EIA Report of Proposed World Bank-funded Shanxi Coalbed Methane Development and Utilization Project of Shanxi Energy CBM Investment Holding Co., Ltd.

(Part I 2.5×108Nm3/a Zhengzhuang Coalbed Methane Development Engineering Project )

ChinaE1886 v.2

Shanxi Coalbed Methane Development and Utilization Project

Environmental Impact Assessment

(Part I: CBM well drilling and CBM production)

April 10, 2008

Shanxi Energy CBM Investment Holding Co., Ltd.

Table of Contents

Summary

1. Policies, laws and management framework

1.1 Laws and regulations for environmental protection

1.2 World Bank’s relevant regulations

1.3 Applicable standards on environmental quality

1.4 Emission standard

2. Engineering analysis

2.1 Well site

2.2 Gas collecting station

2.3 The pipe network of gas recovery and collection

2.4 Metering and pigging station

2.5 Production Management Center

2.6 Road engineering

2.7 Water supply and discharge engineering

2.8 Heating

2.9 Power supply system

2.10 Main engineering volume and main technical and economic indicators

3. Environmental status quo

3.1 Geographical location

3.2 Landform type

3.3 Geological structure

3.4 Climate and meteorology

3.5 Hydrology

3.6 Status quo of the ambient air quality

3.7 Status quo of the ambient noise

3.8 Soil

3.9 Biological diversity

3.10 Overview of the social environment

3.11 Objectives for environment protection

4. Environmental impact appraisal and mitigation measures

4.1 Environmental impact appraisal during the construction period

4.2 Appraisal and analysis of the environmental impact during the operational period

4.3 Appraisal and analysis of the environmental impact during the repair/maintenance period

4.4 Table of environmental protection measures

5. Alternative Analysis

5.1 Comparison of plans for recovered and discharged water treatment

5.2 Comparison of layout plans for Gas Gathering Stations

5.3 Comparison of well completion approaches

6 Environmental Management Plan

6.1 Organizations for environmental management

6.2 Appraisal of the management agency’s capability of environment management

6.3 Training plan for environmental management

6.4 Plan for environmental management

7. Public consultation and information disclosure

7.1 First round of public consultation

7.2 Second round of public consultation

7.3 Suggestions and replies in the public participation

7.4 Summary

8. Safety appraisal

8.1 Analysis on the dangerous and harmful factors in the technical process

8.3 Analysis on Countermeasures

8.4 Conclusion

9. Appraisal conclusion

9.1 The project overview

9.2 Status quo of the environment

9.3 Environmental impact and mitigation measures

9.4 Plan comparison

9.5 Plan for environmental management

9.6 Public participation

9.7 Safety appraisal

9.8 General conclusion

Coal Industry Taiyuan Design & Research Institute1 SEPA Document No.1303

EIA Report of Proposed World Bank-funded Shanxi Coalbed Methane Development and Utilization Project of Shanxi Energy CBM Investment Holding Co., Ltd.

(Part I 2.5×108Nm3/a Zhengzhuang Coalbed Methane Development Engineering Project )

Summary

Shanxi Energy Coalbed Methane Investment Holding Co., Ltd. initiated a Coalbed methane development and utilization demonstration project using World Bank loans (2.5×108Nm3/a Zhengzhuang Coalbed Methane Development Engineering Project). Located in the Zhengzhuang block on the PetroChina’s registered region graphic, the Zhengzhuang Cooperation Zone is 49.14 km2 in land size and 2.5×108m3/a in industrial construction scale. The Project uses vertical wells on the land surface, and the development approach of water extraction, gas recovery and holistic pressure reduction. The vertical wells will be arranged into a network in the shape of clubs with a well distance of 300 m. There will be 350 wells, 333 of which are effective wells.

This part of the construction effort is to build 350 Coalbed methane wells (including 333 effective wells), 3 gas collecting stations and 1 metering and pigging station, 1 wastewater treatment plant, 1 production Management center, 15.6 km of gas collecting feeder line, 135 km of gas recovery pipeline, 11.7 km of station access roads, 57 km of well access roads. The Project has a total investment of RMB 824.60 million Yuan.

The engineering adopts the approach of well-cased perforating for well completion, and 2-spud well structure, solid-free or low-solid well drilling liquid (toxic-free and innocuous), casing pipes and cement for well fixation, and a well drilling cycle of 20 days. The Project uses the fracturing approache to accelerate the water discharge and pressure reduction of the Coalbed, and facilitate desorption and flow of Coalbed methane. The fracturing liquid is the combination of clean water+2.0% potassium chloride+0.2% surfactant(DL-10 or D50)+fungicide in a small quantity.

The Coalbed methane enters into the gas collecting station through the gas collecting feeder lines, gets separated into gas and liquid by the separator, and enters into skid-mounted compressor to be compressed in increased pressure at 2 levels, chosen according to the location of different gas stations in the pipe network. The Coalbed methane is 1.5 MPa in pressure after pressure increase, and gets cooled to be 54℃in temperature by the gas cooler, and transported to the metering and pigging station after metering. The gas collecting approach used is multi-well serial connection, low-pressure transportation, and methanol-free gas collecting techniques. There are 15.6 km of gas collecting feeder lines and 135 km of gas recovery pipelines established.

The 2.5×108Nm3/a Coalbed methane development engineering project is located northwest of Zhengzhuang, Qinshui County, Jincheng City. The project site has mountains surrounding around, a terrain of low mountains and hills, with the factory site located at the lower terrace of Guxian County. With a monsoon climate of medium latitudes, the area has an obvious continental climate, characterized by long winters and short summers, rain in hot seasons, strong monsoons, dry and windy springs with frequent droughts, summers with uneven heat and rains, warm and agreeable falls with a litter more overcast and rainy days, cold winter with little sunshine, rain and snow. On the project site, the land surface waters belong to the Qin River branch, Yellow River system, with Qin River and Qinshui River as its main rivers. The region has adequate ambient air, ground water, land surface water, and ambient noise.

The engineering construction effort of the World-Bank-loan Coalbed methane development and utilization demonstration project will inevitably exert adverse effects on the ecological environment, surface water environment, ground water environment, ambient air and ambient noise. Meanwhile, the project construction will play an active role in promoting the local economical and social development and improving the residents’ living standards. As long as we can implement the “Three simultaneously” work during the project implementation and production, and implement the measures for ecological recovery and pollution mitigation proposed in the Environemtal Impact Assessment(EIA), we will be able to achieve clean production and compliant emissions, meet the objective of total volume control, and minimize the adverse effects of the Project, achieve the integration between economic profits, social effects and environment effects, and attain the sustainable development of society and environment.

From the perspective of environmental protection, the construction of World Bank-funded Shanxi Coalbed Methane Development and Utilization Projectof Shanxi Energy Coalbed Methane Investment Holding Co., Ltd. is feasible.

Coal Industry Taiyuan Design & Research Institute1 SEPA Document No.1303

EIA Report of Proposed World Bank-funded Shanxi Coalbed Methane Development and Utilization Project of Shanxi Energy CBM Investment Holding Co., Ltd.

(Part I 2.5×108Nm3/a Zhengzhuang Coalbed Methane Development Engineering Project )

1. Policies, laws and management framework

1.1 Laws and regulations for environmental protection

1. Environmental Protection Law of People’s Republic of China, Law on Prevention and Governance of Water Pollution, Law on Prevention and Governance of Noise Pollution, Law on Prevention and Governance of Solid Waste Pollution, Promotional Act on Clean Production of People’s Republic of China, Law on Environmental Impact Evaluation of People’s Republic of China, and other national laws and regulations for environmental protection;

2. Law on Antique Protection of People’s Republic of China, Law on Urban Planning of People’s Republic of China, Law on Land Management of People’s Republic of China, Law on Water and Soil Conservation, and other relevant national laws and regulations;

3. PRC State Council Decree, No.253, the Management Rules on Environmental Protection for Construction Projects; November 29th, 1998;

4. Decree of State Environmental Protection Administration, No.14, Catalogue on Classified Managemeng of Environmental Protection for Construction Projects, October, 2002;

5. State Environmental Protection Administration, National Development and Reform Commission, Environment/ Development [2004] No. 164, Notice on Enhancing the Multi-layered Review and Approval Process of Environmental Impact Evaluation for Construction Projects, December 6, 2004;

6. State Environmental Protection Administration, Environmental Regulation〖1993〗No.324, Notice on Enhancing the Management of Environmental Impact Evaluation for Construction Projects Using Loans from International Financial Organizations, 1993;

7. Shanxi Provincial Regulation on Environmental Protection, Shanxi Provincial Regulation on Prevention and Governance of Atmospheric Pollution, the methods of Shanxi Provincial People’s Government to implement the Decisions of the State Council on Several Issues of Environmental Protection, the methods of Shanxi Province to implement the Law on Water and Soil Conservation of PRC, Plan of Shanxi Province on Dividing Management Areas on Land Surface Waters and Water Environment, and other laws and regulaitons;

8. Provisional Methods on Public Participation of Environmental Impact Evaluation (State Environmental Protection Administration, February 14, 2006, Environmental Development 2006【No. 28】).

1.2 World Bank’s relevant regulations

1. The World Bank Operational Policy: Environmental Assessment (OP4.01);

2. The World Bank Policy on Disclosure of Information

3. The World Bank Operational Policy: Natural Habitats (OP4.04);

1.3 Applicable standards on environmental quality

According to the Reply of Jincheng Municipal Environmental Protection Bureau on the Applicable Standards for the Environmental Impact Evaluation of World Bank-funded Shanxi Coalbed Methane Development and Utilization Projectof Shanxi Energy Coalbed Methane Investment Holding Co., Ltd. (Jin/Municipal/Environment/Letter [2007] No.144), the applicable standards on environment quality are as follows:

(1)Ambient air quality standard: Since the factory site is located in the rural area, the Grade II Standard of Ambient Air Quality Standard of China (GB3095-1996)shall be applied;

(2)Standard for the water environment:

Surface water: Type III standard of Quality Standard of Surface Water Environment (GB3838-2002) shall be applied;

Ground water: Type III standard on water quality of Environment Standard for Ground water (GB/T48443-93)shall be applied;

(3)Ambient noise: For industrial sites, type II standard of Ambient NoiseStandard in Urban Area (GB3096-93) shall be applied; for rural residential areas, type I standard shall be applied; for areas on both sides of trunk roads of transportation, type IV standard shall be applied.

See Table1.3-1--1.3-4 for details.

Table 1.3-1 Grade II Standard of Ambient Air Quality Standard(GB3095-1996)

Name of pollutant / Value collection time / Concentration limit / Concentration unit
TSP / Annual average
Daily average / 0.20
0.30 / mg/Nm3
PM10 / Annual average
Daily average / 0.10
0.15
SO2 / Annual average
Daily average Hourly average / 0.06
0.15
0.50
NO2 / Annual average
Daily average Hourly average / 0.08
0.12
0.24

Table1.3-2Quality Standard of Surface Water Environment (GB3838-2002) Unit mg/L

Serial number / Item / Standard value (Type Ⅲ)
1 / pH / 6~9
2 / COD / ≤20
3 / BOD5 / ≤4
4 / NH3-N / ≤1.0
5 / SS / 70
6 / Fluoride / ≤1.0
7 / Arsenic / ≤0.05
8 / Hg / ≤0.0001
9 / Petroleum / ≤0.05
10 / Sulfide / ≤0.2
11 / Fe / 0.3
12 / Mn / 0.1
Note: for Fe and Mn, standard limits for supplementary items for surface water source of consolidated-type life drinking water shall be referred to; for SS, please refer to Grade I standard of standard for integrated wastewater discharge.

Table 1.3-3 Type III standard on Standard for Ground Water (GB/T48443-93)

Serial number / Name of pollutant / Standard value (Type Ⅲ)
1 / pH / 6.5-8.5
2 / General Hardness (calculated by CaCO3)(mg/L) / ≤450
3 / Sulfate(mg/L) / ≤250
4 / Chloride(mg/L) / ≤250
5 / Fe(mg/L) / ≤0.3
6 / Mn(mg/L) / ≤0.1
7 / Volatile phenol(mg/L) / ≤0.002
8 / Nitrate(mg/L) / ≤20
9 / Nitrite(mg/L) / ≤0.02
10 / Ammonia nitrogen(mg/L) / ≤0.2
11 / Fluoride(mg/L) / ≤1.0
12 / Hg(mg/L) / ≤0.001
13 / As(mg/L) / ≤0.05
14 / Cr6+(mg/L) / ≤0.05
15 / Total coliforms(MPN/l) / ≤3.0
16 / Total bacteria(CFU/mL) / ≤100

Table 1.3-4 Standard on Ambient Noise in Urban Areas(GB3096-93) Equivalent sound level Laeq:dB

Type / Daytime / Night
1 / 55 / 45
2 / 60 / 50
4 / 70 / 55

1.4 Emission standard

According to the “Official Reply of Jincheng Municipal Environmental Protection Bureau on the Applicable Standards for the Environmental Impact Evaluation of World Bank-funded Shanxi Coalbed Methane Development and Utilization Projectof Shanxi Energy Coalbed Methane Investment Holding Co., Ltd.” (Jin/Municipal/Environment/Letter [2007] No.144), the applicable standards on pollutant emission are as follows:

(1)Boiler flue gas: Standard for Time Period II in Type II Areas of Emission Standard of Air Pollutants for Coal-burning Boiler (GB13271-2001) shall be applied;

Non-methane total hydrocarbon: the emission limit for non-methane total hydrocarbon in Table 2 of Integrated Emission Standard of Air Pollutants (GB16297-1996) shall be applied;

(2)Wastewater: Grade III discharge standard of Integrated Standard for Wastewater Discharge (GB8978-1996) shall be applied;

(3) Noise: For the factory site, Standard within the Area of Industrial Enterprise (GB12348-90) shall be applied; specifically, TypeⅡ standard shall be applied for industrial sites, and Type Ⅳstandard shall be applied for areas on both sides of trunk roads of transportation;

Noise at the construction sites: Noise Limits for Construction Site (GB12523-90) shall be applied.

(4)Solid waste: Standard on Pollution Control at Storage and Disposal sites for General Industrial Solid Waste (GB18599-2001) shall be applied.

See Table 1.4-1 --1.4-5 for details.

Table 1.4-1 standard for Time Period II in Type II Areas of Emission Standard of Air Pollutants for Boilers (GB13271-2001)

Pollutant / Standard grade / Emission standard(mg/m3)
SO2 / Gas-burning boilers in Type II area and Time Period II / 100
Smoke dust / 50
NOX / 400

Table 1.4-2 Integrated Emission Standard of Air Pollutants(GB16297-1996)

Pollutant / Maximum allowable emission concentrationmg/m3 / Maximum allowable emission speed, kg/h / Monitored concentration limit for fugitive emission
Height of exhaust stack / Grade II / Monitoring points / Concentration mg/m3
Non-methane total hydrocarbon / 120 / 15 / 10 / Maximum concentration point outside the boundary / 4.0
20 / 17
30 / 53
40 / 100

Table 1.4-3 Grade I standard in Table 4 of Integrated Standard for Wastewater Discharge(GB8978-1996)

Serial number / Name of pollutant / Standard value (Grade I) / Unit
1 / pH / 6~9 / Dimensionless
2 / SS / 70 / mg/L
3 / BOD5 / 20
4 / COD / 100
5 / Sulfide / 1.0
6 / Petroleum / 5
7 / Ammonia nitrogen / 10

Table 1.4-4 Standard within the area of Industrial Enterprise (GB12348-90) Equivalent sound level Leq[dB (A) ]

Grade / Daytime / Nighttime
Ⅱ / 60 / 50
Ⅳ / 70 / 55

Table 1.4-5 Noise Limits for Construction Site( GB12523-90)

Equivalent sound level Leq[dB (A) ]

During construction stages / Noise limit
Daytime / Nighttime
Earth and stone work / 75 / 55
Piling / 85 / Construction prohibited
Structuring / 70 / 55
Refurbishment / 65 / 55

Coal Industry Taiyuan Design & Research Institute1 SEPA Document No.1303

EIA Report of Proposed World Bank-funded Shanxi Coalbed Methane Development and Utilization Project of Shanxi Energy CBM Investment Holding Co., Ltd.

(Part I 2.5×108Nm3/a Zhengzhuang Coalbed Methane Development Engineering Project )

2. Engineering analysis

Located in the Zhengzhuang block on the PetroChina’s registered region, the Zhengzhuang Cooperation Zone is 49.14 km2 in land size and 2.5×108m3/a in industrial construction scale. The Project uses vertical wells on the land surface, and the development approach of water extraction, gas recovery and holistic pressure reduction. The vertical wells will be arranged into a network in the shape of clubs with a well distance of 300 m. There will be 350 wells, 333 of which are effective wells.

Plan for annual work and production capacity development:

①In the first year, efforts will be made to drill 21 vertical wells, attempt to exploit in three well teams, and have fracturing and extraction in 20 wells, in order to achieve the production capacity of 0.1518×108m3.

②In the second year, efforts will be made to drill 150 vertical wells, and have fracturing and extraction in 143 wells, in order to achieve the production capacity of 1.085×108m3.

③In the third year, efforts will be made to drill179 vertical wells, and have fracturing and extraction in 170 wells, in order to achieve the production capacity of 1.29×108m3.

See Graphic 2-1-1 for information on well location deployment.

2.1 Well site

2.1.1 Well drilling engineering

2.1.1.1 Well completion approach

Since vertical wells are to be drilled in the Zhengzhuang region, the selected well completion approach is well-cased perforation.

As an adatpive approach, the well-cased perforation approach can be applied to Coalbeds of any kind, and can be used for selective exploitation of single Coalbeds. Its disadvantages: it needs to use casing tube and inject cement for well fixation. Such cement will cause pollution to coal reservoirs; it generally needs hydraulic fracturing. And such operatoin as proferation and facturing will also cause certain damages to the coal reservoirs.

2.1.1.2 Structure of vertical wells

The Project adopts 2-spud structure for the well body on the basis of the actual experience in drilling and geographical features. See Table3-1-2 for information on well structure.

Table 2-1-1 Table of Design of Well Structure

Sequence of spudding / Spud bit size:mm / Spuuding depth: m / Casing tube size: mm / Setting depth:m
First spudding / 311.2 / 51~81 / 244.5 / About 10~20m into the hard base rock
Second spudding / 215.9 / Till the well bottom / 139.7 / About 50~60m under the Coalbed bottom

See Table2-1-2 for information on well structure.


Table 2-1-2 Graphic of well structure

See Graphic 2-1-3 for the Integrated Columnar Section Graphic of the Coalbed.

2.1.1.3 Drilling procedure for vertical wells

In this area, we adopt Type H517 spud bit for first spudding and second spudding of vertical wells. The mechnical spudding speed for the first spudding is generally 3~4m/h. After the second spuuding, we generally use 2 H517 spud bits or 3 old H517 spud bits in order to finish the footage. Before a well gets deeper than 450, the spud bits adopted have a mechanical spudding speed of 7~8m/h. For lower well sections, the adopted spud bits generally have a mechanical spudding speed of 5~6m/h.

2.1.1.4 Drilling liquid

According to the geological conditions, we adopt solid-free or low-solid drilling liquid. Its main contents include PRT bentonite, Na2CO3, KPAM, NH4-HPAN, Nitro Humic Acid Potassium,sawdust and compound plugging agent. They are all found to be non-dangerou wastes according to the National Namelist of Dangerous Wastes.

2.1.1.5 Well casing

Well casing: the 244.5mm casing is designed to use China-made J-55×8.94mm short and round casing; 139.7mm production casing will all use China-made J-55×7.72mm long and round casing.