Tell It to the Judge

Recent developments reveal how the complex permitting process in the U.S. creates opportunities for lawsuits and feeds a crisis of confidence in that process

By Jesse Morton, Technical Writer

In the course of roughly a month, several mining companies trying to move through the labyrinthine permitting process in the U.S. saw litigation by opponents threaten their plans. The opponents, partnered with tribes, were linked to big time environmental activist groups. The news gave the appearance that a trend is forming similar to the one that has hammered the coal space stateside. That appearance could be deceptive, experts say, but it should still be taken seriously by miners. They say it should also be taken seriously by the government as it says more about the permitting process itself and environmental law than it does about miners and their opponents.

Staid on Missteps

In mid-Q3 2019, Poly Met Mining Inc. would sustain both an embarrassing setback and a victory after a court and the state each separately ruled on legal challenges to a couple of permits by local opponents.

The miner’s NorthMet project, a potentially world-class copper-nickel play located near Hoyt Lakes, Minnesota, had received in March from the Army Corps of Engineers the last key permit needed to start construction. In the year prior, it received air, water and dam safety permits from the state. In June 2018, it completed a federal land exchange with the U.S. Forest Service.

By the end of Q2 2019, the miner was ready to pay back its financier as promised and move the ball forward on the mine. Then legal action launched by opponents bore fruit.

On June 25, a Minnesota appeals court ordered a hearing on procedural missteps in a federal agency’s review of a draft water permit for NorthMet. The order effectively staid the permit issued by the state in Q4 2018.

The court order was based on documents that surfaced revealing the federal Environmental Protection Agency (EPA) stated the draft of the permit fell short of meeting federal guidelines. The records reveal a state regulator requested the EPA be silent about it until after the public comment period ended.

The motion for the order was brought by WaterLegacy and the Fond du Lac Band of Lake Superior Chippewa. The WaterLegacy website reveals it is the legal arm of a network of “environmental groups in Minnesota and Wisconsin.” The founder’s public interest firm lists the Sierra Club as a client. And the Sierra Club has a campaign dedicated to stopping NorthMet. WaterLegacy, in its current form, basically exists to stop Poly Met and NorthMet.

The order threatened to push back a couple of deadlines. It was also an unseemly black eye for the miner at a time when it wanted to celebrate the long-planned official onboarding of its global-scale backer.

On June 27, headlines revealed Swiss mining conglomerate Glencore gained majority ownership of the miner’s similarly named parent company, PolyMet Mining Corp. Glencore now owns roughly three quarters of PolyMet stock. The takeover is Glencore’s preordained return for supporting Poly Met’s 15-year effort to plan, permit and launch the mine.

On July 31, PolyMet reported it appointed a Glencore senior executive to the board of directors. Two other seats would go to Glencore people.

Roughly a week later, the state weighed in.

On August 7, PolyMet reported the Minnesota Department of Natural Resources (MDNR) denied a request from the previously mentioned opponents to reconsider the mining and dam safety permits, issued in late 2018.

The concerns raised by the opponents centered on the collapse of Vale’s Brumadinho Dam in Brazil, the use of a specific method to analyze both dams, and how the findings from an inspection of a PolyMet tailings basin could raise questions on draining and materials strength at NorthMet.

In a press release, MDNR stated the opponents failed to provide new information that spoke to the permits. “We remain confident in the safety of the PolyMet tailings dam as permitted,” Sarah Strommen, commissioner, MDNR, said.

MDNR found there were critical differences between the Brumadinho dam and NorthMet’s permitted dam design. The terrain is different, the hydrosphere is different, the tectonic activity in the area is different, and the distance from the dam to certain key locations is different, the agency reported.

Previously, MDNR put NorthMet’s tailings dam proposal through years of rigorous in-house modeling and independent review prior to issuing the permits, the agency reported. The modelling done was more stringent and thorough than that done for Brumadinho, MDNR reported.

The agency stated it was confident that the dam, if built and run according to plan, would be “safe and protective of human health and the environment.”

The opponents vowed renewed efforts.

MDNR and the miners were in the hot seat. And they weren’t alone.

An Unprecedented Decision

In its Q1 2019 report, Canada’s Hudbay Minerals announced construction was set to start at Rosemont, an open-pit copper project sited amid conservation lands in the Santa Rita Mountains in Arizona. In March, the final two permits came through, a water permit from the U.S. Army Corps of Engineers and a mine plan permit from the U.S. Forest Service. In April, the company bought out the minority interest holder.

The company was primed to spend roughly $140 million in 2019 to get things rolling. Construction was anticipated to begin by the end of the year. First production was schedule for the end of 2022.

The company noted in the May 6 report that “opponents of the Rosemont project” had sued over the water permit, one lawsuit among “several outstanding challenges against the Rosemont permitting process.” Hudbay asserted it was “confident the permits will continue to be upheld.”

Among the lawsuits leveled against Rosemont was one brought by the Tohono O’Odham, Hopi and Pascua-Yaqui tribes, who say the mine will be situated on their ancient homeland and they basically consider it sacrilegious.

Legal precedent appeared to be on Hudbay’s side, until it wasn’t.

On July 31, a U.S. District Court decided to vacate and remand the Final Record of Decision (FROD) by the U.S. Forest Service. The decision rendered the miner unable to proceed with construction.

The decision was spun as a victory for a handful of opponents to the mine, which include the Tucson-based Cen-
ter for Biological Diversity and the Grand Canyon chapter of the Sierra Club. The two had sued to stop the mine because, they said, it would devastate local hydrosphere, would create damaging hauler traffic, and would damage jaguar habitat.

Their case, however, had been bundled to others. The court decision ultimately focused on the validity of land claims. The ruling, more than anything else, spoke to what the Forest Service did with the data pertaining to what land had economic-grade ore, what land didn’t, and where claims were staked.

The next day, Hudbay announced it would appeal the decision to the U.S. Ninth Circuit Court of Appeals. Further it would “evaluate other options available to advance the project.”

Leadership at Hudbay stated the court misinterpreted federal mining laws and Forest Service regulations. “We were surprised,” Peter Kukielski, interim president and CEO, Hudbay, said in the company’s Q2 report. “We are extremely disappointed with the court’s decision,” he said in a separate report. “We strongly believe that the project conforms to federal laws and regulations that have been in place for decades.”

According to Hudbay, the FROD was issued in June 2017 after a thorough process of 10 years involving 17 cooperating agencies at various levels of government, “16 hearings, more than 1,000 studies, and 245 days of public comment resulting in more than 36,000 comments.”

Up north, another miner moving through the same process was also headed for court.

Unwarranted, Misguided Litigation

On August 8, the Nez Perce Tribe and a legal organization known as Advocates for the West filed a suit in federal court under the Clean Water Act against Midas Gold Corp., Idaho Gold Resources Co., Stibnite Gold Co. and Midas Gold Idaho for discharging “pollutants from multiple point sources at the Stibnite Gold Project.”

The gold-silver project is located in the century-old Stibnite Mining District, which was a source of tungsten and antimony during the World War II era. The district is situated in the mountains of central Idaho and its history traces back to the Idaho gold rush of 1899.

The pollution discharges, comprised of a laundry list of metals, have allegedly been ongoing for more than a half-decade. According to the tribe and its lawyers, “defendants have not taken action to address the sources of pollution at the site and never obtained” the needed permits “authorizing pollution discharges.”

The suit demands an injunction on the mine, penalties, and legal costs paid.

Next day, Midas Gold Corp. issued a press release stating the pollution long predates its effort to acquire the rights to the site and obtain the permits to do anything about it.

The company described the lawsuit as “unwarranted and misguided,” and said it disregards how the company has been working with regulators to get the permits needed to address the pollution. “Midas Gold is not, and has never, operated on site and is not responsible for the existing contamination, but has proposed the Stibnite Gold Project as a means for providing the much-needed cleanup of historical waste polluting the area today.”

Leadership at the company stated, regarding the pollution “there is a problem,” but the tribe should seek to work with the miner on a solution instead of filing suit. “It is unfortunate that we are now adversaries in litigation instead of partners in restoration,” Laurel Sayer, CEO, Midas Gold Idaho, said in a press release.

Currently, the U.S. Forest Service is reviewing the miner’s Plan of Restoration and Operations. According to the miner, the plan is to, among other things, “reconnect fish to their native spawning grounds, fix the largest source of sedimentation in the river and remove tailings and waste rock that degrade water quality.”

Midas Gold holds that under the law it is “not legally responsible for cleanup of site legacy impacts caused by previous mining companies or directed by government agencies.” Nonetheless, it has sought permits from the state and feds “to take immediate action and learn more about the specific causes of degraded water quality in a number of locations.”

The company reported it has tried to work with the tribe over the years, but the tribe “has refused the most recent overtures.”

With these developments, it appears that the days when opponents of a mine would be swayed by such overtures are over. Talk is out. Litigation is in.

And why not? The Sierra Club deployed the exact same tactic to shut down dozens upon dozens of power plants during its ongoing Beyond Coal offensive. At its height, during a half decade period, on average, four coal-fired power plants per month were shuttered in the U.S.

Insiders warn that while no new trend in lawsuits is apparent, miners stateside should prepare and conduct business as if the next offensive will target them.

Hallmarks of the Big NGO

One similarity between the previously mentioned lawsuits and those of Beyond Coal is the role of big nongovernment organizations (NGOs) like the Sierra Club. That such organizations are involved in all three cases, however, does not necessarily mean they are all somehow linked and acting in concert, according to Katie Sweeney, senior vice president, legal affairs, National Mining Association. “Perhaps it seems that way because we live in the much more connected world of the digital age and social media,” she said.

John Lacy, director of the Global Mining Law Center at the University of Arizona, said there is a trend at play only in the sense that such NGOs use the permitting process to stop or delay a range of development projects. “Many of the objections are well-founded and should be capable of being resolved through appropriate consultation,” he said. “However, there are some NGOs who are so opposed to metal mining, and particularly open pit mining, that no amount of proof of lack of harm will suffice.”

Historically, those NGOs have leveraged local chapters or provided support to otherwise unrelated local activist groups to further that agenda, Sweeney said. Such moves are typically temporary and can be followed by more overt action, she said. “These NGOs’ intentions are revealed by their jockeying for visibility and a platform for influencing policy well beyond the project in question,” she said.

NGOs working with or through local chapters to bring suit fits a bigger trend that has been at play since the 1990s, Jim Allen, mining and resources lawyer with the law firm Snell & Wilmer in Tucson, Arizona, said. More recently, the litigation has been brought forward by smaller groups, who stand a better chance than do the big NGOs at recouping their lawyer fees, he said.

The ability to recoup those costs “can be really significant,” Allen said. “For the statutes that don’t have an attorney’s fee provision, like NEPA (National Environmental Policy Act), the smaller groups can sometimes rely on the Equal Access to Justice Act, which says that if you are a small, underfunded grassroots-type organization and you engage in this type of litigation and prevail then you can get your attorney’s fees, but not if you are a large organization,” he said. “Once the litigation begins, it is usually the same cast of characters, the same lawyers, in most cases.”

Evidence that a big NGO is involved either overtly or in the shadows presents as a reluctance to compromise or negotiate, Sweeney said. “Usually project proponents can work with the concerned local community groups to provide additional information or make project changes to allay such concerns,” she said. “NGOs with a broader anti-mining agenda aren’t similarly interested in finding solutions.”

Bruce Richardson, vice president, corporate communications, PolyMet, said the agenda of the big NGOs prevents them from effecting positive change to either the local community or the industry. “Those groups opposed to mining today aren’t interested in making permits better or the mining project better,” he said. “They are only interested in stopping mining outright.”

Another hallmark of the big NGO is the tendency to spin facts or scientific findings to manipulate locals, making it harder to find common ground for negotiations and upon which to build a path forward, Richardson said. “They unfortunately can, and do, say whatever they want whether it’s true or not.”

It is unfortunate “that much of the public is willing to believe anyone who asserts harmful effects without any real proof,” Lacy said.

Allen said that on one level, the role of the tribes is to pull the heartstrings of the public, who may rally around a perceived underdog. Over the last half-decade, tribes are increasingly involved in litigation to stop mines, he said. “That is the most interesting trend I’ve seen, the involvement of the Indian tribes.”

The development, Allen said, could be an attempt by federal actors to increase their jurisdiction. “What happens is in the course of approving a federal project, a tribe can now come in and say we have a right to control what happens on this land that we don’t own,” he said. The federal permitting body then has to react. “It becomes almost a way for the federal government and the NGOs to engage in landscape and land use planning,” he said. “Land use planning and the property rights thereof have been exclusively a state issue.”

Lacy said the permitting process, which involves agencies from different levels of government, creates opportunities for legal challenges. “In my view, the permitting system is too bifurcated,” Lacy said.

NGOs have seized on this and exploit it to their advantage, Sweeney said. “And the NGOs’ legal arguments continue to evolve and to multiply, raising new angles or theories to try to skirt legal precedent unfavorable to their position,” she said. “Forum shopping for judges that are perceived to be the most sympathetic to the cause also occurs.”

In fact, when a big NGO gets involved, legal challenges to permits become unavoidable, Sweeney said. Without reform to the permitting system, proactive measures miners can take are limited.

Plan on the Lawsuit

Certain steps can be taken to limit the opportunities for big NGO. Miners must think several moves ahead and be realistic about their weaknesses, Sweeney said. “Mining companies need to plan from the beginning as if the project will be challenged,” she said. “That means having legal experts involved at all stages to minimize potential legal vulnerabilities.”

Once an NGO locks sights on a project, involving the courts earlier could be advantageous, Lacy said. “It may be helpful to have a preliminary judicial review early in the process so that the project proponent has an opportunity to clarify perceived problems or deficiencies without the need to go through a legal appeals process.”

Lacy said it is crucial for miners to work with interest groups as early in the process as possible.

That can mean practicing local politics and forming key alliances, Sweeney said. “Most companies are also well aware of the importance of local support to balance out the opposition and to prevent the bigger NGOs from ‘hijacking’ local opinions,” she said. “Having informed and vocal third-party support can help combat the ‘halo effect’ that frequently is associated with NGOs, meaning the information they provide and positions they advocate undergo less scrutiny from the public, media and others because they are allegedly working in the public interest.”

Most miners are critically aware that the long-term success of their operations depends on building and maintaining positive relationships with communities, Sweeney said. “Early engagement, long before permits are even sought, is always an important component of any outreach plan as are regular updates to build credibility and trust.”

Which is exactly what the three above mentioned companies did. Each “can point to significant local support for their projects that will provide future benefits,” Sweeney said.

Beyond early engagement, actively seeking the advice of locals is key, Richardson said. “We’ve learned to not be afraid to ask our community leaders for help,” he said. “They have been eager to help as individuals and as part of their respective elected bodies, and have relationships and influence that really matter.”

The communities near the NorthMet project, referred to as Iron Range communities, were described by Richardson as “steadfastly supportive of our project and very patient” of the permitting process. “The opposition has come from outside, namely Duluth, which is 175 river miles downstream of our project and has a small but vocal anti-mining faction, and the Twin Cities, more than 200 highway miles away, where most of the opposition groups and elected officials opposed to the project are based.”

Knowing that, the company from the onset was careful not to take the local support for granted. “No miner should,” Richardson said. “We’ve had to earn it through open and frequent communications with local leaders and citizens. They know they can pick up the phone or drop in and talk to us any time.”

Sweeney said these cases don’t necessarily reflect poorly on the legal system, but on the permitting process. “I think generally mining companies rate the stability and predictability of the U.S. ‘rule of law’ highly but the same cannot be said of our permitting processes,” she said. “Our global peers accomplish in two to three years what takes a decade to permit in the U.S., deepening our reliance on foreign imports.”

The Need for Reform

The permitting process should be streamlined through better coordination between agencies, clarification of responsibilities, elimination of redundancy, and tighter timelines, Sweeney said.

Lacy described the permitting process as “long on administrative compliance and short on substance.” The effect could be a court-sanctioned crisis of confidence in a permit, the permitting body, and the permitting process. The Rosemont case illustrates, he said. “It seems that Rosemont did a good job in the permitting compliance and public relations, but was faced with political opposition early in the process,” he said. “The complexity of the permitting process was certainly evident and was reflected in the district court’s opinion that addressed issues that, in my view, should not have even been addressed.”

The permitting process should be consolidated, Lacy said. “The permits for mining projects and others for that matter, should be consolidated into a single permit wherein the project gets a clear green light that all issues have been addressed and then there is a single appeal,” he said. “In other countries, where the mineral estate is part of the national patrimony, the central government is a direct beneficiary of the mining operation and this is more sympathetic to the permitting process.”

Downsizing and honing the permitting process, however, would likely not end NGO litigation, Sweeney said. “It could mean fewer challenges during the preliminary stages of permitting as numerous permitting decision timeframes become more aligned.”

Allen agreed, saying even if the process were somehow reformed, legal challenges will continue to be commonplace until measures are taken to limit the ability of the plaintiff to recoup legal costs from government. “The deck is stacked toward NGOs being able to recover their attorneys’ fees,” he said. “That made sense when you were dealing with smaller groups but now in many cases the Sierra Club is better funded than the mining proponent.”

Some litigation would be eliminated by “leveling the field on attorneys’ fees and returning to the simple American rule, which is everybody pays their own costs,” Allen said. Currently, “the environmental groups have no incentive to consider the cost of their litigation and are very willing to go all the way through court with some very shaky legal theories.”

Beyond this, Allen suggests the current standards for environmental impact statements need reform.

“Right now, the way an NGO wins is by going to the permitting agency and saying here is what you should have looked at and didn’t look at,” Allen said. “That is the way NEPA has been structured since the beginning.” Thus the NGO, without technically proving harm exists or potentially could, can cast enough doubt on a permit process to sway a court or agency.

“That should be replaced with a put-up-or-shut-up rule,” Allen said. “If you believe some sort of environmental damage has not been looked at, come to the agency not with a complaint but with data,” he said. “Any organization that is well-funded enough to challenge a major permit should be well-enough funded to get out there and take some air quality data or commission a study to do a ground water flow model.”

This would raise the informational hurdle for someone set to challenge a permit.

Without reform, Allen said, there will continue to be a crisis of confidence in permits and permitting bodies.

Even with reform, litigation will likely remain a core tool in the toolkits of the NGOs. One way miners can cope, he said, may be to think small.

“It has always been an adage in the mining industry that the best place to look for a new deposit is in the shadow of the headframe,” Allen said. “It is just much easier to expand an existing project than to permit a new one.”

Along those lines, big mining companies may fare best by acquiring smaller projects instead of seeking to launch new world-class mines. “Smaller operations get approved without near the opposition that you see for a Rosemont or a NorthMet,” Allen said. “It is the biggest projects that get the most scrutiny.” Companies should “be looking at balancing a portfolio of both big and small projects because the smaller ones seem to get permitted and run their course much more quickly, with a smaller footprint and impact and without the attention.”

Until reform occurs, Allen said, as mining companies are planning operations stateside, “they have to be looking at longer and longer horizons.”