Minnesota's top mining regulators assured legislators Tuesday that the state laws that are designed to protect future generations from the unpredictable costs that could come from decades of mining pollution are among the strongest in the nation.
Speaking at a packed and frequently testy public hearing, Jess Richards, director of lands and minerals for the Department of Natural Resources, said the state's laws "are robust" and designed to protect taxpayers now and in the future.
The DNR is the lead agency on the environmental review of PolyMet Mining Corp.'s proposed $650 million copper mine near Hoyt Lakes. Richards was the star witness in an unusual public hearing on the debate regarding what would be the state's first copper nickel mine, one that represents two divergent views of Minnesota's future.
Richards said mining regulators are in the process of reviewing some 200 mines around the country that have sophisticated financial agreements known as "financial assurance" that ensure environmental calamities, defaults and prolonged water treatment will be paid for by mine owners and operators, not taxpayers.
At issue is an open pit copper mine proposed for Minnesota's Iron Range that would create up to 350 long-term mining jobs and hundreds of temporary construction jobs, leading to a groundswell of support among mining advocates. But it also carries different and greater environmental risks than the incumbent taconite industry, because copper and other precious metals are mined in ore that contains sulfides, which can produce acid drainage and other heavy metals in ground and surface water.
It could require sophisticated water treatment plants to operate for decades and or even centuries after the mine closes.
PolyMet, a Canadian company that has proposed what could be the first of many such mines in Minnesota, says that long-term water treatment and modern mining techniques will protect the water.
The tone for the nearly six-hour hearing was set just as Rep. Jean Wagenius, DFL-Minneapolis, opened the hearing and Rep. Paul Torkelson, R-Hanska, interrupted her to ask whether the committee was the appropriate venue to discuss PolyMet and the state's financial assurance laws.
"I'm trying to figure out what we are up against here and what the purposes are for this committee," he said.
It ended six hours later with Rep. Andrew Falk, DFL-Murdock, asserting that PolyMet is a "shell" company and asking a top official whether it had the financial wherewithal to provide the necessary financial protections required by state law.
Brad Moore, PolyMet's vice president of public affairs, said that state procedures allow for decisions on financial assurance to be decided if and when the company applied for a permit to mine.
Afterward, Moore said that the intensity of the questioning is part of the necessary public process around the state's decision to launch a new type of mining.
"This is what's supposed to happen," he said.
Laws never used
The state's laws on financial assurance for copper mining were passed two decades ago but have never been used. It's a critical question for the state and the company, and all the more important because PolyMet is the first of many companies hoping to tap into one of the largest untouched copper deposits in the world, which lie beneath northeast Minnesota.
If they ask PolyMet to post too large a financial guarantee, the project may not attract the next $450 million in investment PolyMet is seeking. If they ask for too little, then taxpayers someday may have to pay the price of polluting one of the most beautiful corners of the state.
But DNR officials said they plan to negotiate a financial assurance agreement with the company when it applies for a permit. In the meantime, officials are reviewing similar plans from around the country, and plan to hire experts to advise them on the best way to proceed. They said the plans must be adequate enough to protect the state, regardless of the financial impact on the company.
"We assume PolyMet has done its homework on its profitability and the protections that need to be in place before mining," Richards said.
Laura Skaer, executive director of the American Exploration & Mining Association in Tacoma, Wash., told legislators that over the past 30 to 40 years, financial assurance has become a routine and expected cost in the mining industry. It's required of all mines on federal lands. Of the 3,300 projects that have been built since 1990, not one has needed to tap into its financial assurance, she said.
But most of the 20 witnesses were critical of the state's environmental review and its decision not to include the long-term financial impacts of the project, which is now open for public comment. They included former banking, financial and Wall Street executives who offered a hard edged view of corporations and the likelihood that something will go wrong.
John Gappa, who said he was a former chief financial officer, said he's tried to figure how much should be required of PolyMet, but his Excel spread sheet program could only project out 250 years. PolyMet, he said, leverages its investment by transferring the risk to the citizens of Minnesota.
"Minnesota does not want to be facing its own 'too big to fail scenario,' " he said.
Ron Sternal, a retired Wall Street executive from St. Louis Park, urged the DNR to hire "sharks" to help them negotiate with the mining industry, and that the time to do it is now while the state still has leverage.
Better yet, he said, drawing a laugh from the crowd, "why not sell the water Minnesota is willing to pollute" to oil and gas fracking operators in North Dakota. "Perhaps we should sell our water and not our copper."
Margaret Watkins, a water quality specialist from the Grand Portage Band of Lake Superior Chippewa, walked through some of the histories of other mines that failed to accurately predict water pollution and the cost of cleanup, including some old taconite sites in Minnesota. She said that Minnesota would have to ask the company to provide $200 million to $400 million in financial protections.
"I want to demonstrate that this is a huge financial liability for the taxpayers of the state," she said.
