A future on hold: Government agrees to give Store Norske up to 400M during next three years to ‘pause’ Lunckefjell, double shifts at Mine 7


The Norwegian government is recommending spending up to 400 million kroner so Store Norske can maintain inoperative facilities at its largest mines during the next three years and employ a double shift at Mine 7.

“The purpose of the operational pause is to give the community a little longer time to build up new industries,” said Norwegian Minister of Trade and Industry Monica Mæland in a statement released Dec. 17. “At the same time we maintain the ability to start up again if the market picks up.

The proposal, which must be approved by Parliament next spring, would provide 110 million kroner in 2016 to maintain the mines and infrastructure at Svea and Lunckefjell, more than the 95 million kroner a year Store Norske requested. An additional 145 million kroner is projected annually in 2017 and 2018.

The double shifts at Mine 7 means the company will retain about 100 employees, down from about 400 in 2012, but well above a worst-case scenario of less than 30 reported earlier this month. Downsizing and a halt of operations at Svea will continue through next summer.

“It was the best we could hope for,” Ronald Jacobsen, the union steward at Store Norske, told Svalbardposten. “Not least, it is fantastic to get a clarification, for it has been a terrible time recently to live in the unknown.”

Mæland and other officials were heavily criticized by local leaders, Store Norske employees and others for taking too long to reach a decision after the company’s board of directors made its recommendation to the government in September. Mæland told Svalbardposten she doesn’t consider the criticism valid.

“I do not agree that it has taken a long time,” she said. “We got the enquiry in September and we have made thorough assessments and had consultants who have gone through the board’s recommendation. This is a very large amount of money for an operating pause and so we must consider alternatives. And we have done that thoroughly.”

The government has already provided 550 million kroner in emergency funds this year. A 500-million-kroner bailout to keep Store Norske from going bankrupt, consisting of a loan and the acquisition of the company’s property, was approved by Parliament in June. The trade ministry also approved an allocation of 50 million kroner in November for “restructuring measures,” including 23 million kroner for job “innovation and development” through Innovation Norway and 22 million to Longyearbyen’s city government for infrastructure work.

The Store Norske funding drew criticism from those wondering why the government was propping up a money-losing and environmentally unfriendly industry in the country’s supposedly pristine “crown jewel.” Accusations of hypocrisy were numerous, especially since Parliament voted at roughly the same time to rid Norway’s oil wealth fund of investments in companies that were largely coal dependent.

Similar, Norway got decidedly mixed reviews for its pledges at the United Nations climate summit in Paris at the beginning of December, with many analysts noting the country remains committed to Arctic oil and gas activity. Furthermore, Prime Minister Erna Solberg said she believes coal is the real evil that needs to be addressed since Norwegian gas can be part of the solution in bringing down emissions from Europe ahead of 2030.

“We will change some things in all parts of the Norwegian economy in order to meet the ambitious goals that we have set in the parliament,” she said during a presentation at the two-week summit. “But this does not mean that there won’t be a need for both oil and gas in the coming decades.”

Brian Ricketts, the head of the lobbying group Euracoal, said the coal industry is increasingly “hated like slave traders” due to protesters and suggested the embrace of petroleum by many leaders is based on UN “brainwashing” that’s factually inaccurate.

Øyvind Korsberg, a Progress Party leader, characterized Norway’s contradictory positions on coal mining in Svalbard and globally in an interview with NRK. He said  the agreement reached at the summit could sour some Parliament members on approving the government’s recommendation to provide additional funding to Store Norske.

“We must take into account the entire Svalbard community and the switchover that must be done there,” Korsberg said. “And the new climate agreement simply does not strengthen continued coal mining.”

The larger bailout package approved earlier this year was supposed to allow the Store Norske to continue operating through 2016. But a continuing drop in coal prices with no expectation of recovery during the next few years put the company in trouble again sooner than anticipated.

“Had Store Norske been on the mainland, the government would probably not have come to provide such support, Korsberg said. “But given what the company is doing and where it is an important cornerstone in the Svalbard community, one has to think carefully about what to do in the future.”