BANGKOK, Thailand — A hydroelectric dam mega-project under construction in Laos has shortchanged local villagers and caused ecological problems including waterway pollution, an environmental group said Wednesday.

But the World Bank, one of the lead funders on the project, insisted problems are being addressed and that revenues from the $1.45 billion project would go a long way toward eradicating poverty and improving basic services.

Many of the concerns about Nam Theun 2 hydropower are expected to be aired at a three-day meeting that opened Wednesday near the site of the dam, about 150 miles east of the Lao capital, Vientiane.

"Illegal logging is increasing, environmental controls are substandard, and the reservoir threatens to become a polluted cesspool," Shannon Lawrence, the Lao program director for the California-based International Rivers Network, said in an e-mail interview.

A quarterly engineering report on the project found that excessive dust continued to cause breathing difficulties for nearby villagers and high levels of sediment from the construction site were being discharged into the waterways.

"For a project which is intended to set a benchmark of worlds best practice against which future projects can be assessed, the environmental performance still falls significantly short ..." according to the report prepared by New Zealand-based PB Power and obtained by the IRT.

A separate report, also prepared by panel of experts for the project, found that illegal gold mining and logging were on the rise in biologically diverse Nakai-Nam Theun Protected Area, though they said efforts are under way to tackle the problem and admitted some of the logging had occurred in the past.

The concerns about the gold mining and logging stem from earlier promises by project supporters to boost protection of the Nakai-Nam Theun area.

The World Bank acknowledged concerns over the project remain, including compensation for confiscated land, delays in building permanent housing for relocated villagers and as well as erosion and drainage problems on some road projects.

It acknowledged that some villagers have complained about dust from the road project but insisted the 1,070 megawatt hydropower project is making "satisfactory progress."

"This complex project is addressing a range of implementation challenges as they occur," Patchamuthu Illangovan, the World Bank's country manager in Laos. "Many of the affected people who used to live a disadvantaged life in the past are beginning to see the fruits of a better future."

The World Bank projects the dam will generate $1.8 billion in revenues for the Laos government by 2034. The government has promised to spend the funds nationwide on poverty eradication, infrastructure, education, health, agriculture and the environment.

Almost all the electricity from the dam will be sold to Thailand and project supporters say it will release 15 to 20 times less greenhouse gases than a gas-fired power plant producing the same amount of energy.

Among the most contentious issues is the relocation of villages in the path of the 450-square kilometer reservoir on the Nakai Plateau.

The World Bank says 742 of the 1,216 affected households have already moved to their permanent resettlement sites, and are benefiting from schools, roads, food handouts and work projects.

But the Lawrence said the project is leaving people without a way to earn a living.

"The big problem in all these areas is replacing lost livelihoods _ ensuring that before you've taken away people's traditional sources of food and income you've worked with villagers to develop and implement alternative livelihood programs that are likely to prove sustainable," Lawrence said.

Source: http://www.chron.com/disp/story.mpl/ap/fn/4924897.html