ST. PAUL — The Minnesota Court of Appeals on Wednesday weighed challenges to permits issued to PolyMet, the company vying to establish the first copper-nickel mine in the state.

Attorneys representing environmentalists and the Fond du Lac Band of Lake Superior Chippewa challenged the permit to mine and dam safety permits issued by the Minnesota Department of Natural Resources last fall and the state agency’s refusal to hold a contested-case hearing on the permits, which would require an administrative law judge to examine additional evidence and testimony on the project.

The court suspended those permits last month after two post-permitting developments: Glencore took a 72% stake in PolyMet in June and a Vale tailings dam collapsed in Brazil in January, killing more than 200 people.

Those permits for the mine planned near Hoyt Lakes and Babbitt remain suspended, but the court has 90 days to make a decision.

Glencore on permit?

Speaking to the three-judge panel in a packed courtroom, WaterLegacy attorney Paula Maccabee, an opponent of the mine, said Glencore “must be on the permit to protect Minnesota taxpayers” and argued for a contested-case hearing, which the DNR denied when granting PolyMet its permits.

“If the court does not see fit to actually reverse the permits, we believe that the contested-case process will allow not only the consideration of the items in all of our petitions, but the items that the court is most concerned about and is referenced in its order,” Maccabee said.

Chief Judge Edward Cleary asked PolyMet attorney Jay Johnson if he thought Glencore should be added to the permit, but Johnson said he didn’t think PolyMet had a position on that and said the question was better suited for Glencore, which he doesn’t represent.

In August, Gov. Tim Walz and officials from the DNR met with Glencore officials who also sit on the PolyMet board. After the meeting, Walz told the News Tribune, which was first to report on the meeting, that he urged Glencore to add its name to the permit and that the DNR had the ability to add Glencore to the permit.

On Wednesday, Cleary asked DNR attorney Jon Katchen if Glencore had agreed to be added to the permit.

Katchen said the agency was collecting information about the PolyMet-Glencore relationship and that it was "an ongoing process."

"I wish that made me feel better," Cleary said, adding he wanted to know what "an ongoing process" meant.

Cleary also expressed concern that PolyMet’s financial-assurance package, which is meant to ensure the state could reclaim and close the mine and plant sites if PolyMet closed unexpectedly, is in the form of credit and bonds, and not cash.

“If PolyMet was able to perform without Glencore, and now it's relying on letters of credit and bonds rather than cash up front, it looks like a backloading operation that could lead to copper mining that addresses shareholder’s desires rather than the citizens of the state of Minnesota,” Cleary said.

PolyMet posted $74 million in financial assurance prior to its permit to mine, which is expected to grow to $588 million when mining begins and exceed $1 billion at peak mining. The amount can be reevaluated each year by the DNR.

Katchen said the financial assurances required by the agency was “frontloaded.”

“They have to put in place more than enough money or letters of credit or bonds, which are very common in the mining industry — that’s how financial-assurance packages are handled everywhere,” Katchen said.

Dam permit

PolyMet opponents have long argued that PolyMet's planned tailings basin, which would store a slurry of waste rock behind an earth dam, is too risky.

At worst it could fail, sending toxic waste down the St. Louis River watershed and eventually into Lake Superior, and at best, opponents argue, its contents would still leech through the dam and into nearby ground and surface water.

Vanessa Ray-Hodge, an attorney for the Fond du Lac Band, said that being directly downstream means the band members' traditional hunting, fishing and ricing lands are at risk.

Ray-Hodge argued PolyMet's plan of lining the dam with a layer of bentonite, a clay, meant to neutralize tailings is unproven and the DNR approved the permit with the condition that testing bentonite's effectiveness could happen after PolyMet had the permit.

"The purpose of the bentonite is to reduce water seepage and oxidation in the tailings, but it is unclear whether the bed tonight will actually work for that purpose," Ray-Hodge said. "And no actual alternative or adaptive management plan has been defined or provided with any specificity by DNR in the permit."

The DNR's Katchen said testing the bentonite requires "specific real-world tests" on the tailings from the mine.

"You can't do that in the lab," Katchen said.

Katchen said that the DNR is confident bentonite will work, and if it doesn't, the project can't move forward.

"If they can't show that it works — meets water-quality standards — then they can't proceed," Katchen said.

PolyMet attorney Johnson said if the bentonite doesn't work, the permit allows the company find an alternative, but it can mine for three years until it determines if the bentonite works or not.

"The evidence in the record shows it's going to work," Johnson said. "The additional testing is to show mostly how it's going to be applied."

Opponents also expressed concern that the dam will remain a "wet closure" indefinitely instead of being drained and reclaimed. A wet closure would require the treatment of any water leaving the basin while a dry closure would mean the basin was reclaimed to the point it could function as a wetland with minimal effects on the environment.

Ann Cohen, an attorney for the Minnesota Center for Environmental Advocacy, said the rules for tailings basins in Minnesota taconite industry require drainage and reclamation within three years of its life. The same standard should apply to copper-nickel mines, she said.

"I believe it is plain language. The basin has to be drained and reintegrated into the natural watersheds," Cohen said.

Judge Smith asked Katchen if there was a timeline for basin reclamation.

"It's going to be as long as it takes to require treatment and proper reclamation," Katchen said.

"But what's the framework on that? Five years? 100 years?" Smith asked

"It's as long as it takes," Katchen said

"You have no information for how long it will be?" Smith asked.

"We allow for the perpetual maintenance of dams," Katchen said.

Johnson clarified that PolyMet intends on reclaiming the basin "as soon as possible," and its permit includes an reclamation completion date "estimate" of 2072.

That's not good enough for Cohen.

"Do not permit on the basis of hope," Cohen said of the DNR.