In the Matter of the NorthMet Project Permit to Mine Application Dated December 2017 (A18-1952, A18-1958, A18-1959), and In the Matter of the Applications for Dam Safety Permits 2016-1380 and 2016-1383 for the NorthMet Mining Project (A18-1953, A18-1960, A18-1961).
A18-1952 A18-1953 A18-1958 A18-1959 A18-1960 A18-1961
STATE OF MINNESOTA IN COURT OF APPEALS
Filed January 13, 2020
Affirmed in part, reversed in part, and remanded Cleary, Chief Judge Minnesota Department of Natural Resources
Margo S. Brownell, Evan A. Nelson, Maslon LLP, Minneapolis, Minnesota (for relator Friends of the Boundary Waters Wilderness)
Paula G. Maccabee, Just Change Law Offices, St. Paul, Minnesota (for relator WaterLegacy)
Sean Copeland, Tribal Attorney, Cloquet, Minnesota; and
Vanessa L. Ray-Hodge (pro hac vice), Sonosky, Chambers, Sachse, Mielke & Brownell, LLP, Albuquerque, New Mexico (for relator Fond du Lac Band of Lake Superior Chippewa)
Jonathan Katchen (pro hac vice), Sarah Koniewicz, Holland & Hart, LLP, Jackson, Wyoming; and
Monte A. Mills, Caitlinrose H. Fisher, Greene Espel PLLP, Minneapolis, Minnesota; and
Jay C. Johnson (pro hac vice), Venable LLP, Washington, District of Columbia (for respondents PolyMet Mining Corp. and Poly Met Mining, Inc.)
Eric E. Caugh, Zelle LLP, Minneapolis, Minnesota (for amici curiae Arne Carlson, John Gappa, Ron Sternal, and Alan Thometz)
Michael D. Madigan, Brandt F. Erwin, Blair A. Harrington, Megan J. Kunze, Madigan, Dahl & Harlan, P.A., Minneapolis, Minnesota (for amicus curiae Sierra Club)
Mehmet K. Konar-Steenberg, St. Paul, Minnesota (for amicus curiae League of Women Voters Minnesota)
Considered and decided by Cleary, Chief Judge; Hooten, Judge; and Smith, Tracy M., Judge.
S Y L L A B U S
I. Under
II. Under
CLEARY, Chief Judge
In these consolidated certiorari appeals, relators Minnesota Center for Environmental Advocacy (MCEA) et al.,1 WaterLegacy (WL), and the Fond du Lac Band of Lake Superior Chippewa (the band) challenge decisions by respondent Minnesota Department of Natural Resources (DNR) denying petitions for a contested-case hearing and issuing a permit to mine and two dam-safety permits to respondents PolyMet Mining Corp. and Poly Met Mining, Inc. (together PolyMet)2 for a proposed copper-nickel-platinum group elements (PGE) mine known as the NorthMet project. The band also challenges the DNR’s decision to transfer an existing permit to PolyMet.
We affirm the DNR’s decision to transfer the existing permit. But we conclude that the DNR erred in interpreting
FACTS
The permitting decisions challenged in these appeals were made in relation to the NorthMet project, which, if built by PolyMet, would be the first copper-nickel-PGE mine in Minnesota. Although the State of Minnesota has substantial regulatory experience with iron and taconite mining, copper-nickel mining would be new to the state and brings with it the potential for environmental impacts not experienced with iron-ore mining. As such, the NorthMet project has generated significant public interest and controversy. Of particular concern is the potential for acid mine drainage, which may occur if ore and waste rock containing sulfide minerals are exposed to oxygen and water, causing the release of soluble metals and sulfate in area surface waters and groundwaters.
A. The planned project
As planned, the NorthMet project would consist of a mine site six miles south of Babbitt, a plant site six miles north of Hoyt Lakes, and a transportation and utility corridor connecting the mine and plant sites. The entire project would be located in the St. Louis River Watershed, which drains to Lake Superior. Mining would occur on relatively undisturbed land, while the plant site would be at the location of a former taconite-processing facility that was operated by the LTV Steel Mining Company (LTVSMC). The project is planned to have three phases: an 18- to 24-month construction phase; a 20-year
At the mine site, mining would be conducted in three open pits. Ore would be separated from waste rock, and the waste rock would be categorized according to its sulfur content and placed on one of several permanent or temporary stockpiles. Over the 20-year mine life, approximately 225 million tons of ore and 308 million tons of waste rock would be removed from the NorthMet deposit.
Ore would be transported from the mine site to the plant site by rail. At the plant site, the ore would be crushed and processed at a beneficiation plant, producing copper and nickel concentrate and tailings.4 The concentrates would be shipped off site as final products, and some nickel concentrate might be used as feedstock for an anticipated
PolyMet proposes that tailings be transferred as slurry to a flotation tailings basin (the tailings basin),5 which would be constructed, without a liner, on top of the existing LTVSMC tailings basin. A perimeter embankment, or dam, surrounds the existing tailings basin, and future “lifts” of the tailings basin dam would be built from LTVSMC bulk tailings using an upstream construction method.6 New dam lifts would also incorporate a bentonite-amended oxygen-barrier layer (the bentonite amendment) on the exterior side of the basin. A rock buttress would be built to reinforce the stability of the dam, and a seepage-collection system would be built to collect water that seeps from the basin. Tailings would be placed under a wet cover (pond) intended to minimize reactivity. Over the 20-year mine life, approximately 225 million short tons of tailings would be placed in the tailings basin, which would be constructed to a final height of 250 feet.
Several years after beneficiation begins, PolyMet plans to build a hydrometallurgical plant, at which nickel concentrate would be further processed to extract and isolate PGEs, precious metals, and base metals. This further processing would create
Following the approximately 20-year mine life, PolyMet proposes to complete reclamation, close the mine, and perform postclosure maintenance. The tailings basin would be “closed” under an approximately 900-acre pond, which would be maintained in the tailings basin indefinitely. Additional bentonite would be added to the beaches of the dam and the pond bottom. Postclosure, the NorthMet project would require mechanical water treatment for an indefinite period of time.
B. Environmental review and permit proceedings
Environmental review for the NorthMet project began in about 2004. See In re Applications for Supplemental Envtl. Impact Statement for Proposed NorthMet Project, No. A18-1312, 2019 WL 2262780, at *1 (Minn. App. May 28, 2019) (SEIS Appeals) (summarizing environmental-review process), review denied (Minn. Aug. 20, 2019). The DNR, in cooperation with the United States Army Corps of Engineers and the United States Forest Service,7 issued a draft environmental-impact statement; a supplemental draft environmental-impact statement; and a final environmental-impact statement (FEIS). Id.
Following environmental review, PolyMet consulted with the DNR and submitted, as relevant here, applications for a permit to mine and two dam-safety permits, one for the tailings basin and one for the hydrometallurgical residue facility. Based on feedback from the DNR, PolyMet submitted revised applications, with final dam-safety-permit applications submitted in May of 2017 and a final permit-to-mine application submitted in December of 2017. The DNR issued a draft permit to mine and noticed public-comment periods for the permit to mine and the dam-safety permits. Each of the relators submitted comments on the permits during the public-comment periods. MCEA and WL also submitted petitions for a contested-case hearing on the permit to mine.
On November 1, 2018, the DNR issued three decisions: the first denied the petitions for a contested-case hearing and granted the permit to mine; the second granted the dam-safety permits; and the third transferred the existing permit for the LTVSMC tailings basin to PolyMet.
In December 2018, relators—environmental organizations that made many objections to PolyMet’s proposal through the administrative processes—filed six separate certiorari appeals, three from the DNR’s decision to deny a contested-case hearing and to issue the permit to mine (A18-1952, A18-1958, and A18-1959) and three from the DNR’s decision to issue the dam-safety permits (A18-1953, A18-1960, and A18-1961).9 The band’s dam-safety-permit appeal also challenged the DNR’s decision to transfer the existing permit for the LTVSMC tailings basin. This court consolidated all six appeals on the DNR’s motion.10
I. Is the DNR’s decision to deny a contested-case hearing unsupported by substantial evidence, arbitrary and capricious, or affected by error of law?
II. Did the DNR err by issuing a permit to mine without a definite term?
III. Is the DNR’s decision to transfer the existing tailings basin permit arbitrary and capricious?
ANALYSIS
In reviewing the DNR’s decisions, this court may affirm or remand for further proceedings, or we may reverse the agency’s decision if we determine that the decision is unsupported by substantial evidence, arbitrary or capricious, or affected by error of law. See
The DNR is the principal regulator of mining activities in Minnesota. See generally
The dam-safety permits are governed by
In addition to the specific statutory and regulatory provisions governing the permits in this case, the DNR’s conduct is governed by the Minnesota Environmental Rights Act (MERA),
With this regulatory framework in mind, we turn to relators’ arguments on appeal.
I.
MCEA and WL assert that the DNR’s decision to deny a contested-case hearing was based on legal error, arbitrary and capricious, and unsupported by substantial evidence. Under
The commissioner must grant the petition to hold a contested case hearing or order upon the commissioner’s own motion that a contested case hearing be held if the commissioner finds that:
(1) there is a material issue of fact in dispute concerning the completed application before the commissioner;
(2) the commissioner has jurisdiction to make a determination on the disputed material issue of fact; and
(3) there is a reasonable basis underlying a disputed material issue of fact so that a contested case hearing would allow the introduction of information that would aid the
commissioner in resolving the disputed facts in order to make a final decision on the completed application.13
Before May 31, 2017,
In support of their petitions for a contested-case hearing, MCEA and WL submitted declarations from six of their members (the members) who live near the NorthMet project. Applying
A.
As we explain above,
We review issues of statutory interpretation de novo, giving words and phrases their plain and ordinary meaning, and according deference to an agency’s interpretation only if a statute is ambiguous. See A.A.A. v. Minn. Dep’t of Human Servs., 832 N.W.2d 816, 819, 822-23 (Minn. 2013); see also
Furthermore, applying the common definition of “affected,” we conclude that substantial evidence is lacking to support the DNR’s finding that the members do not own property that will be affected by the NorthMet project. The members’ affidavits provide substantial evidence of their ownership of property, predominantly downstream of the project, that will be affected, that is “[a]cted upon, influenced, or changed,” by the release of pollutants from the tailings basin. American Heritage, supra, at 28. WL has provided substantial evidence—in the form of an inundation study conducted by PolyMet—that its members’ properties will be affected by the risk of dam failure. The DNR counters that a dam break is unlikely and that it has concluded that the project “is not expected to have
The DNR also asserts that, if the members are considered affected property owners, “then the limitations imposed by the legislature on who has standing would be rendered practically meaningless.” Although we need not determine the precise limit of the statutory language in these appeals, we are satisfied that the members fall well within its bounds. By the DNR’s own calculations, each of the members lives within 66 miles of the NorthMet project, and the closest member lives just 8.6 miles away. In addition, most of the members live within the St. Louis River Watershed, the same watershed in which the project would be located. Under these circumstances, we reject the DNR’s assertion that allowing the members (through MCEA and WL) to file contested-case petitions renders the limitations in
B.
In addition to arguing that its members are affected property owners, the MCEA argues that the DNR had an independent duty under
C.
The commissioner must order a contested-case hearing if “there is a reasonable basis underlying a disputed material issue of fact so that a contested case hearing would allow the introduction of information that would aid the commissioner in resolving the disputed facts in order to make a final decision.”
The DNR urges this court to defer to the commissioner’s determination that a contested-case hearing would not aid him in making a decision, suggesting that the decision whether to grant a contested-case hearing is entirely discretionary with the commissioner. This suggestion is inconsistent with the language of the statute and the caselaw. Under
The DNR and PolyMet argue that a contested-case hearing is only warranted when a person introduces new evidence that the agency has not previously considered in environmental-review or permitting proceedings. We rejected a similar argument in Owatonna, 672 N.W.2d at 929. In that case, the MPCA argued that the relator was not entitled to a contested-case hearing because they produced no “new” evidence. Id. Like the DNR and PolyMet, the MPCA in that case relied on language in the supreme court’s decision in Red Wing. Id.; see Red Wing, 421 N.W.2d at 404 (holding that contested-case hearing was not warranted when relators “failed to provide the agency or this court with any specific expert’s names or with any indication of what specific new facts an expert might testify to at a contested case hearing”). But, as we explained in Owatonna, Red Wing was a case in which the relators offered only criticism of the MPCA’s decision, the MPCA agreed that the issues needed further study, and the relators offered no evidence (new or otherwise) to contradict the agency’s decision. Red Wing, 421 N.W.2d at 404. In short, the Red Wing relators sought a contested-case hearing to investigate or develop factual issues. See id. at 403-04 (recounting relators’ argument that “even if the data is unavailable, that is not a proper basis for denying a contested case [hearing],” which would offer procedural benefits including discovery). The supreme court concluded that relators had
We also reject the DNR’s assertion that a fact issue does not meet the statutory criteria for a contested-case hearing if an agency has already considered an issue during environmental review. The purpose of environmental review “is to force agencies to make their own impartial evaluation of environmental considerations before reaching their decisions.” Iron Rangers for Responsible Ridge Action v. Iron Range Res., 531 N.W.2d 874, 880 (Minn. App. 1995) (quotation omitted), review denied (Minn. July 28, 1995). “As an investigative tool, the EIS does not authorize or preclude an action and does not take the place of permit or other proceedings governing a particular project.” In re Enbridge Energy, Ltd. P‘ship, 930 N.W.2d 12, 20 (Minn. App. 2019). Thus, the fact that the DNR may have evaluated certain evidence in conducting environmental review does not excuse it from also evaluating that evidence in the permit proceedings, including for the purpose of determining whether a contested-case hearing is required. Moreover, as we note above,
MCEA and WL have identified numerous factual issues on which they assert that a contested-case hearing is required, including factual issues in the following subject areas.
Upstream construction of the tailings basin dam
The NorthMet tailings basin dam would be constructed using an upstream construction method. Upstream construction can generally be understood as a method where the building blocks of a dam are added in a stair-step fashion travelling toward the inside of a tailings basin. In contrast, downstream construction is a method where the building blocks are added to the outside of the tailings basin dam. And a third type of construction, centerline construction, is a hybrid of the upstream and downstream methods. Although the upstream construction method has been the most commonly used method to build tailings basins, the DNR’s own documents reflect that upstream construction is the least “robust” of the three dam construction methods.
MCEA and WL argue that a contested-case hearing was required to address whether upstream construction can comply with
Bentonite amendment to the tailings basin
According to the DNR, “[t]he bentonite amendment is a thin layer of soil that will be ‘amended’ to incorporate a small percentage of bentonite, which will limit oxygen from
MCEA and WL assert that a contested-case hearing is required to address whether the bentonite amendment can comply with
[e]ven if a permanent pond can be maintained above the tailings, the success of wet closure in terms of minimizing oxidation of tailings hinges on the ability of the bentonite-amended layers in the dams and beaches to remain at or near saturation continuously for a long period of time. This is an unproven and untested approach, and lessons learned from studies on the field performance of near-surface earthen barriers indicate that these layers may not perform as intended over the long term.
That expert also concurred with the DNR’s consultant that there is a possibility that the bentonite-amended layers “will exacerbate erosion of the underlying tailings on the dam faces, which would undermine dam stability.”
Alternatives to wet closure of the tailings basin
PolyMet plans for wet closure for the NorthMet tailings basin, which means that the tailings will remain covered by a 900-acre pond indefinitely, and perhaps in perpetuity.23 Wet closure can be contrasted with “dry closure,” which involves draining a basin. Another tailings-management option is “dry stacking” or “filtered tailings,” which involves
Like upstream construction, wet closure is a controversial issue, and the DNR’s own employees and consultants had reservations about approving a wet closure. The DNR’s senior dam engineer “favor[ed] dry closure,” and expressed concern that “the proposed wet cap will significantly increase the potential for a dam failure, and will result in costly monitoring and maintenance over the life of the project.” One of the DNR’s consultants shared the senior dam engineer’s concerns, explaining:
In its simplest form, the proposed tailings basin will be a big pile of highly erosive loose sand and silt. The wet closure will include a pond of water on top that saturates the sand/silt making it less stable and more likely to fail than the dry option.
. . . .
I envision that PolyMet’s reclamation plan could work for a while, but I don’t see how it will function forever without falling apart unless it is continuously maintained; which is a major leap of faith.
. . . .
I don’t like the wet closure, because it is not a permanent closure. I believe it will eventually fail and release the sulfates.
In support of their petitions for a contested-case hearing, MCEA and WL submitted evidence including reports from industry experts who opine on the availability of alternative closure methods to reduce the risks of both dam failure and perpetual water treatment. One expert explains that “water remaining on and in the tailings acts as a deadly mobilizing agent should a catastrophic failure occur. Dry tailings can be mobilized if support is removed, but the distance they will move is orders of magnitude less than tailings saturated with water.” In addition, relators point to a report by an independent review panel on the Mount Polley dam failure. That report identifies dry stacking as a best available technology for storage of tailings.
Financial assurance provides a source of funds to be used by the DNR if PolyMet fails to perform reclamation activities—including closure and postclosure maintenance—that would be needed when operations cease (whether as planned or prematurely), as well as any corrective action that may be required by the commissioner under the permit. The DNR has required financial assurance for the NorthMet project, which can be made through a combination of deposits to a trust for the benefit of the state: irrevocable letters of credit (ILOCs), surety or reclamation bonds, and cash or cash equivalents. Specifically, PolyMet must:
- Provide $74 million in financial assurance at permit issuance, $10 million of which must be a deposit to the trust.
- Starting at Mine Year 1 (MY 1) and annually thereafter, provide financial assurance based on a formula intended to periodically adjust the estimated reclamation and long-term care costs. Required financial assurance is expected to range from $544 million for MY 1 to $1.039 billion at MY 11.
- For each of MY 1-8, deposit $2 million into the trust.
- Starting with MY 9, “ramp up” trust deposits, so that the trust is fully funded for long-term costs by MY 19. These ramped up costs will be determined by subtracting the current amount in the trust from the total expected to be required for long-term costs (currently estimated at $580 million) and dividing that number by the number of years left in the ramp up period.
Amici curiae Arne Carlson, John Gappa, Ron Sternal, and Alan Thometz (Carlson amici)26 assert that a contested-case hearing is required to address whether the financial assurance required by the commissioner will be sufficient to cover reclamation and long-term costs. They argue that the financial assurance is insufficient because the payments to the trust are backloaded, because PolyMet will have difficulty obtaining financial-assurance instruments, and because the financial-assurance amounts are based on artificially low reclamation estimates without sufficient contingency cushions. They also assert that the insurance requirements are insufficient.
MCEA raised similar issues in its petition for a contested-case hearing and submitted evidence including an expert report that supports the Carlson amici’s arguments on appeal. In particular, that expert concluded that the “end-loaded requirements will have a significant impact on project economics, particularly going forward from Year 9, which overall suggests the project is at significant risk of cessation beginning that year, particularly if metal prices were to become unfavorable.” In addition, the Carlson amici
Glencore
Glencore27 is a Swiss-based company that owns a substantial interest in PolyMet, has provided much of the funding for the NorthMet project to date, and is expected to continue to provide funding. WL argues that a contested-case hearing is required to determine whether Glencore would be “engaged in a mining operation” with PolyMet, such that the permit must be issued jointly to Glencore and PolyMet. See
In support of a supplemental petition for a contested-case hearing,28 WL pointed to evidence demonstrating Glencore’s increasing equity interest in PolyMet, as well as significant involvement in the NorthMet project. With respect to Glencore’s interest, PolyMet represented in its 2017 permit-to-mine application that Glencore “would own 35.1% of the common shares if all options and warrants were exercised by Glencore and
We conclude that, with respect to each of the foregoing subject areas, MCEA and WL have made a “showing that evidence can be produced that is contrary to the action proposed by the agency.” Owatonna, 672 N.W.2d at 929.30 We acknowledge that the DNR developed a substantial record during environmental review and the permitting proceedings; that the DNR evaluated evidence submitted by all of the parties, including PolyMet, before issuing its decisions; and that, in many areas, the DNR relied on evidence that is contrary to that submitted by MCEA and WL to support its decisions. But the issue before us is not whether there is substantial evidence to support the DNR’s decisions to
II.
Because we have reversed the DNR’s decisions granting the permit to mine and dam-safety permits on the basis of MCEA’s and WL’s contested-case arguments, we need not, and do not, reach relators’ remaining arguments about these permits, with one exception. In the interest of administrative and judicial efficiency, we address the argument, made by all of the relators, that the DNR erred by issuing a permit to mine without a definite term. This argument is based on the language of
The DNR argues that “nothing in the statute or rule require[s] a permit to have a fixed term.” We disagree. The plain language of the statute expressly requires a “term,” which is commonly understood as a fixed period of time. See American Heritage, supra, at 1796 (defining “term” as “[a] limited or established period of time that something is supposed to last”).32 Accordingly, we conclude that the DNR erred by issuing a permit without a fixed term, and direct that, for any permit issued following remand, the DNR shall determine and impose an appropriate, definite term.
III.
The band asserts that the DNR’s decision transferring to PolyMet the permit for the existing LTVSMC tailings basin is arbitrary and capricious. The transfer is governed by
DECISION
The DNR’s decision to transfer the existing permit for the LTVSMC tailings basin was not arbitrary and capricious, and we affirm that decision. The DNR’s decision to deny a contested-case hearing in relation to the NorthMet project was based on errors of law and unsupported by substantial evidence, and the DNR also erred by failing to include a definite term in the NorthMet permit to mine. For these reasons, we reverse the DNR’s decisions granting the permit to mine and dam-safety permits for the NorthMet project, and we remand for the DNR to hold a contested-case hearing.
Affirmed in part, reversed in part, and remanded.
Notes
The NorthMet project is designed to be progressively reclaimed, which means that reclamation activities would occur while the mining project is still in operation, allowing for a portion of the disturbed areas to be reclaimed prior to closure.Actions intended to return the land surface to an equivalent undisturbed condition. Restoration of mined land to original contour, use, or condition. Steps or operations integral to mining that prepare the land for post-mining use are called reclamation. When the objective of reclamation is to return the land to pre-mining conditions and uses, it is sometimes called restoration.
No state action significantly affecting the quality of the environment shall be allowed, nor shall any permit for natural
resources management and development be granted, where such action or permit has caused or is likely to cause pollution, impairment, or destruction of the air, water, land or other natural resources located within the state, so long as there is a feasible and prudent alternative consistent with the reasonable requirements of the public health, safety, and welfare and the state’s paramount concern for the protection of its air, water, land and other natural resources from pollution, impairment, or destruction. Economic considerations alone shall not justify such conduct.
A. there is a material issue of fact in dispute concerning the matter pending before the board or commissioner;
B. the board or commissioner has the jurisdiction to make a determination on the disputed material issue of fact; and
C. there is a reasonable basis underlying the disputed material issue of fact or facts such that the holding of a contested case hearing would allow the introduction of information that would aid the board or commissioner in resolving the disputed facts in making a final decision on the matter.