Serving Northern St. Louis County, Minnesota

National Forest/PolyMet land swap proposal questioned

Marshall Helmberger
Posted 2/11/16

REGIONAL—Officials on the Superior National Forest are poised to approve the largest federal-to-private party land exchange in Minnesota history without releasing supporting documents for the …

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National Forest/PolyMet land swap proposal questioned

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REGIONAL—Officials on the Superior National Forest are poised to approve the largest federal-to-private party land exchange in Minnesota history without releasing supporting documents for the appraisals that underlie the historic land swap. And that’s raising questions about whether the Forest Service is getting fair value for the lands that PolyMet is hoping to obtain.

The proposed exchange of just over 6,600 acres of federally-owned land is designed to make way for PolyMet Mining’s proposed NorthMet copper-nickel mine near Babbitt. Superior National Forest Supervisor Brenda Halter issued a draft decision in December approving the land swap, but her proposed decision has raised more than 22,000 separate objections from opponents of the mine. Most of the objections focus on environmental effects of the mine project itself, but attorney Paula Maccabee, legal counsel for the group Water Legacy, is also questioning whether the federal lands that the Forest Service proposes to hand over to PolyMet were properly appraised. Maccabee says that the Forest Service has an obligation under federal law to demonstrate that the government is getting fair value for the land.

Federal courts have previously found in favor of environmental plaintiffs when they’ve challenged federal land exchanges for undervaluing the public lands involved.

Maccabee said she’s concerned that’s happening in this case, but despite repeated requests under the Freedom of Information Act (FOIA), the Forest Service has refused to provide Maccabee with key documents that Forest Service officials believe support their appraisal. Forest Service officials have also refused to release appraisal documents to the Timberjay, despite the newspaper’s own FOIA request.

Halter said her agency is frequently asked to provide supporting documents for land exchange appraisals, but has a policy of withholding such documents until after land exchanges are final. She said the ultimate decision on release of the information rests with the regional forester in Milwaukee, or in the Forest Service’s Washington office, not with her. “The Washington office could make an exception,” she said. “They are the only ones who could do so.”

While federal guidance regarding the release of government information isn’t always consistent, the Forest Service’s own policy manual states that: “unless the responsible official documents a sound legal basis for denial of access, the final approved appraisal report(s) and appraisal review report(s) for Federal and non-Federal lands in land exchange transactions shall be made available, upon written request, to all interested parties when:

1. An environmental assessment or draft environmental impact statement is released for public comment identifying a preferred alternative, and the appraisal report(s) have been reviewed and approved for agency use.”

The National Environmental Policy Act, or NEPA, which guides the federal environmental review process, also requires that “any underlying documents” related to an environmental impact statement should be made available to the public, subject to the requirements of FOIA.

The land exchange in question was part of the PolyMet environmental review conducted jointly by the Minnesota Department of Natural Resources, the Forest Service, and the Army Corps of Engineers, so the associated appraisals would seem to be public information. The DNR released the final version of the study in November and is expected to make a final determination on its adequacy later this month.

Maccabee said the Forest Service’s refusal to release the data is a violation of federal law. “Failure of the Forest Service to release the PolyMet NorthMet land appraisals violated NEPA and the FOIA, conflicted with its own policies and deprived the public of any means of verifying that their interests in federal lands were not being sacrificed to serve the PolyMet Mining Company,” Maccabee stated in her 133-page objection to the land exchange.

Does the appraisal favor PolyMet?

On its face, says Maccabee, the land exchange does appear to favor PolyMet. According to the Forest Service, the appraisal shows that the 6,650 acres of federal land that the Forest Service proposes to exchange with PolyMet is worth $3,658,000, or $550 an acre. Meanwhile, the appraisal found that the 6,680 acres of land that PolyMet proposes to exchange with the Forest Service are worth a combined total of $4,083,000, or $610 an acre. To make up for the difference, the Forest Service proposes to pay PolyMet $425,000 in cash.

Real estate professionals are quick to point out that a number of factors can account for differences in land values, and that the difference in the per-acre price of the lands in question could be explained in any number of ways. In northeastern Minnesota, the amount of wetlands on a property can significantly impact land values, according to Charlie Chernak, a real estate broker with Bear Island Land Company, in Ely.

While the lands involved in the exchange all contain significant areas of wetland, the private lands to be acquired by the Forest Service include more than 500 additional acres of wetlands than the lands they plan to hand over to PolyMet. The 6,650 acres of federal lands to be traded include 4,154 acres of wetlands (or 62 percent of the total), according to the Final Environmental Impact Statement released in November. But the parcels that PolyMet proposes to trade include 4,668 acres of wetlands, or 70 percent of the total, according to the FEIS.

The largest single parcel of land that PolyMet proposes to exchange, a 4,600-acre tract located between two iron ore pits northeast of Virginia, includes nearly 2,000 acres of wetlands in and around Hay Lake. PolyMet purchased the land in 2011 for just over $3.2 million. Based on county tax records, estimated market values for the Hay Lake properties range from a high of $567 per acre on high ground, to a low of $195 per acre in wetland areas, with an average value per acre of $423.

Another 160-acre parcel located near the Gold Mine Resort in northwestern St. Louis County has an estimated market value of $446 an acre according to county records. Other lands that PolyMet proposes to trade are located in Lake County.

By contrast, the federal lands in question are valued significantly higher by the county. While the lands are tax exempt, the county does assign estimated market values to public lands, and the values for the federal lands in question average about $640 an acre.

Real estate appraiser Steve Abrahamson, of Vermilion Land Office, in Tower, said county market values are often used as one indicator of land value, but that they are often not as useful as people think. He said a review of recent comparable sales, or “comps” as they are known in the real estate business, is the most defensible means of making an appraisal.

Forest Service officials say the appraisal underlying the PolyMet land exchange considered comps, but the agency’s refusal to release the information makes it difficult for the public to assess whether the comparisons were reasonable.

Highest value?

Federal rules governing land exchanges require that appraisers base valuations on the “highest and best use,” essentially a measure of land use that will achieve the highest economic return to the owner.

In the case of the PolyMet land exchange, Maccabee said the Forest Service valued the federal lands using timber management as the highest and best use. Maccabee said that decision significantly reduced the potential value, and turns a blind eye to PolyMet’s actual intentions for the land— strip mining for copper-nickel. In doing so, Maccabee says the Forest Service is violating federal rules laid out in the federal Uniform Appraisal Standards, which specifically require that underlying marketable minerals should be considered in determining the value of a property.

“Many things must be considered in determining the highest and best use of property and each potential use must be analyzed in terms of its physical possibility, legal permissibility, financial feasibility, and its degree of profitability,” states the federal appraisal standard. “That use which meets the first three tests and is the most profitable use (i.e., results in the highest value) is the property’s highest and best use.”

In this instance, according to PolyMet’s own feasibility study, an open pit mine, not timber management, is the most profitable use for the federal lands it hopes to obtain.

Halter said the Forest Service cannot consider the value of the minerals in this instance, since they don’t belong to the Forest Service. “The appraiser looks at the range of things that could occur on that land, as it is in Forest Service ownership,” said Halter. “We don’t hold the mineral rights so we don’t consider the minerals when valuing the property,” she said.

Maccabee said the pattern of undervaluing federal lands proposed for exchange has been a “national scandal” that has failed to protect taxpayers and the public. “If the surface estate sought by PolyMet were in private hands, there is no question that the private seller would require a premium price based on the highest and best use of the property for a copper-nickel mine,” she said.

Exchange would likely proceed regardless of mine permitting

While PolyMet’s proposed NorthMet mine still faces a number of hurdles, including potential legal challenges and questions about its economic viability given the recent fall in metals prices, Forest Service officials say the land exchange doesn’t hinge on whether the project moves forward. According to Halter, the Forest Service is pursuing the exchange to resolve a legal conflict with PolyMet over access to the mineral deposits.

According to the Forest Service, a 1911 federal law, known as the Weeks Act, prohibits strip mining, among other things, on federal lands obtained under the act. The Superior National Forest lands at issue were acquired under the authority of the act and that means, according to Halter, that the Forest Service can’t legally approve PolyMet’s current plan for an open pit mine.

PolyMet officials, according to Halter, disagree with the Forest Service’s legal opinion and she said the exchange is a way to avoid a legal battle over the issue. Forest Service officials are concerned that a possible loss in court could undermine the century-old protections of the Weeks Act, affecting management of hundreds of thousands of acres in the eastern two-thirds of the country.

Whether PolyMet proceeds with its plans or not, said Halter, the minerals in question are likely to get mined someday and that is why she sees it as important to address the issue now. “The driving purpose and need was to resolve this particular conflict,” she said.

Comments

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snowshoe2

Thanks for the info.

I wonder how much political pressure behind the scenes is moving this forward?

Need more out in the open.

Thursday, February 11, 2016
snowshoe2

Talk about the USFS paying Polymet $425,000 to make up the difference in the land exchange.

Polymet wants the land,we shouldn't have to pay them nothing. They are the ones who want the land exchange.

Friday, February 12, 2016