PolyMet financial assurance doesn't cover catastrophe
BABBITT, Minn. — Whether it's $544 million in coverage suggested by PolyMet for the first year of mining or the reported $1 billion state experts say might be needed at peak mine activity, the so-called financial assurance for the proposed copper mine near Babbitt is being misinterpreted by some people as a guard against catastrophe.
The money, with a final number to be hashed out between state regulators and the company as the permitting process winds down in coming weeks, would be made available only to cover expected cleanup, closure and reclamation of the mine if everything goes well.
The amount also will have to be enough to pay for long-term treatment of water leaving the mine site, perhaps for decades or longer after mining stops.
But the much-discussed financial assurance package is not intended to cover catastrophes that might occur at the mine — unexpected disaster beyond usual mine closure duties, like the 2014 collapse of a giant tailings dam at the Mount Polley mine in British Columbia.
For that kind of disaster — which cost Imperial Metals more than $67 million to fix — the state of Minnesota will require PolyMet to have environmental liability insurance, a critical element which has received little public attention.
PolyMet last week submitted an amended permit-to-mine application that included, for the first time, how much money the company believes will be necessary to cover the cost of closing the mine, cleaning things up and reclaiming the land, as well as water treatment going forward. The company suggests that it would need to have $544 million available in bonds, letters of credit and cash available to the state in the first year of actual mining, with more during peak mining and less before that.
The Minneapolis Star Tribune reported Wednesday, Dec. 21, that state experts say that number should be $1 billion during peak mining years. The newspaper said it obtained that figure in a state open-records-law request.
The final amount will be made public as the permit goes out for public notice in coming weeks. Under state law the DNR and PolyMet will renegotiate each year and the state will decide what the total should be for the coming year.
Is $10 million enough?
But the revised permit also includes PolyMet's previously unreported suggestion on how much catastrophic environmental liability coverage it should carry. PolyMet is proposing $10 million in environmental liability insurance, according to the company's revised permit application.
"The financial assurance package will also include commercial general liability, pollution liability, and property insurance. Insurance coverage will provide security against unknown, unanticipated, and catastrophic conditions resulting in claims against the property, should they occur," the company's revised permit application notes.
PolyMet says it will cost the company about $100,000 annually for $10 million in coverage.
Barb Naramore, assistant DNR commissioner overseeing the Polymet permitting process, said the agency hasn't signed off on that $10 million figure.
"That amount will be what we say it needs to be," she said.
Naramore cautioned that the state is still deciding details of the permit and that the public shouldn't assume PolyMet's proposals will be accepted.
Paula Maccabee, attorney for the group Water Legacy, called PolyMet's $10 million coverage for potential liability "laughably small."
"We still don't know what state regulators are going to require for environmental liability. But PolyMet's proposal is vastly insufficient," Maccabee said.
"Based on what we've seen in Superfund cleanups at mines across the country, and the catastrophic cost to cleanup up sulfide mining's legacy, is that $10 million is a drop in the bucket," Maccabee said. "When the $10 million runs out the cost is going be borne by taxpayers, through Superfund, or by the people who live downstream. ... That's the history of mine cleanup in this country."
LaTisha Gietzen, spokeswoman for PolyMet, noted that there have been no new hard-rock mining projects permitted since 1990 in the U.S. that have resorted to Superfund-funded cleanup.
"There are always different viewpoints about proposed industrial and mining projects," she said. "People will be able to formally voice their concerns and provide comment as a part of the public comment period when the draft permit-to-mine goes on public notice."
Maccabee and others note that the liability insurance will only be available as long as the premiums are paid. But Naramore said it's expected that liability insurance coverage will be covered and required even after the company ceases to exist.
"If the permit holder (PolyMet or its successor) does exist post-operation, it would have a financial incentive to continue to comply with all permit conditions," she said. But even if no company remains to pay "DNR would have sufficient resources available to cover all expenses, including the money needed to maintain the environmental liability policy."
Naramore said, conceptually, the DNR will shift PolyMet's financial assurance requirements to cash and away from bonds or letters of credit as mining goes on. That cash would be in trust and controlled by the state and could be used to pay for future liability insurance coverage.
"The trust has to be there to cover the long-term treatment cost of water in the first place, but in addition to water treatment, we will require money to pay for liability as well," Naramore said. "The real concept behind financial assurance is that there is sufficient funds in place at any time, year one or year whatever. There are sufficient financial resources available to us to do that at no cost to the taxpayer."