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Comment to the PolyMet FEIS

This is a comment to the Final Environmental Impact Statement on the proposed PolyMet

NorthMet copper-nickel sulfide mine. It is offered in opposition to the issuance of a permit to

mine. This comment focuses on the very real financial consequences to the state and its citizens

of a tailings dam failure at the former LTV processing facility, or the persistent pollution of

surface and groundwater either from the processing facility site or the mine pits themselves.

Introduction

It is recognized – although not universally acknowledged – that a non-ferrous sulfide mine is a

substantially different activity than the mines that have been permitted in Minnesota before.

Without undertaking to recite a history of sulfide mining, which most of the readers of this

comment will know anyway, it cannot be denied that it is a dark and expensive history to the

public, full of disasters, cleanup, economic loss, and diminution in the quality of theenvironment and the life of the flora and fauna surrounding the mine. It’s a gift that keeps on

giving, too, sometimes for hundreds of years.

Marshall Helmberger, who, for my money is the best editorialist on the Iron Range, wrote an

op-ed piece in the Timber Jay on November 18, 2015, that includes this:

[Mining], without question, would fundamentally change the character of this region,

taking what is today the crown jewel of the national forest system in the eastern two-

thirds of the country, and converting its heart into an almost continuous industrialized

zone. And this is, perhaps, the biggest flaw in the just-released FEIS on PolyMet. Whenthe DNR opted not to examine the cumulative impacts of this scale of development on

the Superior, they chose to ignore the elephant in the room. They opted not to take the

hard, scientific look they promised and produced a political document, instead.1 

When mining supporters talk of the Duluth Complex as rivaling the Mesabi Iron Range,

or employing thousands of miners, and generating billions in state and local revenues,

they don’t mean PolyMet with its projected 350 workers, on its own. They mean a half

dozen mines or more comprising 50-to-80 miles of open pits, wasterock piles, rail lines,

roads, power corridors and concentrator plants cutting through the heart of the

Superior. [Marshall did forget tailings impoundments. ed .]

The problem with an economic model based on mining, after all, is that it doesn’t work

unless you keep on mining until every last ton of ore has been blasted, processed, and

shipped out. That means once mining of the Duluth Complex begins, the pressure to

1 Raising questions about the fidelity of the regulators to the citizens of the State of Minnesota.

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keep mining will be intense, at least until the ore is all gone or is no longer valuable

enough to extract.

Mr. Helmberger accurately describes what we’re signing up for by permitting the PolyMet

mine. As Mr. Helmberger says, the state is presented with an existential question.

The history of mining in the state is also one of the mining companies coming back to

regulators, hats in hand, complaining that something doesn’t work for them, and that we have

to fix it or the miners get it. The hole in the ground needs to be bigger; or the underground

mine is no longer economic, and we have to make it a pit mine; electric rates are too high; taxes

are too high; keeping the water clean is too expensive, and the standards must be relaxed;

fixing a leaky tailings impoundment is ruinously expensive. The list goes on, and on, and on.

But, of course, the miners get it in the end, anyway. It stuns me that we continue to fall for this.

A word about the commenter

I am Steve Timmer, a retired lawyer, admitted to the Bar for forty years. My law practice was

corporate and commercial in nature, including representing commercial banks, insurance

companies, corporations and individuals in matters involving lending and borrowing, suretyship

and guaranty, secured interests, and the recovery of loss.

The risk problems

A mine can create continuing pollution, or it can suffer a catastrophic event. Catastrophic

events do not happen as often, of course, but when they do, the consequences are much worse

and much more expensive to fix, usually beyond the imagination of regulators before the event

occurs. And the spectacular tailings dam failures in British Columbia and Brazil in the last year,

and the recent release of contaminated water at a former mine site in Colorado teach us that

that catastrophic events do occur with some regularity. Losses are suffered by governments for

cleanup costs or the loss of tax revenue because of diminished economic activity in the affected

area. Private parties, individuals and businesses, also suffer loss: lost business, lost

employment, lost subsistence livelihood, loss of property values, and loss of the enjoyment of

environmental assets.

Some of these losses can be estimated and quantified, and some cannot. This is partly why

“financial assurances” are not an adequate substitute for a plan that is completely vetted andunderstood. The widely-reported problems with the water model, the potential effects on

human health – just brushed aside by state officials on December 7th

  – and the failure to explain

in any meaningful way how regulators will require financial assurances, all illustrate that the

FEIS is not completely vetted, and these underlying problems are either not understood or just

ignored.

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The fact that the FEIS was ten years in the making is an indictment of the process, nothing

more.

Financial assurances in Minnesota law do not even address themselves to the losses incurred by

the public. Only a solvent mine owner, and current, adequate liability insurance will do that.

The governor has stated that he will only permit a mine that stands on a solid financial footing,

and after a sobering tour of the Gilt Edge mine in South Dakota, Commissioner Landwehr stated

that a “bankruptcy proof” plan would be required for PolyMet.

The permit applicant: PolyMet Mining, Inc.

Even when consolidated with its British Columbia parent, PolyMet Mining Corp., PolyMet

Mining, Inc., a Minnesota corporation, has very little in liquid assets. It is not now, nor has it

ever been, an operating business. The stock of the parent has always been just a stock play, and

valuation isn’t based on earnings (there never have been any) or even the liquidation value ofthe company. Well, a stock play and a vending machine for company executives through stock

options.

The idea that regulators would consider taking this flyer –  because that is what it is –  is

 preposterous.2 

Putting a little money in at eighty-nine cents a share as a gamble on the penny stock market is

one thing; gambling the legacy of pristine water in northern Minnesota is quite another.

PolyMet officials say on the one hand, Well, we’re good Minnesota folks. We’d look after the

environment. But on the other hand, they say, A permit to mine could be assigned; we can

assign it to somebody with the wherewithal to operate a mine.

In a commercial lending environment, the applicant PolyMet would be laughed out of the room

and told, Come back, Junior (mining company), with a real partner. 

The only reason that PolyMet has even continued to exist for the last several years is because

of the periodic allowance it gets from its practical parent, Glencore PLC. Glencore’s fingerprints

 – footprints, really – are all over the PolyMet balance sheet. PolyMet lives, moves (such as it

does), and has its being because of Glencore. PolyMet exists on the continuing edge of

bankruptcy.

Glencore has a first-lien position in all of the assets of PolyMet. The extensive debt owned by

Glencore on PolyMet’s balance sheet means that it would be difficult and expensive to replace

Glencore with another investor to assign a mining permit to. Doubly so because Glencore has

2 And it’s a flyer on a new and dangerous kind of mining, too.

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an off-take agreement with PolyMet for the first several years of production from any opened

mine.

But the Land and Minerals Division seems to want to pretend that Glencore doesn’t exist. There

are a lot of adjectives that could be used to describe this, and none of them are flattering.

Simply recognizing that Glencore is a real party in interest, maybe the real party in interest, and

requiring it to be on the application and any subsequent permit – and be responsible for the

financial and environmental obligations imposed on a permitee would not eliminate the

bankruptcy risk that the Commissioner worries about, but it would mitigate it.

Insolvency and bankruptcy

A. On the issuance of a permit to mine to PolyMet, the current permittees, Cliffs Resources and

Minnesota Power, would have their permit to mine closed and be relieved of liability for the

currently-leaking tailings dam at the crushing facility. (The fact that it is and has been leakinginto the groundwater for some time is a demonstrated failure of regulators to enforce the

regulations they are charged with enforcing.3) PolyMet would pick up that the liability for the

tailings dam. The cost to fix the tailings dam is about ten times what PolyMet has in current

assets. 

The day that a permit is issued to PolyMet, it starts in a $70 million+ hole. A junior banker

approving the novation of this liability from two substantial obligors to a lightweight like

PolyMet would be cashiered on the spot.

B. In a press conference subsequent to the Gilt Edge visit, in response to a question about how

to handle the very long liability tails after the mine is closed, Commissioner Landwehr said that

PolyMet’s mining permit would be kept open, so that it would continue to be on the hook for  

its environmental liability.

With due respect to the Commissioner, that’s a little like telling a gravely ill person – or one

already dead – that he doesn’t have permission to die. A charming sentiment, perhaps, but

unenforceable as a practical matter. Loan agreements always prohibit a borrower from

becoming insolvent or going bankrupt, too, but it’s useless, of course. 

C. Insolvency and bankruptcy are no respecters of permits, or Commissioners, for that matter.

And it isn’t a solution to say, “We’ll just get sureties.” Sureties become insolvent too. Moreover,surety bonds are not available for a term that is even a fraction of the time horizon for a serious

3 And where are the LTV financial assurance “instruments” that should have taken care of this problem? Is the DNR

eager to permit a PolyMet mine to remedy the deficits in its oversight of LTV prior it going bankrupt? And if that’s

true, how can the public be assured that the DNR will do any better with PolyMet? I submit that it can’t be so

assured.

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adverse event at the proposed mine or crushing plant, at least now that AIG is no longer around

to offer them.

The FEIS pays only glancing attention to the issue of financial assurances. A few pages in three

thousand. And the language in these pages is full of words like “appropriate” and “propose.”4 

Dancing around the issue, in other words. There is no assurance – there’s that word again – that the public will ever have an opportunity to review and comment on what the DNR

concludes is adequate. Or know, without periodic data practices act requests, when the DNR

allows PolyMet backsliding, as it obviously has for other mining companies over the years.

Quoting from 3.2.2.4.2 of the FEIS:

It seems that it is expected that PolyMet would “propose” financial instruments that would

change over time. All of the above-identified “instruments” (except cash) require somebody to

buy them – and continue to buy them on some periodic basis. (I doubt that many of these

“instruments” are available for more than a few years, at most, at a time.) 

D. As soon as PolyMet hit a rough patch at the mine – and you know it would, given the cyclical

nature of the commodities markets – it will be back asking to be relieved from financial

assurances obligations, or some regulatory requirement. Or the miners will get it.

It might be a rough enough patch that PolyMet couldn’t buy or pay for  renewed financial

assurance “instruments.” This is entirely probable after the mine closes. There will no longer be

revenue from mining operations to pay financial assurance renewals.5 

4 Remember, the regulators have touted a “ten year” study of the PolyMet application; there is nothing to show

for it here.5 Or continue to buy liability insurance against or compensate an affected public for a catastrophic release of

pollutants.

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The need to pay for water treatment, tailings dam maintenance, and possible dealing with a

catastrophic failure of pollution treatment systems will continue for probably at least a couple

of centuries. Will PolyMet still be around buying “instruments” in say, year 92 after the mine

closes? I think we all know the answer to that.

Even PolyMet recognizes the absurdity of the proposition.

3.2.2.1.10 - Reclamation and Long-term Closure Management in the FEIS includes this

statement:

Water quality modeling performed in support of this FEIS indicates that water treatment

systems would be needed indefinitely at the Mine Site and Plant.6 

PolyMet hopes to rely on “non-mechanical” treatment systems after only fifty-five years.7 In

other words, turn off the pumps and hope for the best.

But non-mechanical treatment proved ineffective at the Dunka Pit, and the 2009 PolyMet DEIS

was rejected by the EPA for relying on it.

Conclusion

The real party in interest, Glencore PLC, must be brought in on the permit to mine and

associated applications and named as an obligor on any permits issued. The applicants must put

up adequate cash, for financial assurances, and to fix the leaky tailings dam, as a condition of

the issuance of a permit to mine. What is adequate must be determined, not by PolyMet and

the DNR only, but after hearing and comment by the public. It cannot be assumed that the

permitees will be able to buy financial assurance instruments in the future; it is naïve to so

assume.

If these things are not done, the Commissioner’s words about a “bankruptcy proof plan” for

PolyMet will be hollow words, indeed.

Respectfully,

Steven J. Timmer

5348 Oaklawn AvenueEdina, MN 55424

December 10, 2015

6 Is “indefinitely” longer or shorter than the 500 years mentioned in earlier drafts of the EIS? It is pretty obviously

intended to sound like it’s shorter. 7 http://www.fergusfallsjournal.com/2015/11/minnesota-prepares-for-legal-fight-over-polymet-mine/