Supporters of the proposed PolyMet copper-nickel mine near Hoyt Lakes have reason to celebrate the release of a draft Permit to Mine by the Department of Natural Resources. It’s a significant milestone in a project that has been a long time in coming.
But those who expect that the announcement means construction on the project could begin later this year are likely to be disappointed. As DNR Commissioner Tom Landwehr noted in a press conference with reporters last Friday, there is still much unfinished business.
The issuance of a draft permit means at least several more months of additional work, including the signing of final contractual agreements between the DNR, PolyMet, and financial backers, before a final permit could actually be issued. A contested case hearing over the permit, which could take months more, is still a possibility. Meanwhile, other state permits are still in process, and critical federal permits have been in limbo for years, with no indication of when they might be forthcoming.
Residents of the Iron Range have seen projects like this come close to the finish line too many times to call this one a done deal by any stretch. And as the Essar Steel project reminds us, even projects that begin construction can end up flailing under the high capital requirements inherent in large industrial projects. The public still doesn’t know where PolyMet will find the financing for its plans and we don’t know how the project’s financial prospects have changed since the company issued its last financial feasibility report in 2008. The company is expected to issue an updated version of its definitive feasibility study in March, which should give the public a clearer picture of whether the project will provide the kind of financial returns necessary to attract significant investment dollars for what is, by its nature, a relatively high risk project. While mining has the potential to yield big returns, it is an investment vehicle equally known for burning huge amounts of investor capital and that’s one reason why similar projects in the U.S. have found limited interest in recent years from the investment community.
Meanwhile, financial advisors hired by the state of Minnesota have raised doubts about the company’s ability to fund its financial assurance obligations in part because of the riskiness of the project. And that’s one reason why the state of Minnesota will need an ironclad guarantee, fully backed by irrevocable letters of credit or other financial instruments, before signing off on a financial assurance package. After all, once all the permits are issued, the state would have very little leverage to force the company to keep current with their financial assurance obligations. While the DNR might have regulatory authority over PolyMet, recent political history forecasts that the Legislature would not allow the DNR to pull permits if PolyMet fails to comply with the terms. Once permits are issued, the DNR will be effectively kneecapped as a regulatory agency. It’s safe to say that the Legislature will see to that.
But regardless of anyone’s view of the project and its merits, one fact is beyond dispute. The folks at PolyMet have been remarkably persistent. It’s taken almost 20 years since the company first proposed its mining plans to reach this point. That’s close to a career for some of those who began working on this project from the outset. While it’s still a long way to the finish line, it’s a lot closer than it was when this whole process began.