Serving Northern St. Louis County, Minnesota

Court hears arguments for supplemental impact statement

Marshall Helmberger
Posted 4/4/19

REGIONAL— Lawyers for environmental groups, the Department of Natural Resources, and PolyMet Mining squared off last Thursday before a three-judge appeals court panel charged with determining …

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Court hears arguments for supplemental impact statement

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REGIONAL— Lawyers for environmental groups, the Department of Natural Resources, and PolyMet Mining squared off last Thursday before a three-judge appeals court panel charged with determining whether to order a supplemental environmental impact statement for PolyMet’s proposed copper-nickel mining operation near Hoyt Lakes.

At issue is whether changes in the company’s mine plan in regard to water treatment, and the project’s deteriorating financial picture, require a second look at some aspects of the project under Minnesota environmental rules.

Under the rule, known by the number 4410.3000, an agency must prepare a supplemental EIS under a variety of situations, including when “there is substantial new information or new circumstances that significantly affect the potential environmental effects from a proposed project,” and when that information has not previously been considered in the original EIS.

Lawyers for environmental groups argued that the changes PolyMet has proposed or is likely to propose amount to a “bait-and-switch” since the original EIS examined a project proposal that is likely to be significantly different from any mining operation that ultimately goes forward. Environmentalists noted that following completion of the original EIS, PolyMet dropped plans for a reverse osmosis water treatment plan at its mine site and argued that is a new circumstance requiring supplemental analysis.

But that change is relatively minor compared to the significance of the new circumstances revealed in a March 2018 feasibility study, which an independent engineering firm prepared for PolyMet under the terms of Canadian securities law. That study revealed that the financial viability of the project has diminished greatly in recent years and that the company is exploring mining operations of a much greater scale in order to try to improve profitability.

PolyMet has since received all of its required state and federal permitting for a 32,000 tons-per-day operation, but the March 2018 study suggests such an operation would generate a rate of return to investors of just ten percent, far below the level of return that investors typically seek for mining projects, which are inherently risky ventures.

Yet that March study also examined the financial returns of two different alternatives, including a plan to mine 59,000 tpd and another to mine 118,000 tpd. Both alternative proposals assumed that the company would remove significantly more of the known deposit, including lower grade material not considered in its original plan. The two alternatives did improve the estimated return on investment, while remaining well below the company’s original estimated return of 30.6 percent. The study predicted a rate of return of 19 percent for the 59,000 tpd option and 21.9 percent for the 118,000 tpd option.

Lawyers for the environmental groups argued that the PolyMet project, given the financial realities, is unlikely to proceed as currently permitted and that the company will almost certainly be requesting an expansion of the operation in the near term.

Previous courts have ruled that a supplemental EIS is not necessary in cases where a possible expansion or major change in the project is only possible or speculative.

“Here, there are real expansions proposed in great detail,” said Water Legacy lawyer Paula Maccabee, referring to the mine alternatives outlined in the March study. “A bait and switch cannot be the basis for the most important first mine that would bring sulfide mining to Minnesota,” she argued to the three-judge panel.

John Martin, representing the DNR, argued that the profitability of the mine plan is not the agency’s concern. “That’s the subject that the market determines,” said Martin. “Our concern is the financial assurances. And we have imposed robust financial assurance requirements on PolyMet.”

Martin also argued that PolyMet’s plan to drop the use of a wastewater treatment plant at the mine site does not substantially impact environmental impacts, because the company proposes to pump mine discharges to the treatment plant planned at the plant site and treat that water there and return it to the mine site via pipeline. “We’re talking about the same amount of wastewater and the same discharge locations,” said Martin.

PolyMet attorney Jay Johnson argued that the mining company is only permitted to mine up to 32,000 tpd and that any increase over that level would require additional environmental review. And he argued that the March 2018 study did find the mine to be profitable even at 32,000 tpd. “It recommends that PolyMet proceed with final design, construction and operation of the 32,000 tpd design that is discussed in this technical report,” said Johnson. “The report itself says the mine is profitable and the other scenarios are speculative.” Based on that, Johnson argued that environmental review is not required unless the company actually proposes an increase in the rate of mining.

But Elise Larson, representing the Minnesota Center for Environmental Advocacy, argued that delaying such a review limits its ability to determine the optimal environmental controls. “Once the train leaves the station, the analysis for environmental review changes,” she said. “If you analyze one iteration of the project and then you’re considering how do we move our environmental controls around based on an expansion, then that is a different inquiry than how should we plan out our environmental controls in the first instance because we know this is going to be a big project.”

Larson also took issue with the suggestion that financial viability was not a consideration for the DNR. She noted that the original EIS does address financial return and that the agency did not examine other mining alternatives, such an underground operation, due to concerns about financial profitability.

Maccabee had the last word in the arguments, and drilled in on the financial question, stating that PolyMet raised the prospect of a larger mining operation in order to hold out the hope that the project could be more financially viable, and thereby more attractive to investors.

Without a substantial increase in the rate of mining, environmentalists contend, the project is unlikely to proceed, making an expansion in the operation a virtual necessity.

A decision in the case is expected by mid-summer.

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