Scrutiny of PolyMet proposal turns to cleanup

One of the most contentious issues in the debate over whether Minnesota should allow PolyMet Mining Corp. to build the state's first copper-nickel mine is whether the company can cover cleanup costs after it closes.

PolyMet says it can. But critics of the project say the record of mining companies elsewhere is replete with bankruptcies and environmental disasters that have left taxpayers on the hook for tens of billions of dollars.

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A Minnesota House committee will look Tuesday at whether the financial assurance package can be structured to protect taxpayers now and potentially centuries into the future. Legislative staffers have a long list of tough questions that Department of Natural Resources officials will be asked to address. PolyMet officials and critics all plan to testify, and the hearing will be streamed live on the House website.

"The discussion about financial assurance really belongs to all Minnesotans because if any decisions are made that don't work out as intended, then Minnesotans will pay for the mistakes," said Rep. Jean Wagenius, DFL-Minneapolis, chairwoman of the panel.

"The challenge here is can a mining operation put enough money on the table to take care of any problems and still be profitable?" she said.

PolyMet's proposed NorthMet mine and processing facility will be subject to state regulations that require companies to put up a bankruptcy-proof package to cover costs of reclaiming the mine site and long-term treatment and monitoring. PolyMet's preliminary estimate of cost to close the mine is up to $200 million, with up to $6 million a year after that for treatment and monitoring.

Copper-nickel mining poses environmental challenges because the nonferrous metals are chemically bound up in sulfide minerals that can produce acids and other pollutants when exposed to the elements. The latest environmental review lists several measures designed to make sure the project meets water quality standards, but it also says long-term treatment of water flowing from the project will be necessary.

The discussion about financial assurance really belongs to all Minnesotans because if any decisions are made that don't work out as intended, then Minnesotans will pay for the mistakes.

Nobody knows for how long. Environmentalists seized on language in an earlier draft of the environmental review suggesting that water at the mine site would need to be treated for 200 years, with 500 years of treatment needed at the separate processing plant site. DNR and PolyMet officials later said that was a misinterpretation and treatment might not be necessary for nearly that long -- but they said it could be needed for longer.

Financial assurances are covered only briefly in the nearly 2,200-page environmental review that the DNR released for public comment in December. The DNR plans to deal with financial assurances primarily after the environmental review is finalized and it takes up PolyMet's application for a permit to mine.

The DNR therefore has yet to address how financial assurance will be structured or how much it will cost PolyMet, though it's expected to include some combination of financial instruments such as surety bonds, letters of credit, cash, certificates of deposit, escrow accounts, trust funds and insurance policies that would provide a long-term revenue stream to cover future costs.

PolyMet's critics don't trust the company's cost estimates.

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"It appears PolyMet has provided the final numbers to the DNR without showing any assumptions or calculations that go into those numbers and the DNR has reprinted them no questions asked," said Kathryn Hoffman, staff attorney with the Minnesota Center for Environmental Advocacy.

The estimates are based on "fundamental engineering principles and the law" and will be refined and "fully vetted" during the permitting process, PolyMet spokesman Bruce Richardson said.

"There will be a lot of experts, a lot of calculations, a lot of work that's done in permitting to arrive at the appropriate number," Richardson said.

PolyMet critics often say there's no record of any "sulfide mine" that has operated and then closed without polluting nearby waters. PolyMet and its supporters dispute that. Both sides point to the former Flambeau copper mine near Ladysmith, Wis., as an example of either a failure or success, depending on one's point of view. It was a small mine that operated from 1993-97 before it was closed, filled in, replanted and turned into a park with hiking and horse trails.

"The site looks nice, people hike on it, it's beautiful," Hoffman said. But she pointed to a lawsuit filed by other environmentalists alleging that it was still leaking pollutants into a tributary of the Flambeau River in violation of clean water standards. "They have managed to make the site aesthetically pleasing but they have not been able to contain the water pollution there," she said.

The lawsuit played out somewhat unusually. U.S. District Judge Barbara Crabb ruled in 2012 that Flambeau Mining Company violated federal clean water laws but fined it just $275 because the discharges were "so slight." She also praised the company's "exemplary efforts to protect the environment during its mining operations and reclamation effort. These efforts deserve commendation, not penalties." But an appeals court overturned her last year and sided with the company, saying its permit shielded it from liability. On Wednesday, Crabb denied the company's effort to recover a portion of its legal costs from the plaintiffs.