New EIA Compliance Requirements for Construction Projects

Environmental Protection Series 2 —— Issues Concerning Legal Compliance with Environmental Impact Assessment and the Completion and Acceptance of Environmental Protection Facilities

 Introduction

The Chinese Government is implementing changes to the environmental impact assessment system for construction projects. The assessment system applies to all stages of construction projects that may impact on the environment, from the start of the project through to commencement of production or usage. There are three main stages in the impact assessment system, with the relevant enterprise (most likely to be the owner of such project) required to: (i) hire a qualified agency to undertake an environmental impact assessment; (ii) apply to the competent environmental protection authority (the “EPA”) for environmental impact assessment approval (the “EIA Approval”); and (iii) on acceptance of the environmental protection facilities, formally commence construction.

In recent years, it has been not uncommon for construction projects to commence without the required approval. However, approval is mandatory and, as outlined below, if not followed, enterprises could be subject to severe punishment.

On July 16, 2017, the State Council issued its Decisions of State Council on the Revision of the Administrative Regulations on Environmental Protection for Construction Projects ("Revisions"), which includes revisions to several provisions of the Administrative Regulations on Environmental Protection for Construction Projects ("Regulations") issued in 1998. Under the Revisions, the enterprise itself, and no longer the EPA, is now responsible for acceptance of the environmental protection facilities In light of these regulatory changes, we provide our commentary on several issues of relevance to an enterprise’s (and in particular a manufacturer’s) legal compliance with environmental impact assessment and environmental protection completion and acceptance for new construction projects, refurbishment projects and expansion to existing construction projects.

I. Environmental Impact Assessment during the Feasibility Phase of a Construction Project

During the feasibility phase of a construction project, an enterprise shall hire a professional agency with environmental impact assessment qualifications (the “Agency”) to assist in preparing an environmental impact report ("Report"), an environmental impact statement ("Statement") or the required environmental impact registration forms ("Registration Form"). The aforementioned process is known as the "Environmental Impact Assessment" or “EIA”, and the Report, Statement and Registration Form are collectively the “EIA Documents”. Which of the EIA Documents is required will depend upon the construction project’s likely impact on the environment. This is based on the category of construction project for EIA as below, and published by the national EPA (the Ministry of Environmental Protection).

Impact of Construction Project on the Environment

EIA Document

May have significant impact on the environment

Report

May have slight impact on the environment

Statement

May have minimal impact on the environment and there is no need for EIA

Registration Form

In preparing the EIA Documents, the Agency shall adopt reasonable and practicable standards based on the actual conditions of the construction project. It shall meet the requirements of completion and acceptance and shall not adopt unrealistically high standards, which might then result in the failure of completion and acceptance or other difficulties during the production in the future.

II. Environmental Impact Assessment needs to be approved by the EPA

Under the previous Regulations, all construction projects were required to apply to the EPA for approval of the EIA, even if the project was likely to have only minimal impact on environment. With the introduction of Revisions, in those cases of likely minimal environmental impact, the required Registration Form can be filed with the local, county level EPA, and the EIA does not need to be approved as such. Construction projects that are likely to have a slight or significant impact on the environment will be required to lodge a Report or Statement with the EPA in order to obtain their necessary EIA approval document (the “EIA Approval”). The EIA Approval is essentially a type of administrative license. The authorities, procedures and contents for issuance are clearly defined in the Environmental Impact Assessment Law.

An enterprise shall not start construction without receiving the EIA Approval issued by the EPA or filing the Registration Form with the EPA, as appropriate. The Revisions increase the overall severity of administrative liabilities applied to any violation of the Regulations. If an enterprise starts construction without submitting the necessary Report or Statement for approval or prior to filing the Registration Form with the EPA, it may be ordered by the EPA to stop the construction, be subject to a fine ranging from 1% to 5% of the total cost of the construction project based on the seriousness of the illegal act and the harm caused, and ordered to reinstate the site to its original condition. The responsible manager and other directly responsible personnel may receive administrative punishment.

III. Construction of Environmental Protection Facilities and Completion and Acceptance

After obtaining the EIA Approval, the enterprise shall simultaneously undertake both the main construction project and implement the environmental protection facilities. This is referred to as “Three at the same time”, meaning that the design, construction and operation of the main project should be undertaken at the same time as those for its associated environmental protection facilities. Where there is a significant change to the nature, scale, or location of the construction project, or the production techniques adopted by the construction project, or the measures to prevent pollution or ecological damage (“Significant Change”), the enterprise shall, as appropriate, re-file the Registration Form or re-submit their EIA Documents to the EPA for EIA Approval. Only on completion and acceptance of the environmental protection facilities can the project be formally put into production.

With the exception of certain situations detailed below, the Revisions no longer require an enterprise to apply to the EPA for completion and acceptance of the environmental protection facilities. The enterprise shall itself conduct the construction inspection and acceptance, in accordance with the Provisional Provisions for the Environmental Protection Acceptance and Inspection of Construction Project Completion issued by the national EPA and any specific acceptance inspection criteria or guidelines issued by the local authorities to accept and inspect the ancillary environmental protection facilities. Having done so, the enterprise shall then prepare a completion and acceptance inspection report. Unless it includes information deemed to be confidential under national regulations, the enterprise shall disclose the completion and acceptance inspection report to the public, make it available on the internet, and also allow for public inspection.

Pursuant to the Law on the Prevention and Control of Environmental Pollution Caused by Solid Wastes¹ and the Law on the Prevention and Control of Noise Pollution², any associated noise or solid waste pollution prevention and control facilities required for a construction project are still subject to inspection and acceptance by the EPA. In practice, this means that any construction project discharging solid waste and/or noise is still required to apply to the EPA for inspection and acceptance of the environmental protection facilities.

The Revisions clearly stipulate that where the construction project is put into production or use without the ancillary environmental protection facility having being constructed, inspected or accepted, the EPA may order the enterprise to make correction within a stipulated period and impose a fine ranging from RMB200,000 to RMB1,000,000. Where the required correction is not made within the stipulated period, a further fine ranging from RMB1,000,000 to RMB2,000,000 may be imposed. Additionally, for each responsible manager or other directly responsible personnel, a fine ranging from RMB50,000 to RMB200,000 may be imposed. Under extreme circumstances, production or use of the project may be suspended, or the project may be closed down.

IV. Impact of the Revised Regulations in Practice

Generally speaking, the Revisions reflect a major change in the regulatory approach of the EPAs. Post hoc regulatory supervision should improve, public supervision is being encouraged and there will be significant increases in penalties for non-compliance. Prior to the implementation of the Revisions, EPAs in many provinces were facing a large volume of applications for completion and acceptance of environmental protection facilities, resulting in long delays in the approval process. By setting out to encourage legal compliance on the part of enterprises and handing back responsibility for the environmental protection elements of their construction projects, the Revisions should improve the efficiency of the construction project process.

Summary

Against the background of strengthening environmental protection supervision in China, any enterprise carrying out a new construction project needs to take steps to ensure it is in compliance with the laws and regulations on EIA and that it has the necessary completion and acceptance of the environmental protection facilities. Enterprises shall also inspect and confirm whether projects it is constructing and operating have been through the relevant approval procedures. In the case of any significant change, in order to avoid non-compliance, the enterprise shall ensure that the EIA and the completion and acceptance of the environmental protection facilities have been conducted again.

For any enquiries about these matters, please contact us by email: [e-mail].

1. Draft has been issued for public comments

2. This Law has not as yet been revised

Environmental Protection

ZHU, He (George) 

[e-mail]

Practice Area

Corporate and M&A

Infrastructure and Project Finance

Banking and Finance

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Carey Ni

Associate

[e-mail]

Yiyi Liu

Associate

[e-mail]

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