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Serving Northern St. Louis County, Minnesota

Agencies seek legal help on PolyMet

DNR, MPCA need to determine EIS adequacy and resolve financial concerns

Marshall Helmberger
Posted 11/25/15

REGIONAL—The state’s Department of Natural Resources and Pollution Control Agency are in the process of hiring an outside law firm to guide the two state agencies as they finalize their …

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Agencies seek legal help on PolyMet

DNR, MPCA need to determine EIS adequacy and resolve financial concerns

Posted

REGIONAL—The state’s Department of Natural Resources and Pollution Control Agency are in the process of hiring an outside law firm to guide the two state agencies as they finalize their decision-making on PolyMet Mining’s proposed copper-nickel mine, near Babbitt.

The DNR released its Final Environmental Impact Statement on the proposal on Nov. 6, but still needs to determine the adequacy of the document and whether to move forward with permitting after that. According to DNR Assistant Commissioner Barb Naramore, the law firm would guide the two agencies on the legal aspects of the adequacy decision as well as on a financial review, should the DNR Commissioner decide to move ahead with permitting.

Gov. Mark Dayton called for a separate financial review of PolyMet in comments to reporters last month. Dayton said he wants proof PolyMet and its backers have the financial capacity to build and operate their proposed copper-nickel mine, with a start-up cost in excess of $600 million.

At the same time, the DNR plans to hire an outside consultant with expertise in mine operations and reclamation to assist the agency as it determines the level of financial assurance that would be necessary to protect the state’s taxpayers in the event that PolyMet, or any entity that acquires the junior mining company, declares bankruptcy at any point after mining gets underway. According to Naramore, PolyMet will reimburse the state for the cost of the consultant, since it’s a routine part of reviewing a major project, like a mine.

The cost of hiring a law firm would likely be borne by taxpayers, and the price tag could be substantial. That’s why the Attorney General has recommended that the DNR get approval from the Legislative Advisory Committee before moving ahead.

“All of this would come only after a positive adequacy decision,” said Naramore. DNR Commissioner Tom Landwehr is widely expected to affirm the adequacy of the FEIS in February, but it’s still uncertain whether state officials will ultimately permit the mine. Reaching agreement on financial assurance will be a key step in that process, should PolyMet reach that point.

The financial assurance would need to cover the cost of more than two dozen significant steps following completion of mining at the site, including the implementation of any corrective actions needed to comply with the permit, demolition of unneeded structures, treatment of discharge water from the mine and tailings basin for hundreds of years, and closing and covering the basin that contains hydrometallurgical sludge.

According to Naramore, an examination of PolyMet’s finances will be part of the process, as will a financial examination of any third party that agrees to bond or indemnify PolyMet for post-mining operational costs. At this point, it’s unclear how much money PolyMet would need to provide as part of its financial assurance, and whether it would need to be paid up front or could be phased in over time.

Commissioner Landwehr has already suggested a phased approach would be appropriate, and the FEIS, in its brief discussion of financial assurance, indicates such an approach is likely. The FEIS also provides a preliminary estimate of what those costs might be, at various stages of mining. The projections were developed by PolyMet, which has an incentive to keep the cost of financial assurance requirements as low as it can. The company’s analysis estimates that setting aside $50-$90 million in the first year of mining would be adequate to cover the long-term costs of mitigation if the mine were to close after just one year. By Year 11, those costs would rise to $160-$200 million and would be slightly lower, $120 million-$170 million, at Year 20, when mining would end under the company’s current plan.

PolyMet’s analysis is significantly lower than other projections, including one offered by three financial professionals in a Star Tribune op-ed in October. That analysis suggested financial assurance of $350 million would be required to meet the long-term clean-up costs.

PolyMet’s estimate does not appear to include the cost of other environmental liabilities the company will inherit if it is issued a permit to mine. When PolyMet purchased some of the former assets of LTV from Cliffs Natural Resources, including the former taconite processing plant and tailings basin near Hoyt Lakes, it agreed to indemnify Cliffs for the cost of reclamation and remediation at the site if PolyMet is eventually granted a permit to mine.

The extent of that commitment became clearer in recent years as Cliffs entered into a consent decree in 2010 with the PCA to settle a lawsuit over ongoing violations at the former taconite processing facility. The decree obligated Cliffs to undertake both short-term and long-term mitigation at the former LTV site. In 2012, the PCA approved pilot testing of various treatment options in hopes of determining the best course for clean-up at the site.

PolyMet acknowledges in its 2015 financial reports that the costs associated with long-term clean-up at the site remain uncertain, but that the company had increased its cost estimate to $72.6 million, as of Jan. 31 of this year. That was an increase of $9.9 million from the previous year.

According to DNR spokesperson Chris Niskanen, the financial assurance package will consider the full range of PolyMet's responsibilities at the former LTV processing facility. "As part of the permitting process, PolyMet would be required to include a detailed assessment of the financial assurance needed for the project, including an assessment of the type and amount of financial assurance needed to address existing site liabilities," stated Niskanen. "The DNR would then evaluate PolyMet’s estimates for the existing liabilities and determine what would be required in terms of financial assurance to protect the state’s interests."

Niskanen said the state would not be in a position to further refine the numbers until the permitting phase, if approved.