This paper focuses on path development processes after a sudden path exhaustion. We analyse the decline, the closure and the attempts at the re-orientation of a forestry-based industry agglomeration in Southern Norway, located around the municipality of Hønefoss. In particular, this paper focuses on the Treklyngen holding company in Hønefoss. This paper explores how policy may be influenced by and built upon regional capabilities to support new path development in the aftermath of path exhaustion. It also shows how natural resources and institutional endowments could contribute to path development, under such difficult circumstances in a peripheral region.