1
Joint Implementation Carbon Finance Project
OJSC “Alchevsk Metallurgical Plant”
Environmental Assessment
1Introduction:......
2Background:...... 1
3Overview of Environmental Assessment on the JI Carbon Finance Project...... 6
4Project Environmental Management Plan...... 19
5Consultations...... 19
6Annex 1. A. Mitigation Plan...... 20
7Annex 1. B. Monitoring...... 25
8Annex 2. Consultations summary...... 26
1Introduction:
1.In accordance with the World Bank environmental assessment policies and procedures (OP/BP 4.01 Environmental Assessment), the proposed Joint Implementation (JI) carbon finance project being considered by the Bank at the OJSC “Alchevsk Metallurgical Plant” was assigned Environmental Category “B”. As such it requires an environmental assessment (EA) and preparation of an environmental management plan (EMP). The following documents the EA undertaken by members of the project team during the course of project preparation, along with the overall environmental management plan (EMP). In addition to the application of OP/BP 4.01, the possible application of OP/BP 4.12 Involuntary Resettlement to this project has been raised at the concept stage and is also addressed. These safeguard policies and procedures including those applicable to Disclosure of Operational Information were explained and communicated to counterparts.
2Background:
2.OJSC “Alchevsk Metallurgical Plant” (AISW) is a large integrated iron and steel plant located in the city of Alchevsk in Lugansk Oblast, EasternUkraine. It is part of the Industrial Union of Donbass (IUD), an industrial group that is a major shareholder in a number of metallurgical enterprises in Ukraine as well as in Poland and Hungary. This includes the Alchevsk Coke Chemical Plant that, while a separate corporate entity to AISW, is functionally linked to AISW in terms of its adjacent location and as its exclusive coke supplier. IUD/AISW/Alchevsk Coke has embarked on an extensive long term modernization program involving between over a period 2004 to 2010.
3.While one of the more modern integrated steel works in Ukraine, AISW was fairly typical of the Ukrainian iron and steel sector up to 2004 in terms of the vintage of technologies and physical plant used, and the characteristic high resultant energy intensity and poor general environmental performance relative to comparable facilities in OECD countries. Using 2004 as a baseline marking the initial implementation of the modernization program, the facility’s nominal capacity was 5.4 million tonnes of sinter (agglomerate), 3.2 million tonnes of hot metal (iron), 3.6 million tonnes of steel and 3.2 million tonnes of rolled finished product. In relative terms it is currently the 5th largest iron and steel producer in the country. AISW and Alchevsk Coke have the following primary production shops[1]:
- Sinter Plant – 6 sinter machines (1959 – 62);
- Lime Kilns (1950s)
- Blast Furnaces – 4 furnaces (1955 – 1960);
- Open Hearth Furnaces (OHF) –3 furnaces of 300 MT (1952) and one tandem furnace of 600 MT (2005);
- Blooming Mill (1954)
- Rolling Mills: Sheet and Plate mill 2250 (1952); Plate mill 2800 (1955); Heavy-section mill 600 (1966) plus speciality mills for ball-rolling and structural sections and shapes.
- Alchevsk Coke Plant: Batteries #’s 5, 6, 7 and 8 were constructed in 1957 and rebuilt in the 1980’s. Battery # 9 was constructed in 1983. Battery # 10 is being commissioned in 2006.
These primary production facilities are also supported by a range of infrastructure, the most important of which from an environmental perspective are the ore and other input raw material handling facilities, waste water treatment and reclaim facilities, and solid waste disposal facilities.
4.Beginning in 2004 and now coming on stream, AMK initiated the extensive modernization program noted above, with the integrated objectives of applying more efficient technology, improving environmental performance, increasing capacity and upgrading the quality and range of steel produced. This modernization program involves technology replacement or upgrade of all major components of the iron and steel making and finishing processes. The program’s initial focus has been on steel production with the replacement of the three old OHF[2] with two modern basic oxygen furnaces (converters) integrated with continuous slab casters to replace the existing blooming mill. The first phase of this involving installation of one converter and continuous slab casting line was commissioned in 2006 along with upgrading of waste water treatment and recirculation infrastructure. One of four blast furnaces is currently under reconstruction. The second converter and continuous slab casting line is also currently under construction with addition of ladle furnace upgrades and vacuum degassing capability. Associated with the current work are modernization and specifically installation of fugitive emission capture capability in ore handling, construction of two new lime kilns to replace existing facilities, all of which are due for completion in 2007. Downstream upgrading of rolling mill operations is also being undertaken. Other major upstream investments tentatively planed include replacement of the existing sinter machines with 3 new higher capacity machines after 2010 and upgrading of the remaining blast furnaces on a progressive basis, all with BAT pollution control systems. The overall capacity of the plant expressed as steel production will be increased from 3.6 to 6.9 million tonnes/year. A parallel investment program is underway at Alchevsk Coke including the construction of a new dry quench battery (Battery # 10) with an incremental 1 million MT/year of capacity to be commissioned in 2006/2007, and providing capacity for both AISW and other IUD facilities. Associated with this are a series of renovations and additions on the older batteries related to upgrading aspiration systems and oven lids to reduce emissions as well as coke gas desulphurization.
5.The overall investment involved is US$ 1.7 to 2.2 billion over the period 2005 -2010 with financing of currently committed components in part being supplied by IFC through a US$100 million direct loan and participation in a syndicated loan facility in the amount of US$250 million[3]. The IFC loan project has been assigned an environmental classification of Category B. This determination was made largely on the basis that the modernization and specifically the introduction of converters and continuous slab casting will meet World Bank Group guidelines and approach if not fully meet EU BAT performance standards, as well as represent significant energy savings, improved general emission performance and GHG reductions. This has been supported by a formal due diligence environmental audit covering both AISW and Alchevsk Coke[4]. The results and conclusion of this work along with an Environmental Corrective Action Program (ECAP) adopted by IUD and provisions for its monitoring are documented in the published IFC Environmental Review Summary used to support the IFC loan’s board approval[5]. The principle requirements of the ECAP relate to setting emission specifications meeting World Bank Group Guidelines and approaching if not meeting EU BAT, designation of additional environmental investments, and in having assurance that the latter upstream investments (sinter plant replacement, blast furnace upgrading and the associated coke chemical plant improvements) be undertaken. In particular a commitment is made to shut down the existing heavily polluting sinter plants and either replace them or out source the required material elsewhere in Ukraine. The latter upstream investments including sinter plant replacement, upgrading of the blast furnaces, coke charge replacement with coal, and potentially rolling mill upgrading are considered a candidate for a following future carbon finance operation, either under a JI or GIS mechanism. It is also noted that active development on a separate investment in a new combined cycle gas turbine plant to utilize recovered off gases for power generation is also being pursued with EBRD participation[6] and may be subject to separate JI carbon financing.
6.The scope of the proposed JI project specifically covered by this EA involves the replacement of older open hearth furnaces and blooming mills within the steel making plant by basic oxygen converters and continuous casting. This is described in detail in a the carbon finance PDD document[7], where the boundaries are defined for purposes of the carbon finance proposal as just the steel making portion of the plant (3 x OHF/bloom casting replacement with 2 converters and continuous casting lines). The comparative baseline for purposes of determining GHG reductions is defined as continuation of the current operations with added capacity fulfilled by new open-heart furnaces and conventional blooming mills. The GHG reductions that are obtained from the steel making component investments are estimated to average 934,213 tonnes CO2 eq./year over a 5 year crediting period, principally from:
(i)Reduced use of natural gas in open heart furnaces in comparison with converters;
(ii)Reduced used of blast furnace gas in blooming mill with saved gas being partly utilized in an existing on site combined heat and power plant and/or for other on site purposes in order to reduce natural gas consumption.[8]
(iii)Reduced use of raw materials and steel in converters and continuous casting.
Figures 1 and 2 provides schematics illustrating the baseline and project boundaries respectively that are used in the JI proposal relative to the overall plant, and including mass inputs and outputs (tonnes x 1000/year).
7.The investment components involved in the proposed JI project have also been subject to a formal environmental impact assessments or OVNS undertaken in 2006 in accordance with the applicable legislation and regulations of Ukraine for approval of such developments. These include: the Laws of Ukraine “On Protection of Environment”, “On Ecological Expertise”, “On Protection of Atmospheric Air”, “On Wastes”, “On Ensuring Sanitary and Epidemic Welfare of the Population”, and “On Local Councils and Local Government”, as well as the applicable Water Code, Land Code, and Forest Code. The local environmental assessment review process undertaken in accordance with procedures as determined of the Government of Ukraine, inclusive of the State Environmental Expertise, has concluded that the proposed development has significant positive environmental benefits and that any adverse impacts are not significant as well as being readily mitigated. On this basis, the required local approvals have or are in the process of being issued.
3Overview of Environmental Assessment on the JI Carbon Finance Project
8.The basis for the environmental assessment undertaken on the proposed JI carbon finance projects at AISW is to compare actual reported environmental performance for a base line set in 2004/2005, before any effect of the now implemented first stage of the modernization, with those predicted upon completion of the proposed JI project itself in 2009/10 and with that predicted in the longer term upon completing the overall modernization program after 2010. For purposes of doing this, the analysis includes any impacts associated with Alchevsk Coke[9]. It compares two competing factors. The first is the potential for increased emissions, discharges and waste volumes associated with nearly doubling the plant’s capacity, and the reductions achieved by conversion to modern technology that generally result in lower emission, discharges and waste generation on a unit of production basis. This assessment is primarily directed to the local air emissions, water discharges, and solid waste generation levels but also extends to comment on land use, site contamination, occupational health and safety performance and environmental management capacity. The baseline emissions are as measured by the enterprise and/or authorities, and the post project projections are based on the environmental performance achieved, specified and/or anticipated after detailed design work is completed. The data used was supplied directly by IDU/AISW as well as that recorded in the IFC environmental audit document referenced above. The OVOS documentation and State Environmental Expertise conclusions were also reviewed and used as applicable. It should be noted that it does not independently address impacts associated with GHG emissions and these are taken as estimated in the PDD referenced above which is subject to validation on the Kyoto protocol mechanisms.
9.The IFC assessment indicates that prior to the initiation of the modernization program, AISW and Alchevsk Coke was operating in general compliance with local regulatory requirements as set in the plant specific permits established for the facility and its constituent parts, apart from periodic excursions recorded during upset conditions as occurs with failures in blast furnace emission control systems. However, air emissions often approach local limits and exceed either World Bank Guidelines[10] or EU BAT standards[11] for particulate releases. Waste water discharges meet the facilities permit requirements but in some cases exceed the nominally highly restrictive Ukrainian discharge standards. However these are generally consistent with international standards, including World Bank Guidelines, and reflect a level of recovery and recycling approaching that expected in international good practice. Solid waste generation is significant and its disposal may be problematic in terms of capacity and quality of disposal facilities. However, the enterprise does reprocess a significant portion for internal raw material recovery and for utilization as building material aggregate including some reduction of legacy stockpiles. These waste streams generally involve low hazard class material where physical disposal capacity rather than environmental impact is the primary concern. This is consistent with a general conclusion that the existing baseline environmental performance issue is air emissions, particularly particulates, which would be the major focus of any assessment of environmental impact associated with the proposed project.
3.1Assessment of Air Emissions
10.Table 1 below as derived from the above referenced documents, summarizes the 2004/2005 performance of the principle plant components along with applicable international reference standards for AISW. This highlights the major air emission environmental performance issue as particulate emissions for all major plant units, particularly the sinter plant, lime kilns and OHF. Data available for the Alchevsk Coke batteries show measured emission ranges of 425-750 mg/m3 for NOx, 70-800 mg/m3 for CO and 720-800 mg/m3 for SO2 with no particulate emission data available. While noting that the SO2 levels are higher than World Bank guidelines and EU BAT, this is a function of the high sulphur coal supply and is reported to have been substantially reduced by installation of a modern coke oven gas desulphurization system.
11.The impact of the modernization program on air emission at AISW has been estimated using data supplied by AISW which is generally based on the technical specifications either applied or intended to be applied to the new or upgraded facilities, typical based on input from established EU suppliers. The following summarizes the measures involved and resultant performance standards utilized in the assessment.
- Sinter Plant Replacement: Existing plant particulate 300-400 mg/m3. No specification yet established but targeting EU BAT (< 50 mg/m3).
- Lime Kiln Replacement: Existing Plant particulate 600-700 mg/m3, Design Specifications for the two new lime kilns calls for cyclones and bag filters with a performance of <30 mg/m3 .
- Blast Furnace Reconstruction: Currently blast furnace under reconstruction will have secondary particulate suppression/extraction and electric static precipitators (ESPs) and/or bag filters designed to achieve < 35 mg/m3. Reconstruction assumed to be the same or better.
- Open Hearth Replacement with Converters: Based on the current converter, the conversion will provide each unit with primary particulate extraction to ESPs guaranteed to <35 mg/m3 and secondary particulate to bag filters guaranteed to <25 mg/m3. Existing blast furnace performance unchanged.
- Bloom Casting Conversion to Continuous Slab Casting: Particulate capture and extraction to bag filters with guaranteed performance of < 10 mg/m3.
Table 1: Actual 2004 Measured Air Emission Compared to Local Limits and International Standards as Applicable - AISW
Source / Substance / Measured ConcentrationRange
mg/m3 / Local
ConcentrationLimitRange
mg/m3 / World Bank
G/L
mg/m3 / EU BAT
mg/m3
Sinter Machines / Particulate / 333-368 / 396-453 / 50 / <50
NO2 / 64-99 / 101-118 / 750 / n/a
SO2 / 65-89 / 86-91 / 500 / <500
CO / 3542-3750 / 4405-5056 / n/a / n/a
Lime Kilns / Particulate / 607-701 / 620-720 / 50 / n/a
NO2 / 37-97 / 39-101 / 750 / n/a
CO / 1220-2292 / 1230-2513 / n/a / n/a
Blast Furnaces / Particulate / Not Reported / Not Reported / 50 / <10 for Hot Stoves
1-15 for APC
NO2 / 64-71 / 72-91 / 750 / < 350 (NOx)
SO2 / 25-39 / 27-53 / n/a / n/a
CO / 1563-1875 / 2097-2431 / n/a / n/a
Old Open Hearth Furnaces / Particulate / 76-180 / 87-180 / 50 / 5-15 w/
bag filters
20-30 w/ESP
NO2 / 64-253 / 87-180 / 750 / n/a
SO2 / 7.2-15.4 / 7.8-30 / n/a / n/a
CO / 54-97 / 60-134 / n/a / n/a
New Open Hearth Furnaces / Particulate / 78 / 157 / 50 / 5-15 w/
bag filters
20-30 w/ESP
NO2 / 71 / 90 / 750 / n/a
SO2 / 24 / 32 / n/a / n/a
CO / 10.4 / 15 / n/a / n/a
* ESP – Electrostatic Preciptator
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12.The Table 2 below provides a comparison of AISW’s total mass air emissions for the 2005/2005 base case at nominal capacity level of 3.6 million tonnes/year steel production and the projected total emissions at the 2009 nominal capacity level of 6.9 million tonnes/year for both the situation upon completion of the JI project investment in 2009 and upon completion of the overall modernization after 2010 specifically of the upstream sinter plants and last furnaces. This comparison indicates that in the long term there is an overall reduction in total mass air emissions of 45% and 31% reduction in total particulate emissions[12]. Furthermore, the JI project alone where steel making capacity is increased without the upstream investment still reduces total mass air emissions slightly, although a small increase in particulate emissions is estimated. In terms of gaseous emissions reductions in SO2 and NO2 are also estimated in either case. Based on this it is apparent that the adoption of technologies generally meeting BAT should provide a net environmental benefit in terms of air quality notwithstanding the increase in capacity involved.
13. While the JI project alone essentially has a neutral or small positive impact on local air emissions from AISW, the long term achievement of substantial improvement in local air quality is only gained from the installation of new sinter plants meeting BAT emission standards or alternatively purchasing the required material on the open market while shutting down the present operations. While, this along with the elimination of the last OHF has been set as an undertaking in the IFC financing, it must also be acknowledged that in the near term and where agglomerate or pellets are sourced elsewhere air emissions from this primary source are transferred elsewhere to locations where the purchased material is produced. The actual impact will be a function of the performance standards at these distributed facilities but in a worst case scenario might be assumed to be essentially equivalent to the present performance at AISW factored by the increase in sinter requirements for the expanded plant. Therefore, the critical component in the modernization program in obtaining a significant improvement in air emissions generally and particularly a substantive reduction in particulate emissions is that that the existing sinter plant be shut down and replaced with new sinter machines as is IUD/AISW’s long term plan. Alternatively, the selective out sourcing of this requirement based on using facilities meeting or approaching EU BAT performance standards could be considered.