DNR: PolyMet environmental review is "adequate"

REGIONAL—More than ten years of environmental review on PolyMet Mining’s proposed NorthMet copper-nickel mine have come to a conclusion, pending possible legal action.

The Minnesota Department of Natural Resources, for its part, gave its final okay to the 3,000-page environmental impact statement on the project, ruling it “adequate”. Two co-lead agencies, the U.S. Forest Service and the U.S. Army Corps of Engineers must still make their own determinations on the adequacy of the EIS.

The DNR’s decision was no surprise to those who have followed the project closely, since DNR Commissioner Tom Landwehr had already indicated months ago that approval was highly likely. Still, it had to have come as a relief to DNR officials, who worked on the review for more than a decade. It was Minnesota’s largest environmental review effort, to date, and it generated unprecedented public input, including more than 55,000 individual written comments.

“The public input process has been extraordinary and I want to thank everyone who provided comments,” Landwehr said. “The input has helped us produce a better document.”

The determination, announced Thursday, is a milestone for PolyMet, but it’s only one step on what is likely to be a still-lengthy journey before actual construction of the project could get underway. Even so, PolyMet officials were ebullient. “The state’s decision validates both the Final EIS and the exhaustive process supporting the final document,” said Jon Cherry, president and CEO. “This is a historic event for Minnesota, the Iron Range, and for PolyMet, clearing the path for permit applications required for construction.”

Investors reacted just as positively, sending the price of PolyMet stock to a peak of $1.37 a share in the immediate wake of the announcement, well above the 80-cents per share trading range where the stock had been mired for months. The stock price fell back in more recent days, and sat at 96 cents per share as of Wednesday afternoon.

While the approval of the FEIS is a major milestone, PolyMet officials will now need to begin the potentially long process of applying for nearly two-dozen state and federal permits, some of which will require substantial additional review.

Among the biggest permitting challenges will be reaching a deal with the state of Minnesota on financial assurance for the project, which is a means of guaranteeing that future clean-up costs won’t fall to taxpayers once the mine closes, or if the company goes bankrupt. PolyMet is expected to offer a financial assurance proposal at some point, which will be reviewed by the Department of Natural Resources and other state officials. The state is currently in the process of hiring a consultant to assess PolyMet’s plan. Preliminary numbers offered by PolyMet put the financial assurance package at around $200 million, but that figure will likely face an onslaught from environmental groups. “We have crunched the numbers,” said Kathryn Hoffman, legal counsel for the Minnesota Center for Environmental Advocacy. “Just for mine closure and long-term reclamation, we’d be talking $350 million. And that does not include a contingency plan for the day when a pipeline breaks or a tailings dam bursts. These are the events that often prompt companies to walk away,” she said.

At the same time, the proposed mining project is likely to face any number of legal challenges, from environmentalists or tribal authorities, many of whom have expressed deep skepticism of the project and many of the conclusions drawn in the final EIS. Two environmental attorneys who have been closely tracking the mining proposal declined to comment on their plans for any future litigation. Any legal challenge on the issue of the adequacy of the FEIS would need to be filed within 30 days of the decision, but it’s not clear whether environmental critics will make a stand on that issue, or wait to challenge future decisions.

Economics an issue

Perhaps the biggest challenge to PolyMet’s plans could well be the current economy. The company will need to raise an estimated $650 million to develop the mine, at a time when demand and prices for copper, nickel, and the other metals that PolyMet hopes to produce are low and numerous other copper mines have been shuttered around the world.

PolyMet has no real source of revenue, other than cash infusions from Swiss-based Glencore, an international commodities broker and mine operator. Glencore posted losses of $5 billion last year, a financial fall led largely by steep drops in the price of copper.

The fall in the price of nickel has been even more dramatic. With nickel previously accounting for more than a third of PolyMet’s projected revenue, the drop in the price of the metal— from the $12.20 per pound used in the company’s most recent financial projections, to just $4.25 per pound as of this week— means that once-robust profit margins forecast for the project have diminished significantly.