In 1969 the first of three aluminium smelters was built in Iceland at Straumsvík, near Hafnafjörður, on the South West side of Reykjavík by Alusuisse (subsequently Rio Tinto-Alcan). In 1998 a second smelter was constructed by Century Aluminum (now a subsidiary of controversial mining giant Glencore), at Hvalfjörður near Reykjavík, and in 2007 the third, run by Alcoa, was completed at Reyðarfjörður in the remotely populated East of the country. The Icelandic Government had been advertising the country’s vast ‘untapped’ hydroelectric and geothermal energy at ‘the lowest prices in Europe’ hoping to attract jobs and industry to boost Iceland’s already very wealthy but somewhat fishing dependent economy. The industry, which would permanently change Iceland’s landscape with mega-dams, heavy industry scale geothermal plants and several kilometer long factories, was promoted by the Icelandic Government and the aluminium companies as ‘good employment for a modern age’. However, ten years after the flagship Alcoa Fjarðaál project was completed, unemployment is higher than it was in 2005, and Iceland’s economy has become dependent on an industry which is vulnerable to commodity cycle slumps and mass job losses. Worse, the price charged for Iceland’s energy is tied to the price of aluminium and analyses of the country’s 2008/9 economic crisis suggest it was exacerbated by the poor terms of Iceland’s late industrialisation. Yet demands for further industrialisation remain, and more than 1000 Icelanders are employed in the aluminium sector.

This article exposes the conditions inside Iceland’s aluminium smelters based on interviews with workers conducted in 2012. The stories from two smelters share correlating accounts of being forced to work in dangerous conditions under extreme pressure, and without adequate safety equipment, leading to serious accidents which are falsely reported by the companies. These shocking allegations require serious attention by the trade unions, Icelandic government and health and safety authorities. This especially in the current context of labour disputes with the aluminium companies, alongside revelations about the same companies’ tax avoidance schemes and profiteering in the country.

Century, Grundartangi:

A former worker from the Century plant at Grundartangi shared his story, though did not want his identity revealed. Steini (not his real name) had worked at the plant for ten years and only quit recently.

“When I went to work there I thought of it as just a job and it was good pay. My experience of it was that they were taking our labour for cheap and making work us like slaves. The only thing we get out of it is our pay.

There were so many accidents that were their fault, not ours. They put so many rules in place, but you have to break the rules to get the work done, which they are pressuring you to do, then if something goes wrong its all your fault.”

Steini described how bonuses are awarded to the shift according to the number of accidents. If you have an accident and are off work you lower your annual bonus. At first the bonuses included smart new bikes, then they were reduced to a restaurant meal, and finally just pizza and beer.

He described the pressure of the job; how workers are pushed to work harder, but as soon as they get quick at the tasks they add more work so they are even more pressured. Akin to Alcoa Fjardaál in the East of Iceland the turnover rate is around 20% with only a handful of people staying for ten years as he had. Similarly, both Alcoa and Century Aluminum have gradually replaced permanent jobs with contract labour. Increasingly the work force was made up of University students on summer jobs which made the work even more risky as this short term labour was less experienced and more prone to accidents.

Shifts were twelve hours long, for 183 hours/month and the working hours were very unsociable, many at night for three days in a row. Steini described how most of the days off in between shifts were used to sleep and recover energy in order to work again. As the plant was expanded and more pots were added the work got harder.

“Everybody who works in Norðurál [Century] hates it. Most of the people are eating anti-depressants and everything. They hate the company, they hate the work but they are afraid to change and be without work.” He said.

He described how many accidents there were at the factory and how the company avoid paying compensation or having to report the severity of the incident;

“I got a broken finger, I burned my feet and once I had a forklift drop on my arm. I never got any compensation from the company and when I went to insurance companies I could get nothing either. The company ask you to come back to work as soon as you can move and just sit at the computer, then they count that as being ‘well’ in their records so it looks like less ‘work days lost’. The insurance companies also see it this way so it it very hard to get compensation.

One guy was doing something very risky and fell into the [molten aluminium] pot up to his knees. He was on morphine for a few weeks. I remember the health and safety guy coming out of a meeting with him smiling. He had admitted that it was all his own fault.”

Industry standards on reporting discriminate between lost time injuries and restricted work injuries, with the former being taken more seriously. Like Alcoa, Glencore claim that the ‘total recordable injury frequency rate’ (TRIFR) is being reduced annually. Nonetheless ten people died at Glencore’s global operations last year according to their 2015 Annual report, and sixteen in 2014.

Scandals over worker’s rights had previously erupted in Iceland during the construction of several mega power projects for the aluminium industry after the conditions of cheap foreign labour were exposed. More than a dozen Chinese and other foreign workers died during the construction of the Kárahnjúkar dam and several Romanian workers suffocated in geothermal pipes on the site of a Reykjavík Energy work camp in Hellisheiði where they worked up to 72 hour weeks.

Steini described the heat of the pot rooms and how restrictive and hot the many types of safety clothing are. As a result most workers chose to use the minimum amount of safety clothing, enabling them to be comfortable and work faster to get bonuses;

“You used as little safety equipment as you could so you could get the job done. When I was in the pot room I just used a paper mask for comfort. I stopped noticing the smell of the gases, then after a period working in the pot lining rooms I went back to the pot room and I really smelt it. It chokes your throat and you know it’s bad.”

‘Pot rooms’ are huge sealed troughs of carbon anodes and aluminium flouride through which up to 320,000 amps of electricity are passed to separate the strongly bonded oxygen from the alumina. Molten aluminium is then ‘tapped’ from the pots and cast into ‘ingots’. The process generates gases including inorganic fluorides, sulphur dioxide, CO2 and perfluorocarbons. Perfluorocarbons (PFCs) are extremely potent greenhouse gases lasting up to 50,000 years in the atmosphere. Tetrafluoromethane, the most common PFC is 6,500 times more potent a greenhouse gas than CO2 and its main global source is from aluminium smelters. Sulphur dioxide and fluoride emissions are acidic and can kill or stunt plant growth. Fluoride emissions also build up in the bones and teeth of animals and humans causing Skeletal Fluorosis, which weakens bones and can lead to bone deformation much like arthritis. Farmers living around Centrury’s smelter in Hvalfjörður claim their sheep and horses have got sick and even died from flouride poisoning.

Saga (not her real name) started work in Century Aluminum’s Grundartangi smelter in 2006, before turning twenty. It was her first big job and her introduction to the working world. She was working twelve hour shifts from the outset, and her work began in the pot rooms. Like Steini she described the fallacy of the health and safety training;

“We were told to wear dust-masks because of all the dangerous and unhealthy gases that come out of the pots, also because of the alumina, fluoride and other pollution in the air. You could always smell it all through the mask though. It was emphasized very heavily not to smoke inside because smoking inside the pot-rooms could result in ‘stone-lungs’ in few years time, which is very common amongst smelter-workers. That is because of all the pollution in there. If you would smoke inside, you were inhaling three times more tar and other stuff straight down to your lungs than if you where smoking outside in more normal surroundings. We also learnt that pregnant women are never allowed to enter the pot-rooms because there is a great risk of foetal harm.”

Saga accused Century of extremely low health and safety standards and condemned the company for making workers “repeatedly risk their lives to keep the smelter operational into the next shift”. She described being given second hand protective clothing in poor condition, and claimed that much of the equipment was in need of repair but was still being used as parts were hard to come by. Like Steini she had witnessed and experienced serious injuries, which had been misreported or disguised by asking workers to come in for office days when injured in order to improve the figures on workdays lost due to injury;

“Working for show” you could call it. I have even heard about workers with broken legs being made to show up for hanging out in the office for a few hours just to keep the records clean. It was easy to pressure people with many passive methods, such as bringing down the accident record which means that their shift doesn’t get a reward like the others that went through the year “without” accidents that caused absents.”

She gave a scathing and detailed account of the pressured and dangerous work environment;

“I witnessed others, and found myself, doing dangerous and life threatening things in the smelter. This was not because we had some kind of death wish or thirst for adrenaline but because there was no other way to finish our daily jobs on time. There is no other choice than to climb on that pot, drive that windowless forklift, work on this broken down and not really functioning crane today, not take proper breaks. Be one doing two people’s jobs, drive too fast because you have to hurry and “fixing” things with all possible and impossible ways so they will last just a little bit longer. I have seen people run away, scared for their lives, and then being forced back because somebody has to take care of what went wrong. I have witnessed what happens after a pot explodes.

Far too many people cram themselves into vehicles, because distances are very long and your main transport is your own two legs on the hard concrete floors. These are all labeled as dangerous things to do in there and in theory they are not “really” allowed. For example climbing on pots –which are very often badly closed and have broken lids or holes. Working alone on a crane, which is strictly speaking never allowed, always to be performed by a team of at least two workers. That’s because of the danger of people passing out from the heat, exhaustion, lack of liquid, rest or food, and a crane-operator could very likely be in a critical place when that happens, like over an open pot. Driving vehicles with the lights not working, broken windows or too filthy windows to actually see out is not allowed. Neither is the operation of any vehicles or cranes without proper training, or vehicles and cranes that are broken or not functioning properly. Having your shoes not closed all the way, having an old helmet, old shoes, no dust-mask, standing under an crane in use, not preheating your tools well enough to touch liquid metal or acid. Working in too much loudness, too much darkness or too much pollution. Not getting the breaks that you are entitled to. Teaching yourself how to do things. Working with a person you don’t trust or yourself being in so bad physical state, like suffering illness, fatigue, hunger, pain, that you don’t even trust yourself.

All of these things, I have had to do to finish my duties, just like everybody else in there (at least back then). Of course I could have said no at any given time, but you don’t really want to do that when you know that it is just going to be somebody else, a co-worker who is in the same shoes as you, that will have to take care of it and finish what you left. Everything has to be finished every day no matter what it takes.”

Alcoa Fjarðaál.

The Alcoa plant in the East of Iceland was heralded by the Icelandic Government as the saviour of the waning Eastern economy and a fantastic employment opportunity which would bring young people from Reykjavík to the East. Officials promised up to 1000 permanent jobs, plus another 2.5 jobs created in other sectors for each job in the aluminium industry. Ten years later, however, few of the promised benefits have come to the region, and overall unemployment in Iceland, which was less than 3% in 2005, reached 7.5% in 2009 and remained at 5% 2015.

Alex Smári drove the Alcoa bus from Stöðvarfjörður to Reydarfjörður from 2006 to 2008. He says people in the East believed work in the smelter would be easy, with good pay and plenty of time off, but the reality had turned out to be very different. He described workers returning from their shifts as ‘like corpses’ in the bus, and claims many quit their jobs after a short time. In his opinion the East has not become more thriving as the politicians and company promised, to the contrary “Fjarðabyggd is like a labour camp”.

One worker in the Alcoa Fjarðaál smelter was willing to speak to me though he did not want to be named. Bergur (not his real name) noted the high turnover of workers with many leaving after just a year or two. He claimed around 100 of the 450 employees in the smelter were foreign, suggesting that many in the East simply don’t want to work there. There are only a handful of people who have remained in employment with the company since the smelter opened in 2007.

“Out of twenty people on my shift that started working there five years ago there are only two left. Everyone else quit because they didn’t like working there. The turnover was 20% last year. 20% with all the unemployment in Iceland! It really tells a story.”

Like the Century workers he described how the managers push the workers to work as fast and hard as possible during the shift. However, once they have learnt to work faster the job load simply goes up again.

“The Alcoa building system is devised to suck every bit of what you have. You start with 100 people doing 100 people’s jobs and then you push everyone until 90 people are doing 100 people’s jobs, and then there are 60 and then 50. At Alcoa, everyone gets into the situation where he is working the whole shift doing his absolute best and still walking away with a kick in the butt for not finishing something or other.”

Bergur claimed company people had told them in a meeting that Fjarðaál is the most dangerous of Alcoa’s smelters in Europe. Shifts are twelve hours long and often at night and employees are expected to work 176 hours a month compared with only 142 hours on eight hour shifts at Rio Tinto’s Straumsvík plant near Reykjavík.

There is also a bonus system that rewards the workers for the quantity and quality of aluminium they produce. This means workers effectively get fined when a machine breaks or poor quality alumina is delivered, even though this is out of their control.

“Everything is connected to the bonus. If a crane breaks down and it holds off production it lowers the bonus for everyone. Now we have low quality alumina coming in which means we get through more anodes and that also lowers the bonus. When this situation is going on the workload gets substantially higher, so not only are you working a lot more, but you know you are getting less pay.”

As a result of this pressure Bergur claims the few days off between shifts are usually spent simply sleeping and recovering before work starts again. Contrary to Alcoa’s claims that the workplace is ‘family friendly’ he claims Alcoa Fjarðaál has become known locally as ‘the divorce factory’ since so many couples have separated due to the unsociable hours which affect their relationship.

Bergur also spoke about Alcoa’s use of contract labour, and its effect on worker’s rights and the strength of the unions:

“There are two groups of people working at Alcoa: There are Alcoa employees and there are contractors who are not part of Alcoa. We are doing the same work but they are not members of the unions. By having these two groups they can control the employees more easily and the unity within the factory will be less.”

“We have to live!”

Former Prime Minister of Iceland Halldór Ásgrímsson famously promoted the Alcoa Fjardaál project by proclaiming “we have to live!”. But what kind of livelihood have Icelanders been forced to accept? All of the workers expressed feeling misled by the government and the aluminium companies.

Saga claimed that prospective workers were denied information about the health and safety risks;

“Our government has been been eagerly promoting smelters as very agreeable and good working places for years. Smelters are being promoted in places where people don’t know them, don’t know the dangers, the threats and the health risks, and don’t feel they have a choice. How can a place where you are constantly breathing heavy pollution – alumina, fluoride and dangerous gases – that make you feel like your lungs took a severe beating every time you open up a pot, be a healthy and agreeable working place?”

Bergur analysed the Icelandic government’s claim that the smelter would reverse the East to West migration trend:

“The people who have quit there, who have returned to Reykjavik or whatever…I call those the sensible people. They have moved to the East to work for Alcoa, maybe both man and woman. They come with high hopes and determination to make this work. After working for a year, or a year and a half, the pressure which goes on at the shift becomes too much, and when they realise this is the system and will not change, that they are never going to be in a situation where you are working a relatively easy shift and going home not so tired….this is not going to happen. When they realise that, they quit and get out.”

Steini also questioned the government’s promotion of aluminium smelting as a good employment for Icelanders;

“People in Iceland just wanted jobs, but not necessarily this kind of factory. The question is who put this idea in our minds that the only way to get a job is by having an aluminium smelter?”

Of course, Icelandic smelter workers are not alone in their experience of pollution and dangerous working conditions, and there is much potential to link up with global struggles for workers rights. At Hindalco’s Hirakud aluminium smelter in Odisha, India, workers are taking the company to court asking why they were not told what they were breathing in. They were being moved from the pot-room every four years, told that this was due to the potential health effects of working in such high heats, but the effects of breathing in highly toxic fumes were never mentioned. They believe the company was deliberately concealing the dangers while trying to minimise them.

On top of poor working conditions, employment in the aluminium industry is innately insecure, as it is vulnerable to the peaks and troughs of the commodities supercycle. The recent commodities downturn led to the demise of the UK steel industry, including the likely closure of Port Talbot steel, cutting 11,000 jobs. The workers have already lost part of their pensions, a common phenomenon in the metals industry, as the owners – Tata Steel – claim they cannot afford to pay the full amounts. The rusting skeleton of Century Aluminum’s Helguvík smelter, abandoned midway through construction in 2009, stands as a stark reminder of the false promises and volatility of this industry.

Iceland’s aluminium workers cannot expect their employers, experts in anti-unionising and misleading PR, to protect their rights. Instead, they must properly inform themselves of the risks to their health and security, and contribute to the debate on what constitutes ‘a nice place to work’ in a modern Iceland.

Sources:

Cooke, K. and Gould, M.H. 1991. The health effects of aluminium, a review. The Journal of the Royal Society for the Promotion of Health. 111, 163-8.
Aslam M, Khalil K, Rasmussen RA, et al. (October 2003). “Atmospheric perfluorocarbons”. Environ. Sci. Technol. 37 (19): 4358–61.
Dr R. Liteplo and Ms R. Gomes, 2002, ‘Environmental Health Criteria for Fluorides’. International Programme on Chemical Safety, UNEP. http://www.inchem.org/documents/ehc/ehc/…

Indriði H. Þorláksson, economist and former tax director

Frumvinnsla áls – Lýsing á hinni mengandi og orkufreku framleiðslu álbarra

Haukur Már Helgason

Last week’s Thursday, the majority of Alþingi’s Industrial Affairs Committee (AIAC) announced its intention to to re-categorize eight sites as “utilizable” options for the construction of hydroelectric power plants. These have until now been categorized, either as for preservation, or as on “standby”. These are categories defined by the Master Plan for nature conservation and utilization of energy resources, as bound by law. The re-categorization would serve as the first legal step towards potential construction.

The proposal had neither been announced on the committee’s schedule, before its introduction, nor introduced in writing beforehand. The committee’s majority gave interested parties a week’s notice to submit comments on the proposal, which is admittedly faster than we managed to report on it.

Reasoning

When asked, by Vísir, why the proposal was made with such haste, without any prior process in the committee or an open, public debate, Jón Gunnarsson, chair of the committee on behalf of the Independence party, replied that “it is simply about time to express the majority’s intention to increase the number of options for utilization.”

The proposal is in accordance with statements made by the Minister of Industry, Ragnheiður Elín Árnadóttir, at Landsvirkjun’s autumn meeting earlier that week, as reported by Kjarninn. In her speech at the occasion the Minister said: “I will speak frankly. I think it is urgent that we move on to new options for energy development, in addition to our current electricity production, whether that is in hydropower, geothermal or wind power. I think there are valid resons to re-categorize more power plant options as utilizable.”

Opposition

As the proposal was introduced to Alþingi, members of the opposition rose against the plans.

Róbert Marshall, Alþingi member in opposition on behalf of Bright Future, has called the lack of process “deadly serious” and “a war declaration against the preservation of nature in the country”. Steingrímur J. Sigfússon, the Left-Greens’ former Financial Minister, concurred, calling the proposal the end of peace over the topic, as did the former Environmental Minister on behalf of the Left-Greens, Svandís Svavarsdóttir, who called the proposal “a determined declaration of war”. Katrín Júlíusdóttir, former Minister of Industry, on behalf of the Social-Democrats’ Coalition commented that the proposal was obviously not a “private jest” of the committee’s chair, but clearly orchestrated by the government as such.

Lilja Rafney Magnúsdóttir, the Left-Greens’ representative in AIAC, and the committee’s vice chair, condemned the proposal. According to her, Minister of the Environment, Sigurður Ingi Jóhannsson, specifically requested fast proposals on these eight options. She says that she considered the data available on all options to be insufficient, except for the potential plant at Hvammur.

That same Thursday, the Icelandic Environment Association (Landvernd), released a statement, opposing the proposal. According to Landvernd’s statement, five of the eight options have were not processed in accordance with law. Landvernd says that the proposal “constitutes a serious breach of attempts to reach a consensus over the utilization of the country’s energy resources.” It furthermore claims that the AIAC’s majority thereby goes against the Master Plan’s intention and main goals.

Landsvernd’s board says that if Alþingi agrees on the proposal, any and all decisions deriving thereof will “constitute a legal offense and should be considered null and void”. Guðmundur Ingi Guðbrandsson, Landvernd’s manager, has since stated that if the plans will proceed, the high lands of Iceland will become a completely different sort of place.

The Iceland Nature Conservation Association (INCA) also opposes the plans. The association released a statement, pointing out that if current ministers or members of Alþingi oppose the Master Plan legislation, they must propose an amendment to the law, but, until then, adhere to law as it is.

The options

Mid-October, Environmental Minister Sigurður Ingi Jóhannsson already proposed re-categorizing one of the eight areas, “the plant option in Hvammur”, as utilizable. This was in accordance with proposals made by AIAC last March. Leaders of the parties in opposition then objected to the decision-making process, saying that such proposals should be processed by Alþingi’s Environmental Committee before being put to vote. The Hvammar plant would produce 20 MW of power.

The other seven options to be re-catogorized are: the lagoon Hágöngulón (two options, totalling 135 MW); Skrokkalda, also related to Hágöngulón (45 MW); the river Hólmsá by Atley (65 MW); lake Hagavatn (20 MW), the waterfall Urriðafoss (140 MW); and Holt (57 MW).

The last two, as well as the plant at Hvammur, would all harvest the river Þjórsá, the country’s longest river. The eight options total at 555 MW.

Backstory: Kárahnjúkar

The latest power plant construction in Iceland took place at Kárahnjúkar. The 690 MW hydropower plant at Kárahnjúkar is the largest of its type in Europe. It fuels Alcoa’s aluminum smelter in Reyðarfjörður. The largest power plant in the country before Kárahnjúkar, was the Búrfell hydropower plant, on-line since 1969, at 270 MW. The Icelandic government and the national power company Landsvirkjun committed to the dam’s construction in 2002, which was concluded in 2008. The total cost of the construction was around USD 1.3 billion. The largest contractor was the Italian firm Impregilo. The construction was heavily contested, for its environmental and economic effects, for the treatment of the workers involved and for a lack of transparency and accountability during the prior decision- and policy-making process.

At least four workers were killed in accidents on site, and scores were injured. “I have worked on dam projects all over the world and no-one has even been killed on any of the schemes. To have this number of incidents on a site is not usual,” commented International Commission on Large Dams (ICOLD) vice president Dr Andy Hughes at the time.

During the construction, the country saw new kinds of protest actions, involving civil disobedience and direct action, led by the organization Saving Iceland. Andri Snær Magnason’s 2006 book Draumalandið – The Dream Land – contesting Iceland’s energy policies, and calling for a reinvigorated environmentalism, became a bestseller at the time. Ómar Ragnarsson, a beloved entertainer and TV journalist for decades, resigned from his work at State broadcaster RÚV to focus on documenting the environmental effects of the Kárahnjúkar plant and campaigning against further construction on that scale.

In the eyes of many, however, the greatest impact was the environmental damage done to a significant part of the country’s wilderness and fragile eco-system, as one thousand square kilometers of land were submerged by the dam. Along with Saving Iceland, INCA was at the forefront of the struggle against the plant’s construction.

Few would contest that the dam construction at Kárahnjúkar was the most dividing topic of debate in the country during the first decade of this century, until the 2008 economic crash. Alþingi’s Independent Investigative Committee, established to investigate the advent of the crash, was not alone in relating the expansive effect of construction on this unprecedented scale to the succeeding crisis.

[Correction: Apart from a 2 MW plant in Kaldakvísl, n]o new power plants have arisen since the construction at Kárahnjúkar. Which plays the bigger role, environmentalist campaigns, or the economic crash which ensued, may be debated. What remains at stake is not any single construction project, as such, but the pro-heavy industry policy, continuous through multiple governments through the last fifty years.

Earlier this November, before the latest turn of events, INCA pointed out that at least three of the options that Landsvirkjun already categorized as “utilizable” were considered for preservation according to the still current Master Plan. Due to this, the association protested the Landsvirkjun’s vice president Ragna Árnadóttir’s recent claims, that the company intended to reach a wide consensus on the use of energy resources.

Landvernd and Landsvirkjun

Landvernd, the Icelandic Environment Association, was founded in 1969. It is among the the country’s leading environmental NGOs, runs several educational programs, lobby groups and reviews parliamentary bills and motions. In the last two decades, its emphasis has moved from the conservation of soil and vegetation towards protecting Iceland’s wilderness and landscapes, not least in the country’s uninhabited central highlands. It has initiated civil disobedience actions, its website citing the Mayday Green Walk in 2013 as an example.

Landsvirkjun is the country’s largest electricity provider, operating seventeen power plants, on a scale from Hafið’s 2MW to Kárahnjúkar’s 690MW. The largest hydroelectric power plant serving the public, rather than industry alone, is the plant at Búrfell, at 270MW.

Original source: Grapevine

Al Jazeera

Some farmers suspect fluoride from aluminium smelters is making animals sick, but the companies sharply disagree.

Reykjavik, Iceland – For the third summer in a row, hydrogen fluoride has been detected in vegetation samples taken near an aluminium plant in eastern Iceland, worrying farmers and horse owners who fear for their animals’ well-being.

Aluminium plants emit fluoride, a chemical element that can be toxic to animals and humans in high concentrations.

The Environment Agency of Iceland found the concentration of fluoride in grass grazed by sheep exceeded the recommended limits near the town of Reydarfjordur.

Sigridur Kristjansdottir from the Environment Agency told Al Jazeera the high levels this summer were “primarily due to meteorological and geographical factors … This resulted in the results for early June showing relatively high values”.

A press release issued by the Alcoa Fjardaal aluminium plant noted that, despite the spike this summer, average fluoride levels this year are lower than they were in 2013, which in turn were lower than in 2012.

Fluoride is a cumulative poison, meaning that animals and plants often register higher levels of the element as they age. Before the Fjardaal aluminium smelter began operation, the fluoride level in Sigurdur Baldursson’s sheep – who live on the only farm near Alcoa’s plant – were measured as having 800 micrograms per gram (µg/g) of fluoride in their bone ash. That’s well below the recommended limit of 4,000 µg/g in the bone ash of adult sheep, or 2,000 µg/g for lambs.

But samples taken in 2013, recorded the sheep’s fluoride levels between 3,300 and 4,000 µg/g. Baldursson said he expects the next readings to exceed 5,000 µg/g – above the recommended limit.

“The sheep that will be sampled next were born in 2007, and are thus as old as the aluminium plant itself,” he told Al Jazeera.

Nevertheless, Baldursson said he has not noticed signs of ill health in his sheep.

‘I only heard about it by accident’

Bergthora Andresdottir sees things differently from her farm on the other side of Iceland, 25km north of the capital Reykjavik. She said she is constantly phoning the Environment Agency to complain about smoke rising from Century Aluminium’s smelter at Grundartangi, directly across the fjord from her farm.

“I phone them several times a week,” she told Al Jazeera. “But there’s no specific person to talk to, and they don’t help much. Sometimes they claim that the smoke is coming from the neighbouring factory [the Elkem ferrosilicon smelter], but I tell them it isn’t.”

In August 2006, an accident at the Grundartangi plant caused a large amount of fluoride emissions. Riding school owner Ragnheidur Thorgrimsdottir said local farmers were never told about this accident, which meant that sheep, cattle and horses ate fluoride-contaminated grass. “I only heard about it by accident, two years later,” she told Al Jazeera.

That same year, the capacity of the Century plant was increased from 90,000 tonnes of aluminium a year to 220,000. The firm HRV Engineering stated “the increase in fluoride for the autumn months of 2006 in the atmosphere … can partly be traced to the increase in capacity of the smelter”.

Sick horses

Thorgrimsdottir lives about five kilometres southwest of the Grundartangi plant, and owns 20 horses – which she said have been badly affected by fluoride, some so badly that they have had to be put down.

“This is the eighth year in a row that my horses have been sick. Currently three of them are sick, but I’m also keeping an eye on four more,” she told Al Jazeera. Instead of keeping her horses outside all the time, as is the norm during Icelandic summers, she has kept them in at night and given them hay to eat because they do not digest grass properly.

Thorgrimsdottir showed Al Jazeera one of the affected horses named Silfursteinn. “The affected horses walk stiffly, like sticks. They also tend to have lumps and swellings on their bodies,” said Thorgrimsdottir.

When asked about Thorgrimsdottir’s horses, Solveig Bergmann – a public relations officer for Century – said she could not explain their maladies. “I have no explanation. According to veterinarians, the horses … bear symptoms of Equine Metabolic Syndrome (EMS), which is caused mainly by obesity and lack of exercise,” she said, citing a report by the Icelandic Food and Veterinary Authority (IFVA).

But Thorgrimsdottir said EMS can also be caused by fluoride, and when IFVA vets took samples from the horses she had to put down, they only measured fluoride levels in their bones, not in their soft tissue as she had requested.

Gyda S Bjornsdottir studied the birth rates and health of sheep from 2007 to 2012 in the area close to the Grundartangi plant for her Master’s degree. She found in the areas southwest and northeast of the smelter – which are the most common wind directions in the region – a higher proportion of sheep did not produce any lambs.

“Usually, two to three percent of sheep do not produce lambs. Away from the plant, 2.6 percent of ewes were lambless, whereas in the area southwest of the plant, this figure was 7.4 percent,” she told Al Jazeera. Northeast of the plant, she added, 4.5 percent of ewes did not bear lambs.

“The sheep in the area to the southwest of the plant also show visible signs of tooth damage, which is a clear sign of fluoride poisoning, and poor quality wool,” said Bjornsdottir.

Because the aluminium smelter is next to a ferrosilicon plant that also emits pollutants, Bjornsdottir said she cannot be sure the effects are caused by fluoride, as there were also increased concentrations of sulphur dioxide, nickel and arsenic.

“But the results are consistent with fluoride distribution,” she said.

‘No evidence’ of negative effects

But Bergmann, the Century public relations officer, disagreed. “In research carried out since 1997 in the vicinity of the Century Aluminium smelter at Grundartangi, no evidence has ever been found of negative effects of fluoride on sheep, or any other animal,” she said.

Bjornsdottir, however, pointed out in her thesis that farmers say it is not economically viable to send sick sheep to a veterinarian. Instead, they slaughter the affected sheep at home. As a result, she said she believes the figures are biased, because the sheep monitored by Century for fluoride are healthy animals that are sent to the slaughterhouse.

In a letter sent by Iceland’s Food and Veterinary Authority to Alcoa in January 2013, Thorsteinn Olafsson – who was responsible for sheep and cattle diseases at that time – said: “There are reasons to suppose that the danger levels for grazing and fodder for Icelandic sheep are even lower than overseas research shows. This needs to be researched even better in the local environment of aluminium plants in Iceland.”

Source: Al Jazeera

See also Hand in Hand: Aluminium Smelters and Fluoride Pollution

More Flouride in Animals Around Aluminium Factories than Elsewhere – Environmental Agency Refuses to Investigate

First published in Grapevine. Based on a 2010 article entitled “Í landi hinna klikkuðu karlmanna.” (“In the Land of the Mad Men”). Translated in part by Haukur S. Magnússon.

After the election, we see the old parties of economic mass destruction are coming back to power. Giving enormous promises of easy money to be wrestled from evil vulture funds, debt relief and tax reduction, The Progressive Party doubled in size after a few years of hardship. There is a jolly good feeling between the two young new leaders of a brave new Iceland, and when a radio host called them up and offered to play them a request, they asked for Duran Duran’s ‘Wild Boys.’ I Googled the lyrics, not quite remembering the lines, and got a nice chill down my back:

Wild boys fallen far from glory
Reckless and so hungered
On the razors edge you trail
Because there’s murder by the roadside
In a sore afraid new world

They tried to break us,
Looks like they’ll try again

Sounds quite grim. This, coupled with the new government’s announcement that it would be effectively dismantling the Ministry for the Environment and Natural Resources and that there will be no Minister for the Environment, gave me a strange flashback feeling. I decided to revisit the state of mind that we used to call normal in 2006. When the economic policy, the energy policy, the expansion of our towns, the mortgages on our homes—almost all aspects of our daily life had become totally mad. This is not my own diagnosis; if you search the homepage of the IMF for the phrase “Collective Madness,” you’ll find this:

“’Iceland, in the decade and a half leading up to the crisis, was an example of collective madness,’ said Willem Buiter, chief economist at Citigroup, a remark that elicited spontaneous applause from the more than 300 participants, many of them Icelandic policymakers, academics, and members of the public.”

In our daily lives, we usually sense what is normal and what is over the top. Sometimes the discourse will blind us; PR and propaganda can create a kind of newspeak. It can be a good exercise to try to talk about things in a foreign language, to view them in a new light. As an Icelander, you could for instance try to tell someone from another country that Iceland’s government sold one state bank and received payment in the form of a loan from another state bank—and vice versa. That the state banks were thereby handed to men that were closely connected to the then-reigning political parties. The manager of one of the parties became head of one of the banks’ board of directors, while the other party’s former Minister of Trade belonged to the group that was given the other bank. That man had access to every bit of inside information about the bank’s standing.

In the meantime, this former Minister of Trade became Central Bank Manager. He went to the US and made Alcoa an offer that the company could not refuse. He had thus set in motion the largest-scale construction project in Icelandic history, greatly increasing economic activity in Iceland—a grand boon for the bank he just finished selling to himself.

If you tell this story in a foreign language, people shake their heads. They gape in disbelief. They use words like “corruption” and “mafia.” They exclaim, full of disbelief and even disappointment, “no, not in Scandinavia!”

THE ACCEPTED INSANITY

It is insane to expand a banking system by tenfold in eight years. We know that now. It isn’t technically possible to grow all the knowledge and experience needed to build up and manage such a contraption in such a short time. Not even by shoving an entire generation through business school. It is impossible.

But the megalomania was not just confined to the banking sector. Energy production in Iceland was doubled from 2002–2007, when the huge Kárahnjúkar dam was built in the eastern part of the highlands—to serve one single Alcoa smelting plant. The energy it produces, about 650MW annually, is enough to power a city of one million people. Doubling the energy production in a developed country over a five-year period is not only unheard of, but it would also be considered ridiculous in all of our neighbouring nations. Most industrialised states increase their energy production by around 2–3% annually. Doubling it would be unthinkable. It has been proven again and again that gargantuan investments generally destroy more than they create.

In Iceland, however, the goal was to double the nation’s energy production AGAIN by building aluminium smelters in Helguvík, Húsavík and enlarging the Straumsvík smelter by more than threefold. The period of insanity was to be succeeded by a total and complete madness. This was to be funded by 4–5 billion dollar 100% loans to Icelandic energy companies from foreign banks. Nearly 20,000 dollars for every single Icelander—every loan directly connected to aluminium prices and secret energy prices. The media reported this as your everyday act of government job-creation. It was regarded extremist to ask critical questions. Many regarded it unthinkable for the survival of the nation NOT to do this.

Now we know that we did not only sacrifice our nature for the economy, we sacrificed nature and the economy. Again, we do not have to seek out the websites of activists or environmental groups for this information. We just go to the IMF reports:

“Executive Directors observed that the Icelandic economy is at a difficult turning point. The long economic expansion, initiated by aluminium sector investments, sustained by a boom in private consumption, and fuelled by ready access to external financing, contributed to a build-up of macroeconomic imbalances and financial vulnerabilities.”

COCAINE IN THE HOT WATER?

The madness made itself clear in the business of geothermal energy, making itself known in the form of financial troubles and enormous debt of the energy companies. The geothermal field had enjoyed an even and stable development since it got started in the early twentieth century. During the great depression, the City of Reykjavík created the world’s largest geothermal heating system by pumping hot ground water into the homes in the city. Later they started producing a small amount of electricity by harnessing steam through turbines. But one day it seemed as if someone drilled into a cocaine vein. Out of the twenty high temperature geothermal areas in Iceland, plans suddenly emerged to harness sixteen right away, all for the sake of the aluminium industry. The energy companies applied for permits to do research drilling in most of the remaining ones. In an instant, the field went from a very slow, conservative development to becoming a geothermal wild west.

In the south, a major development of all the geothermal areas from the Reykjanes Peninsula to Þingvellir was planned—a chain of power plants in pristine and delicate areas—to serve a Century Aluminium smelter in Helguvík. But the geothermal plants would not have sufficed—the remaining power would be squeezed from hydro electricity in the Þjórsá river—potentially threatening the greatest stock of North Atlantic Salmon in Iceland—and up in the highlands—threatening the Pink-footed Geese of Þjórsárver.

So what was referred to as “moderate development” when the parties of The Wild Boys were last in charge of our energy sector? Their plans went like this: A new Alcoa smelter in the east, a new Alcoa smelter in Húsavík, a new Rio Tinto Straumsvík smelter beside the old one, an expansion of the Century smelter in Hvalfjörður and a new Century smelter in Helguvík. Amounting to a total of 1.4 million tons of aluminium. Each one of them needing energy that could serve one million people in their daily lives. Each one of them demanding sacrifice of great natural wonders, wild rivers and pristine geothermal areas.

How did they fare? The Alcoa Smelter in the East has been built, with the destruction of two glacial rivers, Lagarfljót and 50 km2 of highland beauty. The expansion of the Rio Tinto smelter was stopped and the Húsavík smelter did not go through, however, a skeleton of the Helguvík smelter is currently rising—with no power in sight.

The Alcoa smelter in the north would have required all the harnessable power in the northern part of Iceland, only excluding Jökulsá á Fjöllum. Close to Mývatn, we have the Krafla geothermal area. After a long and often struggling forty-year development period, the available power from the area reached about 60 MW. Now, the goal was suddenly to quadruple the area’s energy production—expanding it by 150 MW in just a few years, and harnessing the beautiful Þeistareykir area to its utmost capacity—up to 200 MW. They also had their eyes set on Bjarnarflag and Gjástykki, delicate areas that should be regarded as national heritage sites. All this was to serve a new Alcoa factory they wanted to build close to Húsavík, the famous whale watching and fishing village in North Iceland. Having done all that, however, the energy production would still not reach the 600 MW that Alcoa really needed—the harnessing of two more glacial rivers would have been necessary: Skjálfandafljót with the waterfall Aldeyjarfoss and the glacial rivers running from Hofsjökull.

The interesting thing is not how crazy this seems in hindsight, how extreme, how mad this reality was — but that outsiders did not see this plan as collective madness. The scheme was praised in international media as being a progressive plan for “clean” energy, and we still have members of parliament that regret that this did not happen. And the fact that our labour unions and politicians have referred to this when they say that “nothing is happening” in terms of business and job creation in Iceland. Or that they refer to this when they say “we have still only harnessed X% of our energy.” They are talking about this as a normal feasible future state of Iceland.

Why are people so crazy? Is it or was it a good idea to indebt the nation by a total of 5 billion dollars to place two Alcoa smelting plants in the same constituency? To surround the Faxaflói bay, where 70% of Iceland’s population resides, with three smelters? The answer is simple: The mad men still think so. One of the new Independence Party MPs, Brynjar Níelsson, has no regrets for the death of the river Lagarfljót in service of Alcoa. He said it was apparent that protectionists loved a few fish more than they did people.

But you can still ask like a fool: Did Iceland really have enough accumulated knowledge and manpower to multiply all our energy companies in the space of ten years? Was there never a doubt in the geologist’s mind when he found himself in a magical place such as the Torfajökull area above Landmannalaugar, Kerlingarfjöll or the steam areas around Reykjavík? Did they really want to do drill, pipe and harness EVERYTHING, right away? And do it all for the sake of a single industry—the aluminium industry. Did it have to be the role of a marginalised group of a few activists to use their spare time to criticise this?

OF “REYKJAVÍK” KNOWLEDGE

I was once at a meeting in Húsavík, where I screened my film, ‘Dreamland.’ At that meeting, the local geothermal plant manager claimed he could easily harness 1,000 MW out of geothermal areas north of Mývatn. I asked if it wasn’t correct that scientists are concerned about overexploitation of the country’s geothermal areas. The scientists’ criticisms were quickly blown off the table as “Reykjavík knowledge,” and in that instant every alarm bell went off.

Now we understand that power is not as plenty as the hype promised, and now most Icelanders understand that energy production on the banks of Lake Mývatn in Bjarnarflag might just jeopardise the ecosystem in that wonderful lake. But you wonder if the people developing our most delicate areas possess good enough judgement to work close to natural wonders. It seems like they are ready to take the risk, to see what happens.

I found an interview with the aforementioned plant manager from 2002. At that time, he had drilled a big hole for 170 million ISK because a Russian company potentially wanted to build an aluminium oxide factory and a giant aluminium plant in Húsavík.

If one sets aside minor ethical facts, such as the Russian aluminium industry being run by the mafia at that time, one is still left to ponder the fact that almost no industry in the world produces as much and as toxic waste as aluminium oxide production (or alumina, as it is called). Those that followed the horrible events when a red slush toxic lake in Hungary broke should know what comes with an alumina refinery. But this local hard-working man had spent more than one and a half million dollars looking into the feasibility of such a plant in Húsavík. Things have been so good here that people think they are untouchable.

Even though the companies engage in malevolent practices in other countries, they would never do that here. Sure.

THE HOLY LOCAL

It seems that for some reason the most unbelievable hogwash gets promulgated without any critical thought. We enter a boom after boom and never learn from mistakes. We can look further back in history to see how madness is mixed up with ambition, how extreme and unrealistic views of the future are presented and taken seriously.

In an edition of Morgunblaðið from March 1987, one can read a prediction of the impending evolution of local fur farming until 1996. At that time, thirty fur farms were operated in Iceland. Morgunblaðið cites a report that predicts Iceland will foster 600 mink farms by 1996. They assume a twenty-fold growth in ten years, as if nothing were more natural. A month later, this optimistic story ran: “The mink stock will double this year.” Only three years later, in April of 1990, we find this dramatic headline in a copy of Morgunblaðið: “Fur farming: The industry is on its last legs. Many farmers on the edge of despair.”

In this country everything is considered normal if a “local” wants it. Nothing in Iceland is as crazy as the holy local is when he wants a smelter or an oil refinery, no matter how large or out of proportion. He has the sacred right to that, especially if he uses “job creation” as an argument. Numbers that would be considered sizeable in large nation’s economic statistics, energy resources and infrastructure that are earmarked by the world’s superpowers as being “strategically important” are subject to “the will of the locals.” The nation’s energy resources and nature are in the hands of a smattering of district councils that have no staff and no expertise while the majority of Icelanders that reside in the capital area seem by default “local” to nowhere.

So, the locals of the east destroyed their highlands, the locals of the south want to dam the wonders of the Skaftá area, the lower part of the Þjórsá river and the locals of the southwest are ready to harness almost every single geothermal area. And this seems to be a global problem—rural communities losing their youth and talents to the cities of the world are willing to sell off their forests, their mountains, their rivers and valleys for some hope of development and a future.

It is strange to see that one of the major driving forces behind this development resides within our labour leaders, who have been demanding extreme leverage and risk on behalf of public energy companies. If there should be a hesitation in the risk taking, the responsible parties are “dragging their feet.” The labour unions’ “stability agreement” with the former government entails that “every obstacle be removed” that somehow hinders the proposed Helguvík aluminium plant. It is exactly this kind of thinking that lead to almost 200 foreign workers being left disabled and unemployable as a result of working on building the Kárahnjúkar dam. Conditions of workers were severely compromised to make the dam construction process cheap enough. Every obstacle was removed to provide Alcoa with energy prices that save them 200 million USD annually. That amounts to the combined yearly wages of more than 10,000 teachers.

The noble cause of creating jobs becomes quite grim if it involves harming the work capacity of so many. The PR people talk about a ‘multiplication effect’ of every job in a smelter—but wouldn’t it be polite to subtract the disabled workers? People will go so far to satisfy their prince charming that they behave like the ugly stepsister in the fairy tale, cutting their toes off to fit the glass shoe.

HOUSE OF CARDS

The Helguvík aluminium smelter close to Keflavík Airport is a symbol of how poorly run Iceland can be; the Helguvík aluminium smelter is already being built, even though nobody knows where we can scramble together its required 600 MW of energy. The Helguvík smelter is a symbol of how weak the nation’s administration can be, of how shattered professionalism and long-term thinking can become, and how the media all but encourages unlawful activities in their headlines, if job creation is at stake. They started to build the smelter without access to power sources, and without the necessary power lines planned or agreed upon by landowners.

Why start building, then? Because in 2006, the Wild Boys were in power, showing their ambition and “competence” by signing long term sales agreements for cheap energy before the energy sites had been researched, planned or developed. Now Reykjavík Energy and HS Orka are bound by agreements that neither company wants to fulfil due to foreseeable losses from selling the energy below its production costs.

The sharks were very aware that they were taking advantage of a country with mad politicians in a rare period in our history. When they were willing to sell almost everything, anything, anywhere to anyone. In a remarkable investor report called: “Harnessing unlimited power and profit from the world’s most progressive energy program,” an analyst made this great comment:

“It works out great for Iceland, too. It is very cheap for Iceland to deliver power to Century. The Icelandic power companies will make extraordinary profits on that power if aluminium prices stay strong. And if aluminium prices weaken, Iceland is not biting the hand that feeds it.”

This is how politicians build an elaborate house of cards that combine risk, debt and commitment that collapses if only one of the cards falls. Thus, the hands of future city governments have been tied and an insane construction binge in important areas has been commenced, all to benefit one company that’s lacking most of the needed permits.

Could anyone recount the details of the Century Aluminium Helguvík Smelter project at an international conference without being booed off the stage as a fraud? At an aluminium conference, however, such a man would actually bring more lust than an exotic dancer.

Despite being in the hands of extreme capitalists, the labour movement has not called for professionalism or long-term thinking in energy affairs. It simply demands that “every obstacle be removed.” Get the trucks rolling immediately.

In 2006 we were in the middle of a revolution, but the Wild Boys did not call themselves “The Aluminium Revolutionary Front”—they defined themselves as the norm, even though their scale was insane. If they were criticised, they started thinking of themselves as persecuted. Warlords are always persecuted moderates when they’re merely conquering neighbouring nations in the name of peace.

THE CORE OF THE PROBLEM

Throughout the years, polls have shown that a large part of Icelandic males aged 40–70 have been in favour of the collective insanity seen in the energy policy of 2006. The biggest problem seems to be with male voters of The Independence Party, where a vast majority has even considered the most extreme energy policy as the sole basis for the continued survival of Icelanders. That explains the great emotional attachment they have to dams and smelters. To secure their survival, the majority of them wants to cut back on our environmental regulations, and they have no standards whatsoever on the ethical background of the corporations coming to Iceland.

Therein lies Iceland’s most serious political ill. If everything were normal, our males would be conservative, moderate, aversive to risk, frugal, orderly and even a bit boring. This is an important group of people in every society. It contains a lot of average household fathers; it contains pillars of society, company directors, influentials, MPs and even journalists and editors. These are men that have the power to define what is normal and what is abnormal and/or excessive.

OF RESPONSIBLE PUNKS AND SURREALISTS

It is harmful for communities when a critical mass of their important males starts adhering to revolutionary and completely reckless ideas, adopting a blind belief in them. This group is not fit for governing anything while the situation lasts, and it is therefore no coincidence that the city of Reykjavík is now governed by the punkers and surrealists of the Best Party. A moderate mixture of surrealism and punk rock is a down to Earth, conservative and responsible policy when compared to the delusions and anarchy of the crazed men. They have proved very moderate and responsible, and have now moved the policy of Reykjavík Energy, Reykjavík’s energy company, into a more sustainable and modest direction. And the Left Green Social Democrat government did the same with Landsvirkjun, the national energy company.

Those that are worst off in this group of mad men share a mutual admiration for Einar Benediktsson (1863-1945). The Icelandic National Myth is perhaps best embodied in the figure Einar Ben, our poet of progress. His most recent biography gives a good picture of the kind of man he was and the impulses that motivated his actions:

What drives Einar Benediktsson on to undertake this long journey […] is his unshakeable belief in his own abilities to be of use to his impoverished fatherland in countries abroad. His dream is to furnish the money that will transform Iceland into a modern country, with towns, factories, railways, roads, harbours and large-scale farms. He carries nothing with him except his belief in himself…

Einar Benediktsson had great dreams for the future of Iceland, replete with hydroelectric dams, factories and railways. While his generation on both sides of the Atlantic saw their dreams become a reality, and sometimes a nightmare, Einar was to be disappointed in all his great hopes and ambitions. Henry Ford was born a year before Einar Benediktsson, and Sam Eyde, the founder of Norway’s Norsk Hydro was born three years after him. But Iceland failed to industrialize in the way Einar envisaged. Whether Iceland was fortunate or unfortunate to have missed out on the Industrial Revolution is something we can argue over. But the failure of Einar’s dreams left an unfilled space in the Icelandic soul. Iceland’s wealth came from fishing, but Einar’s ideas still hovered in the air, leaving a sense of a task left unfulfilled—the unfinished Icelandic dream. The Americans could move on from Ford to Gates. The Icelanders were still lacking a Ford.

One of the first bubbles in Iceland happened when businesspeople travelled the country buying rights to harness waterfalls in the beginning of the 20th century. Einar Ben had the Norwegian engineer Sætersemoen draw up a row of power plants spanning the entirety of Þjórsá. The drawings of the proposed power plants look magnificent and enticing and would without doubt be considered among Iceland’s most beautiful buildings had they been constructed. But how realistic were the plans? They had planned for harnessing Þjórsá to produce 600–800 MW—in 1918, nota bene. This does not include the rest of the water rights these men had secured for themselves, including Dettifoss and Gullfoss. In comparison one could note that today, one hundred years later, the City of Reykjavík uses 200 MW—on Christmas Eve, with every electric appliance running at full steam.

What did Einar plan on doing with all this energy in 1918? Aluminium production was barely on the horizon as a feasible industry, and televisions and freezers were but distant dreams. What were they planning to do with all the power? Produce fertiliser? The Gufunes fertiliser plant used around 20 MW when it was running at its peak. Who was to use all the energy and pay for the series of power plants? The answer is likely simple: No one. No one in the world could have found use for this energy.

Of course Einar could easily have harnessed a small stream to light up a small village, maybe even a cowshed or two. But there is no glory in that. The act would not appease the deranged men’s need for conquest and magnitude. There’s much more spunk, gusto and vigour in lining all of Þjórsá with power plants, even if the energy produced is way beyond what the nation can use one hundred years later. To this day, a lot of people think that Iceland’s government at that time was backwards, afraid of foreigners and somehow prevented the founding of a great and profitable company and “foreign investment.” But it’s enough to look at the numbers to see that the whole thing was a sham.

It’s so weird to think that, ever since, a certain group of Icelandic males have harboured a strange sort of national grief. It’s as if Einar’s unrealistic ideas have been haunting later generations of Icelanders. Not as fantasy, but as real, attainable goals or lost opportunities: “The dreams of our turn of the century poets have finally come true.” Remarked former PM Geir Haarde as he signed a deal with Alcoa in 2002. Yes, finally, the nation was dragged into a century old illusion.

THE MAD MEN VS. THE WISE GIRLS

The mob seems tolerate nothing worse than young, educated women who that use words like “professional” or “process.” Even if aluminium production in Iceland has been tripled over the last ten years, a lot of the crazy guys think that Iceland’s economic problems stem first and foremost from a lack of aluminium smelters.

Supporters of a new Century Aluminium smelter in Helguvík spent millions in advertisements campaigning against departing Minister for the Environment Svandís Svavarsdóttir, who delayed the building process with demands of a sober overview of the energy demand and environmental impact. The blogosphere went wild when Left-Green MP Kolbrún Halldórsdóttir spoke up against deep-sea oil drilling in Icelandic waters. One sensed a lynch mob in the making as former-Minister for the Environment Þórunn Sveinbjarnardóttir met with locals in Húsavík advocating for a full environmental impact assessment for a new Alcoa smelter—the audience was only lacking the pitchforks. The decline of The Independence Party is very evident in the fact that Katrín Fjeldsted lost her seat in parliament. She is a well-educated, intelligent and logical doctor and the only party MP who questioned the insanity. Every obstacle shall be pushed out of the way.

Icelanders harvest 1% of the world’s fish. We receive more tourists per capita than most nations. Iceland has harnessed five times the amount of energy that the nation needs to function, and we currently operate three aluminium smelters. But we have ALREADY harnessed five times more energy than our neighbouring countries. We are already an energy superpower—if everything were normal, such an investment should yield a fair bit of profit to the nation, if we don’t blow the proceeds and resources in another round of debt. But the discourse is so crazy. People act as if “NOTHING IS PERMITTED” when the energy production is already five times more than the nation can consume. Of the energy we produce, 90% already goes to smelters.

We already have everything a modern society needs. We just need to tend to what we have already built, to reap some profit from the power plants we have already constructed and take better care of what we’re currently fishing. People get insecure when interest groups moan: “Who will support us in the future?!?” as if Iceland is a country without foundations. The fear that is purposely spread is resulting in Iceland acting like a man that demands radiotherapy, chemotherapy and surgery to fix his headache. The truth is that the treatment will never cure him—but it might kill him. He will in the best-case scenario grow addicted to the drugs.

THEY TRIED TO BREAK US…

We are a small community and we need peace and room to work. That Björk should need to take time off work to fight the insanity is just a small example of the disturbance that thousands of Icelanders suffer every day because of this crazy nonsense. Living here will become unbearable if something like the reckless policy from 2006 goes full speed again. It is maddening that we cannot seem to leave our most beautiful areas alone. We are a small community where co-dependency is the norm and people are polite.

The new leaders are young and nice guys; Sigmundur Davíð loves old buildings and has good ideas for city planning. But behind them is a crowd of mad men, “fallen far from glory, reckless and so hungered.” Were four years from power enough to sober up the mentality in terms of the energy policy? What will come out of the “rethinking” of the Energy Master Plan? Will we be strapped up into another rollercoaster, just to take another ride of boom and bust? “They tried to break us. Will they try again?”

The truth is that aluminium smelters and serious fluoride poisoning go hand in hand. Aluminium smelting is the largest single producer of fluorides worldwide. These toxic compounds are released from smelters in both gaseous and solid forms. ‘Scrubbers’ are usually used to remove the majority of fluorides from factory smoke today, but when those scrubbers are spent they are also dumped in landfills where the soluble fluorides absorbed into them can leak out into the soil. Fluorides are phytotoxic (toxic to plants) and actually accumulate in vegetation, making long living trees particularly susceptible to fluoride poisoning. When animals or humans eat fluoride polluted plants or meat, or drink fluoride rich water, they can develop ‘fluorosis’ which weakens bones and teeth and can, in extreme cases, lead to bone deformation and birth defects. Fluoride can also build up in soft tissue in the body causing a range of serious health effects¹.

Swollen Jaws and Weak Teeth

In West Iceland, a number of farmers living around the Century Aluminum (Norðurál) smelter in Hvalfjörður have been suffering serious fluoride pollution in their sheep and horses – in particular since a major pollution incident at the factory released large amounts of fluorides in August 2006.

Sigurbjörn Hjaltason and his wife Bergþóra run a sheep farm at Kiðafell on the South side of the fjord, across the water from the 280 thousand ton aluminium smelter and Elkem’s steel alloy factory. Their sheep have recently developed swollen jaws and weak teeth which break easily and are, in some cases, unable to feed properly and have therefore died. Not satisfied with the industry’s own monitoring, they sent a few of their sheep heads for independent investigation and found fluoride levels of up to 1300-1400ppm, against a baseline (normal level) of 300-400ppm. Sigurbjörn and Bergþóra point out that Umhverfisstofnun (The Environment Agency of Iceland) give no maximum level of fluoride permitted in livestock teeth in Century Aluminum’s license, or elsewhere. Norðurál themselves use a guideline that is based on Norwegian research on young deer and suggests that between 1000 and 2000ppm can cause damage to teeth, and above 2000ppm damage is certain to occur. Sigurbjörn and Bergþóra claim that even this guideline is too high to prevent disease and even death of sheep as they have experienced.

Despite complaints regarding the unacceptably high levels for permitted fluoride, filed by Sigurbjörn and Bergþóra to Umhverfisstofnun and MAST (Iceland’s Food and Vetinary Authority), the situation has not improved.

A Story of Silence

Across the fjord, about four kilometers West of the smelter, stands a farm called Kúludalsá. The owner, Ragnheiður Þorgrímsdóttir, runs an outdoor education center and keeps horses for pupils to ride and learn from. She has looked after horses since her childhood without problems, but in 2007 her horses suddenly started to get sick. They developed a build up of material in the neck and became stiff and unwell, in some cases too stiff to be able to walk. In an interview with Saving Iceland, she explained that in August 2006, while Century were expanding their smelter, a failure occurred in the plant’s scrubbing system with the results that raw fluoride was emitted for at least 20 hours. Local farmers were given no warnings or information, “They told no-one about it until many months later when they were forced to do so because the figures showed that something serious had happened” Ragnheiður said.

She wrote to MAST and requested a formal investigation in April 2009. The agency passed her request to Umhverfisstofnun who declined to act on it until two years later under public pressure. Ragnheiður had already sent samples of bones to local labs, discovering fluorine levels about four times higher than the estimated baseline, nevertheless still technically below the legal limit. In May 2011, she told her story on RÚV, Iceland’s National Broadcasting Service; only two days later she received a letter from Umhverfisstofnun, announcing their formal refusal to investigate the matter.

Finally in spring 2011, MAST agreed to investigate samples of horse teeth and bones from Kúludalsá. However, they didn’t examine fluoride in the liver and other organs as they had been requested to do, claiming that fluoride doesn’t build up in the soft tissues. Following their investigation MAST terminated her case, concluding that Ragnheiður could be blamed for the horses’ sickness herself which was due to overfeeding. At this point she decided to take matters into her own hands and sent samples to a foreign laboratory for further analysis. The lab found high fluoride levels in the liver, spleen, kidney and muscles, proving that fluoride had indeed been accumulating in the soft tissue of the animals – and suggesting that this may be an ongoing issue.

She wrote to the Minister of Environment in spring 2012, and later also to the Minister of Industry and Innovation. Finally in autumn 2012 she was able to meet with both of them and explain her situation in detail. She told Saving Iceland that the two ministers listened to her and resolved to further investigate the matter. They have now appointed two experts to look into the matter in more depth.

In an article on her website (Námshestar), published last autumn, Ragnheiður tells her story in detail through the whole period of her dealings with the authorities, from the moment she first noticed the horses’ illness up until the day of the article’s publication. Her conclusion is the following:

I have fought for in-depth research of the horses and their environment for a few years. Eventually, I was forced to do it myself. After the findings of tests on several biological specimens (monitoring that neither Iceland’s Environment Agency nor MAST were willing to conduct) I believe there to be a well-grounded suspicion that the horses are suffering from a metabolic disease (equine metabolic syndrome) as a result of too much fluoride in grass and hay. In addition to causing calcium deficiency in blood and damaging both teeth and bones, fluoride also impacts the activity of the thyroid which operates the body’s metabolism. Fluoride also wears away magnesium and other important substances.

Regarding her dealings with the authorities, she concludes by stating that her experience through the last years has taught her “not to expect important affairs to receive speedy and conscionable process within public administration in Iceland.” In particular she points out how the local authorities have actively ignored repeated warnings about pollution from the Grundartangi industrial complex and appear to be working for the interests of the industry rather than the people. This fits in with the Icelandic government’s original invitation to energy intensive heavy industry in 1995, which was entitled ‘Lowest Energy Prices!’ and promised ‘a minimum of red tape’ on environmental clearance for foreign industrial companies setting up in Iceland.

More Industry: More Pollution: Less Democracy

Century Aluminum (Norðurál) are supposed to measure fluoride levels around their Grundartangi plant, but according to local nature-protection organization, Umhverfisvaktin við Hvalfjörð (Hvalfjörður Environment Watch), the company stops monitoring the wider local area during the winter months – when pollution hangs in the fjord and is more intense – and, instead, only monitor fluoride levels right at the edge of the smelter, thus distorting the annual figures.

In 2011, Saving Iceland reported on the plans to expand the industrial area at Grundartangi in Hvalfjörður in order to house more polluting industries on top of the already existing ferro-silicon and aluminium plants. Despite more than 70 letters of opposition by local farmers, summer hut owners and others, the local authorities have accepted the planned expansion on behalf of the community. In one of these letters, Umhverfisvaktin pointed out that no proper assessment has yet been made regarding increased industrial pollution in the fjord and its environmental and livestock impacts. In response, the local authorities stated that there was no evidence to suggest that this should be taken into account.

The Most Environmentally Sensitive Smelter in the World!

In the beginning of last February, MAST published a report emphasizing the importance of monitoring the impacts of fluoride pollution in Reyðafjörður. The report states that although current fluoride levels are below maximum levels, a blind eye should not be turned to the possibility that too much fluoride will later damage the dental hygiene of young animals currently grazing at the most polluted areas. As their glaze is taking shape during the period from birth until they obtain permanent teeth, fluoride in too high numbers can endanger the quality of the glaze and damage the teeth up to two years post the absorption. Therefore, MAST states, it’s important to examine the bones of slaughtering animals and monitor the teeth of lambs and young sheep, foals and young horses, calfs kept for breeding, heifers and young dairy cattle – increasing both monitoring as well as the sampling locations.

One of the farms affected by fluoride pollution in East Iceland is Kollaleira, where local farmer Guðmundur Beck famously opposed the giant Alcoa smelter, claiming it would destroy the fjord he knew and loved. Guðmundur spoke to us about the recent pollution incident:

The news about fluoride pollution in Reyðarfjörður last autumn was just what had been warned of all the time, although I admit that it happened a few years earlier than I expected. Alcoa is trying to excuse this event as some kind of accident, when it seems to be a clear case of negligence. It certainly doesn’t fit with the widespread propaganda about “the most environmentally sensitive aluminium smelter in the world” that Alcoa has continuously spread around East-Iceland.

This event clearly underlines the profligacy of the aluminium industry and of the Icelandic authorities that allowed their operation. The experience from other smelters here in Iceland shows that it doesn’t matter how much they pollute – the companies are never fined or punished in other ways for breaking their operating license. And their operation is never amended.

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1.  Christopher Bryson, 2004. The Fluoride Deception. Seven Stories Press.

Geothermal energy is commonly praised as a “green” alternative to environmentally unfriendly power sources such as fossil fuels, coals and nuclear energy. As a result of “the development of what were once thought to be non-viable resources”, a glossy brochure from engineering firm Mannvit states, “more and more public and private entities are looking into geothermal power as part of their strategy to mitigate global warming while still meeting growing energy demands.” In a promotional text for the Geothermal Energy Exhibition at Hellisheiði, the plant is said to be a “striking example of how geothermal energy is harnessed in a sustainable manner in Iceland and a showcase for the rest of the world.” Additionally, Reykjavík Energy has not hesitated maintaining that “general public opinion of exploiting the geothermal resources in the Hengill region is positive.”

So many men, so many minds. Only about ten kilometres away from the plant stands the small town of Hveragerði, wherein one gets to hear a completely different story. “We cannot accept that OR will be permitted to continue polluting the atmosphere,” Hallgrímur Þ. Magnússon, clinical doctor in Hveragerði said to newspaper DV last June. A few days earlier he had voiced his worries to local newspaper Sunnlenska, encouraging the town’s residents to start taking magnesium and iodide supplements to counteract the health impacts of the power plant’s sulphur (hydrogen sulphide) pollution. “I maintain that the pollution is of such quantity that the human body needs those two materials in order to resist the effects,” Hallgrímur said to Sunnlenska.

Recent inspection makes it clear that the sulphur pollution, which does not only reach to Hveragerði but also to Reykjavík, often goes far above Icelandic and international standards. In the case of Hveragerði, the quantity of polluting materials in the atmosphere is such that the town should be considered within the plant’s dilution area (the area in which residential homes are not permitted).

EFFLUENT LAGOONS AND MANMADE EARTHQUAKES

Unfortunately for the burgeoning and PR heavy Icelandic energy sector, the green image of geothermal power has been repeatedly challenged lately. In particular regarding the country’s and, in fact, the world’s biggest geothermal plant at Hellisheiði. Two new unplanned effluent lagoons were recently discovered close to the plant, where waste water from geothermal pumping had leaked out onto the surface. Environmentalist and journalist Ómar Ragnarsson, who originally discovered the lagoons, followed the story by publishing his own photographs of similar lakes created by other geothermal plants, such as those by the plants at Reykjanes, Svartsengi, Nesjavellir and Bjarnarflag¹. These lakes can be very dangerous to local freshwater systems, as Saving Iceland’s Jaap Krater and Miriam Rose explain in a book chapter on the development of geothermal harnessing in Iceland:

Geothermal fluids contain high concentrations of heavy metals and other toxic elements, including radon, arsenic, mercury, ammonia and boron, which are damaging to the freshwater systems into which they are released as waste water. Arsenic concentrations of 0.5 to 4.6 ppm are found in waste water released from geothermal power plants; the WHO recommends a maximum 0.01 ppm in drinking water.²

Yet another backlash for the geothermal industry is a recent study, carried out by Hanne Krage Carlsen, whose results were published in the international Environmental Research journal earlier this year³. The study shows a direct link between the plant’s sulphur pollution and increased purchase of asthma medicine among the residents of the greater Reykjavík area. New examination of vegetation in the Hellisheiði area also shows that the sulphur pollution has damaged large quantities of moss, which according to Magnea Magnúsdóttir who carried out the examination, will take decades to recover⁴. OR claims that the results of the plant’s Environmental Impact Assessment “indicate that construction of the plant will not have a lasting influence on the area’s vegetation” — something which, according to this recent information, needs to be questioned.

POLLUTION ABOVE GUIDELINE LIMITS

During OR’s Annual General Meeting (AGM) last June, it was revealed that Hveragerði is inside an area wherein sulphur (hydrogen sulphide) pollution is above the current guideline limits. New rules are supposed to go through in 2014, according to which the guideline limits will be strict 50 micrograms per square-meter per 24 hours. The authorities will also be obliged to alarm the public each time the pollution goes above that limit.

Though they admit the plant’s high concentration of polluting emissions, OR has said that the company will not able to adapt to the new rules until 2019 at the earliest. Therefore, the company will ask for an exception, to which the people of Hveragerði are heavily opposed. In an interview with Iceland’s National Broadcasting Service (RÚV), the town’s Mayor Aldís Hafsteinsdóttir protested against the company’s request, stating that OR had obviously rushed way too fast when preparing and building the plant and thus underestimated its environmental impacts. In a separate interview with Saving Iceland’s Miriam Rose this June, Aldís emphasized this point:

We feel very much like victims of all of this. This town has been here for 70 years and the power plant has only been here for 10 or 15. They should have considered the effects on the neighbourhood they were putting it in. It is absolutely obvious that the plant is situated too close to our town, as there are so many impacts that affect daily life here in Hveragerði.

Adding fuel to such criticism, Minister of the Environment Svandís Svavarsdóttir followed in the footsteps of many environmentalists and told RÚV, in an interview last June, that OR had been nothing but the puppet of heavy industry for the last years. That explains not only the company’s poor financial situation but also the environmental catastrophe at Hellisheiði, Svandís said. Mayor Aldís agrees: “They [OR] have sold their energy to the aluminium smelters way too cheap and now they can’t afford to reduce their pollution. That is, in my opinion, the reason why they are trying to stop the new regulations.”

DILUTION AREA: BIGGER THAN OF ALUMINIUM SMELTERS

The Hellisheiði plant started operating in 2006 and has since then seen two expansions, in 2008 and 2011, leading to increased sulphur pollution. Most of the energy goes to the aluminium smelter in Grundartangi, owned and operated by the North-American Century Aluminium, which then again is owned by mining and commodities giant Glencore.

Demonstrating Iceland’s haphazard approach to the development of geothermal energy, the Hellisheiði power plants’ dilution area has yet to be defined after six years of operation. However, it is clear from recent evidence that the dilution areas for geothermal plants should be much larger than for other polluting industries in Iceland — much bigger, for instance, than Rio Tinto Alcan’s aluminium smelter in Straumsvík and Century’s in Grundartangi, as reported by newspaper Morgunblaðið in June⁵. During OR’s recent AGM, their environmental director Hólmfríður Sigurðardóttir, admitted that she could not guarantee that the health of people living inside the area where pollution is above guideline limits (i.e. people living inside the dilution area) is not negatively affected by the pollution. Permanent residence is, in fact, prohibited inside such areas by law and land use is restricted to several limitations.

Interestingly, the Environmental Impact Assessment (EIA) for the Hellisheiði power station, carried out by engineering firm VGK on behalf of OR, overlooked the potential impacts on Hveragerði altogether, though it did take into consideration the negligible impacts on Þorlákshöfn and other towns much further away from the plant.

In September 2011 more than 1500 earthquakes were felt in Hveragerði in a single day, with other quakes going on for several weeks, some up to 4 on the Richter scale⁶. At first OR denied any culpability in the incident, though the residents immediately recognised the quakes as being unusual as many were focused on a single spot. However, after a few days they admitted that they had been pumping geothermal effluent water back into the ground, which is necessary to prevent surface pollution, but is well known by geologists to be a cause of man-made earthquakes. OR responded to the resident’s outrage over the quakes by holding a public meeting in which they claimed they were simply speeding up the release of earthquakes that would have happened anyway in the future. To this local resident Einar Bergmundur stood up and stated: “That is a very good argument. I am also sure I am going to die one day, but that doesn’t give you the right to kill me today to speed the process up?”

THE GUINEA PIGS OF HVERAGERÐI

In January this year some residents of Hveragerði started experiencing breathlessness, coughing and nausea as well as a strong sulphurous smell. They called Aldís to ask what was going on. Thanks to a monitoring site the residents had requested OR to install on their kindergarten, Aldís was able to see that hydrogen sulphide levels had persistently been in the hundreds of micrograms for more than a week. One day they had reached 337µg, more than double the current regulations, and almost seven times higher than the new regulations would allow. With the man-made earthquakes still on their minds, the residents were furious. Aldís told us that despite this breach of regulations no action seems to have been taken by OR:

I just can’t believe that this is how it is supposed to be — that the locals are supposed to monitor these levels themselves. There must be some institution that is supposed to take care of the people and make sure that we are not breathing this. But it did not happen. We live here, we have kids, the elderly are fragile and some have bad lungs. They [OR] are experimenting with these technologies as they build the plants. If they wanted to use us, the inhabitants of Hveragerði as guinea pigs they should have asked us first and not let everything that has happened here come as a surprise. They must have known better before they started this project and that is a fact the makes us angry. Our experience of the Hellisheiði power plant teaches us that not a single plant should be built here in the vicinity before they have a complete control of those matters that have gone wrong in Hellisheiði.

In response to such criticism, OR published a press releases claiming that there are no health risks at that level of exposure and that much of the science which says so is contended. They invite people to visit the plant and breathe the fumes, and even suggest that up to 14,000µg of Hydrogen Sulphide is acceptable to breathe for up to 8 hours⁷.

The World Health Organisation (WHO) does not agree. They state that concentrations above 280µg can cause breathing problems, followed by eye irritation at 500µg, loss of energy and increased lactic acid in the blood at 700µg, and finally headaches, irritability, dizziness, memory loss and fatigue at 2800µg. By 14,000µg people tend to suffer “olfactory paralysis” — a shut down of sense of smell which prevents them from noticing the odour and accompanying dangers. The WHO recommends a maximum guideline of 150 µg/m3 for a 24 hour period to ensure “the absence of appreciable risks that can cause adverse health effects” whereas the Californian regulation limits Hydrogen Sulphide emissions to 43 µg/m3 for more than an hour to prevent strong smell⁸. Iceland’s current regulations are weak by international standards and even these weak standards are not being enforced.

In the same press release OR presented a diagram of emissions from Hellisheiði showing that 99.49% of the steam released from the power plant is made up of water, while only 0.42% is CO2 and 0.08% Hydrogen Sulphide. This is a clear attempt at greenwashing the reality, as it is self evident that steam is largely made up of water and that this is not how sulphur concentrations in the environment are measured. These widely broadcast figures try to downplay well established science in what Aldís called “an insult to the intelligence of the people of Hveragerði.”

REYKJAVÍK’S CITY COUNCIL OPERATING AGAINST ITS OWN POLICY

Yet another 90 MW expansion is now planned in the area of Hverahlíð, south of the Hellisheiði plant and even closer to Hveragerði. The Hverahlíð plant is supposed to generate energy for another Century smelter, which currently stands half built and collecting dust in Helguvík, close to the Keflavík International Airport. The Helguvík project has been criticised from the beginning of its construction in 2008, not only for environmental reasons but also for the major energy uncertainty the project has long faced. During the smelter’s ceremonial first shovelling — interrupted by Saving Iceland activists who rightly named it “Century’s Lack Of Permission Party” as the company did not have any permissions but to construct the building itself — Century’s director in Iceland, Ragnar Guðmundsson, said that he hoped the energy issues would be sorted in late 2010, when the smelter’s first phase would be complete.

Today the unfinished building stands like a skeleton at the construction site while the energy issue remains unsolved. Century has signed contracts with two energy companies, OR and HS Orka — the latter owned mostly by Canadian firm Alterra Power and partly by Icelandic pension funds — but neither company has been able to guarantee any energy. HS Orka hopes to be allowed to drill in the geothermal areas of the Reykjanes peninsula — a large-scale construction that would not only permanently alter the peninsula’s unique nature, but also, as many scientists have claimed, not produce enough energy for the Helguvík smelter.

OR, on the other hand, bets on Hverahlíð as an electricity supplier for Helguvík. But the company is heavily indebted after its recent aluminium adventures, which is one of the reasons the contract with Century should be breached, says Sóley Tómasdóttir from the Left Green party (“Vinstri græn”) and board member of OR. In an interview with RÚV in April this year, she maintained that the company should focus on the environmental impacts at Hellisheiði before even thinking about building new plants. She also criticised the current majority of Reykjavík’s city council (composed of the social democratic “Samfylkingin” and the centrist “Besti flokkurinn,” a new party that won the city elections in 2010), for not standing by its promises to stop selling new power from the publicly owned energy company to heavy industry projects.

In the same interview, Haraldur Flosi Ólafsson, chairman of the board, responded to this criticism by maintaining that despite the current majority’s official opposition to developing any further energy for aluminium production, the company would have to abide to already existing contracts. The Century contract is originally from 2006 but was renewed in late December 2008, less than three months after Iceland’s infamous economic collapse. At the aforementioned AGM, Haraldur’s words were echoed by the company’s director Bjarni Bjarnason, who said that in his opinion all future plans for building new power plants should be abandoned, as building new plants for private entities goes against the company’s current policy. However, Bjarni stated, already existing contracts needs to be abided.

Sóley disagrees, pointing out a clause in the contract, which should allow for the company’s withdrawal if it does not have the financial capacity to fund the project. But instead of doing so, OR is now planning to finance the Hverahlíð plant with the assistance of Icelandic pension funds. Such a step is generally seen as very controversial (such as in the heavily criticised case of HS Orka) and as the first step on the way to the privatisation of Iceland’s nature.

NEITHER SUSTAINABLE NOR RENEWABLE

The impacts of sulphur pollution, man made earthquakes and effluent lagoons appearing at Hellisheiði are of great importance in Iceland in view of the large scale geothermal plans which are increasingly being promoted in Mývatn and Reykjanes peninsula. According to the recently published parliamentary resolution for the so-called Master Plan for Hydro and Geothermal Energy Resources in Iceland, these geothermal power plans are definitely “on”, while several planned hydro dams are now “off”.

Effluent lagoons have already been discovered at test drilling sites at Þeistareykir and Bjarnarflag in the North⁹. If all of the planned geothermal power plants are built around Mývatn, the town of Reykahlíð will become exposed to 32,000 tons of hydrogen sulphide per year potentially raising serious health issues for residents¹⁰. In Reykjanes the two existing geothermal power plants at Svartsengi and Rekjanesvirkjun already produce huge amounts of hydrogen sulphide, and the proposed expansions and new projects would radically increase this figure. Scientists have warned that geothermal fields at Svartsengi are already overexploited and may not be able to produce power much longer¹¹. In addition many of the new proposed drilling sites are connected to the same geothermal aquifer and could very quickly become dried or cooled by excessive exploitation for large scale energy. For further information read Saving Iceland’s detailed account of the planned geothermal power projects on Reykjanes peninsula.)

The fact is that geothermal energy technology is still very new and little is known about the long term, or even short term effects of exploiting the heat of volcanic aquifers on such a large scale. In addition, geothermal areas are globally incredibly rare and each one is different, making the impacts of drilling and power generation hard to predict. Cambridge University professor David McKay’s comprehensive 2009 book on sustainable energy points out that geothermal power is neither sustainable nor renewable when used on a commercial scale as the wells can quickly dry up or cool down, taking more than a hundred years to recover afterwards¹², yet drastically altering the local environment. Experimenting with such an undeveloped technology in Iceland’s endemic geothermal hot spring areas, which the country is so famous for, could result in total destruction of these beautiful and unique places. All that for only a few years of energy production, which in turn would be sold at a cut rate price to heavy industry, reaping little reward for Icelandic people.

See Saving Iceland’s photos of the effects of drilling at Hellisheiði here. The photos are from 2008 when Saving Iceland’s then annual action camp against heavy industry was located at Hellisheiði.

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References

1. Ómar Ragnarsson: Affallsvatn háhitasvæða — auðleyst vandamál? Framtíðarlandið, 17.05.2012.

2. Krater and Miriam Rose on behalf of Saving Iceland: “Development of Iceland’s Geothermal Energy Potential for Aluminum Production — A Critical Analysis”. In: Abrahamsky, K. (ed.) Sparking a World-wide Energy Revolution: Social Struggles in the Transition to a Post-Petrol World. 2010, AK Press, Edinburgh. p. 319-333 (download PDF here).

3. Hanne Crage Carlsen: Results published in Environmental Research (link currently not available), 2012.

4. Mosinn lengi að jafna sig, Náttúran.is. 24.06.2012.

5. Meiri mengun en talið var, Mbl.is. 14.06.2012.

6. Jóhanna M. Thorlacius: Jarðskjálftar á Íslandi 2011 — Ársyfirlit, Veðurstofa Íslands, 04.04.2012.

7. Brennisteinsvetni — Spurt og svarað, Orkuveita Reykjavíkur, 15.06.2012.

8. Luis A. Franco Nolasco: United Nations University, Geothermal Training Programme at Orkustofnun, Reykjavík, “Hydrogen Sulphide Abatement During Discharge of Geothermal Steam From Well Pads: A Case Study of Well Pad TR-18, El Salvador”, 2012.

9. Energy Companies Destroying Þeistareykir, Saving Iceland, 10.07.2008.

10. Benediktsson, O.: “Open letter to the minister for the environment regarding operating licenses for an anode factory at Katanes in Hvalfjordur”, University of Iceland, Reykjavík, 2004.

11. Sigmundur Einarsson: Hinar miklu orkulindir Íslands, Smugan, 01.10.2009.

12. David McKay: Sustainable Energy – without the hot air, Cambridge UIT, 2009 (download PDF here).

Click here to read Saving Iceland’s dossier on Glencore, Century and the incestuous world of mining.

Treated as the Master Plan’s trash can, the unique geothermal areas on the Reykjanes peninsula get a particularly harsh deal. Out of the peninsula’s nineteen energy potential areas, only three are listed for protection while seven are set for exploitation in addition to the four that have already been harnessed. Five additional areas are kept pending, more likely than not to be set for exploitation later. Existing plans for energy production outline how the peninsula is set to be turned into a single and continuous industrial zone, and the power companies seem to be simply waiting for a further green light to exploit the area. All this in order to further feed the aluminium industry.

In this overview we take a look at nine of these nineteen areas — those from the west of Gráuhnúkar — of which only one is to be protected according to the Master Plan. We look at the plans on the drawing board, their current status, the key companies involved, the already existing power plants, the threatened areas, and at last but not least: possible targets for direct action. On the map below, these areas are marked from number one to nine. Obviously the map only shows the areas at stake and the reader has to use her or his imagination to fill in power lines and the rest of the necessary infrastructure. Most of the following photos are taken by Ellert Grétarsson — click here and here for more of his photos.

Unmasking the Geothermal Myth

In a world increasingly concerned about carbon emissions,” Jaap Krater and Miriam Rose state, “the clean image of hydroelectric and geothermal energy is appealing.” This has certainly been the case in Iceland, where the highly polluting aluminium industry has attempted to re-model their dirty image by powering their production with so-called ‘green energy’. However, this greenwashing has not entirely worked as the eastern highland’s Kárahnjúkar dams — fully built in 2007 to power an Alcoa aluminium smelter in Reyðarfjörður — have proven to be as ecologically and economically disastrous as environmentalists warned. As a result the aluminium companies have now mostly moved from hydro and instead are increasingly focussing on geothermal energy.

One of the companies is Norðurál, subsidiary of Century Aluminum, who claim that their planned 360 thousand ton aluminium smelter in Helguvík will be one the world’s most environmentally friendly smelters. Why so? Because according to the company, the 625 MW of electricity required to run a smelter of this size is supposed to come only from the peninsula’s geothermal energy sources. However, environmentalists and scientists consider the estimation of geothermal energy believed to be extractable from the peninsula to be highly over-estimated, and claim that additional hydro power plants would be needed to power the smelter. This would most likely come from the much-debated and now temporarily halted dams in the river of lower Þjórsá.

Last year, unable to access the necessary geothermal energy in north Iceland, aluminium company Alcoa was forced to withdraw their six years long plan to build a geothermal powered smelter at Bakki, Húsavík. We predict that if Century cannot force through the damming of lower Þjórsá a similar situation awaits Helguvík. But that has not stopped the project’s interested parties, who still state confidently that the smelter will be built, and powered with geothermal energy.

Regardless of the need for additional hydro power, the exploitation of the Reykjanes peninsula’s geothermal areas spells the end of this magnificent nature of the peninsula as we know it. Test drilling and boreholes, endless roads and power lines, power plants and other infrastructure; all this would turn the Reykjanes peninsula — this unique land of natural volcanic wonders, which many scientists and environmentalists believe to be one of the world’s best options for creating a giant volcano park with educational and tourism-related opportunities — into a large industrial zone.

But these are only the very visible impacts of the planned large-scale exploitation. Other environmental catastrophes are in fact inevitable with large scale geothermal industry, becoming increasingly visible to the public as the green reputation of geothermal energy slowly decreases.

Two of Saving Iceland’s spokespersons — ecological economist Jaap Krater and geologist Miriam Rose — have thoroughly analysed the development of Iceland’s geothermal potential in a chapter, written on behalf of Saving Iceland, and recently published in a book on the current energy crisis. While we strongly recommend the piece for further reading about the geothermal myths, a few of their points will be addressed here, with relevance to recent events in Iceland.

Firstly, geothermal gases are rich in a variety of harmful elements and chemical compounds such as sulphur dioxide, whose impacts are systematically underestimated according the Public Health Authority of Reykjavík. Since production began at the Hellisheiði geothermal power plant — often claimed to be the biggest of its kind in the world — in 2006, a 140 percent increase of sulphur pollution has been measured in the capital area of Reykjavík, only 30 kilometres away. Recent studies, conducted by the University of Iceland, suggest a direct link between increased sulphur pollution on the one hand, and increased use of medicine for asthma and heart disease ‘angina pectoris’ on the other hand. However, engineering firms such as Mannvit, authors of many of the Environmental Impacts Assessments for geothermal power-plants, have so far ignored these studies and instead based their assessments on so-called prediction models. (Read more about the sulphur pollution here and here.)

Secondly, at the end of last year it was revealed that for two years energy company Reykjavík Energy — who own and operate the Hellisheiði plant — had on occasions been pumping waste water containing hydrogen sulphide into drinking water aquifers. Sulphides are far from being the plants’ only damaging effluents entering our water system; Krater and Rose mention that “geothermal fluids contain high concentrations of heavy metals and other toxic elements, including radon, arsenic, mercury, ammonia, and boron.”

Thirdly, it is suggested that depletion of one geothermal reservoir can result in the drying up of surrounding hot spring areas. While large-scale exploitation in Iceland is probably too young to witness these effects, environmentalists and geologists have warned that exactly this will happen in the Reykjanes peninsula if the existing plans go ahead.

The Key Companies Involved

HS Orka

HS Orka is an energy company that owns and operates two geothermal power plants on the peninsula — Reykjanesvirkjun and Svartsengi — the majority of who’s energy goes to Norðurál’s aluminium smelter in Grundartangi, Hvalfjörður. HS Orka’s majority shareholder is Magma Energy Sweden A.B., a puppet company of the Canadian firm Magma Energy, which was established to get around laws that prevent non-Europeans from buying Icelandic companies. After Magma’s 66,6% share, the remaining 33,4% is owned by Icelandic pension funds.

Before privatisation HS Orka (then called Hitaveita Suðurnesja) was owned fifty-fifty by the Icelandic state and several municipalities on the country’s south-west coast, but in 2007 the state’s share was sold to a private company named Geysir Green Energy (GGE). Following laws passed in 2008, regarding the separation of private energy production from competitive operations, the company became two different firms — HS Veitur and HS Orka — of which the latter takes care of energy production and sales. Bit by bit, GGE bought up two thirds of HS Orka’s shares. In 2009, GGE sold extra 10% to Magma Energy, which at the same time bought 32% from another energy company, Reykjavík Energy, and the nearby municipality of Hafnarfjörður. At this point GGE owned 55% of HS Orka and Magma owned 43%.

Harsh criticism arose over these deals which were effectively privatisation of Iceland’s natural resources, including a campaign led by pop-singer Björk and Eva Joly, the recent French Green Party presidential candidate, who at that point served as the Icelandic center-left government’s special financial advisor, following the general elections in 2009. Asked if the company was considering majority stake in HS Orka, Magma’s CEO Ross Beaty replied with a straight “no”. He then emphasised that the company would not buy more than 50% of the shares, as had officially been accepted by Iceland’s government, calling this “a rather awkward business position but certainly something that we feel can be workable.”

However, in 2010 Geysir Green Energy sold all their shares to Magma, which now owned 98.5% of HS Orka. A year later Magma sold 25% to Jarðvarmi slhf, a company owned by fourteen Icelandic pension funds, which a little later bought additional 8.4%. At last, Magma bought the 1.5% still owned by four different municipalities. Thus Magma holds 66.6% of the shares today, while Jarðvarmi owns 33.4%. The land use rights held by Magma allow for 65 years exploitation with an option to extend this for another 65 years.

Alterra Power

Just as the name could not have been coloured with more controversy and scepticism, Magma Energy merged with Plutonic Power and became Alterra Power, a company traded on the Toronto Stock Exchange. The new company’s Executive Chairman Ross Beaty, said that the merger would “strengthen both companies and […] create a larger, more diversified renewable energy company.” He further stated: “Geothermal will remain a core focus of the new company, but hydro, wind and solar assets will be solid business platforms for future growth. In the renewable energy business, bigger is better and this combination will achieve that while enhancing returns to each company’s shareholders.”

Alterra Power already operates geothermal, hydro and wind power plants in Nevada and British Columbia, which together with the Iceland plants have the energy capacity of 570 MW. In the company’s own words, they have a “strong financial capacity to support [their] aggressive growth plans,” which include geothermal plants in Chile and Peru. Such Latin-American adventures are certainly not new to the company’s key people, as Ross Beaty founded and currently serves as Chairman of one of the world’s largest silver producers, Pan American Silver, with some of its mines in Peru.

For the last three decades in fact Beaty has founded and divested a series of mineral resource companies, but has now shifted his focus to the ever-enlarging economy of ‘green energy’. As he explained himself: “This time around I wanted to build something green, so I looked at geothermal and it was just perfect, it just fit”. When confronted with the possibility that he and his company were taking advantage of Iceland’s economic collapse — a theory supported by the words of John Perkins, the author of ‘Confessions of an Economic Hitman’ — he called such ideas “ignorance and complete nonsense.” Only a few months later, he nevertheless said to Hera Research Monthly, an online investment newsletter, that “going into Iceland was strictly something that could only have happened because Iceland had a calamitous financial meltdown in 2008.”

Norðurál

Norðurál is a subsidiary of North-American aluminium producer Century Aluminum, whose largest shareholder is commodity broker Glencore International, a company that controls almost 40% of the global aluminium market. Glencore is mostly known for its many tentacles of corruption and worldwide human rights and environmental violations — most recently manifested in the exposure of child-labour in the company’s copper mines in the Democratic Republic of Congo, as well as the dumping of acid into a river at another site in the same country.

Norðurál currently operates an aluminium smelter in Hvalfjörður, which was fully built in 1998 despite harsh opposition by the fjord’s inhabitants. The smelter has been enlarged in a few phases, seeing the production capacity going from the original 60 thousand tons per year, to the current 278 thousand tons. Since 2004, the company has invested 20 billion ISK into building another Iceland smelter, in Helguvík on the north-west tip of the Reykjanes peninsula. According to the project’s Environmental Impact Assessment (EIA), the smelter is supposed to be powered solely by the peninsula’s geothermal energy — a claim that environmentalists and geologists have seriously questioned.

In April 2007, HS Orka signed a contract with Norðurál, promising the latter company 150 MW of energy for the Helguvík smelter’s first phase, supposed to be extracted by the planned expansion of the Reykjanesvirkjun geothermal power plant. Three years later, when no energy had been made available, the aluminium company filed charges against HS Orka for non-compliance. The conflict ended up in an arbitration court in Sweden, the registered home country of HS Orka’s owner, Magma Energy Sweden. Officially the conflict was presented to the public as a matter of energy prices but in late 2011 the court ruled that HS Orka is obliged to provide Norðurál the originally agreed-upon energy, suggesting that the conflict had to do with more than prices.

Already Existing Power Plants

Reykjanes

Reykjanesvirkjun is a 100 MW plant, owned by Alterra Power, whose energy partly powers Norðurál’s smelter in Hvalfjörður. It is located on 410 hectares of land located at the south-west tip of the peninsula. The company has plans for at least an 80 MW expansion of the plant, which is supposed to take place in two 50 and 30 MW phases, that according to HS Orka should both be completed in 2013.

However, following conditions set by Iceland’s National Energy Authority (NEA) last year, the expansion plans have become a bit more complicated. In order for it to happen, at least 30 out of the 50 MW included in the first phase have to come from another area than currently planned. Further extraction in the already exploited area would simply be unsustainable and decrease the area’s capacity. Geologist Sigmundur Einarsson actually believes that the field is already over-exploited. His claim is based on studies from 2009, by the very same NEA, which state that the area’s long-term sustainable production capacity is hardly more than 25 MW.

Svartsengi

The Svartsengi plant is operated by HS Orka and is located on 150 hectares of land owned partly by the municipality of Grindavík and partly privately. Next to it stands the Blue Lagoon, a tourist attraction created by the brine pollution from the power plant. The plant is a combined electricity and heat plant with a current electric power capacity of 75 MW, of which most goes to Norðurál’s smelter in Hvalfjörður.

The Threatened Areas

Eldvörp

The Master Plan gives a green light for the exploitation of Eldvörp, a 15 km long row of craters, located four km south-west of Svartsengi. Svartsengi and Eldvörp are thought to share a geothermal aquifer, which many claim to be fully exploited already. Thus even the smallest energy production would be unsustainable. Alterra Power still has plans to build a 50 MW power plant in Eldvörp, for which both research and utilization leaves have been granted. The planned plant is on land owned by the municipality of Grindavík, which apparently is about to finish the required land use plan enabling the project to take place.

The geothermal field is situated at the heart of the row of craters. There are only a few signs of geothermal activity on the actual surface, only fumaroles the lavafield and steam wisps when the weather is mild. One single borehole has already been constructed close to one of the craters at the centre of Eldvörp. It’s environmental impact is very limited compared with the impacts of the planned over-all drilling and the appendant pipelines, power lines, roads, powerhouse separator building. Such construction will have enormously destructive impacts on both natural and cultural relics in the area, including the row of craters and the Sundvörðuhraun lavafield.

Stóra-Sandvík

Stóra-Sandvík is a unique geothermal field in a coastal area close to the municipalities of Grindavík and Hafnir, as well as to the Reykjanesvirkjun plant, which in itself should be reason enough to move it from the exploitation category and instead to protection.

Krýsuvík

This geothermal area consists of four subfields — Sandfell, Trölladyngja, Sveifluháls and Austurengjar — which all connect to the same volcanic system, usually just named Krýsuvík. The geothermal activity is located at the margins of the system’s fissure swarms, while the Núpshliðarháls tuff ridge lies closer to its centre, with thousands of years old lava flats and eruptive fissures on both sides. Where the tuff has tightened due to geothermal transformations, small streams flow on to the lavafields and have thus created vegetated areas such as Höskuldsvellir, Selsvellir, Vigdísarvellir and Tjarnarvellir. As from the west of Hellisheiði, hardly any water runs on the surface of the whole Reykjanes mountain range, save the above-mentioned areas of Krýsuvík.

Interestingly, Krýsuvík is directly linked to what many consider to be the origins of environmentalism in Iceland. A geologist and environmentalist named Sigurður Þórarinsson, who had often voiced his concerns regarding Icelanders’ treatment of the country’s natural environment, had become seriously alarmed by what he witnessed by the Grænavatn maar in Krýsvík. It was, Sigurður said, used as a trash can for construction projects in the nearby area. At a meeting at the Icelandic Ecological Society in 1949, Sigurður suggested the creation of a legislation regarding nature conservation. Shortly afterwards, he was asked to take part in designing the legislation, which was passed in 1956 — the first in Iceland’s history. (Read about Sigurður Þórarinsson here.)

Out of the four Krýsuvík areas, the Energy Master Plan allows for the exploitation of Sandfell and Sveifluháls, while Trölladyngja and Austurengjar are supposed to be pending until the results of drilling in the two former areas are known. The National Energy Authority claims that these combined 89 km² of land should have the production capacity of 445 MW of energy for 50 years, and as such be Iceland’s third most powerful geothermal field after the Hengill and Törfajökull areas. However, independent scientists and environmentalists have seriously questioned these figures, believing the area’s maximum possible production capacity to be 120 MW for 50 years.

Sandfell

Sandfell area is a semi-unspoiled volcanic area of lavafields and tuff mountains, large vegetated flatlands, and beautifully formed craters. It is a uniquely colourful area, which will be permanently altered if HS Orka’s planned 50 MW power plant will be built. The company has already been granted permission for test drilling and one borehole has been test-drilled, but no results have yet been published.

Sveifluháls (Krýsuvík)

Sveifluháls is a 20 km broad and 150 to 200 meter high compounded and mostly non-vegetated tuff ridge. The 2-3 km long geothermal area of fumaroles, mud springs and muddy hot springs — usually referred to as simply ‘the Krýsuvík geothermal area’ — lies a little east of the Krýsuvík fissure swarm. Despite drilling done in the second half of the 20th century, the area is relatively unspoiled and could easily be brought back close to its natural state. Due to the tuff transformation, the area is especially rich in colour and contains unusual geothermal salt deposits and gypsum. The area is unique due to its many maars, for instance Arnarvatn and Grænavatn (pictured above), of which some show signs of Holocene volcanic activity. Sveifluháls is a popular stopover as well as an outside school-room for geology. It also contains historical relics of human residence, as far back as Iceland’s original settlement.

There are plans to operate a 50-100 MW power plant in the area — a construction that would include somewhere between 10 and 20 boreholes, road construction, pipelines and power lines to connect the plant to the national energy grid. HS Orka has a research leave in the area but has not been able to guarantee the utilization rights, which are owned by the municipality of Hafnarfjörður.

Austurengjar

The geothermal area of Austurengjar is about 1.5 km east of lake Grænavatn — a relatively flat and mostly unspoiled area of mud pots, hot springs and dolerite ridges, which slopes north to lake Kleifarvatn. As a result of earthquakes in 1924, the geyser activity increased dramatically and since then, Austurengjahver has been the area’s most powerful spring. This colourful geothermal area is special as it lies completely outside of Krýsuvík’s volcanic system and shows no signs of Holocene volcanic activity. The plans for a 50 MW power plant at Austurengjar, including 10 to 15 boreholes and a whole lot of power lines, would directly impact the whole area and change the face of lake Kleifarvatn, which is today a wild and unspoilt lake, surrounded by mountains.

Trölladyngja

Trölladyngja is one of the three mountains (the other two being Grænadyngja and Fífavallafjall) that together make up the north-east end of a 13 km long tuff ridge called Núpshlíðarháls, which lies within Krýsuvík’s volcanic system. The geothermal area is about three km long and seems to be partly connected to extension fractures in the system. South of the mountains, a small stream called Sogalækur has shovelled out a considerable amount of clay and thus formed a colourful canyon called Sogin. The stream deposited the clay into the lava below and formed the vegetated field Höskuldarvellir. HS Orka has for many years had plans to build a power plant in Trölladyngja and three holes have been drilled already, resulting in very limited success but a lot of disruption. The Trölladyngja area is partly included in the Natural Heritage Register.

Protected Area(s)

Brennisteinsfjöll

Only one out of the peninsula’s nine potential energy generating areas will be protected if the Master Plan goes through parliament unaltered. Brennisteinsfjöll are a row of mountains, considered an impenetrable part of the Krýsuvík area, and do in fact constitute the largest untouched wilderness around the capital area of Reykjavík. As highlighted by Krater and Rose: “Wilderness areas are becoming rare globally, with over 83 percent of the earth’s landmass directly affected by humans, and the Icelandic wilderness is one of the largest left in Europe.”

Possible Targets for Protests and Direct Actions

The Ministry of Environment
Skuggasund 1
150 Reykjavík

The Ministry of Industry
Arnarhváll by Lindargata
150 Reykjavík

HS Orka
Brekkustígur 36
260 Reykjanesbæ

Jarðvarmi slhf
Stórhöfða 31
110 Reykjavík

Norðurál Grundartangi ehf (smelter and offices)
Grundartangi
301 Akranes

Norðurál Helguvík ehf (only offices)
Stakksbraut 1
Garður
232 Reykjanesbæ

Helguvík Smelter
See location on map here.

Century Aluminum Company (Corporate Headquarters)
2511 Garden Road
Building A, Suite 200
Monterey,
CA 93940
USA

For a list of more offices and smelter click here.

Alterra Power Corp. (Corporate Offices)
600-888 Dunsmuir Street
Vancouver, BC
Canada V6C 3K4

For a list of more Alterra Power offices click here.

Glencore International

Registered Office
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES

Headquarters
Baarermattstrasse 3
P.O. Box 777
CH 6341 Baar
Switzerland

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Main Sources

Áhugahópur um verndun Jökulsánna í Skagafirði, Eldvötn – samtök um náttúruvernd í Skaftárhreppi, Félag um verndun hálendis Austurlands, Framtíðarlandið, Fuglavernd, Landvernd, Náttúruvaktin, Náttúruverndarsamtök Austurlands (NAUST), Náttúruverndarsamtök Íslands, Náttúruverndarsamtök Suðurlands, Náttúruverndarsamtök Suðvesturlands, Samtök um náttúruvernd á Norðurlandi (SUNN), Sól á Suðurlandi. Umsögn um drög að tillögu til þingsályktunar um áætlun um vernd og orkunýtingu landsvæða. 11. nóvember 2011. (Download PDF here.)

Krater and Miriam Rose on behalf of Saving Iceland, “Development of Iceland’s Geothermal Energy Potential for Aluminum Production — A Critical Analysis”. In: Abrahamsky, K. (ed.) Sparking a World-wide Energy Revolution: Social Struggles in the Transition to a Post-Petrol World. 2010, AK Press, Edinburgh. p. 319-333. (Download PDF here.)

Various information from Náttúrukortið (The Nature Map) on the website of environmentalist NGO Framtíðarlandið (The Future Land).

Sigmundur Einarsson, Hinar miklu orkulindir Íslands, Smugan.is, October 2009.

Sigmundur Einarsson, Er HS Orka í krísu í Krýsuvík?, Smugan.is, November 2009.

Sigmundur Einarsson, Ómerkilegur útúrsnúningur iðnaðarráðherra, Smugan.is, November 2011.

Sigmundur Einarsson, Er HS Orka á heljarþröm?, Smugan.is, December 2011.

Catharine Fulton, Blame Canada? Geothermal energy, Swedish shelf companies and the privatisation of Iceland, The Reykjavík Grapevine, October 2009.

Catharine Fulton, Magma Energy Lied to Us, The Reykjavík Grapevine, May 2010.

Volcano Park to Open in Iceland? Iceland Review, July 2007.

Various information from the websites of Alterra Power, HS Orka and Norðurál.

Since the publication of the long-awaited Energy Master Plan’s second phase in July last year, a good part of the discussion regarding the plan has been centred around the Þjórsá river, especially as the two concerned ministers — Minister of Environment Svandís Svavarsdóttir and Minister of Industry Katrín Júlíusdóttir — presented their proposition for a parliamentary resolution for the Master Plan, wherein the three Þjórsá dams were included. Following a three months long public commentary process — including 225 commentaries by individuals, organizations and companies, of which more than 70 had specifically to do with Þjórsá — the above-mentioned ministers have been working on amending their proposal in order for it to go through parliamentary discussion before the end of parliament sessions this spring.

The Energy Master Plan, which is supposed to lay the foundation for a long-term settlement upon the future exploitation and protection of Iceland natural resources, is split into three categories, of which two are quite clear, titled “exploitation” and “protection”, but the third one, titled “in waiting”, has pretty much been the bone of contention. On the one hand those in favour of extreme energy extraction believe that too many exploitable areas are being kept in waiting, while on the other hand environmentalists think that many of the areas categorized as in waiting should rather be moved straight into the protection category.

As frequently highlighted by Saving Iceland, the Þjórsá conflict splits the government, manifested in the Left Green’s focus on nature conservation versus the social democratic People’s Alliance’s (Samfylkingin) focus on so-called job creation. According to the above-mentioned news an additional inside split has occurred within the latter party, wherein a part wants to follow the Left Green line while others would rather give the go ahead for the three dams in lower Þjórsá.

During a radio interview this morning, Össur Skarphéðinsson, Minister for Foreign Affairs and MP for the People’s Alliance, pointed out that according to laws regarding the Energy Master Plan, environmentalist organizations should be asked to comment on energy options, and more importantly, their comments should be taken into account when final decisions are made. Considering the high quantity of negative remarks about the Þjórsá dams, in addition to the fact that the Environmental Impact Assessment (EIA) for one of the three dams, Urriðafoss dam, will expire next year, Skarphéðinsson claimed it sensible to move Þjórsá to the waiting category until further researches and a new EIA have been made.

However, by moving the project from exploitation to waiting, but not straight to protection, it is not unlikely that the final decision about the Þjórsá dams will be in the hands of a different government. Recent polls suggest that the current government will not stand after parliamentary elections next year and that the right wing conservative party, Sjálfstæðisflokkurinn (e. Independence Party), might end up as the biggest party. The Independence Party has repeatedly pushed for the damming of Þjórsá, most recently in December last year when 10 of the party’s MPs proposed a bill in parliament, suggesting an interim provision allowing the Minister of Industry, rather than Iceland’s Energy Authority, to grant the National Power Company (Landsvirkjun) permission to start building the three proposed dams.

Landsvirkjun has repeatedly stated that no contracts exist concerning the possible energy from lower Þjórsá and that the company will not enter any negotiations regarding Þjórsá until the Master Plan is ready, given that the river will be included in the exploitation category. However both environmentalists and heavy-industrialists believe that the Þjórsá dams are in fact crucial for the continued construction of Century Aluminum’s planned but currently on-hold aluminium smelter in Helguvík. Parliamentarians as well as local politicians in Reykjanesbær, the municipality of where Helguvík is located, have recently mentioned the delay of the Þjórsá dams as one of the main reasons for the standstill situation of the Helguvík project, whereas environmentalists have pointed out that at least the planned Urriðafoss dam is needed for the Helguvík smelter to operate.
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To read more in-depth and detailed articles regarding the Þjórsá conflict and the Energy Master Plan, follow the Þjórsá tag and the Energy Master Plan tag.

These news echo the many warnings made by the opponents of the cluster of five dams at Kárahnjúkar and nearby Eyjabakkar, who repeatedly stated that the project’s alleged profitability was nothing but an illusion, but were systematically silenced by Iceland’s authorities.

Now, as these facts finally become established in the media—this time straight from the horse’s mouth—similarly bad news has arrived regarding another big Icelandic energy company. Reykjavík Energy has failed to make a profit from their 2007 and 2008 investments, effectively making them lose money. At the same time, new research shows that the environmental impacts of the Kárahnjúkar dams are exactly as vast and serious as environmentalists and scientists feared.

And yet, more dams, geothermal power-plants and aluminium smelters are on the drawing table—presented as the only viable way out of the current economic crisis.

Dividend: Close to Zero

During the last half century, Landsvirkjun has paid its owner—the Icelandic nation—only 7,8 billion Icelandic Krónur (66 million USD at present value) as dividend, which according to Hörður Arnarson is way too low and in fact almost equivalent to zero. While it would be fair to expect around eleven percent dividend from the company’s own equity, it has been at an average of two percent since Landsvirkjun was founded. The income from the Kárahnjúkar plant has been about 6 percent of its book value, which again is too low, as according to normal standards the income should be 9 percent of the book value.

At present, Landvirkjun’s total earnings have been 73 million US dollars at most, whereas it should be closer to 180 million USD, considering the owner’s 1,6 billion USD equity. It was made clear by Arnarson that the price of energy purchased by large-scale energy consumers plays a major role herein—a price that obviously has been far below any rational logic and standards.

Same Old, Same Old

In 2003, British newspaper The Guardian published “Power Driven”, Susan De Muth’s exclusive report about the Kárahnjúkar power plant, which at that point was already under construction. Among many critiques made in the article, De Muth questioned Kárahnjúkar’s allegeded profitability. She wrote:

Thorsteinn Siglaugsson, a risk specialist, prepared a recent independent economic report on Karahnjukar for the Icelandic Nature Conservation Association. “Landsvirkjun’s figures do not comprise adequate cost and risk analysis,” he says, “nor realistic contingencies for overruns.” Had the state not guaranteed the loans for the project, Siglaugsson adds, it would never have attracted private finance. “Karahnjukar will never make a profit, and the Icelandic taxpayer may well end up subsidising Alcoa.”

Siglaugsson is just one of many who critically analysed the economics of the Kárahnjúkar project, concluding that its contribution to Iceland’s economy would be about none—or in fact negative. But just as many geologists who cautioned against the risks of locating the dams in a highly geologically seismic area were dismissed by Valgerður Sverrisdóttir, then Minister of Industry, as “politically motivated and not to be listened to”, so were the skeptical economists.

De Muth’s article caused a real stir in Iceland, manifest for instance in the fact that Landsvirkjun and Iceland’s Embassy in London contacted The Guardian in a complaint about “so much space […] used for promoting factual errors and misconceptions of the project and Icelandic society as a whole.” Friðrik Sophusson, Landsvirkjun’s director at that time—who in the article is quoted calling all of Kárahnjúkar’s opponents “romantics”—actually offered The Guardian to send another journalist over to Iceland in order to do “a proper report on issues in Iceland”, this time with his “assistance.” ALCOA also sent a barrage of objections to the Guardian. All the facts presented in the article were double checked by the Guardian’s legal team and confirmed to be accurate.

This volatile response from the authorities and corporates only strengthened the article’s points on the Icelandic tradition of suppressing criticism. This was confirmed in a letter to The Guardian by Icelandic environmentalist and commentator Lára Hanna Einarsdóttir, who suggested that “an Icelandic journalist would have lost [his or her] job if he or she had been so outspoken.”

The Coming Recession

And no wonder, as the article pinpointed serious flaws in the whole rhetoric surrounding the plans to heavily industrialize Iceland, plans that would be nothing without the construction of a series of mega hydro dams and geothermal power plants. Whereas these plans were presented as a path to an increased economical prosperity, De Muth quoted aforementioned economist Siglaugsson, who voiced his fear “that a boom during the construction period, with attendant high interest rates, will be followed by a recession.”

And as time told, this was indeed what happened. In an article published in the early days of Iceland’s current financial crisis, Jaap Krater, ecological economist and spokesperson of Saving Iceland, gave it a thorough explanation:

These mega-projects in a small economy have been compared to a ‘heroin addiction’. Short-term ‘shots’ lead to a long-term collapse. The choice is between a short-term infuse or long-term sustainable economic development. The ‘shot’ of Fjardaal [Alcoa’s aluminium smelter in Iceland, powered by the Kárahnjúkar power plant] overheated the Icelandic economy.

Recognizing the dangers of overheating the economy—a point also made clear in Charles Ferguson’s recent documentary, Inside Job—leaves us with two options. As Krater pointed out:

There has been a lot of critique on the proposed plans to develop Iceland’s unique energy resources. Those in favour of it have generally argued that it is good for the economy. Anyone who gives it a moment of thought can conclude that that is a myth. Supposed economic benefits from new power plants and industrial plants need to be assessed and discussed critically and realistically. Iceland is coming down from a high. Will it have another shot, or go cold turkey?

Another Shot, Please

This spring, Landsvirkjun stated that if the company was to start its operations from scratch the aluminium industry would be its prime costumer. This particular paradox—as the aluminium industry is already its biggest energy purchaser—was just one of Landsvirkjun’s many. Another one is their suggestion that Icelanders should “settle upon” plans to build 14 new power plants in the next 15 years. And the third one is the company’s plans to sell more energy to aluminium companies—costumers who, in Landsvirkjun’s own words, do not pay a fair amount for what they get.

But Arnarson has said that the future looks better, referring for instance to the fact that the price for Kárahnjúkar’s energy is directly connected to world-wide aluminium prices, which Arnarson says are getting higher. Herein is the fourth paradox, as linking energy prices with aluminium prices has so far been disastrous for Iceland’s economy—most recently acknowledged in an official report regarding the profitability of selling energy to heavy industry. According to the report, commissioned by the Ministry of Finance and published last Friday, December 2nd, the total profitability has been an average 5% from 1990 until today, which is far below the profitability of other industries in Iceland, and much lower than the profitability of similar industries in Iceland’s neighbouring countries. The year 1990 is crucial here, as since then, Landsvirkjun’s energy prices to heavy industry have been directly linked to global aluminium prices.

It is worth quoting Jaap Krater again here, where he explains the dangers of interlinking these two prices, and describes how increased aluminium supply will lower the price of aluminium and decrease revenue for Iceland:

One might think that a few hundred thousand tons of aluminium more or less will not impact the global market. The reality is that it is not the sum of production that determines the price but rather the friction between supply and demand. A small amount of difference can have a significant effect in terms of pricing.

High Costs, Low Production

On top of this, recent calculations revealed in newspaper Fréttablaðið, show that Kárahnjúkar is Landsvirkjun’s proportionally most expensive construction. When the production of each of the company’s power plants is compared with the production of Landsvirkjun’s property as a whole, as a proportion of their construction costs, it becomes clear that Kárahnjúkar—with its 2.3 billion USD initial cost—is the most economically unviable plant.

Another Energy Company in Crisis

At the same time that Icelanders face Landsvirkjun’s confession to it’s virtually zero profitability, a damning report on another big energy company, Reykjavík Energy (OR), has been made public. It was originally published at the beginning of this year but wasn’t supposed to enter the public sphere, which it indeed didn’t until in late November. Reykjavík Energy’s biggest shareholder is the city of Reykjavík, meaning the inhabitants of Reykjavík.

As already documented thoroughly, the company—which operates several geothermal power plants, including Hellisheiðarvirkjun, largely built to fuel Century Aluminum’s production—is in pretty deep water. But the newly leaked report proves that it has sunk even deeper than generally considered. The report is a literal condemnation of the company, its board and its highest ranking managers, who get a grade F for their job. A good part of Reykjavík Energy’s investments from 2007 and 2008 are now considered as lost money.

The report also reveals that when energy contracts between OR and Norðurál (Century Aluminum) were made, for the latter’s planned fantasy-of-a-smelter in Helguvík, Reykjavík Energy’s directors completely ignored the very visible economic collapse confronting them.

Recently it has been reported that Reykjavík Energy owes 200 billion Icelandic ISK in foreign currency, which is two thirds of all foreign debts owed by Icelandic companies, whose income is not in foreign currency.

What we see here are two of Iceland’s largest energy companies, both of them public property, both having spent hugely excessive amounts of money—or more precisely, collected gigantic debts—struggling to continue to build power plants in order to feed the highly energy intensive aluminium industry with dirt cheap and allegedly “green” energy. As a result, they have ended up without profit and in a deep pool of debt.

And who is to pay for their gambling risks? As Thorsteinn Siglaugsson stated in 2003: the Icelandic taxpayer.

“No Impacts” Become Huge Impacts

To make bad news even worse, the irreversibly destructive ecological impacts of the Kárahnjúkar dams have, in the last months, become more and more visible. To quote “Power Driven” once again (as simply one of a good number of warnings on the dams’ environmental impacts):

The hydro-project will also divert Jokulsa a Dal at the main dam, hurtling the river through tunnels into the slow-moving Jokulsa i Fljotsdal, which feeds Iceland’s longest lake, Lagarfljot. The calm, silver surface of this tourist attraction will become muddy, turbulent and unnavigable.

This was written in 2003. Today, this is what is happening: because of the river’s glacial turbidity Lagarfljót has changed colour, which according to Guðni Guðbergsson, ichthyologist at the Institute of Freshwater Fisheries (IFF), means that light doesn’t reach as deep into the water as before (see photos aside and below). Photosynthesis, which is the fundamental basis for organic production, decreases due to limited light, its domino effects being the constant reduction of food for the fish. IFF’s researches show that near Egilsstaðir, where visibility in Lagarfljót was 60 cm before the dams were built, it is now only 17 cm. They also show that there are not only less fish in the river, but that the fish are much smaller than before.

In addition to this, residents by Lagarfljót have faced serious land erosion due to the river’s increased water content and strength.

This effect was warned of in an Environmental Impact Assessment (EIA) for the project by the Iceland National Planning Agency (INPA), purposely ignored and overruled by Siv Friðleifsdóttir, then Minister of Environment. Landsvirkjun had complained to the Ministry of the Environment, and the EIA ended up on Friðleifsdóttir’s table, who nevertheless issued a permit for the construction, stating that the dams would have no significant impact on Lagarfljót.

In response of the news on Lagarfljót’s current condition, Svandís Svavarsdóttir, Minister of the Environment, said during parliamentary discussion last September, that her Ministry’s over-all administration regarding the Kárahnjúkar decision-process will be examined in detail. She should demand a similar investigation into the decision making of the Ministry of Industry, whose Minister, Valgerður Sverissdóttir has, along with Landsvirkjun’s Friðrik Sophusson, openly admitted while joking on film with the US ambassador in Iceland, how they enjoyed “bending all the rules, just for Alcoa.”

All the Old Dogs

Despite all of this, Iceland’s energy companies, hand in hand with the aluminium industry, some of the biggest labour unions and industry-related associations—not to mention a majority of parliamentarians, including those of government-member social-democratic Samfylkingin—are still in heavy industry mode, campaigning for the construction of more dams, geothermal power plants and aluminium smelters. Ironically, but still deadly serious, smelter projects such as Century Alumium’s Helguvík, which is at a standstill, unable to guarantee both necessary energy and financing, continue to be presented as profitable solutions to the current crisis.

Met with little resistance in parliament, most of these plans are still considered to be on the drawing table, though most of them seem to be on hold when looked at closely. The latter is mostly thanks to grassroots activists, bloggers and commentators who have systematically reminded the public of the reality, while the bulk of journalists seem to be unable to stick to facts—being extraordinarily co-dependent with those in favour of further heavy-industrialization.

Under the banner of “solving the crisis”, “creating jobs”, and most recently “getting the wheels of work to spin again”, the heavy industry-favoured parties seem to simply refuse to listen to hard facts, even their very own. This attitude is probably best summed up in the recent words of Valgerður Sverrisdóttir, responsible as Minister of Industry, for the building of the dams at Kárahnjúkar, who in response to the news about the power plant’s close-to-zero profitability, said that she wouldn’t want to imagine how the current financial situation would be, if the dams hadn’t been built.

It is said that an old dog will not learn new tricks. And to be honest, ‘old dogs’ pretty accurately describes those making decisions on Iceland’s energy and industry affairs. In order to learn from mistakes and prevent even bigger catastrophes, it wouldn’t be unfair to ask for a new generation—would it?
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More photos of Lagarfljót’s turbid condition

These photos are from 2008, which suggests that the current condition is even worse.

During a recent meeting of chairmen from all the member unions of the Icelandic Confederation of Labour (ASÍ), Hörður Arnarson, the director of the national energy company, Landsvirkjun, said that due to the current situation on international markets it would be enormously difficult for Norðurál to finance the 250 billion ISK smelter project. According to Vilhjálmur Birgisson, who attended the meeting, chairman of the Labor Union of Akranes (near to Grundartangi, where Century’s currently operating smelter is located),  Hörður spoke of the Helguvík project’s likelihood as very negligible. Another representative at the meeting, Kristján Gunnarsson, chairman of the Labour and Fishermen Union of Keflavík, stated that when asked about the possibility of Landsvirkjun selling energy to Norðurál, Hörður answered saying that no energy is really available for the project.

While it certainly is true that Landsvirkjun has, especially in the nearest past, had problems with financing, due to the international financial crisis as well as the Icelandic economy’s instability, the latter point – that no energy is actually available for Helguvík – is of more importance here. Environmentalists have, from the beginning of the Helguvík project, stated that the plans to harness energy for the smelter in geothermal areas on the Reykjanes peninsula, are not sufficient, for two reasons. Firstly, as the alleged size of the energy extraction is not sustainable and is more than likely to drain these unique natural areas for good. Secondly, because even if fully exploited, the geothermal areas would not produce enough energy for the smelter. Another energy source will be essential in order for the smelter to operate and even though Reykjavík Energy (OR) has promised Century some energy from a planned enlargement of their power plant in Hellisheiði, the aluminium producer still faces a serious lack of electricity for Helguvík.

It is here that Lower Þjórsá enters the picture. In November 2007 Landsvirkjun announced that the company would not supply any further energy to aluminium smelting in the South-West of Iceland, meaning Rio Tinto Alcan’s smelter Straumsvík, Century’s smelter in Grundartangi and the one planned in Helguvík. But many have doubted the truth behind this statement. In early June of 2008, when Saving Iceland activists gate-crashed Century Aluminum’s lack-of-permission-party in Helguvík, Saving Iceland highlighted the obvious lack of energy and asked if the planned damming of the river was meant for the smelter. Though Landsvirkjun has always denied those suggestions, several different signs have suggested the opposite.

Geologist Sigmundur Einarsson has  for the last couple of years repeatedly called attention to the inaccuracy concerning geothermal energy’s alleged sustainability and efficiency. In a new article about Reykjanes’ energy resources, Sigmundur once again points out the real energy figures and reveals that even if H.S. Orka is able to go ahead with its energy plans for Reykjanes – as mentioned above currently on hold due to an arbitration conflict between H.S. Orka and Century regarding energy prices – the Helguvík smelter will still lack between 310 and 390 MW. Sigmundur theorises that Century has from the beginning been aware of its slack energy situation, but used the cheap trick to simply start construction and thereby create expectations among the inhabitants of the Reykjanes peninsula. “Shallow-minded Icelandic politicians,” says Sigmundur, “were then supposed to bite the bait and sort out the energy by ordering Landsvirkjun to dam Lower Þjórsá (c.a. 200 MW) and sell it to Norðurál [Century] for a price accepted by the aluminium company.”

Not only does this theory full confirm Saving Iceland’s and other environmentalists’ repeated warnings not to let Century start construction of the Helguvík smelter, but now it also seems that at least a few high ranking officials have come to the same conclusion. Following Alcoa’s recent announcement about the company’s withdrawal from its years long planned Húsavík smelter, both Katrín Júlíusdóttir, minister of industry, and Hörður Arnarson, Landsvirkjun’s director, stated that Alcoa and other interested parties had created unrealistic expectations way ahead the establishing of the project’s key foundations. Thus it should not take them long to put two and two together, realizing that the same story applies to Helguvík – something that neither of them has been willing to seriously address until now.

To officially state the dead end of Century’s Helguvík dreams, Landsvirkjun would have to confirm that the planned Þjórsá dams are not meant for the smelter but for quite a while the company has been unwilling to openly discuss the Þjórsá project. The Þjórsá conflict actually splits the sitting government: While favored by the social-democrats of Samfylking, of which the minister of industry is a member, it is opposed by the Left Greens (VG). When asked about Þjórsá, Landsvirkjun now cites the Master Plan for the exploitation and protection of Iceland’s natural resources, currently in making, of which conclusions the company will wait for before any further comments. In a draft for a parliamentary solution regarding the Master Plan, the three planned Þjórsá dams are given a green light for construction. But this might change due to strong local opposition to the dams as well as the comments of a considerable number of people who protested against the project during a three months long open reviewing process, which was a part of the Master Plan’s making.

Albeit not necessary being the project’s one and only fundamental foundation, the protection of Lower Þjórsá would almost certainly mark the end of Century’s fantasies of a smelter in Helguvík. Until then the myth might live a bit longer.
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For more information about Century Aluminum, its operations in Iceland and the Helguvík crisis, see:

Century Aluminum Energy Questions

From Siberia to Iceland: Century Aluminum, Glencore and the Incestuous World of Mining

Believes Aluminium Plant Is Poisoning Sheep

National Energy Authority Fears Overexploitation of Geothermal Areas in Reykjanes

Preface

Glencore are the majority shareholder of Century, the owner of one operational and one half-built smelter in Iceland, it’s key operations for aluminium smelting. But who are Glencore and what are the implications for Iceland? This comprehensive article profiles the world’s biggest commodity broker, who’s only comparable predecessor was Enron. The profile covers the reach and grip of Glencore’s domination of metal, grain, coal and bio-oils markets, allowing it to set prices which profit very few and are detrimental to many. It shows the tight web of connections between the major mining companies and Glencore through shared board history and shared ownership of assets, cataloguing key shareholders (and board members) who’s stakes make them larger shareholders than institutional investors in ownership of Glencore. These connections include Rusal’s co chair Nathaniel Rothschild, a financier with a $40m investment in Glencore, and a personal friend of Peter Mandelson (former EU trade commissioner and British politician) and George Osborne (UK Chancellor).

The article details the human rights and environmental abuses of Glencore at it’s many operations, including the 2009 killing of Mayan indigenous leader Adolfo Ich Chamán who spoke out about Century’s activities in Guatemala under CEO-ship of Peter Jones (still a Century board member). It claims that Glencore is higher than most in the running for most abusive and environmentally detrimental mining company, going where lesser devils fear to tread – trading with Congo, Central Asia and embargoed countries such as Saddam Hussein’s Iraq and apartheid South Africa. Glencore founder Marc Rich was involved in trading embargoed Iranian oil, and fled the United States in 1983 accused of insider dealing and tax dodging over Iranian deals, becoming one of the 10 fugitives most wanted by the FBI, until he was pardoned by Bill Clinton. Glencore is still run by two of his main men.

Introduction

From Kazakhstan to Australia, taking in the views of Zambia, war-stricken Congo and Angola, cutting across from Siberia to Iceland is a network of mining and metals companies with a catalogue of environmental and community abuse in their wake. In Iceland its  face is Century Aluminum, but behind them, at the heart of this web lies the secretive commodity broker Glencore International of Switzerland. Glencore is about to launch one of the biggest placement of shares, raising $10 Billion, making a lot of people very rich and valuing itself as a company worth $60Bn. In this article we start to throw a spotlight on just how Glencore makes its money and how Iceland is just one of many victims of a company built on ruthless exploitation.

On the surface, Glencore’s wealth comes from the buying and selling of the world’s commodities (see below for more detail), specialising in grain and metal markets. However, what is unusual for a commodity broker is that it invests heavily in the very companies whose produce it is trading. Its interests are global, from the breadbaskets of Russia, to zinc mines in Kazakhstan, copper and cobalt interests in Congo and Angola, and aluminium in Iceland.

It is the latter that ties Glencore into the Icelandic economy through its 44% ownership of Century, as well as membership of the board of directors. Century is the owner of the Grundartangi smelter and is behind the building of another plant at Helguvik, for which a number of controversial new geothermal and hydro power plants would need to be built. There is also a doubt if enough energy to run a smelter in Helguvík actually exists. Glencore controls 38% of the global trading market in aluminium. Of this, 50% of this comes from Century and UC Rusal, the Russian Aluminium giant (of which Glencore owns 8.8%).

The result is a private network of personal ties and business relationships so tight that what matters to Century also matters to Glencore. The Icelandic government may be doing deals with Century, but Glencore is always present in the background, bringing unsavoury alliances to this particular bed. There are a lot of unanswered questions over how and with whom Glencore chooses to invest. One only has to look at its principle partners and deals to see it does not shy away from exploitation of war torn countries or making alliances with men whose fortunes carry with them heavy taints of corruption. Despite all the exuberance in financial circles at the profits to be made by the Glencore share offering, a few more level-headed traders and journalist are wondering if there should be more caution, especially given how little is known about the inner workings of the company and just how manages to pull off so many exceptionally profitable deals.

It is also worth noting that the last time the world saw such a commodity broker dominate a market to this extent ended up going very sour – that commodity broker being Enron.

Who are Century Aluminum?

Century is a company that specialises in smelting aluminium. It was founded in 1995 when various interests controlled by Glencore were brought together. In 1996 it was spun off as a public company^.1 As well as its Icelandic sites, which it owns outright, it owns or has a share in aluminium plants at Ravenswood, West Virginia, at Hawesville (100%), Kentucky (80% owned with the rest owned by Glencore), and at Mt. Holly, South Carolina (50%, the other half owned by Alcoa Inc). In the past it has had interests in the Congo. As a global player it is the 10th largest producer.

Its ownership remains dominated by Glencore at 44%, with the majority of the other shareholders being held in relatively small amounts by US institutional investors (hedge funds etc.).² It is clear from Century’s website that Iceland is a major part of their business and strategy and three executives of its Icelandic operations are listed as key management.

Key People

Gunnar Gudlaugsson, Plant Manager of Nordural Grundartangi

Joined Nordural in 2008, from Straumsvik, the Rio Tinto Alcan smelter, where he had served for over ten years.

Ragnar Gudmundsson, Managing Director of Nordural

Nordural is the holding company for the Icelandic interests of Century. Previously Chief Financial Officer of Basafell, prior to which he was a senior manager at Samskip, both leading companies in Iceland.

Wayne R. Hale, Chief Operating Officer

Joined Century in 2007, having previously been with Sual in Russia (it was Sual, Rusal and Glencore’s Russian aluminium interests which merged to form UC Rusal). Has also worked for Kaiser and Rio Tinto.

Peter Jones, Director

2001-2006 was President & Chief Operating Officer of Inco Ltd. Former President & CEO of Hudson Bay Mining & Smelting Co (retired at the end of 2009).

David J. Kjos, Vice President of Operations in Iceland

Former manager of Cygnus Inc, an aerospace manufacturing company; prior to that was with the United Development Co & Kaiser Aluminium & Chemical Co.

Logan W. Kruger, CEO, President

Joined November 2005. Before Century, from 2003 he had been a leading executive at Inco, the large nickel mining company where he over saw operations in the Asia / Pacific region, including the Goro Nickel operation in New Caledonia and other projects in Indonesia, remaining as a director of the Indonesian subsidiary P.T. Inco (Inco has since been acquired by the Brazilian nickel miner Vale). He has also served as head of Anglo American’s operations in Chile (2002-03) and as CEO of the Hudson Bay Mining & Smelting Co in Canada (1998-2002).³ He is also a director of Amcoal which over sees the South African coal interests of the mining giant Anglo-American.

Andrew Michelmore, Director

From 2009 CEO of Minerals and Metals Group; former CEO & Managing Director of OZ Minerals. Both firms are leading Australian mining companies. Minerals & Metals Group is a subsidiary of Minmetals Resources Ltd, a Hong Kong based company with significant aluminium interests in China.

John P. O’Brien, Chairman of the Board

Chairman since January 2008. His background is in business management and restructuring.

Willy R. Strothotte, Director

Chairman of Glencore and of Xstrata (see below under Glencore).

Jack E. Thompson, Director

Also serves a director for a number of other mining companies including Anglo-American and Centerra Gold (largest Western-based gold producer in Central Asia), among others.

Though there are 4 other directors who appear to represent general institutional investors, it is clear from the above that the board is dominated by mining executives who share considerable common history. There is much more that is not obvious just from this board of directors. For example, Century and Noranda purchased from Kaiser Aluminium the bauxite mine at St. Anns, Jamaica and factory at Gramercy, Louisiana, though Noranda has since bought out Century. Noranda is a spin off from Xstrata who originally purchased it in 2006 when it took over the Falconbridge mining company.

Other links of note are:

Xstrata and Anglo-American Chile are joint owners of the Collahuasi copper mine, the world’s third biggest such mine and which in 2010 saw violent action against striking miners.⁴

Hudson Bay (of which Logan Kruger, now Century CEO, was CEO until 2002) is now the subject of a lawsuit over the murder of Mayan indigenous leader Adolfo Ich Chamán who spoke out over the company’s activities in Guatamala – he was hacked to death by security personnel in 2009.⁵ This took place while Century board member Peter Jones was CEO of the company.

Centerra Gold has acquired the Kumtor mine in Kyrgyzstan from the government there. Given that the deal saw little benefit to the people of that country, it has, as a result, played an important political role there.⁶ Jack Thompson, board member of Century and of Anglo-American sits on Centerra’s board also.

In 2006, indigenous tribes people stormed the Inco mine at Goro, New Caledonia due to environmental concerns.⁷ Inco’s CEO of the time was Peter Jones, while Logan Kruger oversaw operations at this mine from 2003-2005, and remains a director of its parent company P.T. Inco of Indonesia.

UC Rusal, the world’s single largest aluminium producer is controlled by Russian oligarch Oleg Deripaska through his En+ Group which he chairs. En+ is the controlling interest in a large number of other extractive and power generation businesses, mostly based in Siberia.⁸

His co-chairman is the financier Nathaniel Rothschild who runs the mining investment company Vallar, has a $40m investment in Glencore and is on record as being keen to support a Glencore takeover of Xstrata.^9,10 Rothschild is also a personal friend of both Peter Mandelson, the former EU Trade Commissioner, and of George Osborne, current UK Chancellor.

Xstrata has large interests in Australia where it has been criticised for sharp business practices¹¹, run roughshod over indigenous people at the McArthur River site¹² and is subject of a campaign due to its environmental destruction at it Mangoola opencast mine.¹³

It is hard to single out any firm within the incestuous world of mining conglomerates as being better than the other. All have issues with relationships with indigenous people, suppression of union activity and environmental damage, however the ease at which these accounts can be found in the collective past and present of Century’s key people and directors is telling.

Glencore International AG

Marc Rich & Co

The origins of Glencore are in the trading firm controlled by commodities baron Marc Rich, a controversial figure over the last few decades. Rich built up a commodities trading empire by making deals with the likes of Ayatollah Khomeini to trade Iranian oil while a US embargo was in place. At the same time he was linking himself to Mossad, the Israeli secret service.

In 1983, he and his partner Pincus Green were accused of insider dealing, dodging tax and illegal dealings with Iran when that country was under US sanctions. As a result they both fled the United States and Rich was named among the top ten most wanted fugatives by the FBI until he was controversially pardoned by Bill Clinton on the latter’s last day in the White House. Interestingly, his representative in Washington for 15 years (1985-2000) was Lewis ‘Scooter’ Libby, the subsequently disgraced Chief of Staff to Dick Cheney.

Rich settled in Switzerland where he founded Marc Rich & Co, continuing his commodities dealing, specialising in oil, gas and metals. In 1993/4 he failed in an attempt to corner the world zinc market, which lead to the loss of control of his company, though he remains a comfortably well off billionaire.

At the same time part of the company was spun off to become the equally controversial Trafigura. This is another commodity broker who entered the news when it brought out a ‘super-injunction’ to stop reporting of its role in illegal dumping of toxic waste in Côte d’Ivoire, though it has other scandals to its name as well.

Glencore

Marc Rich & Co was taken over by Rich’s inner circle and renamed Glencore. Many of its partners, of whom there are 485, will become very wealthy men following the listing of the shares. Day-to-day control remains principally with two of Rich’s former lieutenants, the highly seclusive and media-shy Ivan Glasenberg (current CEO) & Willy Strothotte (founding CEO and Chairman). Under these two, Glencore has continued to grow and dominate many of the markets it is involved in. It developed the tactic of investing in producers of raw materials, then striking deals that gave it exclusive access to their products which it would then trade on the market. The result is a global empire with its fingers in many pies, particularly metals, oil and grain. The ruthless and aggressive dealings methods developed under Marc Rich continued to shape the culture of the company, though it remains mired in considerable secrecy.

A large part of Glencore’s success is its willingness to do deals in places and with people were the more respectable sides of capitalism are wary to tread, doing deals in Congo and central Asia. It has also never been afraid to make deals that breached embargoes, including Saddam Hussein or South Africa during the apartheid era. Large-scale deals are being done in Central Asia with the numerous mining barons which emerged there after the collapse of the USSR, and who have strong links to corruption in those states. To this day many of its subsidiaries continue to be accused of human rights and environmental abuses.

The networks of control associated with Glencore are vast. In terms of its position in the world, it controls huge amounts of the addressable global market in copper (50%), zinc (60%), aluminium (38%), lead (45%), cobalt (23%), ferrochrome (16%), thermal coal (28%), wheat (10%), and one quarter of the worlds barley, sunflower and rape seed.^14,15 What this means is that it can effectively set prices for these commodities.

Addressable: the amount of a commodity accessible to a market. For example, many mines are owned by larger concerns who have acquired them entirely for their own use rather than for trading the ore/products on the open market. Thus the percentages quoted are for the volume of the global market rather than the total amount if all production is taken into account.

Leading Business Interests¹⁶

Glencore has a vast number of interests around the globe. The following is a brief on some of its leading assets and their problems, and it is certainly not exclusive. Many of the other mines it has a controlling interest in are open cast, with all the attendant problems, such as habitat destruction and pollution of the environment.

Argentina

The AR Zinc Group, acquired in 2005 operates the Aguilar mine, the Palpala smelter and a sulphuric acid producer, Sulfacid S.A. in the heavily mined north-western state of Jujuy, Argentina. These operations are part of a group of mines and related industries that have caused significant environmental damage and health problems to the various indigenous peoples of the region – demonstrations and protests against the presence of the mining companies have been held, including AR Zinc.^{17, 18, 19}

Australia

Glencore have a 40% stake in Minara Resources (formerly Anaconda), which runs the Murrin Murrin mine. Willy Strothotte, Ivan Glasenberg and others connected with Glencore sit on Minara’s board.²⁰ Both Murrin Murrin and Mt Isa Mines, which is controlled by Xstrata, were cited in 2009 as among the worst polluters in Australia.²¹

Bolivia

Glencore owns the Sinchi Wayra mining company that operates five mines. There has been an ongoing dispute with workers over attempts to increase working hours and on pay. The workers have called on the government to nationalise the company.²² In the past it has been criticized for mass lay-offs as a cost cutting tactic.²³

Columbia

The El Cerrejon Norte mine, jointly owned with Anglo American & BHP Billiton has been described as “a continuing horror story of forced relocations of indigenous people, human rights violations, environmental destruction and other assorted injustices”, in particular against the Wayuu people. Union organisers have received death threats from paramilitaries.²⁴ Similar allegations are made in relation to its coal mine at La Jagua, which Glencore’s subsidiary Prodeco purchased from Xstrata.^25,26,27 Prodeco also operates an open cast coal mine at Calenturitas, La Loma.

Congo

Glencore acquired control in 2008 of the financially troubled Katanga Mining²⁸, one of Africa’s biggest copper and cobalt producers. It is situated in a highly troubled region where militias have funded their struggles by selling off resource rich land. There are reports of water contamination and poor working conditions at its mines.²⁹ Swiss NGOs have been highly critical of Katanga Mines, with Bread For All and The Swiss Catholic Lenten Fund publishing a report accusing Glencore of involvement with of human rights abuses, child labour, pollution and tax evasion in the region³⁰, which has lead to a campaign against the company. ³¹ Glencore also owns the new mine at Mutanda, also in Katanga province. Glencore’s minority partner in Katanga is the Israeli magnate Dan Getler who specialises in investments in the Congo and who has links to blood diamonds and to right-wing Israeli politicians, in particular Avigdor Lieberman.³²

Kazakhstan

Glencore has partnered with Kazakhstan private investment company Verny Capital to take control of the Kazzinc, which has extensive mining and smelting interests throughout that country. Currently 51% owned by Glencore, that stake is expected to rise to 93% following Glencore’s floatation. Verny is controlled by the controversial Utemuratov family, which is close to President Nazarbayev, who is also believed to have a stake.³³ Under Nazarbayev there has been large-scale transfer of the nation’s mineral wealth into private hands and Glencore has been integral to that process.

Peru

Glencore owns the Iscaycruz & Yauliyacu mines (Los Quenualos), which have been accused of unsafe working conditions and subsequent anti-union activities.³⁴

Philippines

Xstrata’s proposed Sagittarius mine at Tampakan, Mindanao threatens indigenous peoples and important rainforests. On 9th March, 2009 a leading opponent of the project, Eliezer “Boy” Billanes, was assassinated.³⁵ Mines in Philippines, such as this one, have also been linked with threats to food security, partly due to the particular nature of the ecology they work in.³⁶

Russia

UC Rusal³⁷, the Russian aluminium giant; controls the world’s largest deposits of bauxite (the ore from which aluminium is obtained) and is the second biggest producer of global alumina (aluminium refined from bauxite) with a 14% of global production. Controlled by oligarch Oleg Deripaska, the firm was created by a merger of Rusal with the smaller SUAL and Glencore aluminium interests. There remain strong links between Glencore and UC Rusal with Glencore owning 8.7% of UC Rusal, and a friendship between Deripaska and Glasenberg.³⁸

As well as UC Rusal, Glencore has numerous other business interests in mineral wealthy Russia. Some of these date back to when Glencore was swift to do deals to take control of Russian state assets following the collapse of the USSR. Though it has been edged out of some of these companies who prefer to sell direct to consumers in China, etc, it does have deals with Russian producers of coal, oil and grain, in part through EN+, Deripaska’s company. There are rumours that it is trying to exploit links into the zinc, nickel and lead producers. Other deals and their relations to Glencore remain murky³⁹, but another major partner is the independent oil refiner Russneft.⁴⁰

Zambia

Glencore has control of Mopani Mines, which has come under environmental scrutiny, being believed to be the source of acid rain due to sulphur dioxide emissions.⁴¹ In 2005, 20 miners died in different accidents at the mine, blamed in part on cut backs in training.⁴² A Daily Mail investigation has claimed that Glencore is engaged in exploitation tax evasion through sharp pricing techniques, so depriving the country of much needed revenue.⁴³

Zimbabwe

In 2011 Glencore signed an agreement with Mwana Africa to acquire nickel from the Trojan mine at Bindura in Zimbabwe – notable for its links with Morgan Tsvangirai. Mwana’s is a South African based miner with copper operations at Katanga in the Congo and gold mines in Ghana.

Other global interests

Glencore owns the PASAR copper smelter in the Philippines, the Sherwin Alumina smelter in Texas (cited for hazardous chemical releases^44,45) and the Portovesme lead and zinc smelter on Sardinia. It also owns 70% of the South African coal miner Shanduka. As owner of the Moreno sunflower oil company, one of the biggest in the world’s largest suppliers of sunflower oil, Glencore is heavily involved in the producing and selling of genetically modified products.⁴⁶ It controls 270,000 hectares of agricultural land and has various grain processing sites around the world which aid its interests in these markets.

The smallest aluminium smelter in Iceland uses 50% more electricity than all of Iceland’s households and businesses combined, while contributing very little to the country’s GDP. Heavy industry has often been touted by Icelandic conservatives as a cash cow: foreign companies can provide the country with jobs, while utilising Iceland’s green energy to produce aluminium in a cleaner fashion.

While the myth of the “green smelter” has been definitively put to rest, aluminium is still billed by some as being good for the economy. However, Vilhjálmur Þorsteinsson – the chair of a study group assembled by the Ministry of Industry that studies Iceland’s energy use – has come to some damning conclusions about smelters in Iceland.

Iceland’s three aluminium smelters – Alcoa in Reyðarfjörður, Norðurál in Grundartangi, and Rio Tinto Alcan in Straumsvík – consume approximately 13 terawatt hours of electricity. The entire capacity of Iceland’s electrical output is 17 terawatt hours. Furthermore, Straumsvík – the smallest smelter in the country – uses 3.6 terawatt hours. The combined total energy consumption of every home and business in Iceland (apart from the smelters) equals only 2.3 terawatt hours.

At the same time, even the best estimates of what smelters contribute to the economy only put them in the neighbourhood of contributing to 5% of the GDP. Tourism accounts for about the same percentage of the GDP while using far less of the power grid. Meanwhile, Iceland’s service sector accounts for 69.9% of its GDP, and fishing accounts for 12%.

Those who are yet to give up on Icelandic media cannot have avoided noticing one Kristján Már Unnarsson, a news director and journalist at TV station Stöð 2. Kristján, who in 2007 received the Icelandic Press Awards for his coverage of “everyday countryside life”, is a peculiar fan of manful and mighty constructions and loves to tell good news to and about all the “good heavy industry guys” that Iceland has to offer.

To be more precise, Kristján has, for at least a decade (and I say “at least” just because my memory and research doesn’t take me further back), gone on a rampage each and every time he gets the chance to tell his audience about the newest of news in Iceland’s heavy industry and energy affairs. He talks about gold-mills when referring to dams built to power aluminium production; and when preparing an evening news item on, say, plans regarding energy and aluminium production, he usually doesn’t see a reason for talking to more than one person – a person who, almost without exception, is in favour of whatever project is being discussed.

After witnessing Kristján’s latest contribution to the ongoing development of heavy industry and large-scale energy production, i.e. his coverage of Alcoa’s recently announced decision not to continue with its plan of building a new aluminium smelter in Húsavík, wherein he managed to blame just anything but Alcoa itself for the company’s decisions, I couldn’t resist asking (and, really, not for the first time): What can really explain this way too obvious one-sidedness, manifest not only in this one journalist’s work but seemingly the majority of news coverage concerning heavy industry?

“Lack of professionalism,” someone might say. Professionalism would thus imply allowing more than one single voice to be heard, letting one argument meet another, allowing conflicts to take place and thereby giving the audience a chance to critically make up its mind. This lack of professionalism actually applies to such a huge quantity of all news material produced. Indeed, the constant recycling of content – of interviews, press-releases, photos etc. – and the manufacture of single-perspective news content often seems to be the mainstream media’s predominant modus operandi.

“Co-dependency,” could be another suggestion. And a good one, as it often seems that the bulk of journalists are seriously co-dependant with the ruling political and economical order. Take, for instance, the mantra of the never-questioned importance of non-stop economic growth, or the commonly heard phrase that during a protest “the police needed to use teargas” – as the decision to spray isn’t fuelled by a precise political will, but rather of a simple need.

These two are good answers, but definitely not good enough when standing on their own. To get the full picture, lets look into the relationship between mainstream journalism on the one hand, and public relations on the other. How, for instance, are the tops of the aluminium and energy companies’ PR departments staffed?

At Reykjavík Energy we have Eiríkur Hjálmarsson, former journalist and program maker at state TV station RÚV, whereas at Landsvirkjun we find one Ragna Sara Jónsdóttir, former journalist at RÚV and newspaper Morgunblaðið. Alcoa prides itself of Erna Indriðadóttir, long-time journalist at RÚV, while Rio Tinto Alcan sports Ólafur Teitur Guðnason, former journalist at RÚV, DV and business paper Viðskiptablaðið (it is worth noting that Ólafur is also known for his aonce-annual books analysing and criticising the mdia, not from the usual Chomsky-alike left-wing but rather a right-wing perspective). At last but not least, the only employee of Samál (or The Icelandic Association of Aluminium Producers), is Þorsteinn Víglundsson who, along with a few jobs in the financial sector, used to write news for Morgunblaðið.

Quite an impressive list, isn’t? And where does it bring us? Possibly to the assumption that the first-mentioned Kristján Már Unnarsson must be doing his entrance examination, or even an on-the-job-training. But that would be a bit too simplistic because practically, Kristján Már might well be preparing for a better paid PR job, whereas theoretically it really doesn’t mater if that is the case or not.

What matters is the ever impenetrable handshake between those two industries: Public Relations and The Media. What, in fact, is one medium’s coverage of a company but a conversation between the two parties? A pre-designed and post-edited conversation, for sure, but a conversation nevertheless. And the conversation element is crucial as a journalist’s co-dependency and lack of professionalism (deliberate or not) are of no use if the Holy Trinity’s most important link is missing. And vice versa: Without beneficial journalists, a PR stunt is likely to end up dead in the water.

The stunt’s key moment, as Spice Girls realised and told us, is “when two become one.”

The Energy Master Plan is a framework programme, meant to result in a long term agreement upon the exploitation and protection of Iceland’s glacial rivers and geothermal areas. Its making, which since 1999 has been in the hands of special steering committiees, established by the two above-mentioned ministries, reached a critical status in July this year when its second phase was finished and presented to the ministers who in mid August presented their proposition for a parliamentary resolution. Before it will be discussed in parliament the proposition will be open to comments and criticism from the public, as well as interested parties, energy and aluminium companies on the one hand, environmentalists on the other.

Twenty-Seven Energy Options Put on Hold

The proposition lists natural areas into three categories; protection, exploitation and hold. The last-mentioned includes areas that, according to the steering groups and ministers, have not undergone enough research for a decision to be made upon weather to protect or exploit them. Included in this category are, among other, the glacial rivers in fjord Skagafjörður as well as other rivers such as Skjálfandafljót, Hvítá, Hólmsá and Farið by lake Hagavatn in the south-west highlands. Also geothermal areas such as Trölladyngja and Austurengjar in Krýsuvík and certain areas around mount Hengill where the heavily indebted Reykjavík Energy (OR) already operates Hellisheiðarvirkjun, a sulphur polluting geothermal power plant. The 27 areas of the waiting category will be revised in five years, given that satisfactory studies have been made at that time.

Þjórsárver Wetlands to be Saved

Delightfully, the protection category features the uppermost part of river Þjórsá where Landsvirkjun wants to construct Norðlingaölduveita, a dam that would destroy the Ramsar listed Þjórsárver wetlands. River Jökulsá á Fjöllum, which has been seen as an energy potential for a new Alcoa aluminium smelter in Bakki, is also listed protected. The same applies for certain parts of river Tungná, in which Landsvirkjun is already building the Búðarháls dam that will provide energy for increased production in Rio Tinto Alcan’s aluminium smelter in Straumsvík.

The protection category also features geothermal areas such as the ones around Brennisteinsfjöll mountains on the Reykjanes peninsula, as well as Gjástykki, close to volcano Krafla and lake Mývatn. The same goes for the Grændalur valley and Bitra, which are located close to the small town of Hveragerði and have been particularily desirable in the eyes of energy companies. Bitra was saved by a local campaign in 2008 whereas Grændalur was recently threatened when Iceland’s National Energy Authority allowed a company called RARIK to operate test drilling in the valley, in complete contravention of previous rulings by the Ministries of Industry and of Environment.

Krýsuvík, Þeistareykir and Þjórsá to be Destroyed

The exploitation list features geothermal areas Þeystareykir, Bjarnarflag and Krafla in the north of Iceland, as well as Hágöngur in the mid-highlands west to glacier Vatnajökull. Also certain parts of the area around mount Hengill and finally geothermal spots in Reykjanes, Krýsuvík and Svartsengi, all three on the Reykjanes peninsula. Rivers Hvalá, Blanda and Köldukvísl are then all categorised as exploitable. And most critically the Energy Master Plan proposition allows for Landsvirkjun’s construction of three dams in the lower part of river Þjórsá.

Environmentalists Threefold Response

The most common response from environmentalist so far has been threefold. Firstly there generally satisfied by the protection of areas such as the Gjástykki, Jökulsá á Fjöllum and Grændalur, let alone the Þjórsárver wetlands. Shortly after the publication’s release, Iceland Nature Conservation Association (INCA) stated that, if approved by parliament, the Master Plan will mark the end of environmentalists’ forty years long struggle to save Þjórsárver from destruction. Though listed by the international Ramsar Convention on Wetlands due to its unique ecosystem, the wetlands have been on Landsvirkjun’s drawing table as a potential for construct a large reservoir, meant to produce energy for a planned expansion of Rio Tinto Alcan’s aluminium smelter in Hafnarfjörður, which was later thrown off in a local referendum. The plan has always been met with fierce opposition, no matter of Landsvirkjun’s repeated attempts to get it through by proposing a smaller dam and reservoir.

Secondly environmentalists are critical of the fact how many invaluable areas, such river Skjálfandafljót, are kept on hold instead of simply been categorised protected. Thirdly there is a clear opposition to the planned exploitation of certain wonders of nature, one example being the geothermal areas on the Reykjanes peninsula. Ellert Grétarsson, a photographer who has documented these areas extensively (his photos are here aside), fears that the drilling in Krýsuvík – covering between five and eight thousand square meters of land – will simply kill the area. And as a matter, says Ellert, the whole Reykjanes peninsula will be riddled with energy construction. Hjörleifur Guttormsson, former Left Green MP and a genuine environmentalists, shares Ellert’s worries and has asked for an integral study of Reykjanes before any decisions are made.

Þjórsá, the Bone of Contention

As as mentioned before the biggest concern regards Þjórsá, which has for a long time been the bone of contention between the two clashing arrays fighting for or against nature conservation. The struggle over Þjórsá has been especially tough, actually to such an extent that the government can be reputed to stand or fall with that conflict in particular. Guðfríður Lilja Grétarsdóttir, MP for the Left Greens, demonstrated, during parliamentary debate last April, her full opposition to the construction of dams in Þjórsá. At that point, three Left Green MPs, who up until then had been increasingly critical of the government and its lack of left-leaning policies, had just recently departed from the party, leaving the government with only one person’s majority in parliament. And as most members of the social-democratic People’s Alliance (Samfylkingin), which makes up the government along with the Left Greens, have not shown a sign of objection to the damming of Þjórsá, it wouldn’t be surprising if the river will be up for a heavy debate in parliament.

In fact it is more than sure that Þjórsá will be among the main matters of argument in parliament. The right wing Independence Party, which was in in power from and is largely responsible for the neo-liberalisation and heavy-industrialisation of Iceland, has always been one of the driving motors behind Landsvirkjun’s plans to dam Þjórsá. When the Master Plan’s proposition was presented in August, Ragnheiður Elín Árnadóttir, a MP of the party, called for the immediate starting of construction in Þjórsá. She also said she grieved the long period of which the project has been stuck within bureaucracy, referring to the attempts of Svandís Svavarsdóttir, current Minister of Environment, to halt the construction of one of the three proposed dams by refusing to include the dam, Urriðafossvirkjun, in a land-use plans for the parishes of Flóahreppur and Skeiða- and Gnúpverjahreppur (rural districts along Þjórsá) made by them at the request of Landsvirkjun.

Three Dams: Threat to Society and Ecology

The conflict in parliament mirrors the actual conflict in the Þjórsá region where locals have for a long time fought over the river’s fate. There Landsvirkjun hasn’t only used bribes in its attempt to get its plans through local administration, but also threatened farmers whose lands are at stake will the dams be built, by stating that if the farmers do not negotiate with the Landsvirkjun, the company will attempt for a land expropriation. This conduct has created a complete split within the local community, clearly demonstrated in last March when young locals from the region published a statement, in which they demanded a permanent halt to all plans of damming Þjórsá – thereby an end to the social conflict associated.

As a matter of fact two members of the Master Plan’s steering committee recently stated, when interviewed on state radio station RÚV, that due to the serious lack of studies regarding the social impacts of the planned Þjórsá dams, those plans should without any doubt have been put on hold. This is exactly what Guðmundur Hörður Guðmundsson, chairman of environmentalist organization Landvernd, said in last July following the publication of the Energy Master Plan’s second phase report.

Þjórsá’s position in the Master Plan proposition, yet shouldn’t be of any surprise. In the second phase report the three planned dams are not considered to be a great threat to the ecology of Þjórsá and its surroundings – contrary to the opinion of environmentalists who have voiced their worries concerning the dams’ impacts, for instance on the river’s salmon stock. Orri Vigfússon, chairman of the North Atlantic Salmon Fund (NASF), recently stated that “never before in the history of Iceland has there occurred such an attack on a sensitive area of wild salmon.” As is considered that the salmon’s spawning and breeding grounds are mosty located above waterfall Urriðafoss, where one of the three dams is planned to be built, Orri believes that the stock of salmon and salmon trout are likely to vanish.

Energy Companies Unsatisfied as Expected

As one could have imagined, Icelandic energy companies and other adherents of large-scale power production for heavy industry, are everything else than happy about the Master Plan’s proposition. Following its release Eiríkur Hjálmarsson, Public Relation manager of Reykjavík Energy, opposed the protection of Bitra on the ground that the company has already harmed the area with three examination boreholes, roads and electricity lines – but most importantly, spent 785 million ISK on the project. As reported earlier this year by Anna Andersen, journalist at the Reykjavík Grapevine, the foolhardy business operations of Reykavík Energy during the last decade or so – including large-scale geothermal projects associated with heavy industry – have brought the publicly owned company a debt of 233 billion ISK (2 billion USD or 1.4 billion Euros). Despite this financial collapse the company still advocates for the continuation of the agenda that brought it down.

Other energy companies have responded similarly, mostly complaining about the amount of areas listed as protected or on hold. Landsvikjun’s director Hörður Árnason has said that compared to the second phase report, the parliament proposition suggest that way too many energy options are put on hold. Another company, Suðurorka, owned by Alterra Power (former Magma Energy) and Íslensk Orkuvirkjun, had planned to construct a dam, called Búlandsvirkjun, in river Skaftá – a plan that the proposition puts on hold. The company argues that few energy options have been studied as thoroughly and while the studies might have been done – and might be thorough – not everybody agrees with the company on the impacts. Farmers in the area have opposed the project as some of their most important grasslands will be drowned under the dam’s reservoir.

Energy company RARIK will, due to the Master Plan, loose its grip on geothermal areas in Grændalur valley, as well as rivers in Skagafjörður and Hólmsá river – projects that the company claims to have invested in with 300 million ISK. Using the same monetary argument, HS Orka, also owned by Alterra Power, has been vocal about its 700 million ISK investment into their proposed, but now delayed if not entirely halted, geothermal plants in Trölladyngja. Finally representatives from Reykjahlíð, a small town that holds the good part of Gjástykki’s property rights, have stated that if the area will be protected, billions of ISK will be demanded as compensation.

The Predominant Strategy

Those arguments do in fact manifest the predominant strategy of those involved in the heavy industrialization of Iceland. Instead of waiting for all necessary contracts to been signed, all needed permissions to be granted, and all required energy to be ensured, the energy and aluminium companies have simply started major construction immediately when only one or a few permissions have been granted. And when criticised, not to mention when forced to stop, they have stated that because these projects have been announced and vast amounts of money put into them, they should be allowed to continue. If needed, they have also pointed out that because the natural areas at stake have already been harmed (by themselves), there is “no point” in preserving them.

One example would be Helguvík, where a framework for a proposed Century Aluminum smelter has already been built but hardly any construction has taken place there for two year. With every day that passes it becomes clear that not only has the company failed to ensure the energy needed to operate the smelter, but also that the energy simply doesn’t exist.

Geologist Sigmundur Einarsson has, for the last years, pointed this out and stated that the amount of energy needed for the Helguvík smelter cannot be found and harnessed on Reykjanes, like stated by the parties involved. For instance he believes that no more than 120 MWe can be harnessed in Krýsuvík, contrary to the official numbers of 480 MWe, and has repeatedly demanded answers from the authorities about where from the rest of the energy is supposed to come. Just as Saving Iceland’s questions about the whereabouts of energy for Alcoa’s planned smelter in Bakki, Sigmundur’s questions have never been answered, but he claims the Energy Master Plan proofs his theory.

Yet Another Three Kárahnjúkar Dams!

Environmentalists have reacted to the energy companies’ complaints and asked how on earth the companies can still pretended to be unsatisfied. As pointed out by Landvernd, these company’s are about be granted permission to harness energy equivalent of three Kárahnjúkar dams. From 2004 to 2009, Iceland’s energy production duplicated, largely with the construction of Kárahnjúkar dam, and is currently 16,900 gigawatt-hours. If the Energy Master Plan will be accepted as proposed, the energy companies will be able to duplicate the production again in few years, says Guðmundur Hörður, chairman of Landvernd, and continues:

The increase of public electricity usage is about 50 gigawatt-hours per year. The expansion entailed in the proposition would thus sustain that particular public increase for the next 265 years! If this will be the conclusion, the energy companies can be very satisfied. Still they send their agents onto the media, in order to cry and complain. That doesn’t give a good hint for a settlement.

Other environmentalists, Ómar Ragnarsson for instance, have mentioned that the whole discourse surrounding the Energy Master Plan portrays a false image. While the plan regards Iceland’s each and every hydro and geothermal area, potential for exploitation, the areas that have already been harnessed are kept outside of the discourse. Ómar says that it is simply false to state that “only twenty-two areas” have been categorised exploitable, as twenty-eight large power plants have already been built in Iceland. That means that out of the ninety-seven considered in the Master Plan, fifty have already been or will be utilised. In addition to the twenty-seven areas put on hold, another thirty-two have yet not been categorised by the steering committees, which makes the current proportion of protected areas even lower.

Ómar has also pointed out mismatches within the proposition. One example regards geothermal area Gjástykki that is listed as protected, as it is “a part of Krafla’s volcanic system, which has a protection value on a worldwide scale,” like stated in the proposition. But according to Ómar this will depend entirely on definitions. As an energy option, Vítismór, which is a part of Krafla’s volcanic system and is an inseparable part of the Gjástykki-Leirhnjúkur area, is currently listed as an addition to the Krafla power plant and would thus, regardless of its position within the Master Plan, be available for exploitation.

Limnology (or freshwater science) professor Gísli Már Gíslason upholds Ómar’s argument and has stated that half of Iceland’s “profitable hydro power” has already been utilised. One of those rivers is Jökulsá á Dal, harmed by the infamous Kárahnjúkar dam, which in order to be built required disallowing the protection of Kringilsárrani, an extremely important grassland for reindeer. This is not a unique incident as, for instance, the three dams in river Láxá are also manifestations of hydro power plants built in protected areas.

The Coming Struggle

Notably by the above-listed contradictions, which though demonstrate only a small part of the debate about the Energy Master Plan so far, the coming struggle about the fate of Iceland’s nature is going to be harsh and heavy. Armed with the rhetoric of economic crisis, unemployment etc., those in favour of heavy industry – in other words a big part of parliament, the energy companies, the Associations of Industry and Employers, the country’s biggest trade unions, and most recently Samál, a joint association of aluminium producers in Iceland – use literally every opportunity to push for the further development of industry, especially aluminium. In order for that development to occur, the country’s glacial rivers and geothermal areas have to be exploited on a mass scale.

Environmentalists, on the other hand, need to sharpen their knives and both ask and answer a great amount of questions. What, if any, are the actual benefits of heavy industry and its parallel large-scale energy production? And what are its impacts on Iceland’s society and ecosystems? No less importantly, what are its global impacts such as on the atmosphere or bauxite communities in India, Guinea, Hungary and Jamaica? How has it affected the economy and what are its contributions to the current economic situation? What are the impacts of the building of big dams and geothermal power-plants, fuelled by extremely high loans, bringing a temporary pump into the economy that inevitably leads to the demand for another shot? And what is the value of nature per se?

Only by answering all of these and many more questions, one can honestly try to answer the one fundamental question regarding the Energy Master Plan: What actual need is there for yet another three Kárahnjúkar dams, or in fact just a single more power plant?

In a recent article, originally published on news-website Pressan, Sigurbjörn says that before the municipal elections in spring 2009, the community in Hvalfjörður settled upon an agreement about environmental and industrial affairs. But under the administration of Hjálmar Sveinsson (on photo), who is a vice-councilman of Reykjavík for Samfylkingin, a joint venture of several port authorities in the Faxaflói area, titled the Associated Icelandic Ports, is enabling the way for the construction of yet another two factories at the Grundatangi industrial site in Hvalfjörður, where the two aforementioned factories are located. Sigurbjörn describes the whole process as a very dubious one:

Faxaflóahafnir [the Associated Icelandic Ports] requested that the industrial site at Grundartangi would be enlarged by 70,000 square-meters in order to place polluting industries there. The municipality, lead by the chairman of the parish council who is also a board member of Faxaflóahafnir, managed to put the change, which is now waiting a verdict from the Ministry of Interior, through by shady manners. Around 50 persons and parties made remarks on Faxaflóahafnir’s requested changes, but none of them were taken into consideration. But that wasn’t all: A detailed land-use plan was advertised beside the change of the general plan even before the deadline to make remarks on that particular change passed.

As the authorities have kept silent it is still not certain what companies are involved in those plans. In July this year newspaper Fréttatíminn reported that a Finnish company called Kemira – involved e.g. in paper and fertiliser production as well as biotechnology – which plans to operate a sodium chlorate plant in Iceland for bleach production, is looking at two potential locations: Bakki by Húsavík on the one hand, also a planned location for an Alcoa aluminium smelter; Grundartangi on the other. Such a construction does not require an Environmental Impact Assessment (EIA) by default but needs to be notified to Iceland’s National Planning Agency, which then decides if an EIA is needed or not. The energy needed to run the plant, which is said to be 40 MW, would, according to Fréttatíminn, come from geothermal area Þeistareykir, given that the plant would eventually be built in Bakki. No particular energy source has been mentioned in the case of Grundartangi.

Sigurbjörn and other residents of Hvalfjörður, who have filed repeated complaints against the plans to enlarge Grundartangi’s industrial site, have mostly been met with silence. While this should not necessary be surprising in a state that has still not ratified the Aarhus Convention, the Hvalfjörður residents were astonished to find out that the above-mentioned Hjálmar Sveinsson – who, in his article, Sigurbjörn says “can be remembered as a creative radio personality who one could contentedly listen to, especially due to his own stance on environmental and planning issues” – is one of the project’s key figure. Sigurbjörn states that after weeks, months and years of Hjálmar’s radio talks on environmentalism and democracy, one would have considered it as likely that Sea Shepherd’s Paul Watson would become a whale-hunter in Hvalfjörður as that Hjálmar Sveinsson would advocate for polluting industries and abuse of power. Paul Watson visited Iceland in 1986, along with Rod Coronado, where the two of them famously sank two of the country’s whaling ships and sabotaged a whale-processing factory in Hvalfjörður.

Neither Hjálmar nor any other authority figure responsible for these plans have openly responded to this criticism.
____________________________________________

See also:

Believes Aluminium Plant Is Poisoning Sheep

More Flouride in Animals Around Aluminium Factories than Elsewhere – Environmental Agency Refuses to Investigate

Elkem’s Icelandic Alloys Year Round “Human Errors”

A sheep farmer, noticing bone deformities in the skulls of some sheep, believes they may be connected to an environmental accident at an aluminium smelter in 2006, and is calling for an investigation.

Sigurbjörn Hjaltason, a sheep farmer from Kiðafell, told DV that he had noticed quite a number of sheep in his area having difficulty eating, with some dying of starvation as a result. On examining the skulls of the animals, he discovered unusually large swelling of the jaw bones.

This, he believes, is the result of pollution from an aluminium smelter at nearby Grundartangi. In 2006, an accident at the plant caused fluorine to be released into the environment.

Fluorine, which is also present in volcanic ash, when ingested by animals can cause freakish growths in the bones. Sheep that would eat grass that had been covered in volcanic ash would often times grow unnaturally large teeth that prevented them from being able to eat any food at all, resulting in starvation.

The conclusion of the Environmental Office at the time of the accident was the fluorine levels in the surrounding area had doubled.

Sigurbjörn has called for a full investigation, and wants an independent team of scientists to examine the teeth and bones of the sheep that have died.

See also:

More Flouride in Animals Around Aluminium Factories than Elsewhere – Environmental Agency Refuses to Investigate

Pollution from Smelters Damages Teeth in Sheep

Like explained on the project’s official website the process was “split into two phases. The first phase, 1999–2003, evaluated and ranked 20 large-scale hydro-power options, mostly located in the highlands, and the same number of geothermal options in 8 high-temperature areas.” The second phase was supposed to “rank all the options to produce the final result,” including “an evaluation of whether some areas should be conserved completely, without any energy-harnessing activities.” Proposed power projects were said to be “evaluated and categorised on the basis of efficiency, economic profitability, and how they will benefit the economy as a whole,” while the “the impact on the environment, nature, and wildlife” was also supposed to be evaluated, “as well as the impact on the landscape, cultural heritage and ancient monuments, grazing and other traditional land use, outdoor activities fishing, and hunting.”

TORFAJÖKULL AND KERLINGAFJÖLL PROTECTED – HELLISHEIÐI, REYKJANES AND KRAFLA AMONG “EXPLOIT-FRIENDLY” AREAS

The second phase’s report, as said before, was published in the beginning of July 2011, two years later than expected when the process started. On top of the protection list are two geothermal areas, around Torfajökull glacier and Kerlingafjöll mountains, which both have been viewed as preferable exploitation areas by the energy industry and its representatives in committees concerning the Master Plan. Other areas scoring high on the protection list are geothermal area Vonarskarð and rivers Skaftá and Hólmsá, south-west of Vatnajökull glacier, the latest-mentioned being a part of Landsvirkjun’s recently announced plan to build 14 new power-plants in the next 15 years. These areas are, according to the report’s authors, the highest ranking natural treasures that were taken into account in the making of the report.

On the other hand the geothermal areas on Hellisheiði by mountain Hengill, the Reykjanes peninsula and volcano Krafla, as well as river Tungnaá, are listed on the top of exploitation areas. Geothermal energy production has been going on Hellisheiði since 2006 (where Saving Iceland’s 2008 action camp was located ), resulting in highly increased sulphur pollution in the Reykavík capital area. There is a vast local opposition against the plant and the planned enlargement of it, its most recent manifestation being when residents of Hveragerði, living close by one of Reykjavík Energy’s boreholes, called the police to complain about constant noise coming from the borehole. Further construction is currently taking place in Hellisheiði as well as in Tungaá river where Landsvirkjun is building its Búðarháls dam that will produce energy for increased aluminium production in Rio Tinto Alcan’s smelter in Straumsvík, Hafnarfjörður. Already existing plans to increase geothermal energy production on the Reykjanes peninsula, for a planned Norðurál/Century Aluminum smelter in Helguvík, have resulted in worries of overexploitation – not only by environmentalists but also, and most recently, by Iceland’s National Energy Authority.

ÞJÓRSÁ RIVER NOT CONSIDERED NATURALLY VALUABLE

What mostly grabs one’s attention is the fact that Þjórsá river is llisted quite high on the report’s exploitation list, meaning that according to the authors, Landsvirkjun’s three planned dams in the river would not have any serious impacts on the environment surrounding the river. Thus the planned dams by Holt and Hvammur are number 15 and 16 on the list, while the damming of Urriðafoss waterfall – the most critical of all three – is located number 28, which is still above the list’s middle. This conclution completely contradicts environmentalists nation-wide and many local residents around the river, opposing all three dams. In an article e.g. published on Saving Iceland’s website, natural scientist and author Guðmundur Páll Ólafsson, criticised the rhetoric of those in favour of the dams:

When a glacial river is harnessed to generate electricity, this important function, and the binding of the greenhouse gas CO2, is diminished. What they generate is not green energy as the advocates of hydro-power plants and heavy industry maintain, but black energy. Dams and reservoirs hinder the function of glacial sediment in the oceans, and hence hydro-electric power plants that harness glacial rivers are far more harmful than has hitherto been believed.

The planned Þjórsá dams have also been highly criticised from a social perspective, most recently by a group of young locals who challenged Iceland’s government “to state officially that no dams will be built in the lower Þjórsá river, against the peoples wishes.” This happened shortly after a Supreme Court ruling stating that the decision of Environmental Minister Svandís Svavarsdóttir, to reject the construction of a dam in Urriðafoss waterfall in Þjórsá river, was illegal. The ruling was only a one small factor in the long and complicated farce concerning the Þjórsá issue – a farce including Landsvirkjun’s attempts to bribe local residents and the company’s threats of using expropriation in order to gain access to lands owned by people opposed to the dams. Following the publication of the Master Plan’s second phase report, Guðmundur Hörður Guðmundsson, chairman of environmentalist organization Landvernd, expressed the organization’s disagreement with Þjórsá’s position on the exploitation list, stating that a much better and more detailed research has to be done on the planned dams’ social impacts.

Interviewed by newspaper Fréttablaðið, natural scientist Guðmundur Páll Ólafsson voiced a very negative view towards the report, saying that the whole process of it marks the energy company’s coming retrieval. “My criticism is mostly based on the premises that the exploitation options are always at the forefront, but not to protect the Icelandic nature and Icelandic natural treasures from the outburst of the present,” Guðmundur said and added that the latter is much more important than to exploit certain areas. He also criticised the Minstry of Industry and the National Energy Authority for allowing Landsvirkjun to walk all over the second phase’s protective section.

THE COMING RETRIEVAL

Only a few days prior to the report’s publication Landsvirkjun announced the company’s future policy formulation, parallel to the publication of another report that was made for Landsvirkjun by a consulting service named GAMMA. The reports states that according to the results of the Energy Master Plan’s first phase, Landsvirkjun can duplicate its energy production in the next 15 years, promising between 9.000 and 11.000 thousand related jobs. If things go like planned, at least 3.000 people would be employed by energy-intensive heavy industry companies in 2025, while the so-called – and often doubted – derivative jobs would be a little more than 4.000, meaning that c.a. 4% of the Icelandic nation would work directly or implicitly for heavy industry. To make a good story better the director of Landsvirkjun, Hörður Arnarson, compared Landsvirkjun with the Norwegian oil industry, saying that if the company is allowed to follow its published strategy, only its dividend payment and tax payment could become 14% of the state treasury. Hence Landsvirkjun would be able to live up to the cost of Iceland’s police, courts, culture, sports, colleges and universities.

Aforementioned Guðmundur Hörður Guðmundsson, chairman of Landvernd, called Landsvirkjun’s strategy “the mapping of the next economical bubble,” pointing out that the financial amounts mentioned in the report are much higher than the amounts of the Kárahnjúkar dam project, which contributed fiercely to Iceland’s economic collapse in 2008. “How will the situation be here when all this construction will be finished?” he asked when interviewed by a left-leaning news-website Smugan, adding that Landsvirkjun is not the only energy company planning large-scale constructions. The editor of that same website, Þóra Kristín Ásgeirsdóttir, called the report “Landsvirkjun’s political manifesto” and asked when a time would come where expensive professionals would be hired to write a report about the immeasurable value of unspoiled nature instead of yet another report on the greatness of large-scale exploitation. In an open letter to Katrín Júlíusdóttir, Minister of Industry, Guðmundur Páll Ólafsson said that “in fact nothing has changed in the Minstry of Industry since the collapse […] except that the scurrility is more than before.”

ENVIRONMENTAL MINISTER PROMISES EMPTY-LOOKING CHANGES

As reported by Saving Iceland before, environmentalists are highly critical of the making of the Master Plan, especially in relation to a committee, nominated to sort the areas in question into three different categories: protection, hold and utilization. The committee did not include a single representative from environmentalist organizations whereas representatives from the energy and tourism industries, as well as the Ministries of Environment and Industry, had seats IN it. Minister of Environment and a Left Green MP, Svandís Svavarsdóttir, has now backed up the criticism, stating that there is, and has always been, an enormous advantage difference between environmentalists on the one hand and those in favour of extreme exploitation on the other. Interviewed by State TV station RÚV, Svandís said that within both the Ministries of Environment and Industry there is a will to strengthen environmentalists’ position, though no plans have been made how to actually execute that will.

Once again promises given about changes concerning the protection of Iceland’s nature seem to lack all real meaning.

Overrun by Viking ambition, Reykjavík Energy built headquarters fit for Darth Vader, expanded ambitiously, dabbled in tiger prawn farming and flax seed production, went into the fibre optics business, invested in a new geothermal plant, speculated in places like Djibouti, and finally managed to run itself so completely into the ground that foreign investors will no longer offer the company loans.

In hopes of rescuing its multi-utility service company from the depths of abyss, the city of Reykjavík stepped in this March with a 12 billion ISK (105 million USD) loan, which is nearly its entire reserve fund set aside for the company, but still only a fraction of the company’s massive foreign debt of 200 billion ISK (1.7 billion USD).

With thousands of captive lifetime subscribers and a means of producing energy at very little cost, the company had all the makings of a cash cow. So what happened to Reykjavík Energy, an entity that less than a decade ago was a perfectly viable, municipally owned company providing the city with basic utilities: cold water, hot water and electricity?

From the top floor of Reykjavík Energy headquarters, an expansive view of Mount Hengill can be observed on the eastern horizon. The mountain range forms part of the Mid-Atlantic Ridge as it cuts through Iceland and divides the country between the North American and Eurasian continental plates. It is one of the most geologically active areas in the world.

Two thick white clouds of steam can be seen rising up from the mountain where Reykjavík Energy operates the Nesjavellir and Hellisheiði geothermal power plants. Together the plants provide hot water and electricity to more than half of Iceland’s population of 318.452.

Over the last half century, Iceland has successfully established a name for itself as a world-renowned leader in the field of geothermal energy, using it to heat 90% of the country’s buildings and nearly all 136 swimming pools in the country. As Iceland’s President Ólafur Ragnar Grímsson said at a geothermal conference last year, “We were very fortunate that while most of the world forgot about the geothermal sector, we had visionaries in Iceland. Not just scientists and technical experts, but also local councillors in towns and cities who saw the opportunities in this area.”

The President is well known today for having travelled the world during Iceland’s boom years giving laudatory speeches about the nation’s valiant bankers who led the country to economic prosperity, to the extent that some have called it cheerleading. However, since the crash he has abandoned the bankers, and now travels the world singing songs of praise for Iceland’s geothermal “visionaries,” who, instead of the bankers, helped “transform a country of farmers and fishermen into one of the most prosperous welfare economies in the world.”

The story goes, as he told it in Xiamen, China last year, “In my youth, over 80% of Iceland’s energy needs came from fossil fuel, imported coal and oil. We were a poor nation, primarily of farmers and fishermen, classified by the UNDP as a developing country right down to the 1970s. Now, despite the effects of the present financial crisis, we are among the most prosperous nations in the world, largely due to the transformation which made our electricity production and space heating based 100% on clean energy.”

He emphasises the last point that Iceland’s geothermal energy business has served to offset the effects of the economic crisis: “Yes, indeed,” he said in Abu Dhabi, Bali, and Shanghai last year, and again in New York this year, “geothermal energy has helped Iceland to survive the recent banking shock […].”

While the story that the President tells about Iceland’s transformation to geothermal energy is indeed marvellous, and it is true that the cost of heating and electricity is nowhere in Europe cheaper, one would have to be wearing rose-tinted glasses to see Reykjavík’s geothermal energy business as a saviour in the crisis. Upon closer inspection it appears that the country’s largest multi-utility geothermal energy company, which claims to operate “the largest and most sophisticated district heating system in the world,” has only driven the nation into deeper water.

A FINANCIAL BASKETCASE IS UNVEILED

When The Best Party came to power in Reykjavík after the May 2010 elections, the comedian-turned-Mayor Jón Gnarr said he was surprised to learn that Reykjavík Energy was in such a horrible financial state. “I had always had the impression that it was the wealth in the city,” he said of the company that is 94% owned by the city Reykjavík and exploits what is arguably Iceland’s greatest resource.

Yet despite the abundance of resources and a steady demand for its services, Reykjavík Energy managed to rack up a 233 billion ISK debt (2 billion USD or 1.4 billion Euros), which is nearly four times the city’s annual budget of 60 billion ISK. What’s more, 200 billion ISK (1.7 billion USD or 1.2 billion Euros) of this debt is in the form of foreign currency loans, which fluctuate at the whim of the króna.

“For months I found myself in daily meetings directly or indirectly related to Reykjavík Energy,” Jón Gnarr told me, admitting that it grew very tiresome. It was around that time, on September 25, 2010 at 11:43 pm, that he wrote the Facebook status update that would come back to haunt him in the form of political ammunition six months later [our translation]: “Reykjavík Energy is bankrupt. The city is in bad shape and its revenue has decreased. What should be done? Cut backs? Price increases? Streamlining? Where and how much? Meetings, meetings, meetings…”

Aiming to clean up the mess, Jón Gnarr’s team brought in Haraldur Flosi Tryggvason as Chairman of the Board and made him a full-time executive director with the gargantuan task of getting the company back on track. The initial ‘rescue operations’ included orchestrating a mass layoff of 65 employees in October 2010 and raising the price of heating and electricity by 27% between November 2010 and January of this year, to little fanfare from citizens and employees alike.

Though the decision to hire Haraldur Flosi was initially criticised because he had been the head attorney at Lýsing, a company that guaranteed the now-deemed illegal foreign currency loans to individuals, he is also one of the few Chairmen in the history of Reykjavík Energy to have a background in business. “We have made an effort to hire people based on professional training and experience rather than political affiliation,” Jón Gnarr told me.

In February, Haraldur Flosi had been noticeably cautious when he explained to me how the company managed to accumulate such colossal debt. “If the crash had not happened, it wouldn’t have been nearly as bad,” he said. “When the financial crisis hit, Reykjavík Energy was in a huge expansion period, so it was quite exposed to the crash, and because loans were mostly financed in foreign currency, the company’s debt about doubled overnight.”

The company chose foreign loans with a favourable interest rate of 1–2% over domestic loans with an interest rate of 10–15%. Had the company taken domestic loans at the higher interest rate, the debt would not have doubled in the crash, but it would nonetheless have been equally large today, Reykjavík Energy PR Manager Eiríkur Hjálmarsson would later tell me.

While this suggests the company’s massive debt cannot be wholly explained by the crash, Haraldur Flosi was not interested in pointing any fingers. He admitted that the company was perhaps over-optimistic in its investments, but yet his explanations were mostly framed by the economic crash.

“The biggest problem today is getting financing,” he said. “Foreigners have become sceptical of the situation here in Iceland. It’s more difficult to get access to money and it’s more expensive,” he told me, adding diplomatically, “but I think it’s the same everywhere. Many companies abroad are also struggling to adjust to this new reality. This is in a nutshell what happened.”

Less than one month later, this problem became more evident. Unable to secure loans from Deutsche Bank, Barclays, Citibank, Council of Europe Development Bank, European Investment Bank and Nordic Investment Bank, Reykjavík Energy announced on March 29 that it would be dipping 12 billion ISK deep into the city’s reserve fund, which had been set aside for a situation like this.

At the same time, the company announced that it would cease paying the city its annual 800 plus million ISK in dividends, it would continue raising the price of hot water and electricity, it would lay off another 90 employees, and it would begin selling off all assets unrelated to its core business. These assets include everything from a fibre optics business to The Pearl, a Reykjavík monument. Russian investors with ties to Ásgeir Þór Davíðsson from the sleazy Kópavogur strip club Goldfinger have already made an offer on Perlan, expressing an interest in turning the omnipresent monument into a flashy casino.

THE BEST PARTY TAKES THE RAP

Despite the fact the Reykjavík Energy had been heavily in debt for years, little had been said about it. “The state of the company should have been pretty clear for some time now,” Jón Gnarr told me, “but for some reason, while Icesave featured heavily in the public discourse, nobody talked about the state of Reykjavík Energy though the company debt is four to five times the Icesave debt.”

As soon as news of the emergency loan from the city broke, however, a blame game ensued. Fingers were pointed in all directions, but despite the fact that The Best Party is the only political party in Reykjavík that did not have a hand in running the company during the decade that it accumulated its monstrous debt, the fingers pointed were generally in the direction of Jón Gnarr and the new Reykjavík Energy directors.

It started on March 27 with an article on news website Vísir.is blaming Jón Gnarr and the new directors for making it difficult for the company to get its loans refinanced. As seems customary in the Icelandic media, Vísir based the entire story on an anonymous source: “According to our sources from the financial world, getting loans refinanced has not been going well, due to, among other reasons, comments that have been made by the directors and Jón Gnarr.”

Specifically, the article said, according to their sources, investors had received a translation of one of Jón Gnarr’s Facebook statuses: “Reykjavík Energy is bankrupt.” The status, which has since been deleted (and is quoted above in its entirety), was posted in September 2010, six months prior to the Vísir story.

This continued to be a point of contention for others, like Independence Party City Councillor and former Mayor of Reykjavík Hanna Birna Kristjánsdóttir, who publicly criticised Jón Gnarr for his comments about the company being bankrupt. She also disagreed with the idea of phrasing the city’s 12 billion ISK loan as a city bailout, which implied bankruptcy. This is despite Reykjavík Energy CEO Bjarni Bjarnarson claiming that the company would not have been able to continue paying employee salaries without the loan.

Then, on March 30, Haraldur Flosi’s predecessor as Chairman, Guðlaugur Gylfi Sverrisson, wrote a letter to the media both to make it known that when he was Chairman—between 2008 and 2010—the company had always been able to secure loans, and to accuse the new Board of fumbling a loan that was essentially a sure grab.

“In January 2010 the CFO of Reykjavík and the CFO of Reykjavík Energy met with the Nordic Investment Bank (NIB). They [NIB] expressed great desire to lend Reykjavík Energy 12–14 billion,” he wrote. “…In June 2010 when I left as Chairman, there were no doubts that NIB would loan the company the previously mentioned amount given that the company met stipulations [to raise prices].”

He concluded his letter with the implicating questions: “What changed after June 2010? Could it be that comments made by the directors and owner about the financial state of Reykjavík Energy have negatively influenced its ability to get financing?”

Sigurður Jóhannesson, a Senior Researcher at the University of Iceland Institute of Economic Studies, put it this way on a University of Iceland radio show: “I probably wouldn’t say that my company were bankrupt if I was trying to get loans, but I think that investors must look first and foremost at things like cash flow and annual financial statements. One can also read reports by rating agencies, and there is very little there mentioned about Jón Gnarr.”

If anybody knows best what the banks were thinking in 2010, however, it is probably Anna Skúladóttir who was Reykjavík Energy’s CFO from May 2006 until 2011. As Guðlaugur Sverrisson wrote, Anna met NIB in January 2010 and she confirms in conversation that “the bank expressed interest,” but told me that it was by no means a done deal. “In 2010, foreign loans weren’t just closed to Reykjavík Energy. Iceland as a whole was still on ice.”

Ultimately, the far bigger questions remain: What happened to Reykjavík Energy before Jón Gnarr and the Best Party enter the story in June 2010? And, could it be that something happened before 2010, which would explain the company’s financial state?

WHEN MONEY GREW ON TREES

Reykjavík Energy was founded through the merger of the institutions Reykjavík Electricity (Rafmagnsveita Reykjavíkur) and Reykjavík District Heating (Hitaveita Reykjavíkur) in 1999, and Reykjavík Water Works (Vatnsveita Reykjavíkur) in 2000. The company thus began on solid ground, with a long history of well-managed services to captive subscribers, respectively dating back to 1921, 1930 and 1909.

Historian (and active Left Green member) Stefán Pálsson, who worked as a curator of the Reykjavík Energy Museum for ten years before he was let go in the mass layoff last October, explained that the institutions were so lucrative that they had to find ways of spending money so that they wouldn’t show too much profit.

“They would, for example, hire hundreds of school children every summer to plant trees, make roads, and work on environmental projects,” Stefán said. “They would rationalise that we are harnessing geothermal energy from this area so we owe it to society to plant loads and loads of trees. And we give school children jobs, which makes their parents happy, which is good for society, and things like that.”

In fact, the institutions that preceded Reykjavík Energy were so lucrative that politicians could milk them to fund pet projects and other vanities. For instance, it was under Davíð Oddsson’s legacy as Mayor of Reykjavík that District Heating financed the construction of The Pearl, a well-known monument in Reykjavík, which opened to the public in 1991. “It was never supposed to turn a profit,” Stefán said. “The big tanks carry hot water, but then there is the building on top, the restaurant, and the sightseeing deck. And actually it was supposed to be even more extravagant with palm trees and tropical birds and plants.”

Nonetheless, the institutions were loaded with money and owed very little when these endeavours were carried out. It was not until after the institutions were turned into a private partnership company (sf.) in 2001 that the debt begins to amass.

A SLEEPING GIANT STIRS

If there is one person who has been most closely associated with Reykjavík Energy over the years, it is Progressive Party politician Alfreð Þorsteinsson. Alfreð’s involvement began in 1994 when he was appointed Chairman of a municipal body charged with overseeing the three institutions. It was under his leadership that the institutions were merged into Reykjavík Energy in 1999, and from then until 2006 he served as Chairman of the Board of the new company.

Alfreð, along with Guðmundur Þóroddsson, the former head of Water Works who was hired as CEO, were keen on stressing that Reykjavík Energy was now a company, Stefán explained. “We the staff were told that we were not to refer to it as an institution.”

This shift in mentality was also mirrored by a shift in the legal framework governing the company. A specific law, no. 2001/139, which was passed in 2001, gave Reykjavík Energy the right to take small loans and make payments for the purposes of running the company without the consent of its owners (the municipalities, Reykjavík, Akranes and Borgarbyggð). It also gave the company the right to operate subsidiaries and to invest in other companies. In essence, it enabled Reykjavík Energy to be run like a private company, while retaining a political management.

“The idea was that this new company was a sleeping giant that had been ineffective in the past. It had almost endless credit because it owed next to nothing, and around early 2000 that was not really something to brag about in Icelandic society; it was seen as an unused opportunity. You had this potential of taking loans to grow,” Stefán told me.

“The same argument was made to regular people who had paid off their mortgage; they were told that this made no sense, that it was downright silly. So people refinanced their homes, took a new loan to be paid over twenty years time instead of five, and this freed cash to play in the stock market, or to buy a summer house or a new jeep. I would say that Reykjavik Energy’s troubles stem from a large-scale version of the same thing.”

In the case of Reykjavík Energy, unleashing the power of capital meant buying tens of small district heating companies in the south and west of Iceland, expanding their service from five to over twenty municipalities. “You got the impression that somewhere in Reykjavík Energy there was someone with a map, putting down flags, you know with a Napoleonic dream of taking over,” Stefán jokingly remarked.

Additionally, Reykjavík Energy began investing in other companies, and by 2003, it had shares in over twenty companies, including Feyging ehf, a flax seed operation of which it was the largest shareholder. That project was abandoned in 2007 with a loss of 340 million ISK. An attempt to farm tiger prawns was also declared a failure in 2007, after seven years of work and 114 million ISK down the drain.

Alfreð, the former Chairman of the Board, is adamant that the investments were not too many or made too quickly. “When I left in 2006,” he told me, “the company’s debt was less than 70 billion ISK. The state of the company was very strong. The loans taken were all long term, to be paid off in 20–30 years.” In any case, that debt is still nearly seven times the debt that Reykjavík Energy inherited through the merger of the institutions in 1999.

BIG INDUSTRY FULL STEAM AHEAD

That being said, the bulk of Reykjavík Energy’s debt can be attributed to the construction of the Hellisheiði plant, which former Reykjavík Energy CFO Anna Skúladóttir said is “the largest investment in the company’s history.”

The decision to build the plant, she said, was made in the beginning of the 21st century when it became evident that the Reykjavík area would need more hot water as the Nesjavellir plant was expected to become fully utilised. At the same time, the decision was made to harness 300 megawatts of electricity to be sold to heavy industry, as it was considered more efficient to build and run a plant that produces both hot water and electricity.

In 2006, the company reached an agreement to sell electricity to aluminium smelting company Century Aluminum Norðurál, but when the crash hit in 2008, Reykjavík Energy had yet to secure financing for phase five of the plant build-up, including the 90 MW that were supposed to go to Norðurál in 2010.

By that time, however, it had already purchased five turbines at about 5 billion ISK a pop. “Turbines must be ordered at least three years in advance,” Anna explained. “It’s like ordering an airplane.”

Two of the five will come online this year, but an agreement was reached to postpone delivery of three of the turbines until a decision has been made to continue further plant production. Of the three outstanding turbines, Reykjavík Energy didn’t have a definite energy source lined up for the third one. What’s more, there were originally seven, not five, turbines ordered, but Independence Party politician Kjartan Magnússon said he was able to back out of two of them when he took over as Chairman of the Board in 2008.

When Moody’s reviewed the company for a possible downgrade in July 2008, it noted: “The company’s financial profile has continued to weaken during the course of the year, mainly due to the company’s exposure to unhedged foreign currency debt, the company’s primary source of funding. Conversely, 80% of its revenues today are in Icelandic krona derived from its operations as Reykjavik’s primary multi-utility.”

Despite the risks involved, however, it has essentially been government policy to attract heavy industry to the country. In the span of a decade, Iceland’s aluminium production went from 4% of the country’s GDP in 2000 to 14% in 2010—surpassing the country’s fish exports and making Iceland one of the largest aluminium producer in the world. “The ‘heavy industry agenda’ was a big part of the bubble in Iceland,” Minister for the Environment Svandís Svavarsdóttir said.

“The Left Greens always put a question mark next to heavy industry, but it was really the mainstream view. When we suggested that it was possible to do something else, people said, well ‘do you want to knit socks and pick mountain herbs?’ The Left Greens were considered a very foolish party for not wanting to proceed with heavy industry.”

Following the city’s bailout, though, it has been increasingly debated whether a municipally owned company should take the risks associated with making these kinds of heavy industry deals given that the city and its taxpayers are accountable. Not only is Reykjavík Energy financially incapable of continuing with phase six of the Hellisheiði plant for the time being, but they have also for the first time turned their back on the company’s heavy industry policy.

“We think that Reykjavík Energy should fulfil its role as a service company that provides people with electricity, hot and cold water, and sewage disposal,” Jón Gnarr explained. “We don’t think it should participate in heavy industry or other risky investments.”

BLOWING THE LID OFF 2007

Though it was undoubtedly unfortunate that Reykjavík Energy was in the middle of raising capital for the Hellisheiði plant when the crash hit, the company nonetheless made some very questionable decisions in 2007 at the peak of Iceland’s financial boom. For instance, the Board decided to buy shares in Hitaveita Suðurnesja for 13.4 billion ISK despite the fact that the company didn’t have any spare funds. The shares were paid for in entirety with a five year loan, which is due to come back to bite the company in 2013.

Perhaps, though, the spirit of the times is best captured in Reykjavík Energy’s decision to boost its geothermal operations overseas through a subsidiary company called Reykjavík Energy Invest (REI). At the same time as the banks had reached nearly ten times the nation’s GDP by expanding offshore, Reykjavík Energy also aspired to a world domination that made Ólafur Ragnar Grímsson proud. “I allege that if we continue like this,” he told a TV2 reporter in October 2007, “the Icelandic energy ‘outvasion’ can be an even bigger operation than the banks.”

The event that the President was praising is now commonly referred to as the REI scandal, in which Reykjavík Energy briefly merged its subsidiary company Reykjavík Energy Invest with Geysir Green Energy, a private company owned by, amongst others, FL Group and Glitnir bank, which were highly implicated in Iceland’s banking collapse.

According to an article that appeared in Fréttablaðið on October 4, 2007, REI’s project list included the building and buying of about 700 MW of energy in the United States, Philippines, Greece, Indonesia, Germany and Ethiopia. Their goal was to produce three to four thousand megawatts before year-end 2009, at which time they planned to go public. “These are very ambitious goals that will lead to the biggest geothermal energy company in the world,” FL Group Chairman Hannes Smárason told Fréttablaðið.

Though Reykjavík Energy Chairman of the Board at the time Haukur Leósson sincerely believed that the merger was in the best interest of the company, noting that they had negotiated 10 billion ISK for the use of Reykjavík Energy’s brand name alone, it is widely believed that there was foul play involved. When the former CEO of Glitnir and Chairman of REI Bjarni Ármannsson admitted in 2009 that the merger between REI and GGE had been a mistake, Independence Party politician Gísli Marteinn Baldursson wrote on his blog, “Hopefully he now realises that there were other things than our deliberation that have done more damage to Iceland and one would wish that more had shown care.”

Ultimately, the grand plans never materialised. After the company introduced the idea to the Board, news of the meeting went to the media and people were especially outraged to hear that key staff at Reykjavík Energy were being given special stock options. “There was so much anger,” Svandís Svavarsdóttir recalled. “I did a lot of interviews in the span of two to three days. I’ve never felt anything like it. It was like everything was burning in society. There was a lot of heat.”

The controversy led the Independence Party and Progressive Party majority municipal government to fall apart, and a new majority between the Social Democrats, Progressives, Left Greens and Liberal Party formed with Dagur B. Eggertsson becoming Mayor of Reykjavík.

While the so-called ‘100 day majority’ reigned, a steering committee headed by Svandís with representatives from every political party was set up to look into the events and to determine whether any lessons could be learned. The more they learned, the more it became clear to them that the merger should be stopped. They felt that Reykjavík Energy had developed too far from its owners and on its own initiative.

“In many ways, the REI story is a prototype of the financial crisis. Politicians decided to allow private individuals into public entities and let them behave as if they owned what belonged to the public,” Svandís told me.

“We saw that on a large and small scale in society. We saw it in the privatisation of the phone company, the banks, in the privatisation plan of the right-leaning government, which ruled for far too long, for eighteen years, but in Reykjavík this was basically the same thing that happened.”

At the same time as the REI deal was being discussed, an attempt was also made to privatise Reykjavík Energy. Part of such a proposal, which was put forth by CEO Guðmundur Þóroddsson and Vice President Hjörleifur B. Kvaran on August 28, 2007 rationalised that “[i]t is time to unleash the energy of free enterprise so that Iceland’s expertise and knowledge can be used to the fullest extent in the geothermal energy company outvasion.”

On September 3, 2007, the Board actually approved sending the proposal to the owners of the company for approval, e.g. the Mayor of Reykjavík, the City Manager of Akranes and of Borganes. However, the idea fell by the wayside when the frenzy erupted over Reykjavík Energy Invest. “Since then it hasn’t been brought up again, and I doubt it will be,” Svandís said. “Well I hope not.”

Reykjavík Energy Invest still exists today though its ambition is far from the grandiose dreams of its founders. Independence Party City Councillor Kjartan Magnússon, who became Chairman of Reykjavík Energy in January 2008, a few months after the REI scandal exploded, explained: “We decided after I became chairman to fulfil our commitments in projects abroad, in Djibouti for instance, but to stop the financing of such projects thereafter, and instead focus on selling knowledge and expertise.”

Said Anna Skúladóttir: “Unfortunately, looking back I think that everyone ran around crazy in 2007, it didn’t matter whether it was the municipality, State, companies, individuals—everyone was blinded. Hopefully we’ve learned something from this and can look forward.”

It might be noted that in 2009, Reykjavík Energy purchased a 7.1 million ISK Mercedez Benz ML 350 for Anna’s personal use. Anna went on to return the car in 2010 after Icelandic tabloid DV ran an indignant story about it.

A ROSY STORY INDEED

Though the crash alone is a convenient excuse as Reykjavík Energy’s debt doubled in 2008 due to fall of the króna and financing became more difficult, it could also be said that Reykjavík Energy was as much a victim of the financial crisis as Iceland’s banks were a victim of the United States mortgage crisis.

Truth be told, Reykjavík Energy managed in less than a decade to run a perfectly viable company into the ground, despite having the ingredients of a cash cow. As President Ólafur Ragnar Grímsson tells Icelanders, foreign leaders and journalists alike, geothermal know-how in Iceland is first class, and people come from all over the world to see it firsthand.

“We have great competitive advantages,” Ólafur said at a geothermal conference last year. “One is that Iceland is the only place in the world where you can, in a single day, witness all the aspects of geothermal utilisation. You can witness three geothermal power plants, a greenhouse town in a farming area, a world famous international spa, a medical clinic, as many swimming pools as you want to and visit fishing companies that use geothermal energy for drying their products.”

He continued: “…When we bring people here, they are inspired, they have a vision. They leave Iceland full of hope, inspired by the possibilities. That is very important, because political decision-making and even business decision-making need more than mere calculations. They also need a vision and inspiration—hope. That is what we can give.”

With all the geothermal know-how in the world, however, Iceland’s largest multi-utility geothermal energy company was inspired by a vision that took hold of Iceland during the financial bubble, which grew rapidly for a decade, peaked in 2007 and then burst in 2008.

When we called up the President to ask about his geothermal rhetoric, he explained, “The reason why I have emphasised the geothermal experience of Iceland as well as the technological know-how is that I believe this the most significant contribution we can make to the battle against climate change, which seriously is the most fundamental threat that the world faces.”

He added: “Even if one company in Iceland does badly it doesn’t mean that we should think to take this away from other countries, and quite frankly there is such a strong demand from the world to have access to Icelandic cooperation in this area that our problem is to meet the requests and they come from poor countries in the developing world to rich countries in Europe and the Western world.”

Despite the dark outlook presented by rating agencies for Reykjavík Energy, Jón Gnarr is optimistic. “The state of Reykjavík Energy is still difficult, and it’s very sensitive to exchange rates,” he told me, “but I believe that the plan that we have initiated is very good, and I am confident that the state of Reykjavík Energy will improve.”

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In addition:

HEADQUARTERS

Price tag: 4.271,7 BILLION ISK

As the company struggles to stay afloat, its headquarters, which were built in 2002 under the chairmanship of Alfreð Þorsteinsson, stand as a symbol of what many believe to have been the excessive and ill-founded investments of the municipally owned company.

“A service company for the people of Reykjavík has no business building a house like that,” Independence Party representative Kjartan Magnússon disapprovingly told me. “The people of Reykjavík felt it was part of a power game. When you come into this house, it’s a sign of power.”

Similarly, former employee and historian Stefán Pálsson called it a monstrosity. “You would expect it to be Darth Vader’s Headquarters. It is my advice to politicians connected with Reykjavík Energy never to allow themselves to be interviewed outside the building.”

On a visit to the infamous headquarters, Chief Press Officer Eiríkur Hjálmarsson, a company veteran since 2006 and the lone survivor in the PR department after the October layoffs, showed a photographer around the building. He took us to top floor to see the view over Mount Hengill, where the company operates the two power plants at Nesjavellir and Hellisheiði.

Since our visit, that floor has been put on the rental market. The advertisement is telling: “Fantastic 745m² office space on the sixth and top floor in Reykjavík Energy is available for rent immediately. The building is fully equipped with the best of the best and has access to a big rooftop balcony with a vast unhindered view over the city…”

It continues: “In the house is a staffed reception, World Class (luxurious fitness centre), with optional access to lecture rooms, a library, computer room, and more […]Special housing for those with demands. Blue prints and more information can be solicited from our sales men, trod.is.”

The ad doesn’t mention it, but the building also houses impressive art, including a 35 metre tall granite fountain by artist Svava Björnsdóttir, which travels through all five floors of the building, and a Foucault Pendulum, which takes 26 hours to knock down all the pins before they pop up again.

However, former Chairman of the Board Alfreð Þorsteinsson doesn’t think it’s overly extravagant. “The main fault of the house is that it is considered beautiful and chic,” he said. “If it had been built as a one or two story house nobody would have said anything. Should we have built an ugly house?” Furthermore, he said the top-class kitchen, which has been heavily criticised is “not unlike other kitchens in Reykjavík.”

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THE REI SCANDAL

The course of events

January 25, 2007

Former Reykjavík Energy CEO Guðmundur Þóroddsson proposed to the Board that Reykjavík Energy create a subsidiary company called Reykjavík Energy Invest (REI), which would oversee all of Reykjavík Energy’s stakes in ventures abroad, including Enex, Enex-Kína, Galantaterm and Iceland American Energy. The Board approved.

March 7

The Board additionally agreed that Reykjavík Energy would put two billion ISK into REI towards future projects. A report that was commissioned at the January 25 Board meeting and then delivered at the March 7 Board meeting noted: “There is great interest amongst Icelandic investors in environmentally friendly energy, for instance, Geysir Green Energy hf, Atorka hf and Enex hf. The first two named have already requested a partnership with Reykjavík Energy in the outvasion.”

June 11

Reykjavík Energy Invest was formally founded. Appointed to the Board were Björn Ársæll Pétursson, Haukur Leósson, and Björn Ingi Hrafnsson. Reykjavík Energy CEO Guðmundur Þórodsson would replace Björn Ársæll Pétursson as CEO in September.

September 11

Former CEO of Glitnir Bjarni Ármannsson was appointed Chairman of REI and bought stock worth 500 million ISK.

September 20

The Directors of REI met with banksters Hannes Smárason from GGE and Jón Ásgeir Jóhannesson from FL Group to discuss merging the companies.

September 22

Chairman of REI Bjarni Ármansson met with Chairman of GGE Hannes Smárason to flesh out the details of the merger.

September 23

Chairman of REI Bjarni Ármansson and Chairman of Reykjavík Energy Haukur Leósson met with Mayor of Reykjavík Vilhjálmur Þ. Vilhjálmsson at his home to brief him on the merger. Vilhjálmur did not inform his colleagues in the Independence Party about the merger until October 2, which greatly upset them, and led to a rift in the Independence Party.

October 3

Reykjavík Energy held a Board meeting and an owners meeting to introduce the merger. Invitations to the meeting were sent out the previous evening, which is extremely short notice. Nonetheless, the Board approved the merger, save for Svandís Svavarsdóttir from the Left Green party, who did not vote.

News of the meeting and specifically news that key staff were being given special stock options blew up in the media. The majority government between the Independence and Progressive parties collapsed. A new majority, dubbed ‘The 100 Day Majority’ took over. A steering committee headed by Svandís Svavarsdóttir began investigating the events that led up to the merger and proposed to City Council that the merger be thwarted.

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‘OUTVASION’

Yes, it’s a made up English word

The term ‘outvasion’ is a direct translation of the Icelandic word ‘útrás,’ which is often used to describe Icelander’s expansion overseas. The ‘útrásavíkingar’ or ‘outvasion Vikings’ refers to the businessmen who set out to conquer the world with a Viking-like ambition that ultimately brought about Iceland’s downfall in 2008.

The companies behind the co-operating forum include energy companies Landsvirkjun, Reykjavík Energy, HS Orka and its owning company Alterra Power Corporation (former Magma Energy), as well as aluminium companies ALCOA and Norðurál, owned by Century Aluminum. Banks Íslandsbanki, Landsbanki and Arion banki are also all involved, the last-mentioned being the forum’s main sponsor. Amongst other parties involved are the Universities of Reykjavík and the University of Iceland, the Federation of Icelandic Industries (SI) and the Confederation of Icelandic Employees (SA), the ministries of environment, of industry, of trade and of foreign affairs, and Mannvit, Iceland’s biggest engineering firm, responsible for both the design and the making of Environmental Impact Assessments for most of the country’s biggest heavy-industry and large-scale energy projects.

To recap, the newly formed co-operating forum manifests that all major parties with direct links and financial interests in the further heavy-industrialization of Iceland and its parallel destruction of the country’s wilderness, have joined forces. And the aim: To increase the competitiveness of Iceland’s geothermal energy industry and its making of capital goods, facilitate the capitalization of geothermal projects, contribute to technological advances and reinforce Iceland’s image.

A Follow-Up of the Plan to Heavy-Industrialize Iceland

During the forum’s establishing meeting, which took place in the headquarters of Arion bank, a new report, titled “The Icelandic Geothermal Cluster – Mapping and Mobilization”, was published, covering “the analysis and the collaboration-formation of the the Icelandic geothermal cluster.” The term business cluster was originally introduced and popularised by the aforementioned Michael Porter, and is, to quote Porter’s own words, a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. According to the idea, the formation of a cluster creates a certain entity, which is supposed to be much stronger than many individual parties each operating separately.

The report – starting with the words of Henry Ford: “Coming together is a beginning, staying together is progress, working together is success” – lays out what it calls “three big growth opportunities”, as the results of the analysis of Iceland’s geothermal cluster. To nobody’s surprise these so-called opportunities consist of bringing energy-intensive industries to Iceland, exporting geothermal energy to Europe through a marine cable, and exporting Iceland’s geothermal expertise. These suggestions are of course no novelty in Iceland but rather a predictable follow-up of the plan to heavy-industrialize Iceland and fully exploit the country’s natural resources – a plan that was well documented in an infamous booklet, titled “Lowest Energy Prices!!”, which was made in 1995 by Landsvirkjun and the ministry of industry, and sent to international energy-intensive heavy industries, offering them cheap energy and “minimum environmental red tape”.

Carefully Chosen Rhetoric and a Private Speech on State Television

Michael Porter has carefully adapted his rhetoric to the current political atmosphere, obviously aware of many Icelanders’ increased doubt and decreased trust towards corporations due to the 2008 economic collapse and many of its following exposures of corruption, as well as the enhanced discussion about the importance of keeping the ownership of natural resources away from private parties. In his forewords to the aforementioned report, he and his co-author, Dr. Christian Ketels, also from Harvard Business School, state that though the “economy has [since the collapse] stabilized at a lower level, and the government has gotten its budget balance so much under control that it is expected to return to the global financial markets later this year […] stabilization is necessary and not sufficient.” And they continue:

Iceland needs to lay the foundations for a new, more sustainable economic growth path. In February 2009, we published an article in the Icelandic press that set out an action agenda for the country. One of its key elements was cluster mobilization as a critical step to build on Iceland’s unique assets and capabilities. We stressed that Iceland had to move beyond a backward looking debate about who was to blame for the crisis to a forward-looking collaboration to improve competitiveness. Clusters are a powerful vehicle to mobilize the private sector and guide the policy choices of government.

The Icelandic geothermal cluster program puts this vision into practice. It builds on Iceland’s unique assets and capabilities in geothermal energy with a clear focus on creating greater value for the Icelandic economy, rather than simply selling power. The geothermal program is grounded in the realization that progress towards this goal will only materialize through collaboration.

Interviewed in Kastljós, a daily news-report show on state-owned TV station RÚV, last night, Porter spoke in a similar way, reminiscent of a memorable Kastljós interview with Ross Beaty, the CEO of Magma Energy (now Alterra Power Corporation), in August 2009. When asked if he understood the public opposition towards privatization after the economic collapse, Beaty said, as reported by Saving Iceland, that he was aware of this but added that Icelanders would have to understand what kind of company he was leading. “We are not a scary company, we want to work with H.S. Orka in building up a stronger company, for the good of Icelanders, ourselves, and actually the whole world,” said Beaty to newspaper Fréttablaðið that same day.

During the TV interview last night, Michael Porter said that he finds Icelanders are “too cautious” when it comes to “using the opportunities that consist in geothermal energy,” and added that there is need for more innovating spirit, aggressiveness and risk-taking. Asked the same the question as Ross Beaty was, a little less than two years ago, Porter answered that the country’s natural resources could still be “owned by the nation” while the utilization rights could be lent to private companies. He also said that though he preferred a mixture of privately and state run businesses, the state-owned energy companies would still have to be run like private companies. This idealisation of privatizing energy companies perfectly resonates a recent encouragement from the Organisation for Economic Co-operation and Development (OECD), set fourth in the institution’s 2011 Economic Survey of Iceland. The interview would better be described as a speech-like monologue as the questioner mostly nodded and occasionally said things like “yes”, “absolutely” and “indeed”. After Porter had described his utopian corporate vision for large-scale geothermal energy production in Iceland, he ended the interview by saying: “Let’s do it!” – followed with an end-note from the presenter: “Let’s hope!”

Fearing Overexploitation of Geothermal Resources

Contrary to the statements about the need for large-scale exploitation of geothermal energy, as mentioned by Porter and the parties of the co-operating forum, environmentalists and Iceland’s National Energy Authority (INEA) fear overexploitation of the geothermal areas that are planned to be exploited to produce energy for aluminium smelter, which in fact constitute all major geothermal areas in Iceland. Recently INEA decided that HS Orka/Alterra Power would have to widen its planned drilling area for the planned enlargement of Reykjanes geothermal power plant and that they would have to supply proof that enough energy can be found on a larger area than already arranged for. The enlargement is meant to provide energy for a planned aluminium smelter in Helguvík, owned by Norðurál/Century Aluminum.

“It is possible to get all this energy on the current construction area, there is no doubt about that,” said energy director Guðni Jóhannesson to newspaper Morgunblaðið in March 2011. But he continued: “But we know it from geothermal areas abroad that if too much construction has taken place in too short time, the capacity of the area can decrease, resulting in the need for reducing the production again.”

Hence, we have it from the horse’s mouth that geothermal energy on a large-scale industrial level is not sustainable.