In re Northmet Project Permit to Mine Application Dated Dec. 2017

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 SUPREME COURT

April 28, 2021

Court of Appeals

Hudson, J.

Thissen, J., took no part

Office of Appellate Courts

Monte A. Mills, Davida S. Williams, Greene Espel PLLP, Minneapolis, Minnesota; and

Jay C. Johnson, Kathryn A. Kusske Floyd, Venable LLP, Washington, D.C., for appellants Poly Met Mining, Inc. and Poly Met Mining Corp.

Sherry A. Enzler, General Counsel, Minnesota Department of Natural Resources, Saint Paul, Minnesota; and

Jon W. Katchen, Sarah M. Koniewicz, Holland & Hart LLP, Anchorage, Alaska, for appellant Minnesota Department of Natural Resources.

Paula G. Maccabee, Just Change Law Offices, Saint Paul, Minnesota, for respondent WaterLegacy.

Ann E. Cohen, Elise Larson, Evan Mulholland, Minnesota Center for Environmental Advocacy, Saint Paul, Minnesota, for respondents Minnesota Center for Environmental Advocacy, Duluth for Clean Water, Center for Biological Diversity, Friends of the Cloquet Valley State Forest, Save Lake Superior Association, and Save Our Sky Blue Waters.

Vanessa L. Ray-Hodge, Sonosky, Chambers, Sachse, Mielke & Brownell, LLP, Albuquerque, New Mexico; and

Sean Copeland, Tribal Attorney, Cloquet, Minnesota, for respondent Fond du Lac Band of Lake Superior Chippewa.

Margo S. Brownell, Evan A. Nelson, Maslon LLP, Minneapolis, Minnesota, for respondent Friends of the Boundary Waters Wilderness.

Dara D. Mann, Squire Patton Boggs LLP, Atlanta, Georgia, for amicus curiae Iron Mining Association of Minnesota.

Byron E. Starns, Stinson LLP, Minneapolis, Minnesota, for amicus curiae MiningMinnesota.

Lloyd W. Grooms, Minnesota Chamber of Commerce, Saint Paul, Minnesota; and

Jeremy P. Greenhouse, The Environmental Law Group, Ltd., Mendota Heights, Minnesota, for amicus curiae Minnesota Chamber of Commerce.

Michael D. Madigan, Brandt F. Erwin, Megan J. Kunze, Christopher W. Bowman, Madigan, Dahl, & Harlan, P.A., Minneapolis, Minnesota, for amicus curiae Sierra Club.

Eric E. Caugh, Zelle LLP, Minneapolis, Minnesota, for amici curiae Arne Carlson, John P. Gappa, Ron Sternal, and Alan Thometz.

Gregory R. Merz, Lathrop GPM LLC, Minneapolis, Minnesota, for amici curiae Allan W. Klein, Richard Luis, and Eldon G. Kaul.

SYLLABUS

1. Allegations that property owned by a person will be affected by the proposed mining operations is sufficient to satisfy the standing requirement in Minn. Stat. § 93.483, subd. 1 (2020), to file a petition for a contested case hearing.

2. The Minnesota Department of Natural Resources has discretion under Minn. Stat. § 93.483, subd. 3(a) (2020), to decide whether a contested case hearing will aid the commissioner in resolving a disputed material issue of fact related to a completed application for a permit to mine.

3. Under Minn. Stat. § 93.483, subd. 3(a)(3), when reviewing the commissioner's decision to deny a petition for a contested case hearing, the reviewing court must determine whether the petitioner has shown that the decision by the Minnesota Department of Natural Resources regarding a specific disputed material issue of fact was not reasonably supported by substantial evidence in the record.

4. Minnesota Statutes § 93.481, subd. 3(a) (2020), requires the commissioner of the Minnesota Department of Natural Resources to set a definite, fixed term of years for a permit to mine.

5. The court of appeals erred in reversing the dam-safety permits on the basis that a contested case hearing was ordered on the permit to mine because the two permits are governed by distinct statutory standards.

Affirmed in part, reversed in part, and remanded.

OPINION

HUDSON, Justice.

On November 1, 2018, the Minnesota Department of Natural Resources (DNR) issued a permit to mine and two dam-safety permits to Poly Met Mining, Inc. (PolyMet) to build and operate Minnesota's first copper-nickel mine. The DNR's Findings of Fact,Conclusions, and Order of Commissioner¹ for the permit to mine also denied respondents' petitions for a contested case hearing on various factual issues related to PolyMet's completed permit to mine application. Respondents Minnesota Center for Environmental Advocacy (MCEA),² WaterLegacy, and Fond du Lac Band of Lake Superior Chippewa (the Band) appealed from the decisions to grant the permit to mine and the dam-safety permits, and the decision to deny their contested case petitions.³ After consolidating the appeals, the court of appeals reversed the DNR's decision to grant the permit to mine and remanded to the DNR to hold a contested case hearing on the issues raised by the respondents. In re NorthMet Project Permit to Mine Application Dated Dec. 2017, 940 N.W.2d 216, 238 (Minn. App. 2020). The court also reversed the decision to issue thedam-safety permits in order to allow for reconsideration of those permits after the contested case hearing on the permit to mine. Id.

We conclude that the court of appeals adopted an incorrect legal standard to evaluate the DNR's decision to deny the petitions for a contested case hearing. By disregarding the DNR's discretion, the court of appeals erred in its interpretation of Minn. Stat. § 93.483, subd. 3(a) (2020). Under a substantial-evidence standard, we conclude that a contested case hearing is required on the effectiveness of the proposed bentonite amendment for PolyMet's proposed tailings basin. Regarding the other factual issues raised in respondents' petitions, however, we conclude that the DNR did not abuse its discretion in denying the petitions for a contested case hearing because substantial evidence supports those decisions. We further conclude that the court of appeals was correct in reversing the decision to grant the permit to mine because the DNR erred by issuing the permit without an appropriate fixed term. Finally, we conclude that the court of appeals erred in reversing the two dam-safety permits. Accordingly, we affirm in part and reverse in part the decision of the court of appeals and remand to the DNR to conduct the contested case hearing required by this decision and, thereafter, to determine and fix the appropriate definite term for the permit to mine as necessary.⁴

FACTS

PolyMet proposes to develop a mine and associated processing facilities to extract copper and nickel from the NorthMet Deposit in northeastern Minnesota. If approved, the mine would be the first of its kind in the state. Minnesota has a long history of regulating iron and taconite mining. Although years of study and regulatory activity have been underway to prepare for copper-nickel mining, this is the first permit to mine of its kind. Further, the proposed NorthMet project brings with it potential environmental impacts unique to this type of mining. In particular, the mine waste generated by extracting and processing sulfide ore has the potential to release acid rock drainage, which occurs if either the sulfide ore or waste rock is exposed to oxygen or water. If so exposed, the sulfide ore and waste rock would release toxic metals and sulfate that could seep into nearby surface waters and groundwaters. As a result, the NorthMet project has generated significant public interest and controversy.

The NorthMet Project. As proposed by PolyMet, the NorthMet project will be located along the eastern flank of the Mesabi Iron Range, near the towns of Babbitt and Hoyt Lakes in St. Louis County. The project would consist of three main facilities: a mine about six miles south of Babbitt; an ore processing plant about six miles north of Hoyt Lakes; and a transportation corridor connecting the two sites. The entire project would be located within the St. Louis Watershed, which drains into Lake Superior. The proposedopen-pit mine site is a previously undisturbed area; the plant site is a former taconite-processing facility owned by LTV Steel Mining Company (LTV Mining). Over the estimated 20-year life of the mine, approximately 533 million tons of ore and waste rock would be removed from the open-pit mines and processed at a rate of up to 32,000 tons per day.

Tailings, the waste by-product from ore processing, would be mixed with water and pumped as a slurry into an existing, but upgraded, flotation tailings basin maintained at the LTV Mining plant site.⁵ To contain these tailings, PolyMet plans to build a new dam atop the existing LTV Mining tailings dam, using an upstream construction method.⁶ To keep water and oxygen from reaching the tailings, the exterior side of the dam, along with the tailings basin beaches and basin bottom, would incorporate a bentonite-amended oxygen-barrier layer (the bentonite amendment). Bentonite is a natural clay sealant. The project would also use a containment system to collect water seepage from the tailings basin to prevent surface water and ground water pollution.

After mining operations cease, the project calls for placing the tailings under a "wet cover" (i.e., a man-made pond) to minimize the reactivity of tailings to oxygen. Reclamation and closure following the expected 20-year mine life would include periodicmonitoring and maintenance of water quality until conditions are deemed environmentally acceptable. See Minn. Stat. § 93.44 (2020) (declaring the State's policy to provide for reclamation of land subject to mining). According to PolyMet's modeling, post-closure maintenance is likely necessary for at least 200 years.

The Mine Permitting Application Process. Mining in Minnesota is regulated by statute and administrative rules. The permitting process allows the State to balance its interests in limiting the "possible adverse environmental effects of mining" and preserving natural resources, against its interests in encouraging "the orderly development of mining," "good mining practices," and the beneficial...