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Originally published in the September 2023 issue of Bench & Bar of Minnesota Environmental Law Update, Minnesota State Bar Association.

On August 2, 2023, the Minnesota Supreme Court affirmed in part, reversed in part, and remanded the National Pollutant Discharge Elimination System/State Disposal System (NPDES/SDS) permit (“Permit”) issued by the Minnesota Pollution Control Agency (MPCA) for a new copper mining project in St Louis County, MN, proposed by New Range Copper Nickel (formerly Poly Met Mining). In re Contested Case Hearing Requests & Issuance of Nat'l Pollutant Discharge Elimination Sys., ___ N.W.2d ___ (20223).

In January 2019, several environmental groups and the Fond du Lac Band of Lake Superior Chippewa (together, “Appellants”) challenged the Permit to the Minnesota Court of Appeals. Among other things, Appellants alleged that MPCA had followed irregular and unlawful procedures by pursuing and entering into an agreement by which the U.S. Environmental Protection Agency (EPA) would not submit written comments on the Permit during the public-comment period but would read the proposed comments to MPCA staff in a conference call. In May 2019, the court of appeals transferred the case to the district court to examine the alleged unlawful procedures. The district court determined that while MPCA had followed several procedural irregularities, the agency’s conduct, including MPCA’s efforts to persuade the EPA not to submit written comments during the public-comment period, was not procedurally improper or otherwise unlawful.

In reviewing the district court’s decision, the court of appeals determined it did not need to determine whether the challenged procedures were unlawful because Appellants had not demonstrated that the procedures prejudiced their substantial rights. For example, the court noted that MPCA’s actions did not prevent Appellants from submitting comments on the Permit, and even if EPA had submitted comments during the public comment period, they likely would have come toward the end of the comment period such that Appellants could not have considered EPA’s comments in drafting their own comments. Plus, EPA did communicate its comments to MPCA. The court of appeals also evaluated Appellants’ other arguments challenging the permit, including whether the Permit should have included water-quality-based effluent limits (WQBELs) in addition to technology-based effluent limits, and whether the Permit properly regulated seepage discharges to groundwater from the proposed project’s stockpile and tailings basin.

The Minnesota Supreme Court granted Appellants’ petition for review to address three primary issues: (1) whether the Permit must be reversed or remanded because of the procedural irregularities described above, (2) whether the Permit should have included water quality-based effluent limitations (WQBELs); and (3) whether the Permit complies with a Minnesota rule addressing wastewater discharges to groundwater, Minn. R. 7060.0600 (2021).

On the issue of procedural irregularities, the court held that even if an irregular procedure of an agency does not rise to the level of an unlawful procedure under the Minnesota Administrative Procedure Act (MAPA, Minn. Stat. ch. 14), an irregularity in procedure nonetheless may constitute a “danger signal” that may be considered in determining whether an agency decision is “arbitrary or capricious.” Here, the court found several “danger signals” in MPCA’s interaction with EPA during the permitting process, including: (1) arranging to delay EPA comments on the draft permit; (2) failing to document in the administrative record either its request or EPA’s concerns about the draft permit; (3) not explaining if or how the MPCA resolved EPA’s concerns; and (4) general deficiencies in the administrative record regarding communications between the MPCA and the EPA. These danger signals, the court held, rendered the MPCA’s decision on the Permit arbitrary and capricious.

In determining whether MPCA’s arbitrary and capricious Permit decision required reversing or modifying the decision, the court emphasized that the relevant inquiry is whether Appellants’ substantial rights “may have been prejudiced.” Minn. Stat. § 14.69 (emphasis added). Here, the court held that Appellants had met the standard. For example, the court concluded that the lack of documentation in the administrative record regarding EPA’s concerns with the Permit—particularly on issues of greatest concern to Appellants, such as the need for WQBELs—“may” have limited Appellants’ right to engage in meaningful review of the proposed Permit. Accordingly, the court remanded to MPCA for the limited purpose of giving EPA an opportunity to provide written comments on the final Permit and for MPCA to respond to any comments submitted by EPA. The court also directed MPCA to amend the Permit, if warranted by EPA’s comments, to add WQBELs and ensure compliance with state and tribal water quality standards.

Regarding compliance with Minnesota groundwater requirements, at issue was an MPCA rule prohibiting, in relevant part, the discharge of industrial waste to the “unsaturated zone” in a manner that may “pollute the underground waters.” The rules define "unsaturated zone" as “the zone between the land surface and the water table.” Minn. R. 7060.0300, subp. 7. The court evaluated the application of this prohibition to the proposed category 1 stockpile and tailings basin at New Range’s proposed mining operation. Both the stockpile and the tailings basin would allow pollutants from the mining waste materials to infiltrate to the underlying groundwater; however, in both cases, New Range proposed to construct cut-off walls from surface to the bedrock that would contain the polluted groundwater and minimize the groundwater escaping outside of the containment system. The polluted groundwater in the containment system would then be collected and sent to a wastewater treatment system. No party disputed that the groundwater in the containment systems underlying the stockpile and tailings basin would be polluted; rather the core issue was whether the groundwater in the containment systems was part of “the underground waters” that may not be polluted under Rule 7060.0600, subpart 2.

The supreme court held that it was. Looking to the broad definition of “underground water,” Minn. R. 7060.0300, subp. 6, the court held that the term’s unambiguous language contemplates no exclusions. The court thus held that the prohibition on discharges to the unsaturated zone in a manner that may pollute the underground waters “applies with equal force to groundwater within the planned containment systems” at the proposed mining project, “as it does to groundwater outside the planned containment system.” And because the language was unambiguous, the court determined it did not need to defer to MPCA’s contrary interpretation. The court noted that its holding does not necessarily preclude MPCA from issuing a permit for the project, as the MPCA could consider granting a variance, which the rules allow in “exceptional circumstances.” Minn. R. 7060.0900. The court reversed the court of appeals on the groundwater issue and remanded the Permit to MPCA for consideration of whether a variance is appropriate for the project.

The court’s holding on the groundwater issue raises the possibility that other infiltration-based wastewater management facilities could likewise require a variance for pollution of the groundwater underlying the facilitites.


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