Federal regulators said discharges from PolyMet's proposed copper-nickel mine "may affect" downstream waters of the Fond du Lac Reservation and state of Wisconsin, setting the stage for a new hearing and potential changes on what could be the first mine of its kind in Minnesota.

After a 90-day review, the U.S. Environmental Protection Agency on Friday gave the official "may affect" notification to the Fond du Lac Band of Lake Superior Chippewa and Wisconsin. Now, the tribe and state have the ability to object to the project's Section 404 permit, which allows PolyMet to discharge dredged and fill material into over 900 acres of wetlands.

Such a hearing would allow for parties to outline their positions, the public to provide comment and the EPA to submit its "evaluation and recommendations" on the objection, the EPA said on its website Friday. The Army Corps would then determine whether it should change the permit so it complies with water standards or, if conditions can't be met, not issue the permit at all, the EPA said.

"EPA is notifying you that the discharge associated with this proposed permit may affect the quality of waters of the Fond du Lac Band of Lake Superior Chippewa (the band), including the St. Louis River. EPA has made no determination that this project will affect the quality of the waters of the band," Tera Fond, the EPA's water division director, said in a letter to Fond du Lac Chairman Kevin Dupuis.

PolyMet is proposed near Babbitt and Hoyt Lakes, 70 miles upstream from the Fond du Lac Reservation, and in the St. Louis River Watershed. The St. Louis River also forms the Minnesota-Wisconsin border from the edge of Jay Cooke State Park in Carlton to Duluth-Superior Harbor.

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The band fears potential pollution from PolyMet, namely sulfides and mercury, would damage its wild rice and other resources.

Fond du Lac sued the EPA because the agency never notified the band on whether the project "may affect" its waters. The band argued it should have because under the Clean Water Act, the band is considered a state and was entitled to the same kind of notification and objection process.

A federal judge, and later the EPA's Office of Inspector General, agreed.

The "may affect" review stems from a federal judge's decision in February that said the "EPA had a legal duty to make a 'may affect' decision." As a result, the EPA voluntarily filed a motion, later granted by the court, to allow it 90 days to determine any potential effects.

At the EPA's request, the Army Corps also suspended the discharge permit in March as it waited for the EPA's "may affect" determination.

Fond du Lac spokesperson Rita Karppinen on Monday said the band was "pleased" with the EPA's decision.

"The decision validates the band’s position, which led to federal litigation against EPA, that it should have received notice in early 2018 under the Clean Water Act so that the band would have an opportunity to object to the issuance of PolyMet’s Section 404 permit," Karppinen said. "The band now has that opportunity and will be fully participating in and exercising its rights as the administrative process continues."

In a news release Friday, PolyMet said it disagreed with the EPA's finding but would make its case during the "likely" hearing that downstream communities would not be affected.

“I am hard-pressed to understand how our treated water can meet water quality standards at the point of discharge and at other downstream communities closer to the project site, and actually reduce overall mercury loading to the river, but somehow ‘may affect’ water in places located more than 100 river miles downstream,” said Jon Cherry, chairman, president and CEO.

Several other PolyMet permits remain suspended amid numerous legal challenges to the project.