With Minnesota mining permit, PolyMet proposal reaches a turning point

The most divisive mining project Minnesota has ever seen now has a proposed state permit laying out how it will be built, operated and eventually closed.

The permit for PolyMet Mining's proposed copper-nickel operation on the Iron Range comes after more than 10 years of regulatory review and contentious public meetings. The 20,000 pages of documents posted by the Minnesota Department of Natural Resources on Friday not only lay out the life of the mine, they also show how the project will fund what could be hundreds of years of water treatment to remove heavy metals and other contaminants after the closing of the first copper-nickel mine in state history.

Mining advocates see PolyMet's open pit project near Hoyt Lakes, and others that are expected to follow, as the long-awaited economic rejuvenation of a once-thriving mining community in northeast Minnesota.

"It builds on our rich iron-mining heritage and is a catalyst for a new era of responsible mining," said the pro-mining advocacy group Jobs for Minnesotans.

Conservationists point out that such hard-rock mining is new in Minnesota and carries grave environmental risks that could threaten the last remaining wild area of the state and the pristine lakes and rivers that give Minnesota much of its identity.

"This critical permit decision will have impacts for centuries," said Kathryn Hoffman, chief executive of the Minnesota Center for Environmental Advocacy, a nonprofit law firm. "PolyMet has made lofty promises to treat polluted water for hundreds of years, prevent taxpayers from being stuck with a $1 billion cleanup bill, and to meet or exceed industry best practices. Will PolyMet meet their promises?"

It is, however, a significant milestone for a company that was created exclusively to develop this mine, the first of what could be many projects stretching from Tamarack in Aitkin County up to the edge of the Boundary Waters Canoe Area Wilderness.

"This is a big step," said Brad Moore, vice president of environmental and government affairs for PolyMet Mining Corp., a Canadian company. "We've had a decade of public process, and as a result we have a strong project."

It's not over yet. The DNR has proposed two more public meetings — Feb. 7 in Aurora, Minn., and Feb. 8 in Duluth — and a 60-day public comment period.

Several regulatory steps remain as well, including permits from the state Pollution Control Agency that will set limits on pollutants the mine can discharge and a federal permit for wetland management.

The company must also raise hundreds of millions it will need to build the mine and nail down $588 million in bankruptcy-proof financial instruments for the first three years of operation; the permit requires that "financial assurance" to protect taxpayers from any environmental harm and bankruptcies that could befall the project.

Another remaining question is whether the permit will be challenged. A challenge could be filed by an affected landowner or an outside government entity — or even the DNR itself, to ensure thorough review — which would send the issue to an administrative law judge.

But the permit details what the mine would look like:

PolyMet's NorthMet project, in the St. Louis River watershed 6 miles south of Babbitt, would cost $650 million or more, on top of the $300 million the company has already spent. It would operate for about 20 years and cover 30 square miles, including a former LTV Mining taconite-ore processing facility, a 4-square-mile tailings basin and three open pits that would eventually be 700 feet deep.

It would take out more than 6,000 acres of U.S. Forest Service land that PolyMet has already agreed to exchange elsewhere in the northeast part of the state — the subject of two lawsuits from environmental groups. And it will take out 900 acres of wetlands to be replaced by the creation or acquisition of other wetlands within St. Louis County — a swap that was clarified for the first time in Friday's permit.

The company says the mine will create about 300 jobs and produce 72 million pounds of copper annually. In addition, it would produce many more millions of pounds of nickel, cobalt and precious metals — a total of 533 million tons of ore and waste rock over the life of the mine.

But the risks to air, water and wildlife are significant, and can be measured by what state regulators say are the potential financial costs to protect taxpayers. At the mine's peak production in 11 years, the company would be expected to put up $1.039 billion in bankruptcy-proof financial protections. That's what it would cost to close the mine and treat tainted water that runs off it.

Unlike taconite operations, copper-nickel mines can produce runoff that can generate acid that leaches heavy metals, mercury and other toxic contaminants from underlying rock, a problem that can linger for decades. That has created massive environmental problems in other parts of the country, primarily the West, and is viewed by many mining experts as particularly risky for a water-rich ecosystem like Minnesota's.

PolyMet and other mining advocates say that modern technologies and government regulations will prevent such problems.

Nonetheless, the mine permit requires PolyMet to post $588 million in financial instruments to cover the first three years of mining. That would suffice to launch a long-term trust fund of $580 million to generate the money required to treat the water "in perpetuity."

"At any point in time we will have more funding than we would need if the company went belly up," DNR Commissioner Tom Landwehr said Friday."

The company has proposed eventually replacing those funds with cash from operations, which some financial experts see as risky. And it says it hopes to eventually come up with a system that uses "passive" treatment like wetlands or natural processes to remove contaminants rather than a reverse-osmosis treatment plant.

The proposed permit, however, does not include what the state's own advisers had recommended — a long-term feasibility study that would include the burden of the protections on taxpayers. The company said it will start developing those financial projections, required by law in Canada, and critical for potential investors and financial backers.

Environmentalists say the state should have required the study as part of the permit because taxpayers deserve transparency for a decades-long project in a highly volatile industry. Once the mine is up and running, they said, it's unlikely that regulators would shut it down if the company could not afford the necessary financial protections. The state has never shut down a mine when it failed to fulfill its obligations, they point out.

"Every year will there be attempts to get the financial assurance down and change the standards?" said Aaron Klemz, communications director for the Minnesota Center for Environmental Advocacy, which has repeatedly challenged state regulators on PolyMet.

PolyMet said when the study is completed, it will share it with the public.

DNR Assistant Commissioner Barbara Naramore said it's likely to be complete by March, adding, "we will be taking a look at [it] before making a final decision on the permit to mine."

Josephine Marcotty • 612 673 7394