Project Name. PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB3933 Argentina Mining Environmental Restoration Project

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB3933 Argentina Mining Environmental Restoration Project Region LATIN AMERICA AND CARIBBEAN Sector Mining and other extractive (80%);Central government administration (20%) Project ID P Borrower(s) ARGENTINE REPUBLIC Implementing Agency Atomic Energy National Commission (CNEA) Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared May 16, 2008 Date of Appraisal June 2, 2008 Authorization Date of Board Approval July 17, Country and Sector Background Like the rest of Latin America, Argentina has experienced strong growth. The economy grew by 8.7 percent in 2007, the sixth straight year of 8-9 percent growth since the crisis. The recovery has been supported by favorable terms of trade (high export commodity prices), a strong rebound in domestic demand and improved fiscal performance. The economy also benefited from a significant reduction in public debt following the 2005 sovereign debt restructuring, and a depreciated currency. Twin surpluses (fiscal and external) have underpinned macroeconomic stability and allowed the country to accumulate foreign reserves (over US$50bn as of May 2008). Looking forward, the macroeconomic outlook for Argentina is subject to important risk factors that could impact future growth. Economic growth in 2008 is expected to decelerate to about 7 to 6 percent, and could decelerate further in The main risk factors include inflationary pressures, an eventual decline in the terms of trade, and Argentina s limited access to international financial markets. In the short-term, the main challenge is to strengthen macroeconomic stability by containing inflation and reducing fiscal vulnerabilities. In the medium-term, the key challenge is to raise productivity and increase investment. The Argentine mining sector represents an important component of the country s private sector investment and is currently booming as a result of high commodity prices, competitive exchange rates, sector liberalization, streamlining of federal and provincial administrative procedures, and relatively virgin mining sites where valuable deposits can be found. In 2006, the mining sector employed 170,000 workers and produced minerals worth $3.45 billion. More important, perhaps, is that mining investments are growing rapidly: investment in mining projects reached $1.27 billion in 2006, up 56% from The national government estimates that mining sector investment throughout the country over the next eight years could reach over $10 billion. Argentina has a rich endowment of uraniferous ores. Argentina is not currently producing uranium, although in the past there have been up to ten different uranium mines. Due to a combination of adverse economic factors, notably low prices on the international market and high costs of domestic production, all of the country s mines and all but one processing facility were closed during the late 1980s and the early 1990s. Recent uranium prices rises - from a range of US$10-15/lb during to a range of

2 $75-138/lb during the first eight months of and renewed interest in developing domestic nuclear power 1 have resulted in renewed interest in domestic uranium mining as well. Therefore, it is likely that the country will re-enter into uranium mining and processing in the future. INVENTORIED SITES Since mining is a relatively new industry in Argentina, there is little country experience with mine closure and clean-up. Years of lax environmental enforcement and management practices in the uranium extraction industry have resulted in undesirable environmental legacies. These legacies consist of the accumulation of harmful solid and liquid wastes associated with uranium mining and processing, and the generation of waste tailings and low-grade ore containing low levels of radioactivity. It should noted, however, that the legacy issue is not nuclear waste, but rather large amounts of low-grade tailings with radioactivity levels typically below what is commercially viable natural uranium ore. CNEA has inventoried eight abandoned uranium mining and milling sites across the country that have residual low-level radioactive wastes (see map). These wastes, improperly managed, raise environmental concerns about long-term public health and use of natural resources. These concerns include: (a) contaminated ground and surface waters and potable water supplies, (b) elevated incidence of lung and other cancers, and (c) restricted land use and loss of access. On one site, toxic chemicals have been abandoned and also require proper disposal. Some of the abandoned uranium processing sites present additional concerns because of their location close to dense urban areas (e.g., City of Córdoba or the Municipality of Malargüe) or close to sites designated for tourism activities (e.g., Los Cardones National Park in the Salta Province or the San Roque lake in the Córdoba Province). Furthermore, a high level of anxiety among the local population surrounds the issue of environmental impacts on air, soil, or water quality that might be caused by abandoned uranium mining and milling sites. 2 In order to reduce both economic and public health risks associated with these sites, they need to be properly remediated consistent with internationally accepted best practices. The Federal Government has entrusted to CNEA, through the Nuclear Waste Management Law of 1998, the management, including remediation, of abandoned and/or inactive uranium mining and processing sites in the country. Also, the Environmental Law for Mining Activities of 1995, part of the federal Mining Code, and decrees passed by provincial governments, require that CNEA remediate and manage these sites. CNEA s commitment to remediation and to this project s objectives are evidenced, inter alia, by its formal policy statement which commits itself to strengthening environmental policies, developing and implementing procedures for information disclosure and public consultation, and adopting international best practice standards for environmental assessments and monitoring. 2. Objectives 1 In August 2006, President Kirchner s administration launched a New Nuclear Plan aimed to reengage Argentina in the path of nuclear energy production. At the core of this plan is the finalization of one nuclear reactor (Atucha II) and preparatory studies for another. 2 A conservative estimation of the population that might today be directly affected by potential impacts from the sites represents about 15,000 persons in Malargüe, 10,000 in the Alto Córdoba neighborhood, and 20,000 to 30,000 in the San Roque Lake area (including small towns such as Tanti, San Carlos and others).

3 The development objectives of the proposed project are to: (a) reduce potential economic and health damages associated with a closed uranium milling site in Malargue, Mendoza; and (b) strengthen GoA s capacity to assess and mitigate environmental risks associated with closed uranium mines, processing sites, and related mining sector investments, in accordance with international good practice. 3. Rationale for Bank Involvement Although CNEA has been active in the nuclear energy fuel cycle since the 1950s, it has had little experience with mine closure. The Bank s involvement with the project is a major benefit to CNEA and the government, in that it provides international expertise and international best practice. In addition, World Bank funding will provide for a consistent approach to addressing sector-wide issues, while helping remediation efforts at one site, in Malargüe, Mendoza. If World Bank funds were not available, it is probable that CNEA would have difficulty mobilizing internal funding to either complete the works at this site in a time fashion, or to put into place the required capacity and programs for technical design, environmental consultation and awareness campaigns to address the necessary remediation measures in the other seven sites. The Bank s involvement with this project will bring to bear its experience in environmental management. Outside of Argentina, the Bank has been an important provider of assistance to the development of environmental management capacity for mining activities in Latin America, Africa, Eastern Europe and Central Asia. Within the country, environmental issues appear throughout the Bank s program, including in the areas of pollution, natural resources management, water resources management, and global issues such as climate change, biodiversity, and ozone depletion. Environmental NGOs in Argentina, through as evidenced extensive consultations, have supported the Bank s role in this project. The Argentine Federal Government as well as provincial authorities, municipal authorities, and local communities, have turned to the World Bank for its assistance because of its technical capacity and reputation for exacting standards in environmental management. It is felt that the Bank s involvement will lend credibility to CNEA s new policy to be more open and inclusive in involving communities in its environmental management activities. The proposed project fits squarely within the June 2006 CAS under both the pillars of growth with equity and improved governance. (The other pillar is social inclusion.) In addition, one of the recommendations of the Management Response to the Extractive Industries Review of 2004 is that the World Bank should assist governments to address and clean-up environmental legacies of past mining activities. 3 The proposed project is fully responsive to this commitment to help the Argentine government deal with past environmental legacies by adopting internationally accepted standards and procedures. 4. Description The project will finance investments to remediate the closed uranium processing site in Malargüe, Mendoza, and will provide technical assistance in three areas: (a) to develop CNEA's environmental management capacity to plan and carry out sustainable and technically sound remediation interventions throughout the uranium sector; (b) to support technically, environmentally, and socially responsible planning of the remediation needs of the other seven priority sites across the country; and (c) to introduce concepts of environmental risk management more broadly in the mining sector, including the Secretariat of Environment and Secretariat of Mining. 3 Extractive Industry Review Management Response (September 17, 2004), Mitigating Environmental and Social Risk (p.7), and Annex: Detailed Management Response, Part II Mitigating Environmental and Social Risks (pp ).

4 A SIL approach is justified because, although the current locations of the mines are known, in all but the Malargüe site, solutions for their remediation have to be further defined. Only the Malargüe site has completed the rigorous design, consultation, environmental and social assessment, and international validation process that meet Bank lending requirements. It is envisaged that the experience garnered from this SIL - technical and procedural, such as the processes for addressing environmental and social issues and mechanisms for public consultation - will help guide the country for its future remediation of the remaining sites and management of possible new sites. 5. Financing Source: ($m.) Borrower 7.50 International Bank for Reconstruction and Development Total Implementation Project implementation period. The project will be implemented over a period of five years ( ). The project completion date will be November 30, Executing agency. The National Atomic Energy Commission (CNEA) will be responsible for the implementation of the project. CNEA is the government agency which has a legal obligation to remediate the sites of abandoned or closed mines or milling sites. CNEA has 1,752 permanent staff, comprising professional, technical, administrative and support staff, located at the offices of its various undertakings throughout the country. 4 Project administration. CNEA will maintain the already established coordinating unit that has been responsible for the preparation of the project and management of two Project Preparation Facilities (PPFs). This unit is fully integrated within CNEA s Environmental Management Unit (UGA). The UGA is composed of : (i) the Project Coordinator and the Deputy Coordinator responsible for the overall management of project activities. The Project Coordinator will report quarterly to the National Steering Committee on project implementation; (ii) the Technical Management Unit, responsible for preparation of TOR (studies) and technical specifications (works) and for supervision of the studies (mainly EIAs and engineering) and works; local technical teams are (Malargüe, Córdoba and Salta) and will be (other sites) established at the different sites for daily follow-up of the activities; (iii) the Community Relationships Unit, responsible for: the identification and characterization (social analysis) of stakeholders; the set up and follow up of the consultation processes at the different sites; and the set up and implementation of a communication strategy, including information and communication with affected communities; and (iv) the Quality and Monitoring Unit, responsible for follow-up of project activities and objectives and compliance with Safeguard Policies. Activities of this unit will include environmental monitoring and ensuring compliance with the project s environmental management plan. (v) the Administrative Management Unit (which would fade out at project end) responsible for the administration of the project, including budget preparation and follow-up, financial management, and procurement. 4 CNEA website:

5 7. Sustainability Sustained awareness and commitment. Awareness of and interest in environmental issues is growing in Argentina, and concern over un-remediated uranium waste is a source of public and government concern. Such concern has been well demonstrated in Malargüe, San Rafael (a conflictive mine-site that is not under the project for the reason that it may be re-opened in the near future), and Córdoba. Government commitment is indicated by, inter alia: (i) the country s enactment of an Environmental Law for Mining Activities 5 (Law , November 1995) and related environmental regulations in the provinces for its application, mandating, for example, the use of EIAs for all phases of the mining cycle and rules assigning liability for environmental damages due to past contamination; (ii) legal procedures for public consultation currently under development or, in the case of the Federal Government 6 and the Mendoza and Córdoba Provinces, already established; (iii) the passage of the Radioactive Waste Management Law (Law , October 1998), assigning to CNEA the responsibility for managing all radioactive waste in the country; and (iv) the national interest in building a nuclear industry, and the increasing importance CNEA is placing on earning public trust. The specific investments in Malargüe are likely to be sustained because: (a) remediation works are mandated by law, already underway, and supported by both government and civil society; and (b) downstream monitoring and impact data will be publicly available. Financial sustainability. The required financing during the project's operational period includes: 3 counterpart funding for the remediation works at Malargüe, and for subsequent site surveillance, environmental monitoring of potential impacts in the areas of influence, and maintenance and attention to site visitors and stakeholders; 3 staff and operating costs related to UGA (a multi-disciplinary team of about 10 persons, plus on-site institutional monitoring teams) and operating costs (including information and consultation). 3 counterpart funding, as needed, for the project's technical assistance activities. Counterpart financing during the Bank-financed project period will be included in the National Budget Law and provided under the CNEA budget. 8. Lessons Learned from Past Operations in the Country/Sector The World Bank has acquired experience in remediating past environmental damages and reducing hazards related to mining activities. Examples are investment projects in the Kyrgyz Republic, Poland, Romania and Zambia. 7 Lessons from these projects include: develop a comprehensive process and management plan, as opposed to a piecemeal or purely engineering-focused approach, including inter alia, an in-depth study and discussion of alternative solutions; an assessment of risks, costs and benefits; the development of institutional capacity for management and monitoring; adequate information dissemination and consultation procedures;. 5 The Environmental Law for Mining Activities has been prepared as part of a previous WB loan ( PASMA ). 6 Federal Decree 1172/2003 on Access to Public Information. 7 Annex 2 includes a list of recent World Bank projects related to mining remediation works and environmental management.

6 involve civil society at an early stage and generate/improve trust with stakeholders with respect to information sharing and proposed engineering solutions, and, subsequently, to involve civil society organizations in monitoring processes during both project implementation and long-term follow-up activities; take into account community risk perception (vs. actual risks) and include risk management components in the project activities; define clearly, and agree with stakeholders on, environmental liabilities as well as current and future obligations with respect to monitoring and maintenance; optimize the benefits from lessons learned from international experiences, good practice, and leading-edge technology; link and coordinate with other environmental and mining governmental and nongovernmental organizations at the local, provincial, and federal levels; and ensure acceptance of proposed remediation strategies through a well-designed outreach, consultation, and communication strategy, with respect to the environmental remediation measures to be implemented (community, CNEA, and government levels). These lessons learned are reflected in the project design. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Physical Cultural Resources (OP/BP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [ ] [X] Indigenous Peoples (OP/BP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP 7.60) * [ ] [X] Projects on International Waterways (OP/BP 7.50) [ ] [ ] 10. List of Factual Technical Documents Project Appraisal Document Mining Environmental Restoration Project Environmental Assessment Mining Environmental Restoration Project 11. Contact point Contact: Carter J. Brandon Title: Lead Specialist Tel: / Fax: * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties claims on the disputed areas

7 Location: Buenos Aires, Argentina (IBRD) 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) pic@worldbank.org Web: