Environmental and Social Due Diligence Report for the CMPC Guaíba 2 Project - PDF

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Environmental and Social Due Diligence Report for the CMPC Guaíba 2 Project Prepared for: Inversiones CMPC S.A., Banco Santander S.A., and Nordea Bank Finland Plc Prepared by: ENVIRON UK Date: May 23,

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Environmental and Social Due Diligence Report for the CMPC Guaíba 2 Project Prepared for: Inversiones CMPC S.A., Banco Santander S.A., and Nordea Bank Finland Plc Prepared by: ENVIRON UK Date: May 23, 2013 Project Number: UK Contents 1 Executive Summary Scope of Review Status of the Project Project Categorization and Rationale Status of Requested Project Documentation Project Limitations 3 2 Project Description Line 2 and Extension of Line Line Line Port Expansion Rio Grande Port Terminal New Transmission Lines New Roads Plantations The Plant Nursery 15 3 Summary of Site Visit Activities Site Visit Activities 17 4 Project Compliance with Applicable International Standards Overview Existing Facilities (Line 1) WBG EHS Sector Guidelines for Pulp and Paper Mills (air emissions and wastewater discharge limits) WBG EHS Sector Guidelines for Thermal Power Plants (air emission limits) Guaíba 2 Project Component: Line 2 and Extension of Line PS 1 Social and Environmental Assessment and Management Systems PS 2 Labor and Working Conditions PS 3 Pollution Prevention and Abatement PS 4 Community Health, Safety and Security PS 5 Land Acquisition and Involuntary Resettlement PS 6 Biodiversity Conservation and Sustainable Management of Living Natural Resources PS 7 Indigenous Peoples PS 8 Cultural Heritage IPPC BAT EHS Sector Guidelines for Pulp and Paper Mills WB Pollution Prevention and Abatement 1996, Chlor-Alkali Industry WBG EHS Sector Guidelines for Thermal Power Plants WBG EHS General Guidelines Guaíba 2 Project Component: Existing Plantations PS 1 Social and Environmental Assessment and Management Systems 65 Page i ENVIRON 4.4.2 PS2 Labor and Working Conditions PS 3 Pollution Prevention and Abatement PS 4 Community Health, Safety and Security PS 5 Land Acquisition and Involuntary Resettlement PS 6 Biodiversity Conservation and Sustainable Management of Living Natural Resources PS 7 Indigenous Peoples PS 8 Cultural Heritage WBG EHS Sector Guidelines for Forest Harvesting Operations and WBG EHS General Guidelines (limited assessment) The Plant Nursery Other Potential Issues Guaíba 2 Project Components: Port and Dredging Maintenance Operations PS 1 Social and Environmental Assessment and Management Systems PS 2 Labor and Working Conditions PS 3 Pollution Prevention and Abatement PS 4 Community Health, Safety and Security PS 5 Land Acquisition and Involuntary Resettlement PS 6 Biodiversity Conservation and Sustainable Management of Living Natural Resources PS 7 Indigenous Peoples PS 8 Cultural Heritage WBG EHS Sector Guidelines for Ports, Harbors and Terminals and WBG EHS General Guidelines (limited assessment) MARPOL Australian Guidelines for Dredging Guaíba 2 Project Component: Transmission Line PS 1 Social and Environmental Assessment and Management Systems PS 2 Labor and Working Conditions PS 3 Pollution Prevention and Abatement PS 4 Community Health, Safety and Security PS 5 Land Acquisition and Involuntary Resettlement PS 6 Biodiversity Conservation and Sustainable Management of Living Natural Resources PS 7 Indigenous Peoples PS 8 Cultural Heritage WBG EHS Sector Guidelines for Electric Power Transmission and Distribution and WBG EHS General Guidelines (limited assessment) Guaíba 2 Project Component: New Electrical Road PS 1 Social and Environmental Assessment and Management Systems PS 2 Labor and Working Conditions PS 3 Pollution Prevention and Abatement PS 4 Community Health, Safety and Security PS 5 Land Acquisition and Involuntary Resettlement PS 6 Biodiversity Conservation and Sustainable Management of Living Natural Resources PS 7 Indigenous Peoples PS 8 Cultural Heritage WBG EHS Sector Guidelines for Toll Roads and WBG EHS General Guidelines (limited assessment) 116 ii ENVIRON 4.8 The Equator Principles Project s Compliance with Brazilian Regulations ESHS Management Programs Environmental and Social Action Plan Action Plan Action Plan Conclusions and Recommendations 153 Tables Figures Table 3.1. Stakeholder Consultations Table 4.1. Applicable Standards Table Compliance with Table 6 (c) WBG EHS Sector Guidelines for Thermal Power Plants Table Affected Municipalities in the Baixo Jacuí Plantation Basin Table Affected Municipalities in the Camaquã Plantation Basin Table Affected Municipalities in the Vacaçaí Plantation Basin Table Affected Municipalities in the Santa Maria Plantation Basin Tabl e 5.1. Summary of Permit Status Table 6.1. Management Programs Table Environmental and Social Action Plan Figure 2.1. Aerial view of the Guaiba 2 mill site Figure 2.2. Mill expansion project Figure View of the current port at the Guaiba mill. Figure Squematic layout of the port expansion project Figure T-Line alignment western portion. Figure T-Line alignment eastern portion. Figure Electrical Road alignment option presented during the site visit. Figure Location of the plantation areas. Figure Aerial view of the nursery. Figure View of the communities in the mill area. Figure Areas of community interest. Figure AOI in the Baixo Jacuí Plantation Basin Figure AOI in the Camaquã Plantation Basin Figure AOI in the Vacaçaí Plantation Basin Figure AOI in the Santa Maria Plantation Basin Figure Location of Quilombo Communities List of Attachments Appendix A: Appendix B: Appendix C: Summary of 2007 Public Consultations Documents Reviewed Outstanding Project Documents iii ENVIRON Appendix D: Appendix E: Appendix F: Maps of Plantation Areas List of Programs and Mitigation Measures General Description of the Brazilian Permitting Regime iv ENVIRON Acronyms and Abbreviations APP AOI ASME BLRBAC CERFLOR CMPC CMPC-CRG CONAMA DAI EHS EMP EP EPC EPFI ESAP ESDD ESHS ESIA ESMP ESMS FEPAM FUNAI FSC GHG H&S HSE IESC IFC IAI ILO IP IPHAN Permanent Preservation Area Area of Influence American Society of Mechanical Engineers Black Liquor Recovery Boiler Advisory Committee Brazilian National Forest Certification Program Inversiones CMPC S.A. CMPC Celulose Riograndense Ministério do Meio Ambiente (Ministry of the Environment) Direct Area of Influence Environmental, Health, and Safety Environmental Management Plan Equator Principles Engineering, Procurement and Construction Equator Principle Financial Institution Environmental and Social Action Plan Environmental and Social Due Diligence Environmental, Social, Health, and Safety Environmental and Social Impact Assessment Environmental and Social Management Plan Environmental and Social Management System Fundação Estadual de Proteção Ambiental Henrique Luiz Roessler (State Foundation of Environmental Protection) Fundação Nacional do Indio (National Indian Foundation) Forest Stewardship Council Greenhouse gas Health and Safety Health, Safety, and Environment Independent Environmental and Social Consultant International Finance Corporation Indirect Area of Influence International Labour Organization Indigenous Peoples Instituto do Patrimônio Histórico e Artisitco Nacional (National Institute of Historic and Artistic Heritage) v ENVIRON IUCN Km MW OECD NBR NRs PASA PBA PEFC PLACOM PLASUS PPE PPP PPRA PS RIMA ROW RS SIS WBG YTD International Union for the Conservation of Nature Kilometers Megawatts Organization for Economic Co-operation and Development Norma Brasileira Regulamentadora (Brazilian Regulatory Norm approved by ABNT) Normas Regulamentadoras (Brazilian Health & Safety norms and regulations approved by the Ministry of Work and Employment) Plano de Ação Social e Ambiental 2011 (Social and Environmental Action Plan) Projeto Básico Ambiental (Action Plan) Programme for the Endorsement of Forest Certification Plano de Comuniçação 2010 (Strategic Communication Plan) Plano de Sustainabilidade 2012 (The Operational Sustainability Plan) Personal Protection Equipment Public Participation Program Plano de Prevenção de Riscos Ambientais (Risk Prevention Plan) Performance Standards Relatório de Impacto Ambiental (Non-technical summary of the EIA) Right of way Rio Grande do Sul Pesquisa de Avaliação de Imagem da Aracruz e Impactos do Plano de Expansão da Produção 2007 (3-part Social Impact Study) World Bank Group Year-to-date vi ENVIRON 1 Executive Summary ENVIRON UK (ENVIRON) is engaged as the Independent Environmental and Social Consultant (the IESC) on behalf of prospective lenders (including Banco Santander Chile and Nordea Bank Finland Plc (the Advisors) and export credit agencies, together the Lenders ) who are considering providing financing to CMPC for a mill expansion project involving the construction of a new pulp line and related facilities at an existing mill in Guaíba, Rio Grande do Sul, Brazil (the CMPC Guaíba 2 Project or the Project). 1.1 Scope of Review This Environmental and Social Due Diligence (ESDD) Report provides an overview of ENVIRON s understanding of the Project, based on a site visit and the Project information made available to ENVIRON as of October 31, 2012, and also includes a review of information submitted by CMPC in response to the Gap Analysis developed by ENVIRON in October It should be noted that a number of material Project documents requested as part of the Gap Analysis have not yet been received by ENVIRON (refer to Appendix C). It is therefore quite possible that some of the information gaps and/or findings identified in the Gap Analysis may have been adequately addressed by CMPC, but in the absence of additional documentary evidence these items remain open and have been included in this ESDD Report as such. This ESDD Report presents ENVIRON s assessment of the Project s compliance with the Applicable Standards, the key gaps, an environmental and social action plan (ESAP), and our conclusions and recommendations for going forward. The ESAP is in tabular format and the issues are organized by those that are applicable to: the entire project (general issues); Line1 (in operation); and each of the new Project components. An effort has been made throughout this report to summarize key EHS good management practices identified in relation to Line 2, the extension of Line 1 and plantations. The ESAP constitutes a summary of the recommended actions, whereas a full description is presented in the body of this report on the nature of the findings, distinguishing between: Those aspects that could not be verified based on the available information; and Those areas in which a non-compliance with International Standards or Brazilian National Regulations was observed. 1.2 Status of the Project We understand that CMPC s Board approved the Project on December 6, Certain actions including the final design for the Project and the selection of contractors and sub-contractors were put on hold until the Project s receipt of Board approval. CMPC has selected 3 of the contractors for the Project, which suggests that CMPC has decided on the Project s final design but this has not yet been confirmed. Furthermore, while we initially were under the impression that there would be one EPC contractor, we have since been informed that there will be around 14 EPC contractors (for the various project components) and multiple other sub-contractors and suppliers. As the main contractors have not yet been selected, ENVIRON has not been able as part of its ESDD to review their contracts, and labor and EHS policies and procedures, and UK Issue 1 1 ENVIRON provide an assessment of their individual capacities to construct the Project in compliance with the Applicable Standards. On 30 April 2013, ENVIRON was informed that the following EPC contractors had been contracted at the beginning of April. METSO: Fiber Line, Evaporation, Recovery and Causticizing, NCG and DCS DEMUTH :Wood Handling VEOLIA: Waste Water Treatment and Water Treatment Chemical Plant EPC is still under negotiation. No additional information was provided on the EPC contractors for other project components. In order to provide CMPC and the Advisors with an interim assessment of the Project and also to prioritize the actions required to bring the Project into compliance with the Applicable Standards, ENVIRON prepared in October 2012 a detailed gap analysis of the Project against most of the Applicable Standards (in tabular format), which identified the key gaps and included our recommendations to close the gaps. After our submission of the Gap Analysis, CMPC-CRG provided ENVIRON with additional information which closed some of the gaps, but other gaps remain. The outstanding gaps and ENVIIRON s recommendations to close these gaps are included in the ESAP included in this ESDD report. 1.3 Project Categorization and Rationale Because the Project will likely have significant adverse social and/or environmental impacts that are diverse, irreversible, or unprecedented (IFC Guidance Note 1, 2012), the Project has been given an A categorization under the IFC s Policy on Environmental and Social Sustainability, the OECD Common Approaches and the Equator Principles (EPs). Key potential environmental and social impacts are detailed in section Status of Requested Project Documentation We note that although a substantial amount of information has been received from CMPC-CRG, a large amount of the documentation ENVIRON would expect to review, which is customary for an ESDD review, has not yet been received (refer to Appendix C). ENVIRON is in receipt of copies of the EIAs and RIMAs for the pulp mill, port expansion and the four hydrographic basins where the plantations are located (a total of 6 EIAs and 5 RIMAs (no RIMA was presented for the port expansion)) and all additional documentation listed in Appendix B. We have reviewed these materials to the level possible, considering the extreme volume of documentation provided, and the scope and adequacy of these documents. The EIAs and RIMAs were all developed in 2007 and contained socioeconomic baseline data primarily from , but in some cases dating back to As a result, most of this data was not useful for development of the ESDD Report. For potential social risks and impacts, ENVIRON relied more on information obtained and observations made during the site visit at the mill, in the communities in the vicinity of the mill and in the communities near the plantations we visited. Based on the Project documentation reviewed, along with information UK Issue 1 2 ENVIRON obtained and visual observations made during the site visit, ENVIRON has identified the relevant risks and impacts and has determined whether appropriate mitigation measures and monitoring plans are in place for the Project. ENVIRON has requested but not yet received detailed information on the infrastructure projects transmission lines, roads and port expansion, which are all integral components of the Project. Some of ENVIRON s concerns relate to the Project s potential impacts on neighbouring populations (i.e., community health and safety), both for the communities surrounding the mill site and the communities in the four plantation areas. 1.5 Project Limitations The Project is comprised of multiple components at different stages of development; the mill and plantations have been in operation for a number of years and a complete review of all the operating procedures in place and a full assessment of the degree of implementation of recommendations from the EIAs could not be conducted based on the available information, and considering time and budget limitations. Six EIAs and five RIMAs (for the mill expansion, port expansion plus four plantation areas), an Environmental Impact Diagnosis, a Social Impact Study, Preliminary Report on the Development Plan for the Socio-environmental Communications Unit at Guaíba (all developed in 2007 by Aracruz) and multiple-related plans, programs and other documents were received by ENVIRON (more than 840 individual documents, sections of EIAs and other information), and no Executive Summary was provided to summarize the extensive documentation. Despite the submission of the large body of documentation noted above, key documents needed to conduct the ESDD review were either outdated (i.e. environmental and socioeconomic baseline data) and/or missing (i.e. EIAs for the transmission line and electrical road). In the original terms of reference (TOR) no information was provided on the number and location of plantations. The number of plantations has since been identified as 500, and this doesn t include the plantations acquired through CMPC s recent acquisition of the Losango Project from Fibria. It is not possible within our scope of work to analyze the potential environmental and social impacts to each plantation. In the TOR no information was provided on the number and location of potentially affected communities. The Social Direct Area of Influence is well defined in the EIA covering the mill expansion, but the Social Direct Areas of Influence in the four EIAs covering the plantation areas are too broad. At ENVIRON s request, CMPC-CRG has provided more than 20 maps of the plantation areas with municipalities identified but not local communities (refer to Appendix D). Based on the information received, it is not possible to determine the full extent of potential impacts to local communities (i.e. traffic and pesticide risks). UK Issue 1 3 ENVIRON In the TOR no information was provided on the current extent of CMPC s engagement with potentially affected communities. Based on information received to date, no formal public consultation meetings have taken place in Guaíba or South Porto Alegre since During the ENVIRON site visit we were able to conduct a few informal consultations with stakeholders (a local business owner, an NGO and two brothers who are partners with CMPC-CRG in a parceria), but no formal consultations took place so we are not yet able to fully assess community support for the Project. The TOR included the task of reviewing existing bid documents for contractors and subcontractors, focusing on the content of the code of conduct as well as lodging arrangements and provision of necessary services for the temporary workers. However, only three of the contractors and sub-contractors have been selected so ENVIRON cannot comment on the overall capacity of CMPC s contractors to construct the Project in accordance with the Applicable Standards. UK Issue 1 4 ENVIRON 2 Project Description CMPC plans to build a new bleached kraft pulp line in the existing CMPC-CRG mill located in Guaíba, Rio Grande do Sul Brazil. Raw material for the mill will be eucalyptus wood from plantations established by CMPC-CRG in several municipalities within Rio Grande do Sul. The Guaiba 2 Project mill site is located within the fence of the existing pulp and paper mill, in a developed area and surrounded by residential and commercial properties on three sides; Guaíba Lagoon is to the east of the mill site. There is existing infrastructure, including road networks and utilities, but a new transmission line and access road are planned. Based on information ENVIRON has received to date, CMPC is targeting that 75% of workers for the construction phase will be local workers (from the same region as the Project), and 25% will be external (from other regions in Brazil). There will not be a need for any physical or economic displacement in the communities surrounding the mill and in the plantation areas. Figure 2.1. Aerial view of the Guaiba 2 mill site indicating current extent of the existing line 1 (in green) and the mill boundary after the expansion (in yellow). UK Issue 1 5 ENVIRON Figure 2.2. Mill expansion project (based on the 2007 RIMA) The Project has the following components and associated facilities: Extension of the existing Line 1 and Installation of a new Line 2 Port Expansion Rio Grande Port terminal New transmission lines New roads Plantations Plantation nursery Each of these components is described in turn below. 2.1 Line 2 and Extension of Line 1 The Guaiba 2 Project, aimed at increasing the pulp production capacity at the Guaíba Mill, includes the expansion of the exis
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