Regarding the discussion on development sites and agreements with oil companies

Last night's edition of Kastljós on the Icelandic National Broadcasting Service covered agreements Reykjavík City has reached with oil companies to close gas stations in established neighborhoods and redevelop those lots for new residential construction and other uses. The segment contained several inaccuracies that require correction. 

Unit count closer to 450, not 700 as claimed 

Early in the segment, a claim was made that "the oil companies received permission under the agreement to build 700 units in this first phase of the City's agreements." In reality, Reykjavík City's municipal plan establishes general density guidelines, and the letters of intent simply describe the lot owners' development concepts—nothing more. The final building volume and unit count are determined through the land-use plan process, which follows established public consultation, informational meetings, and environmental assessment procedures. Each site must be evaluated on its own terms—local conditions can vary considerably—and that evaluation includes assessing impacts on the surrounding environment, green space requirements, daylight access, and more. Consequently, actual building volumes are likely to fall well short of the general maximums outlined in the municipal plan, including those tied to proximity to the CityLine. It is also worth noting that the municipal plan always establishes maximum thresholds, not guaranteed outcomes. 

The total area of these lots is approximately 4.3 hectares, and given their varied locations—some better positioned relative to the CityLine than others—a Floor Area Ratio of 1.0 to 1.2 would be a reasonable estimate. That would put the total building volume at roughly 43,000 to 51,600 square meters. Assuming 10% is allocated to commercial use, the residential portion would be 38,700 to 46,440 square meters—or approximately 387 to 464 units under these assumptions. 

Development rights value overstated  

The program proposed a figure of roughly 10 billion króna for the value of the development rights: "Real estate agents and contractors consulted by Kastljós estimate the value of development rights on the 12 gas station lots included in this first phase of the City's agreements with the oil companies at around 10 billion króna. This depends on how much building volume is ultimately approved."  

Once again, this assumes a significantly higher building volume than what is likely to be approved through the land-use plan process—the very process that will form the basis for any final agreements. Reykjavík City disputed this 10 billion króna valuation of development rights on these lots, but that objection was not reflected in the Kastljós coverage. 

The figure also fails to account for the oil companies' development costs—including soil remediation and demolition of existing structures—or the fact that the companies will be giving up profitable operations on these lots and forfeiting the revenue that comes with them. 

The 3.9 billion króna figure for Högun is incorrect 

The program also cited the profits of one of the oil companies as an example: "The oil companies' goal is to maximize returns, since they are publicly listed and aim to generate as much profit as possible. For example, Hagar—which owns and operates Olís, one of the three oil companies—has already transferred 3.9 billion króna in building rights as new share capital into its real estate company, Klasi. Hagar holds a one-third stake in Klasi following this transaction." 

According to Klasi, the assessed value of building rights on lots that were formerly gas stations is less than one-third of the figure cited as an example on the May 6, 2024, episode of Kastljós. The building rights for a large lot in Norður-Mjódd, a waterfront lot near Klettagarðar, a lot on Nýbýlavegur in Kópavogur, and another at Tjarnarvellir in Hafnarfjörður account for the largest share of the 3.9 billion króna cited in the program as an example of oil company profits from these transactions. These are not gas station lots. Hagar values the building rights for three gas station lots—along with road construction fee credits and other entitlements—at approximately 1.2 billion króna, not 3.9 billion as claimed on Kastljós. It should be noted that allowable building volumes have not yet been determined for these lots, so the final value of the rights cannot be established at this time. 

Competition Authority recommendations on equal treatment 

In July 2019, the Competition Authority sent recommendations to Reykjavík City urging that the City's efforts to reduce the number of fuel stations be carried out in a way that would not harm competition in the fuel market. When determining how many stations would be subject to negotiations, particular care was taken to ensure equal treatment among the oil companies and to confirm that the reduction would not distort competition. Reykjavík City proposed closing 50% of gas stations in the city, but the oil companies only agreed to close approximately one-third—33%—of the stations.   

When lot lease agreements expire, open-ended lot leases take effect that can be terminated with at least two years' notice. It is worth noting that the oil companies hold lot lease agreements that have already expired or are nearing expiration, as well as agreements that remain in effect until as late as 2065. It is unclear what course of action would apply if Reykjavík City reclaimed lots without first negotiating with the lot lease holders. In such a scenario, the City's overall interests, general principles of equal treatment, and the specific recommendations on equal treatment in competitive markets would all need to be considered.  

At a regular City Executive Council meeting in June 2021, progress milestones and the terms of reference for the negotiation committee were presented to the City Executive Council, along with an update on the status of negotiations with operators and lot holders.  

June 24, 2021: Reducing gas stations — milestones in negotiations with fuel station operators and lot holders in Reykjavík on development of various lots 

City Executive Council was not on summer recess 

The program repeatedly suggested that the data in this matter was being kept secret, or that documents had been released during the summer recess. The agreements in question were approved on behalf of Reykjavík City at City Executive Council meetings on June 24, 2021, and Feb. 10, 2022. At the first of those meetings, the City Executive Council exercised the City Council's full decision-making authority while the City Council was on summer recess—which means the City Executive Council was, by its very nature, not on recess at the same time. 

It bears repeating that the City Executive Council's meeting minutes contain detailed data, reports, and policies addressing the background of this matter, along with published progress reports and all related agreements. The status of efforts to reduce the number of gas stations in the city, along with all related negotiations, was also reviewed at the City Executive Council meeting on Nov. 17, 2022, and the presentation was published in the official meeting minutes on the Reykjavík City website.  

What do Reykjavík City's agreements with gas station operators and lot holders cover? 

The agreements with the oil companies were presented to the City Executive Council and can be found in the meeting minutes, as can most other documents related to this matter: 

June 24, 2021: Framework agreement on planned changes to fuel station facilities (N1, Skeljungur, and Olís, including subsidiaries)  

Feb. 10, 2022: Framework agreement on planned changes to fuel station facilities (Skeljungur on behalf of Dæluna and Atlantsolía)  

Under the agreements, 12 gas stations will close and be replaced by mixed residential development, with ground-floor retail and services where appropriate. To ensure a mixed housing stock, Félagsbústaðir Social Housing will have the right to purchase 5% of residential units on all lots at a preferential price. In addition, up to 20% of units are planned to be rental homes, dwellings in building cooperatives, and/or housing for seniors.

Under the aforementioned agreements, which are both time-limited and conditional, the relevant lot leaseholder must give up their current lot lease rights and any associated returns by ceasing gas station operations. In return, they receive authorization to develop a proposal for a new land-use plan in consultation with Reykjavík City, covering the changed use and new development plans for the lot. If the planning objectives are met within three years through a corresponding agreement, Reykjavík City will enter into a new lot lease agreement with the relevant leaseholder once the new land-use plan takes effect. If no agreement on such plans is reached within that same timeframe, any settlement and separation between Reykjavík City and the leaseholder will be governed by the terms of the existing lot lease agreement.   

Rights may be transferred subject to City Executive Council approval 

Because Reykjavík City's contractual relationship was with the named parties, the city would not have been able to open negotiations—or, where applicable, to solicit new interested parties to lease the lots in question—at least not until it had determined how to end the existing lot lease agreements for those lots. By definition, parties outside a lot lease relationship cannot participate in negotiations or agreements concerning the modification and/or termination of rights under that agreement. 

Nothing prevents the leaseholders in question from transferring their lease rights on the lots to another party, provided they have paid Reykjavík City the road construction fee and all other legally required fees. All agreements concluded with leaseholders and operators of gas station lots on June 24, 2021, and Feb. 10, 2022, explicitly state that such a transfer is permitted once the taxes and fees noted above have been paid and Reykjavík City's consent has been obtained. It is therefore up to the holders of these lot rights to decide whether to transfer their rights to a third party and, if so, how to structure that transfer—provided Reykjavík City has approved the change of parties. Reykjavík City has, in several instances, approved requests for a change of parties to such an agreement based on City Executive Council approval.