05-4216. Interim Environmental Guidelines for Public Comment

AGENCY:

Millennium Challenge Corporation.

SUMMARY:

The purpose of these Guidelines is to help ensure that the projects undertaken as a part of the Millennium Challenge Compacts are environmentally sound, designed to operate in compliance with relevant regulatory requirements, and are not likely to cause a significant environmental health and safety hazard. In order to provide guidance to MCC eligible countries as they develop Compacts, MCC will use these procedures as interim Environmental Guidelines throughout the comment period.

Public Comment: For a ninety-day period beginning on the date of publication of this notice in the Federal Register, the Millennium Challenge Corporation will accept public comment on the interim Environmental Guidelines.

Contact Information: Public comments should be submitted through the MCC website at www.mcc.gov or in writing addressed to: Public Comment on Environmental Guidelines, Millennium Challenge Corporation, P.O. Box 12825, Arlington, VA 22219-2825.

Environmental Guidelines

Table of Contents

Statement of Principles

Sources of Policy; Applicability of Guidelines

Envrionmental Screening

Environmental Review

Public Consultation

Monitoring

Reporting

Appendix A: Definitions

Appendix B: Procedures Implementing Executive Order 12114

Appendix C: Illustrative List of Sensitive Sectors and Sensitive Locations

Appendix D: Environmental Impact Assessment Reports

Statement of Principles

The Millennium Challenge Corporation (“MCC”) recognizes that the pursuit of sustainable economic growth and a healthy environment are necessarily related. The purpose of these guidelines is to establish an environmental review process to ensure that the projects undertaken as part of programs funded under Millennium Challenge Compacts with eligible countries (“Compacts”) are environmentally sound, are designed to operate in compliance with applicable regulatory requirements, and, as required by the legislation establishing MCC, are not likely to cause a significant environmental, health, or safety hazard.^[1]

MCC is committed to program design that reflects the results of public participation in host countries during all phases of the program, integrating governmental interests with those of private business and civil society. In this spirit, MCC will work to ensure that the preparation of an environmental impact assessment will include consultation with affected parties.

Finally, MCC is committed to the principle of host-country ownership of a Compact proposal. Wherever appropriate, MCC will consider analyses, standards and norms of the host country. In addition, Compact projects should generally comply with relevant international environmental guidelines and requirements, including those that the host country is bound by under international agreements.

Sources of Policy; Applicability of Guidelines

The policies reflected in these guidelines are based, broadly speaking, on sound sustainable development project design principles and international best practices in this field, including, but not limited to, the “Principles of Environmental Impact Assessment Best Practices” of the International Association for Impact Assessment, the environmental policies and guidelines of other United States government development assistance and financing entities, the environmental policies and guidelines of the multilateral development banks, the Common Approach developed by export credit agencies through the Organization for Economic Cooperation and Development (OECD), and the Equator Principles in use by international commercial banks. In addition, these guidelines reflect the following:

1. Section 605(e)(3) of the Millennium Challenge Act of 2003 prohibits MCC from providing assistance for any project that is “likely to cause a significant environmental, health, or safety hazard.” Consequently, the presence of such a project in a host country's proposal will preclude MCC funding (or continued funding) of that project. (See the discussion of “environmental, health or safety hazard” in Appendix A.)

2. Executive Order 12114, January 4, 1979, 44 FR 1957 (January 9, 1979) requires every federal agency taking actions encompassed by that Executive Order to establish procedures to implement it with respect to certain major Federal actions having significant effects on the environment outside the geographical borders of the United States and its territories and possessions. It is expected that the Executive Order will have limited applicability to MCC programs, but where the terms of the Executive Order apply, the procedures described in Appendix B will be used.

3. In those instances where MCC's actions or a project undertaken or funded under a Compact may significantly affect the quality of the environment of the United States, including its territories or possessions, MCC will require adherence to the environmental review procedures established by the Council on Environmental Quality under the National Environmental Policy Act (NEPA), in lieu of these guidelines.

MCC will review and revise these guidelines from time to time to reflect lessons learned in their application as well as relevant changes in international standards and norms of practice. In addition, MCC may from time to time provide such additional guidance to a host country during the implementation of a program as may be advisable in light of host country norms and international standards.

Environmental Screening

As early as possible in the Compact proposal review process, MCC will screen each project described in the Compact (generally referred to herein as a “project” or collectively, as “projects”). MCC funding for a project is contingent upon satisfactory completion of environmental screening in accordance with these guidelines, and in general, the environmental screening of projects will be completed before the Compact is signed. For those projects that require a full environmental impact assessment, MCC funding for that project generally will be contingent upon completion of the EIA in accordance with these guidelines.

• Categorical Prohibition: As stated above, MCC may not provide assistance for any project that is “likely to cause a significant environmental, health, or safety hazard.” Accordingly, as part of its environmental screening, MCC will identify and exclude such projects from MCC financing, using the definition contained in Appendix A. Such projects will be classified as a Categorical Prohibition.
• Determination of Project Category: MCC will screen all Compact proposals to identify projects that require further review due to their potential adverse environmental impacts,^[2] and projects that are in sensitive sectors or in or near sensitive locations. The result of this screening process will be an environmental classification following the recommendations contained in the OECD Common Approach and the practices of the World Bank, classifying in accordance with the potential environmental impact, and the extent of the environmental review required:

—Category A: A project is classified as Category A if it has the potential to have significant adverse environmental impacts. These impacts may affect an area broader than the sites or facilities subject to physical works. Category A, in principle, includes projects in sensitive sectors or located in or near sensitive areas. An illustrative list of sensitive sectors and sensitive locations is set out in Appendix C.

—Category B: A project is classified as Category B if its potential environmental impacts are less adverse than those of Category A projects. Typically, these impacts are site-specific, few if any of them are irreversible, and mitigation measures are more readily available.

—Category C: A project is classified as Category C if it is likely to have minimal or no adverse environmental impacts.

Environmental Review

The application of these guidelines to specific projects and the breadth, depth, and type of environmental review to be completed will depend on the nature, scale, and potential environmental impact of proposed projects.

Category A Projects

For Category A projects, MCC will require an Environmental Impact Assessment (EIA) as a condition for disbursement of funds under a Compact. An Environmental Impact Assessment evaluates the potential environmental risks and impacts of a specific project in its area of influence; examines alternatives to the project; identifies ways of improving project selection, siting, planning, design, and implementation by preventing, minimizing, mitigating, or compensating for adverse environmental impacts and enhancing positive impacts; and includes the process of mitigating and managing adverse environmental impacts during the implementation of a project. The recommended contents of an Environmental Impact Assessment report are included in Appendix D.

An Environmental Impact Assessment should be initiated as early as possible in project development and be integrated closely with the economic, financial, institutional, social, and technical analyses of a proposed project.

An Environmental Impact Assessment should take into account the natural environment (air, water, and land); human health and safety; social aspects (involuntary resettlement, indigenous peoples and cultural property); and transboundary and global environmental aspects.

An Environmental Impact Assessment should also take into account specific host-country conditions; the findings of host-country environmental studies; National Environmental Action Plans (NEAPs); the host country's overall policy framework and national legislation; the capabilities of the entity implementing the project, as they relate to managing environmental and social impacts; and obligations of the host country under relevant international environmental treaties and agreements.

While the completion of the Environmental Impact Assessment is the responsibility, either directly or indirectly, of the host country, MCC will advise and consult on Environmental Impact Assessment requirements. MCC will review the findings and recommendations of the Environmental Impact Assessment to ensure their consistency with these guidelines, and where appropriate, may require additional assessment work, including public consultation and information disclosure (see below).

Category B Projects

For environmental Category B projects, the MCC will require specific environmental analyses, as appropriate. The scope and format of the analyses will depend on the project and its environmental impacts. Generally, the scope of such work will be narrower than for Category A projects.

Category C Projects

Environmental Category C projects are unlikely to have adverse environmental impacts. However, the MCC reserves the right to require specific environmental studies, reporting, or training where relevant or where positive environmental impacts may be enhanced.

Public Consultation

Consistent with MCC's principles of host-country ownership of the projects implemented under its Compact, implementing entities will be expected to allow meaningful public consultation in the development of Compact-related Environmental Impact Assessments and make public the results of Environmental Impact Assessments.

Monitoring

In order to ensure compliance with measures to mitigate any adverse environmental impacts of projects undertaken pursuant to a Compact, MCC may condition MCC funding for the project on satisfactory implementation of those mitigation measures. The host country will be responsible for appropriate monitoring of project Environmental Impact Assessments during the term of the Compact. MCC will monitor compliance through the review of information provided by the implementing entity and through site visits.

These guidelines will be referenced and reflected in the Compact. The Compact will include a prohibition, for the full term of the Compact, on funding projects deemed likely to cause a significant environmental, health, or safety hazard.

Reporting

MCC will require regular reporting on all projects for which an Environmental Impact Assessment was completed and as otherwise requested by MCC. The reports should provide detailed information on realized environmental impacts and the status of the implementation of the Environmental Management Plan, including associated costs. MCC may modify its guidance to project implementers following the review of such reports.

Appendix A: Definitions

Environmental, Health or Safety Hazard—A project is deemed “likely to cause a significant environmental, health, or safety hazard” and, therefore, prohibited from receiving MCC funding, if:

(a) As a result of the project, even with mitigation efforts and proper use, there exists or will exist a substance, condition, or circumstance that represents a significant risk of harm to the environment or to human health because of the physical, chemical or biological effects of such substance, condition or circumstance;

(b) The project involves or will involve the production, procurement or intentional release of:

—Persistent Organic Pollutants (POPs) that the United States Environmental Protection Agency (USEPA) has identified as of greatest concern to the global community;^[3]

—Any pesticide or industrial or consumer chemical that is listed by the United States Environmental Protection Agency as “banned” or “severely restricted” under the Prior Informed Consent (PIC) Program;^[4] or

—A product (including an emission or effluent) that is prohibited or strictly regulated in the United States because its toxic effects on the environment create a serious public health risk; or

(c) The project is a physical project that is prohibited or strictly regulated by Federal law in the United States to protect the environment from radioactive substances, unless the MCC has made a final determination, taking into account a thorough Environmental Impact Assessment, that the project is not likely to cause a significant environmental, health, or safety hazard.

Environmental Impact Assessment (EIA)—Analysis that identifies the potential environmental risks and impacts of a specific project in its area of influence; examines alternatives to the project; identifies ways of improving project selection, siting, planning, design, and implementation by preventing, minimizing, mitigating, or compensating for adverse environmental impacts and enhancing positive impacts; and includes the process of mitigating and managing adverse environmental impacts during the implementation of a project. The scope and level of detail in an Environmental Impact Assessment should be commensurate with a project's potential impact. At a minimum, an Environmental Impact Assessment should include the information outlined in Appendix D: Environmental Impact Assessment Reports (also sometimes referred to as Environmental Impact Statements).

Environmental Management Plan (EMP)—An Environmental Management Plan describes mitigation, monitoring and institutional measures to be taken during project implementation to eliminate adverse impacts, offset them, or reduce them to acceptable levels.

Appendix B: Procedures Implementing Executive Order 12114

This Appendix sets forth the procedures that MCC will use to implement Executive Order 12114, January 4, 1979, 44 FR 1957 (January 9, 1979) (the “Executive Order”).

1. Actions Covered

The MCC officer having the ultimate responsibility for authorizing and approving actions will take into consideration an appropriate environmental review before authorizing and approving any

a. Major Federal action that significantly affects the environment of the global commons outside the jurisdiction of any nation (e.g., the oceans);

b. Major Federal action that significantly affects the environment of a foreign nation not involved or participating with the United States in the action; or

c. Major Federal action outside the United States that significantly affects natural or ecological resources of worldwide importance which the President has designated for protection or, in the case of resources protected under a binding international agreement, by the Secretary of State.

2. Type of Environmental Review

a. For actions specified in 1.a above, MCC will consider an Environmental Impact Assessment.

b. For actions specified in 1.b or 1.c above, MCC will take into consideration an appropriate environmental review in accordance with the criteria in the “Environmental Review” section of these guidelines.

3. State Department Coordination

MCC will contact the State Department for coordination of all communications with foreign governments concerning environmental agreements and other arrangements to implement sections 1 and 2 above.

Appendix C: Illustrative List of Sensitive Sectors and Sensitive Locations ^[5]

The following list is indicative and the types of projects it contains are examples only. This list is not intended to be exhaustive.

—Crude oil refineries (excluding undertakings manufacturing only lubricants from crude oil) and installations for the gasification and liquefaction of 500 tons or more of coal or bituminous shale per day.

—Thermal power stations and other combustion installations with a heat output of 300 megawatts or more and nuclear power stations and other nuclear reactors, including the dismantling or decommissioning of such power stations or reactors (except research installations for the production and conversion of fissionable and fertile materials, whose maximum power does not exceed 1 kilowatt continuous thermal load).

—Installations designed for the production, or enrichment of nuclear fuels, the reprocessing, storage or final disposal of irradiated nuclear fuels, or for the storage, disposal or processing of radioactive waste.

—Integrated works for the initial smelting of cast-iron and steel; installations for the production of nonferrous crude metals from ore, concentrates or secondary raw materials by metallurgical, chemical or electrolytic processes.

—Installations for the extraction of asbestos and for the processing and transformation of asbestos and products containing asbestos: for asbestos-cement products, with an annual production of more than 20,000 tons finished product; for friction material, with an annual production of more than 50 tons finished product; and for other asbestos utilization of more than 200 tons per year.

—Integrated chemical installations, i.e., those installations for the manufacture on an industrial scale of substances using chemical conversion processes, in which several units are juxtaposed and are functionally linked to one another and which are for the production of: basic organic chemicals; basic inorganic chemicals; phosphorous-, nitrogen- or potassium-based fertilizers (simple or compound fertilizers); basic plant health products and biocides; basic pharmaceutical products using a chemical or biological process; explosives.

—Construction of motorways, express roads and lines for long-distance railway traffic and of airports with a basic runway length of 2,100 meters or more; construction of a new road of four or more lanes, or realignment and/or widening of an existing road so as to provide four or more lanes, where such new road, or realigned and/or widened section of road would be 10 km or more in a continuous length.

—Pipelines, terminals, and associated facilities for the large-scale transport of gas, oil, and chemicals.

—Sea ports and also inland waterways and ports for inland-waterway traffic which permit the passage of vessels of over 1,350 tons; trading ports, piers for loading and unloading connected to land and outside ports (excluding ferry piers) which can take vessels of over 1,350 tons.

—Waste-processing and disposal installations for the incineration, chemical treatment or landfill of hazardous, toxic or dangerous wastes.

—Large^[6] dams and other impoundments designed for the holding back or permanent storage of water.

—Groundwater abstraction projects or artificial groundwater recharge schemes in cases where the annual volume of water to be abstracted or recharged amounts to 10 million cubic meters or more.

—Industrial plants for the (a) production of pulp from timber or similar fibrous materials; (b) production of paper and board with a production capacity exceeding 200 air-dried metric tons per day.

—Peat extraction, quarries and open-cast mining, and processing of metal ores or coal.

—Extraction of petroleum and natural gas for commercial purposes.

—Installations for storage of petroleum, petrochemical, or chemical products with a capacity of 200,000 tons or more.

—Large-scale logging.

—Municipal wastewater treatment plants with a capacity exceeding 150,000 population equivalent.

—Municipal solid waste-processing and disposal facilities.

—Large-scale tourism and retail development.

—Construction of overhead electrical power lines.

—Large-scale land reclamation.

—Large-scale primary agriculture/silviculture involving intensification or conversion of natural habitats.

—Plants for the tanning of hides and skins where the treatment capacity exceeds 12 tons of finished products per day.

—Installations for the intensive rearing of poultry or pigs with more than: 40,000 places for poultry; 2,000 places for production pigs (over 30 kg); or 750 places for sows.

—Projects that are planned to be carried out in sensitive locations or are likely to have a perceptible impact on such locations, even if the project category does not appear in the above list. Such sensitive locations include National Parks and other protected areas identified by national or international law, and other sensitive locations of international, national or regional importance, such as wetlands, forests with high biodiversity value, areas of archaeological or cultural significance, and areas of importance for indigenous peoples or other vulnerable groups.

Appendix D: Environmental Impact Assessment Reports ⁷

The scope and level of detail of an Environmental Impact Assessment should be commensurate with the potential impacts of the project. The Environmental Impact Assessment report should include the following items (not necessarily in the order shown):

• Executive summary: concisely discusses significant findings and recommended actions.
• Policy, legal and administrative framework: discusses the policy, legal, and administrative framework within which the Environmental Impact Assessment is carried out.
• Project description: describes the proposed project and its geographic, ecological, social, and temporal context, including any offsite investments that may be required (e.g., dedicated pipelines, access roads, power plants, water supply, housing, and raw material and product storage facilities). Indicates the need for any resettlement or social development plan. Normally includes a map showing the project site and the project's area of influence.
• Baseline data: assesses the dimensions of the study area and describes relevant physical, biological, and socio-economic conditions, including any changes anticipated before the project commences. Also, it takes into account current and proposed development projects within the project area but not directly connected to the project. Data should be relevant to decisions about project location, design, operation, or mitigatory measures; the section indicates accuracy, reliability and sources of the data.
• Environmental Impacts: predicts and assesses the project's likely positive and negative impacts, including the impact on involuntary resettlement, indigenous peoples and cultural property, in quantitative terms to the extent possible. It identifies mitigation measures and any residual negative impacts that cannot be mitigated. It explores opportunities for environmental enhancement. Identifies and estimates the extent and quality of available data, key data gaps, and uncertainties associated with predictions, and specifies topics that do not require further attention.
• Analysis of alternatives: systematically compares feasible alternatives to the proposed project site, technology, design and operation-including the “without project” situation-in terms of their potential environmental impacts; the feasibility of mitigating these impacts; their capital and recurrent costs; their suitability under local conditions; and their institutional, training and monitoring requirements. For each of the alternatives, it quantifies the environmental impacts to the extent possible, and attaches economic values where feasible. It states the basis for selecting the particular project design proposed and justifies recommended emission levels and approaches to pollution prevention and abatement.
• Environmental Management Plan: describes mitigation, monitoring and institutional measures to be taken during project implementation to eliminate adverse impacts, offset them, or reduce them to acceptable levels.
• Consultation: lists and describes consultation meetings, including consultations for obtaining the informed views of the affected people, local nongovernmental organizations and regulatory agencies.

Dated: February 28, 2005.

Frances C. McNaught,

Vice President, Domestic Relations, Millennium Challenge Corporation.

Footnotes

1.  Appendix A sets forth definitions of words and phrases used in these guidelines.

2.  “Environmental impacts” include the effects of a project on the surrounding natural environment and on the humans reliant on that environment, to include effects on cultural property, indigenous peoples, and involuntary resettlement, as well as the impacts on human health and safety.

3.  http://www.epa.gov/​oppfeadl/​international/​pops.htm.

4.  http://www.epa.gov/​oppfeadl/​international/​piclist.htm.

5.  Source. EBRD Environmental Policy (http://www.ebrd.org/​enviro/​index.htm, also in use under the Organization for Economic Co-operation and Development (OECD) “Common Approach.”

6.  A large dam is a dam with a height of 15 meters or more from the foundation or a dam that is between five and 15 meters high with a reservoir volume of more than three million cubic meters (the definition used by the International Commission on Large Dams (ICOLD)).

7.  This Appendix is based on the World Bank Operational Manual, OP 4.01, which is also in use under the Organization for Economic Co-operation and Development (OECD) “Common Approach.”