Environmental Assessment Report

Initial Environmental Examination Project Number: 40524 January 2011

People’s Republic of China: Energy Efficiency and Emission Reduction Project in Shandong Province (Lufang Subproject) Prepared by Zhu Chao for the Asian Development Bank The initial environment examination report is a document of the borrower. The views expressed herein do not necessarily represent those of the ADB’s Board of Directors, management, or staff, and may be preliminary in nature.

ABBREVIATIONS

ADB – Asian Development Bank CDM – clean development mechanism CFB – circulated fluidized bed CO – carbon monoxide CO2e – carbon dioxide equivalent COD – chemical oxygen demand dB (A) – a weighted decibels EIA – environmental impact assessment H2S – hydrogen sulfide IEE – initial environmental examination NH3 – ammonia NOx – nitrogen oxide NO2 – nitrogen dioxide PRC – People's Republic of China PM10 – particulate matter SO2 – sulfur dioxide SS – suspension solid TSP – total suspension particles tsce – ton standard coal equivalent

MEASUREMENT UNITS

.

oC – centigrade dB(A) – decibel km – kilometer kg/h – kilogram/hour kWh – kilowatt-hour km2 – square kilometer kW – kilowatt g/l – gram per litre GJ – gigajoule GW – 109 watts GWh – gigawatt-hour ha – hectare m – meter m/s – meter per second mg/L – milligram per litre mm – millimeter m2 – square meter m3 – subic meter m3/h – cubic meter [erhour Mt – million ton MW – megawatts MWh – megawatt-hour t/h – ton per hour TJ – trillion joule t/a – ton per year

Table of Contents

Page Executive Summary

I. INTRODUCTION 1 II. DESCRIPTION OF THE PROJECT 1 III. DESCRIPTION OF THE ENVIRONMENT 3

A. Physical Resources 3 B. Ecological Resources 4 C. Natural Resources 4 D. Human and Economic Development 4 E. Sociocultural Environment 4

IV. POTENTIAL ENVIRONMENTAL IMPACTS AND MITIGATION MEASURES 5 A. Noise 5 B. Water Use and Quality 5 C. Air Quality 7 D. Solid waste 8 E. Land 8 F. Ecological Environment 8 G. Socioeconomic Environment 8 H. Health and safety impact 8

V. ECONOMIC ASSESSMENT 9 VI. INSTITUTIONAL REQUIREMENTS AND ENVIRONMENT MANAGEMENT AND

MONITORING PLAN 9 A. Institutional Requirements 9 B. Environmental Monitoring Plan 9 C. Environmental Management Plan 10

VII. PUBLIC CONSULTATION AND INFORMATION DISCLOSURE 11 A. Public Consultation 11 B. Grievance Redress Mechanism 11 C. Information Disclosure 11

VIII. FINDINGS AND RECOMMENDATION 11 IX. CONCLUSIONS 13

EXECUTIVE SUMMARY The subproject company, Shandong Dongying Lufang Metal Materials Co. Ltd, is a large metallurgical company that engages in copper melting operation. By the end of 2009, the total assets of the company amounted to CNY6.0 billion, and total number of staff reached 2,000. The main product of the company includes 0.20 million ton per year refined copper. The subproject proposes to recover the waste heat from flue gases of the copper ore processing system to produce steam and electricity. The proposed work also includes a sulfur removal process that removes sulfur dioxide and dust through high efficient technologies to comply with the air emission standards which will at the same time generate sulfuric acid and white arsenic as byproducts. The scope of the project was evaluated under the Asian Development Bank’s rapid environmental assessment (REA) checklist criteria for thermal power plant. The assessment concluded that there are no significant impacts that can cause irreversible damage to the environment and any potential impact will be limited within the boundary of the project site. Hence, the REA evaluation, justifies the ‘B’ categorization of the subproject. A detailed environmental assessment based on the project environmental impact assessment (EIA report, feasibility report, and site visit were conducted and the following findings and recommendations have been made:

(i) The proposed subproject is an environmentally friendly project which will save substantial amount of energy, improve the existing environment and will mitigate pollution emissions. The subproject complies with national industrial and environmental policies. The land occupied by the subproject is an existing industrial land owned by the subproject owner. There is no involuntary resettlement, no indigenous people and no land use change involved in the proposal. The subproject adopts advanced technology to recover sulfur dioxide and removal of dust as well as produce electricity and steam through waste heat recovery. There may be some minor environmental impacts associated with wastewater discharge and limited noise during project construction and operation. All necessary measures will be taken to reach the national and World Bank standards.

(ii) The environmental impact analysis assessment report shows that the pollutants

discharged from the proposed subproject will not have any notable impact on local air, surface water and acoustic environment, and also has minimal impact on the nearest community, which is about 2.1 kilometer (km) away from the project site. There is no rare or endangered species or designated culture and heritage sites within 6 km radius of the subproject site. The nearest national natural protection area, Yellow River Delta Area Natural Reserve, is about 25 km away north of the project site.

(iii) During subproject construction, the following recommendations were made to

help minimize the environmental impacts:

• Due to temporary and short duration of construction period and the fact that the nearest residential area is 2.1 km away from the site, the noise impact to the residential receptors would be limited. Nevertheless, it is recommended that all noise emissions from the site should be managed

adequately in order to comply with the noise limit required under the Noise Limit at Construction Site Boundary (GB12523-90). The noise control measures will include appropriate mufflers or other noise attenuation devices with all outdoor activities to be limited to daylight hours.

• Any dust emission from the site should be managed in order to minimize dust pollution associated with the construction activities. For example, the construction site should be equipped with silt curtains; prepared concrete should be used to construct buildings; water spray should be used along access road and at construction site; closed transport should be used for building material transport, especially for sand and cement.

• Construction wastes should be properly stockpiled onsite followed by proper offsite disposal.

• Soil erosion and sedimentation measures should be taken to control soil loss from site.

(iv) After construction, the subproject components should be subject to “Three

Simultaneities 1 ” inspection within the trial operation period by the local environmental protection department to ensure that all the required environmental protection measures are fully implemented and function properly. As required in the approved EIA, the facility is required to install online measurement systems for air emissions and wastewater discharge. The online monitoring system shall be verified during the “Three Simultaneities” inspection.

(v) Following successful “Three Simultaneities” inspection, the following are

recommended for the long-term operation: • The desulfurization facility should be maintained on a regular basis to

ensure sulfur removal efficiency; • Management and control of production processes should be maintained

on a regular basis to help avoid accidental emissions; • Vegetation including landscaping should cover 20% of the site to provide

visual screening and noise attenuation; • Sulfuric acid production/storage is considered a major health and safety

hazard source. The plant shall ensure that a stringent management procedure is in place to effectively control the safety risk to less than 1E-5.

• The contaminants of potential concern to the groundwater quality that are associated with the proposed subproject would include pH and heavy metals which may potentially migrate to the subsurface from the acid production/storage area. This concern may be addressed through adequate design and implementation of anti-corrosion and secondary containment measures.

1 Three simultaneities refer to simultaneous alignment of design, construction and operation of

production and environmental facilities for a particular project and a compliance inspection for three simultaneities is done during trial project operation.

I. Introduction

1. The initial environment examination (IEE) report has been prepared to assess the environmental impacts relating to the proposed works by the Shandong Dongying Lufang Metal Materials Co. Ltd. (Lufang) as part of the Energy Efficiency and Emission Reduction Project in Shandong Province. The assessment is based on a comprehensive due diligence exercise done as part of environmental impact assessment (EIA) process prescribed by Shandong Environment Protection Department (SEPD) and ADB Safeguard Policy Statement (June 2009).The proposed subproject by Lufang is classified as category B in accordance with Asian Development Bank classification criteria.

2. The scope of the IEE study includes description of the physical, ecological and social environment with regard to the Lufang subproject’s area of concern, analysis of the main environmental potential impacts, and recommendations for mitigation measures. 3. Lufang is a large metallurgical company that engages in copper melting operation. By the end of 2009, the total assets of the company amounted to CNY6.0 billion, and the total number of staff reached 2,000. The sales revenue in 2009 was CNY14.1 billion. The main product of the company includes 0.20 million ton per year (Mt/yr) of refined copper. Lufang leads the application of the oxygen bottom blown furnace (OBBF) technology in copper melting, which requires little to none coal fuel in the melting process. Unlike other copper melting technologies, it does not require addition/blending of 3%–6% coal or coke to the ores as fuel in the smelting furnace during normal operation. As a result, it can reduce carbon dioxide (CO2) emission by 220 kilogram carbon dioxide per ton (kg CO2/t) ore processed or approximately 800 kgCO2 /t blister copper produced. 4. The subproject has been designed to recover waste heat from flue gases of the copper ore processing system to produce steam and electricity. The subproject also includes a sulfur removal process that removes sulfur dioxide (SO2) and dust through high efficient technologies to comply with the air emission standards which will at the same time generate sulfuric acid and white arsenic as byproducts. 5. The construction is expected to start in April 2010 and would be completed by the end of 2011. The implementation of the subproject will result in substantial energy saving and emission reduction.

II. Description of the Project

6. The subproject is designed to recover waste heat for steam and power generation and remove sulfur and smoke from flue gas from copper melting furnaces. The subproject can supply 48,970 megawatt-hour per year electricity and 352,123 t/yr low pressure steam. The subproject uses electric dust collector to remove smoke (680 kg per hour [kg/h]) and recover arsenic (8.71 kg/h) from waste gas from melting furnaces, the dust removal efficiency is greater than 97.5%. The subproject removes sulfur in flue gas by two steps, the double rotary and double adsorption technology is used in the first step to remove 99.99% sulfur and the semi-dry limestone desufurization technology is used in the second step to remove more than 60% SO2. 7. The subproject is located in the Coastal New Material Industrial Park, Dongying, Shandong Province, which is located approximately 15 kilometer (km) to the east of downtown Dongying city. A site location and vicinity map is provided below. In the industrial park, a 100,000 t/yr copper melting demonstration project that employs the advanced OBBF melting technology has been in operation since 2008.

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Location of the Project

8. The proposed subproject will utilize the flue gases from Lufang’s 1 Mt/yr copper smelting project as the feedstock to recover waste heat, sulfur and particulates and generate steam/electricity, sulfuric acid and white arsenic as by-products. The subproject, therefore, consists of the following components:

(i) Waste heat recovery by three high temperature heat recovery steam boilers (HRSBs), including one boiler of 28.75 t/h capacity following the OBBF and three boilers of 12.1-13.0 t/h capacity each following each of the three converting furnaces. The high temperature HRSBs will cool high temperature flue gas from 750oC–850oC to approximately 350oC to produce mid-pressure steam (steam pressure 4.0 mega-pascal [MPa], steam T 250oC) for power generation. The generated mid-pressure steam totaled at 52.95–54.75 t/h is to drive a steam turbine power generation station to generate 4,640–5,680 kilowatt electricity (10 kilovolt/50 Hertz). The generated power will be utilized by internal users to reduce the draws from the regional grid.

(ii) Waste heat recovery by four mid temperature HRSBs, including two boilers of 5.0

t/h each capacity (steam pressure 0.8 MPa, T170oC) following the two sets of settlement furnaces and anode furnaces, respectively, and two other boilers of 12.4 t/h capacity and 14.4 t/h capacity (steam pressure 0.6 MPa,,T 159oC) associated with the stage 3 and stage 4 sulfuric acid reaction processes. The mid temperature HRSBs will cool mid-temperature flue gas from 650oC–750oC to approximately 180oC–250oC to produce low-pressure steam for process use and winter heating.

(iii) Flue gas from OBBF and converting furnaces will then be treated by electrostatic

precipitators (ESP) for dust removal, which is followed by a sudden temperature drop process, from some 350oC–120oC, to recover As2O3 in particulates (“white arsenic”) as a by-product.

ADB Shandong EEER Project – Lufang Subproject

SITE LOCATION AND VICINITY MAPJOB NO.：10-101015 DATE：2010-10-08

DRAWN BY：LI Xiaoqiong FIG NO.：1

ADB Shandong EEER Project – Lufang Subproject

SITE LOCATION AND VICINITY MAPJOB NO.：10-101015 DATE：2010-10-08

DRAWN BY：LI Xiaoqiong FIG NO.：1

Dongying City

Dongying Economic Development Zone

Guangligang Community

10km

Yello

w R

iver

Dong Ying

Lai Z

hou

BayThe

Site

DongyingDongying Economic Development Zone

Guangli River

NN

Dongying EastDowntown

Guangli River

Yihong River

Lai Z

hou

Bay

GuangbeiReservoir

GuangnanReservoir

Huatai ChemicalDongying Dadi Silicon Co.

Binhai New Material Park

Guangli 220 KV SubstationThe siteJinling Group New Material Co.

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(iv) The treated flue gas from OBBFs and converting furnaces containing SO2 concentration of approximately12% (v/v) will be subject to a four-stage sulfuric acid reaction process to reduce emissions of sulfur and SO2 which will also generate 887,941 t/yr of 98% industrial sulfuric acid as a by-product.

(v) The offgas from the sulfuric acid production process would contain SO2 up to 775

milligram per cubic meter (mg/m3), which will be combined with the anode furnace flue gas as well as smokes from other sources of the smelter plant and be treated for desulfurization by a semi-dry limestone moving bed technology. The combined flue gas of approximately 640,000 Nm3/h containing a SO2 concentration of 480 mg/m3 will be treated to remove over 60% SO2, resulting in the final SO2 emission concentration of ≤192 mg/m3 (or ≤122.4 kg/h) to be emitted to the air via a 90 meter (m) high stack.

(vi) In addition, the proposed project scope would also include auxiliary components

that generate desalinated water for the use by the heat recovery boilers and treat wastewater discharge from the boilers and acidic wastewater from the sulfuric acid recovery process.

9. The total cost of the subproject is estimated to be CNY557.32 million, including CNY46.96 million for buildings, CNY240.50 million for equipment purchasing, CNY96.59 million for installation, and CNY126.87million for others. The project would start construction in April 2010 and operation in October 2012. With the implementation of the above waste heat recovery and emission reduction processes, the total energy savings are expected to reach 62,426 ton of standard coal equivalent (tsce)/yr. Aside from the energy savings, the subproject can achieve annual emission reduction (direct plus indirect) by 159,232 ton of carbon dioxide equivalent (tCO2e), 645 tSO2, 124 t smoke, 504 ton of nitrogen oxide (tNOx) and 181 ton of carbon monoxide (tCO).

III. Description of the Environment A. Physical Resources

10. Topography. Dongying city is located in the northeastern portion of Shandong Province in the Yellow River estuary delta, bordering the Bohai Sea to the north and east. The subproject site is located in the Dongying New Material Industrial Park of the Dongying Economic Development Zone. The shallow soil formation belongs to modern Yellow River Delta plain, featuring coastal lowlands. The original site is an abandoned aquatic farming site and shoal. The land reclamation has been completed. The topography in the site area is flat. The land acquired for the project does not involve farmland or forest land. 11. Climate. The subproject site is in temperate zone and belongs to the continental climate. The daily temperature difference is considerable. The mean annual air temperature is 12.8°C, with a maximum of 40.7°C and a minimum of –20.2°C. The annual precipitation is 593.6 millimeter. The prevailing wind direction is SSE, with frequency of 14%, the average wind speed is 3.8 meter per second. 12. Surface water. The per capita water resource in Dongying is 324 m3, about 11% of national average. The annual average runoff is 448 million m3 resulting from local rainfall, mostly in summer, and most of the runoff enters into the sea. Yellow river is the main surface water source with an average annual runoff of 35.2 billion m3 and average flow rate of 1264 m3/s. The nearest natural surface water body is the Guangli River, located approximately 0.5 km to the

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southwest of the Lufang site, which is 47.3 km long, passing through Dongying Economic Development Zone. The water quality in the Guangli River is poorer than Class V standard of the Surface Water Quality Standard (GB3838-2002), which is essentially a wastewater canal. The Guangnan Reservoir is located approximately 1.0 km to the southwest of the project site; the storage capacity of the reservoir is 114 million m3. The Guangbei Reservoir is located 4.5 km to the north of the subproject site, with a storage capacity of 30 million m3. 13. Soils. The topsoil in the subproject site area is salty soil with mineralization degree of 23-88 grams per liter (g/L). The top soil that contains over 8% salt in the coastal zone is not suitable for farming. The subproject will only occupy waste land, which cannot be used for tree planting without top soil replacement. 14. Geology and hydrogeology. Due to the specific sediment environment conditions in the Yellow River Delta, the groundwater aquifers in the site area are located in pulverized sandstone, fine sandstone, middle and fine sandstone and soil; ground water confining layers (mainly clay) are distributed alternatively. The grade is approximately 1 m to 2 m above sea level and the depth to ground water table is typically less than 2 m. The mineral content of the ground water is in the range of 23 g/L to 88 g/L, unsuitable for industrial and domestic use. B. Ecological Resources

15. There are 84 kinds of plant around the subproject area, including 12 kinds of arbor (pine, cypress and poplar, etc.), eight kinds of shrub, and 64 kinds of grass none of which are endangered species. In the subproject site, there is no arbor and bush, but few grass. There is no large wild animal in the subproject area. In the area within 10 km from the project site, there are about 26 kinds of birds distributed mostly around the Guangnan Reservoir and the Guangli River, none of which are endangered species or migratory birds. C. Natural Resources

16. Dongying enjoys rich oil and gas resources; the second largest oilfield, Shengli Oilfield, is mainly located in Dongying City. By the end of 2004, the total proven reserves of Shengli Oilfied amounted to 4.5 billion t and proven natural gas reserves 38.2 billion m3. Dongying also has more than 100 billion t salt resources and rich geothermal, clay and shell resources. D. Human and Economic Development

17. Dongying City has two districts and three counties; the total population is 1.79 million, of which 1 million are rural population. The site is located in the Dongying District, the nearest residential area is the recently built Guangligang Community, located approximately 2.1 km to the southwest of the site. The registered population of the community was 1,089 in 2008, and floating population 5,800. 18. The industry in Dongying city is dominated by the oil industry. Promoted by the oil industry, the local basic industry has made rapid development. A range of new industries consisting of oil, salt chemistry, paper making, machinery manufacturing has been formed. E. Sociocultural Environment

19. The surrounding area of the site is inhabited by industrial communities, comprised of mainly workers of the industrial park. The human settlements are found only in areas over 2 km away from the subproject site and therefore does not impact on the livelihood of the surrounding

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community. There is no ethnic and minority group living in the subproject area. Within 10 km to the subproject, there is no designated cultural site or historic site for protection.

IV. Potential Environmental Impacts and Mitigation Measures A. Noise

20. The monitoring results of 9 October 2009 at the subproject site area show that the maximum background noise levels were 54.0dB (A) in the daytime and 47.8 dB (A) at night, which is in compliance with Class III standard for Industrial Enterprise Boundary (GB12348–2008). The monitoring results are shown in Table 1.

Table 1: Noise Monitoring Results at Project Site

Monitoring Site

Daytime dB(A)

Night dB(A)

Location

Percentile Leq L90 L50 L10

National Standard

Leq L90 L50 L10

National Standard

World Bank

Standard

East 52.4 46.3 49.2 54.9 60* 46.2 40.1 43.0 48.7 South 53.2 49.4 51.2 56.2 47.2 43.2 45.0 50.1

Noise at Plant Site West 54.0 51.9 53.8 55.4 47.8 45.7 47.6 49.2

50a 70b

Source: Lufang 1 million ton per year multiple metal smelting project environmental impact assessment report. a The standard refers to Class II standard for Industrial Enterprise Boundary (GB12348-2008). b The World Bank’s Standards as per Pollution Prevention Abatement Handbook 1998.

21. During subproject construction, the construction machinery will generate certain noise impact. Given the short construction period and long distance to the nearest residential area, the noise impact to the residential receptors would be limited. The mitigation measures will include implementation of appropriate noise control measures e.g. mufflers or other noise attenuation devices used for noisy equipments and ensuring that all outdoor activities are limited to daylight hours. 22. During subproject operation, the noise would be mainly from discharge ducts of waste heat boilers, boiler blowers and exhaust dischargers for duct collection. The nominal noise levels at source would be in the range of 70 dB(A) and 110 dB(A). Building isolation and noise control will be employed in the project design; the discharge ducts of waste heat boilers will be installed with mufflers; the high noise equipments such as blowers will be installed in insulated rooms. With proper engineering design, the noise level at the factory boundary will be controlled to meet the Class III Standard for Industrial Enterprise Boundary (GB 12348–2008). There are other factories around the project site, the nearest residential communities is located 2 km away from the project site. Therefore, the proposed project will not have notable noise impact on the environment. B. Water Use and Quality

23. Monitoring results at the Guangli River on 22 March 2009 show that the river water is severely polluted, exceeding Class V Standards of the Standard for Surface Water Environment Quality (GB3838–2002) for chemical oxygen demand and total nitrogen. The monitoring results are shown in Table 2. The main reason for pollution is discharge of large amount of domestic wastewater into the river.

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Table 2: Monitoring Results of Surface Water (mg/L, except pH)

pH

SS

COD

Total Nitrogen

Oil

6–9 - ≤40 ≤2.0 ≤1.5

Standards - • National Standardsa • World Bank Standardsb 6–9 50 125 10 10

Monitoring Point - 1# River Section

7.62-7.90 23-31 160-190 7.89-9.02 .60-0.88

Source: Lufang 1Mt/a multiple metal smelting project EIA report a The standard refers to the Class V standard for surface water quality (GB3838-2002). b The World Bank’s Standards as per Pollution Prevention Abatement Handbook 1998.

24. The ground water in the project area belongs to shallow ground water, with a depth from grade of about 2 m. The ground water survey in the site area shows that all the ground water samples failed to meet the Class III Standard for Ground Water Quality (GB/T14848-93). The parameters that exceeded included total hardness, fluoride, NH3-N and chloride. The contaminants of potential concern to the groundwater quality underneath the site that are associated with the proposed subproject would include pH and heavy metals which may potentially migrate to the subsurface from the acid production/storage area. This concern would be addressed through adequate design and implementation of anti-corrosion and secondary containment measures as prescribed in para. 24 below. 25. During the operation period, the proposed subproject will generate three streams of wastewater, as follows:

(i) Domestic wastewater of 18 cubic meter per day (m3/d), which will be treated by the existing central domestic wastewater treatment plant to meet the Class I Standard stipulated under the Comprehensive Water Pollutant Discharge Standard for the Shandong Peninsula Water Basin (DB37/676-2007) and reused for landscaping;

(ii) Production wastewater from sulfuric acid recovery process and floor washing, etc. in the order of approximately 660 m3/d will be treated in the acidic wastewater treatment system to meet the Class I standard under DB37/676-2007, and reused for slab flushing within leak proof enclosed facilities, these measures will ensure that no acidic waste water escapes beyond the Lufang premises including ground water; and

(iii) Blow-down water from the cooling water circulation system amounting to1,632 m3/d is relatively clean, which can either be discharged to the municipal sewer or reused.

26. In addition to the above and outside the scope of the ADB subproject, there is a plant-wide emergency wastewater storage planned to collect accidental spill water and initial rain water (initial 15 minutes) from the production areas for treatment.2 2 Shandong Environmental Research and Design Institute. 2010. Environmental Impact Assessment Report of

Dongying Lufang Metal Materials Co. 1Mt/a Multiple Metal Project. Shandong.

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C. Air Quality 27. The monitoring results at the nearest residential area (Guangligang Community, which is located at 2.1 km away to the southwest of the project site) during 7–13 September 2009 showed that the local ambient air quality meets the Class II Standard of the Ambient Air Quality Standard (GB3095-1996) (Table 3). The air environment quality is good in the project area.

Table 3: Monitoring Results of Ambient Air Quality (mg/m3)

Pollutants Monitoring Results National Standarda World Bank Standardb TSP 0.215–0.291 0.30 -- PM10 0.113–0.146 0.15 0.07 SO2 0.020–0.042 0.15 (0.5 for hourly limit) 0.15 NO2 0.016–0.028 0.12 0.125

NO2 = nitrogen dioxide, PM10 = particulate matter of the size of ten microns, SO2 = sulfur dioxide, TSP =total suspended particles. Source: Lufang 1 million ton per year multiple metal smelting project environmental impact assessment report. a The standard refer to Class II Standard (daily average) for ambient air quality (GB3095-1996). b The World Bank’s Standards as per Pollution Prevention Abatement Handbook 1998, and the air quality

requirement for the air condition at property boundary. 28. During construction period, construction activities would generate certain dust pollution in the project area. Due to small-scale and short-term nature of the construction activities, the impact of the dust pollution would be limited. Proper mitigation measures will be taken such as sealing of building material, sealed transport of materials, earth and solid waste and flushing of vehicle wheels, to reduce dust emission. 29. During operation, the subproject will treat flue gas from melting furnaces and convertors by ESP for dust removal, a sudden temperature drop process, from some 350oC to 120oC, which will also recover As2O3 in particulates as a by-product. The SO2 latent waste gas will then be subject to double conversion and double absorption processes to reduce sulfur and SO2 emission. This process will generate sulfuric acid as a by-product. The tail gas from the sulfuric acid recovery process will be further treated by the desulfurization system prior to the final emission into the ambient air via a 90 m tall stack. The desulfurization system can process approximately 640,000 Nm3/h waste gas to remove SO2 by over 60%, which will reduce the SO2 concentration from 480 mg/m3 to less than 192 mg/m3 and SO2 mass emission rate to less than 122.4 kg/h, lower than the emission limits (960 mg/m3 and 130 kg/h, respectively) stipulated under the Comprehensive Emission Standard for Air Pollutants (GB16297-1996). The treatment process will also reduce the dust concentration in the waste gas from approximately 350 mg/m3 to less than 29 mg/m3, much lower than the emission standard of 100 mg/m3 stipulated under GB16297-1996. In addition, acidic wastewater treatment process will generate hydrogen sulfide (H2S) gas, which will be collected and treated through a sodium hydroxide absorption tower prior to discharge to the ambient air via a 35 m tall stack. The treated waste gas will contain hydrogen sulfide concentration less than 10 mg/m3. 30. Based on the modeling results, the impacts of SO2 and H2S from the point sources associated with this subproject were estimated to result in maximum incremental increase of hourly SO2 and H2S concentrations by 0.0324 mg/m3 and 0.0016 mg/m3, respectively, in the ambient air in the nearest residential community, which would be substantially lower than the Class II ambient air quality standard of 0.5 mg/m3 for SO2 and the industrial hygiene standard (TJ36-1979) of 0.01 mg/m3 for H2S stack.

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31. Local environmental protection department (EPD) currently provides Lufang with a SO2 mass emission quota of 1,872 t/a. The proposed subproject, when put into operation, will help reduce Lufang’s overall SO2 mass emission to 1,415.2 t/a, which will meet the total mass emission control requirement. D. Solid Waste

32. The main solid wastes from the proposed subproject include gypsum solid wastes from the desulfurization process and acid treatment wastes. The gypsum waste generated from the desulfurization system at a rate of 4,709 t/yr and gypsum waste generated from acid treatment process at a rate of 28, 827 t/yr will be sold to local building material companies to produce cement. The acidic wastewater treatment process will generate arsenic containing waste at a rate of 1,479 t/yr, which is hazardous waste (HW48) and shall be disposed offsite by a licensed hazardous waste management contractor. Spent catalyst from the sulfuric acid production process (66 t/a) is also a hazardous waste and shall be disposed of offsite by a licensed hazardous waste management contractor. E. Land

33. The proposed subproject will only utilize the industrial land in the New Material Industrial Park, currently owned by Dongying Lufang Metal Material Co. Ltd. F. Ecological Environment

34. The main vegetation around the project site includes grass and trees and bushes planted by the neighbouring enterprises. The proposed project will only occupy industrial land already owned by Lufang. There is no virgin vegetation in the project area. Therefore, the subproject construction will not materially alter the local ecological environment; the impact on local ecological environment would be negligible. G. Socioeconomic Environment

35. The subproject has notable energy conservation and emission reduction benefits. The waste heat recovery can save 62,426 tsce energy per year, which would also result in indirect reduction of air pollutant emission caused otherwise by coal combustion. Aside from the energy saving, the subproject can achieve annual emission reduction (direct plus indirect) by 159,232 t CO2e, 645 t SO2, 124 t particulates, 504 t NOx and 181 t CO. H. Health and safety impact

36. The proposed project involves some harmful materials such as sulfuric acid and arsenic contained waste. The leakage of sulfuric acid could result in health and safety problems. The mitigation measures will include: (i) in case of sulfuric acid leakage, the transport pipe will be closed immediately; (ii) a 4,000 m3 emergency storage pool is proposed to be constructed at project site to accept any accidental spill or leaks as part of site runoff, (iii) sulfuric acid production/storage will be designed to allow for sufficient protection distance of over 600 m away from sensitive location e.g., residential area as required under the Sulfuric Acid Plant Hygiene Protection Distance Standard (GB1166-89).The plant shall ensure that a stringent management procedure is in place to effectively control the safety risk to less than 1E-5. (iv) arsenic containing waste shall be disposed offsite by a licensed hazardous waste management contractor.

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V. Economic Assessment

37. The total investment in environmental protection facilities is estimated at CNY557.32 million. The environmental input mainly covers waste gas treatment, wastewater treatment, noise control devices and re-vegetation at the project site. 38. The subproject was confirmed to be economically viable accordingly, the economic internal rate of return (EIRR) for Lufang is 40.3% with environmental benefits. Without environmental benefits, the EIRR for Lufang is 37.5% which proves the robustness in terms of economic viability.

VI. Institutional Requirements and Environment Management and Monitoring Plan A. Institutional Requirements

39. The company has established work safety and environment protection division, consisting of four full time management personnel directly under the General Manager. The company also has a central testing laboratory, which has 27 staff with their educational background in environmental engineering, analytical chemistry and chemical engineering, etc., responsible for environmental management and monitoring as well as routine tracking of “three wastes” of the whole factory. More staff will be added in the work safety and environmental protection division to perform the environmental management for the proposed project. B. Environmental Monitoring Plan

40. The proposed subproject has limited adverse environmental impact and yet provides significant benefits in energy conservation and emission reduction. As the proposed subproject compliments the existing operation of the 1 Mt/yr copper melting plant, the environmental compliance monitoring will be combined with the main plant. The environmental monitoring plan is summarized in Table 4 below.

Table 4: Environmental Monitoring Plan Monitoring

Target

Monitoring Point

Monitoring Item

Frequency

Stack, waste gas from

sulfuric acid producing and

desulfurization device

SO2、NO2、sulfuric acid fog, dust

and smoke

On line monitoring device will

be installed at waste gas

discharge duct.

Monitoring at factory

boundary Smoke and dust, sulfuric acid fog quarterly

Guangli Port Community SO2、NO2、sulfuric acid fog, dust

and smoke yearly

Waste gas

Permanent sampling platform and monitoring holes will be established at main waste gas discharge

ducts.

Waste

water

Inlet of waste acid

treatment station, outlets of

pH、COD、SS、NH3-N、Cu、Pb、

Zn、Cd、As and flow quarterly

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main treatment links

Ground

water Guangli Port Community

Hg, cyanide, six value chromium、Cu、

Pb、Zn、As and Cd Semi-annually

1m away from the factory

boundary Leq(a) Monthly

Noise

Main equipment Leq(a) Quarterly

Solid waste All solid waste in the factory Recording type, generation, treatment

method and disposal site Monthly

Soil Guangli Port community pH、Pb、Cu、Cd、As、Zn、Hg Quarterly COD = chemical oxygen demand, NH3N = ammonium nitrite, NO2 = nitrogen dioxide, SO2 = sulfur dioxide, SS = suspension solid, Source: Lufang 1 million ton per year Multiple Metal Smelting Project Environmental Impact Assessment Report. C. Environmental Management Plan

41. The Shandong project management office (PMO), acting on behalf of the financial intermediary to oversee environmental and social due diligence for this subproject, has overall responsibility for ensuring that all environmental standards and procedures are followed as specified under the IEE and project environmental and social management system. A summary environmental management plan (EMP) is presented in the Appendix. This will be updated during the engineering design stage, translated into Chinese and incorporated into all bidding documents and civil contracts. Contractors will be responsible for preparing comprehensive environmental mitigation action plans (EMAP) based on the summary EMP, and will designate an environmental manager who will manage environmental issues during construction. Lufang’s environmental representative will be responsible for reviewing and approving (including any updates) the EMAPs, and for ensuring that the contractors comply with their provisions during the construction. The cost for environmental protection facilities is included in the overall investment cost and the project owner will be responsible for offering funds for implementing the EMP. 42. The management of production facility and pollution control facility should be enhanced and should be operated in conjunction with the production facility. Wastewater, air pollutant and noise emissions should be strictly controlled in order to ensure the compliance with applicable national standards. 43. Landscaping plan should be implemented, including planting trees around the project site and road sides, forming a noise attenuation belt as well reducing visual implications. The landscape area should be greater than 20% of the subproject site. Full time staff should be arranged to take care of the landscaped areas. 44. Sulfuric acid production/storage is considered a major health and safety hazard source. It will be designed to allow for sufficient protection distance of over 600 m away from sensitive location e.g. residential area as required under the Sulfuric Acid Plant Hygiene Protection Distance Standard (GB1166-89).The plant shall ensure that a stringent management procedure is in place to effectively control the safety risk to less than 1E-5.

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VII. Public Consultation and Information Disclosure

A. Public Consultation 45. The information was disclosed to Dongying Economic Development Zone Management Committee, Guangli Port Community, Dongcheng District by environment bulletin during 20–30 July 2009. The bulletin includes project description, main environmental impacts and public involvement, contact information on project owner. No comments were received by the due date. 46. During 17-27 September 2009, the second information disclosure was conducted at the website of Dongying Economic Development Zone, the information disclosure included project description, potential environmental impacts, mitigation measures and expected results, method and time for obtaining simplified EIA report, and again no comments were received. B. Grievance Redress Mechanism

47. Given that public consultation process did not generate any comments and due to minimal environmental impacts which can be managed with the recommended safeguards, no major complaints are anticipated. However, Lufang will assign designated staff to address all potential complaints for both construction and operation phase. Any complaints which concern any aspect of the subproject will be recorded and investigated by the responsible staff promptly. A complaints register will be maintained which will show the details and nature of the complaint, the complainant, the date and actions taken as a result of the investigation. It will also cross-reference any noncompliance report and/or corrective action report or other relevant documentation. The arrangement for complaints management will be reflected in the contractor's EMP to cover construction phase and Lufang’s system documentation to cover operational phase. When construction starts, a sign will be erected at the site providing the public with updated project information and summarizing the grievance redress mechanism process including contact person details. In addition, all complaints will be recorded in an incident report and forwarded to the PMO within 3 days of the incident occurring. C. Information Disclosure

48. According to the procedures of project approval, the proposed subproject is part of the Shandong Energy Conservation and Emission Reduction Project which would be approved by Shandong Development and Reform Commission; therefore, the EIA report of Lufang subproject would be approved by SEPD. Information disclosure will be made during the approval process of the EIA report.

49. The following environmental information disclosure will be made:

(i) The EIA report for the subproject will be available for review in pollution supervision and management departments of local and provincial level EPDs.

(ii) The IEE will be available for review at www.adb.org. (iii) Copies of the IEE will be made available upon request.

VIII. Findings and Recommendation

50. The proposed subproject is an environmentally friendly project which will save substantial amount of energy, improve the existing environment and will mitigate pollution emissions. The subproject complies with national industrial and environmental policies. The land occupied by the subproject was existing industrial land owned by the developer. There is no

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involuntary resettlement, no indigenous people and no land use change involved in the proposal. The subproject adopts advanced technology to recover SO2 and removal of dust as well as produce electricity and steam through waste heat recovery. There may be some minor environmental impacts associated with wastewater discharge and limited noise during project construction and operation. All necessary measures will be taken to reach the national and World Bank standards. 51. The environmental impact analysis assessment report shows that the pollutants discharged from the proposed subproject will not have any notable impact on local air, surface water and acoustic environment, and also has minimal impact on the nearest community, which is about 2.1 km away from the project site. There is no rare or endangered species or designated culture and heritage sites within 6 km of the subproject site. The nearest national natural protection area, Yellow River Delta Area Natural Reserve, is about 25 km away north of the project site. 52. During subproject construction, the following recommendations are made to help minimize the environmental impacts:

(i) Due to temporary and short duration of construction period and the fact that the nearest residential area is 2.1 km away from the site, the noise impact to the residential receptors would be limited. Nevertheless, it is recommended that all noise emissions from the site should be managed adequately in order to comply with the noise limit required under the Noise Limit at Construction Site Boundary (GB12523-90). The noise control measures will include appropriate mufflers or other noise attenuation devices with all outdoor activities to be limited to daylight hours.

(ii) Any dust emission from the site should be managed in order to minimize dust pollution associated with the construction activities. For example, the construction site should be equipped with silt curtains; prepared concrete should be used to construct buildings; water spray should be used along access road and at construction site; closed transport should be used for building material transport, especially for sand and cement.

(iii) Construction wastes should be properly stockpiled onsite followed by proper offsite disposal.

(iv) Soil erosion and sedimentation measures should be taken to control soil loss from site.

53. After construction, the subproject components should be subject to “Three Simultaneities” inspection within the trial operation period by the local EPD to ensure that all the required environmental protection measures are fully implemented and functions properly. As required in the approved EIA, the facility is required to install online measurement systems for air emissions and wastewater discharge. The online monitoring system shall be verified during the “Three Simultaneities” inspection.

54. Following successful “Three Simultaneities” inspection, the following are recommended for the long-term operation:

(i) The desulfurization facility should be maintained on a regular basis to ensure sulfur removal efficiency.

(ii) Management and control of production processes should be maintained on a regular basis to help avoid accidental emissions.

(iii) Vegetation including landscaping should cover 20% of the site to provide visual screening and noise attenuation.

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(iv) Sulfuric acid production/storage is considered a major health and safety hazard source. The plant shall ensure that a stringent management procedure is in place to effectively control the safety risk to less than 1E-5.

(v) The contaminants of potential concern to the groundwater quality that are associated with the proposed subproject would include pH and heavy metals which may potentially migrate to the subsurface from the acid production/storage area. This concern may be addressed through adequate design and implementation of anti-corrosion and secondary containment measures.

IX. Conclusions

55. The subproject has notable positive environmental impacts. The waste heat recovery for steam/power generation would result in net energy saving and avoid coal consumption. As such, it would also reduce air pollutant emissions that would otherwise be caused by coal combustion. The advanced desulfurization process will reduce SO2 and particulate emission levels well below the applicable national air emission standards. The environmental impacts of the proposed works are not found to be significant and can be managed adequately through the proposed mitigation measures. Accordingly, category B as per ADB classification for the Lufang subproject is justified. 56. The subproject construction has some minor impact in the environment mainly occurring during construction period, including construction noise and dusts. Such temporary impacts can be minimized by taking proper protection measures and enhancing construction management. 57. The environmental impacts during operation would include noise, SO2 emission, H2S emission, and discharges of solid waste and wastewater, which can be effectively mitigated by proper measures and advanced technologies. The gypsum solid waste from desulfurization system will be recovered and sent to building material companies nearby; arsenic containing solid wastes and spent catalysts will be recovered and disposed of off site by qualified hazardous waste management contractor. With stringent health and safety management, the potential hazard associated with sulfuric acid production and storage can be controlled to an acceptable risk level. 58. In general, the subproject belongs to Energy Conservation and Emission Reduction Project. The proposed subproject has notable environmental and economical benefits. The implementation of the subproject can result in substantial energy savings and at the same time indirectly reduce the emissions of SO2 and other air pollutants otherwise associated with the coal fuel consumption. With the measures included in the EIA and IEE reports, the adverse environmental impacts of the subproject can be minimized to acceptable levels by implementing adequately funded environmental mitigation measures.

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Appendix

X. Environment Management Plan Pollution Type

Discharge Source

Main Pollutants

Mitigation Measures

Expected Results

Responsibilities

Project construction Water pollution

Domestic wastewater and construction wastewater

COD, BOD5, oil NH3 and SS

Construction wastewater is treated by settling and oil separating pool, the domestic wastewater is treated by existing domestic wastewater treatment plant.

The discharge amount is small, it has no adverse impact on local surface water environment SS<10mg/L, PH=6-9, COD<50 mg/L, NH3-N<0.5mg/L, oil<1mg/L.

Implementation: Contractor Supervision: Lufang

Solid waste Construction activities and living activities

Construction solid waste, and domestic solid waste

The construction solid waste is reused as far as possible, the remaining is transported to designated site treatment. The domestic solid waste is collected and transported offsite on a regular basis, and treated by the local sanitary department.

100% municipal solid waste is treated

Implementation: Contractor Supervision: Lufang

Noise Transport vehicles, construction machinery

noise Properly arranging construction plan to mitigate the noise impact on local residents, adopting noise attenuation devices, planting trees and limiting noisy activities during day light hours. Low noise equipment and technology will be used.

The noise emission will meet the requirements of the national standards. The project is located in the Coastal New Material Park,

Implementation: Contractor Supervision: Lufang

Appendix 15

Pollution Type

Discharge Source

Main Pollutants

Mitigation Measures

Expected Results

Responsibilities

there is no environmentally sensitive point in the vicinity of the project site. Vehicle running noise <84dB, Construction activity: Daytime<75dB Night<55dB

Air pollution Transport and construction activities

TSP Construction activities should be limited to designated areas; timely disposing of solid waste excavated and construction waste; spraying water for dust control; sealed transport is adopted for material and rubbish.

The dust emission will be minimized.

Implementation: Contractor Supervision: Lufang

Human health

Construction workers and domestic rubbish

Maintaining good housekeeping, examining on a regular basis epidemic disease control and keeping hygienic environment

Avoiding the occurrence of infectious disease, improved medicare and hygienic conditions

Implementation: Contractor Supervision: Lufang

Grievance Redress Mechanism

Complaints of all nature relevant to the project

N/A Any complaints which concern any aspect of the project will be recorded and investigated by the responsible staff promptly. A complaints register

A well defined and established grievance redress mechanism

Implementation: Lufang Supervision: Lufang, PMO

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Appendix

Pollution Type

Discharge Source

Main Pollutants

Mitigation Measures

Expected Results

Responsibilities

will be maintained which will show the details and nature of the complaint, the complainant, the date and actions taken as a result of the investigation.

system.

Project operation Air pollution Dust from

melting workshops, inlet of convertors, feed inlet of bottom-blowed furnace, etc. Tail gas from sulfuric acid production system, tail gas from anodic stove and smoke from ventilation system

TSP, SO2 Bag dust collectors will be installed at main dust emission sources, with dust removal efficiency more than 99.5%. The tail gas and smoke will be treated by desulfurization system, and semi-dry-slime fluidized bed technology will be adopted.

The air pollution impact is minimal, and emission discharge will comply with relevant air pollution discharge standard. Dust from melting TSP<100ppm, SO2 <850ppm

Lufang

Water pollution

Acidic wastewater, wastewater from boiler water treatment

SS, PH, COD, NH3-N, oil,

The acidic wastewater will be treated by a two-step process, the first step is sulfuration, mainly removing as ions; the second step is slime-based neutralization, increasing the pH value to 2–3, and then sent to

The neutralized acidic wastewater will be reused. The treated domestic

Lufang

Appendix 17

Pollution Type

Discharge Source

Main Pollutants

Mitigation Measures

Expected Results

Responsibilities

system, domestic wastewater

wastewater treatment system. The boiler system wastewater will be reused. The domestic wastewater will be treated by biological and chemical method, and then discharged.

wastewater will reach the Class A Standard of the Pollutant Discharge Standard of Urban Wastewater Treatment Plant. (GB18918-2002) SS<10mg/L, PH=6-9, COD<50 mg/L, NH3-N<0.5mg/L, oil<1mg/L

Solid waste Desulfurization a gypsum, arsenic contained waste and domestic rubbish

desulfurization gypsum, Arsenic, domestic rubbish

The gypsum waste from the desulfurization process will be sold to local cement plants; the arsenic containing wastes and spent catalyst shall be disposed offsite by a licensed hazardous waste management contractor. The domestic rubbish is collected and treated by local sanitary department

All the solid waste will be reused or properly treated.

Lufang

Noise Steam turbines, and blowers etc.

noise Noise mitigation measures such as foundation vibration mitigation etc are used for noisy equipment, most machines and pumps are arranged indoors to control noise pollution.

The overall noise level of the project will meet Class III standard of the Ambient Noise Discharge

Lufang

18

Appendix

Pollution Type

Discharge Source

Main Pollutants

Mitigation Measures

Expected Results

Responsibilities

Standard at the Factory Boundary of Industrial Enterprise (GB12348-2008) Daytime<65dB; Night<55dB

Sufuric acid leakage

Transport pipe,storage tank

Sulfuric acid In case of any sulfuric acid leakage, transport pipe will be closed immediately, leaked sulfuric acid will be removed and collected into an emergency pool for further treatment.

The risk with sulfuric leakage will be effectively mitigated.

Lufang

Total emission control

Whole subproject

SO2 SO2< 1872 t/a Lufang/local EPD

Ecological Environment Protection

Lufang

Soil loss Excavation, backfilling, construction solid waste

Engineering and ecological measures are taken to control soil loss.

Reduced soil loss Lufang

BOD5 = biological oxygen demand, COD = chemical oxygen demand, EPD = environmental protection department, N/A = not applicable, NH3 = ammonia, NH3-N = ammonium nitrite, PMO = project management office, SO2 = sulfuf dioxide, SS = suspension solid, TSP = total suspended particles. Source: Lufang 1 million ton per year Multiple Metal Smelting Project Environmental Impact Assessment Report and Asian Development Bank