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In re NorthMet Project Permit to Mine Application Dated December 2017

Court of Appeals of Minnesota

January 13, 2020

In the Matter of the NorthMet Project Permit to Mine Application Dated December 2017 and In the Matter of the Applications for Dam Safety Permits 2016-1380 and 2016-1383 for the NorthMet Mining Project

         Minnesota Department of Natural Resources

          Ann E. Cohen, Evan Mulholland, Minnesota Center for Environmental Advocacy, St. Paul, Minnesota (for relators Minnesota Center for Environmental Advocacy, Duluth for Clean Water, Center for Biological Diversity, Save Lake Superior Association, Friends of the Cloquet Valley State Forest, Save Our Sky Blue Waters)

          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 Sherry A. Enzler, General Counsel, Minnesota Department of Natural Resources, St. Paul, Minnesota (for respondent Minnesota Department of Natural Resources)

          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.

         SYLLABUS

         I. Under Minn. Stat. § 93.483, subd. 3(a) (2018), the Minnesota Department of Natural Resources has an independent obligation to determine whether the statutory criteria for holding a contested-case hearing on a permit to mine are met.

         II. Under Minn. Stat. § 93.483, subd. 3(a)(3), a contested-case hearing must be held on a permit to mine when "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." This standard is met when there is probative, competent, and conflicting evidence on a material fact issue.

          OPINION

          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 Minn. Stat. § 93.483 (2018) and that the requirements for holding a contested-case hearing under that statute are met. We also conclude that the DNR erred by issuing a permit to mine without a definite term. Accordingly, we reverse the DNR's decisions to issue the permit to mine and dam-safety permits and remand for the DNR to hold a contested-case hearing.

         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 mining-operations phase; and a reclamation, [3] closure, and postclosure phase of unknown duration.

         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 hydrometallurgical plant. The average ore-processing rate would be limited to 32, 000 tons per day, according to PolyMet.

         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 waste byproducts that would be placed in a hydrometallurgical residue facility, which would be built on the site of the existing LTVSMC emergency basin, using a downstream construction method. The hydrometallurgical residue facility would be a double-lined cell, and it would be drained and covered following the completion of mining.

         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. In March 2016, the DNR issued a decision determining the FEIS adequate; no appeal was taken from that decision. Id.[8]

         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.

         C. Judicial proceedings

         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]

         ISSUES

         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 Minn. Stat. §§ 93.50 (2018) (providing that DNR's decisions are subject to review under Minn. Stat. §§ 14.63-.69), 14.69 (2018) (providing standard of review); see also In re City of Owatonna's NPDES/SDS Proposed Permit Reissuance for Discharge of Treated Wastewater, 672 N.W.2d 921, 926 (Minn.App. 2004) (discussing standard of review) (Owatonna). "[D]ecisions of administrative agencies enjoy a presumption of correctness, and deference should be shown by courts to the agencies' expertise and their special knowledge in the field of their technical training, education, and experience." In re Excess Surplus Status of Blue Cross & Blue Shield of Minn., 624 N.W.2d 264, 278 (Minn. 2001) (quotation omitted). But appellate courts "retain the authority to review de novo errors of law which arise when an agency decision is based upon the meaning of words in a statute." Greene v. Comm'r of Minn. Dep't of Human Servs., 755 N.W.2d 713, 721 (Minn. 2008) (quotation omitted); see also St. Otto's Home v. Minn. Dep't of Human Servs., 437 N.W.2d 35, 39-40 (Minn. 1989) ("When a decision turns on the meaning of words in a statute or regulation, a legal question is presented. In considering such questions of law, reviewing courts are not bound by the decision of the agency and need not defer to agency expertise." (citation omitted)).

         The DNR is the principal regulator of mining activities in Minnesota. See generally Minn. Stat. § 93.47 (2018). As relevant here, PolyMet was required to obtain from the commissioner of natural resources (commissioner) a permit to mine and two dam-safety permits. The permit to mine is governed by Minn. Stat. §§ 93.44-.51 (2018) (permit-to-mine statutes) and Minn. R. 6132.0100-.5300 (2019) (chapter 6132). Under the permit-to-mine statutes and chapter 6132, the DNR must determine whether an area proposed to be mined can be reclaimed using existing technology. See Minn. Stat. § 93.47, subd. 3 (directing DNR to adopt rules allowing such determination); Minn. R. 6132.4000 (providing permitting procedures); MCEA v. DNR, 2019 WL 3545839, at *8 (reasoning that permitting procedure under rules is procedure for determining whether area can be reclaimed).[11] If the commissioner determines that an area proposed to be mined cannot be reclaimed using existing techniques, a permit to mine should be denied. MCEA v. DNR, 2019 WL 3545839, at *8.

         The dam-safety permits are governed by Minn. Stat. §§ 103G.301-.315 (2018 & Supp. 2019) and Minn. R. 6115.0300-.0520 (2019). Under Minn. Stat. § 103G.315, subd. 3, the commissioner shall grant a permit "[i]f the commissioner concludes that the plans of the applicant are reasonable, practical, and will adequately protect public safety and promote the public welfare." The applicant bears the burden of proving that the standard is met, and the commissioner may include in the permit conditions related to the "method of construction or operation of controls as appear reasonably necessary for the safety and welfare of the people of the state." Minn. Stat. § 103G.315, subd. 6.

         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), Minn. Stat. §§ 116B.01-.13 (2018). As relevant here, MERA precludes the DNR from authorizing any conduct that is likely to impair, pollute, or destroy air, water, land, or natural resources if 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." Minn. Stat. § 116B.09, subd. 2.[12] "Economic considerations alone shall not justify such conduct." Id.

         With this regulatory framework in mind, we turn to ...


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