[Federal Register Volume 70, Number 42 (Friday, March 4, 2005)]
[Notices]
[Pages 10690-10694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4216]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 05-02]


Interim Environmental Guidelines for Public Comment

AGENCY: Millennium Challenge Corporation.
SUMMARY: The purpose of these Guidelines is to help ensure that the 
projects undertaken as a part of the Millennium Challenge Compacts are 
environmentally sound, designed to operate in compliance with relevant 
regulatory requirements, and are not likely to cause a significant 
environmental health and safety hazard. In order to provide guidance to 
MCC eligible countries as they develop Compacts, MCC will use these 
procedures as interim Environmental Guidelines throughout the comment 
period.
    Public Comment: For a ninety-day period beginning on the date of 
publication of this notice in the Federal Register, the Millennium 
Challenge Corporation will accept public comment on the interim 
Environmental Guidelines.
    Contact Information: Public comments should be submitted through 
the MCC website at www.mcc.gov or in writing addressed to: Public 
Comment on Environmental Guidelines, Millennium Challenge Corporation, 
P.O. Box 12825, Arlington, VA 22219-2825.

Environmental Guidelines

Table of Contents

Statement of Principles
Sources of Policy; Applicability of Guidelines
Envrionmental Screening
Environmental Review
Public Consultation
Monitoring
Reporting
Appendix A: Definitions
Appendix B: Procedures Implementing Executive Order 12114
Appendix C: Illustrative List of Sensitive Sectors and Sensitive 
Locations
Appendix D: Environmental Impact Assessment Reports

Statement of Principles

    The Millennium Challenge Corporation (``MCC'') recognizes that the 
pursuit of sustainable economic growth and a healthy environment are 
necessarily related. The purpose of these guidelines is to establish an 
environmental review process to ensure that the projects undertaken as 
part of programs funded under Millennium Challenge Compacts with 
eligible countries (``Compacts'') are environmentally sound, are 
designed to operate in compliance with applicable regulatory 
requirements, and, as required by the legislation establishing MCC, are 
not likely to cause a significant environmental, health, or safety 
hazard.\1\
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    \1\ Appendix A sets forth definitions of words and phrases used 
in these guidelines.
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    MCC is committed to program design that reflects the results of 
public participation in host countries during all phases of the 
program, integrating governmental interests with those of private 
business and civil society. In this spirit, MCC will work to ensure 
that the preparation of an environmental impact assessment will include 
consultation with affected parties.
    Finally, MCC is committed to the principle of host-country 
ownership of a Compact proposal. Wherever appropriate, MCC will 
consider analyses, standards and norms of the host country. In 
addition, Compact projects should generally comply with relevant 
international environmental guidelines and requirements, including 
those that the host country is bound by under international agreements.

Sources of Policy; Applicability of Guidelines

    The policies reflected in these guidelines are based, broadly 
speaking,

[[Page 10691]]

on sound sustainable development project design principles and 
international best practices in this field, including, but not limited 
to, the ``Principles of Environmental Impact Assessment Best 
Practices'' of the International Association for Impact Assessment, the 
environmental policies and guidelines of other United States government 
development assistance and financing entities, the environmental 
policies and guidelines of the multilateral development banks, the 
Common Approach developed by export credit agencies through the 
Organization for Economic Cooperation and Development (OECD), and the 
Equator Principles in use by international commercial banks. In 
addition, these guidelines reflect the following:
    1. Section 605(e)(3) of the Millennium Challenge Act of 2003 
prohibits MCC from providing assistance for any project that is 
``likely to cause a significant environmental, health, or safety 
hazard.'' Consequently, the presence of such a project in a host 
country's proposal will preclude MCC funding (or continued funding) of 
that project. (See the discussion of ``environmental, health or safety 
hazard'' in Appendix A.)
    2. Executive Order 12114, January 4, 1979, 44 FR 1957 (January 9, 
1979) requires every federal agency taking actions encompassed by that 
Executive Order to establish procedures to implement it with respect to 
certain major Federal actions having significant effects on the 
environment outside the geographical borders of the United States and 
its territories and possessions. It is expected that the Executive 
Order will have limited applicability to MCC programs, but where the 
terms of the Executive Order apply, the procedures described in 
Appendix B will be used.
    3. In those instances where MCC's actions or a project undertaken 
or funded under a Compact may significantly affect the quality of the 
environment of the United States, including its territories or 
possessions, MCC will require adherence to the environmental review 
procedures established by the Council on Environmental Quality under 
the National Environmental Policy Act (NEPA), in lieu of these 
guidelines.
    MCC will review and revise these guidelines from time to time to 
reflect lessons learned in their application as well as relevant 
changes in international standards and norms of practice. In addition, 
MCC may from time to time provide such additional guidance to a host 
country during the implementation of a program as may be advisable in 
light of host country norms and international standards.

Environmental Screening

    As early as possible in the Compact proposal review process, MCC 
will screen each project described in the Compact (generally referred 
to herein as a ``project'' or collectively, as ``projects''). MCC 
funding for a project is contingent upon satisfactory completion of 
environmental screening in accordance with these guidelines, and in 
general, the environmental screening of projects will be completed 
before the Compact is signed. For those projects that require a full 
environmental impact assessment, MCC funding for that project generally 
will be contingent upon completion of the EIA in accordance with these 
guidelines.
     Categorical Prohibition: As stated above, MCC may not 
provide assistance for any project that is ``likely to cause a 
significant environmental, health, or safety hazard.'' Accordingly, as 
part of its environmental screening, MCC will identify and exclude such 
projects from MCC financing, using the definition contained in Appendix 
A. Such projects will be classified as a Categorical Prohibition.
     Determination of Project Category: MCC will screen all 
Compact proposals to identify projects that require further review due 
to their potential adverse environmental impacts,\2\ and projects that 
are in sensitive sectors or in or near sensitive locations. The result 
of this screening process will be an environmental classification 
following the recommendations contained in the OECD Common Approach and 
the practices of the World Bank, classifying in accordance with the 
potential environmental impact, and the extent of the environmental 
review required:

    \2\ ``Environmental impacts'' include the effects of a project 
on the surrounding natural environment and on the humans reliant on 
that environment, to include effects on cultural property, 
indigenous peoples, and involuntary resettlement, as well as the 
impacts on human health and safety.
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--Category A: A project is classified as Category A if it has the 
potential to have significant adverse environmental impacts. These 
impacts may affect an area broader than the sites or facilities subject 
to physical works. Category A, in principle, includes projects in 
sensitive sectors or located in or near sensitive areas. An 
illustrative list of sensitive sectors and sensitive locations is set 
out in Appendix C.
--Category B: A project is classified as Category B if its potential 
environmental impacts are less adverse than those of Category A 
projects. Typically, these impacts are site-specific, few if any of 
them are irreversible, and mitigation measures are more readily 
available.
--Category C: A project is classified as Category C if it is likely to 
have minimal or no adverse environmental impacts.

Environmental Review

    The application of these guidelines to specific projects and the 
breadth, depth, and type of environmental review to be completed will 
depend on the nature, scale, and potential environmental impact of 
proposed projects.

Category A Projects

    For Category A projects, MCC will require an Environmental Impact 
Assessment (EIA) as a condition for disbursement of funds under a 
Compact. An Environmental Impact Assessment evaluates the potential 
environmental risks and impacts of a specific project in its area of 
influence; examines alternatives to the project; identifies ways of 
improving project selection, siting, planning, design, and 
implementation by preventing, minimizing, mitigating, or compensating 
for adverse environmental impacts and enhancing positive impacts; and 
includes the process of mitigating and managing adverse environmental 
impacts during the implementation of a project. The recommended 
contents of an Environmental Impact Assessment report are included in 
Appendix D.
    An Environmental Impact Assessment should be initiated as early as 
possible in project development and be integrated closely with the 
economic, financial, institutional, social, and technical analyses of a 
proposed project.
    An Environmental Impact Assessment should take into account the 
natural environment (air, water, and land); human health and safety; 
social aspects (involuntary resettlement, indigenous peoples and 
cultural property); and transboundary and global environmental aspects.
    An Environmental Impact Assessment should also take into account 
specific host-country conditions; the findings of host-country 
environmental studies; National Environmental Action Plans (NEAPs); the 
host country's overall policy framework and national legislation; the 
capabilities of the entity implementing the project, as they relate to 
managing environmental and social impacts; and obligations of the host 
country under relevant international environmental treaties and 
agreements.
    While the completion of the Environmental Impact Assessment is

[[Page 10692]]

the responsibility, either directly or indirectly, of the host country, 
MCC will advise and consult on Environmental Impact Assessment 
requirements. MCC will review the findings and recommendations of the 
Environmental Impact Assessment to ensure their consistency with these 
guidelines, and where appropriate, may require additional assessment 
work, including public consultation and information disclosure (see 
below).

Category B Projects

    For environmental Category B projects, the MCC will require 
specific environmental analyses, as appropriate. The scope and format 
of the analyses will depend on the project and its environmental 
impacts. Generally, the scope of such work will be narrower than for 
Category A projects.

Category C Projects

    Environmental Category C projects are unlikely to have adverse 
environmental impacts. However, the MCC reserves the right to require 
specific environmental studies, reporting, or training where relevant 
or where positive environmental impacts may be enhanced.

Public Consultation

    Consistent with MCC's principles of host-country ownership of the 
projects implemented under its Compact, implementing entities will be 
expected to allow meaningful public consultation in the development of 
Compact-related Environmental Impact Assessments and make public the 
results of Environmental Impact Assessments.

Monitoring

    In order to ensure compliance with measures to mitigate any adverse 
environmental impacts of projects undertaken pursuant to a Compact, MCC 
may condition MCC funding for the project on satisfactory 
implementation of those mitigation measures. The host country will be 
responsible for appropriate monitoring of project Environmental Impact 
Assessments during the term of the Compact. MCC will monitor compliance 
through the review of information provided by the implementing entity 
and through site visits.
    These guidelines will be referenced and reflected in the Compact. 
The Compact will include a prohibition, for the full term of the 
Compact, on funding projects deemed likely to cause a significant 
environmental, health, or safety hazard.

Reporting

    MCC will require regular reporting on all projects for which an 
Environmental Impact Assessment was completed and as otherwise 
requested by MCC. The reports should provide detailed information on 
realized environmental impacts and the status of the implementation of 
the Environmental Management Plan, including associated costs. MCC may 
modify its guidance to project implementers following the review of 
such reports.

Appendix A: Definitions

    Environmental, Health or Safety Hazard--A project is deemed 
``likely to cause a significant environmental, health, or safety 
hazard'' and, therefore, prohibited from receiving MCC funding, if:
    (a) As a result of the project, even with mitigation efforts and 
proper use, there exists or will exist a substance, condition, or 
circumstance that represents a significant risk of harm to the 
environment or to human health because of the physical, chemical or 
biological effects of such substance, condition or circumstance;
    (b) The project involves or will involve the production, 
procurement or intentional release of:

--Persistent Organic Pollutants (POPs) that the United States 
Environmental Protection Agency (USEPA) has identified as of 
greatest concern to the global community;\3\
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    \3\ http://www.epa.gov/oppfeadl/international/pops.htm.
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--Any pesticide or industrial or consumer chemical that is listed by 
the United States Environmental Protection Agency as ``banned'' or 
``severely restricted'' under the Prior Informed Consent (PIC) 
Program;\4\ or
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    \4\ http://www.epa.gov/oppfeadl/international/piclist.htm.
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--A product (including an emission or effluent) that is prohibited 
or strictly regulated in the United States because its toxic effects 
on the environment create a serious public health risk; or

    (c) The project is a physical project that is prohibited or 
strictly regulated by Federal law in the United States to protect 
the environment from radioactive substances, unless the MCC has made 
a final determination, taking into account a thorough Environmental 
Impact Assessment, that the project is not likely to cause a 
significant environmental, health, or safety hazard.
    Environmental Impact Assessment (EIA)--Analysis that identifies 
the potential environmental risks and impacts of a specific project 
in its area of influence; examines alternatives to the project; 
identifies ways of improving project selection, siting, planning, 
design, and implementation by preventing, minimizing, mitigating, or 
compensating for adverse environmental impacts and enhancing 
positive impacts; and includes the process of mitigating and 
managing adverse environmental impacts during the implementation of 
a project. The scope and level of detail in an Environmental Impact 
Assessment should be commensurate with a project's potential impact. 
At a minimum, an Environmental Impact Assessment should include the 
information outlined in Appendix D: Environmental Impact Assessment 
Reports (also sometimes referred to as Environmental Impact 
Statements).
    Environmental Management Plan (EMP)--An Environmental Management 
Plan describes mitigation, monitoring and institutional measures to 
be taken during project implementation to eliminate adverse impacts, 
offset them, or reduce them to acceptable levels.

Appendix B: Procedures Implementing Executive Order 12114

    This Appendix sets forth the procedures that MCC will use to 
implement Executive Order 12114, January 4, 1979, 44 FR 1957 
(January 9, 1979) (the ``Executive Order'').

1. Actions Covered

    The MCC officer having the ultimate responsibility for 
authorizing and approving actions will take into consideration an 
appropriate environmental review before authorizing and approving 
any
    a. Major Federal action that significantly affects the 
environment of the global commons outside the jurisdiction of any 
nation (e.g., the oceans);
    b. Major Federal action that significantly affects the 
environment of a foreign nation not involved or participating with 
the United States in the action; or
    c. Major Federal action outside the United States that 
significantly affects natural or ecological resources of worldwide 
importance which the President has designated for protection or, in 
the case of resources protected under a binding international 
agreement, by the Secretary of State.

2. Type of Environmental Review

    a. For actions specified in 1.a above, MCC will consider an 
Environmental Impact Assessment.
    b. For actions specified in 1.b or 1.c above, MCC will take into 
consideration an appropriate environmental review in accordance with 
the criteria in the ``Environmental Review'' section of these 
guidelines.

3. State Department Coordination

    MCC will contact the State Department for coordination of all 
communications with foreign governments concerning environmental 
agreements and other arrangements to implement sections 1 and 2 
above.
    Appendix C: Illustrative List of Sensitive Sectors and Sensitive 
Locations \5\
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    \5\ Source. EBRD Environmental Policy (http://www.ebrd.org/enviro/index.htm, also in use under the Organization for Economic 
Co-operation and Development (OECD) ``Common Approach.''
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    The following list is indicative and the types of projects it 
contains are examples only. This list is not intended to be 
exhaustive.

--Crude oil refineries (excluding undertakings manufacturing only

[[Page 10693]]

lubricants from crude oil) and installations for the gasification 
and liquefaction of 500 tons or more of coal or bituminous shale per 
day.
--Thermal power stations and other combustion installations with a 
heat output of 300 megawatts or more and nuclear power stations and 
other nuclear reactors, including the dismantling or decommissioning 
of such power stations or reactors (except research installations 
for the production and conversion of fissionable and fertile 
materials, whose maximum power does not exceed 1 kilowatt continuous 
thermal load).
--Installations designed for the production, or enrichment of 
nuclear fuels, the reprocessing, storage or final disposal of 
irradiated nuclear fuels, or for the storage, disposal or processing 
of radioactive waste.
--Integrated works for the initial smelting of cast-iron and steel; 
installations for the production of nonferrous crude metals from 
ore, concentrates or secondary raw materials by metallurgical, 
chemical or electrolytic processes.
--Installations for the extraction of asbestos and for the 
processing and transformation of asbestos and products containing 
asbestos: for asbestos-cement products, with an annual production of 
more than 20,000 tons finished product; for friction material, with 
an annual production of more than 50 tons finished product; and for 
other asbestos utilization of more than 200 tons per year.
--Integrated chemical installations, i.e., those installations for 
the manufacture on an industrial scale of substances using chemical 
conversion processes, in which several units are juxtaposed and are 
functionally linked to one another and which are for the production 
of: basic organic chemicals; basic inorganic chemicals; phosphorous-
, nitrogen- or potassium-based fertilizers (simple or compound 
fertilizers); basic plant health products and biocides; basic 
pharmaceutical products using a chemical or biological process; 
explosives.
--Construction of motorways, express roads and lines for long-
distance railway traffic and of airports with a basic runway length 
of 2,100 meters or more; construction of a new road of four or more 
lanes, or realignment and/or widening of an existing road so as to 
provide four or more lanes, where such new road, or realigned and/or 
widened section of road would be 10 km or more in a continuous 
length.
--Pipelines, terminals, and associated facilities for the large-
scale transport of gas, oil, and chemicals.
--Sea ports and also inland waterways and ports for inland-waterway 
traffic which permit the passage of vessels of over 1,350 tons; 
trading ports, piers for loading and unloading connected to land and 
outside ports (excluding ferry piers) which can take vessels of over 
1,350 tons.
--Waste-processing and disposal installations for the incineration, 
chemical treatment or landfill of hazardous, toxic or dangerous 
wastes.
--Large \6\ dams and other impoundments designed for the holding 
back or permanent storage of water.
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    \6\ A large dam is a dam with a height of 15 meters or more from 
the foundation or a dam that is between five and 15 meters high with 
a reservoir volume of more than three million cubic meters (the 
definition used by the International Commission on Large Dams 
(ICOLD)).
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--Groundwater abstraction projects or artificial groundwater 
recharge schemes in cases where the annual volume of water to be 
abstracted or recharged amounts to 10 million cubic meters or more.
--Industrial plants for the (a) production of pulp from timber or 
similar fibrous materials; (b) production of paper and board with a 
production capacity exceeding 200 air-dried metric tons per day.
--Peat extraction, quarries and open-cast mining, and processing of 
metal ores or coal.
--Extraction of petroleum and natural gas for commercial purposes.
--Installations for storage of petroleum, petrochemical, or chemical 
products with a capacity of 200,000 tons or more.
--Large-scale logging.
--Municipal wastewater treatment plants with a capacity exceeding 
150,000 population equivalent.
--Municipal solid waste-processing and disposal facilities.
--Large-scale tourism and retail development.
--Construction of overhead electrical power lines.
--Large-scale land reclamation.
--Large-scale primary agriculture/silviculture involving 
intensification or conversion of natural habitats.
--Plants for the tanning of hides and skins where the treatment 
capacity exceeds 12 tons of finished products per day.
--Installations for the intensive rearing of poultry or pigs with 
more than: 40,000 places for poultry; 2,000 places for production 
pigs (over 30 kg); or 750 places for sows.
--Projects that are planned to be carried out in sensitive locations 
or are likely to have a perceptible impact on such locations, even 
if the project category does not appear in the above list. Such 
sensitive locations include National Parks and other protected areas 
identified by national or international law, and other sensitive 
locations of international, national or regional importance, such as 
wetlands, forests with high biodiversity value, areas of 
archaeological or cultural significance, and areas of importance for 
indigenous peoples or other vulnerable groups.

Appendix D: Environmental Impact Assessment Reports \7\

    The scope and level of detail of an Environmental Impact 
Assessment should be commensurate with the potential impacts of the 
project. The Environmental Impact Assessment report should include 
the following items (not necessarily in the order shown):
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    \7\ This Appendix is based on the World Bank Operational Manual, 
OP 4.01, which is also in use under the Organization for Economic 
Co-operation and Development (OECD) ``Common Approach.''
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     Executive summary: concisely discusses significant 
findings and recommended actions.
     Policy, legal and administrative framework: discusses 
the policy, legal, and administrative framework within which the 
Environmental Impact Assessment is carried out.
     Project description: describes the proposed project and 
its geographic, ecological, social, and temporal context, including 
any offsite investments that may be required (e.g., dedicated 
pipelines, access roads, power plants, water supply, housing, and 
raw material and product storage facilities). Indicates the need for 
any resettlement or social development plan. Normally includes a map 
showing the project site and the project's area of influence.
     Baseline data: assesses the dimensions of the study 
area and describes relevant physical, biological, and socio-economic 
conditions, including any changes anticipated before the project 
commences. Also, it takes into account current and proposed 
development projects within the project area but not directly 
connected to the project. Data should be relevant to decisions about 
project location, design, operation, or mitigatory measures; the 
section indicates accuracy, reliability and sources of the data.
     Environmental Impacts: predicts and assesses the 
project's likely positive and negative impacts, including the impact 
on involuntary resettlement, indigenous peoples and cultural 
property, in quantitative terms to the extent possible. It 
identifies mitigation measures and any residual negative impacts 
that cannot be mitigated. It explores opportunities for 
environmental enhancement. Identifies and estimates the extent and 
quality of available data, key data gaps, and uncertainties 
associated with predictions, and specifies topics that do not 
require further attention.
     Analysis of alternatives: systematically compares 
feasible alternatives to the proposed project site, technology, 
design and operation-including the ``without project'' situation-in 
terms of their potential environmental impacts; the feasibility of 
mitigating these impacts; their capital and recurrent costs; their 
suitability under local conditions; and their institutional, 
training and monitoring requirements. For each of the alternatives, 
it quantifies the environmental impacts to the extent possible, and 
attaches economic values where feasible. It states the basis for 
selecting the particular project design proposed and justifies 
recommended emission levels and approaches to pollution prevention 
and abatement.
     Environmental Management Plan: describes mitigation, 
monitoring and institutional measures to be taken during project 
implementation to eliminate adverse impacts, offset them, or reduce 
them to acceptable levels.
     Consultation: lists and describes consultation 
meetings, including consultations for obtaining the informed views 
of the affected people, local nongovernmental organizations and 
regulatory agencies.


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    Dated: February 28, 2005.
Frances C. McNaught,
Vice President, Domestic Relations, Millennium Challenge Corporation.
[FR Doc. 05-4216 Filed 3-3-05; 8:45 am]
BILLING CODE 9210-01-U