Court reverses PolyMet's key DNR permits; calls for contested case hearing

A former iron ore processing plant near Hoyt Lakes, Minn., that would become part of the proposed PolyMet copper-nickel mine sits dormant in February 2016.
Jim Mone | AP file 2016

Updated: 4:38 p.m.

The Minnesota Court of Appeals dealt a blow to the proposed PolyMet copper-nickel mine Monday, overturning three key state permits that had been issued to the project — and requiring the state to conduct a hearing before it works to reissue those permits.

In one of several legal challenges to the northern Minnesota mine, eight different groups had asked the court to overturn a permit to mine and two dam safety permits that were among several the state Department of Natural Resources granted to PolyMet in November of 2018.

While the decision doesn’t completely stop the project, it will likely mean a significant delay, and requires state regulators to reissue key approvals for the controversial project before PolyMet can move forward with construction.

The plaintiffs — including the Minnesota Center for Environmental Advocacy, Friends of the Boundary Waters Wilderness, WaterLegacy and the Fond du Lac Band of Lake Superior Chippewa — also asked the court to require the DNR to hold a “contested case hearing” on the proposed mine before the agency decides whether to reissue those permits.

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The DNR had denied opponents’ request for a hearing at the same time it granted the permits, but the court said Monday that the agency had erroneously interpreted state law in that denial, and called for the DNR to hold a contested case hearing.

Court ruling targets key permits

Opponents of the project, which would become the first copper-nickel mine in the state, reacted jubilantly to Monday’s ruling.

"What the court of appeals has done is changed the entire equation,” said Paula Maccabee, an attorney for Water Legacy, one of the groups involved in the suit, “from being a process behind closed doors to being a process that is fair and public and out in the open and is decided by a neutral judge."

A contested case hearing involves a trial-like process, held before an administrative law judge, in which the mine’s potential environmental impacts would be assessed ahead of a final DNR decision on whether to give the project a green light.

It would include testimony, evidence and cross-examination. The judge would then issue a recommendation to the DNR, before the agency’s commissioner decides whether to approve the mine.

The process is common in Minnesota for large development projects. The groups challenging the mine say the hearings are needed to settle disputes over issues such as the tailings dam designed to hold back PolyMet's mine waste, and the financial assurance required to protect the state in the event it has to take over the project and close and reclaim the mine site.

In 2016, the Duluth City Council took up a resolution that would have pushed the DNR to hold a contested case hearing before the agency decided on the permits. Droves of the PolyMet project’s opponents and supporters packed the council’s chambers to debate the merits of the resolution. The city council ultimately voted the resolution down, declining to push for the additional step in the process.

PolyMet argues the project has already undergone the longest and most comprehensive review and permitting process ever conducted in Minnesota. Environmental review for the PolyMet project, which would be located between Babbitt and Hoyt Lakes, began in 2004.

“The administrative record for the NorthMet Project is built on a comprehensive process of scientific study, analysis and public review and comment established in state law, which we participated in for 15 years. We and the regulatory agencies have strictly followed that process,” the company said in a statement.

PolyMet said it is reviewing the decision and exploring its options, including whether to file a petition for review to the Minnesota Supreme Court. The company said it remains “firmly committed to putting people to work in northern Minnesota and will continue pushing forward on the project.”

The DNR, for its part, says it is also weighing whether it will appeal the decision to the state Supreme Court.

“We are carefully reviewing the Court’s opinion, which has implications not only for this project but for the role of contested case hearings in the state’s permitting framework more broadly,” the agency said in a statement Monday. “Notably, the Court’s opinion does not draw conclusions about the validity of the scientific analyses underlying the DNR’s decisions. We remain confident in the solid foundation of our technical work.”

Because the court sided with the plaintiffs’ call for a contested case hearing, it did not rule on the majority of their arguments regarding the merits of the permits themselves.

However, “in the interest of administrative and judicial efficiency,” the court wrote, it did issue a ruling in agreement with the plaintiffs that “the DNR erred by issuing a permit to mine without a definite term.”

During oral arguments in October, environmental groups argued that, after the approximately 20 years of the mine’s life, the permits allowed for treatment of polluted water at the mine site for an indefinite amount of time — potentially hundreds of years — in violation of state rules.

Attorneys for the DNR and PolyMet argued that state rules allow for flexibility in how the mine is closed, and said the permit gave a target date of 2072 to completely reclaim the mine site.

Additional permit under scrutiny

The environmental review and permitting process for the PolyMet mine has been contentious from the start. And although PolyMet had secured all of the state and federal permits it needed to move forward by November 2018, many of those permits remain caught up in legal and investigative challenges.

Three of those challenges are tied to a major water quality permit the Minnesota Pollution Control Agency issued for the project:

  • State and county courts. The state appeals court ordered an investigation into alleged irregularities into how the MPCA handled the water permit for the project. That investigation is set to continue next week in a Ramsey County courtroom, in what’s expected to be at least a weeklong fact-finding hearing. The judge will present the findings to the appeals court, which will then decide on a separate challenge to the MPCA’s water permits.

  • EPA inspector general. The EPA’s watchdog arm is conducting its own review of whether the agency's staff followed the Clean Water Act in reviewing the PolyMet permit.

  • State legislative auditor. Minnesota's legislative auditor announced in June it would investigate concerns over how the MPCA handled the same permit.

The investigations were prompted by the release of a leaked email sent by a top official at the state MPCA to her counterparts at the federal EPA, asking them not to file written comments on PolyMet's permit during the public comment period. Critics say that kept federal regulators' criticisms off the public record.

The appeals court said in its order that there is "substantial evidence of procedural irregularities" that needs to be examined.

The court put a temporary hold on the MPCA’s water quality permit, while the investigations proceed.

PolyMet's proposal is for a massive open pit copper, nickel and precious metals mine near the Iron Range town of Babbitt, and a processing plant near the town of Hoyt Lakes, within the watershed of the St. Louis River, which drains into Lake Superior.

Copper-nickel mining poses potentially more severe environmental risks than the state's long-established iron ore mining industry because the process used to extract the minerals from the sulfide rock can result in acid mine drainage, which can leach heavy metals and other pollutants into nearby surface and groundwater.

That's why the project's water quality permit, which sets limits on the pollutants that can be released into groundwater, lakes and streams, has been so heavily scrutinized since the MPCA announced it had been issued in December 2018.

Meanwhile, Toronto-based PolyMet is working to raise $1 billion in financing while it fights the challenges, before it can break ground on the project.

The copper-nickel mining industry is new to Minnesota, so the way state regulators handle the PolyMet project could set a precedent for future proposals.

The other major copper-nickel mine plan underway in Minnesota comes from Twin Metals, a subsidiary of the Chilean mining conglomerate Antofagasta.

Twin Metals submitted its formal plans for the mine in December, kicking off what is likely to be another long and contentious public review process that will determine whether the project — this one especially controversial, given its proposed location within the watershed of the Boundary Waters Canoe Area Wilderness — can proceed.