Mining Infrastructure Investment Support (MINIS) Project

Original image by Eugene Simonov, Rivers without Boundaries Coalition

The World Bank is funding feasibility studies under the MINIS project that could lead to large dams on the Selenge and Orkhon Rivers in Mongolia. These dams will negatively impact agricultural productivity for the communities living in the affected river basins as well as affect water levels in Russia’s Lake Baikal, a UNESCO World Heritage Site.

Location: Mongolia

Total Cost: US$29.2 million

Funding: World Bank

Status: Approved

The World Bank approved the initial $25 million credit to the Mongolian government for the Mining Infrastructure Investment Support (MINIS) Project on May 10, 2011. The purpose of the project is to provide technical assistance to the Government of Mongolia to facilitate investments in the infrastructure needed to support mining (such as roads or power sources) and build the capacity of the government to prepare and seek financing for similar projects in the future. The project does not fund any physical activities or works, only feasibility studies and other preparatory assessments. However, because of the potential risks that may be incurred by the implementation of any of the proposed subprojects, the project has been classified as Category A and six of the ten environmental and social safeguard policies has been triggered.

The MINIS project is comprised of four major components. An additional $4.2 million grant from the Australian Agency for International Development for Component 3 was approved by the Bank on March 24, 2014.

Component 1: Support for Infrastructure Investments.
This component includes financing to prepare regional infrastructure investment plans, address emerging priority issues, and conduct feasibility studies for a select number of subprojects. The six subprojects selected under this component are (i) Flow regulation of the Orkhon River and construction of water reservoir complex (Orkhon-Gobi River Diversion), (ii) Shuren Hydropower Plant (HPP), (iii) 3) Integrated Steel Complex with infrastructure in the central region of Darkhan-Selenge, (iv) Extension of Coal Mine “Baganuur” LLC, (v) Rural and Industrial Water Supply Scheme in the South Gobi region, and (vi) Synthetic Natural Gas Plant (SNG).

Component 2: Capacity Building and Knowledge Transfer
This component includes training and advocacy programs (both formal and on-the-job) from qualified consultants on project preparation, especially for Public-Private Partnerships. The component also covers fees for consultants and training on contract administration.

Component 3: Strengthening Groundwater Management
This component covers the establishment of regional Groundwater Management Councils and Groundwater Management Administrations in Southern Mongolia. This component will also include a review of water resource pricing.

Component 4: Project Management
This component finances the hiring of the Project Management Unit (PMU) Director and consultants as well as funds to procure the necessary supplies and equipment to effectively operate the PMU.

Civil society groups in Mongolia and Russia are particularly concerned about the impacts of two of the subprojects selected under Component 1: the Shuren Hydropower Plant (HPP) and the Orkhon-Gobi River Diversion scheme. The Shuren HPP will be located on the Selenge River, which is the largest river in Mongolia and is the main feeder river into Lake Baikal in Russia, a UNESCO World Heritage Site. The wetlands at the Selenge River Delta are also protected by the Ramsar Convention. The Orkhon-Gobi River Diversion is intended to pipe water from the Orkhon River, which is a tributary of the Selenge River, in northern Mongolia to the mines in the South Gobi region (such as Oyu Tolgoi), a distance of over 1,000 km. Any activities on these rivers will have an impact on the biodiversity of Lake Baikal as well as impact the indigenous Buryat community that live near the Lake.

The concerns can be broken down into issues of process and potential impacts. Process-wise, the groups are concerned about the quality of the reports being conducted. Because the feasibility studies and other documents are not publicly disclosed nor consulted on means that stakeholders cannot assess them. They also question the selection of subprojects such as the Shuren HPP, which is not directly related to mining.

A summary of the potential environmental and socio-economic impacts is listed below:

Environmental Impacts

Disruption to the river flow and human/animal movements. For instance, the dams will likely block the migration paths of endangered fish species, causing a decrease in available fish stock;
Damage to Selenge ecosystems and native species4, for instance through the introduction of exotic species; which could lead to further direct destruction of already-endangered fish species;
Low quality of water supply;
Degradation of critical habitats, including floodplains and the Selenge River Delta Ramsar site;
Possible accumulation of heavy metals, potentially endangering human health;
Increased greenhouse gas (methane) emissions, contributing further to the severe effects of climate change in Mongolia;
Loss of geologic stability and increased risk of damage from landslides due to erosion, earthquakes, and flooding from catastrophic dam failure;
Unpredictable water flows caused by climate change and desiccation (drying up) of Mongolian landscape will be exacerbated by dam projects. Flow volumes are decreasing in rivers such as the Orkhon, and data suggests that under current conditions the Orkhon River will not survive the planned diversion to the South Gobi region; and
Degradation of Lake Baikal, a designated UNESCO World Heritage Site, due to alteration of Selenge River ecosystem patterns and processes.

Impacts

Loss of access to traditional water and pasture resources by nomadic communities in Bulgan, Huvsgul, Selenge, Orkhon, Uvurhangai, Dundgobi, in the South Gobi provinces of Mongolia;
Disruptions to ecosystem services such as Selenge River fish population will increase competition for people who depend upon the fish stock for their livelihoods;
Loss of economically valuable land, especially important crop and pasture land, as a result of reservoir flooding and floodplain degradation;
Potential resettlement of about 30-100 families at each planned reservoir site and more from planned pipeline path;
Loss of ecotourism opportunities and loss of access to traditional resources by local businesses dependent on river and lake resources which also pose high risks of their insolvency for existing ecotourism enterprises;
Loss of culturally significant archaeological sites in the Selenge River Basin. The Orkhon and Selenge rivers themselves are also considered sacred by traditional Mongolian and Buryat shamans and Lake Baikal is a major sacred object for all peoples populating the region;
Loss of crops due to the conversion of lands;
Loss of ecological service of critical habitat;
Loss of honey bearing plants – damage to bee farms; and
Loss of vast areas of floodplain forests to the Shuren Hydropower Project.

On February 10, 2015, representatives from communities in Mongolia and Russia submitted a request for inspection to the World Bank’s independent accountability mechanism, the Inspection Panel. The complaints focused on the potential impacts of the Shuren Hydropower Plant (HPP) and the Orkhon-Gobi River Diversion scheme. While the Bank is only funding the feasibility studies and the environmental and social impact assessments, the complainants and their supporting NGOs (Greenpeace Russia and Rivers without Boundaries, a regional coalition made up of activists and academics in Russia, China, and Mongolia) are concerned that these studies will serve as a rubber-stamp for the Mongolian government to push the construction of these projects without the input of concerned stakeholders, including academics, civil society, and impacted communities.

The complaint was registered by the Panel on March 16, 2015 and staff traveled to Mongolia and Russia in May 2015 to assess the eligibility of the complaint. On July 2, 2015, the Panel submitted its Eligibility Report and Recommendations to the Board of Directors, which concluded that the Panel would defer making a decision to recommend an inspection for a year. The Board approved the recommendation to defer on July 28, 2015. In its second eligibility report, approved by the Board of Directors on July 20, 2016, the Panel once again deferred the investigation for another year.

In support of the complaint, a petition was sent by Avaaz to the World Bank and the governments of China, Russia, and Mongolia on May 7, 2015 asking them to protect Lake Baikal from destructive hydropower projects. The petition, Save the Blue Jewel of Siberia, had over 55,000 signatories from around the world.

Nezir Sinani
Europe and Central Asia Manager
Tel: +1 202 624 0625
Email: nsinani*bankinformationcenter.org

Mongolia Page, Bank Information Center