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Mr. Chairman, I appreciate the opportunity to submit this statement for the record of this important hearing. I am Thomas B. Stoel, Jr., Director of the International Program of the Natural Resources Defense Council (NRDC). NRDC is one of the Nation's leading environmental organizations, with more than 75,000 members located in every state and many foreign countries.

NRDC has been working for more than five years to improve the environmental performance of the multilateral development banks (MDBS). We are convinced that the environmental performance of the MDBS would be greatly enhanced if they systematically prepared environmental assessments (EIAS) similar to those required of all federal agencies under the National Environmental Policy Act (NEPA). The lack of this kind of systematic procedure is one of the main reasons why the environmental performance of the MDBs has been so bad.

Requiring that EIAs be prepared would ensure that the staffs of the MDBs take environmental impacts into account in designing projects. In addition, if each EIA were required to be available to the U.S. Government and U.S. public a reasonable time before votes on proposed MDB actions, it would enable the U.S. Government to engage in an orderly, informed decisionmaking process.

Equally important, this requirement would enable all other members of the MDBs' boards to take account of environmental impacts when they vote on proposed MDB loans. currently, only the U.S. board members have even a rudimentary capability to do this, and then only in the case of the Washington-based MDBs (the world Bank and Inter-American Development Bank). Other members of the MDBS' boards often learn about proposals for large,

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complex MDB loans only two weeks before they have to vote. As a consequence, the United States often has abstained alone on environmental grounds, with the result that environmentally harmful loans have been made over our objection.

It would be especially helpful if the MDBs were required to consider alternatives to the projects they propose to support, as is required under NEPA. This would mean, for example, that the MDBS would have to consider smaller-scale alternatives to environmentally harmful "mega-projects" and energy conservation as an alternative to energy production facilities.

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Many of the problems relevant to environmental impact assessment by the MDBS have been addressed successfully by the U.S. Agency for International Development (AID). Late in 1975, AID settled a NEPA lawsuit brought by NRDC and others by agreeing to adopt environmental regulations. Those regulations, now found at 22 CFR Part 216, require that an Environmental Impact Assessment (EIA) be prepared concerning every proposed action which might cause significant harm to the environment.

These EIAS must consider both the environmental consequences of the proposed action and alternatives to it. EIAS are available to the public under the Freedom of Information Act, but drafts are not circulated for comment outside the Agency (AID also is required to prepare full-scale environmental impact statements in a few circumstances, and these must be circulated more widely).

In 1981 (see 95 Stat. 1533), the Congress codified the AID procedure in what is now section 117(c) of the Foreign Assistance Act, which provides in relevant part:

"Subject to such procedures as the President considers appropriate, the President shall require all agencies and officials responsible for programs or projects under (Chapter I of the Act]

(B) to prepare and take fully into account an environmental assessment of any proposed program or project under this chapter significantly affecting the environment of any foreign country. ..

Like the MDBS, AID is a development aid agency the largest bilateral aid agency. AID'S EIA procedures have worked very well. They provide a good model for the MDBS.

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III.

The possibility of Requiring Treasury To Prepare

Full-Scale EISS Under NEPA

Section 102(2)(C) of NEPA requires every federal agency to prepare an environmental impact statement on every recommendation or report on a proposal for a major federal action "significantly affecting the quality of the human environment." The EIS must assess both environmental impacts and alternatives. It must accompany the proposal through the agency decisionmaking process. Prior to any decision, the EIS must be circulated to relevant federal, state, and local governmental agencies for comment, and must be made available to the public pursuant to the Freedom of Information Act.

One obvious possibility is simply to apply Section 102(2)(C) to the Treasury Department, by making it clear that recommended votes on proposed MDB actions (mainly proposed loans) are within the ambit of NEPA.

This approach has the advantage of simplicity, but is not ideal. Some of the circulation and comment procedures for EISS under NEPA seem ill-suited to the way the MDBS operate. And a phase-in period seems a necessity.

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NRDC believes that the best approach would be to amend section 102 of NEPA to add a new paragraph (D) as follows:

"(D) Include in every recommendation for a U.S.
vote on a proposed action by a multilateral development
bank of which the United States is a voting member that
would affect significantly the quality of the human
environment a detailed environmental impact assessment
meeting the same requirements as to content as are
required for environmental impact statements under
paragraph (C). That assessment must be available to
the U.S. official responsible for the recommendation
not less than 120 days before the date of the vote in
question; shall accompany the recommendation through
the subsequent agency review process; and shall be made
available to the public as soon as possible pursuant to
section 552 of title 5, United States Code. This
requirement shall apply only to votes taken more than
two years after the enactment of this statute. After
that date, the United States shall not vote in favor of
any such action unless this requirement is met, unless
the President finds that such a vote is essential to
img ortant economic or security interests of he United
States. The President shall report to the Congress the

reasons for any such finding within 30 days of the vote in question."

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NRDC recommends the following report language:

"Actions taken by multilateral development banks (MDBS) of which the United States is a voting member

such as loans to support tropical deforestation and construction of large dams have enormous adverse environmental impacts. Often, such actions have been approved without understanding these impacts, resulting in unnecessary harm to the environment. The Committee finds that the lack of systematic procedures for assessing environmental impacts is a major reason why the environmental performance of the MDBs has been so poor.

This amendment adds a new paragraph to section 102(2), the purpose of which is to induce the MDBS of which the United States is a voting member to prepare environmental impact assessments similar to those required of all federal agencies under current section 102(2)(C). The Committee believes that this will would greatly improve the environmental performance of the MDBS.

Preparation of an EIA will ensure that the MDBS take environmental impacts into account in designing projects. It will enable the U.S. Government to engage in an orderly, informed decisionmaking process. It also will enable the other members of the MDBs' boards to take account of those impacts when they vote. Currently, only the U.S. board members have even a rudimentary capability to do this, and usually only with respect to the Washington-based MDBS (the World Bank and Inter-American Development Bank). AS a consequence, the United States often has abstained alone on environmental grounds, with the result that environmentally harmful loans have been made over our objection.

The amendment will require the MDBS to consider alternatives to the projects they propose to support, as U.S. agencies are required to do under NEPA. This means, for example, that the MDBs will have to consider smaller-scale alternatives to huge, environmentally harmful "mega-projects" and energy conservation as an alternative to energy production facilities.

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The Committee does not intend that the responsible Federal agency (currently the Department of the Treasury) shall prepare the environmental impact assessment required under this amendment. This should be done by the multilateral bank in question. The Committee expects the Treasury Department to work with the MDBs to develop feasible procedures to be followed by the MDBS in preparing EIAS which satisfy the content requirements of section 102(2)(C) (including the requirement that alternatives to the proposed action be considered). In doing so, the Committee recommends that the Treasury and the MDBS draw on the experience of the U.S. Agency for International Development, which has developed highly successful EIA procedures, currently found at 22 CFR Part 216.

The Committee recognizes that this requirement cannot be implemented immediately, since many MDB projects are now in late stages of development. Accordingly, the requirement applies only to votes occurring more than two years after the enactment of this amendment. However, the Committee urges the Treasury to work with the MDBs to implement the requirement as soon as possible.

The sanction imposed by the amendment is that the United States shall not vote in favor of a proposed action unless the EIA requirement has been met (or unless the President finds that important economic or security interests require such a vote). The Treasury (or other responsible agency) shall decide whether the requirement has been met. However, the Committee expects that the United States will have to abstain or vote negatively in few if any cases. Rather, the Committee believes that the MDBS will adopt EIA procedures which satisfy the requirements of the amendment.

The amendment allows the United States to vote in favor of a proposed action by an MDB even though the EIA requirement is not met, if the President finds that such a vote is essential to important economic or security interests of the United States. The Committee expects this to be a rare occurrence.

The amendment requires that the EIA be made available to the responsible U.S. official not less than 120 days before the date of the vote in question, ai

th U.S. public as soon as possible after

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