Serving Northern St. Louis County, Minnesota

MCEA updates Tuesday Group on PolyMet project

Keith Vandervort
Posted 8/1/18

ELY – “Without MCEA, PolyMet would probably be mining here for several years now.”

Kathryn Hoffman, the chief executive officer of the Minnesota Center for Environmental Advocacy made that …

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MCEA updates Tuesday Group on PolyMet project

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ELY – “Without MCEA, PolyMet would probably be mining here for several years now.”

Kathryn Hoffman, the chief executive officer of the Minnesota Center for Environmental Advocacy made that statement as she updated the Ely Tuesday Group on her group’s efforts to slow or even stop copper- nickel mining projects in the water-rich environment of northeast Minnesota.

She was joined by MCEA’s senior staff attorney and lead mining lawyer, Kevin Lee, who spoke to the overflow crowd at the Grand Ely Lodge about PolyMet’s updated financial picture, as copper prices continue to trend downward and automation trends reduce the possibility of big-money employment as an economic boon to the area.

MCEA has existed for more than 40 years, founded in the 1970s as an environmental non-profit organization. “The vision behind the MCEA is that the environment needs lawyers to protect it and we need that expertise,” Hoffman said.

The MCEA staff has grown to 21 people, including lobbyists, policy experts, technical experts, as well as a team of litigators that allows the organization to operate in many areas. “We work with agencies, and legislatures to get environmental laws passed or to protect the laws that we have, or to go to court if we need to,” Hoffman said.

MCEA doesn’t do much litigation, but it is one more of their tools. “That is one thing that we have that is unique among the environmental non-profits. We’re really the only group that has in-house lawyers,” she said.

Besides mining, MCEA also works in the energy sector as well as agriculture. “We advocate for the replacement of coal to be not only with natural gas but also with renewable energy. And Minnesota is seeing more hog and dairy farms coming in the near future. As much as 40 percent of our waters are polluted and most of that is from agriculture,” Hoffman said.

But the Tuesday Group crowd showed up to hear about copper-nickel mining and what MCEA is doing to protect the state’s environment as well as the state’s taxpayers from the risky PolyMet project, the Twin Metals underground proposal, and other foreign companies lining up behind them to extract precious metals from an area so close to the wilderness.

Minnesota rocks contain deposits of copper, nickel, gold, palladium and platinum that has never been mined. “Part of the reason for that is that we have such low-grade deposits, and one has to dig up a lot of rock to get very little metal,” Hoffman said.

Until recently, it was not very economical for foreign mining conglomerates to even consider such a risky venture in the Minnesota Arrowhead region. “But, in 2011, copper prices hit record highs and the demand to find the copper in Minnesota started growing,” she said.

PolyMet was the first one out of the gate to seriously explore the possibility of copper nickel mining in northeast Minnesota. “This is pretty important because it sets the precedent on how we move forward,” she said.

PolyMet has actually been exploring here since 2005, called a scoping period during which regulators determine what an environmental review would look like. “In 2010, the Department of Natural Resources put out their first draft of an EIS (Environmental Impact Statement) and it wasn’t very good. A lot of people agreed with us. A lot of scenarios weren’t even considered; for example, they wanted to leave the mine pit unmanaged,” she said.

Hoffman noted that there is no federal or state law that says one can’t build a project that has a bad EIS. “You can do a bad EIS and then build your project based on sub-par analysis. PolyMet didn’t do this because they knew that MCEA and other groups were ready to challenge that project,” she said. “They knew that was a risk they were going to lose, so they started over. Without MCEA, they would probably have been mining now for several years.”

A new EIS was deemed adequate in 2016 and the company has applied for permits for the project. “They are in a comment period right now and that’s the last we heard,” Hoffman said. “The state has not declared what they are going to do with those comments. We are in a bit of a holding pattern while the state figures out the permitting questions.”

Meanwhile PolyMet has been updating some of their financial statements. MCEA attorney Kevin Lee explained some particulars.

A technical report, issued in March 2018, as required by Canadian securities regulators, showed that the PolyMet project has an internal rate of return of about $945 million, according to Lee, or barely ten percent on the investment.

“They looked at what their profitability will be if metals prices are at a certain level,” he said. The numbers [they used] are much higher than actuality. They show copper at about $3.22 a pound and now we are at about $2.80 a pound. Likewise, they show nickel at $7.95 per pound. I think nickel is somewhere around $6.16 per pound.”

Lee talked about the higher risks of copper-nickel, which means investors require a higher rate of return. “These projects are volatile. They are subject to metal prices swinging all over the place, and labor prices swinging all over the place.”

Mining companies have to increase their volume of material mined to get to a higher profit margin. “As volumes go up, so do the potentials for accidents,” Lee said. “One of the problems that we see is these accidents increase over time as the scale gets bigger and bigger. And they are happening more and more often with operations that are economically fragile. These are companies that are on a knife’s edge of profitability.”

“The question of jobs is more about when and how mining occurs,” Lee said. “The state has to be protected. When the state looks at financial assurances, they are looking at our liabilities and they have to make sure we don’t go down the same path as Mount Polley.”

Local environmental advocate Becky Rom said world-wide copper mining automation is rapidly accelerating and is a huge cost saving for mining companies. “The only local employees these mining companies will have are PR (Public Relations) people who will have to deal with the diminished expectations in the local communities that don’t have the jobs,” she said.

“The economics are inseparable from the environmentals,” Lee said. “We don’t have any jobs reports in the works. It is a very important issue. The automation concerns you talk about is a problem that is economy-wide and no one knows how to deal with it right now. It is very acute for mining.”

A recent new strategy being voiced in the pro-mining world is that copper nickel mining has to be done in the United States for national security reasons. Lee was hesitant to wade into the issue. “This is a real hornet’s nest,” he said. “We are in a (copper) glut right now. I don’t think it is an issue right now. Our access to copper supplies is not a national security issue, but 10 years from now? Maybe. It is difficult to project that far into the future.”

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