Records:  For years, federal regulators pushed for mining near Boundary Waters as they eyed financial royalties

By Mike Kaszuba and Matt Ehling

Environmentalists and mining officials have long debated how ambitious copper-sulfide mining proposals might impact the Boundary Waters Canoe Area Wilderness (BWCAW) and other sensitive land parcels in northern Minnesota.

But hundreds of documents obtained through Freedom of Information Act litigation by Public Record Media, a non-profit based in Saint Paul, show that federal regulators have for years weighed one other factor: how such mining projects would generate significant financial royalties for the federal government.

“The importance of the [mining] prospects cannot be understated as significant amounts of royalties would be paid to the Federal government,” wrote John Lyon, the Eastern States state director for the U.S. Bureau of Land Management (BLM), one of the federal agencies tasked with overseeing prospective mining operations in northern Minnesota. Lyon’s memorandum, labeled an “internal working document”, was attached to a June, 2012 e-mail from a BLM official.

“If leasing and subsequent development occurs, this region will become one of the major mining areas of the world and likely the largest hardrock mining center in the United States,” Lyon added.

“Mineral exploration has occurred [in the Superior National Forest] for over 50 years but recently, due to the discovery of significant prospects and historically high prices for metals, the level of activity has markedly increased,” Lyon added in the memorandum.

High concentrations of copper, nickel, and rare earth elements in the northern reaches of Minnesota have spurred extensive mineral exploration, and have led to two separate proposals for copper-nickel mining projects by PolyMet Mining and Twin Metals Minnesota.  

Royalty payments for mineral exploration a recurring theme

Internal BLM correspondence obtained by PRM revealed a recurring agency focus on royalties that could be earned through mineral “leasing” – the regulated process by which private entities explore for minerals on public lands.  

“These lands are acquired lands and therefore leasable with a royalty.  The royalty is negotiable, it is variable, but the tradition is 5%,” BLM’s Lyon wrote in a June 2012 e-mail to Neil Kornze, another BLM official.

“Exactly how broad is our latitude on royalties, [is] there a ceiling, a floor?” Kornze wrote back the same day.  “How and when do we negotiate the royalty rate?  Does it differ by mineral?  Lease by lease?  By state or region?

“The Ely [MN] area mines are going to be a big deal,” Kornze added.

Less than two years later, Kornze would be confirmed by the U.S. Senate to lead the BLM under President Obama, and would serve as its director until 2017.

In recent years, the subject of mining royalties paid to the federal government has largely been obscured by two highly-publicized actions: a move by the Obama administration in late 2016 to reject the renewal of two mineral leases sought by Twin Metals Minnesota, and more recently a counter-move by the Trump administration to reinstate the leases and abort a mining-related environmental study.

Federal policy inclined toward mining project approval

Hundreds of documents obtained by PRM show that officials in the U.S. Forest Service and the BLM – including during the Obama administration — regularly acted to move a series of mining-related permits and projects forward.  In one instance, the documents indicate that federal officials even helped a key mining company in the area maneuver around government guidelines on acreage limits for hardrock mineral mining permits and leases.

The documents detail how long-standing federal policy to make public lands available for mining-related activities influenced day-to-day decisions made by federal regulators.  And the documents also reveal how regulators were inclined to find a way to make those activities happen.

The documents largely center on two separate mining decisions in northern Minnesota:  One was the pending renewal of two federal mining permits by Twin Metals Minnesota, known as 1352, or the Maturi Lease, and 1353, known the Spruce Road Lease.  Together, the two leases covered more than 4,500 acres of federal minerals and were set to expire in December of 2013.  The leases were ultimately denied by the Obama administration, but later authorized by the Trump administration.

The second involved a plan to address nearly 30 existing prospecting permits – and any future prospecting applications – in the three-million-acre Superior National Forest.  In 2006, both the BLM and Forest Service had concluded that an earlier forest plan had failed to provide an adequate environmental analysis, and called instead for a more stringent Environmental Impact Statement (EIS).  A draft EIS was released in 2011, and the BLM issued 28 prospecting permits in 2012.

Twin Metals project and Leases 1352 and 1353

In a June 2012 report, Twin Metals Minnesota outlined the potential importance of its proposed Minnesota project, including Leases 1352 and 1353.

The company reported “significant increases in the copper, nickel, platinum, palladium and gold resources within the Project area [with] more than 10 billion pounds of Cu-Ni [copper-nickel] indicated Resource.”

Twin Metals Minnesota added that the “goal is to obtain up to 85,000 feet of core by Q1 2013.”  In a document outlining an upcoming Twin Metals Minnesota meeting in May 2013, company representatives said the project “would be one of the largest underground mines anywhere.”

The potential did not escape notice at the BLM.

In an October 2013 e-mail, Michael Glasson (the lead official for the BLM’s solid minerals program in Washington, D.C.) wrote that a task force had been formed to “evaluate [the] economics” of mining in northeastern Minnesota.  “The bigger picture and long term goal of course is that once royalty rates are established for these [Twin Metals Minnesota] leases, we will be using the same methods and data and evaluation standards for setting royalty rates on hardrock leases of all sorts far into the future,” he wrote in a message to other BLM officials.

“I spoke with you about the enormous development potential in the so-called Duluth Complex in NE MN, and although this is years away from development, the two existing leases in question can sort of set the table for future royalty negotiations,” Glasson added.

Obama-era BLM helped Duluth Metals expand mineral prospecting

Documents obtained by PRM show how federal officials, during the Obama administration, acted to keep mineral prospecting projects in northern Minnesota moving forward.

In one memo, Lyon discussed a June, 2011 attempt to assist Duluth Metals, which was then listed as a 60 percent owner of Twin Metals Minnesota.  The memo described how officials in BLM’s Washington, D.C. office met with representatives of Duluth Metals for the purpose of helping the company. Lyon’s memo detailed how Duluth Metals had “raised concerns” because it had exceeded the 20,480-acre limit for land that could be contained in leases, prospecting permits, and prospecting permit applications.

“To resolve this issue, the Northeastern States Field Office [NSFO] worked with the Regional Solicitors Office in Pittsburgh and had Duluth Metals and Idea Drilling [another company] enter a development contract [that] was approved by the BLM in February 2012,” Lyon wrote.

The documents show that a hardrock mineral development contract was signed on February 8, 2012 between Duluth Metals Ltd. and its affiliates, and Idea Drilling LLC, which was described in the contract as an independent contractor retained by Duluth Metals.  The contract stated that the two companies “collectively require more than 20,480 acres in prospecting permits and preference right leases in order to conduct their exploration activities efficiently.”

The contract added that federal regulations allowed the BLM to approve development contracts “made by a lessee of certain lands with one or more persons to justify large scale operations for the discovery, development, production, or transportation of ores, provided such Development Contract will conserve natural resources and is in the best interest of the public.”

In addition, the contract stated that “hardrock mineral prospecting permits and leases committed to this Development Contract are exempt from the acreage limitations.”

A BLM official approved the agreement the next day.

Lyon’s memo, which was undated, noted that the BLM had received 22 new prospecting permit applications – six of which were submitted by Duluth Metals.  He said that Duluth Metals, in addition to its ownership interest in Twin Metals Minnesota, also owned roughly 40,000 acres of mineral interests “on properties adjacent to and near the Twin Metals Project.”

He added: “The exploration and development of the Duluth Complex [mining area] is an extremely large and complicated undertaking.  This level of inter-agency development of leasable hardrock minerals with several companies is unusual.”

But he stated: “The BLM and the Forest Service will continue to work closely with Duluth Metals and the other companies to keep this critical project moving forward.”

Other correspondence from Lyon – written in March of 2012 – praised the proposed Twin Metals mining project, which was co-owned by Duluth Metals at the time.

“This is a very rich and extensive deep mine prospect,” Lyon said in an e-mail, “and the operators are working very hard with the public and federal/State agencies for orderly and thoughtful development and environmental stewardship.”

Twin Metals activities advanced during Obama years

Documents indicate that during much of the Obama administration, mining-related activities advocated by Twin Metals and its corporate affiliates were kept going in other ways.

One of those ways related to the renewal of the two federal leases Twin Metals Minnesota needed for its project.  In the closing months of 2013, with Twin Metals Minnesota trying to extend Leases 1352 and 1353, the company urged federal regulators to speed up their review before the leases expired at the end of that year.

Twin Metals Minnesota produced a 31-page report following a meeting with federal officials in July of 2012 in which the company stated that it needed “a renewal decision before its two federal mineral leases expire December 31, 2013.”  It argued that the company’s upcoming “investment of several hundred million dollars [requires] secure and long-term mineral tenure.”

In the same report, the company also pointed out that both the Forest Service and BLM – which had first issued leases for the property in the mid-1960s – had determined in previous instances when the leases were renewed that neither a formal environmental assessment or a more stringent environmental impact statement were necessary.  Both agencies, the company stated, had “determined that lease terms [themselves] were sufficient to protect [the] environment.”

In May of 2013, Twin Metals Minnesota pressed again for a “categorical exclusion” for renewing the two leases, arguing that in renewing the leases twice before the federal government had “found no impacts warranting further [environmental] analysis.”

The company noted that “no ‘extraordinary circumstances’ exist” in which “a normally excluded action may have a significant environmental effect.”

Four months later, federal regulators concluded that an environmental assessment would be necessary – but not a more stringent environmental impact statement.  In addition, BLM officials told Twin Metals not to worry about the December 2013 expiration.

In an internal memorandum, the BLM’s acting field manager for the Northeastern States field office wrote in September of 2013 that “an Environmental Assessment for the lease renewal [of 1352 and 1353] will provide the Eastern States with a defensible analysis document.”

He added that the “lands involved have never been fully evaluated to determine the environmental impacts of potential ground disturbing activities on resource values such as vegetation, water, and recreation.”

As the environmental assessment was compiled in the fall of 2013, Twin Metals Minnesota was hoping for quick action.  “I know the company is very anxious about this as we are in almost daily communication with them on various issues,” the BLM’s Dean Gettinger wrote in an October 2013 e-mail.

Documents indicated that BLM officials tried to reassure the company as the review continued.  The BLM’s Jessica Rubado, the agency’s acting associate state director, wrote to company officials in an undated letter, stating that the agency wanted “to assure you that the leases will in fact not expire, so long as the BLM is diligently working on the renewal of the two leases.”

“BLM would like to make it clear that during the interim, while BLM is in the process of renewal, Twin Metals is authorized to continue to make beneficial use of these leases in any way for which the company is already approved under proper authority,” she added.

In October of 2013, Rubado went further and suggested having “an in-person technically focused meeting with Twin Metals.”  Rubado’s e-mail also suggested having twelve BLM officials attend, and said that the “coordination goal” would be to “connect/build relationships between technical specialists within Twin and the BLM and to facilitate the exchange of information [to] support a preliminary valuable mineral determination (PVMD), [National Environmental Policy Act] analysis, and permitting needs.”

A separate draft agenda for the meeting, which was scheduled for December 2013 in Ely, included a “group dinner” and a discussion of “Royalties (Fed. & State) and other lease terms.”

Other, relatively routine, decisions by the BLM also favored Twin Metals Minnesota.

For instance, in April of 2012 the BLM’s Mark Storzer approved an operating plan modification for Lease 1352.  “Plan modification results in no additional surface disturbance while accomplishing minerals exploration objectives,” he wrote.  “Exploratory core holes will be drilled directionally from drilling sites on states leased lands and private lands into Federal minerals on a year round basis.”

Long-standing federal policy regarding mining

Much of what occurred regarding Twin Metals Minnesota and other projects was driven by a long-standing federal policy that encouraged mining-related activity – such as mineral prospecting – on federal lands.

In a September 2012 decision authorizing federal hardrock mineral prospecting permits in Minnesota’s Superior National Forest, the BLM issued 28 permits to five companies and rejected one permit.  The 28 permits covered roughly 38,545 acres of the Superior National Forest.  “The Federal government has a policy of fostering and encouraging private enterprise in the development of a stable domestic minerals industry and the orderly and economic development of domestic resources,” the seven-page decision stated.

“The BLM has a minerals policy that ‘except for Congressional withdrawals, public lands shall remain open and available for mineral exploration and development unless withdrawal or other administrative action is clearly justified in the national interest’,” it added.

“The Forest Service [in addition] has a program policy for minerals management that states ‘the availability of minerals and energy resources within the National Forests and Grasslands significantly affects the development, economic growth and defense of the Nation’,” the decision stated.

The BLM’s Lyon cautioned that, in the case of the 28 prospecting permits, there were limits.  “The BLM Record of Decision does not propose or authorize mining,” he wrote in an undated memo.  “The prospecting permits authorize mineral exploration only.”

But an undated internal working document, also authored by Lyon, noted that of the Superior National Forest’s three million acres “approximately 2.7 million acres are open to mining and being analyzed.”

Federal perspective on leases 1352 and 1353

For decades – before the Obama administration, and even before the project site came under the control of Twin Metals Minnesota – federal officials had indicated that no special analysis was needed to study the impact of Leases 1352 and 1353 on the nearby environment.

“These [mining] leases have been in effect for 20 years and past experience has shown that their terms and conditions provide adequate authority to prevent or mitigate unacceptable impacts,” Clay Beal, a forest supervisor wrote in a February 1987 memo.  In agreeing to renew the two key federal leases, Beal noted that the existing conditions were “adequate to prevent or mitigate unacceptable impacts and that no additional conditions need to be added.”

Beal added: “During this time the area has been extensively explored, hundreds of test holes have been drilled, both surface and underground bulk samples have been taken, and a large scale open pit mining operation proposed and evaluated. At no time were the terms and conditions of the leases found to be inadequate.”

Mining companies and the federal government were meanwhile joined together by one additional factor – a cost recovery program set out by federal regulations.  The program requires companies proposing projects to pay – up front – the estimated cost for a government agency to process an application.

In a May 2013 letter to the BLM, Twin Metals representative Jennifer Biever wrote that the company wanted to “assist the [“BLM”] with obtaining the resources necessary to timely process all of the current Twin Metals proposals and future Twin Metals proposals.”

“To that end,” wrote Twin Metals’ Jennifer Biever, “we present information informing the development of a master cost recovery agreement between BLM and Twin Metals that would provide BLM the resources it needs to hire additional employees or contractors,” Biever added.  “Twin Metals requests that the master cost recovery agreement apply to future proposals and applications in the same geographic area, and Twin Metals may further request revisions to the master cost recovery agreement to expand the geographic area.”

Twin Metals corporate organization

Documents revealed that as the proposed Twin Metals project moved forward, federal officials also had to engage the multiple corporate entities that were involved.

In a July 2012 report from Twin Metals that recapped a meeting with federal officials, a diagram showed that Chilean mining company Antofagasta PLC and Duluth Metals Ltd. of Canada jointly owned Twin Metals Minnesota at the time.  The diagram showed that Twin Metals held seven permits and applications, owned the Maturi East Deposit, and also owned another company, Franconia Minerals LLC.

Franconia Minerals, along with Beaver Bay Inc. and Lehmann Exploration Management Inc., owned Birch Lake Joint Venture, which owned the Maturi West Deposit, the Spruce Road Deposit and the Birch Lake Deposit.  Twin Metals Minnesota was authorized to manage the leases, permits and applications for the Maturi West, Spruce Road and Birch Lake mineral deposits.

Beaver Bay Inc. meanwhile held the critical federal mineral leases, 1352 and 1353.

The diagram showed that Lehmann Exploration Management Inc. held seven permits and applications on behalf of Birch Lake Joint Venture.

And a new Duluth Metals entity, DMC USA, held another 14 permits and applications.

Four days after the Twin Metals Minnesota report was issued, Beaver Bay Inc. sent a letter to two BLM officials.  “In this letter, we will attempt to clarify the relationship between Beaver Bay Inc. (”BBI”), which is the successor to the Beaver Bay Joint Venture; Lehmann Exploration Management, Inc. (LEM); and Franconia Minerals (US) LLC (“Franconia”) (formerly Franconia Minerals (US) Inc.). This letter restates and supersedes in its entirety my letter to you of June 29, 2012,” wrote Ernest Lehmann, the president of Beaver Bay Inc. and Lehmann Exploration Management Inc.

In an October 2012 letter from officials representing the two companies, Beaver Bay Inc. and Franconia Minerals LLC said they were jointly submitting an application to renew leases 1352 and 1353 for a 10-year period.

Less than three years later, in January 2015, the mining companies alerted government officials to more corporate structure changes.

“I am writing to provide you a brief update and a ‘heads up’ regarding the acquisition of Duluth Metals Limited by Antofagasta plc,” Bob McFarlin, Twin Metals Minnesota’s vice president of public and government affairs, wrote in an e-mail to state officials including Tom Landwehr, the then-commissioner of the Minnesota Department of Natural Resources.

“Antofagasta and Duluth Metals are the original partners in the Twin Metals Minnesota joint venture,” McFarlin stated.  “Antofagasta’s friendly acquisition of Duluth Metals, first announced in November 2014, will place Twin Metals under unilateral control of Antofagasta. The acquisition process is moving forward smoothly.”

(Antofagasta would separately make headlines in 2019 when the New York Times reported that the Trump administration began to lift restrictions on the mining project at a time when Andronico Luksic, whose family owns Antofagasta, rented a home in Washington, D.C. for $15,000 a month to Ivanka Trump and Jared Kushner, the president’s daughter and son-in-law who serve as senior White House advisors).

Environmental groups weigh in

As federal officials continued to push a series of proposed mining projects forward during the second term of the Obama administration, documents show that others were weighing in on the projects.

In a November 2013 letter, the Minnesota Center for Environmental Advocacy (MCEA) stated that the company’s multiple projects in the Superior National Forest were being studied too narrowly – and needed to be analyzed for their wider impacts.  The company’s request for a special use permit to install up to 13 hydrogeologic wells in the South Kawishiwi River and Birch Lake watersheds, the MCEA stated, left the group “concerned with the potential limited scope of the environmental assessment for the proposed hydrogeologic monitoring activities.”

“Cumulative effects on the environment can and have resulted in a significant and adverse [impact on the forest] and must not be discounted,” the MCEA stated.

The group’s letter was written as Twin Metals Minnesota and the BLM were organizing a large group meeting to discuss the company’s mining plans in Minnesota.

At roughly the same time, Rachel Garwin, an instructor at the Voyageur Outward Bound School, had her own questions for federal officials about Twin Metals Minnesota’s varying projects.

“Twin Metals Minnesota has proposed to construct a number of monitoring wells to conduct a hydrogeologic study. It is our understanding that these wells would be approved by a letter of an operating plan under the existing lease. What is the timeline for this process, and will it include public input?” Garwin asked in a November 2013 e-mail.

“Does the approval of hydrogeo monitoring wells require that the mineral lease renewal [now being reviewed] be approved without a finding of significant environmental impact under the ongoing Environmental Assessment?” she asked.

Garwin’s e-mail was brought to the attention of Glasson, the BLM’s lead official with the solid minerals program in Washington, D.C.  “The ongoing EA [environmental assessment] has nothing to do with what they [Twin Metals Minnesota] wish to do. It would be approved under the existing lease, existing terms, conditions and stipulations. It should be approved (or not) based solely on the existing rights the lease gives them,” Glasson wrote in a  November 2013 e-mail.

Project push continued as first Obama term neared end

In March of 2012, the U.S. Fish and Wildlife Service took another action aimed at moving mineral prospecting forward in the Superior National Forest – concluding that the approval of 33 federal hardrock minerals prospecting permits and 21 associated plans would not significantly harm habitat for the Canada lynx.

“This action is not likely to adversely affect designated Canada lynx critical habitat, but [the] action is expected to result in some adverse effects to Canada lynx,” the 48-page report stated.

As Obama faced re-election in 2012, Twin Metals Minnesota continued to push its project and emphasized the important role federal regulatory officials would play.  “All of us on the Twin Metals Minnesota team look forward to working with you in the months ahead,” Andrew Spielman, a company representative, wrote to the BLM’s Storzer.

“We understand completely that you [and BLM’s Eastern States office] will have primary responsibility for decisions affecting this proposed project,” Spielman added.  “We also think it important to provide short, introductory briefings at various levels throughout the [BLM] for this world-class project.

“Because this project may well involve issues of first impression, we expect legal and policy officials in Washington to have questions of us,” he wrote.

Documents cited in this story were fist obtained by PRM in 2015 through a Freedom of Information Act lawsuit filed against the U.S. Department of the Interior.