SOUTH CAUCASUS PIPELINE EXPANSION PROJECT GUIDE TO LAND ACQUISITION AND COMPENSATION - GEORGIA

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1 SOUTH CAUCASUS PIPELINE EXPANSION PROJECT GUIDE TO LAND ACQUISITION AND COMPENSATION - GEORGIA Applicable from July 1 st, 2016

2 This document is the Guide to Land Acquisition and Compensation prepared in June 2016 for the South Caucasus Pipeline Expansion (SCPX) project activities in Georgia. This document updates the revised version of the GLAC issued in April 2014 and is applicable to compensation undertaken from July 1 st, 2016 onwards. It was prepared by SCP Co. based on inputs from international and Georgian independent consultants specialised in land acquisition. Land acquisition for the Project has been completed hence this update focuses on the principles of orphan land and crop compensation and the description of the Project s procedures for land hand back and grievances. Should any land be required for unforeseen issues, this will be acquired based on individual valuation by a third party. This document is also available on the Reports and Publications page at Inquiries in relation to this document can be addressed to the following address or telephone number: SCP Co BP Georgia office 24 Sulkhan Tsintsadze Street (formerly 38 Saburtalo Street) 0160 Tbilisi Tel: (switchboard)

3 1 BP-MX30ZZ-EV-REP THE SCPX PROJECT The SCP Company is developing and will operate an expansion to the South Caucasus Pipeline (SCP). Called SCPX, this project aims at increasing the capacity of the existing SCP pipeline, which originates in Sangachal near Baku in Azerbaijan and ends at the Georgia Turkey border between Akhaltsikhe (Georgia) and Posof (Turkey). SCP has been in operation since 2006 and transports gas produced in the Azerbaijan field of Shah Deniz located in the Caspian Sea. The expansion project involves new sections of pipeline and associated facilities, which will be constructed at different locations in both Georgia and Azerbaijan. In Georgia, the work will involve two new sections of pipeline, shown in red on the sketch below. The first section will start at the border with Azerbaijan and will end to a location to the north-west of Marneuli (a distance of approximately 63 km). This pipeline loop will generally be parallel to the existing SCP pipeline. After this point the increased gas flow will continue in the existing SCP line. In Akhaltsikhe and Adigeni municipalities an additional 2.5km of pipeline will be constructed from the pressure reduction and metering station to the Georgian-Turkish border. In addition, there will be three new permanent above-ground facilities. Two of these facilities (a compressor station (CSG1) near the Azerbaijan Georgia border in Gardabani municipality, and a pressure reduction and metering station (PRMS) near the Georgia -Turkey border in Akhaltsikhe municipality) will be located adjacent to existing facilities. A new compressor station (CSG2) will be constructed in Tsalka municipality. Construction works began in 2014 and are ongoing. Operations are expected to begin in The pipeline will be buried under one metre of earth or more, and the land will be restored after construction. A temporary construction camp to house workers is located approximately 5km north of Rustavi. Land acquisition for all areas has been completed. The pipeline and associated facilities will be built to the highest international standards. During the construction period, and continuing into operations, there will be a programme of regular surveillance to ensure that everything is working well. 2 ORPHAN LAND In some cases, the purchase of the pipeline Land Purchase Corridor may leave sections of land on either side that will not be required for the Project and would normally not be purchased. If, however, agricultural activities on these sections of land cannot normally be continued, because of size, shape or access issues, they may qualify as so-called orphan land. Depending on the situation: - either compensation equal to the value of the original land price will be paid if the impediment to farming is permanent (for example in the case of permanent facilities), - or if agricultural activities can resume normally after construction, only crop losses experienced during construction will be compensated. Crops in orphan land will be compensated as needed based on a case by case review of actual impacts. Compensation rates are presented in Appendix 1 and are based on one year harvest at market value for annual crops and replacement value for perennial crops. Whether a parcel qualifies as orphan land will be transparently reviewed on a case-by-case basis based on a request to be lodged by the landowner to SCP Co. UNCONTROLLED WHEN PRINTED Page 3 of 9

4 3 The following criteria will be considered in this review: - Size, dimensions and shape of the orphaned part of the plot; - Access restrictions and whether these will only last for the duration of the construction period or will be permanent; - Size and nature of mechanical equipment typically used for cultivation on this plot and whether such equipment reasonably can be used given the size, shape and dimensions of the orphaned part of the plot; - Restrictions to irrigation or drainage during the construction period and/or further. In summary What is Orphan Land? - Orphan land is land that is located outside of the normal purchase area but is made uneconomic by the acquisition of part of the plot. - Orphan land may be eligible to either purchase if the disruption to agriculture is permanent or compensation for temporary losses if the disruption is for the construction period only. - Land owners who deem their land may qualify as orphan will have to lodge a request to the SCP Co. Land or Community Liaison Officers, which will be transparently reviewed on a case-by-case basis. LAND HANDBACK AND OPERATIONS Land permanently required for Above Ground Installations has been be purchased by SCP Co. Its usage will not be handed back to former users after construction is complete. The Land Purchase Corridor has been purchased by SCP Co. from its current owners and will remain in SCP Co. s ownership after reinstatement and for the life of the Project until decommissioning. After construction and reinstatement are complete, the Land Purchase Corridor will be handed back to its former owners for agricultural use, subject to re-use restrictions defined by Georgian law. Through this hand back process, former owners from whom SCP Co. purchased land in the Land Purchase Corridor will be entitled to recover a usage right over the Land Purchase Corridor, henceforth owned by SCP Co. Any agricultural use of the Land Purchase Corridor will be subject to the restrictions applicable in Zones 1 and 2. SCP Co. will be able to access Zone 1 and Zone 2 land at any time for surveillance and maintenance of the pipeline, and any damage that may occur in respect of such access will be compensated to land users. 4 In summary What is the Land Purchase Corridor? - The Land Purchase Corridor (31, 36 or 41 m in width) has been purchased by SCP Co. before construction and will remain in SCP Co. s property for the life of the pipeline; - Agricultural use in the Land Purchase Corridor will be handed back to former owners after construction and reinstatement are completed (3 years), subject to restrictions applicable in Zone 1 and 2; - Land required on a temporary basis for pipeline construction will be leased for the duration of construction Land purchased permanently for construction camps will also be handed back after construction and reinstatement. Land required on a temporary basis for pipeline, AGI or Facilities construction which has been leased from current landowners will be returned to owners after construction and reinstatement, based on lease agreements. LAND EXIT AGREEMENT Where the right to use land for agricultural purpose is to be handed back to the former owner or user (Pipeline Land Purchase Corridor only), the Project Land Acquisition Team and the construction contractors will carry out an exit inspection with the previous land owner/user of all his/her land that was used during the construction period. The aim of this inspection is to ensure that the land has been left in a suitable state such that previous agricultural activities may be resumed on the land, subject to safety restrictions stipulated by Georgian law. Subject to the consent of the former land owner, the usage right of the affected land plot will be handed back free of charge to him/her for agricultural activities. During the exit inspection the landowner/user will also be provided with the information in respect of permissible and restricted activities on the land plot, and contact details of the team responsible for the long-term monitoring of the project. The land exit agreement will include this information and will be signed by the construction contractor and the affected landowner or land user, and by SCP Co. as a witness. This agreement will confirm that all parties are satisfied with the quality of the reinstatement. UNCONTROLLED WHEN PRINTED Page 4 of 9

5 5 DISPUTES AND GRIEVANCES The project will apply best endeavours to resolve any grievances related to the project through an amicable settlement, rather than through the judicial system. An amicable grievance procedure has been developed by BTC/SCP according to the following principles: - Any grievance will be registered and acknowledged receipt of within 7 calendar days of its receipt, responded to by SCP Co. within 30 calendar days of its receipt, and tracked until it is closed; - The grievance procedure will include a first level of review of grievances internal to SCP Co.; within 30 days of receipt SCP Co. will review the grievance, check available documentation, do verifications in the field if needed, and propose a resolution to the complainant; - If this proposed resolution is not acceptable to the complainant, SCP Co. will propose to the complainant to address the grievance to an external mediation body, which will in turn review the grievance, hear both parties, and propose a resolution; if this resolution is accepted by SCP Co, it will be proposed in writing to the complainant and will henceforth become binding to SCP Co.; - If this second proposed resolution is not acceptable to the complainant, either party will be able to resort to Justice; - The process will be free of charge to the complainant. This grievance procedure remains optional, at the discretion of the complainant, and will not prevent complainants from exercising their rights under Georgian law, including by applying to a Court of Law at any stage. In case of a complaint, the initial application by the complainant will be made to SCP Co. The following avenues are available to lodge a complaint: - to SCP Co. Land Officers or Community Liaison Officers, verbally or in writing; - to SCP Co. offices in writing, at the following address: SCP Co - BP Georgia office 24 Sulkhan Tsintsadze Street (formerly 38 Saburtalo Str.) 0160 Tbilisi Tel: (switchboard) In summary Grievances: - An amicable grievance procedure will be established by SCP Co. to handle any grievance related to the SCPX land acquisition and compensation programme in an amicable manner rather than applying to Justice. - Any grievance will be acknowledged receipt of in writing within 7 calendar days and a first resolution will be proposed by SCP Co. within 30 calendar days. - If the complainant is not satisfied with the proposed resolution, he or she will be able to apply to an external mediator, who will also propose a resolution after relevant hearings and verifications. - If the complainant is still unsatisfied, he or she will be able to apply to Justice (and would be able to apply to Justice at any time in this process anyway). UNCONTROLLED WHEN PRINTED Page 5 of 9

6 APPENDIX 1 COMPENSATION RATES FOR CROPS ANNUAL CROPS Gardabani Crop Compensation Rate (GEL/ha) Wheat 2,160 2 Barley 1,770 3 Maize 4,130 4 Broom 3,987 5 Hay Cabbage 19,809 7 Cucumber 48,473 8 Tomato 78,097 9 Aubergine 57, Beetroot (vegetable) 26, Onion 39, Watermelon 38, Potato 23, Radish 9, Spinach 7, Mellon 19, Lucerne 2, Capsicum 16, Carrot 24, Garlic 54, Beans 9,812 UNCONTROLLED WHEN PRINTED Page 6 of 9

7 Akhaltsikhe Crop Compensation Rate (GEL/ha) 1 Winter wheat 2,443 2 Spring wheat 2,443 3 Barley 2,100 4 Oat 1,125 5 Maize 2,550 6 Straw Hay French beans 24,570 9 Cabbage 88, Cucumber 81, Tomato 159, Carrot 90, Beetroot 75, Onion 39, Spring onion 67, Capsicum 55, Sweet pepper 36, Radish 2, Garlic 50, Potato 26, Kidney beans 4, Lucerne 1, Aubergine 59, Salad 46,110 Tsalka Crop Compensation rate 2016 (GEL/ha) 1 Winter wheat 2,440 2 Barley 1,800 3 Hay Cabbage 35,400 5 Potato 20,216 6 Tomato 52,800 7 Onion 30,530 8 Garlic 76,000 9 Onobrychis 1,750 UNCONTROLLED WHEN PRINTED Page 7 of 9

8 COMPENSATION RATES IN GEL PER TREE FOR PERENNIAL CROPS (TREES) Gardabani Tree / crop Non-bearing 1 Low-yielding 2 Mature-yielding 3 1 grape Apple Pear Cherry ,250 5 Sweet cherry 100 1,943 6,426 6 Peach Walnut Plum Wild Plum Akhaltsikhe Tree / crop Non-bearing 1 Low-yielding 2 Mature-yielding 3 1 grape Apple Pear Cherry ,229 5 Sweet cherry 100 1,910 6,318 6 Peach Walnut Plum Wild Plum Currant Definitions: 1 Non-Bearing covers the period prior to the beginning of fructification. 2 Low-yielding covers the period from the beginning of fructification until mature yielding, and from the beginning of aging until the end of fructification. 3 Mature-yielding covers the period from mature yielding until the beginning of aging. For clarity, please also refer to the following table showing the amounts of average annual yields (kg) of a single tree over the periods of low yielding and mature yielding. UNCONTROLLED WHEN PRINTED Page 8 of 9

9 Municipality Perennial crop (tree) Average annual yield per tree during its lowyielding period (kg) Average annual yield per tree during its matureyielding period (kg) Gardabani 1 Grape Apple Pear Cherry Sweet cherry Peach Walnut Plum Wild plum Akhaltsikhe 1 Grape Apple Pear Cherry Sweet cherry Peach Walnut Plum Wild plum Currant UNCONTROLLED WHEN PRINTED Page 9 of 9

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