Minnesota appeals court orders review of "procedural irregularities" in PolyMet permit

Finding "substantial evidence of procedural irregularities," the Minnesota Court of Appeals handed a victory to environmentalists Tuesday, ordering that a district court review the state's handling of a key water quality permit for PolyMet Mining.

The ruling marks the third inquiry that has been launched into a permit issued late last year by the Minnesota Pollution Control Agency (MPCA) and the U.S. Environmental Protection Agency (EPA). Earlier this month, the EPA's Inspector General opened an investigation into the agencies' handling of the permit, and then Minnesota Legislative Auditor Jim Nobles said he would conduct a review.

Among the irregularities noted in the Appeals Court order Tuesday: The EPA didn't submit its written comments on the draft of PolyMet's water permit for the public record, and instead read them to Minnesota officials over the telephone last year. Opponents of the proposed mine say that amounted to suppressing significant environmental concerns raised by EPA staff.

The ruling is a huge win for conservation groups who challenged the water permit, including WaterLegacy, the Minnesota Center for Environmental Advocacy, the Center for Biological Diversity, Friends of the Boundary Waters Wilderness and the Fond du Lac Band of Lake Superior Chippewa.

Kathryn Hoffman, chief executive of the Minnesota Center for Environmental Advocacy, on Tuesday called for a stay on all permits PolyMet needs to proceed.

"With a federal investigation, a state investigation, and now a district court hearing … it's time to hit the pause button," Hoffman said. "Now Minnesotans can finally get answers about what MPCA was trying to cover up about the PolyMet permit."

MPCA spokesman Darin Broton said the agency will fully comply with the court inquiry. He said the 14-year permitting process for PolyMet was rigorous and involved frequent communication between the state and EPA.

"Clearly, in retrospect, the agency probably should have been a lot clearer with the EPA about how and when communications occurred," Broton said.

But he said the agency opposes any move to stop all permits while the inquiries play out.

PolyMet spokesman Bruce Richardson downplayed the significance of Tuesday's ruling. In an interview, he said he does not expect the inquiries to affect progress on the mine or the company's effort to raise necessary financing. He also said he thinks PolyMet's water permit will withstand the intense scrutiny.

"Because the permit meets all of the requirements of the law, we believe it will stand," he said. "We continue to move forward."

PolyMet Mining, which is headquartered in Toronto and operates out of St. Paul, is seeking nearly $1 billion in financing to build the open-pit copper-nickel mine on the site of an old LTV taconite mine near Babbitt. After more than a decade of regulatory review, PolyMet cleared its regulatory hurdles early this year.

The court decision comes on the eve of PolyMet's annual shareholders meeting in Toronto and the close of a shareholder rights offering. The rights offering could make Glencore, the Switzerland-based global mining and commodities giant, PolyMet's majority owner. Glencore currently owns a 29% stake.

More than 13,000 Minnesotans own shares in PolyMet. Results of the rights offering are expected later this week.

PolyMet expects to wrap up the financing by the end of the year. Construction of the mine would start after that, and take about two and half years.

"It's totally a function of the financing at this point," Richardson said.

Questions about the water quality permit, first raised last year by Minnesota tribes and advocacy groups, intensified last week with the release of a leaked e-mail from the MPCA's assistant commissioner at the time, Shannon Lotthammer.

In the e-mail, Lotthammer asked EPA Region 5 Chief of Staff Kurt Thiede not to submit the agency's written comments on the draft permit until after the close of Minnesota's public comment period.

A key concern of EPA staff was that the draft permit lacked specific numeric limits on the amount of pollutants, such as mercury, arsenic and lead, that could be in the effluent coming out the discharge pipes.

The e-mail appeared to support accusations that state and federal regulators may have contorted the permit process against the public interest. Former Minnesota Governor Arne Carlson called it "a huge political scandal."

"Everybody did their best to assure the public was kept out, and that challenging data was kept out," said Carlson, who has formed a loose confederation of current and former legislators opposed to copper sulfide mining near water, calling themselves the Sunshine Club.

The permit in question governs the pollutants PolyMet can discharge into surrounding waters. The mine operation will drain into the St. Louis River and Lake Superior, which provides drinking water for Duluth and other communities.

WaterLegacy lawyer Paula Maccabee said she's thrilled with the ruling.

"Something happened wrong here to benefit PolyMet, and it's time to fix that and make our regulatory process work the way it's supposed to work, to protect people and the environment," Maccabee said.

Duluth City Council Member Joel Sipress, who is traveling with a delegation to Toronto to protest at PolyMet's shareholders meeting, called the ruling "encouraging news." Sipress said he thinks the regulators dismissed the concerns of downstream communities.

"We've spent years and millions of dollars cleaning up the St. Louis River," Sipress said. "We want to be sure we don't repeat the mistakes of the past."

Separately, Nobles on Tuesday said his legislative auditor's office will start examining the permit issues as soon as it can. Their focus is more on transparency of the process, he said. The review may take several months.

"I do not think we are being asked to necessarily look at the substance of their decision," Nobles said, "but the process by which they arrived at it and whether or not it was consistent with state law and best practices."

Jennifer Bjorhus • 612-673-4683