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Questions linger in Arrowhead about proposed sulfide-metals mining and potential effects

BABBITT, MINN. — Vancouver-based PolyMet is seeking permits to open Minnesota’s first sulfide-metals mine and launch what advocates see as an economic boom in a region that could use a boost.

BABBITT, MINN. — “There are two kinds of mining companies,” Pete Pastika said in a thick Iron Ranger brogue. “There are those with the experience and the money to do it, and there are the speculators.”  
Pastika, 60, ran a taconite mine here for Republic Steel that shipped ore to a processing plant at Silver Bay on Lake Superior’s coast, and he was an engineer for Reserve Mining, Republic’s predecessor, before he settled in as city administrator nearly five years ago. Pete Pastika knows mining. 
He was responding to a question about the newest company on the scene, Vancouver-based PolyMet, which is seeking permits to open Minnesota’s first sulfide-metals mine and launch what advocates see as an economic boom in a region that could use a boost.

Or, goes the muffled buzz across Minnesota’s Iron Range, PolyMet may be merely driving up value by assaying the ore body near Hoyt Lakes, Minn., and getting state permits to mine before selling off to a more established company. PolyMet, one critic has said, hasn’t even run a gravel pit, and “that concerns me,” Pastika said. 
The answer invited speculation over questions about PolyMet and other prospecting companies that are swirling around here like the fine taconite dust that, about 15 miles or so on the other end of Birch Lake, Steve Koshak spent time recently cleaning off the deck of a cabin at his secluded River Point Resort.

Steve Koshak
MinnPost photo by Ron Way
Steve Koshak at his resort on Birch Lake.

Many in favor — while some voice objections
Babbitt was built by mining companies, its 1,670 residents live off the mines and the town’s run by miners like Pastika, who favors the new mining and “I expect most everyone here feels the same.” 
Koshak does not, and he’s not reluctant to voice his animated objection to the coming of the mines that could, he and others fear, introduce potentially toxic sulfuric acid and other heavy metals to the pristine waters of the famous forested lakes that lace Minnesota’s Arrowhead.

“And the mines will be noisy,” Koshak said, lamenting another unwanted effect that a planned mine on Birch Lake could bring to the north lake country near the Boundary Waters Canoe Area Wilderness.  
At the next lake up the chain, White Iron near Ely, Ray Doran and others in the association he belongs to have begun water-quality testing to help guard against anything happening to the water quality of their lakes.   
“We are not opposed to mining,” Doran was careful to emphasize. “But we don’t want anything getting into our water.”

Ray Doran, at White Iron Lake, is concerned about water quality.
MinnPost photo by Ron Way
Ray Doran, at White Iron Lake, is concerned about water quality.

Would be a first for Minnesota
While northeastern Minnesota is synonymous with iron ore, a modern “nonferrous” metal mine has never operated in the state. And with something so large and complex as sulfide-metals processing there can be no guarantees about its environmental effects; in fact, the history of copper-nickel mining is littered with infamous cases of mining companies pulling out and leaving states with millions of dollars in clean-up costs. 
There is an exhaustive effort by the state’s Department of Natural Resources (DNR) and the Pollution Control Agency (PCA) to carefully review potential environmental effects of the mining and craft operating permits to guard against foreseen problems — and even to ensure that if future problems occur that the state won’t get stuck with the abatement tab.     
PolyMet is hoping to begin operations within a year. That timetable will depend on resolution of some dicey questions that are beginning to hang over the Arrowhead:  
• Will PolyMet run the mine, or will another company? 

• Will PolyMet get special treatment in Congress for a land swap with the U.S. Forest Service to enable the company to avoid further delay?

• Are state laws adequate to protect against sulfuric acid and other mine toxics? Will PolyMet and other mines guarantee to pay for environmental damage that could show up after mine operations cease?  

• Will the long-awaited environmental impact statement (EIS) on PolyMet adequately analyze an underground mining option? 

• Will the plummeting metals market stop short of the level needed to financially support costly mining of low-grade ore? 
EIS release expected soon
After nearly $20 million and four years of study, the DNR is expected to release its EIS on the PolyMet project this month, starting a months-long process on a permit to mine and resolution of state law’s untried “financial assurance” provision to protect the state from potentially future cleanup costs. 
Release of the EIS could also touch off a controversy over whether the document properly analyzes an option of an environmentally safer — but much more costly — underground mine rather than the open pit favored by the company. The Minnesota Center for Environmental Advocacy (MCEA) has said that if this issue isn’t satisfactorily addressed in the final EIS the matter could end up in court. 
Another knotty problem for PolyMet is gaining ownership to 6,700 acres of land it needs to mine. Rather than go through a months-long transfer process with the U.S. Forest Service, the company has gone to Rep. James Oberstar and Sen. Amy Klobuchar, both DFLers, to get Congress to force the land swap. Their bills have drawn strong opposition from environmental advocacy groups led by the Minneapolis-based Friends of the Boundary Waters Wilderness.    
Meanwhile, PolyMet and a half dozen other companies are boring hundreds of test holes in hard rock that’s part of the “Duluth Complex,” where a billion years ago a subterranean lava upwelling brought with it a slew of minerals that became attached to sulfides in the molten mix. Only 1 percent of the ore body contains such “heavy” metals as copper, nickel, cobalt, palladium, platinum, and even gold, and extracting the valuable metals will bring along the sulfides. 
Large quantities of waste rock
For every ton of metals mined, there will be 99 tons of waste rock bearing minute quantities of sulfides that, when exposed to air and water, convert to sulfuric acid, which can be deadly to fish and other lake aquatics. That’s the environmental problem that’s raising so much concern.    
MiningMinnesota, a mining advocacy group, says there are more than 4 billion tons of mineralized ore in the Duluth Complex and that means billions of tons of waste rock that would be piled in controlled basins on the surface or shoveled back underground as mines are exhausted. 
On the economic side, the mines will bring high-paying jobs to a region reeling from a downturn in logging and iron mining. (Mines are still working, but new processing technologies mean that today each worker produces 13,000 tons of ore, more than triple the output of 1980. [PDF])
The economic stimulus could be impressive. PolyMet alone will hire hundreds of construction workers to ready its $360 million mine, which will provide 400 jobs and, the company says, stimulate another 500 support jobs. 
Several others lining up
Next up is an Alberta corporation (based in Spokane, Wash.), Franconia Minerals, whose $620 million underground operation is planned to begin in two years near — and under — Birch Lake, where Koshak has his River Point Resort. Birch drains into the BWCA. 
That has the attention of the Friends of the Boundary Waters and the Sierra Club, groups that have been effective enough in their advocacy work to rile economic-development interests on the Range. And both organizations, along with others like MCEA, are watching the sulfide-metals issue very closely. 
A half dozen other companies are prospecting the Duluth Complex, and if metals prices hold and all open a mine, the economic stimulus could be measured in billions of dollars and hundreds of permanent jobs for a century or more (while each mine plans for a life of 20 years, most could run much longer).  
But the prospecting companies are keeping an eye on the metals market, where spot prices for the benchmark copper has plummeted during the world economic decline over the past year, falling from a high of around $4 a pound down to under $2 ($1.55 on Dec. 3). That’s still above the break-even price of $1 to justify mining, but the spot price for nickel has slipped below the $4.50 threshold used by PolyMet (the company would annually process about 36,000 tons of copper and 7,000 tons of nickel).  Prices for the other metals remain above the break-event point.
Strong demand for copper predicted
PolyMet Vice President LaTisha Gietzen expects worldwide copper demand will remain strong because of the expanding economies of high-population countries like India and China (even with the economic slump, China’s still growing at 9 percent), and because the transition to alternative energy sources like wind will require lots of copper wire for turbines and transmission lines.    
Still, the metals market is historically fickle, leading to the boom-bust cycles experienced on the Iron Range and virtually every other mining region. Some 30 years ago, prospecting companies were on the verge of moving ahead with nonferrous mines but gave up amid a sinking metals market. 
That was just as well from both an environmental and economic standpoint. Back then, the processing technology involved a smelter that would have released huge quantities of sulfides to the air and water. State officials toured a smelter site near Sudbury, Ontario, that looked like a moonscape due to contaminants from the copper-nickel processing. 
Minnesota’s tougher laws
As a result of that experience, Minnesota adopted much tougher environmental laws, including a “financial assurance” provision that requires mining companies to guarantee cleanup funds will be available, even if their operations go bust. 
The provision has never been used, and the DNR’s Marty Vadis says his department will hire outside financial experts to help assure that the state is financially protected if sulfides or other toxics leach from waste-rock basins.  
Complicating the situation somewhat is if PolyMet, as the low-level speculation goes, either sells out or is bought out before it begins to mine.  When asked about that, Gietzen said only that PolyMet is a publicly-traded company “and, as you know, anything can happen.” 
Still, PolyMet recently entered into a financing arrangement with Glencore, a giant commodities marketing company, that not only could provide up to $50 million in cash but also provide key marketing support  — in all “one helluva deal,” said a market insider.   
Regardless of who owns the mine, Vadis said PolyMet would remain responsible for the financial-assurance provision and the DNR must approve the terms of sale to any successor company. 
New technology planned
None of the mining companies would rely on a troubling smelter to extract metals from the ore.  Instead, they will use chemical flotation followed by an “autoclave” process that that minimizes the potential for the release of harmful toxics. Moreover, the new technology improves the recovery rate for copper and nickel from 85 percent up to 96 or more percent, and it utilizes sulfides in the ore for heat, which means the release of the worrisome sulfides is significantly reduced.
In all, says Rick Sandri, president of Duluth Metals, which is also developing a mining plan, Minnesota has some of the toughest environmental laws in the world. Along with others in the industry, he expresses confidence that mining here would be as environmentally safe as regulators anywhere could make it.      
But while Minnesota is poised to proceed with nonferrous mining, neighboring Wisconsin is less sanguine; in 1998 it passed a “prove it first” law that prohibits sulfide-metals mining until a North American mine can be operated for 10 years and sit idle for another 10 years without environmental harm. 
Legislators question adequacy
Given the political strength of the all-DFL Iron Range legislative delegation, it’s highly unlikely that such a law would be adopted here. But questions are being raised by such influential DFL legislators as Sen. Ellen Anderson of St. Paul and Rep. Jean Wagenius of Minneapolis — both chairs of environmental finance divisions — over whether laws are adequate.

Anderson asked the Legislative Citizens Committee on Minnesota’s Resources (LCCMR) to consider paying $150,000 for an independent review of the adequacy of state laws — a request that drew a stern rebuke from Iron Range legislators, who fear the proposed study would unnecessarily delay mining. While PCA and DNR insist that state law and their regulations are sufficient, Anderson has support on the LCCMR for the request and from Bob Tammen in Soudan, Minn., who spent much of his 66 years in the mining industry. 
Tammen points to the years it’s taken the DNR and PCA to deal with sulfides leaching from a mining waste pile near Bob Bay on Birch Lake and, more recently, with mercury and other trace metals found in water being pumped from the popular Soudan underground mine, and endocrine-disruptors discovered in paper mill discharges. 
As well, Tammen said, local state environmental officials have told him that there is worry over lead-lined grease barrels dumped around the Range similar to a discovery a few years ago of a dump near Silver Bay. 
“What else are we going to find?” Tammen asked, adding, “I’m very skeptical that our laws are adequate. Copper-nickel mining presents a whole new set of problems, and I’d say that Senator Anderson is onto something.”    
Changing times, changed reactions
Thirty years ago, such skepticism about mining was nearly nonexistent on the Iron Range, but even that’s changed. Tammen is precinct chair of Breitung Towship DFL, and at last spring’s caucus he said a resolution critical of copper-nickel mining was passed. The same thing happened in Ely, according to outfitter Steve Paragis. 
“I know there’s support for mining throughout the Range,” Paragis said. But the 70 people who showed up for his DFL precinct caucus also passed a resolution critical of sulfide-metals mining. 
In part, that may be due to the changing Iron Range economy in which non-mining jobs far out-pace mining employment, according to a report by economist Thomas Michael Power.  He noted that the area has attracted retirees and others who are drawn to the sheer beauty of the region and its outdoor amenities, including the BWCA.