In re Issuance of Air Emissions Permit No. 13700345-101 for Polymet Mining, Inc.

• Decision Date: 19 July 2021
• Docket Number: A19-0115, A19-0134
• Citation: 965 N.W.2d 1
• Parties: In the MATTER OF Issuance of Air Emissions Permit No. 13700345-101 for POLYMET MINING, INC., City of Hoyt Lakes, St. Louis County, Minnesota.
• Court: Minnesota Court of Appeals

965 N.W.2d 1

In the MATTER OF Issuance of Air Emissions Permit No. 13700345-101 for POLYMET MINING, INC., City of Hoyt Lakes, St. Louis County, Minnesota.

A19-0115, A19-0134

Court of Appeals of Minnesota.

Filed July 19, 2021

Review Denied September 30, 2021

Evan J. Mulholland, Ann E. Cohen, Jay E. Eidsness, Minnesota Center for Environmental Advocacy, St. Paul, Minnesota (for relators Minnesota Center for Environmental Advocacy, Friends of the Boundary Waters Wilderness, Center for Biological Diversity, and Sierra Club)

Sean Copeland, Fond du Lac Band of Lake Superior Chippewa, 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)

Monte A. Mills, Davida S. McGhee, Greene Espel PLLP, Minneapolis, Minnesota; and Jay C. Johnson (pro hac vice), Venable LLP, Washington, District of Columbia (for respondent PolyMet Mining, Inc.)

Keith Ellison, Attorney General, St. Paul, Minnesota; and Emily C. Schilling (pro hac vice), Holland & Hart LLP, Salt Lake City, Utah; and Sarah Koniewicz, Holland & Hart LLP, Boulder, Colorado; and Adonis A. Neblett, General Counsel, Minnesota Pollution Control Agency, St. Paul, Minnesota (for respondent Minnesota Pollution Control Agency)

Considered and decided by Jesson, Presiding Judge; Cleary, Judge;^* and Rodenberg, Judge.^*

OPINION

JESSON, Judge

Respondent Poly Met Mining Inc. (PolyMet) hopes to build a mine in northern Minnesota, and it requires numerous state and federal permits to do so. These consolidated certiorari appeals are taken from one of those permits—an air-emissions permit—issued by respondent Minnesota Pollution Control Agency (the Agency). Relators Minnesota Center for Environmental Advocacy, et al. (the Center)¹ and Fond du Lac Band of Lake Superior Chippewa assert that the Agency improperly issued an air-emissions permit for the proposed mine. Relators believe that PolyMet does not intend to comply with the operational limits of that permit. Their belief is based largely on a report that PolyMet submitted to Canadian securities regulators after the public-comment period for the air-emissions permit had closed but before the Agency issued the permit. Although the Agency received this Canadian report before issuing the air-emissions permit, it did not address the document in its decision granting the permit.

In March 2020, we issued a decision supplementing the record with the Canadian report and other documents and concluding that the Agency's findings were not sufficient for us to review the arguments raised by relators. See In re Issuance of Air Emissions Permit No. 13700345-101 for PolyMet Mining, Inc. , 943 N.W.2d 399, 402 (Minn. App. 2020) (PolyMet I ), rev'd , 955 N.W.2d 258 (Minn. 2021). The Minnesota Supreme Court granted PolyMet's and the Agency's petitions for further review and reversed our decision. In re Issuance of Air Emissions Permit No. 13700345-101 for PolyMet Mining, Inc. , 955 N.W.2d 258, 261 (Minn. 2021) (PolyMet II ). The supreme court held that the Agency is not required, under federal law, to prospectively investigate whether a permit applicant is engaged in "sham permitting." Id. at 260-61.

The supreme court then remanded the appeals for us to consider two issues arising under the Agency's permitting rules. Id. at 269. First, the supreme court instructed us to consider whether the Canadian report and other documents undermined the Agency's conclusion that PolyMet "will ... comply with all conditions of the permit." Id. (quoting Minn. R. 7007.1000, subp. 1(G) (2019)). And second, the court directed us to consider whether the Agency should have denied the permit because PolyMet "has failed to disclose fully all facts relevant" to the permit or has "knowingly submitted false or misleading information to the agency." Id. (quoting Minn. R. 7007.1000, subp. 2(C) (2019)).

We review these issues under the substantial-evidence test—a test that requires us to determine, as a threshold matter, whether the Agency has adequately explained the reasons for its conclusions. Applying that standard to the two issues before us on remand, we conclude that the Agency has not adequately explained the reasons for its conclusions. Although this failure could support reversal of the Agency's decision to issue the permit, we determine that a remand—for further consideration and additional findings—is the more appropriate disposition on the facts before us.

FACTS

If built, PolyMet's mine, which it calls NorthMet, would be the first copper-nickel-platinum mine in Minnesota. PolyMet II , 955 N.W.2d at 261.² Pursuant to the federal Clean Air Act, before constructing the mine, PolyMet must obtain an air-emissions permit from the Agency.³ This is because there will be air pollution from ore-processing equipment—including ore crushers and conveyors—as well as vehicle traffic and other sources. But the level of regulatory scrutiny triggered by this permit application depends upon the projected amount of air pollution. Generally, a facility that has the potential to emit more than 250 tons of air pollution per year is deemed a "major stationary source." Id. (quoting 40 C.F.R. § 52.21(b)(1)(i)(a) - (b) (2019) ). And such major sources of pollution, as the supreme court explained, undergo an exacting permitting process. Id. (citing 40 C.F.R. § 52.21(b)(12) (2019) ). Stringent pollution control measures are imposed before construction begins. Id. (citing 40 C.F.R. § 52.21(b)(12) ).⁴ But even if a facility is capable of emitting more than 250 tons of annual pollution, it can bypass these exacting requirements by agreeing to enforceable operational restrictions, thereby limiting air pollution. Id. (citing In re Shell Offshore, Inc. , 15 E.A.D. 536, 550 (EAB 2012) ). The logic: if operations are limited, less pollution results, and less regulation should be necessary.

To avail itself of this option of limiting its operations—and avoid more stringent regulation—an entity may apply for what is known as a synthetic minor source permit under the federal Clean Air Act. Id. That is the permit PolyMet seeks here. Under that permit, PolyMet agrees to the restriction central to this appeal: to limit its ore-processing rate (also known as throughput) to 32,000 tons per day. An issue may arise, however, if PolyMet increases its operations to major-source levels after receiving a synthetic minor source permit. Id. at 261-62. In that event, PolyMet may be determined to have engaged in "sham permitting" by seeking a permit with which it did not intend to comply. Id. at 262.

Administrative Proceedings on the Permit Application

After PolyMet submitted its permit application, the Agency initiated proceedings that included accepting public comments on the application. Relators submitted comments questioning the accuracy of the modeling used to determine the NorthMet project's potential to emit air pollutants and the sufficiency of permit conditions to limit pollution to synthetic-minor levels.

Ten days after the close of the public-comment period, in March 2018, PolyMet's Canadian parent corporation filed a report with Canadian securities regulators (the Canadian report). The Canadian report evaluated the economics of the NorthMet mine with the ore-processing limitations provided in the synthetic minor source permit applied for by PolyMet. But the report also discussed the feasibility of increasing the throughput of the NorthMet mine to levels that would require a major-source permit under the Clean Air Act. More specifically, the Canadian report identified a 10.3% internal rate of return⁵ for the NorthMet mine at the planned ore throughput of 32,000 tons per day. But the Canadian report discussed and provided preliminary economic assessments of two scenarios with higher ore throughputs of 59,000 and 118,000 tons per day. For these increased throughputs, the Canadian report identified potential internal rates of return of 18.5% and 23.6%, respectively.

The Center notified the Agency of the Canadian report on three separate occasions. First, in June 2018, the Center served the Agency's commissioner with a copy of a petition to the Minnesota Department of Natural Resources (DNR) for a supplemental environmental-impact statement based on information in the report. The Center attached ten exhibits to the petition, including the Canadian report, multiple articles indicating that PolyMet discussed expanded mining at NorthMet with investors, and an analysis of the Canadian report from the Center's expert.

That expert opined that the 10.3% internal rate of return forecasted for the planned throughput "cannot be viewed favorably" and could suggest that NorthMet is "no longer economic." Major mining firms, the expert opined, generally require an internal rate of return of 30% or 40% for new mining projects. And the expert asserted that if PolyMet did not intend to expand operations, "it is unlikely the [Canadian report] would have included the expanded options."

Second, in November 2018, the Center submitted a request to the Agency asking that it stay all permits pending judicial review of the DNR's decision to deny a supplemental environmental-impact statement. The Center attached to the stay request an October 2018 memorandum from the DNR's consulting engineering firm that analyzed the information in the Canadian report. That memorandum, consistent with the Center's expert, characterized the NorthMet mine as "marginally" economic.

Third, on December 13, 2018, the Center sent the Agency a letter asking it to investigate whether PolyMet was engaged in sham permitting in violation of the Clean Air Act. The Center attached the Canadian report to the letter. In that letter, the Center asserted that the Canadian report "reveals a fundamental truth about the PolyMet project: the mine as proposed is too expensive to attract investors." The Center requested that the Agency withhold issuance of...