Monday November 4. 2002

Icelandic Minister for the Environment Siv Friðleifsdóttir approved the proposed Kárahnjúkar Power Plant in her extensive ruling on its environmental impact assessment, announced on 20 December 2001.

With her ruling, the Minister presents twenty itemised conditions, demanding significant changes to the power plant in order to reduce its environmental impact - changes which somewhat reduce the energy producing capacity of the plant, while costing thousands of millions of Icelandic crowns to implement. The conditions are generally explained here and can be read in their entirety in the concluding section of the ruling.

The developing party, Landsvirkjun, contents itself with the conditions of the Minister for the Environment, nevertheless pointing out the necessity of finding a source of energy elsewhere to make up for this reduced capacity to produce electricity and to fulfil the energy demand of an aluminium plant expected in East Iceland.

Complicated, extensive negotiations are meanwhile continuing between parties to the aluminium plant in Reyðarfjörður and to Kárahnjúkar Power Plant. Expectations are that a decision on whether to begin construction will be ready by 1 September 2002. If the outcome is to build the power plant, construction toward hydroelectric development would commence in 2003.

The Minister of Industry will soon introduce a bill in the Icelandic Alþingi, or parliament, on consent for Landsvirkjun to build Kárahnjúkar Power Plant. The bill is expected by the government to be passed into law before summer vacation, after the Alþingi has discussed, among other things, national economic effects of the construction. The Minister for the Environment did not deal with the macroeconomic factor in her ruling of 20 December 2001, considering it more appropriate for that aspect of the matter to belong with the granter of consent, i.e. the Alþingi.

On 1 August 2001, the Planning Agency rejected Kárahnjúkar Power Plant in its ruling concerning the assessment of the development's environmental impact. The grounds were considerable environmental impact along with insufficient information on individual factors of the construction and its environmental effects. As provided for by law, it is possible to appeal a Planning Agency ruling to the Minister for the Environment; if that happens, the process of the case terminates with the ministerial decision.

As developer, Landsvirkjun appealed the ruling of the Planning Agency, as did also the Regional Association of Local Authorities in Eastern Iceland, Fjarðabyggð (the community in the East where the aluminium plant is to be built), labour organisations in East Iceland and a great number of individuals. Landsvirkjun asserted the Planning Agency ruling did not hold up to law and presented detailed supporting arguments, which the Minister to some extent accepted. In addition, Landsvirkjun turned in explanations with information on possible mitigating measures because of blowing soil from Hálslón and raised water levels in the river Lagarfljót and in Fljótsdalur, as well as ideas on revegetation and defences against soil erosion and the destruction of vegetation. Last but not least, the Minister for the Environment received a description of new and extensive investigation by the Marine Research Institute into the impact of freshwater flow into the bay Héraðsflói on ocean currents and the conditions of seawater off Iceland's east coast. The conclusion of the institute is that Kárahnjúkar Power Plant will have no significant influence on the coastal waters of East Iceland.

The new documentation was intended to account better for various debatable issues and to answer questions which the Planning Agency had felt were little or not at all answered in the original report on the assessment of environmental impact from the power plant. The Minister of the Environment engaged both Icelandic and foreign scientists and consultants to treat the environmental effects of Kárahnjúkar Power Plant in detail. Research went on for months and was concluded in a ruling of around 150 pages. In the opinion that the worst faults had been solved through the fresh documentation for the case, the Minister of the Environment approved of Kárahnjúkar Power Plant. At the same time, the ruling of the Planning Agency was invalidated.