BASF Comes To Town

Lack of organizational self-confidence is not an attribute often associated with BASF, the world’s largest chemical company. Later this year, BASF will begin construction of a $1.2 billion polyurethane complex at the Chongqing Chemical Industry Park in southwest China. BASF’s assuredness will come in handy as it tries to convince wary residents that its project is in their best interest.

The German company is eager for the plant’s construction to proceed smoothly. But it faces challenges on two fronts. Residents of the communities adjacent to the chemical park are former farmers, many of whom are bitter about having had to give up their land to make way for industry. Beyond the local communities, environmental activists are unconvinced of the safety of the project, which, they say, was approved in a secretive way.

To improve its standing in the eyes of local residents and to bring environmental activists on board, the company’s Chongqing-based staff is launching a new community relations program this month. Corporate outreach activities are uncommon in China, particularly in an inland city such as Chongqing.

“The people in Chongqing don’t trust the chemical industry; they’ve seen many accidents,” says Christian Tragut, general manager of BASF Polyurethanes in Chongqing. “But they don’t know BASF yet.”

The industrial park is in recently developed Changshou, a section of the municipality of Chongqing about two hours by car from the city center. It’s seven years old and already houses numerous, mostly local, chemical companies. The government seized the land to build it before BASF arrived, but lingering resentment colors residents’ attitudes toward the company. Locals contend they did not receive enough compensation for yielding their land and that their new neighbors are dangerous.

When the government approved the BASF project earlier this year, Greenpeace said it was unacceptable to build such a project next to the Yangtze, the largest river in China. In central Chongqing, Dengming Wu, president of the Green Volunteer League of Chongqing, worries most about the threat the BASF project poses to his city of some 5 million people. “The wind blows from Changshou to central Chong­qing in summer,” he says. “And they will use particularly toxic materials like phosgene and benzene.”

The resettled former farmers now mostly live in apartment buildings in Yanjia, a community of about 40,000 people within the Changshou district. Many Yanjia residents are not keen to talk about leaving their land because several people were arrested after expressing discontent. Most of the residents who talked to C&EN did so in casual conversations without providing their names.

“We’re worried about the pollution, especially after the BASF plant is built,” says the owner of a small restaurant on a Yanjia main street. The money he received for giving up his land did not meet his expectations, but he does not complain forcefully. A year ago, he says, one of his aunts started serving a two-year jail sentence for participating in a protest. “You get some money from the government,” he says. “It’s not quite enough to acquire an apartment in this town, and if you complain, off to jail you go.”

Few ex-farmers seem to miss their former life, though. At a budget hotel in Yanjia, a housekeeper tells C&EN, “Things are much better now—I get paid every week.” As others do, she says that the financial compensation her family received for its land was inadequate but that complaining about it would only lead to jail time.

Not everyone in Yanjia is afraid to openly talk about the land seizures. Hui Wang, the 40-year-old mother of a teenage boy, was released in March after serving a two-year jail term for transporting contraband items in a long-distance bus.

It was a made-up charge, she tells C&EN. The real reason she was arrested, she says, was that she was traveling to Beijing to complain to the central government. Prior to her attempt to reach Beijing, Wang and other protesters had blocked a road leading to the Chongqing Chemical Industry Park for a week, in February 2009. The protesters were outraged that the government had not deposited some of their land compensation money into a retirement account, as they say had been agreed. Wang and another person were jailed after the protests. Twenty others got two-year terms after another protest in the summer of 2010, Wang says.

Wang takes a dim view of not only the government but also the chemical industry. Local residents of Yanjia develop skin allergies from wearing clothes washed in polluted water, she says. “My skin wasn’t itchy in jail, and it started again once I came back,” she says. “How do you explain that?”

Widespread financial prosperity, without pollution, is what BASF believes its project will help bring to Yanjia and the Chongqing region. “Our plant will employ 300 people on a permanent basis, and downstream units will provide jobs to another 3,000,” BASF’s Tragut says. “The government wants to develop this area, and BASF can help to bring about a lot of change.”

BASF expects to start up its project in 2014. Occupying more than 100 acres, it will be by far the largest project in the Chongqing Chemical Industry Park. Its centerpiece will be a plant producing methylene diphenyl diisocyanate (MDI) with an annual capacity of 400,000 metric tons. BASF will also build units making the MDI raw materials nitrobenzene, aniline, and phosgene. Upstream and downstream from BASF will be 14 partner companies that will either supply BASF or buy its products for further processing.

MDI is the main component of rigid polyurethane foam, which is used in construction and appliance applications. It also finds use in adhesives, thermoplastic elastomers, and coatings. BASF already operates an MDI plant in Shanghai. It sees a need for a second unit in Chongqing to serve the Chinese hinterland.

According to Zhenbang Jiang, general manager of the government-owned Chongqing Chemical Industry Park, the economic impact of the BASF project far exceeds the 3,000 or so chemical production jobs that it will create. Other companies, in the automotive and electronics industries, are coming to the area to take advantage of BASF’s products, he tells C&EN. “The polyurethane made here will mostly be consumed by companies around Chongqing.”

Being inland, the Chongqing area has been left behind by the rapid economic growth that China’s coastal cities are enjoying, Jiang says. BASF and other chemical companies help to spread the wealth inland, according to Jiang: “Many of the local young people have moved away,” he says, “and we’re giving them a chance to remain here.” A technical institute training teenagers and young adults for jobs in the chemical industry will open in Changshou next year, Jiang adds. It will enroll 10,000 students.

Regarding local discontent, Jiang says land seizures were done in a proper way. The money farmers got for their land, he says, was awarded in accordance with regularly updated pricing guidelines issued by Beijing. Frequent changes in the guidelines have been responsible for some grumbling, he points out, because some farmers may have received more money than others depending on when the government acquired their land.

Farmers who were using land not designated for agriculture may also have been frustrated that they were not compensated. The government doesn’t pay for protected land such as nature preserves, Jiang says. “I think many of the frustrated people here were on land they should not have been on.”

Wang, the recently freed resident, tells C&EN that her family did indeed receive compensation for only part of the land it had been using, but that she wasn’t ever told the remaining land was off-limits. She adds that the government uses many ­methods to reduce the amount of compensation it pays.

Jiang responds that after farmers leave their land, the government provides extensive assistance. For instance, the government subsidizes the residents’ apartments in Yanjia and has built schools and hospitals nearby. Moreover, residents receive help with finding jobs. “By taking away their land, we’ve turned them into urban dwellers,” he says. “We have a responsibility to help them settle into this new life.”

Overall, Jiang says, the Chongqing Chemical Industry Park aims to adhere to the highest standards in both community relations and environmental management. Such efforts help attract other companies. Like BASF, Bayer is interested in building a polyurethane plant at the site, Jiang tells C&EN. “These companies want a stable society, a clean environment, access to resources, industrial safety,” he says.

Emission controls at the park are comprehensive, Jiang maintains. First, companies building there must demonstrate that they will have systems in place to comply with local environmental standards. Second, the park manages a control room that monitors emissions of all the plants there. “We’re monitoring 40 companies so far,” Jiang says.

Third, all wastewater is treated both by individual plants and by a central water treatment facility operated by the French company Suez. Finally, the park has built reservoirs to contain accidental releases of untreated water before they can reach the nearby Yangtze River. “It’s far better to locate many chemical plants at a well-managed site such as this one than haphazardly all over the countryside,” Jiang says.

He is dismissive of the Green Volunteer League’s concerns that the BASF plant may be unsafe, saying that the league failed to attend public hearings about the project before it was approved. “Mr. Wu should participate in the information sessions that we hold rather than listen to what he hears on the street,” Jiang says. “We are happy to discuss our safety practices with him.”

For his part, Wu says that BASF was not forthcoming during the environmental impact assessment (EIA) process that preceded the project’s approval. For instance, the company did not contact the league even though it’s one of the oldest environmental groups in China. BASF, he says, should have made its EIA submission public to allow league members to assess its plans.

BASF’s Tragut counters that the company does not allow nongovernmental organizations or the public to review EIAs anywhere in the world because they contain technical information that competitors could use. The company’s plans were thoroughly debated by numerous Chinese experts during the EIA process, he says. Moreover, a simplified description of BASF’s project, containing key details, was posted online, Tragut adds.

The Chongqing complex will be built in accordance with BASF’s best practices, Tragut promises. The company is particularly vigilant regarding phosgene, a hazardous gas that was used as a field weapon during World War I and the Second Sino-Japanese War in the years before World War II.

To minimize risk, BASF will produce only as much phosgene as is needed and will keep it under low pressure. The phosgene will be held in a large chamber made from reinforced concrete—“basically a bunker,” Tragut says.

There is no Chinese requirement for such a chamber, he notes, but BASF will build it to comply with its corporate MDI production standards. The chamber will be fitted with a “destruct” system capable of neutralizing any accidental release of phosgene gas.

Other measures will also ensure the safety of the production process, Tragut adds. For instance, any modification made to the plant’s original design will have to receive approval from the firm’s global MDI safety team. “We go through comprehensive scenario analysis for any change made to an MDI plant,” he says.

In the end, BASF hopes to address concerns that its MDI complex might raise through a community advisory panel (CAP) that it is in the process of setting up in Changshou. Principles governing CAP membership were agreed on at a meeting in July that was attended by Wu, of the Green Volunteer League, and Jiang, the head of the chemical industry park. BASF expects the first CAP meeting to take place later this month.

Wu is encouraged by BASF’s CAP initiative. “The EIA process was secretive, and we were not allowed to participate,” he says. “I am more optimistic now.”

Jiang argues that the arrival of international companies in Changshou benefits the area in many ways: “These companies bring in not only investment capital, but also their advanced way of doing things in a very open way.” Corporate community relations programs are rare in China, he says.

In Changshou’s Yanjia district, a resident standing outside a convenience store one evening is philosophical about the local growth of the chemical industry. Sure, he says, the compensation residents received for their land did not cover the costs of buying new apartments and of contributing to a mandatory government-run social welfare fund. But, he adds, “China is becoming more prosperous every year, and you can’t stop progress. We’ve now moved from farms to cities, and things are getting better all the time.”