In 2006, Árni Finnsson, chairman of the Iceland Nature Conservation Association, accused Valgerður Sverrisdóttir of corruption for failing to reveal details of a report showing that the site of the Kárahnjúkavirkjun dam had active faults in the earth while she was Minister of Industry and Commerce.

Geophysicist Grímur Björnsson revealed on the television news programme Kastljós that a report he had prepared, criticizing the placement of the Kárahnjúkavirkjun dam, had been stamped as confidential by his superior at the time.

Minister of Industry Valgerður Sverrisdóttir had subsequently failed to reveal the details of the report to parliament, as she was obliged to do.

Valgerður Sverrisdóttir rejected all accusations, claiming the controversy was a last-ditch effort by the opposition to delay the flooding of the Hálslón Reservoir.

The flooding of the reservoir, which was set to take place at the end of September of the same year, subsequently submerged a large section of the Icelandic highlands.