What now? Store Norske seeks short-term help, but town’s long-term future perilous as layoffs begin quickly

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To the extent there’s hope, it’s mostly that somebody somewhere will think of something.

The first round of layoffs that will ultimately leave Store Norske with about 100 of its current 270 employees is likely to occur next week, said Arild Olsen, the union steward for the workers. He estimated 40 to 50 employees may be affected, most of whom will likely get a three-month notice period.

“The government has a maximum three-month thinking period,” he said, referring to the national government now owning 100 percent of Store Norske as a condition of a 500-million-kroner bailout package approved earlier this year.

Store Norske is now asking for an additional 95 million kroner in annual assistance during the next three years. Ministry officials and Parliament members face the conflicting problems of a universally expressed desire to keep a strong and economically health presence in Svalbard, and a widespread reluctance to continue subsidizing a money-losing industry at a time when Norway’s economy is facing a far more severe crisis due to a collapse in oil prices.

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Operations at the Lunckefjell mine, seen here near the completion of construction in late 2013, lasted for less than a year after opening in early 2014. Store Norske is asking the Norwegian government for 95 million kroner a year for the next three years to maintain the mine in the hope of reopening it and the mine at Svea. Photo courtesy of Store Norske.

The additional assistance would allow Store Norske to keep a maintenance stuff of about 50 at the Svea and Lunckefjell mines. The latter opened early last year but closed after a collapse in coal prices left the company nearly bankrupt at the beginning of this year. A total of 1.2 billion kroner was spent constructing the mine in the hope it would sustain Store Norske for the next three to four years, but the current coal price of just above $50 a ton is about 40 percent less than expected when the mine opened.

Longyearbyen Mayor Christin Kristoffersen said after meeting with central government officials this week in Oslo she’s optimistic the company’s plan will be supported.

“I think there is a positive vibe,” she said.

State Secretary Lars Jacob Hiim, in an interview with High North News, said the Ministry of Trade Industry and Fisheries is evaluating the proposal, but doesn’t know when a recommendation will be made.

“But this is a high priority and we have already started work,” he said.

Store Norske is proposing to suspend mining at the mines for up to three years in the hope prices recover, although no upturn is projected in the foreseeable future. But Olsen said shutting down operations for a lengthy period will mean the loss of people with extensive experience mining in Svalbard’s unique conditions.

“The human capital is the most valuable resource we have,” he said.

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Coal from Mine 7 is loaded into trucks provided by LNS Spitsbergen. The mine near Longyearbyen is scheduled be the only one in operation by next summer and the heavy layoffs at Store Norske have resulted in large downsizings at supporting companies such as LNS. Photo courtesy of Store Norske.

Under the plan, 45 employees would work at Mine 7, nearly twice as many as now since production would be doubled, according to Svalbardposten. The company would also retain five to 10 administrative employees.

Olsen said keeping that Mine 7 open makes sense logistically and economically.
“First, we feed the (local) power plant with coal,” he said. “We need we need a certain volume to create that specification.”

The remaining coal is sold for industrial use because it is of higher quality than standard energy coal, which also means it can sell for prices of up to $90 or $100 a ton, Olsen said.

Store Norske has stated it needs an average coal price of $65 a ton to break even following a restructuring plan enacted earlier this year as part of the bailout package.
Olsen, who is also the top-ranked Labor Party candidate in next month’s municipal council election, will become the town’s next mayor if the party retains retains its control of the council. He acknowledged it’s hard to envision what Longyearbyen’s economy and society will look like at the end of his four-year term.

“I reckon somehow the town will survive because we have a lot of people who are craving to create,” he said.

Virtually all local political parties agree Store Norske should remain a significant economic contributor to Longyearbyen, but other industries – especially tourism and education – will need to increase their presence dramatically to compensate for the loss of mining jobs.

The decision by Store Norske’s board of directors to halt virtually all operation quickly is “is based on economic considerations without, in our opinion, taking into sufficient account the socioeconomic impacts such a reduction in activity will entail,” wrote Torgeir Prytz, the top-ranked candidate for the Conservative Party, which represents the council’s second-largest bloc, in a policy statement.

The board’s decision is now being evaluated by the Ministry of Trade, Industry and Fisheries, and Prytz is requesting the ministry recommend less drastic measures.
“We therefore request that it seeks to find other solutions that will provide a more long-term and gradual restructuring of society than what the board’s recommendation proposes,” he wrote.

One change to a long-standing tradition sought by the Conservative Party is putting an emphasis on miners who live full-time in Longyearbyen, rather than working the two-week-on/two-week-off shifts that are common now for workers who “commute” from the mainland.

One option being evaluated by Store Norske leaders, as well as local and national politicians, is expanding the company’s activities into fields such as providing a research and test site for other companies hoping to perform infrastructure and natural resource work in the Arctic. The Svalbard Liberal Party, in its campaign platform, supports such an approach, but state the company needs help – if not necessarily more coal mining subsidies – to achieve it.

“Accelerate the development of future energy supplies,” the platform states. “Be a driving force to establish a future-oriented, environmentally-friendly and robust energy with a great capacity to develop the city into a center in the Arctic. (But) Store Norske must for the sake of the community, the staff, the values ​​and competencies of the company be ensured time and the financial framework for a smooth restructuring.”

The biggest dissenter is the Svalbard Green Party which, like the national party, argues mining should cease in the archipelago due to its adverse environmental impacts.

“The Greens will not under any circumstances support further coal mining in Svalbard after 2016,” Rasmus Hansson, a leader for the national party, told Vårt Land. “We supported the emergency loan in the summer to avoid an uncontrolled bankruptcy with the negative consequences this would have for the Svalbard community, but our assumption has always been that the time must be used to restructure away from coal.”

While the trade ministry is evaluating Store Norske’s shutdown decision during the next few months, a longer-term indication of the government’s plans for the archipelago is likely to come with the release of a revised “white paper” outlining policy goals for the area.