Store Norske’s plans for future coal

Resource base

SNSK is now making plans for future coal mining in other deposits to replace the current operations in the Svea Nord mine. Future coal mining in Sval­

bard under the direction of SNSK will be submitted to the Storting as a separate item of business when the project has been fully studied.

The company has made major investments in connection with the development of Svea Nord and associated facilities for the transport and shipping of coal. Major investments have also been made in the infrastructure of the Svea area. In the event of

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Svalbard coal mining in other, smaller deposits, it is proba­

bly a necessary condition for profitable operation and preservation of the environment that the infra­

structure in Svea can continue to be used. Substan­

tial new investment will be necessary for coal min­

ing even in the case where existing infrastructure can be used.

After the planned closing of the Svea Nord mine in 2014, SNSK will assess possible further operations in four new locations in the Svea area, where existing infrastructure can be used. These are Lunckefjell (9), Svea Øst (4), the fringe zone of Svea Nord (6) and Ispallen (11), where the num­

bers in parentheses indicate the estimated size of the coal reserves in millions of tonnes. Remaining

reserves in Svea Nord are estimated at 15 million tonnes. Thus, in the company’s estimation, there is currently a total of about 45 million tonnes of remaining surveyed coal reserves in the Svea area.

Planned coal mining at Lunckefjell

Based on geological surveys of the resources at Lunckefjell, which is located northeast of the Svea Nord mine, it is estimated that the field will yield 9 million tonnes of recoverable coal. This will pro­

vide a basis for operation for somewhere between four and eight years. If there should be mining operations at Lunckefjell, it will be necessary to build a transport road between Svea Nord and

Figure 9.1 Map of claims and resources

Source: SNSK

Lunckefjell across the Märthabreen Glacier, i.e. a stretch of about two kilometres. According to the company, the discharges of environmentally haz­

ardous substances will be modest, and it is planned that when the mining is terminated as many of the traces of the mine as possible will be removed. To this must be added the openings out of Svea Nord and into Lunckefjell. The development will occur right up to the border of the national park in the Reindalen valley. Discharges of mine water can drain into the park.

Plans for new mining operations will require an environmental impact assessment pursuant to Sec­

tion 59 of the Svalbard Environmental Protection Act. In June, the Governor of Svalbard in consulta­

tion with the Directorate of Mining established a research programme for the Lunckefjell project that would focus on the topics of natural environ­

ment, society and climate. In this research pro­

gramme, the question of runoff into the national park will be an important one. It is also specified in the research programme that an overview shall be prepared of coal mining’s contributions to emis­

sions of greenhouse gases. Among other things, this overview shall include emissions of green­

house gases from the combustion of mined and sold coal.

A zero alternative including the consequences associated with closing down the coal mining oper­

ations shall also be studied. SNSK plans to submit the environmental impact assessment and applica­

tion to the Governor in the autumn of 2009. Accord­

ing to plan, the Governor shall circulate the envi­

ronmental impact assessment for comment in October 2009 with a two-month deadline for inputs.

The environmental authorities’ resolution, includ­

ing any permits, is expected in the third quarter of 2010. In order to facilitate coal mining at Luncke­

fjell, a necessary investment on the order of NOK 1 billion has been estimated. The company is cur­

rently assessing various production paths and methods of operation. Among other things, the Lunckefjell project’s estimated profitability is sen­

sitive to changes in expected start-up date, the price of coal, the exchange rate on the dollar and the cost level, including the number of employees.

If the project goes ahead and a permit is issued, the main project will be prepared with a view to the start-up of operations in the actual deposits around the middle of 2013, with the transport of construc­

tion equipment and road building beginning in 2010. The start-up is thus planned to be coordi­

nated with the removal of the remaining coal pan­

els in the Svea Nord mine.

The Government’s work on the Lunckefjell project Essentially, the Lunckefjell project is an investment decision for SNSK’s Board of Directors. However, the project constitutes a substantial investment that is associated with a relatively large financial risk and will have a significant effect on the com­

pany’s equity and dividend capacity, among other things. These are key questions for the owners, and thus it is natural that the project be submitted to the general meeting.

In keeping with the administration of owner­

ship, it is clearly a necessary condition that SNSK’s coal mining should be commercially profitable.

The Ministry of Trade and Industry wants to eval­

uate the Lunckefjell project on the basis of its own assessments of the company’s calculations and by hiring an independent adviser. Final consideration in the ministry also requires that the project be issued a permit pursuant to the Svalbard Environ­

mental Protection Act. According to the schedule, this may occur in April 2010 or alternatively in the autumn of 2010. Before then, the environmental impact assessment and the company’s application to the Governor will have been completed. In addi­

tion to commercial profitability, key evaluation cri­

teria for the Government will include the project’s effect on the settlement in Longyearbyen and its environmental impacts. Future coal mining must also be carried out in a way that conforms to the ambitious environmental objectives in Svalbard.

The Government further specifies that safety must be given the highest priority in all assessments related to mining operations. Profitability must not come at the expense of safety or the environment.

Future coal mining and the Svalbard community SNSK envisions that the resources in the Svea area can sustain coal mining until 2023. However, this time horizon assumes the opening of new mines in Lunckefjell and Ispallen, which is dependent in turn on commercial profitability and the projects being environmentally acceptable.

The company is currently evaluating produc­

tion paths for the remaining resources in Svea Nord and likewise in Lunckefjell in the event of any operations there. If the production volume is reduced to 2 million tonnes per year, the resource base can be further extended. According to the company, it ought to be possible to achieve this without substantially reducing profitability. The company has expressed a manpower goal of 310 employees in 2010. This assumes that the downsiz­

ing will occur through natural wastage. As men­

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2008– 2009 Report No. 22 to the Storting

Svalbard tioned, the group had a total of 396 employees at year-end 2007, 337 of which were employed in the mining company. To this can be added a consider­

able number of externally hired crews.

The commercial and social analysis for Sval­

bard for 2007 shows that SNSK makes a good con­

tribution to stability, year-round activity and family community in Longyearbyen. Coal mining is by far the largest basic industry in Svalbard, and when derived activities are included, coal mining accounts for 40 per cent of the total full-time equiv­

alents (FTEs) in Longyearbyen and Svea.

At the request of the Ministry of Justice and the Police, the Norwegian Institute for Urban and Regional Research (NIBR) has analysed the rela­

tionship between production and employment in SNSK and the social development in Longyear­

byen. Although most jobs related to coal mining are in Svea, and a large percentage of the employ­

ees in SNSK commute to the mainland, NIBR report 2008:22 makes it clear that a possible disap­

pearance of coal mining will have major ripple effects in the local community. According to the NIBR report, these effects may be limited to some extent by encouraging alternative activities, such as research, education and ecotourism.

The company’s working hour arrangements are important for the community in Longyearbyen.

Through the employee organisations, a proposal was submitted a couple of years ago for an arrange­

ment with 14 days on the job and 14 days off, and it has been possible to institute this as a trial scheme.

SNSK’s Board of Directors decided in the spring of 2008 to continue this arrangement for an interim period lasting until January 2010. The arrange­

ment gives the employees better opportunities to travel from Svalbard to the mainland and was ini­

tially a trial scheme for one year. One reason for the introduction of this trial scheme was the lack of family dwellings in Longyearbyen and of jobs for spouses or cohabitants.

Studies show that about half of SNSK’s employ­

ees currently commute to the mainland on their time off. Increased commuting may make Long­

yearbyen seem more like a commuter society as opposed to the family community that has evolved over a period of time. This can lead to problems with keeping the school and day care institutions open and will weaken some of the basis for a robust local community. Store Norske has now gone in for devising arrangements for working hours and dwellings so that there will be less commuting and the company’s residential properties will be more fully utilised. The company is also signalling its intention to develop a new recruitment policy,

suited to attracting more miners to settle in Long­

yearbyen. Together with the company, the Minis­

try of Trade and Industry will review the experi­

ences from the trial scheme and evaluate on this basis whether it may be relevant to discuss contin­

uing such arrangements with the Board of Direc­

tors.

Coal mining as a policy instrument in the Svalbard policy

One of the five main objectives of Svalbard policy is the maintenance of Norwegian communities in the archipelago. This objective has been met through the family community in Longyearbyen. At present, more than 100 years after its foundation, coal mining is still the most important mainstay for this community. However, coal mining is based on a non-renewable resource. It is also vulnerable to fluctuations in the price of coal, and recent history has shown that unforeseen events may have major consequences for this activity.

Coal mining has traditionally taken place in the vicinity of established communities and through­

out history has also formed the basis for Longyear­

byen and other communities in the archipelago. At present, Norwegian coal mining is mainly based in the Svea area. There are also mining operations in Longyearbyen. Based on the current situation, as mentioned above, there can be a basis for mining in the Svea area up to 2023. This assumes that it is commercially viable to open new mines in the Svea area, with Lunckefjellet the first development project after Svea Nord is played out, or alterna­

tively the fringe zone, Ispallen and Svea-Øst. It is also a necessary condition that the projects sepa­

rately and aggregately are acceptable on the basis of environmental considerations and the goal of preserving the natural wilderness in Svalbard the way this has been regulated through the Svalbard Environmental Protection Act.

Continued coal mining is essential for maintain­

ing Longyearbyen as a family community. It is the Government’s view that coal mining should con­

tinue within the strict constraints set by environ­

mental legislation and commercial profitability and in a manner that supports the objective of Store Norske Spitsbergen Kulkompani to help support a robust community in Longyearbyen. Existing infrastructure for coal mining operations should be used where possible. At the same time, it is impor­

tant to support existing and new, diversified activi­

ties in Longyearbyen. This is especially true of the activity at UNIS, a further development of Svalbard as a platform for research and education and fur­

ther development of tourism and space-related activities. Developments in the various areas must be considered in context and assessed in view of the overriding objectives of Svalbard policy, includ­

ing the ambitious environmental goals for the archipelago.

The Mining Code for Svalbard

The right to apply for, acquire and exploit natural deposits is regulated by the Mining Code for Sval­

bard, laid down by the Royal Decree of 7 August 1925. The Mining Code is based on two principles:

equal access to conduct exploration and mining operations on the basis of the principle of non-dis­

crimination and first finder’s right to be issued a so-called claim (area where the right to mining opera­

tions is granted). As previously mentioned, SNSK currently has 316 claims in Svalbard, which cover a total area of about 3,000 km². In 2007, there were a total of 382 claims, and the Russian company Trust Arktikugol is the second largest claim holder with 50 claims. Pursuant to Section 15 of the Min­

ing Code, a claim holder is obligated to commence mining operations within the claim. However, this obligation to work the claim is not absolute, and dispensation can be applied for on terms that are further specified. The Commissioner of Mines makes his/her recommendation on the matter to the Ministry of Trade and Industry, which can issue dispensation from the requirement concern­

ing the obligation to work the claim. If the claim holder does not fulfil the obligations pursuant to Section 15 or dispensation is not granted, the claims will lapse. Others can then apply for a claim in the area. This means that if SNSK on the basis of various assessments decides upon permanently closing down the mining operations in Svalbard, the claims will lapse in time and may be exploited by others. However, the restrictions on the possi­

bility of carrying out infrastructure development that has an impact on the natural wilderness and the protected areas in Svalbard will be the same for other players as they are for Store Norske. These restrictions are discussed in greater detail in sec­

tion 7.4.3.

Figure 9.2 Woodfjord. A chance encounter with polar bears.

Photo: Bjørn Frantzen

91 2008– 2009 Report No. 22 to the Storting

Svalbard

In document Svalbard Report No. 22 (2008–2009) to the Storting (sider 87-92)