varies between approximately 1060 mm and 1360 mm

The long-term average runoff of the Nam Ngum at its confluence with the Mekong is around

Other than low dissolved oxygen levels at the Nam Ngum river below NN1 dam site (Water Quality Monitoring Network and DOI, MAF), baseline water-quality data, collected over the past 20 years, indicate that overall water quality in NNRB can be considered as good, and has not been significantly affected by human activities

The mean annual sediment yield for the NN1 reservoir is 140 tonnes/km²/year This value is similar to various estimates of the natural (pre-clearing) sediment yield from catchments in the humid tropics, thus erosion related to shifting cultivation (the main source of human-induced erosion) in the region has not yet translated into dramatic, or even high, sediment yields in the larger streams of the basin

Figure 2.1.1: Basic Map of the Nam Ngum River Basin, with main planned hydropower project sites and their incremental catchments marked The location of the NNRB in Laos is shown at top left

Source: MAF

Table 2.1.1: Analysis of flow in the Nam Ngum river (calculated from daily flow records)

Parameters

Nam Ngum at NN1 Dam Site

Nam Ngum at NN2 Dam Site

Nam Ngum at Naluang*

Nam Ngum at NN3 Dam Site

Nam Ngum NN5 Dam Site

Nam Lik

at NL1 Dam Site

Nam Lik

at NL2 Dam Site

Source: Department of Electricity Time period is 20 years, 1987-2006 Data is not consistent with Table A.2.3

in appendix A, because values have been calculated using daily, rather than monthly discharge data

* Data at Naluang is from Dept of Meteorology and Hydrology, for 1987 to 2003 (17- year record).

2.2 Land use and agriculture

The NNRB consists mostly of mountainous terrain, with generally steep slopes The landscape is dominated by forest vegetation of various types, however the forest cover has been depleted by many years of commercial logging and intensive slash-and-burn agriculture, which still exists in many areas The current forest cover is approximately 38% The area of agricultural cultivation is estimated at 58% and water bodies, swamp, urban and other categories account for the remainder (Forestry Inventory and Planning Division, FIPD, 2002) The agricultural areas include paddy rice land, agricultural fallow land (pa lao on), current-year swidden (hay), grassland, and commercial tree crops

The Lao Government has an overall objective to rehabilitate forests in the country in order to restore the productive and protective functions provided by viable forest ecosystems A forest cover target of 70% by the year 2020 has been set

In the upper parts of the catchment, the land-use system is a low-input, low-output system with a combination of subsistence rice and rice production for sale Livestock are important for income, as a source of protein and in providing manure for maintaining soil fertility and rice yields

In the eastern-central parts of the catchment, and to a lesser extent in the western-central parts, people are still dependent on subsistence rice production, with small surpluses being sold

Small-holder commercial cropping is not yet widely practiced due to a lack of financial resources, limited communications and infrastructure, and lack of access to markets Livestock and forest products, therefore, play an important role in the livelihood systems in this zone The situation is changing in the western-central parts, because improved production infrastructure and agricultural services are facilitating the intensification of commercial agriculture

In the lower parts of the catchment there is good access to markets, irrigation is available in many villages and production inputs such as chemical fertilisers and pesticides are more commonly used in lowland and other high-yielding production systems In the Lower Nam Ngum there is also more commercialisation of annual cash crops, fruit trees, and commercial tree crops such as teak and eagle wood

Shifting cultivation or slash and burn agriculture is mostly used by ethnic minorities living in the uplands and higher elevation areas Productivity in this system is very dependent on soil fertility being restored, which in turn depends on the areas being left fallow for a number of years after cultivation has taken place Slash-and-burn systems make optimal use of the

natural resources, but this can only be sustained when there is sufficient fallow cycles

2.3 Ecology

The maintenance of a varied flora and fauna is of great importance for rural peoples’ livelihoods With a rural population estimated at above 80% of the total population, the aquatic and terrestrial ecological resources play a pivotal role in local livelihoods and food security Fish are also an important source of household income, and according to the FAO (2006), account for a national average of approximately 20% (dominated by wild capture fisheries)

Comprehensive quantitative information on plants, game and fish that local farmers use for their subsistence is not available It is, nevertheless, highly relevant to be aware of this aspect

of biodiversity since it affects the well-being and nutritional status of the local people – especially the rural poor

2.3.1 Aquatic ecology

Laos is subject to an annual monsoon season and flood pulse which drives the productivity of the Mekong system The seasonal connection between seasonally isolated habitats, along with the availability of food, shelter and spawning areas, provide the basis for much of the production associated with the Mekong Basin’s river system, (Sverdrup-Jenson, 2002;

Poulsen et al., 2002)

Wild fish and certain other aquatic animals have become well adapted to the natural variation

in water levels and flow and seasonal habitat availability The various habitats such as mainstream rivers and streams, deep pools and flood plains are the nodes of connection throughout the fish life cycle and fish themselves can be considered “living threads that tie or link widely scattered ecosystems together” (Glowka 2000)

Prior to the impoundment of the NN1 reservoir the Nam Ngum river would have contributed significantly to Mekong basin fish productivity and in providing important migration routes for Mekong middle and long distance migrants

Due to impoundment of NN1 reservoir, the Nam Lik River is now the only major tributary of the Nam Ngum basin that remains un-dammed as a migration route from its source in the upper part of the NNRB down to the Mekong River and on to the Mekong delta in Vietnam