Minnesota regulators were right to deny U.S. Steel's requests for a contested-case hearing and a variance on a groundwater-quality standard for Minntac's water permit, an appeals court said Monday.

In its decision, the Minnesota Court of Appeals said the Minnesota Pollution Control Agency properly denied the company's two requests after the state agency in 2018 granted a water pollution discharge permit to U.S. Steel's Minntac taconite plant near Mountain Iron in 2018. The permit had been up for reissuance since 1992.

U.S. Steel had taken issue with the permit's regulation sulfate levels in and around its leaky tailings basin, which stores a slurry of water and finely ground rock left over from the pelletization process.

Sulfates at high levels harm rice when the sulfate is converted to hydrogen sulfide in the sediment. Sulfate levels within the basin had been measured as high as 1,320 milligrams per liter, with an average of 954 milligrams per liter, the MPCA has said.

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The permit would require Minntac to reduce sulfate levels within its basin to 800 milligrams per liter within five years and 357 milligrams per liter within 10 years. It would also require levels in groundwater and streams surrounding the basin to drop to 250 milligrams per liter by the end of 2025.

U.S. Steel had objected to such requirements and called the groundwater requirements "economically infeasible," unnecessary and impractical.

The company also asked the MPCA for a contested-case hearing, which would put the issue in front of an administrative law judge to examine additional evidence and testimony, on what it said were factual disputes on the in-basin sulfate limit.

Both requests were denied by the MPCA.

And on Monday, the Court of Appeals backed the MPCA's decision, saying it deferred to the agency's expertise.

"U.S. Steel has not argued, much less substantiated with the required information, that it will suffer an 'undue hardship' through application of the standards, as an applicant is required to do when seeking a variance primarily based on economic hardship," Judge Jeanne M. Cochran wrote in the Court of Appeals decisions.

"In seeking a contested-case hearing, U.S. Steel sought to indict its own report, but it identified no evidence that would support a different in-basin limit," Cochran wrote. "Instead, it pointed to ongoing studies by the (Minnesota Department of Natural Resources) regarding sulfate reactivity, which the MPCA acknowledged but did not find contrary to the requirements of the permit."

“The Court of Appeals decision regarding the Minntac permit reaffirms the MPCA’s reliance on sound science and confirmed facts when making a permitting decision," MPCA spokesperson Darin Broton said in an emailed statement to the News Tribune. "The agency remains committed to working with facilities to ensure Minnesota’s environment is protected while fostering local economic development.”

But the court also reaffirmed its earlier decision that reversed the permit and sent it back to the MPCA because "evidence does not support the MPCA’s determination that water-quality-based effluent limits are not required to be included in the permit for surface water discharges."

The issues decided Monday had returned to the Court of Appeals after the Minnesota Supreme Court in February decided the MPCA was correct in applying drinking-water standards to groundwater in Minntac's permit.

Combined, the decisions are a significant win for environmental groups, according to Paula Maccabee, advocacy director and counsel for WaterLegacy.

"(U.S. Steel has) evaded controls on both groundwater pollution and sulfate pollution,'" Maccabee said. "And finally, after a series of decisions at the Court of Appeals, the Supreme Court and now back at the Court of Appeals, U.S. Steel is going to be required to comply with Minnesota water quality standards for groundwater and surface water."

U.S. Steel spokesperson Amanda Malkowski said the company was reviewing the decision.