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 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 the 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 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 EIA 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 EIA 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 EIA 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’ socioeconomy . . .
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
villagers, who 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 the downstream Theun-Hinboun Hydropower
Project, now six years after commercial operation began, 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?

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 a community forestry area. However, even the developers aren’t
optimistic about this plan. 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 nontimber 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.” Dam operations 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 Gráinne 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.”