EXECUTIVE SUMMARY

1.0

INTRODUCTION

Tenaga Nasional Berhad (TNB) is planning to construct and operate a 212MW Hulu Terengganu Hydroelectric Project. The proposed Project comprises two storage reservoirs namely the Puah Reservoir (6,000 ha) and Tembat Reservoir (130 ha), two dams (one each at Sg. Terengganu Mati and Sg. Tembat), an underground power house, and an 802 m diversion tunnel between the Tembat and Puah Reservoirs. This hydroelectric development will generate an average of 406 GWh peaking energy per annum to the national grid. Timbers will be extracted from the proposed 6,130 ha of the inundated area (Tembat and Puah Reservoirs) and the Terengganu State Government has further decided to extract timber from the 12,620 ha of the proposed catchment areas around the Tembat and Puah Reservoirs. The proposed project is expected to be completed by the end of 2012.

2.0

LEGAL REQUIREMENT

The proposed Hulu Terengganu Hydroelectric Project and the logging of 18,750 ha of indundated and catchment areas are prescribed activities under the following schedules of the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order, 1987 as follows: 6. Forestry (b) Logging or conversion of forest land to other land use within the catchment area of reservoirs used for municipal water supply, irrigation or hydro-power generation or in areas adjacent to state and national parks and national marine parks. (c) Logging covering an area of 500 hectares or more. Power Generation and Transmission (b) Dams and hydroelectric power schemes with either or both of the following: i. Dams over 15 meters high and ancillary structures covering a total area in excess of 40 hectares ii. Reservoirs with a surface area in excess of 400 hectares.

13.

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3.0

STATEMENT OF NEED

The needs for the hydroelectric power plants are as follows; To meet Peak Power Demand The electricity load profile in Peninsular Malaysia has a large portion of base load, approximately 10,000MW and about 4,000MW of peak demand. To provide for a safe and reliable power system, electricity demand must be met by a combination of base-load and peaking power plants. Base load demand is usually supplied by power plants that operate on long duty cycle providing power output at a constant load. Most of these power plants are either coal-fired steam plants or gas fired combined cycle plants. Peaking plants usually operates on short duty cycle at varying loads. These stations have fast start-up capability that would be able to come into the system in a very short time and would be taken off once the peak periods are over. Currently, the types of power plants that are capable of providing peaking duty, in terms of technology and economics are the open cycle gas turbines (OCGT) and hydroelectric power plants. Reliable Fuel Source In ensuring effective and reliable power plants, their fuel source should be readily available and not subjected to market volatility and availability. The price of fuel (oil) has increase rapidly in the last few years, and once peaked at USD147 per barrel in July 2008. The limited supply of gas by Petronas for the power sector, capped at 1,350 mmscfd, means that there will be very little spare capacity to meet additional requirement for the power sector. Water, on the other hand is relatively abundant, renewable and cheap. It is therefore the strategy of the Government and TNB to meet the growth in base-load and peak-load power by non-gas fuel sources. Coal-fired thermal plants (Tanjong Bin, Jimah and Manjung) and possibly hydro resources from Sarawak will be expected to meet base-load demand growth in the next 10 years. As for peak-load, the only economic non-gas option will be to harness the remaining hydroelectric resources in Peninsular Malaysia. Reducing Carbon Emission Another advantage of opting for hydropower instead of OCGT is the potential reduction in carbon emission. The Hulu Terengganu Hydroelectric Project is capable of generating an annual energy of 406 GWh which can be translated to an equivalent carbon reduction of approximately 250,000 tons/year

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4.0

NO PROJECT OPTION

Without the Project, TNBs dependence on fossil fuel, primarily gas and coal for generating energy will continue. Since the cost of fossil fuel has been on the increase for the past ten years and particularly in recent years, the cost of generating energy will increase and ultimately the users will have to pay more for every unit that they use. This Project will also provide the peaking power required to ensure the stability and security of the system.

5.0 5.1

PROJECT DESCRIPTION Project Location

The proposed Project area is located at the north of existing Kenyir Dam in Kuala Berang, Daerah Hulu Terengganu, Negeri Terengganu Darul Iman. It is about 50km from Bandar Gua Musang Hulu Terengganu roadway, and about 65km west of Kuala Terengganu. The coordinates of Puah and Tembat dams are N 05o 09 6.1, E 102o 35 9.8 and N 05o 13 7.0, E 102o 36 6.8 respectively. The project area is located about 20 km away from Saddle Dam A of Tasik Kenyir which is situated to the North-West of Kenyir dam. 5.2 Project Components

The Hulu Terengganu Hydroelectric Project can be classified into three geographic clusters. These clusters are: (1) (2) (3) the Puah Dam and its associated Works; the Tembat Water Transfer Scheme; the Power Station and Switchyard Complex.

The salient features of the proposed Project are as follows: Two reservoirs known as Puah Reservoir (6,000 ha) and Tembat Reservoir (130 ha); Two dams; one a 78 m high earth-fill dam (Puah) on the upper Sg. Terengganu Mati just downstream of its confluence with the Sg. Puah and the other a 30 m high roller compacted concrete (RCC) dam on Sg. Tembat; An underground powerhouse having 212 MW (2 x 106MW) turbine/generator units. Two intakes, one each at Tembat Reservoir and Puah Reservoir; Two unlined low pressure diversion tunnels to carry flows from the Tembat reservoir to Puah reservoir (802 m) and Puah reservoir (450 m) to the drop shaft; Two surge shafts near the top of the drop shaft; Two high pressure, steel lined penstock tunnels to carry flows from the drop shafts to the powerhouse; A 1.3 km long, concrete lined, free flow tailrace tunnel to carry flows downstream from the powerhouse to the Tasik Kenyir; A 600m long access tunnel to the powerhouse; ES - 3

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A switchyard located above ground near the access tunnel portal; Approximately 10 km (estimated based on the existing roads) of new access road to the dam sites, access tunnel and power house; and A 2.2 km long transmission line, which will connect the power station to the existing Kenyir-Tanah Merah line.

6.0

EXISTING ENVIRONMENT, MITIGATING MEASURES LANDUSE

POTENTIAL

IMPACTS

AND

PROPOSED

6.1

The study area has varied landuse types, consisting of primary tropical forest, agriculture, aquaculture, settlements, resort and recreational facilities, water bodies and infrastructures. Forest occupies the largest area, followed by water bodies. Forest occupies the largest area, followed by the lake. Agriculture is confined to a small area, to the north of Pengkalan Gawi. Settlements are located along the main road to Pengkalan Gawi. They are surrounded by rubber and oil palm small holdings and orchards. Project implementation will reduce the forested area as a result of the formation of two new lakes and the construction of dam, power station and access roads. This impact on the landuse is permanent. The formation of the two lakes may lead, at a later stage, to the establishments of resorts, chalets and other tourist facilities. It is suggested that development of tourism facilities take into consideration the areas carrying capacity.

6.2

GEOLOGY AND SOIL

The geomorphological patterns of the study area consist of undulating hilly and mountainous terrain. The highest area is represented by Gunung Lawit to the north at 1518m above sea level. There are other hilly terrains including Gunung Batil (1445 m) and Gunung Susu Dara (1452 m). The elongated terrains at the western part with north-south trend is known as Granit Banjaran Sempadan while moderately high and undulating terrains between mountainous terrains are dominated by metasedimentary rocks. The two main lithologies consist of igneous and metamorphic rocks. In general, an acidic intrusive granitic rock covers approximately 40% of the study area followed by metasedimentary rock (about 30%). Meanwhile, the rest of the area is covered by other rocks such as volcanic, limestone and sedimentary rocks. The metamorphic rocks include phyllites, schists and metasandstone of possibly Carboniferous age while the sedimentary rocks consist of shale/mudstone and small amount of limestone and conglomerate of Permian to Triassic age. The anticipated geomorphology and geological impact of the project are the permanent landscape change, and disturbance on rock stability and seismicity caused by the cut and fill activities, drilling and quarrying of rock and reservoir formation. Seismic activity should be

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monitored and innundation should be carried out slowly to avoid great disturbance to the fault structure underneath the dam. Soils in the area are formed from parent rock of granite, metasedimentary and volcanic rocks. The residual soil from the weathering of granitic rock is characterized by reddish yellow in colour with texture of sand while soil developed from metasedimentary and volcanic rocks give finer texture with yellowish colour. The pH value of soils in the study area is low. The organic content ranges between low and moderately high. Soil at Tembat Dam is more sensitive to erosion compared at Puah Dam which is due to their higher elevation and steeper slope.

The existing average sediment yield for Sg.Tembat and Sg.Terengganu Mati are 84.5 tonnes/ha/year and 37.02 tonnes/ha/year, respectively. However, the rate of soil loss for the worst case scenario (clear felling of trees) is very high at an average of 1,456.8 tonnes/ha/year 1,769.7 tonnes/ha/year for Sg. Tembat and Sg. Terengganu Mati respectively. To reduce the erosion impact, selective logging is proposed for the catchment area and buffer zones should be introduced along rivers of order 3 and 4. This method of logging will reduce the rate of soil erosion by almost 80%. The predicted soil loss when selective logging is adopted is 255.4 tonnes/ha/year for Sg. Tembat and 309.7 tonnes/ha/year for Sg. Terengganu Mati.

6.3

CLIMATE

The climate is hot and humid with high average annual rainfall, temperature, evaporation and humidity. Humidity, temperature and evaporation show very little variation. The humidity is about 80 % all year round and temperature range from 21 to 32OC. The average annual rainfall depth at the project area is approximately 4138.30 mm ranging from 2517 to 8714 mm over 20-years; the maximum rainfall was recorded in 2001 while the lowest is year 1996 recorded at 2517 mm. The development of future reservoirs will act as a potential evaporating surface that decreases the surface temperature, cools the lower atmosphere, decreasing upward motion, and increasing sinking air mass. This, however may not have a significant impact on local climate as the future Tembat and Puah reservoirs are relatively small compared to Kenyir.

6.4

SURFACE HYDROLOGY

There are two main river catchments in the study area, namely Sg. Terengganu Mati and Sg. Tembat. The Sg. Terengganu Mati catchment comprises more than 13 major tributaries; Sg. Rat, Sg. Lata, Sg. Buluh, Sg. Kura, Sg. Rusa, Sg. Limbang Besar, Sg. Limbang Kecil, Sg. Jalang Kecil, Sg.Ladang, Sg. Rang, Sg. Sireh, Sg. Jalang and Sg. Puah. Meanwhile, Sg. Tembat catchment consists of five major river tributaries: Sg. Lawang, Sg. Anak Tembat, Sg. Ayur, Sg. Tedung and Sg. Ayub. The distance of Sg. Terengganu Mati from their headwater is 55 km long and 30 km long for the Sg. Tembat. Total catchment size for Sg. Terengganu Mati is estimated to be 410 km2 and 101 km2 for the Sg.Tembat Catchment. Average runoff Hulu Terengganu Hydroelectric Project ES - 5

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for Sg. Terengganu Mati is 2,040 mm and 2,200 mm for Sg. Tembat. The maximum daily flow for Sg. Terengganu Mati is 40.00 m3/s, mean daily flow is 28.00m3/s and the minimum flow is 15.00m3/s. The maximum daily flow for Sg. Tembat is 5.50 m3/s, while the mean and minimum daily flows are 2.50 and 1.00 m3/s respectively. Based on field measurement, daily flow of Sg. Terengganu Mati ranges from 0.146 m3/s to 16.60 m3/s with range of velocity from 0.10m/s to 2.20m/s. Daily flow of Sg. Tembat range from 3.50 m3/s to 5.20 m3/s with range of velocity from 0.18 m/s to 0.915 m/s. During high flow condition, the figures increase 2 to 3 folds, and their range from 32.60 m3/s to 88.87 m3/s for Sg. Terengganu Mati and figures increase 3 to 5 folds for Sg, Tembat, it ranges from 11.84 m3/s to 22.75 m3/s. The minimum flow analysis was performed to determine the magnitude and frequency of low flow for the proposed project site. Analysis of minimum flow was determined based on three methods: 1) Mean Annual Minimum flow (MAM), is 4.520 m3/s for Sg. Terengganu Mati and 0.976 m3/s for Sg. Tembat. 2) 10% of the average annual flow; 4 m3/s for Sg. Terengganu Mati and 0.55 m3/s for Sg. Tembat and 3) Based on the SMEC Engineering study, minimum daily flow was 3.3 m3/s (Sg. Terengganu Mati) and 0.80 m3/s for Sg. Tembat. The hydrological impacts associated with soil investigation, collection of data and lines cutting are expected to be minor or no significant impact during pre-construction. During dam construction, major activities such as earthwork and site clearing, river diversion, construction of access roads and construction of the Puah and Tembat dams are expected to alter the characteristic of the river regime. Increase of surface runoff leads to increase in flow and river banks erosion. The impact can be mitigated by preparing and implementing erosion control plan. The diversion channel should be designed to take into account the maximum capacity of the diverted channel to ensure reduction in water velocity. The alignment of the diversion should be optimized so that the length of dried up river immediately after the dam is minimized Bucking, skidding and hauling, landing and loading of the timbers during logging operation will have the effect of increasing surface runoff as a result of a reduction in the capacity of the area to absorb rainfall and reduction in infiltration. This change in the flow regime will increase river siltation and affect the morphology of the river system such as the reduction in the widths and depths, and increase in the velocity of flows in the rivers that will eventually affect the riparian ecosystems, vegetation, nutrient and food chains for the aquatic fishes and benthos. Selective logging method is recommended for the catchment area that will not be innundated. A 30m river buffer where no logging is allowed must also be maintained to the impact of erosion. During reservoir filling and dam operation, the river stretches downstream of the dam (Sg Tembat-4.14km and Sg Terengganu Mati-4.82km) will be dried up if no water is released during reservoir filling. The river ecology will be completely destroyed. To mitigate the impact a minimum flow of 1.0 m3/s for Sg Terengganu Mati and 0.5 m3/s for Sg Tembat is recommended.

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6.5

WATER QUALITY

In this study, 23 stations were selected at Sg Terengganu Mati and Sg Tembat and their tributaries to assess the existing water quality. Samples were taken in July 2008 and analysed based on standard methods suggested by American Public Health association APHA (1995). The laboratory analyses were carried out by accredited laboratory at ALS Technichem (M) Sdn Bhd (MS 120/IEC 17025, SAMM No. 147). The values of water quality parameters recorded at Sg Terengganu Mati are good. Based on the General Rating Scale for the Water Quality Index (WQI), Sg Terengganu Mati is classified as clean (Class I). The result for Sg Tembat indicates that the existing water quality is also good (Class I). Two water quality impact scenarios were simulated for this study, namely (i) the impact of logging activity based on clear felling and selective logging methods, and (ii) the impact of Puah-Tembat dam construction with respect to river carrying capacity. In the worst case scenario (clear felling), TSS concentration during high flow along Sg Terengganu Mati is predicted to increase to Class IV and V (INWQS). The river carrying capacity is considered as sensitive with low carrying capacity. For Sg Tembat the TSS concentration along the river falls to Class III at middle stream and Class IV at upstream and downstream stretches during high flow. Again, the river carrying capacity is considered as sensitive with low carrying capacity. For selective logging, the value of TSS at Sg Terengganu Mati during high flow will reduce to Class III at the upstream and middle stream while Class IV is expected in downstream sites. The river carrying capacities at these stages are considered as sensitive (high flow) and moderately sensitive (low flow). At Sg Tembat, TSS concentration during high flow is expected to fall to Class II and Class III (>30 mg/l; <80 mg/l) particularly at the middle and downstream sites. In terms of river carrying capacity, the river is categorized as moderate sensitive to sensitive zones. Scenario (ii) involves dam construction at both Sg Terengganu and Sg Puah Dam. The regulated flows at downstream of the proposed dams (4.82 km and 4.18 km stretches) are designed at 1 m3/s and 0.5 m3/s for Sg Terengganu Mati and Sg Tembat. Simulation results indicate that for Sg Terengganu Mati: BOD - Class II (moderately sensitive) DO - Between Class II (moderately sensitive) to IV (sensitive) TSS Between Class II (moderately sensitive) to Class IV (sensitive) For Sg Tembat, the simulation results are: BOD - Between Class II to III (moderately sensitive) and Class I (less sensitive) DO - Between Class II to III (moderately sensitive) TSS - Between Class III to IV (sensitive) and Class I (less sensitive) Logging and dam construction are the two activities with the most significant impacts on water quality. Logging and dam construction will increase soil erosion and siltation, and if not mitigated will significantly reduce the river water quality. Selective logging is recommended for the catchment area that will not be inundated. In addition, a 30 m buffer Hulu Terengganu Hydroelectric Project ES - 7

Executive Summary

where no logging is allowed must be maintained for rivers of order 3 and above. At the dam construction sites, erosion and sediment control plans that incorporate silt traps and temporary drains must be prepared and implemented to minimize adverse water quality impact. This study also notes that without water being released from the dam, the river downstream of the dams (4.14 km for Sg Tembat and 4.82 km for Sg Terengganu Mati) will be dried up. It is therefore required that EFA discharges must be maintained at 1.0 m3/s and 0.5 m3/s for Sg Terengganu Mati and Sg Tembat respectively. With this discharge, the predicted water quality parameters at 4.82 km for Sg Terengganu Mati are Class II for BOD, DO and TSS with river carrying capacity of moderate sensitive. The predicted water quality parameters at 4.14 km for Sg Tembat are Class I (BOD and TSS) (less sensitive) and Class II (DO) (moderate sensitive). At the peak of construction activity, the number of workers could reach up to 1,500 people. Without proper management, raw or partially treated sewage can lead to water quality problems when directly discharged to water courses. It is recommended that the portable sewage system to be used to avoid risk of contamination.

6.6

AIR QUALITY

In general, the existing air quality at the study area is considered good. All the parameters (PM10, TSP, CO, NOX and SOX) measured are well below the Malaysian Recommended Air Quality Guidelines Criteria. The anticipated impacts from the project activities are mainly dust generation from quarrying and blasting, earthworks and vehicles movements on dirt roads. Nevertheless, the impacts are minimal and only localized within project construction sites and along access tracks.

6.7

NOISE

The day-time LAeq noise levels at all monitoring locations ranges from 44.2 dBA to 59.0 dBA. The day-time LAeq noise levels recorded outside of project area (the residential area) are higher than the levels obtained at the proposed project area. The day-time LAeq noise levels at the residential area was influenced by transient noise from vehicular traffic whilst noise contributors within the project area were from diurnal insects activities. The night-time LAeq noise levels at all monitoring locations ranges from 49.5 dBA to 54.6 dBA. The noise generated during the construction phase is expected to increase the existing noise level. However, the nearest residential are is about 30 km away from the proposed project site. Therefore, any adverse impact from noise would be insignificant. The movement of heavy vehicles and long trailers for carrying construction equipment and materials to the construction site may increase the existing noise level along the routes. However, by limiting the flow of these vehicles during the day time only will minimise the impact of noise on the residents along the transportation routes.

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6.8

FLORA

All study locations indicate a high richness of vegetation species whereby the taxonomic composition of higher plants in the surveyed area indicates a total of 234 species from 50 plant families at Sg. Terengganu Mati, 152 species of high plants from 47 families at Sg. Kura, 388 plant species of 89 families at Sg. Limbang, 166 species of 55 plant families at Sg. Puah, 205 higher plant species from 56 families at Puah Dam Site and 263 species in 53 families of higher plants at Sg. Tembat. Tree species diversity calculated using Shannon-Wiener Diversitys Index (H) ranges from 4.12 to 4.94 indicating high diversity. Total biomass of trees in all study plots varies from 458.1 t/ha to 914.1 t/ha. Timber species found in the undisturbed forest include Shorea (Meranti, Balau), Dipterocarpus (Keruing), Hopea (Merawan), Vatica (Resak) and Anisoptera (Mersawa). The secondary or disturbed forest are mainly dominated by species from the families of Rubiaceae, Euphorbiaceae, Annonaceae, Moraceae, Myrtaceae, Fagaceae, Burseraceae, Ebenaceae and Lauraceae. The perennial weed species are very common in the disturbed forest which include Chromolaena odorata, Vernonia cinerea, Mikania micrantha, Mimosa pudica, Urena lobata, Sida ramiflora, Spemacoce spp.. Bamboos of Schizostachyum sp. and Dendrocalamus sp. were also found abundantly, indicating the occurrence of disturbances of the surveyed area. In the riparian habitats, Dipterocarpus oblongifolius (Keruing Neram) is abundant along Sg. Limbang and Sg. Tembat. Other riparian tree species include Pometia pinnata (Sapindaceae), Antidesma silicinum (Euphorbiaceae), Dysoxylum angustifolium (Meliaceae), Peronema canescens (Verbenaceae), Syzygium salictoides (Myrtaceae), Neolamarckia cadamba, and Neonauclea pallida (Rubiaceae). Semi-aquatic and aquatic plants were also noted in most streams which were mainly represented by the Cryptocoryne sp., Homalomena sp., Pithospatha sp., Alocasia sp., Rhaphidophora sp. and Schismatoglottis sp. The epiphytes were mainly of the lycopids (Huperzia nummulariifolia, H. carinata, H. phlegmaria, H. pinifolia), orchids (Eria spp., Dendrobium spp.), and fern of Platycerium ridleyi; whilst the herbaceous such as Hanguana malayana, Piper spp., Begonia spp., Sonerila spp., were seen on the forest floor at most study areas. The composition of fern and fern-allies in all study areas indicate similar representatives of species in the families Adiantaceae, Aspleniaceae, Blechnaceae, Cyatheaceae, Osmundaceae, Selaginellaceae, Dryopteridaceae and Polypodiaceae. From overall list of recorded tree species (excluding shrubs, herbaceous, epiphytes, creepers and saprophytes), 94 species were identified as having conservation status according to the IUCN Redlist Data Book. Almost all dipterocarps (Dipterocarpaceae) are categorized as Endangered (En) and Critical Endangered (CR), whilst only a small number of non-dipteocarps are listed in these categories. Most species are categorised as Least Hulu Terengganu Hydroelectric Project ES - 9

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Concern (LC) and Vulnerable (VU). For non-trees, most orchids (Orchidaceae), Begonia spp. (Begoniaceae) and Huperzia spp. (Lycopodiaceae) are considered as threatened species because these species are having very high market demand, yet they are not easily found. The presence of the biggest flowers in the world, Rafflesia sp. at the Sg. Tembat area is of conservation interest; however, the conservation of this species is a difficult task. Moreover, the ginger species called Kantan Hutan (Etlingera terengganuensis) found at Sg. Tembat is also of concern because the species is endemic to the State of Terengganu. Impacts on vegetation communities during pre-construction stages are mainly associated with activities of construction of access road, site clearing (workers camp) but these activities will only result in relatively minor loss to forest floor vegetation and weed species. No mitigation on flora species is needed because most affected species are common. The activities during construction that are predicted to have negative impacts on forest flora are site clearing, excavation, tunneling and earthworks. These activities require the removal of vegetation which will cause permanent loss of vegetation species at the work areas, tunnel and roads. The loss is permanent. During operation, stream regulation will have direct impact on riparian habitat and in particular on the riparian vegetation. Adverse effects are expected for some of the common riparian species. Nevertheless, species such as Keruing Neram (Dipteocarpus oblongifolius), which can only be found on the banks of fast-flowing rivers in the habitats is of conservation interest. The juveniles, seedlings and saplings of this species should be salvaged for its survival.

6.9

TERRESTRIAL FAUNA

Terrestrial fauna which comprises terrestrial large and small mammals, bats and birds were investigated at 16 study sites representing two main catchments; Petuang and Tembat. The sites were also selected based on topographic and habitat type. From this study, a total of 28 large mammal species comprising of 14 families from 5 orders were recorded from these two catchments. This is about 37 % of the total large mammal species reported in Peninsular Malaysia. From this number, 6 species are Artiodactyls (Ungulate), 11 are Carnivors (cat and civets), 2 are Perissodactyls (Rhinoceros), 8 are Primates (Monkeys), and one is Proboscid (elephant). All the five big mammal species that need conservation are present in this area. Those species are Sumatran Rhinoceros, Tiger, Elephant, Tapir and Malayan Gaur. Among these species, Sumatran Rhinoceros has the highest conservation priority and urgently need special attention. However, Sumatran Rhinoceros were reported found only once at the north of Site PA1 in 2003 and 2006 but no signs were found in 2007. The same area was revisited in July and August 2008 by two teams of experts and they found old foot prints and wallows possibly left for more than three months. The next most important species that need attention is Gaur or Seladang. Seladang were reported and found scattered within the catchment until further south to Taman Negara. Elephant is possibly the species that will be Hulu Terengganu Hydroelectric Project ES - 10

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affected most from the project. The reconnaissance survey indicated that tapir and tiger are still commonly seen and reported by loggers and locals inhabiting the catchment areas. For small mammals, a total of 22 species comprising of 7 families from 4 orders were recorded from these two catchments. This is about 40 % of the total small mammal species (excluding bats) reported in Peninsular Malaysia. From this number, one species each for Demopteras (Clugo), Pholidotas (Pangolin), and Scandentids (Treeshrew), 19 are Rodents (rats and squirrels). Among these species only 6 are listed under Totally Protected, and 2 species are listed under Protected according to local Wildlife Act (1972). Bats are more diverse than other mammal groups with 44 species comprising of 5 families. From this number 32 species are insect bats (Hipposideridae, Rhinolophidae, and Vespertilionidae) and 11 are fruit bats (Vespertilionidae). For insect bats, the species recorded here is about 34 % and for fruit bats is about 55% of the total bat species reported in Peninsular Malaysia. In overall diversity, Hipposiderids are representing by 9 species, Rhinolophids by 8 species, Vespertilionids by 15 species, Pteropodids by 11 species and Molossid by 1 species. Among bat species only 7 are considered important for conservation (6 are catogarised as Near Threatened and 1 as Vulnerable) based on IUCN Red Data Book and none of bats are locally protected except Pteropus spp. Finally birds also considered relatively diverse with 285 species from 47 families. This is about 38 % of the total bird species reported in Peninsular Malaysia. The bird community at the study area is dominated by family Timaliidae followed by Dicruridae, Muscicapidae, Nectariniidae, and Pycnonotidae the common families found in pristine lowland forest. Among these species 156 are Totally Protected (55%) and 1 species is Protected according to local Wildlife Act (1972). The general impact of the proposed logging based on selective logging procedures on wildlife is predicted to be relatively low on birds and bats but significant on mammals (small and large). The impacts of the proposed project on the terrestrial fauna (small and large mammals), bats and birds are predicted to be minimal during pre-felling activity and no major mitigation measure is required. The activities during pre-felling stage are generally associated with survey and investigation which include the presence of workers in the field, clearing several areas for camps, and tracks, and transportation of equipments to the work areas. However the activities during timber felling and transportation (including skidding) are predicted to have direct impact on the wildlife activities (e.g. foraging activities). Timber felling and clearing of forest would kill wildlife and destroy wildlife habitat (nests and food resources). Individuals that can escape will find refuge in the nearby habitat. Species that require large area (such as elephant) may be displaced and encroached into plantations and villagers. Encroached individuals can cause damage to plantations and post some threat to human safety especially towards the eastern and western parts of the catchment. Specialized species that require specific habitat such as Sumatran Rhinoceros may have problem finding new habitat. Reduction in population of wildlife especially small and medium size animals may cause local extinction. Further, easy access to the interior of the catchment area via available logging roads will increase hunting and poaching activities. The impacts of logging on wildlife in general are considered high (as the area is three times bigger than area requires for development of two dams) and require proper mitigation Hulu Terengganu Hydroelectric Project ES - 11

Executive Summary

measures. Short and long terms measures for maintaining the biological diversity and reduce the wildlife conflicts are proposed. The proposed short term mitigation measures for maintaining high biological diversity (conservation) includes a) choosing a minimal destructive logging method (e.g. selective logging not total logging), b) logging conducted in phases, gradually from the dam site upstream, c) inspecting for the presence of wildlife within logging area, d) reporting on the presence of endangered wildlife species within the logging area and the presence of poachers (locals and foreign) to the PERHILITAN, e) closing and dismantling all logging roads and bridges to prevent easy access by poachers, f) enforcement, g) educating the public and h) habitat rehabilitation. The short term mitigation measures to reduce human-elephant conflict (HEC) are also proposed which include constructing electrified fences and trenches along the border of the plantations with the forest reserve (e.g. Tembat FR). If all measures are not effective, translocation is proposed by catching and relocating the animals to a new site such as Taman Negara. The cost of translocation however is very high; between RM 20,000 to RM 40,000. This cost should be provided by the Terengganu State Government and partially by TNB through Elephant Fund. The number of elephants that need to be translocated is estimated between 6 to 10 individuals. Other wildlife may not cause any conflict but increased road kills along the highways between Tasik Kenyir to Terengganu-Kelantan border is to be expected. The long term mitigation measures are also proposed to maintain the biological diversity which include; a) implementing selective logging, b) no logging at areas north of Petuang and Tembat FRs for conservervation of Sumatran rhinoceros, c) gazzetting catchment area as catchment forest, d) patrolling the highways between Tasik kenyir to KelantanTerengganu border and e) provide sign boards to warn the motorist on the wildlife animal crossing. Other long term mitigation measure to reduce human-elephant conflict (HEC) includes creating and maintaining the corridors between the catchments and Taman Negara and converting this area as wildlife reserve. The impacts of the proposed project on the terrestrial fauna (small and large mammals), bats and birds are predicted to be minimal during pre-construction and no mitigation measure is required. However, the activities during construction stage such as construction of haul or access roads is predicted to have direct impact on the wildlife activities (e.g. foraging activities), especially medium and small animals. The presence of vehicles and heavy machinery may increase disturbance and the number road kill of wildlife. To minimize this impact it is suggested to minimize the unnecessary opening, cutting and land clearing of the area. Choosing the right alignment for new roads is also required to reduce erosion and also to reduce cutting and earthworks to minimize disturbance to wildlife habitats. Further mitigation measures to minimize the impact include rehabilitation of any opened areas to provide habitat for wildlife and any sighting of wildlife need to report to the authority (PERHILITAN) especially endangered species such as tapirs and tigers. The existence of reservoir is also predicted to have an impact on wildlife movements, roaming habitat and migratory route especially on larger mammal species. Larger species that require larger area for foraging might be displaced and raiding adjacent plantations such as at the north near Setiu. Some species can move further south to Taman Negara. Currently, moving south requires them to pass through a relatively narrow corridor located at Hulu Terengganu Hydroelectric Project ES - 12

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the west of existing Tasik Kenyir. The creation of the Tembat and Puah reservoirs will extend the narrow corridor further north. The impact (the existence of reservoir) is expected to be permanent. However the displaced wildlife (if any) can be mitigated through i) catching and transferring to another areas (e.g. Taman Negara), and ii) guiding back to the existing habitat. Again, as proposed above in the long term mitigation measure, the existing corridor (west of Tasik Kenyir) needs to be preserved to facilitate free movement of wildlife to Taman Negara. Otherwise, Taman Negara and the catchment will be separated and resulting in forest fragmentation. The existence of roads access inside the forest reserve will increase the opportunity for illegal hunters. Also, the existence of main roads such as highway from Tasik Kenyir to Gua Musang has also an impact on migrating wildlife such as elephant. Elephant requires large area for foraging and the existence of this road will reduce their foraging areas and also endanger the safety of motorists using this highway. Hunting activities can be stopped by regulating the movement of vehicles that use the service road (or logging road) inside the catchments (except Orang Asli). Patrolling of the area needs to be carried out regularly by the Department of Wildlife and National Parks and the Forestry Department. Road signs need to be provided along the critical section where elephant normally cross to warn motorists on the presence of wildlife (e.g. elephants). Road signs are also important to reduce the occurrences of road-killed wildlife.

6.10

HERPETOFAUNA

Assessment of the herpetofauna in the proposed area includes presence, relative abundance, and conservation status, based on primary and secondary data. The total number of herpetofauna recorded from the six study sites in Hulu Terengganu was 302 individuals, from 15 families, 42 genera and 65 species (36 species of amphibians and 29 species of reptiles). Almost half of the total individuals was from Ranidae (52%), followed by 10% from Bufonidae, and 9% from Microhylidae. There were 29 species of reptiles from 9 families. Species richness, Shannon diversity and the Dominance Indices were analyzed using Ecosim for the amphibian data only. Species richness ranges from 10.1 1.46 to 13.8 1.49. Shannons index varies from 2.05 0.17 to 2.40 0.17, while Dominance index ranges from 0.18 0.03 to 0.29 0.06. All indices estimated from the six study sites show insignificant difference between any two pair of data sets. Previous study on herpetofauna at the study sites recorded a total of 23 species of amphibians and 43 species of reptiles. Possible impacts during construction include changes to specific habitat features, such as loss of pools, riparian vegetation that would ultimately lead to loss or impairment of habitat functions, such as breeding and rearing. Impact may affect early stages of life cycle the most, being exposed to pollutions and increased sedimentation due to clearing of forest for construction of access road and build up area, and disposal of tunnel excavated material. Particularly hard-hit are animals that depend on riparian habitat. Some level of biodiversity loss of herpetofauna, especially the tree-dwellers, would ensue due to clearing of the forest. New access roads to dam sites provide access to previously remote areas for settlers and hunters, thus increasing opportunities for exploitation of tradable animals. Mitigation measures proposed are directed towards minimizing pollution and sedimentation of rivers and water bodies, such as building roads along ridges, avoiding construction on highly Hulu Terengganu Hydroelectric Project ES - 13

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erosive soils, installing permanent culverts under permanent roads, and designing drainage for low-frequency storm runoff, and controlling illegal hunting of protected species. Habitat loss at inundated areas is total for the herpetofauna, but compensation is only possible if the State Government is willing to regazzette the remaining forest area as a water catchment area to safeguard the remaining wildlife and vegetation, or to strengthen management of the area.

6.11

FISH

A total of 36 fish species from ten families were found during the study period. Among them, Cyprinidae is the dominant family (54.5%), followed by Bagridae (15.2%) and Channidae (12.1 %). Thirty species were recorded at Sg. Terengganu Mati while 26 species were recorded at Sg Tembat. Out of the 36 species, sixteen species are classified as common, two species rare and the others are unknown. These species include the targeted species for sport fishing with high commercial value such as Tor tambroides (Kelah), Poropuntius deauratus (Daun), Neolissochilus hexagonolepis (Tengas) and Hampala macrolepidota (Sebarau). Aquarium fish such as Rasbora spp. (Seluang) and Puntius lateristriga (Baguh) can also be found in the area. No endangered and protected fish species under Terengganu Fisheries Act 1988 such as Arowana (Scleropages formosus) and Temoleh (Probarbus jullieni) were recorded in the studied areas. Result also shows that the dominant species at Sg. Terengganu Mati is Poropuntius deauratus (36.8%) followed by M. marginatus (Sia) (25.0%) whereas at Sg. Tembat, P. deauratus is the dominant species (61.3%) followed by Hemibagus nemurus (Baung) (7.1%). Based on their general feeding habits, 11 species can classified as planktivorous, eight detrivorous, seven carnivorous, three herbivorous and omnivorous and two insectivorous. Many previous studies have shown that planktivorous species may not adapt to lentic systems while detrivorous and carnivorous species are well adapted to new habitats especially at littoral and shallower areas. Others such as Kelah, Daun and Tengas cannot adapt to the lentic conditions, thus are strictly limited to lotic habitats at the upstream of the proposed reservoir. The main impact of logging and dam construction are soil erosion that leads to high turbidity due to high Total Suspended Solid (TSS) and sedimentation of the nearby river. Suspended sediment in the river water will eventually settle to cover periphyton, aquatic insect and benthos which are important food source for fishes which lead to natural food source for fish decreased. Turbidity in river water will reduce visibility of the riverine fish thus hampering their ability to find food. The siltation of the fish spawning ground will reduce the hatching rate of eggs due to unsuitable condition. With the completion of the proposed dams, there are changes in fish population where big cyprinids such as Kelah, Daun and Tengas will slowly diminish in population. On the other hand, smaller cyrinids such as Barbonymus schwanenfeldii (Lampam sungai), Osteochilus hasseltii (Terbui) and Labiobarbus lineatus (Kawan) will become dominant.

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Soil erosion and sedimentation which affect fish is minimal during pre-logging and preconstruction stage. Existing logging track must be reused where available and the access road must be kept 20m away from permanent water courses. At river crossings, temporary bridges must be constructed or culvert and hollow logs must be used to avoid the disturbance of the existing river flows and river beds. The opening of access road may result in potential illegal fishing for consumption, collection and sale of fishes by workers and outsiders. Workers are prohibited from illegal fishing and must be supervised and monitored by the contractors from engaging in such activities. To minimize illegal fishing by outsiders, the access roads should also be closely and strictly monitored by the contractor particularly during spawning season (early rainy season November) and during dry season (May - September) to maintain fish recruitment by avoiding over fishing. The main impact of logging and dam construction are soil erosion and sedimentation. To reduce soil erosion which leads to high TSS reading in nearby river especially during wet season plus to reduce water temperature due to lost of the canopy cover, a strip of 30m buffer zone along the 3rd and above order river should be maintained. Selective logging must be adopted for timber extraction in the catchment area. Erosion Control Plan must be prepared and implemented by the contractors for the dam construction area. The retention ponds should be regularly maintained by the contractors. To minimize water quality deterioration due to decomposition of organic matter during reservoir filling phase, clear cutting of the reservoir area should be carried out. Filling of the reservoirs will force the riverine fish species to adapt to the new, less favourable, lacustrine habitats. Filling of the reservoir will flood the existing feeding and spawning ground (for rivers within the inundated area) of fish species causing fishes to migrate upstream. The water level should be allowed to increase slowly (about one year) to allow fish to adapt to the new environment or swim upstream. The downstream of the proposed dams (4.14 km for Sg. Tembat and 4.82 km for Sg. Terengganu Mati) will experience changes in hydrology because of flow regulation. The induced desiccation of rivers below dams (when the water is regulated) will influence the population of fish or aquatic organism and flora that are dependent on the river flow downstream. To sustain the ecological condition of the downstream rivers, minimum flow of 1.0 m3/s and 0.5 m3/s, should be maintained at Sg Terengganu Mati and Sg Tembat respectively as recommended by EFA. With this minimum flow, water quality and hydraulic simulation results indicate that the DO and TSS levels right after Sg. Tembat and Sg. Terengganu Mati Dam area are 5.5-8.5 mg/L;0.8-12 mg/L and 6-7.5 mg/L; 3.4-10.0 mg/L, respectively. Simulation results also indicate that the water level downstream of the proposed dam at Sg. Tembat and Sg. Terengganu Mati are 0.2-1.6m and 0.3-1.2m, respectively. These conditions, are considered as clean water and adequate for fish and others aquatic organisms to survive in the new environment.

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6.12

BENTHOS AND MICROEINVERTABRATES

Physically, Sg. Terengganu Mati and Sg. Tembat are characterized by fast flowing water and cobble and sandy are dominant substrates. Both rivers also drain through dense secondary forest and exhibit steep slope. Both rivers support high diversity of benthic macroinvertebrates and phytoplankton and these organisms were distributed evenly along the rivers. Benthic macroinvertevbrates is dominated by Arthropoda phylum. The presence of pollution sensitive families such as Ephemeroptera and Plecoptera indicates that the existing ecosystems are clean and not seriously disturbed. Chlorpohyta and Bacillariophyta (phytoplankton), which are common phyla in freshwater ecosystem, were dominant in both rivers. The presence of pollution sensitive species in both rivers demonstrates that both rivers are clean. Calculated diversity indices indicate that both rivers are not stressed and are in balance condition. Only logging activities are predicted to cause physical (sedimentation) and biological (sewage effluent) to the aquatic communities. Activities such as road construction, tree felling, river crossing and log materials skidding and hauling can cause erosion which consequently will enter the river ecosystem. Worker biological waste can contamnate river system if not systematically managed. However, all impacts are predicted to be temporary and will be rehabilate after the logging is completed. In order to minimise the logging impact, all activities should be conducted according to the guidelines for reduced impacts logging in Peninsular Malaysia. Selective logging is proposed to be conducted since it produced lower sedimentations load compared to clear logging. Temporary bridge should be used for large river crossing and hollow timber or culvert for small river. Most activities during pre-construction are expected to cause minimal impact with temporary effects to the aquatic communities. Most activities during the construction period are expected to cause significant adverse impacts to the aquatic communities. Permanent habitat changes will occur within the proposed dam construction area, which can change benthos composition and diversity. Effects of sedimentation and river habitat alteration are expected to give the most significant adverse effects to the aquatic organisms. Total suspended solids cause by dam construction activities is much higher than existing condition. River crossing activity is expected to cause a significant residual environmental effect to the aquatic communities and the use of temporary bridge is recommended to minimize the effects. The formation of wetland/fringe area during the water impoundment and dam operation will promote the dominance of lenthic communities and reduction of lotic communities. The water fluctuation due to the electricity generation requirements will reduce diversity and density of benthic community. However, for longer period, both communities will be able to adapt to the new environment and reach ecosystem equilibrium.

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During operation, benthos and phytoplankton communities at the river stretch downstream of the dam will be affected due to the lesser water discharge. Benthos density and biomass will increase but diversity will decrease.

6.13

SOCIOECONOMY

The proposed project is located within a forest reserve; thus there is no residential area in close proximity to the site. The nearest village (Kg. Basung) is 26 km away. In total, six villages are located between 25 to 50 km from the project area, namely Kg. Baung, Kg. Payang Kayu, Kg. Sg. Berua, Kg. Basung, Kg. Pasir Dula and Kg. Padang Setebu. A socioeconomic survey involving 275 households in these villages was conducted to determine their socio-economic profile as well as ascertaining their perception on the proposed project. A number of heads of household of the Orang Asli community were also interviewed. In addition, 33 officers/representatives of relevant government bodies and NGO were interviewed to supplement the findings of the socio-economic survey. The socio-economic survey reveals that the majority i.e. 64.3 percent of the villagers and agencies are aware of the proposed project. Most villagers agree with the construction of the project (Totally agree 6.1%, Agree 47.4% and Agree with condition 5.7%). Among the Orang Asli, however, 66.7 percent are opposed to the proposed dam, mainly because of their concern that the project poses a threat to their source of livelihood. However this data need to be interpreted with caution, since only six Orang Aslis agreed to respond to the question of whether they agree or disagree with the project. Of the six, four disagreed with the construction of the dam. The results of the survey show that the top-four potential benefits expected by the villagers are income-related. The top most expected benefit is job-creation during the construction. The representatives of the agencies have different priority as far as the benefits of the dam are concerned. They put highest emphasis on the development of the infrastructure. The Orang Aslis were also asked about their opinions on the potential benefits as the results of the construction of the new dam. Only one of the six respondents sees income-related potentials of the proposed project as a benefit. The villagers are most worried about the potential negative impact of the proposed project on the flora and fauna as well as on the wild life. They are also worried that the proposed dam will pose danger to the villagers. The representatives of the agencies rank the environment-related damages top in the list of potential adverse impacts of the proposed dam. These adverse impacts include the potential damages on flora and fauna as well as on wild life. The Orang Aslis are particularly concerned with the potential negative impact of the proposed new dam on livelihood, hunting activities as well as the flora and fauna. Next, they are also worried about the impacts of the proposed dam on the logging activities, opportunity to open up new land and agricultural activities. The major socio-economic impacts of the project include unhealthy and uncomfortable living condition in the base camp; workers safety; illegal hunting, poaching and harvesting of Hulu Terengganu Hydroelectric Project ES - 17

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valuable forest produce because of access; reduction in the size of Orang Aslis roaming area and thus the source of livelihood; and positive impacts on employment opportunities. To mitigate the impacts, several mitigation measures are proposed. These include the provision of proper basic facilities (water and electric supply) and maintain hygienic environment for workers base camps; briefing and supervision of workers so that they will not engage in illegal hunting, poaching and harvesting of forest produce; consideration for possible compensation to affected Orang Aslis; provision of appropriate training to enhance the skill of locals especially Orang Aslis so that they are able to participate in the project; employment of local workers for suitable and appropriate jobs to reduce dependency on outside workers.

6.14

PUBLIC HEALTH

A public health study was conducted in the five villages in Hulu Telemong district which in vicinity to the proposed project. This study aimed to obtain the existing health conditions of the local population, to identify the mosquito population and their distributions and to determine the prevalence of water and vector-borne diseases in the area and finally to assess the possible impact of the proposed project to the public health. Several methodologies were carried out to address these objectives. This study is divided into three sections; community health, parasitological and entomological sections. The health survey has obtained a very good coverage (73.4%). The baseline information shows that the health problem of this community is related to the basic infrastructure in sanitation and water resources. There were some improvements in the water supply in this present survey where the reliance on the piped water supply has increased from 16.8% in the 2003 survey to 74.8% in the present survey. There are some improvements in the health conditions of the communities which were shown by the lower prevalence of the communicable and chronic diseases as compared to the previous surveys. Based on the parasitological survey, intestinal parasitic infection is still an important public health problem in the local population especially Giardia duodenalis and Entamoeba histolytica. However, the infection of helminths had shown a decreasing trend. During construction phase, the workers base-camp is the potential source of mosquito breeding if their sanitary condition is not well maintained. In addition, the transmission of dengue vector is highly associated with human activities and development. The risk for dengue and dengue haemorrhagic fever is high due to the migration of population within the proposed development area. Land clearing activities could expose the streams and provide the breeding area for Anopheles maculatus, the primary vector for malaria. The basic amenities for the workers such as the safe and clean water supply should be provided. Proper solid waste disposal system is necessary. Pit latrine should be built for the workers and well maintained. Pest control and the proper environment sanitation are important to prevent the transmission of the vector and water-borne and zoonotic diseases. To prevent breeding of vectors of DF/DHF, unwanted containers, should be disposed properly. To minimize breeding of Anopheles maculates, covering the exposed streams with coconut husks is recommended.

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During operational phase, the downstream rivers which are the water resources for the affected population would not be affected by the proposed development. Therefore, this would not have any impact to the transmissions of the waterborne diseases. In the current study, very few An. maculatus were captured in the villages and there is no malaria case in this area. It is important that they remain so during and after the construction of the dam. However, any introduction of a new case from an infected person, such as any illegal migrant worker, could trigger transmissions of the infection. Thus this area remains a highrisk area for an outbreak at any time. The primary vectors for Japanese encephalitis (Culex gelidus) and filariasis (Mansonia dives) and vectors for dengue (Aedes albopictus) are present in this area. The risks to infection by Culex spp and Mansonia spp. are predicted to be low in this area if proper sanitation is provided (proper sullage system) and livestock rearing is controlled in the area. It is important that all workers especially foreign workers in the project be screened for malaria, filariasis and other vector borne diseases. The recruitment of these workers must follow the legal procedures which require health screening of these workers. Constant periodic vector surveillance on the abundance and composition of the vector species in the zone of influence is needed in order to assess the actual impact of the proposed development.

6.15

ECOTOURISM

Data for this study are collected from published and unpublished materials, interviews and field surveys. Flora, fauna, landforms and scenery constitute ecotourism resources in the study area. The study area is still densely forested and rich in fish species, despite being logged and over-fished. Other resources include a large man-made lake, watwerfalls, mountains and caves. At certain locations, the study area is blessed with scenic beauty, where the views of mountain ranges, forest covers, lake, islands and man-made structures can be seen. At present, the accommodation establishments provide 115 rooms, 252 chalets, 2 hostels and 15 boathouses. The number of tourists coming to Tasik Kenyir has been declining since 2000, but began to rise again after 2005. In 2006, there were almost 50,000 tourist arrivals recorded at Tasik kenyir. With the completion of East Coast Highway and Kuala BerangGua Musang-Pulai Highway, the industry players are optimistic that tourism at Tasik Kenyir will rejuvenate. Fishing, camping, picnicking, boat-riding, kayaking, rafting, jungle trekking, caving and resting are among the recreational activities that the tourists pursue. The potential impacts of the proposed project during the construction stage are the water flow in Sg, Tembat will be regulated and reduced, Tembat Waterfalls will be lost permanently, fish population in Sg. Tembat will be reduced, and boat trips bringing visitors to Sg. Tembat will be declined and this may adversely affected the income of boat operators. To mitigate the impacts, it is suggested that new suitable activities, such as picnicking, camping, environmental education and environmental walks along Sg. Tembat, be promoted. During the operation stage, it is anticipated that there will be beneficial impacts on tourism whereby tourism activities and businesses will be expanded to the two new lakes at Puah and Tembat Reservoirs. There is a need to introduce some measures on tourism development at the project area so as to prevent over development. Hulu Terengganu Hydroelectric Project ES - 19

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6.16

ARCHEOLOGY

There is no evidence of prehistoric archaeological sites within the proposed project site. However, any discovery of artifacts during project implementation should be reported to the authorities such as Department of Museum Negeri Terengganu, Department of Museum Malaysia and Department Heritage of Malaysia.

6.17

ENVIRONMENTAL ECONOMIC SECTORS

Electricity Supply The project has been analysed with configurations of FSL296/212MW/405GWh and FSL290/212MW/385GWh. Both are viable before environmental costs are considered (FSL296: NPV159mill, IRR 14.39%; FSL290: NPV141mill; IRR 14.0%). The FSL290 option is consider best when environmental cost are considered. Timber and Forests Some 55km2 of forests at the proposed Puah dam were clear-felled between 2003 and 2005. If the project is implemented, some additional clear-felling would have to be carried out. The incomes from this clear-felling is greater than the 50 year sustainable timber incomes from the catchment. The proponent should therefore not need to pay compensation for timber revenues, and Terengganu State has a unique opportunity to conserve the remaining catchment for biodiversity-, tourism-, energy- and cultural benefits. Greenhouse Gases and Carbon Balance Power Density (PD) is defined as installed capacity (MW) divided on reservoir area (km2). If PD is 4 or smaller, CO2 quotas can not be accredited. The FSL296/212MW option has a PD 3.5. The FSL290/212MW has PD=4.1 and can apply for CER credits. A successful application will give additional incomes of MYR15.6mill/year. This would add MYR96mill to the project NPV over 10 years. Comparable hydro projects have been approved by UNFCCC in other countries. Biodiversity Forests in Pahang and Terengganu are nearly cut in two by deforestation west of Kenyir lake. The Puah reservoir will lengthen and narrow this rainforest corridor and make it more fragile. Among seven organism groups studied, local loss of species can be 200-300 species. Mitigating by managing individual species could cost MYR30+mill. Catchment conservation, with particular attention to the north-south habitat corridor, will be more effective. Catchment protection can be implemented without a net loss to society because of clear-felling incomes in reservoir areas. Water Quality and Supply There is excess supply of water in Terengganu. Additional dry season supply from the proposed project will only be of benefit in the future, and has an estimated option benefit of NPV 2.9mill. Deterioration of water quality in the Puah and Tembat rivers as well as in surface water of the north and west sections of the Kenyir Lake may affect lake tourism and recreational fisheries.

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Tourism Diversion of water from Puah and Tembat rivers will be damaging for two resorts since the rivers are the main attraction. The proposed new reservoirs will have greater water level variations than Kenyir lake. Any new resort developments are therefore likely to be linked to the existing Kenyir lake. The project can have a negative impact on tourism in the NW section of Kenyir lake of up to MYR27mill. Maintenance of adequate minimum flow and improved forest management may compensate for this. Rural Economy and Fisheries No net benefit on commercial fisheries is expected. Probable negative impacts on recreational fisheries area considered under impacts on tourism. The economic impact on Semoq Beri Orang Asli were explored by scaling the economy per family to the Malaysian per-capita Gross National Income (GNI) (MYR24000/year). If the scaling of income is adopted, the compensation costs are unlikely to fall outside the range of MYR3-4mill. Cost-benefit Analysis In a worst-case scenario, assuming maximum mitigating cost in all sectors, the project has a benefit/cost ratio of 1.3 to 1.35. This ratio is sensitive to capital costs. In a good case scenario without cash timber compensation and where biodiversity mitigation is achieved by protection of catchment forests, the benefit/cost ratio is 19.7. The best-case scenario is that the project in addition achieves CO2 quota accreditation. In this case the project has a benefit/cost ratio of 38.

6.18 RISK ASSESSMENT

Based on the work in this study, the average individual risk posed by the proposed Tembat Dam and Puah Dam would be 4.46x10-5 fatalities per person-year. This value is considered high as compared to the acceptable involuntary risk level of 1x10-6 fatalities per person-year. However, there are no settlements downstream of the proposed Puah and Tembat Dam and all the water held up by the dams flow into Tasik Kenyir if ever there is an occurrence of dam break of either dam. Hence there is no individual that will be involuntarily exposed to the risks posed by the existence and operation of the proposed dams.

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