Nam Theun 2 Studies Miss the Boat

Aviva Imhof
Tuesday, February 1, 2005

Project Documents Mask Flaws in World Bank Project

A series of technical reviews by independent experts for the Nam Theun 2 Hydropower Project in Laos has revealed serious flaws in the project’s environmental impact assessment and social development plan – flaws which call into question the project’s viability and scale of its impacts.Reviewers note that the project documents lack critical analysis, data and information, and the project’s plans for compensating affected villagers have a high likelihood of failure.

The US$1.3 billion Nam Theun 2 Hydropower Project would forcibly displace 6,200 indigenous people and impact more than 100,000 villagers who depend on the Xe Bang Fai River for fish, agriculture and other aspects of their livelihood. The project is being developed by Electricité de France (a French utility) and two Thai companies in cooperation with the Lao government. One of its big selling points is that it will generate foreign exchange for Laos by selling the power to Thailand. The World Bank, Asian Development Bank and other donors will make a decision on whether to support the project in the coming months.

Technical reviews of the EIA and Social Development Plan (SDP) were commissioned by NGOs on five different aspects of the project, including hydrology, water quality, impacts along the Xe Bang Fai River, and the viability of the resettlement plans for villagers living on the Nakai Plateau. Contrary to claims by the World Bank and the Nam Theun 2 Power Company that the project is "world class" and that studies are "comprehensive" and in compliance with World Bank safeguard policies, reviewers found major gaps in documentation.

"Nam Theun 2 has been under preparation for more than a decade, which makes these gaps quite alarming," said Shannon Lawrence, with the Washington, DC–based group Environmental Defense. "Considering the project’s size and scope and the significant resources that have already been poured into its development, it is shocking that more rigorous analysis of potential impacts and clear, feasible plans for compensating affected people still do not exist."

Viability in Question

The review of the project’s hydrologic data found that the analysis is so deficient that it is impossible to predict how much water is available for power generation. The reviewers found that the lack of long–term stream flow and rain flow monitoring, coupled with questionable statistical analysis techniques, makes the project "high risk for meeting its power generation predictions and for estimating potential project impacts." In addition, the project developers have undertaken no analysis of how global climate change might affect flows in the Theun River.

"Project planners propose to make irreversible commitments of the hydrologic integrity of these two river basins, the livelihoods of basin residents, and a large capital investment," says Dr. Peter Willing, a hydrogeologist who reviewed the plans. "The EIA's underlying data is inadequate to sustain a conventional hydrologic analysis. The consequences will be vast and difficult to predict: flooding, erosion, disruption of biological and human systems."

The reviewers found that the project developers have also failed to examine how increased water flows will affect the upper and middle reaches of the Xe Bang Fai River, the river to which Nam Theun 2’s water will be diverted. This is of concern as more than 7,600 people live along this stretch of the Xe Bang Fai and will be seriously affected by increased flooding and erosion, as well as by depleted fisheries and other impacts.

Fisheries Impacts Underestimated

David Blake, a fisheries specialist based in Thailand, looked at the project’s potential impacts on fisheries in the Xe Bang Fai and other downstream rivers. According to Blake, Nam Theun 2 "is likely to have multiple serious, negative impacts on the aquatic resources of the Xe Bang Fai, Nam Phit and other downstream river basins. The likely result will be, as predicted in the project’s Social Development Plan, a ‘collapse in the aquatic food chain’ from the Nam Phit down to the Mekong."

Tens of thousands of people depend on the fish and other aquatic resources of the Xe Bang Fai River for protein and income.

Blake’s review of the project’s EIA found that the plan was severely lacking in detail and rigorous scientific analysis. The official prediction of impacts on fisheries for the downstream rivers is based on only three field surveys, all conducted during the dry season. As a result, the EAMP likely underestimates the number of fish species present in the Xe Bang Fai, and contains no study of fish migrations in either the Nam Theun or Xe Bang Fai river basins. The EAMP also ignores the importance of other aquatic organisms in the riverine ecology and food chain, and therefore fails to consider the implications of the loss of these resources for the food security and livelihoods of the people of the Xe Bang Fai basin.

Blake found that where the EAMP does identify serious impacts likely to result from the project’s operations, it expresses an unwarranted faith in mitigation methods to alleviate the impacts, despite a poor record of mitigation attempts at other regional hydropower projects.

Blake also reviewed the plan for compensating villagers along the Xe Bang Fai. According to the power company, "all and any negative impacts on villagers’ socio–economy... will be fully compensated" by "fair replacement or in alternative income at least equal to the value lost." However, Blake found that the program is "overly ambitious, poorly reflects actual experience in the region and leaves many questions unanswered."

One of the main plans is to replace freshwater fisheries with aquaculture. However, Blake says that aquaculture should not be considered as a direct replacement to "capture fisheries," as cultured fish do not have an equal economical, nutritional or cultural value in the diets of Lao villagers. Moreover, experiences to date in Lao PDR suggest that adoption of aquaculture is a slow and gradual process, and that the poorest people often lack the land and capital resources to fully adopt aquaculture. Even if villagers did decide to take up aquaculture in any numbers, there is unlikely to be the human resources or supporting infrastructure present in the area to provide sufficient fish seed or offer training and extension services for many years to come.

According to Blake, "the compensation options proposed are incompatible with helping more than a fraction of affected people in the short to medium term, and even then there is a real danger that any benefits will only go to the better–off members of the villages, whom are likely to be chosen for pilot testing the options."

In this context, the power company’s goal of replacing lost livelihoods along the Xe Bang Fai within five years of commercial operation is completely unrealistic. At Theun-Hinboun Dam and Expansion Project, now six years after commercial operation, many villagers remain without adequate compensation for lost fisheries and riverbank vegetable gardens, and while there have been some successes, many challenges remain.

Resettlement Failure?

What is International Rivers Doing?

International Rivers is lobbying the World Bank and Asian Development Bank (ADB) to refuse support for the project. As part of this effort, International Rivers will circulate the technical reviews to key decision–makers in donor countries and to Executive Directors at the World Bank and ADB, highlighting how the project documents fail to comply with their policies.

The project will forcibly displace more than 6,200 indigenous people living on the Nakai Plateau, the area to be flooded by the reservoir. According to the developers’ plans, resettlers’ income will be tripled within seven years. To achieve this, they’ve promised new irrigated farmland and fruit trees, new livestock and community forestry operations, and a reservoir fishery capable of supporting over 1,000 fishermen. However, many of these plans are simply unrealistic or unviable, and even the developers admit that plenty can go wrong.

Just as villagers feared, the new farm plots are small, and the soil is poorly suited to crop production as it is "heavily leached and infertile," according to the Social Development Plan (SDP). High inputs of organic and inorganic fertilizer will be required to grow anything, but the company plans to help pay for fertilizer for only three years. In addition, there may not be sufficient land for grazing villagers’ livestock, particularly their prized herds of buffalo. Instead, the resettlement plans require the villagers to adopt intensive livestock raising techniques, requiring high levels of labor and inputs in the form of feed and animal health care.

According to the reviewer of the resettlement plans, "this proposed change in agricultural and livestock raising practices is nothing short of a revolution in farming methods for the resettled villagers," a revolution that has a "high likelihood of failure."

Villagers are also supposed to derive some income from logging of a community forestry area. However, even for this aspect the developers themselves aren’t optimistic. They report that "profitability of pulpwood production is likely to be close to marginal given the poor sites available at the Plateau... [and is] fraught with risks as many things could happen over the long term that pose a threat to the profitability of the crop." Meanwhile, villagers will be losing a major part of their income from the collection and sale of non–timber forest products (NTFPs), many of which will disappear once the reservoir is flooded. While villagers were hoping that the community forest area could be used for collection of such products, the SDP reveals that due to the poor soils, this area will produce "very few NTFPs".

While the SDP also promises significant incomes for villagers from fishing in the reservoir, a review of the fisheries management plan by fisheries specialist Eric Theiss has found that it is unlikely that the Nam Theun 2 reservoir will be able to sustain a significant fishery. According to Thiess, "the fishery is intended to be developed from fish trapped by the dam, however many of these fish will die, and it will be difficult to build a substantial population." Damoperations will shrink the reservoir to less than a fifth of its size during the dry season, which eliminates most of the underwater habitat. What water is remaining is likely to be lacking in oxygen, making it difficult for fish to survive.

According to Grainne Ryder from Probe International, "A fair compensation plan would look very different from the current plans. Quite apart from investments in dubious livelihood improvement schemes, the Nam Theun 2 Power Company owes Nakai villagers for sacrificing their land and resources, and for enduring a decade of economic stagnation. The company owes anyone displaced by the project full market value compensation for lost resources, livelihoods, income, and opportunity, for at least as long as the project fails to triple resettlers’ income as promised. Anything less makes Nakai villagers victims of the Nam Theun 2 Power Company, not its beneficiaries."