PolyMet officials should be livid. The company’s plans to open their copper-nickel mine near Hoyt Lakes could run aground as a result of a federal appraisal for their land exchange that is quite simply a head scratcher.
For years, the Forest Service denied Freedom of Information Act requests for copies of the appraisal, including one from this newspaper. After obtaining a copy from another source, we can understand why the agency preferred to keep the document, prepared by a Wisconsin-based appraisal company, under wraps. It’s stated valuation of $550 an acre for the federal land that PolyMet is seeking is poorly justified and is so far below any comparable sales in the region that it simply doesn’t pass the smell test. “Not credible” is how a Minnesota-based appraisal firm put it in their review of the document. Water Legacy, which is suing alleging that the federal land was undervalued, commissioned that review, but that doesn’t mean its conclusions are not valid.
As we report this week, the appraiser who completed the federal valuation concluded that the land had such limited value because it was only usable for timber production, a remarkable conclusion considering that the purpose of the exchange is to facilitate a copper-nickel and precious metals mine. Federal appraisal rules require that the planned use of the land under consideration for exchange must be considered in the appraisal process. That means the land should have been appraised as mineland, which typically sells for significantly more than timberland.
Even timberland typically sells for more than $550 an acre, even in large tracts. Indeed, the company that produced the appraisal did look at some recent comparable purchases by mining companies in other parts of the Superior National Forest in St. Louis and Lake counties, and those sales, which included purchases of comparable size tracts, went for an average of $1,645 an acre. And these lands weren’t known to hold valuable minerals. They were just scattered forest tracts purchased for potential land exchange or wetland replacement. But the appraiser disregarded those comparable sales, suggesting that the buyers were “highly motivated.” We believe the same could be said of PolyMet, since without the land exchange with the Forest Service, their mine proposal may be unable to go forward.
It gets worse, since the review commissioned by Water Legacy looked at purchases of surface rights by Kennecott Mining in Aitkin County, where the company is pursuing an identified copper deposit. In other words, it’s in the same situation as PolyMet, except it’s acquiring private land rather than public. In Aitkin County, the company is paying an average of $3,685 an acre.
Under federal rules, public lands have to be sold for their appraised value, but that is supposed to be based on a fair market price, and what the market will bear is typically determined by comparable sales. Those rules were put in place to prevent “sweetheart deals,” which is exactly the accusation in this case. One thing is for sure, no private landowner in a similar situation would let lands sitting atop a multi-billion-dollar mineral deposit go for $550 an acre. Nor would they exchange their valuable mineland acre-for-acre for run-of-the-mill timberland, much less for the thousands of acres of swamp near Hay Lake, north of Virginia, that the public is actually receiving from PolyMet. Not in a million years.
So why should PolyMet be upset about a getting a great deal? Because the “deal” threatens to throw a monkey wrench in the company’s plans. While any number of technical issues, such as lack of standing, can derail a lawsuit in federal court, the Water Legacy suit could get traction because the appraisal appears to be so flawed. If so, PolyMet won’t have the option of just shelling out more money for the Forest Service property it needs for its planned mine. The federal government can only exchange land, so the company would have to begin the process of buying up thousands, perhaps tens of thousands, of acres of private land to accommodate the exchange. That would take considerable time, and may not even be possible. Then, a new appraisal would need to be completed and a new federal decision-making process would be required. The whole process could take years.
Which could quickly turn a sweetheart deal into a very costly fiasco.