Nam Theun 2 - BankTrack THEUN 2 TRIP REPORT AND PROJECT UPDATE ... ADB,and a written exchange with NTPC. The trip report does not provide a comprehensive

February 2008

Nam Theun 2 TRIP REPORT AND PROJECT UPDATE

About International Rivers

International Rivers is a non-governmental organization that protects rivers and defends the rights of communities that depend onthem. International Rivers has been monitoring the Nam Theun 2 hydropower project and other dams in Laos for more than adecade, opposing destructive projects and advocating for better compensation and mitigation measures for affected communities.International Rivers’ staff members visit the Nam Theun 2 project site regularly.

International Rivers was opposed to World Bank and Asian Development Bank support for Nam Theun 2 because: a) the damdoes not meet World Commission on Dams guidelines; b) Nam Theun 2’s risks to affected communities outweigh any potentialproject benefits; and c) dams have not contributed to poverty reduction in Laos. International Rivers continues to monitor NamTheun 2’s development to ensure that commitments made by the Nam Theun 2 Power Company, the Lao government and theinternational financial institutions to affected communities and on the environment are met.

Written by Shannon Lawrence

Published by International Rivers 1847 Berkeley Way, Berkeley CA94702, USATel: +1 510 848 1155Fax: +1 510 848 [email protected]

www.internationalrivers.org

Design by Design Action Collective

Cover photo: Ban Sop Phene resettlement village, Nakai Plateau

I N T E R N A T I O N A L R I V E R S | 1

NAM THEUN 2 TRIP REPORT AND PROJECT UPDATE

As evidenced by discussions with local villagers anda review of project documents, the NT2 project hasexperienced a number of delays and problems sinceconstruction began in 2005.The resettlement of vil-lagers on the Nakai Plateau and the implementationof livelihood restoration programs are behind sched-ule. Resettled villagers have noted health improve-ments and the benefits of new houses and betterroads provided by the project. But those benefitswill be overshadowed by the failure of livelihoodprograms if implementation does not improve soon.

Downstream, the $16 million budget and the pro-posed compensation and mitigation measures areinadequate to deal with the scale and severity ofNT2’s impacts on communities in the Xe Bang Faiarea.Additionally, the short time remaining toimplement the program before dam operationmeans that villagers are likely to experience a signif-icant drop in their incomes and major impactsbefore new livelihood programs yield any results. Itis essential that the Nam Theun 2 Power Company(NTPC) provide interim compensation to down-

stream villagers until livelihood projects restore theirincomes to pre-NT2 levels.

In December 2007, with only six months remaininguntil scheduled reservoir impoundment, NTPC andthe Government of Lao PDR (GoL) reportedlyagreed on a biomass clearance plan.This is a wel-come, if belated, development. However, the pro-posed clearance operation may be too little too lateto prevent significant water quality problems.

NTPC and the GoL’s poor planning and executionhave also exacerbated the hardship of villagersaffected by construction activities in Gnommalatdistrict.The taking of land and assets before pay-ment of compensation, the failure to providereplacement land, and broken promises regardingirrigation provision have left some households won-dering how they will feed their families in the com-ing years.

The December 2007 World Bank-AsianDevelopment Bank (ADB) NT2 Update acknowl-

Executive Summary

The Nam Theun 2 Hydropower Project (NT2) in Laos is approaching an importantmilestone. Water is due to begin rising behind the dam in just a few months, but

villagers are not ready to face NT2’s impacts. Construction is 70 percent completeand proceeding on schedule, while social and environmental programs continue to lagbehind.


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edges some of these failings but argues that as socialand environmental programs will continue beyondconstruction completion, sufficient time remains toremedy the defects in these programs. However,NT2’s social and environmental impacts are closelytied to the construction timeline; resettled villagersand those affected by construction activities arealready experiencing significant impacts, and down-stream villagers will start experiencing negativeimpacts once power production begins in 2009.

Problems experienced to date can be attributed inpart to poor planning and to a lack of high-levelcommitment, staff and resources to execute viablesocial and environmental mitigation and livelihoodrestoration programs. Provisions of the ConcessionAgreement and World Bank and ADB policies, par-ticularly regarding resettlement and informationdisclosure, have been violated. But despite numer-ous monitoring missions, the international financialinstitutions have not taken strong enough stances—including withholding loan and grant disburse-

ments—to correct critical problems and minimizenegative impacts on affected people. Less than twoyears remain before power production and revenuegeneration begins, at which time the World Bank,the ADB and other international financial institu-tions’ leverage in the project will decline signifi-cantly.

The performance of NT2 has broader implicationsfor the Lao hydropower sector.There are approxi-mately six hydropower projects under constructionin Laos, and the Lao government intends to developnearly 30 new hydropower projects by the year2020, most of which will export power to Thailandor Vietnam. Strategic sectoral planning and theimplementation of social and environmental regula-tions and mitigation programs are not keeping pacewith these developments.The commitment made todonors and investors that NT2 would help improvethe overall social and environmental performance ofthe hydropower sector is not being met.

Nam Theun 2 damsite, November

2007



XE BANG FAI DOWNSTREAM PROGRAM

n The savings and credit scheme should be revisedto ensure that villagers are not bearing the risksof livelihood restoration pilot projects. If villagersfollow NTPC’s advice and the project fails,NTPC should repay the loan to the village sav-ings fund. If villagers do not have the time orresources to effectively manage the project, thenits design is flawed and NTPC should repay theloan. Interest rates should also be revisited, inconsultation with villagers, based on repaymentexperience to date.

n Because NTPC’s livelihood programs are notlikely to be successful for at least several years,NTPC should commit to developing and imple-menting an interim compensation scheme toaddress the impacts of NT2 operations ondownstream villagers until livelihood restorationprograms yield sustainable results.Additionalfunding will be required, as the $16 millionbudget is inadequate to deal with the scale ofanticipated downstream impacts.

n NTPC and the GoL should develop a flood pre-vention program in consultation with affectedvillagers and ensure that there is sufficient fund-ing available to implement the program.

n NTPC, the GoL, the World Bank and the ADBshould ensure disclosure of: 1) the DownstreamProgram Implementation Plan; 2) marketing sur-veys for the Xe Bang Fai; and 3) hydraulics andwater quality studies for the downstream areas.

PROJECT LANDS COMPENSATION

n The Independent Monitoring Agency for theResettlement Management Unit (RMU) shouldurgently disclose its review of the Project Lands’compensation program.

n NTPC and the GoL should provide incomesupport to significantly affected Project Lands’villagers until livelihood programs restore vil-lagers’ incomes to pre-NT2 levels.

BIOMASS CLEARANCE AND WATER QUALITY

n NTPC should not burn the cut biomass in thereservoir area but should move it outside thereservoir area, ideally for mulching and use on thePlateau.

n NTPC and the GoL should disclose the biomassclearance plan and the fill-and-flush plan for 2008and 2009.To facilitate learning for otherhydropower projects in Laos and the region, thevarious proposals considered and the rationalebehind the selected plans should also be disclosed.

n NTPC should commit to regularly disclose, via itswebsite, data from its water quality, fisheries andgreenhouse gas emissions monitoring programs.

NAKAI PLATEAU RESETTLEMENT

n NTPC should ensure that all villagers are settledin their new sites and that all houses and reset-tlement infrastructure have been completedbefore the bypass tunnel is closed and partialreservoir filling begins.

n NTPC and the GoL should clarify with resettledvillagers that rice support will continue untilresettlers are self-sufficient in rice, and that riceand protein support will be continued for vul-nerable households until they attain and sustainthe household income target.The situation ofNong Boua village, where rice support was cut-off in 2003 or 2004, should be reviewed sincethey are undergoing a second transition periodas other villages are resettled.

n Villagers whose rice crops were affected byflooding of the drawdown zone in August 2007should be compensated for these losses.

n NTPC should explain how reduction of thebuffalo population is being managed and moni-tored.

n Water supply systems in resettlement villagesshould be evaluated to address pump failures andwater shortages in the dry season.

The following recommendations should be implemented before NT2 dam gates are closed for reservoir filling:


Although the project area is open to the public,International Rivers informed NTPC and the GoLof its intentions to visit the area before the trip.Theteams were not accompanied by GoL or NTPCrepresentatives.

To obtain as comprehensive an understanding ofthe situation as possible, International Rivers triedto visit many villages and to interview more than

one family representative in a given village. Intotal, our teams visited 30 villages across the threemain project affected areas, and spoke with approx-imately 140 people over 13 days.The teams typi-cally spent 1.5 to 2 hours talking with each group,asking both open-ended and direct questions, aswell as requesting specific recommendations fromvillagers to address their concerns.

International Rivers’ November 2007 Visit toNam Theun 2

An International Rivers’ staff member visited the NT2 project site in late November2007, accompanied by an interpreter. Researchers working with International

Rivers also visited the Xe Bang Fai downstream areas in late 2007. The purpose ofthese trips was to gather first-hand information regarding the implementation of theNT2 project. Following the field visit, International Rivers met with representativesfrom NTPC, the World Bank, the ADB and non-governmental organizations. GoL offi-cials did not respond to International Rivers’ meeting requests.



Although this sample is small compared to the over-all number of affected people (more than 100,000),the majority of people interviewed in each projectarea expressed serious—and similar—concerns. In acountry where people are reluctant to speak openlyand critically about a government-supported initia-tive, this is especially significant.

Information from the field was verified and supple-mented by a review of recent project documents,meetings with NTPC, the World Bank and theADB, and a written exchange with NTPC.

The trip report does not provide a comprehensiveoverview of the dam and its current or future impactsacross all project areas. International Rivers primarilyseeks to monitor and report on NT2’ s environmentaland social impacts and the implementation of mitiga-tion and compensation programs.The trip report isdivided into sections that correspond to the threemain impact areas of the NT2 project: the Xe BangFai downstream area, project construction lands, andthe Nakai Plateau resettlement area.A fourth sectionaddresses biomass clearance and water quality impli-cations, which are critical cross-cutting issues.

n Construction is on schedule and is more than70% complete.1

n Resettlement on the Nakai Plateau is behindschedule. Resettlement is required to be com-pleted—with all related infrastructure in place—by May 2008, before the dam gates can beclosed. Only 30% of new houses had beencompleted as of December 2007.2 NTPCreported that 800 of 1,216 houses had beencompleted at the end of January 2008.3

n Livelihood restoration plans for the resettled vil-lagers, villagers affected by construction activi-ties, and villagers downstream along the XeBang Fai River are all behind schedule.

n Dam closure and reservoir filling is planned forJune 2008. The Panel of Experts (PoE) must cer-tify that the Concession Agreement’s resettle-ment requirements have been met before thedam gates can be closed.

n Power production (and revenue generation) isplanned for December 2009.

Project Status

TheunHinbounDam Nam

Theun 2Dam

power station

downstreamchannel

Nakai Plateaureservoir

XeBa

ngFa

i

NamHinboun

NamKading

Nam Theun

Mekong Rivero Thakek

THAILAND

LAO PDR

VIETNAM

0 10 20 30 40 50km


In an attempt to mitigate NT2’s impacts and com-pensate Xe Bang Fai villagers, NTPC has developeda Downstream Livelihood and Asset RestorationProgram (Downstream Program).This program willbe implemented in approximately 220 villages,including nearly 90 riparian villages. In violation ofWorld Bank and ADB involuntary resettlement andinformation disclosure policies, the DownstreamProgram has not been publicly disclosed. NTPC saysthat information on program planning and imple-mentation has been provided to people living in thedownstream area.Villagers with whom InternationalRivers spoke seemed to have a general understand-ing of NT2’s likely impacts and the proposed liveli-hood restoration programs.

The Downstream Program focuses on micro-creditfunds to support agriculture, aquaculture and live-stock projects. NTPC is also supporting water andsanitation improvements, and in some villages, watergate rehabilitation or mini-polder flood protection.Pilot livelihood restoration projects were initiated ina downstream demonstration village, Boeung Xe,in 2005.

CURRENT SITUATION

The $16 million Downstream Program budget andthe proposed compensation and mitigation meas-ures are inadequate to deal with the scale andseverity of NT2’s downstream impacts.Additionally, the short time remaining to imple-ment the program before dam operation meansthat villagers are likely to experience a significantdrop in their incomes and major impacts beforenew livelihood programs yield any result. It isessential that NTPC provide interim compensationto downstream villagers until livelihood projectsrestore their incomes to pre-NT2 levels.

NTPC is now implementing the program inapproximately 42 pilot villages in the upper, lowerand middle Xe Bang Fai area, which is less than 20percent of the villages that are likely to be affectedwhen NT2’s operations begin. NTPC says itintends to expand the program to all the riparianvillages in 2008, and initiate activities in theremaining villages in late 2009.8

Xe Bang Fai DownstreamProgramBACKGROUND5

The Xe Bang Fai River will receive large amounts of additional water from theNakai Plateau reservoir after it passes through the power station and the down-

stream channel. More than 120,000 people in the Xe Bang Fai area will be negativelyaffected by the NT2 project.6 NTPC says7 it is planning for the worst-case scenarioalong the Xe Bang Fai, which means 85 percent fish losses, increased high frequen-cy floods in the Xe Bang Fai and its tributaries, erosion of riverbanks and loss ofriverbank gardens, major water quality problems, and transportation difficulties fordownstream villages.



The World Bank, theADB and the NT2Panel of Experts (PoE)note that theDownstream Program isbehind schedule, whichposes risks to affectedvillagers.The PoE’s mostrecent report states:“Theproblem [with theDownstream Program] atthis point is that many ofthe impacts of the proj-ect will be felt wellbefore comprehensivecounter measures are inplace.”9 The WorldBank-ADB December2007 NT2 Updateagrees that “[t]heprogress of implement-ing the DownstreamProgram poses consider-able challenges, especiallythe livelihood activities,and needs significantacceleration.” 10

The PoE also points to the Downstream Program’sshort and long term funding gap, noting that the$16 million budget “was never going to be sufficientfunds to complete the tasks envisaged” to at leastrestore the livelihoods of affected people, as requiredby the Concession Agreement.11

Researchers working with International Rivers vis-ited 18 villages in the Xe Bang Fai River down-stream area and spoke with approximately 75 peoplein November/December 2007. Many of these vil-lages have received approximately 2 millionkip/household (about $200) from NTPC through avillage savings fund.These fundscan then be borrowed for variouslivelihood projects, ranging fromfish ponds to pig-raising to tomatocultivation.The PoE report raisesconcern about the adequacy ofproposed livelihood projects:“theexisting programs do tend to lookmore like a series of essentiallyunrelated if useful sub-projects than the product of acoherent plan.”12

Villagers reported that they have to pay back theloans to the village savings fund, with monthly

interest ranging from one to three percent,whether or not the projects succeed or fail. As aresult, while one villager may have success raisingpigs and generate enough income to repay the loanon time with interest, another villager’s fish pondmay fail and leave him only with debt.Those peo-ple with unsuccessful projects have been forced tosell buffalo and other assets to repay the village sav-ings fund. Some villagers report that they havealready stopped participating in the fund or will nolonger borrow for livelihood projects.

NTPC says that in the case of project failure, the rea-

sons are investigated and loan repayment is onlyexpected if “mishandling” can be demonstrated.NTPC also maintains that such failure is probablyexceptional.13 However, in every pilot village thatInternational Rivers’ researchers visited, people

Children transport-ing water near theXe Bang Fai River

It is essential that NTPC provide interim compensation todownstream villagers until livelihood projects restore theirincomes to pre-NT2 levels.

reported that some projects (most often pig raising orfish ponds) had failed. No one said that they did nothave to repay the loan to the village savings fund.

The uptake of new and untested livelihood systemsto replace traditional fishing and farming activitiesis a long-term venture.There are a number ofshortcomings with the livelihood projects andmore time should have been allocated to learnfrom these pilots before scaling them up acrosshundreds of villages.

For example, in Mahaxai Tai villagers reported thatin the first year of the pilot project, five familiestook out loans for fish ponds.The company toldthem that the tilapia fish seedling would producefish large enough to sell after three months. Aftersix months, the fish were still too small to sell andvillagers had a hard time affording the fish feed. Allfive families had to sell buffalo or cattle or findwork outside the village to pay back the loan.Thesecond year, approximately 23 families tried newfish ponds.Those fish were still in the pond at thetime of International Rivers’ visit, but villagersreported that six months had passed and they werestill too small to sell.The villagers with whom


International Rivers spoke said they will not tryfish ponds again next time.They want the compa-ny to come more often to help them with theseprojects.

In the Boueng Xe demonstration village, ten fami-lies tried to grow wet-season tomatoes as suggestedby the company.Villagers reported that the smalltomatoes fell off the vine before they could harvestthem.The plastic required to protect the plants wasalso too expensive.They lost money and now theyhave to pay back the loan. But the activity with thehighest failure rate is pig raising. Fifteen familiestried to raise approximately five pigs each.All thepigs died, and villagers said that the people had tosell rice to pay back their loans.

While some of the projects seem to work better forsome villagers and in some villages, these and otherreports contradict NTPC’s assertions that villagersare not bearing risks and that the pilots are perform-ing well. NTPC says,“An evaluation is currentlyunderway but our initial findings and confirmed bymany monitoring missions is that the pilot villageexperience is positive including the micro financecomponent and the livelihood activities.”14

Fishing in the XeBang Fai



Experience from Khamfeuang Noi villageAccording to villagers, 24 fish pondshave been developed using loansfrom the village savings fund. Onlytwo families were able to sell someof the fish they raised in the pond.The fish does not grow very fastbecause they do not have enoughgood fish feed. The company saidthey would be able to sell the fish inthree months, but villagers reportedthat the fish were still very small atthat time. Seven fish ponds dried up

and villagers told the company theyshould not have to pay interest onthese loans and be given a longerrepayment period, but they have notreceived a response yet. One villagerwith two ponds said he has to pay49,000 kip/month on his loan. It willtake him one to two years to pay offthe debt. If he can’t pay back themoney, they will take two buffalo fromhim (which were listed as collateral inhis loan contract). Poorer members

of the village are especially con-cerned about this system. Villagersare reluctant to get involved in otheractivities, such as cotton cultivationand textile production, because theysee that fish ponds have forced peo-ple into debt. Villagers suggestedthat interest should only be appliedafter two or three years, not from thebeginning of the loan.

Flooding is a major concern for villagers, some ofwhom lose rice crops and other assets every two tothree years as a result of Xe Bang Fai flooding. NT2is expected to increase flooding in the Xe Bang Faiarea, even if power production is stopped when theriver overtops its banks at Mahaxai.At the nearbyTheun-Hinboun Hydropower Project, recentresearch has shown that flooding along the HinbounRiver has become increasingly severe over the pastdecade, leading to large-scale abandonment of ricepaddy fields.15 While NT2 and Theun-Hinbounvary in some technical specifications, there areimportant lessons to be learned from the Theun-Hinboun experience. NTPC should prepare for aworst-case scenario where wet-season rice produc-tion is no longer viable along the Xe Bang Fai dueto protracted annual flooding.

Most of the flood-prone villages visited byInternational Rivers said they had requested floodprotection works (dikes, mini-polders, water-gaterehabilitation) from NTPC, but in many cases weretold that funding is not available. NTPC says it willdetermine which water gates will be rehabilitatedbefore dam operation begins in consultation withlocal and provincial government authorities. NTPCalso asserts that the implementation of mini-poldersto rectify the flooding problem is not a simple solu-tion.16 However, the PoE argues “there is no obvi-ous reason why present plans call for only seven ofthe fourteen water gates needing repair to be reha-bilitated before [Commercial Operations Date] orwhy only one mini-polder is to be built by then.”17

RECOMMENDATIONS

n The savings and credit scheme should be revisedto ensure that villagers are not bearing the risksof livelihood restoration pilot projects. If villagersfollow NTPC’s advice and the project fails,NTPC should repay the loan to the village sav-ings fund. If villagers do not have the time orresources to effectively manage the project, thenits design is flawed and NTPC should repay theloan. Interest rates should also be revisited, inconsultation with villagers, based on repaymentexperience to date.

n Because NTPC’s livelihood programs are notlikely to be successful for at least several years,NTPC should commit to developing and imple-menting an interim compensation scheme toaddress the impacts of NT2 operations ondownstream villagers until livelihood restorationprograms yield sustainable results.Additionalfunding will be required, as the $16 millionbudget is inadequate to deal with the scale ofanticipated downstream impacts.

n NTPC and the GoL should develop a flood pre-vention program in consultation with affectedvillagers and ensure that there is sufficient fund-ing available to implement the program.

n NTPC, the GoL, the World Bank and the ADBshould ensure disclosure of: 1) the DownstreamProgram Implementation Plan; 2) marketing sur-veys for the Xe Bang Fai; and 3) hydraulics andwater quality studies for the downstream areas.

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Failure to clear biomass is also likely to exacerbatethe problem of greenhouse gas emissions from theNT2 reservoir.The characteristics of NT2—a tropi-cal reservoir with a large drawdown zone—are simi-lar to those of Brazilian reservoirs where highmethane emissions have been measured.

CURRENT SITUATION

In December 2007, with only six months remaininguntil scheduled reservoir impoundment, NTPC andthe GoL reportedly agreed on a biomass clearanceplan.This is a welcome, if belated, development.However, the proposed clearance operation may betoo little too late to prevent significant water qualityproblems.

During the last rainy season (August 2007), a partialfilling of the reservoir occurred.According to theWorld Bank-ADB Update,“degraded water qualitywas observed, resulting in limited fish kills down-stream of Ban Thalang” when, during two to threedays,“levels of dissolved oxygen went close to zerofrom Ban Thalang to the dam site at Nakai.”21 TheUpdate concludes,“Such impacts are a possible indi-cation of what might initially be expected with fullreservoir filling (and longer periods of inundation)in the future,”22 a situation which InternationalRivers and independent experts have been predict-ing for several years. In late 2007, the World Bankand the ADB finally recommended that NTPC clearas much biomass as possible from areas which willbe permanently flooded.

Biomass Clearance andWater Quality

BACKGROUND19

One of the major threats to downstream villages once NT2 starts operating is thequality of water that will pass from the reservoir down through the power station,

into the downstream channel and then to the Xe Bang Fai, before eventually reachingthe Mekong. Experience with tropical reservoirs, including some in Laos and Thailand,indicates that biomass should be removed before the area is flooded to prevent the rot-ting vegetation from polluting the stored water. The failure to do so adequately wouldlikely lead to fish kills in both the reservoir and downstream rivers, and result in waterthat is unsuitable for drinking and irrigation in the downstream channel and along theXe Bang Fai.20 This poses significant risks to the livelihood programs proposed for bothNakai Plateau resettled villagers and villagers living downstream.

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The clearance plan has not been disclosed, but accord-ing to NTPC,“the biomass clearance plan focuses onareas of interest for the development of livelihood pro-grams. As a priority, areas below [minimum operatinglevel] will be cleared, for (i) access corridors and (ii)fishing areas.”A total of 3,000 hectares will be cut andburnt. The operation will be carried out beforeimpoundment by the Lao Ministry of Agriculture andForestry with support fromNTPC. NTPC adds,“After thisoperation, more than half of thearea below [minimum operatinglevel] upstream of Ban Thalangwill be clear of vegetation.However, the largest part of bio-mass will still remain in the soils,not affected by this clearance.”23

According to Dr. Guy Lanza,Aquatic Ecologist/Microbiologist from the University of Massachusetts-Amherst who reviewed the NT2 EnvironmentalAssessment and Management Plan:

Burning the biomass will add air pollutantsincluding carbon dioxide, ozone and othergreenhouse gases and toxic substances; notablymercury. It is well known that burning biomassreleases considerable quantities of toxic mercu-ry from both biomass (wood and leaves) andfrom the scorching of the soil as well…Burningwill also greatly accelerate the release of nutri-ents trapped in the biomass (nitrogen, phospho-rus, sulfur, various trace elements).The nutri-ents will be in a concentrated and readily avail-able form as ash.The new slug of nutrients inthe ash will support the sudden growth ofexcess algae and bacteria in the reservoir water,which in turn will trigger a cascade of waterquality problems including greatly reduced dis-solved oxygen from sudden BiochemicalOxygen Demand (BOD), fish kills, the forma-tion of toxic metabolites by cyanobacteria, andthe release of toxic chemicals from the reservoirsediments.24

More explanation should be provided as to whyNTPC will only clear biomass from approximatelyhalf of the permanently flooded reservoir area.Toavoid additional water quality impacts caused byburning, the biomass should be cut and removedwhere it could ideally be mulched for use in thearea. If burning is unavoidable due to the short timeremaining and the large volume to be cleared, thebiomass should be removed and burnt outside thereservoir area.25

Regarding other water quality concerns, NTPCcommissioned an assessment of the degree of mer-cury contamination in the ecosystems of Laos in2006 “in order to quantify the impact of the futureNT2 development in terms of the possible mercurycontamination of the site fish.”26 The report con-cludes that mercury is present in the Nam Theun,Xe Bang Fai and Nam Kathang rivers, although the

levels were lower than those found at the Petit Sautdam reservoir in French Guiana, for example.“Nevertheless, taking into account the poor qualityof water that is predicted in the Nam Theun reser-voir during the first years following filling, it is rec-ommended that the fish mercury contaminationshould be monitored for public health reasons.”27

NTPC has committed to a two-year fill-and-flushplan for the reservoir which it says will have moreof an impact on water quality than the selective veg-etation removal. Details on this plan have not beenprovided. NTPC says it will continue to monitorwater quality levels throughout the 25-year conces-sion period, although it is not clear if methyl-mer-cury levels in fish will also be monitored. NTPCasserts it is also developing a procedure to monitorgreenhouse gas emissions from the reservoir.28

RECOMMENDATIONS

n NTPC should not burn the cut biomass in thereservoir area but should move it outside thereservoir area, ideally for mulching and use onthe Plateau.

n NTPC and the GoL should disclose the biomassclearance plan and the fill-and-flush plan for2008 and 2009.To facilitate learning for otherhydropower projects in Laos and the region, thevarious proposals considered and the rationalebehind the selected plans should also be dis-closed.

n NTPC should commit to regularly disclose, viaits website, data from its water quality, fisheriesand greenhouse gas emissions monitoring pro-grams.

NTPC’s biomass clearance plan is a welcome, if belated,development. However, the proposed operation may be toolittle too late to prevent significant water quality problems.


Project Lands Compensation

BACKGROUND29

More than 2,500 households have been affected by NT2 construction activities,including construction of transmission lines, roads, and project facilities.

Households in Gnommalat district near the NT2 power station, regulating pond anddownstream channel are the most severely affected, where many have lost more than10 percent of their land and assets to the project.

The downstream channel is 27-kilometers long andapproximately 100-meters wide, with access roadson either side, cutting through significant areas ofpaddy fields and other village land.The channel alsoblocks access to the forest and villagers’ gardens andrice paddies on the other side.Villagers in the areahave lost paddy land, houses, gardens, fruit trees,fisheries, irrigation water supply, and other assets tovarying degrees.

As documented by International Rivers in 2006 and2007, there have been significant problems with theassessment of entitlements and the delivery of com-pensation and replacement land for project lands’ vil-lagers. Villagers with whom International Riversspoke expressed significant confusion about the com-pensation system. Many were also frustrated by whatthey considered to be delayed, inadequate andunequal compensation payments. Villagers who lost



agricultural and paddy land were most concernedabout the lack of replacement land.

Disbursement of compensation payments beganonly in mid-2006, more than a year after NT2construction activities started to impact villagers’land and resources.This is a violation of theConcession Agreement and the World Bank invol-untary resettlement policy. Resettlement ActionPlans for Project Lands were finally disclosed inNovember 2007.

CURRENT SITUATION

NTPC and the GoL’s poor planning and executionhave exacerbated the hardship of villagers affectedby construction activities in Gnommalat district.Thetaking of land and assets before payment of com-pensation, the failure to provide replacement land,and broken promises regarding irrigation provision

have left some households wondering how they willfeed their families in the coming years.

In late November 2007, International Rivers visitedthree villages affected by construction of the down-stream channel and spoke with approximately 15 vil-lagers. The confusion and frustration noted duringInternational Rivers’ two previous visits with regards tocompensation entitlements and their delivery remains.

NTPC asserts that most compensation payments30

have been made, but that contradicts what villagersreported. Villagers told International Rivers thatcompensation had not been provided for land andcrops taken for the main Ital-Thai construction camp,for fisheries losses and for some fruit trees and hard-wood trees.A number of villagers who lost more than10 percent of their land and now will have to acceptcash compensation instead of new land said the com-pany keeps promising the money “next month, nextmonth”, but has yet to deliver.

Villagers’ formerpaddy fields, clearedfor downstreamchannel construction

Experiences from Gnommalat District


Between 300 and 400 households31 in the down-stream channel area lost more than 10 percent of theirproductive land assets. Land-for-land replacement iscritical, especially given the importance of rice paddyfields to villagers’ livelihoods. However, sufficientreplacement land is apparently no longer available inthe area, so only six households received land-for-land replacement.32 The remaining households arestill waiting for new land, adequate compensationand/or livelihood programs.

NTPC, the World Bank and the ADB have report-ed that villagers preferred cash compensation toland. But many villagers with whom InternationalRivers spoke said that they only preferred cashcompensation because the company offered landthat was of poor quality or too far away.Accordingto NTPC,“The land for land option was unsuc-cessful due to the lack of available equivalent landwithin an acceptable radius of the [affected house-holds’] residence and other fields. Land that could

One villager reported that shereceived approximately 10 million kip($1,000) in compensation for all herpaddy land. She does not think theymeasured the land correctly. She saidthe money lasted only one year (lessthan $3/day). Before, she could growall the rice that her family needed. “Iraised seven children and grewenough rice to feed all of them. Butnow, there is nothing left. I don’t knowwhat to do.” If they want to participatein some of the livelihood projects thecompany is offering, such as pig andfrog raising or mushroom cultivation,they have to invest some of the com-pensation money they received fortheir land. Another villager said “nowwe have to buy everything. Before wedidn’t have to buy anything becausewe just got food from our paddyfields, fruit trees and the river.”

One villager explained, “We are afraid

to say anything because it could bebad for us. If we say too much, maybewe will be taken by the police.” Inanother village, someone noted: “Ifwe say something wrong againstthem they’re going to use poweragainst us later. Every time the com-pany comes, they tell us that villagershave to say they already got theircompensation. The project told us, ifsomeone asks, even if you don’t haveyour compensation money, say youdo.”

One headman said that the companyhas not paid the village for losses ofcommon property resources. Hedoesn’t know when they will get com-pensation or land for the people wholost more than 10 percent of theirassets. Villagers still complain aboutthe compensation because they don’thave enough money to buy rice.There used to be fish in the river but

now it is polluted by chemicals fromthe construction work. The companyhas talked about rubber trees andother plantations, but nothing hasstarted yet. “The company helps, butthey are too slow.”

Another villager said that the compa-ny gave them about 1,000 smallfrogs, built a pen and gave them frogfeed. All the frogs died. Last year thecompany tried large frogs, but theydidn’t have any offspring. The compa-ny gave her seeds for pineapple andmango trees and some vegetables.Because of the lack of water, most ofthe crops died. She wants the com-pany to provide irrigation for that land.She wants money to buy new land forrice paddy. The company keepstelling her “next month, next month.”



be economically developed (irrigated land) wasoutside [affected households’] range and did notmeet [affected households’] standards of replace-ment land due to the walking distance and otherfactors.”33 While NTPC says that the “acceptabilityof replacement land could not be forecasted”34, it isthe responsibility of the project that the availabilityof replacement land was notinvestigated before commit-ments were made in the SocialDevelopment Plan, and beforevillagers’ land was taken.

The recently disclosedResettlement Action Plan forGnommalat district says that“when asked about their pri-orities for livelihood restora-tion measures, a total of 412 households of signifi-cantly impacted [project affected households]…representing 93 percent of the total number ofaffected households in Project Lands, give highestpriority to rice paddy and the raising of large ani-mals, in particular cattle.”35 Despite these prefer-ences, given the lack of available land, theResettlement Action Plan proposes the followinglivelihood restoration programs for significantlyaffected villagers: wet-season rice improvement,cash crops and horticulture, livestock productionimprovement, non-agriculture based skills andsmall business.

The experience reported in one village indicatesthat these projects are all at early stages and pro-ducing mixed results at best. According to villagersin Sangkeo, the pig and frog projects supported bythe company were not successful (villagers reportedthat the animals died). Some pineapple trees havegrown well, but the other fruit trees died.The onefamily that tried to grow mushrooms in 2006 wasable to sell the mushrooms two or three times.Twofamilies are trying fish ponds this year, but it is tooearly to sell the fish.The company has talked aboutrubber trees and other plantations, but these proj-ects have not started yet.

Finally, NTPC continues to contradict itself on theinitially promised benefit of irrigation from thedownstream channel to support affected villagers inGnommalat.The November 2007 NTPC ProjectUpdate states:“The water diverted from regulatingpond and from downstream channel will allow largescale dry season irrigation in the Gnommalat

plain.”36 But the October 2007 ResettlementAction Plan for Mahaxay and Gnommalat argues,“The development of irrigation in the GnommalatPlain through the use of water from the futureDownstream Channel described in the [SocialDevelopment Plan] as a key element for agriculturaldevelopment and livelihood restoration has essential-ly become an obsolete option due to the following:1) the Downstream Channel as currently designed isnot a multi-purpose channel and is not suitable forirrigation due to its hydraulic properties. 2) Water inthe Downstream Channel will only be available after[Commercial Operations Date] in December 2009.The water in the Downstream Channel will mostlikely be unsuitable for domestic or agricultural usefor several years after 2009.”37

RECOMMENDATIONS

n The Independent Monitoring Agency for theResettlement Management Unit (RMU) shouldurgently disclose its review of the Project Lands’compensation program.

n NTPC and the GoL should provide incomesupport to significantly affected Project Lands’villagers until livelihood programs restore vil-lagers’ incomes to pre-NT2 levels.

The taking of land and assets before payment of compensation,the failure to provide replacement land, and broken promisesregarding irrigation provision have left some householdswondering how they will feed their families in the coming years.


Nakai Plateau Resettlement

BACKGROUND38

Seventeen villages of more than 6,200 indigenous peoples on the Nakai Plateauare being resettled to make way for the NT2 reservoir. Resettlement is required

to be completed—with all related infrastructure in place—by May 2008, before thedam gates can be closed.

The resettlement program has been fraught withdelays, missing its original deadline to have all vil-lages resettled by the 2006-2007 dry season.As aresult of these delays, NTPC began moving peopleto temporary houses in their new villages in April2006 under what has been called “transitional reset-tlement.”39 As of December 2007, 30 percent ofnew houses had been completed.40

CURRENT SITUATION

Progress has been made in terms of resettlementinfrastructure (permanent housing construction andwater supply installation, in particular) sinceInternational Rivers’ visit in March 2007.Villagerswith whom International Rivers spoke inNovember 2007 noted the following benefits: bet-ter houses, water supply for domestic use, newroads, electricity (in some cases), and healthimprovements. At the end of January 2008, NTPCreported that approximately 800 of 1,216 houseshad been completed.41

The World Bank-ADB December 2007 Updatenotes:“At this rate, all houses should be completed amonth before the reservoir impoundment targetdate of June 2008. However, the schedule is tightand needs close monitoring.”42 NTPC asserts thatthe remaining houses will be completed by the endof March 2008.43

Partial reservoir filling will occur with the closure ofthe bypass tunnel, currently scheduled for March2008.To minimize difficulties for resettlers, housesand resettlement infrastructure should be completedbefore tunnel closure.

However, as the PoE explains,“Though prospectshave improved since January 2007 for meeting theConcession Agreement’s requirements for dam clo-sure in time, the POE remains concerned aboutongoing delays in implementing the necessary liveli-hood activities and the risk that resettler living stan-dards will drop following reservoir impoundment.”The World Bank-ADB Update agrees:“… therehave been delays in the transformation of a sound



planning framework for develop-ment of sustainable livelihoods onthe Plateau into an operational pro-gram. Such delays can pose seriousrisks to the achievement of projecttargets….”45

In late November 2007,International Rivers visited theNakai Plateau and spoke withapproximately 50 villagers in ninevillages. One village (Nakai Tai) hadyet to move to its resettlement site,and one group (14 households ofVietic villagers and one Lao Loumhousehold from old Sop Hia) hadchosen to move uphill from theirold village site.The seven other vil-lages International Rivers visitedwere in their resettlement locations.

Vietic villagers told InternationalRivers that they would like toremain in their current location andreceive tools and additional materi-als for their houses.They want elec-tricity, piped water from the river, atruck for transporting sick peopleand goods, and road access to beextended to the village.NTPC saysthey are “proceeding at village levelon the basis that [Vietic villagers]will remain in their current locationindefinitely, though the final deci-sion on their status must be agreedby GOL.There are, however, certainlimitations arising from the choicemade by the [Vietic villagers] toremain in a traditional set-up in theprotected corridor area. Road accesswill need to remain very limited,and electricity highly infeasible.”45

More consultations should be con-ducted with Vietic villagers urgently to find a solu-tion that meets their needs, taking into account theirselected location, and is consistent with resettlementbenefits provided to other villages.

With the exception of the Nong Boua demonstra-tion village (which has been in its resettlement loca-tion since 2004), people with whom InternationalRivers spoke did not know what their new agricul-tural activities would be; if their agricultural plotswould be irrigated; if and how they would growrice in their new locations; and how many buffalo

they would have to sell by when (due to the short-age of land for grazing).

NTPC says,“In 2008 the first irrigation schemesoutside the Pilot Village will commence operation.Irrigation schemes will continue to be developeduntil all 0.66 ha plots are covered.All the 0.66 haplots will be cultivated in the 2007 wet season, withproportions cultivated in rice.”46

Last year, some villagers were encouraged to culti-vate rice in the drawdown zone. Due to partialreservoir filling in August 2007, approximately 60 ha

Milling rice in NongBoua village

of rice were destroyed by flooding.47 Villagers raisedconcerns about these losses, and should be compen-sated for them by NTPC.

In terms of buffalo reduction, NTPC asserts,“Overthe past 3-4 years there has been a natural trendtowards overall reduction—possibly somewhat relat-ed to anticipation of reduced grazing land but alsodue to changing lifestyles. It is now expected that asustainable herd population of approx. 3000 headwill be reached by 2009.”48 NTPC should clarifyhow this activity is being organized to ensure that:1) villagers are not selling buffalo to offset riceshortages; 2) villages that will have more access tograzing land and fodder are not selling buffalounnecessarily; 3) each household is able to keepsome buffalo; and 4) the price of buffalo does notfall sharply.

Villagers have been receiving rice and protein sup-port from NTPC during the resettlement process.Many villagers said that protein support had endedaround September 2007 and that rice support wouldend by May 2008.Villagers with whomInternational Rivers spoke wanted rice support tocontinue at least until the next rice harvest inNovember 2008.

Since resettlement and livelihood programs havebeen delayed, extension of rice support is importantto ensure that villagers are not forced to sell buffaloor other assets to purchase rice during this transitionphase.The Concession Agreement says that rice andprotein supplements will be provided to vulnerablehouseholds “until they attain and sustain theHousehold Income Target” (Schedule 4, Part 1,12.3.1).The World Bank-ADB Update says “ricesupport will continue for all resettlers until they are

self-sufficient in rice.”49 NTPC asserts that ricesupport is to continue at least until the end of 2008:“Withdrawal of rice support will be closely linkedto rice harvests by villagers as well as incomederived from livelihood development.”50 This con-tradicts what villagers told International Rivers andneeds to be clarified.

RECOMMENDATIONS

n NTPC should ensure that all villagers are settledin their new sites and that all houses and reset-tlement infrastructure have been completedbefore the bypass tunnel is closed and partialreservoir filling begins.

n NTPC and the GoL should clarify with resettledvillagers that rice support will continue untilresettlers are self-sufficient in rice, and that riceand protein support will be continued for vul-nerable households until they attain and sustainthe household income target.The situation ofNong Boua village, where rice support was cut-off in 2003 or 2004, should be reviewed sincethey are undergoing a second transition periodas other villages are resettled.

n Villagers whose rice crops were affected byflooding of the drawdown zone in August 2007should be compensated for these losses.

n NTPC should explain how reduction of thebuffalo population is being managed and moni-tored.

n Water supply systems in resettlement villagesshould be evaluated to address pump failures andwater shortages in the dry season.



Reservoir filling is imminent and the NT2 hydropower project faces a decisivemoment. One of the project’s selling points was that the Panel of Experts would have unprecedented

powers: they must certify that all resettlement infrastructure has been completed, in compliance with theConcession Agreement, before the dam gates can be closed. NTPC and the GoL should take this deadlineseriously. But the numerous slippages to date have already jeopardized the PoE’s authority. If PoE recom-mendations had truly been binding, as the World Bank asserted when NT2 was approved, livelihood restora-tion programs would not be so critically behind schedule on the Nakai Plateau and downstream areas. IfWorld Bank policies had been followed, villagers affected by construction activities would have receivedcompensation before they lost their land. It is past time that the social and environmental programs wereprioritized alongside construction. NTPC and the GoL should increase the staff resources and budget avail-able for livelihood restoration programs, fix critical shortcomings and step-up implementation in all projectareas before the Nakai Plateau is flooded.


Villager from oldBan Sop Hia, NakaiPlateau

Conclusion


Appendix

Nam Theun 2 Project Background

Nam Theun 2 (NT2) is a US$1.45 billion hydropower project currently under con-struction in central Laos. When it begins operations in December 2009, NT2 will

export most of its 1,070 MW of power to Thailand. The project will also forcibly displacemore than 6,200 indigenous peoples to make way for its 450-square kilometer reser-voir, and impact more than 120,000 Lao farmers and fishers downstream.

NT2 is a trans-basin diversion which means it willdramatically alter not one, but two river basins.A 39-meter high dam will block the Nam Theun River toform the reservoir. Once the reservoir has beenfilled, water will be directed down a 350-meter dropto the power station, before being transferred to theXe Bang Fai. Both the Nam Theun and the XeBang Fai are tributaries of the Mekong River.

In 2005, NT2 and its project developers, the NamTheun 2 Power Company (NTPC), whichincludes Electricité de France International, theElectricity Generating Company of Thailand, Ital-Thai Development and the Lao government, gotthe go ahead in the form of loans and guaranteesfrom the World Bank and the Asian DevelopmentBank (ADB).

The World Bank and the ADB asserted that theproject would reduce poverty in Laos.They vowednot only that the social and environmental riskscould be managed, but that NT2 would jumpstart

development for Laos as a whole. Following theWorld Bank and ADB’s endorsement, other publicand private financial support was offered from theEuropean Investment Bank, the Nordic investmentBank, COFACE, and other export credit agenciesand private banks.

NT2 is governed by a variety of legal documentsthat outline the obligations of NTPC and theGovernment of Lao PDR (GoL).The NT2 legalframework includes the Concession Agreementbetween the GoL and NTPC, and loan agreementswith project financiers such as the World Bank andthe ADB.The World Bank and ADB loan and guar-antee agreements with the GoL and NTPC in turnrequire compliance with these institutions’ ownpolicies. Essentially, these legal agreements constitutethe promises made to Lao villagers regarding com-pensation and mitigation measures, and the alloca-tion of responsibility amongst NTPC and the GoL.


Endnotes

1 World Bank-ADB Update on the Lao PDR: Nam Theun 2(NT2) Hydroelectric Project, December 2007, p. 4.

2 Ibid, p. 7.

3 Nam Theun 2 Power Company (NTPC), written responseto International Rivers questions, January 2008. Availableat: http://www.internationalrivers.org/en/southeast-asia/laos/nam-theun-2.

4 There will be downstream impacts in other areas, such asthe Nam Theun downstream of the dam site where waterflows will sharply decrease. However, the InternationalRivers’ field visit focused on the Xe Bang Fai area wherethe largest number of affected people live.

5 Excerpted from International Rivers’ May 2007 Nam Theun2 Trip Report and Project Update, available at:http://www.internationalrivers.org/files/NT2TripReport2007_full.pdf.

6 These numbers are based on a survey conducted by inde-pendent experts (Shoemaker, Baird and Baird, The Peopleand their River, 2001). NTPC asserts that only 75,000people in 221 downstream villages will be affected byNT2, which includes the Khamkeut district downstream ofthe Nam Theun. NTPC’s downstream livelihood restorationprogram targets 75,000 villagers.

7 Meeting with Olivier Salignat, NTPC Social andEnvironmental Deputy Director, March 8, 2007.

8 NTPC response to International Rivers, January 2008.

9 McDowell, Scudder, Talbot, Lao PDR Nam Theun 2Multipurpose Project, Twelfth Report of the InternationalSocial and Environmental Panel of Experts, September2007, p. 33. Available at:http://siteresources.worldbank.org/INTLAOPRD/Resources/293582-1092106399982/492430-1092106479653/POE_Report_12_Sept07.pdf.

10 World Bank-ADB Update, p. 11.

11 Panel of Experts, p. 35.

12 Ibid, pp. 34-35.


14 Ibid.

15 FIVAS, “Ruined rivers, damaged lives: The Impacts of theTheun-Hinboun Hydropower Project on DownstreamCommunities in Lao PDR”, November 2007.


17 Panel of Experts, p. 33.


19 NT2 EAMP, 2005, Chapter 3; Lanza, “Review of the WaterQuality Assessment (EAMP), Proposed Nam Theun 2Hydroelectric Project,” 2005, and Theiss, “ReservoirFisheries Predictions for the Nam Theun 2 HydroelectricProject”, 2005. Available at:http://www.irn.org/programs/mekong/namtheun.php?id=namtheuntech.html.

20 World Bank-ADB Update, pp. 10-11.

21 Ibid, p. 10.


23 Personal communication, Dr. Guy Lanza to Aviva Imhof,September 11, 2006.

24 Personal communication, Dr. Guy Lanza to Aviva Imhof,February 14, 2008.

25 Hydreco for NTPC, “Assessment of the Degree of MercuryContamination of Ecosystems in Laos—Final Report,”October 2006, p. 1.

26 Ibid, p. 32.






30 NTPC, “Resettlement Action Plan 3—Mahaxay andGnommlath District,” October 2007 says 377 households.NTPC’s response to International Rivers states: “Note thatnumber of significantly impacted PAPs has been reviseddown from this figure following very close revision of theimpact assessment, the final designs of the constructionssites as well as the PAPs assets as registered during thebaseline studies prior to land hand over.”


32 Ibid.

33 Ibid.

34 NTPC, “Resettlement Action Plan 3—Mahaxay andGnommlath District,” October 2007, p. 26.

35 NTPC/GOL, “Nam Theun 2- Lao PDR, Project UpdateNovember 2007, Overview of the Project”, November 2007,slide 15. Available at:http://www.namtheun2.com/Project%20Update/Overview%20of%20the%20project.pdf.

36 NTPC, “Resettlement Action Plan 3—Mahaxay andGnommlath District,” October 2007, p. 11.


38 For more details regarding the transitional resettlementprocess, see the IRN NT2 Trip Report September 2006,available at: http://www.irn.org/programs/mekong/namthe-un.html.





43 Panel of Experts, p. 10-11.



46 Ibid.

47 Ibid.

48 Ibid.



Documents

Nam Theun 2 - BankTrack THEUN 2 TRIP REPORT AND PROJECT UPDATE ... ADB,and a written exchange with NTPC. The trip report does not provide a comprehensive