After a dam has been constructed, an area of land behind it is inundated to create a storage lake. It is the loss of this land that normally leads to the greatest controversy. (Run-of-river schemes are less disruptive and may be considered acceptable in situations where a dam and storage reservoir are not permissible.)

The most significant effect of a reservoir will be to displace people living in the area to be flooded. Resettlement is extremely disruptive, particularly if the land involved has cultural and ancestral associations stretching back over decades or centuries. If a unique ethnic group is involved it is unlikely that the project will be permitted to proceed. But in all cases resettlement should be minimised.

If resettlement is permitted, human rights considerations dictate that it should be carried out in consultation with the people involved. A hydropower scheme is usually intended to improve the local standard of living and that yardstick should be applied to the displaced people; these people should be better off after displacement than they were before.

To achieve this aim involves financial support which should be built into the project budget. As a rule of thumb, a figure of six times the per capita gross national product (GNP) of the host country should be allowed for each individual to be resettled.

Effects on plant and animal life in the area must also be taken into account. Unique habitats will need replacing with new habitats in the region of the reservoir. The effect on fish, particularly migratory fish such as salmon and eels must be studied. In addition a reservoir can stimulate seismic activity as a result of the pressure of impounded water; its likelihood should be assessed.

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