Environmental and Social Issues

What IFC environmental & social safeguard policies apply?

IFC has applied the following environmental and social safeguard policies to the two projects:

• IFC OP 4.01, Environmental Assessment policy, IFC OP 4.04, Natural Habitats, IFC Policy Statement on Harmful Child and Forced Labor, World Bank OPN 11.03, Management of Cultural Property, World Bank OD 4.30, Involuntary Resettlement policy, OP 7.50 Projects on International Waterways, and IFC Policy on Disclosure of Information.

• The following World Bank Group guidelines – Thermal Power Plant (July 1998), General Environmental (July 1998), Onshore Oil and Gas (July 1998) were applied in addition to IFC Waste Management Facilities Guidelines (July 1998), IFC General Health & Safety Guidelines (July 1998), IFC Oil & Gas Development – Offshore (Dec. 2000), and IFC Hazardous Materials Management Guidelines (Dec 2001).

• In addition, BTC has utilized IFC’s public consultation Good Practice Manual in implementing their public consultation and disclosure program, IFC’s Community Development Guide, IFC’s new Handbook for Preparing a Resettlement Action Plan, and IFC Hazardous Materials Transportation Plan Good Practice Manual.

Various environmental policies and procedures of other lenders (e.g., EBRD, OPIC, US-Exim) are also being utilized in addition to the BTC project also applying the European Union (EU) standards.

Since construction has begun prior to loan approval, won’t IFC be financing a project over which it has had little influence?

While construction may start prior to IFC’s Board consideration date (as is the case with many of IFC’s investments), a) IFC’s substantial engagement has contributed significantly to ensuring a high standard of environmental, social and consultation measures; and b) IFC has stated categorically to sponsors that if they proceed with construction prior to loan approval they do so "at their own risk" and should proceed very carefully in order to ensure that the project does indeed comply fully with IFC Safeguard Policies and guidelines, including having appropriate action plans in place to guide the sponsor and their contractors.

IFC has been working closely with the Sponsors led by BP for the past 2 ½ years providing significant environmental and social development input to ensure upfront that the BTC pipeline project is designed and operated in a manner that meets or exceeds IFC’s environmental and social safeguard standards. We therefore believe that IFC has brought significant additionality to the projects already. For instance, IFC has required that the Sponsors/BP prepare:

(i) a ground-breaking Regional Review document that discusses in a regional context the broader socio-economic development issues surrounding the projects such as transparency and management of revenues, human rights, security, and access to energy;

(ii) a detailed Resettlement Action Plan (RAP) that exceeds individual country requirements that is guiding the Sponsors in the land acquisition and compensation processes,

(iii) a summary of key components of the RAP called the Guide to Land Acquisition and Compensation (GLAC) was widely disseminated (over 40,000 copies) to land owners and disclosed for 60 days prior to finalizing land transactions at IFCs insistence hence improving the transparency of the process, and

(iv) an environmental and cultural offset investment program under IFC OP4.04 (Natural Habitats policy) and World Bank OPN 11.03 (Management of Cultural Property policy), which were not requirements in the host country approvals of the respective ESIAs. Furthermore, the Sponsors have also utilized fully IFC’s public consultation Good Practice Manual in designing its public consultation and disclosure processes.

Finally, IFC also strongly encouraged the Sponsors to disclose key project documents including HGAs, PSA, LSTK and IGA and the Sponsors accepted IFC’s suggestion in this regard. These documents are available on the projects’ website (www.caspiandevelopmentandexport.com). This has brought significant transparency to the projects.

Consistent with IFC’s Sustainability Initiative, IFC expects that, beyond compliance, innovative programs such as the Project’s Community Investment Program (CIP), Social Investment Program (SIP), Environmental Investment Program (EIP), and the Regional Review report, will demonstrate that the Project is a leader in environmental and social sustainability.

Given the exceptional nature of the BTC project, IFC has agreed with the Sponsors to a program of pre-financial close monitoring, the details of which are being negotiated. The Lenders’ independent environmental and social consultant (Mott McDonald-UK) will monitor construction activities prior to Board approval and will report their findings to IFC staff. It should also be noted that IFC’s due diligence prior to the loans’ approval includes a significant number of field visits and on-the-ground validation of environmental and social commitments as described above by IFC staff as well as verification by independent environmental/social consultants. Monitoring activities by IFC staff as well as independent environmental/social consultants, including field visits, will continue after loan approval on a regular basis.

What specific changes has IFC requested in project design or implementation to reduce social or environmental impacts?

There are, and have been, many positive changes/improvements made by requests from IFC and this will be continued throughout the life of the Project. Just to list some of the key areas:

Verification that all viable pipeline corridor alternatives have been assessed and that the corridor selected by the project sponsors is in fact the best corridor and has been optimized for minimum impacts. Detailed in the BTC Pipeline Routing Report reviewed and vetted by the Lenders’ Independent Engineer (Parsons E&C) and subsequently made part of IFC’s disclosure package (submitted to the Georgian Ministry of Environment as well).

• Specific instances where IFC has requested a change or an addition include relocating the IPT1 pressure reduction station in Turkey; disclosing the Resettlement Action Plan’s Guides to Land Acquisition and Compensation (GLACs) for 60 days prior to acquiring land; ensuring culturally appropriate consultation (e.g., improving the consultation process with women in conservative villages in Turkey and ensuring land acquisition teams are comprised of minority language speakers, e.g., Kurdish in Turkey); and requiring additional sea grass surveys in Sangachal Bay, etc. IFC also strongly encouraged the inclusion of third party local NGOs in the land acquisition process in all three countries. The Project Sponsors have agreed to all of these requests.
• The Regional Review is a document that has been completed solely at the request of IFC. It is the first document of its kind and it is hoped that it will be a ground breaking and innovative document that looks at the broader socio-economic development issues surrounding the projects such as transparency and management of revenues, human rights, security, and access to energy. Some of these issues are complex and controversial in nature and in many respects outside the direct control of IFC and the project sponsors. It is a significant step in itself that the sponsors have addressed these issues in an open and transparent manner. The Regional Review was disclosed both locally in the InfoShop and on the project’s website (www.caspiandevelopmentandexport.com).
• Programs designed not only to reduce environmental and social impacts but also to enhance societal benefit and promote conservation and biodiversity will be implemented through the Social Investment Program (targets investment in the countries on a macro basis), the Community Investment Program (intended to bring lasting socio-economic benefits to people living in areas along the pipeline route), and the Environmental Investment Program (this will include IFC OP 4.04 and World Bank OPN 11.03 “offset” programs and additional value added investment programs as described above). Details of these programs are currently being refined, however, specifics related to these measures will be included in project documentation released locally and the IFC international disclosure process via the InfoShop.
• IFC has required the development of a Resettlement Action Plan (RAP) – which was not required under the HGAs -- in order for the project to comply with World Bank OD 4.30, Involuntary Resettlement Policy. This has and will continue to provide the BTC project a significant plan of action during construction and operation regarding land acquisition, compensation and consultation.
• To enhance BTC project design and overall sustainability, BP has also fully used IFC's good practice guidance materials including IFC's public consultation Good Practice Manual, IFC’s Community Development Guide and IFC’s new Handbook for Preparing a Resettlement Action Plan. In this regard, BTC will set new standards for large infrastructure projects in all three countries with regard to public consultation and disclosure of information.
  
• IFC has placed an SME Development coordinator in the region. This coordinator works closely with the Sponsors, stakeholders and other development agencies in the region (e.g., EBRD) to identify and implement SME linkage and other value-added opportunities along the pipeline route which complement the sponsors’ CIP/SIP programs.
• IFC, together with EBRD, will carry out a Multistakeholder Forum (MSF) in all three countries in between August 26 and September 11, 2003. MSF objectives are to provide an opportunity for IFC/EBRD to communicate their position on issues of concern to stakeholders and to listen to their concerns and suggestions. The MSF will not replicate -- but complement -- the substantial amount of on-the-ground consultation work already done to date by BP and BTC. MSF outcomes are to be documented in reports and disclosed publicly thereby increasing considerably project transparency and IFC institutional accountability.

Is an Environmental and Social Action Plan (ESAP) or EMP being prepared?

Yes. ACG and BTC have prepared an ESAP for IFC which will be ISO14001 certifiable. (Note: the BTC pipeline will achieve ISO 14001 certification within 9 months of starting operations, not during construction). The main ESAP document (Level II) is an overarching document with details on programs, contractual obligations and monitoring. The Contractor Control Plans (CCPs, Level III) will set out the environmental and social performance measures that the contractor will be contractually obligated to meet. The measures in the CCPs are derived from many Source Documents including the ESIAs, SLIPs SLIP = Supplementary Lenders Information Package. There is one SLIP per country which is an extension of the host government approved ESIA that provides information on any IFC Polices or guidelines that were not adequately addressed in the main ESIA. , RAPs, IFC guidelines, etc. The ESAP Main document and the CCPs are part of the InfoShop disclosure package that was released to the IFC InfoShop and locally in June 2003. The construction contractors will take the CCPs and write detailed Contractor Implementation Plans and Procedures (CIPPs) discussing how they will implement and achieve the requirements in the CCPs.

Does the Indigenous Peoples Policy apply to BTC?

Various international NGOs have asserted that the Kurdish communities near the pipeline route in Turkey fall within the ambit of World Bank OD 4.20, Indigenous Peoples Policy. IFC, in consultation with the World Bank, has determined that the project does not affect any groups or communities (including the Kurds) that would fall under the definition of the World Bank’s OD 4.20, Indigenous Peoples policy. Project affected Kurdish communities constitute an ethnic minority with a distinct language and dialects but do not meet the key characteristics of indigenous people as defined by OD 4.20, since they 1) are not primarily involved with subsistence oriented production, and 2) are not tied to or solely reliant on the natural resources of the area.

IFC has determined also that the Kurdish communities affected by the BTC Pipeline are not isolated or disconnected from larger socio-economic structures of the surrounding area.

IFC is however cognizant that there are a number of potentially vulnerable groups, e.g. ethnic minorities such as Azeri and Greek communities in Georgia and Kurdish and Alevi Muslim communities in Turkey, the elderly, women, etc. Although there are various ways to address the vulnerability of these different groups, the approach has been to implement comprehensive Resettlement Action Plans (RAPs) and social and community investment programs. The RAPs have given specific attention to project impacts that may affect marginalized and vulnerable groups and have set in place the means to ensure that compensation measures are applied equitably. It should be noted that no households will be physically displaced along the pipeline route; the main impact will be temporary disruption to cropping and grazing activities during construction.

Please see Q&A above regarding the Kurdish language issue.

How was the route analysis and selection process undertaken for the BTC pipeline? Have there been any routing changes to avoid sensitive habitats?

A number of alternative oil transportation methods were assessed during preliminary work relating to Caspian crude oil export solutions. These included road, rail, shipping, and new-build pipeline options as well as expansion of the NREP and/or WREP and combinations of all of these. This assessment took over five years, starting with consideration of the best transportation method, followed by a comprehensive assessment of the best pipeline corridor and culminating in the final route selection. Even prior to this work by the BTC consortium, many parties (World Bank/PLE/BOTAS, Shell, etc.) have studied various Caspian Sea to Mediterranean Sea routes which fed in to BTC’s work.

The BTC pipeline route delivers a major environmental benefit enabling Caspian ACG crude to be exported from the land-locked Caspian, to open market, without an incremental increase in volumes shipped through the Bosphorus Straits. Turkey was selected as the most suitable export destination, as it is the nearest country to Azerbaijan with access to the Mediterranean Sea, which provides the nearest open market point of delivery. The pipeline now had a beginning point and ending point. Routing options included Iran, Armenia or Georgia.

Due to political constraints, building the pipeline across Armenia or down through Iran was not possible. Therefore, the route through Georgia was selected based upon the willingness and support offered by Georgia and Turkey to be transit countries.

The Turkey Lump Sum Turnkey (LSTK) agreement defines a boundary where the pipeline from Georgia could cross in to Turkey based upon some of these previous studies just as the Azerbaijan HGA defines certain boundaries. The HGAs also defined the process for selecting the final alignment which would be accomplished through a series of refinement and approvals from the respective governments. The process began with selecting a Corridor (10 kilometer corridor of interest), then Route Refinement (500 meter specified corridor), then Route Definition (100 meter specified corridor), and finally ROW Alignment (32 meter construction corridor).

BTC studied three main 10 kilometer corridors in Georgia – the Western, Central and Eastern corridors. The eastern route was rejected because of security risks (the US Government and the Georgian Government listed the Akhalkalaki and Ninotsminda districts as “no go areas” because security of the pipeline can not be guaranteed by the Georgian Government), presence of Russian Military facilities, very little transportation or infrastructure facilities, seismic areas and Lake Childer. The western route was discarded based upon landform instability (landslides and debris flows), the requirement to cross the Borjomi-Kharagauli National Park (IUCN Cat II) and the State Nature Reserve (IUCN Cat I), high number of archaeology sites, populated areas, and extremely difficult terrain including large river and gorge crossings. The central corridor was also discarded because it crosses the Akhalkalaki district, encroaches sensitive landscapes, and crosses severe geohazard areas.

BTC began seeking a corridor that did not cross the Akhalkalaki district to the south and did not cross the Borjomi-Kharagauli National Park to the north yet minimized impact to the Borjomi-Kharagauli Support Zone. After a long search, the Modified Central Corridor was identified as the only option that met this criteria. This corridor has been controversial because it crosses the water catchment area for the Borjomula River for 18 kilometers.

As part of the Environmental and Social Assessment (ESIA) process, numerous routing alternatives were evaluated, including various routes for the pipeline in all three countries. Results of the routing analysis are presented in the ESIAs, and are further elaborated in the Addenda to the ESIAs. As a requirement of IFC’s international disclosure and also as required by the ESIA Project Permit provided by the Georgian Ministry of Environment, BTC has developed a robust routing analysis report for Georgia in particular. This includes an evaluation of the Karakaia route and other routes. This report has been reviewed by the lenders’ independent environmental and technical consultants to verify its accuracy and conclusions. It is our understanding that the ESIA Dutch Commission will assist the Ministry of Environment with the review of this supplemental information. In all, BTC has made some 200 route changes since the initial selection which has added substantial length to the pipeline.

The pipeline will be buried beneath the ground along its entire length. In Azerbaijan it will mostly run alongside an existing pipeline, the Western Route Export Pipeline. The actual area disturbed for the building and burying of the pipeline will be 44 meters wide. Once the pipeline is built, BTC will require only an eight-meter right-of-access corridor to allow the line to be monitored and maintained. People will be able to use the ground over the line for agriculture and grazing with minimum inconvenience.

What mitigation measures are being undertaken to prevent a spill in the Borjomi Valley and to address Georgian Glass and Mineral Water Company’s (GGMW) concerns?

The Borjomi area is famous as a health center, tourist destination and the home of the GGMW. The plant is in the process of upgrading including the addition of other types of water and the promotion of the product in the international market. The pipeline is located 60 kilometers away from the aquifer recharge zone and 16 kilometers from the actual town of Borjomi and GGMW. It does not cross the Borjomi-Kharagauli National Park, it crosses the Support Zone to the park. Despite this routing, concerns include the risk of an oil pipeline in a highly prized and sensitive aquifer and the potential for competitors to mount a negative public relations campaign which could affect sales and thus local employment in the factory (currently 1,200).

Regarding the latter, we understand that BTC Co. is actively engaged in discussions with GGMW to assist the Company in dealing with certain difficulties raised by the presence of the project.

Regarding the former, the waters that are used both commercially by GGMW and publicly by the communities in this area come from three different zones or layers of water. The deepest layer of water is the source of the heavy mineralized water that GGMW is famous for, a middle layer of water supplies GGMW with spring water, and surface waters in the Borjomola river and very shallow layers of water provide the communities with water. Studies have shown that it is physically impossible for an oil spill to contaminate the deepest layer of water because it is under pressure via a hydraulic head to rise to the surface therefore, nothing can soak or be pushed down in to it. Studies also indicate, though there is some disagreement if enough data was collected, that the middle layer of water can not be contaminated because it is sealed off from above by impermeable layers of soil. Therefore, BTCs main concern is the unlikely event of an oil spill of large enough volume, being able to travel over the land surface without being intercepted by spill control equipment, and entering the small gullies, rivers and streams that feed into the Borjomola River and making its way into the Borjomola River. If conditions were such that a spill was able to get this far without being stopped, it would impact the Borjomola River and communities water supplies. BTC would be responsible for cleaning up the spill and for supplying water to the communities.

Safety and impact minimization have been incorporated in to the planning and siting of the pipeline at every step. In addition, the following design and operational measures have been incorporated. The entire pipeline system will be protected by the following design measures: pipeline route alignment to avoid environmentally sensitive areas and natural hazards; buried to an acceptable depth; wall thickness incorporating design safety factor; ACG crude analysis for line pipe specification; external coating system; external corrosion protection system; specialized design for natural hazards; line separation between BTC and SCP pipeline >10m; 8m wide ownership/exclusion zone; adequate separation from existing utilities and infrastructure; quality assurance and control; block valve spacing on the basis of environmental risk and leak detection systems. The following operational measures will be applied the length of the pipeline: monitoring the fluid quality entering the system; monitoring the cathodic protection system; internal inspection pigging; planned maintenance; operational staff training and competence; pipeline patrols and surveillance; landslide and river crossing monitoring and public awareness.

In Georgia, as a result of discussions with the Georgian authorities a number of additional safety measures have been agreed for the Tskhratskaro Pass to Kodiana Pass section of the route which passes through sensitive groundwater areas.

• Double the number of block valves required by international pipeline construction codes to isolate sections of the pipeline.
• Increased pipe wall thickness.
• State of the art sensor systems (wavy wire and fiber optic sensors) to detect any earth movements, illegal excavation, or third party intrusion.
• Additional route markers.
• The use of marker tape in the trench with an electronic alarm to detect breakage/interference to alert people digging near or on the pipeline.
• A permanent local security presence, equipped with all-terrain vehicles and communications systems, to conduct daily monitoring and horse patrols.
• All-weather access roads for daily monitoring and emergency response.
• Locally recruited, internationally trained oil spill response personnel and permanently located equipment.
• Additional groundwater monitoring and specialized analysis for sensitive areas.

Does the pipeline cross any internationally or nationally designated reserves, parks, etc. and if so, will any money be available for offsets and upgrades?

A total of $9,175,000 has been allocated for offset and additionality programs. BTC will try to leverage this money to attract additional money. Most of the areas listed below are not actually designated or protected areas but because of existing natural habitats will be treated as if they were officially protected:

• Gobustan Cultural Reserve (Az) – The pipeline crosses the Gobustan Cultural Reserve for 900 meters in a location that has no impact upon any of the rock art that the Reserve is designated to protect. Many options were explored to avoid the area but none were feasible. BTC will sponsor the development of a Strategic Environmental & Cultural Plan which hopefully will assist the Ministry of Culture in its efforts to obtain recognition of the Gobustan Cultural Reserve under the World Heritage Convention.

• Proposed Gobustan National Park (Az) – The pipeline will cross this area for 9 km (0.13% of the proposed park area) mostly in areas that have previously been disturbed by pipeline construction or degraded by anthropogenic activities. A site specific reinstatement plan will be designed for this area. BTC will sponsor the development of a Strategic Environmental & Cultural Plan which hopefully will result in the area becoming an actual National Park and will combat desertification.
• Ktsia-Tabatskuri Managed Reserve (Ge) – The pipeline crosses the 22,000 hectare area for 21.2 km (~ 0.4%). The route has been micro-located to avoid the wetlands, seasonal construction constraints have been implemented, and series of mitigation and restoration measures put in place. There is no active conservation management on the site, it does not have a management plan and much of the area is utilized for agricultural activities or grazing. BTC has committed to render assistance to the government for management planning which should result in proactive sustainable management of this area.
• Tetritskaro Primary Forest Fragments (Ge) – The majority of the relatively limited forest areas that would be affected by the pipeline are of secondary origin and/or heavily degraded by human activity including logging and grazing. The total length of primary forest fragments crossed is 1.61 km and secondary forest of high ecological value is 1.07 km. As far as possible the route passes through non forest areas or degraded forest blocks. Special mitigation and restoration measures will be enacted. BTC will implement an Eco-Compensation Plan and a Rare Species Management Program. These programs are designed to create forest habitat off project areas and to ensure survival and propagation of rare floral species.
• Tkhratskharo Pass to Tiseli (includes the “Borjomi” section) (Ge) – The pipeline crosses limited areas secondary forest that has been heavily impacted by logging and grazing interspersed with small fragments of primary forest and diverse high mountain meadows. This includes crossing the 170,846 hectare non-designated Support Zone for the Borjomi-Kharagauli National Park for 39 km (0.075% of the support zone is crossed by the pipeline). The support zone does not have legal standing and is not internationally acknowledged or listed. Georgian legislation does not correlate the support zone with any IUCN category. There is a Special Regulatory Regime applicable to Borjomi Resort (SDTR Regulations) which as not been approved by Presidential Decree and has not entered in to force. If it is approved, the area where the pipeline crosses will be classified as Zone III. In Zone III, “Activities that do not have negative impact on natural curative resources and the sanitary conditions of the territory, are permissible.”. BTC will implement an Eco-Compensation Plan, a Rare Species Management Program and Management Planning Assistance. These programs are designed to create forest habitat off project areas, to ensure survival and propagation of rare floral species and to assist the Georgia Protected Areas Program.
• Posof Wildlife Protection Area (Tu) – The Protection Area was established primarily for the Caucasian Black Grouse though it also contains important large mammals and plant species.. The pipeline route crosses this area for 25.3 km in lower quality sparse and patchy forested areas. Special mitigation, restoration measures, an Eco-Compensation Plan and a Rare Species Management Program will be implemented.
• Sarikamis Natural Site Area (Tu) – 4.1 km of pipeline pass through the 20,000 ha nationally protected Sarikamis Forest. The pipeline has been carefully routed to follow an existing corridor therefore forest impacts will be slight. Special mitigation, restoration measures, an Eco-Compensation Plan and a Rare Species Management Program will be implemented.