The (much) higher price of failure: Cost of dismantling Store Norske’s main mines doubles to 1.5B kroner


Norway’s government has made it clear they’ll pay whatever it takes to shut down virtually all coal mining in Svalbard – and it turns out they’ll pay dearly as the estimated cost is now twice the 750 million kroner originally estimated.

The new estimate of 1.5 billion kroner to shut down maintenance and remove all infrastructure from the Svea and Lunckefjell mines far exceeds the roughly 900 million kroner that officials at Store Norske estimate is needed to resume operations at the mines. But the government has embraced the shutdown, stating uncertainty about coal prices in the years ahead means there is no assurance the government-owned company could avoid the losses in recent years that have reached into the billions.

“It’s never been a similar project ever, as far as I know,” Store Norske Administrative Director Wenche Ravlo told NRK. “This is absolutely unique.”

“The costs depend on the amount of bulk to be shipped, and the requirements that the Environmental Directorate and the governor will establish. If there’s a lot of waste it becomes a question of whether we can store it locally or if it has to be transported to the mainland.”

Operations at Lunckefjell were halted almost immediately after the mine opened in 2012 and its closure means the Norwegian government is writing off the 1.2 billion kroner to build it. Operations at Svea were suspended in late 2016, supposedly for up to three years in the hope coal prices would recover enough to allow the company to resume mining at a profit.

But Store Norske leaders said the suspension was costly and inefficient, and asked the government to either approve an immediate resumption of operations or shut down the mines permanently. But the company was still planning to use the existing infrastructure to establish tourism and science activities at Svea even if mining was halted.

The government, which owns 100 percent of company, had other ideas. The Ministry of Trade, Industry and Fisheries announced at the end of 2017 it was recommending dismantling the settlements altogether. It has maintained that position despite the greatly increased cost of doing so and an offer from private interests in purchasing the mines.

The dismantling is expected to take three to four years, which the government argues will provide employment in Longyearbyen as the city strives to transition to other industries such as tourism, research and fish processing.