The Minnesota Supreme Court on Tuesday weighed whether a lower court should have reversed key permits to PolyMet, the company trying to open Minnesota’s first copper-nickel mine, and whether the Minnesota Department of Natural Resources should have required an additional hearing on the project.

The Minnesota Court of Appeals in January sent PolyMet's dam safety permits and permit to mine, awarded by the DNR, back to the agency and said it must hold a contested-case hearing over concerns on the upstream tailings dam construction; the basin's bentonite liner; alternative methods of tailings storage; the financial assurance package; and if PolyMet's majority shareholder Glencore should be on the permit.

The decision was a blow to the DNR and PolyMet but a win for environmental and tribal groups opposed to the project, an open-pit mine and processing facility near Babbitt and Hoyt Lakes.

Tuesday morning’s virtual oral arguments gave six Supreme Court justices — Justice Paul Thissen recused himself — the chance to ask the parties questions and hear them make arguments. The court is expected to make a decision on the case in several months.

Is a contested-case hearing needed?

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A contested-case hearing would put the issues in front of an administrative law judge to examine additional evidence and testimony. Then, with information from the contested-case hearing in hand, the DNR must decide whether to reissue the permits.

While environmental groups and the Fond Du Lac Band of Lake Superior Chippewa agreed with the Court of Appeals’ decision requiring such a hearing, the DNR and PolyMet argued in appeals to the Supreme Court that the decision deviated from a long-standing interpretation of the state’s mining laws.

On Tuesday morning, DNR attorney Jon Katchen maintained the DNR commissioner is the only one responsible for deciding if a contested-case hearing is needed and that the Court of Appeals erred in its decision.

“The Court of Appeals eliminated the commissioner's discretion and independently reviewed the record to see if a contested case here is warranted,” Katchen said.

Katchen said the agency had exhaustively reviewed any factual disputes and determined it didn’t meet the threshold needed for a contested-case hearing.

“The commissioner issued a reasoned decision,” Katchen said. “It’s supported by substantial evidence explaining why the petitions fail to satisfy the statutory criteria.”

Opponents of the mine, however, argue the agency has not resolved disputed facts or new information, which should have triggered the commissioner to order a contested-case hearing.

“The PolyMet permit calls for a contested-case hearing based on fundamental principles,” Paula Maccabee, attorney for WaterLegacy, said.

Maccabee said a contested-case hearing must be held to help the DNR ensure “better substantive results,” a “focused” administrative law judge record would support judicial review and an “open, neutral hearing will increase public confidence.”

But PolyMet attorney Jay Johnson warned a contested-case hearing would just lead to more confusion.

“I agree that this is an extremely complicated record with lots of facts, but the principles of administrative law say that’s when we need to defer and lean on the expertise of the agency, not to an outside administrative law judge who may or may not have a scientific expertise to make these decisions,” Johnson said. “Ultimately, this is a scientific decision, not a decision that seems to be resolved in the adversarial process.”

Should Glencore, dam failure issues lead to hearing?

The Court of Appeals first suspended the permits in question in September 2019 after two events that followed the DNR’s November 2018 permit issuance: Glencore took a 72% stake in PolyMet and a Vale tailings dam collapsed in Brazil, killing more than 200 people.

The court then called for the DNR contested-case hearing when it reversed the permits, citing questions of Glencore on the permit and the Vale disaster, among other issues.

But Katchen said because those events happened after the permits were issued, they can’t be added to the record.

“The agency’s decision has to be judged by what it knew at the time,” Katchen said, adding that the DNR has or is considering those events in different settings.

“I think it’s important from an administrative law perspective to keep the agency’s decision pattern to what it actually had in front of it and to address things that happen later in separate decisions,” Katchen said.

Ann Cohen, an attorney for the Minnesota Center for Environmental Advocacy, said the record can be reopened and information after the issuance can be added.

“If the court does remand back for contested-case hearing, it is not limited to the record that was before the DNR in 2017 and 2018 when it made these decisions,” Cohen said. “The record will be opened up and that is in the statute itself.”

PolyMet is reusing and reclaiming the former LTV Steel Mining site near Hoyt Lakes. Photo courtesy of PolyMet Mining
PolyMet is reusing and reclaiming the former LTV Steel Mining site near Hoyt Lakes. Photo courtesy of PolyMet Mining

Effectiveness of bentonite questioned

PolyMet plans to reduce water seepage and oxidation from its tailings basin by lining it with bentonite, a clay.

Justice Natalie Hudson asked if there was “substantial evidence” on whether the bentonite would actually work.

“Some of those conditions essentially allow, at least as I understand them, allow PolyMet to test the bentonite amendment for a number of years to see if it works, which would suggest that it might not work,” Hudson said. “And then they can do a study later on years down the road, years after the mine has been in effect.”

But Katchen said the DNR “imposed a rigorous monitoring and testing program” on bentonite and that it working is a condition of a dam permit and the permit to mine. Such conditions are a standard in the mining industry, he said.

“There can be no construction (of the tailings basin) until PolyMet proves the effectiveness of bentonite,” Katchen said. “So there’s no deposition of tailings into the basin without DNR determining bentonite will, in fact, be effective.”

Vanessa Ray-Hodge, attorney for the Fond Du Lac Band of Lake Superior Chippewa, said the state’s dam safety rules require permits be issued only when final plans are completed, and the lack of information on bentonite leaves those plans incomplete.

“By approving these permits that are based in large part on special conditions, which require complete and final plans after permit issuance, the mining rules have been violated,” Ray Hodge said.

Other permits still in court, too

The permit to mine and dam safety permits are just a few of the PolyMet permits on hold and working through the court system.

Water permit

The company's national pollutant discharge elimination system, or NPDES, permit, which regulates water discharged from industrial activities, remains on hold after an August order by the Minnesota Court of Appeals after it was revealed the Minnesota Pollution Control Agency requested the Environmental Protection Agency refrain from commenting on a PolyMet draft water permit until the public comment period ended.

That issue was sent down to the district court level where a judge last month determined the MPCA's actions did not break the law or its own or policies but acknowledged the agency did try to keep the EPA's comments and concerns out of the public.

The case is now headed back to the Court of Appeals for further consideration.

Air permits

A March Court of Appeals decision sent PolyMet's air permits back to the MPCA over concerns that a report released by PolyMet in March 2018 outlines the company's plans to recover 118,000 tons of ore per day instead of 32,000 tons per day, the amount listed by the company in permit applications. The air permits, issued in December 2018, allow the company to release 250 tons of regulated pollutants per year, but opponents say the company would exceed that limit if it were to recover more ore.

The Supreme Court in June said it would take up the case.