A Tale of Two Mine Plans
April 17,2020
JT Haines, MCEA Duluth Office:
The battle to protect Minnesota’s air, land, and water from the threat of international sulfide mining has reached the courts, with several key decisions coming down already in 2020. While you may have heard about the decision to strike down two major construction permits issued to Canadian junior miner PolyMet -- including the permit to build a dam with the same design method that has been failing around the world -- a recent air permit decision is just as important, and holds useful lessons about the company’s approach to Minnesota’s environmental laws.
For those who may be less familiar, PolyMet -- a majority-owned subsidiary of Swiss commodities giant Glencore -- has for years been seeking permission to operate the first ever sulfide-ore copper mine in Minnesota. Bogged down due to a failed Environmental Impact Statement, a public comment scandal, flagging commodities and stock prices, and, most importantly, broad concern in Minnesota about the likely impacts of the company’s proposal, PolyMet now faces serious legal challenges as well.
To date, four PolyMet permits have been struck down by Minnesota courts. On March 23, the Court of Appeals rejected the PolyMet air pollution permit, finding that the Minnesota Pollution Control Agency (MPCA) failed to consider evidence that PolyMet has been engaged in “sham permitting” when it issued the permit. “Sham permitting” occurs when an applicant avoids more protective permit requirements by pretending to be a “minor” air pollution source.
The evidence of sham permitting, discussed below, has implications not only for the air pollution permit case, but for the PolyMet application as a whole. Fortunately, Minnesota has a new opportunity to consider that evidence again now.
Two Audiences, Two Messages
PolyMet’s proposal in Minnesota is to process 32,000 tons of ore per day for twenty years. Throughout the review of its application by Minnesota state agencies, PolyMet has insisted that it only plans to implement this 32,000 ton per day plan, despite its awareness of additional ore at the site.
For the past several years, however, the company has told investors a different story.
In early 2018, MCEA’s legal team discovered important information in a PolyMet securities document called an “NI 43-101 Technical Report” -- a filing PolyMet is required to make as a publicly traded Canadian company. In that document, PolyMet revealed that it was considering two expansion scenarios, including one plan for the processing of 118,000 tons per day over a 19-year mine plan.
To be clear -- a sulfide mining operation processing 32,000 tons per day would be no small thing, particularly in Minnesota’s water-rich and sensitive wetland environment. Even at this size, the project would entail the largest permitted destruction of wetlands in the state’s history.
But a 118,000 ton per day mine plan would be 3.6 times that size and speed. In addition to more earth moved and more tailings stored behind an already dangerous dam, the 118,000 ton per day expansion scenario would also require the addition of an eight-mile long conveyor belt, in-pit crushing that would spread dust in sensitive wetlands, and more air pollution in general.
Careful observers will note the financial forecasts in the document as well: The rate of return for the 118,000 tpd expansion scenario is more than double the applied-for version, and the overall value (measured by “net present value”) of the 118,000 tpd scenario is more than eight times the application version. (Not more jobs, though. One year shorter in duration, the 118,000 tpd scenario does not indicate any additional hires.)
Despite the obvious relevance of the more profitable expansion scenarios, PolyMet never delivered the report to Minnesotans or our agencies. In fact, if it weren’t for the team at MCEA, Minnesota agencies might not have received it at all. MCEA lawyers delivered the report to the MPCA on three occasions during the permit review, along with a formal request that it be included in the official record.
Nevertheless, in December, 2018, the MPCA issued an air pollution permit for the 32,000 ton per day mine plan, and didn’t touch the questions raised by the expansion plans.
Why Two Messages?
You might be asking, why would PolyMet communicate one plan to Minnesota, while presenting a much larger one to its investors?
On January 8, 2020, MCEA attorney Evan Mulholland described the differing scenarios for the Minnesota Court of Appeals, including this key fact: Smaller proposals, below a certain air pollution threshold, qualify for less stringent permits under federal law.
At 32,000 tons of ore per day, the smaller PolyMet mine plan is under the threshold for a “major source” permit under the Clean Air Act. The 118,000 ton per day scenario, however, would almost certainly require a “major source” permit, which involves stricter requirements including the use of “best available control technology” for air pollution reduction. In other words, starting with a smaller plan, if allowed, could provide a company with an opportunity to get a project underway without the stricter requirements.
Which raises this clear question: What is PolyMet’s actual intent, and should the 118,000 ton per day version have been part of the permit review? In other words, is the company engaging in “sham permitting” with the smaller initial mine plan?
The company’s response has been to say the expansion scenarios are speculative, and that Minnesota law only requires such information to be delivered to the agencies in the event of an actual expansion application. Meanwhile, though, PolyMet has continued to sell investors on the larger plans, and has confirmed reserves which are part of the expansion scenarios and which it previously said were “inferred.” (There is a complicated story to be told about how PolyMet kept certain resources as “inferred” in reports, allowing them to simultaneously include these resources in their presentations to investors and represent to Minnesota regulators that they are speculative. In fact, PolyMet announced new reserves -- which make up some or all of the expansion scenarios depicted in the investor report -- on November 19, 2019, shortly before oral argument in this case at which its lawyers continued to describe the expansion scenarios as “speculative.”)
The Inherent Danger of Expansion
Expansion plans like these are nothing new to the industry. In fact, they are commonplace, and after-the-fact mine expansions are one of the root causes of mining disasters.
Experts on mining economics have made clear that when increased tailings capacity is placed in existing storage facilities, rather than in new facilities specifically engineered to handle the higher volumes, failure is regularly the result. Major expansions rarely include a systematic re-evaluation of existing storage facility capacity or tailings management needs inherent in the planned expansion. Of course, profit motives typically drive such choices, which can lead to catastrophic loss.
In the case of Mount Polley in British Columbia, that dam failed catastrophically in 2014, sending 25 million cubic meters of contaminants into pristine Quesnel Lake in Xat’sull First Nation territory, one of the most important salmon spawning areas left in British Columbia. The expert review panel later concluded that if the original design had been followed, the failure would not have occurred. (There’s much more to say about Mount Polley as well. To read about the trip of a British Columbia delegation to Minnesota in 2018 to warn about their experience, click here.)
The fact is, projects are harder to regulate once they are up and running because, at that point, theoretical jobs are held by real people and environmental damage has already been done. This is even more true when massive profits are on the line. PolyMet and its majority owner Glencore are, of course, well aware of this. Fortunately for Minnesotans, so are our courts.
The Court’s Finding
In its March 23 opinion, the Minnesota Court of Appeals noted that “of course, once a project is operating, expansion proposals may be viewed more favorably by regulators...If [118,000 tons per day] is the true course being charted by PolyMet, then there is merit to the argument that the synthetic-minor permit is a sham.”
The Court found that the MPCA erred by dismissing “the consideration that PolyMet intended to produce ore at a significantly elevated pace” and rejected the air pollution permit, ordering further review at the agency. (You can listen to the entire January 8 oral argument here, and view the Court’s decision here.)
Notably, in the very same month that PolyMet lawyers were in court asking Minnesota judges to disregard the expansion plans as “speculative,” PolyMet executives were again touting those plans to investors. The company’s January 2020 Investor Report, which includes the expansion scenarios, continues to be available on the company’s website.
What’s Next
The next step in the air pollution case is for PolyMet, and separately the agency, to decide whether they will seek review of the Court of Appeals’ March 23 decision. Given the Court’s clear repudiation of the company’s approach to Minnesota’s permit process, the MPCA should forgo that appeal and begin an open and thorough review of the true scope of the company’s intentions.
PolyMet has deliberately misled Minnesotans. And it’s clear that it has done so in an effort to avoid stronger standards meant to protect people from air pollution, and, potentially, to get a foot in the door under false pretenses. The Court’s rejection of the air pollution permit, as well as its rejection of each of the other PolyMet permits that have come before it to date, presents an opportunity for Minnesota to hit the reset button across the board and consider how we got here. We should take it.
Learn more about our case against PolyMet's pollution at: peoplevspolymet.org