Mar 28 2008

Cost of Karahnjukar Far Exceeds Estimates

I’ts official: the cost estimates of Landsvirkjun, the National Power Company, for Karahnjukar were false and the numerous economists and even the National Planning Agency, who criticized Landsvirkjun for massaging their economic data were dead right. The new cost estimate for Kárahnjúkar was presented by Minister of Industry Össur Skarphedinsson at the Althingi parliament yesterday.

According to Skarphedinsson the total cost of constructing the dams and the hydropower plant at Fljotsdalur has exceeded estimates by ISK 17.7 billion (USD 264 million, EUR 172 million) and is now expected to amount to ISK 133.3 billion (USD 2.0 billion, EUR 1.3 billion). MP for the Left-Greens Álfheidur Ingadóttir said until yesterday people had not been aware of by how much cost estimates were exceeded. Ingadóttir criticized the minister for not taking the cost of agreements with contractors into account. She argued that by including such agreements the original cost estimate is exceeded by an even higher amount, ISK 32.5 billion (USD 484 million, EUR 315 million).

The Kárahnjúkar project stands as a typical blueprint for international multi-billion-dollar megaprojects where promoters self-servingly misinform parliaments, the public and the media in order to get projects approved and built. The formula for approval is a cocktail of underestimated costs, overestimated revenues, undervalued environmental impacts and overvalued economic development effects. Landsvirkjun spokesman Thorsteinn Hilmarsson claimed that the cost increase was only natural and that due to geological fissures the tunnelling took much longer than expected. Conveniently he did not mention that several years before a number of highly regarded geophysicists submitted reports warning of the fissures and the unstable ground that the dams were to be situated on. As a result Landsvirkjun slandered these scientists and had official gagging orders placed on them. The government withheld the geological reports from parliament when voting on the dams took place.

The Kárahnjúkar hydropower station provides electricity (at a secret price) for the infamous Alcoa aluminium smelter in Reydarfjördur. Needless to say it is not ALCOA who will foot the bill for the Kárahnjúkar disasters but Iceland’s pristine nature and gullible Icelandic taxpayer.

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