Otto: Think of taxpayers when considering copper-nickel mining

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A rock with signs of copper
A rock alongside a highway near Ely, Minn. shows evidence of copper mineralization Friday, September 27, 2013.
Derek Montgomery / For MPR News

State Auditor Rebecca Otto has been an outspoken skeptic of proposals to mine copper and nickel in northern Minnesota.

Otto, a Democrat, in October voted against issuing mineral leases to several companies hoping to explore parts of northern Minnesota for copper, nickel and precious metals. She has said the state must fully understand the financial risks of opening the state to copper-nickel mining, which comes with environmental concerns different from iron mining.

MPR's Morning Edition spoke with Otto on Tuesday. On Friday, a long-awaited environmental study on what could be the state's first copper-nickel mine, will be released to the public.

Cathy Wurzer: During the debate over the mineral leases, you said copper-nickel mining, or non-ferrous mining, brings unfamiliar financial risks to the state. What did you mean by that?

Rebecca Otto: We do ferrous mining. We have not embarked on nonferrous mining in the state. We live in the land of 10,000 lakes, we're very water rich, and with that brings concerns.

My concern really boils down to the financial assurance that we're going to require. Really what that is is it's a damage deposit we're going to require from the mining companies so that if something goes wrong, that they are on the hook for the cleanup costs.

They're estimating 500 years of water treatment after operation at the PolyMet's mine. My concern, then, is how do we calculate the cost for that to make sure we get an adequate damage deposit. Five hundred years.

State Auditor Rebecca Otto
Minnesota State Auditor Rebecca Otto in 2010.
Derek Montgomery / For MPR News

That's an awfully long time, so do we really know how to calculate these numbers right so that taxpayers aren't left with the cleanup costs after these mines close? And do we know what form of financial assurances to get? These companies quite often have gone bankrupt, and are taxpayers going to be protected if there's a bankruptcy? Severe weather events.

We've had more of those recently. Are we going to factor in the cost potentially of a severe weather event and what that could do?

So it's really about being proactive and preventative and making sure these companies have real skin in the game in their financial assurances that they must provide so that they're incented to get this right and don't damage our water quality and leave cleanup costs to the taxpayers.

Wurzer: But your suggestion that mining companies pay a damage deposit, might that be an impossible bar for mining companies to meet?

Otto: Really I think the model today is that you ask these businesses to internalize the financial risks that come with this type of mining because it is so different.

And it's an important test. Commodity prices on copper and nickel are fairly high on copper and nickel, so economically it is possible feasibly to do this type of mining now in Minnesota, but with it come great financial risks.

So as a state, we're above average, we like to get things right, and I think it really behooves us as government to make sure that we really know how to calculate the numbers and protect taxpayers as well as our land of 10,000 lakes.

Wurzer: Those who support copper-nickel mining say we have more to gain financially than to lose with more jobs, tax revenue. As someone who has argued for protecting taxpayers, does that argument hold water for you?

Otto: It could. There could be gains. There could be loss. I've looked at U.S. Government Accountability reports kind of looking at the track record of this type of mining around the country, and quite often the taxpayers are left on the hook.

The devil is in the details on this. Minnesota does not have experience with this type of mining, we have not calculated these numbers before. I don't know that even with the mining we've got now we've gotten the financial assurances right, nor the right forms.

As a state there are things we don't know all the time and we've made mistakes. In this day in age with some of the pressures we have with the economy and people retiring, we must get this right and spend the time. Otherwise what we could end up doing is privatizing the gain and socializing the pain.

Wurzer: You've said you wanted to spark a conversation with your vote against the mineral leases. Has your vote and the reaction in northeastern Minnesota been the kind of conversation you wanted?

Otto: I spent a few days up there about a week ago. What I'm trying to do is have people who feel strongly on both sides of the issue, what I'm trying to do is build a bridge between the two groups. It's not about pro-mining versus anti-mining. It's really about pro-taxpayer and making sure — I believe everybody wants to get this right and nobody wants to shift costs onto taxpayers into the future.

I think this is a good and safe conversation to be having. And I want to make sure what our government does is be very transparent around this process of calculating the financial assurances and trying to determine the types of financial assurances and telling us what it will cover and what it will not cover. If government is transparent, then people are more likely to trust their government.

Wurzer: You're the first statewide official to come out against copper-nickel mining, and that's led some in northern Minnesota to start a campaign against you. Are you worried about your political future?

Otto: The reality of elective office is you've got a chance of returning and a chance of not, and what I must do as state auditor is my job on a daily basis and so I'll continue to do my job and try to make sure we are protecting the taxpayers and making sure government is transparent to the people.

I've been a little bit surprised by some folks who say, you know, "Dump Otto." That's their right. But what I'm worried about is why they're scared to have this conversation. I don't understand why they wouldn't want to make sure that we got this right.

It doesn't have to do in any projects at all if we know how to calculate the numbers. So my question would be, why is there fear around having this discussion, and I certainly hope that we can get to a place where we all agree that this is an important thing to do.

Wurzer: I have to ask, though, how much was that trip last week damage control in a typically DFL stronghold?

Otto: Well, I was actually invited very shortly after my vote to come up and address a group that meets I think every Tuesday — active, interesting people.

So I went up to speak to them but I couldn't get up there for a couple weeks and I had other meetings as well to check in with folks who had some concerns, so maybe it's a blend of both.

But in my experience being in public office, communication is extraordinarily important, but also having that conversation I'm talking about right now to make sure we're transparent and that we get this right for the taxpayers of Minnesota.

Wurzer: Do you have any power as state auditor to try to derail this project?

Otto: Some people think I'm extraordinarily powerful, but I'm not as powerful as some may think.

It's my responsibility as a constitutional officer to again make sure there's public awareness around this issue, do my very best to work with the Department of Natural Resources, the Minnesota Pollution Control Agency, the governor, anybody else, to make this process as transparent as possible so the public can see it.

People love this state and they're proud of this state. If we're going to embark on this very different type of mining, that we get it right. So I will continue to urge and push the conversation and try to bring everybody to this neutral, safe ground of getting it right.

Interview transcribed by MPR News reporter Elizabeth Dunbar.

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