The Minnesota Court of Appeals has rejected another permit for PolyMet Mining Corp.'s proposed copper-nickel mine, this time for its air emissions.

The Minnesota Pollution Control Agency (MPCA), which issued the air permit in 2018, should have looked harder at whether PolyMet plans to expand the state's first copper-nickel mine well beyond the limits imposed by the permit, the three-judge panel concluded in its unanimous decision released Monday.

Writing for the court, Judge John Rodenberg said the regulator should have clearly addressed whether PolyMet "is engaged in sham permitting" to avoid a permit requiring greater review and more stringent controls.

PolyMet's Canadian securities filings indicate it may actually be planning a mine nearly four times larger than operation covered by the air permit, which limits the mine to producing 32,000 tons of ore per day, the court noted.

The court remanded the permit back to the MPCA for further review.

The MPCA said it's reviewing the decision and will soon decide its next steps.

The decision is another setback for PolyMet's proposed copper-nickel mine, which is already tied up in litigation and investigations into how regulators handled its water quality permit. If it gets built, the open-pit mine, near Babbitt and Hoyt Lakes, would be the state's first nonferrous mine, known as a hardrock mine.

The publicly traded company, majority owned by global mining and trading conglomerate Glencore in Switzerland, said it's reviewing its legal options.

In a statement, PolyMet said it thinks the MPCA "appropriately accounted for the potential effects of the NorthMet Project."

"We stand ready to provide the additional information the agency might need to update its decision on the air permit," the company said.

Jobs for Minnesotans, a pro-mining group backed by business and labor groups, issued a statement saying they are concerned about the signal the decision sends to prospective investors in Minnesota.

"We're increasingly concerned by court rulings that appear to effectively transfer regulatory authority to the judiciary from agencies long established under state statute and staffed with experienced experts in the scientific fields relevant to decisions, such as air permitting," the group said.

The open-pit mine and its operations for crushing and processing ore required an air permit because it will emit a range of pollutants into the air such as carbon monoxide, fine dust and mercury. Although the MPCA considers the PolyMet mine's mercury emissions to be small, the metal is a neurological toxin that drifts down into water and builds up in the tissue of fish.

Water contamination is a core concern of mine opponents worried that this riskier form of mining will poison nearby waters with sulfide and heavy metals.

Opponents who appealed the air pollution permit — the Minnesota Center for Environmental Advocacy, Friends of the Boundary Waters Wilderness, the Center for Biological Diversity, the Sierra Club and the Fond du Lac Band of Lake Superior Chippewa — applauded the ruling.

"The Court of Appeals decision today makes it even more clear: the process that granted permits for the PolyMet mine proposal is broken," said Kathryn Hoffman, chief executive of the Minnesota Center for Environmental Advocacy. "It's clear that the permits that were issued to PolyMet did not protect human health and the environment, and it's time for our agencies to acknowledge and address that."

Marc Fink, senior attorney with the Center for Biological Diversity said: "The losses keep piling up for PolyMet and the state agencies that are supposed to protect our citizens and our environment."

The Court of Appeals has rejected or suspended environmental permits on three different projects over the last year. It is the second time this year that the appellate court has rejected permits issued to PolyMet. In January, the court reversed three permits that the state Department of Natural Resources issued to PolyMet — its permit to mine and two dam safety permits. Both the company and the agency have asked the Supreme Court to review that decision.

PolyMet faces significant hurdles on other fronts. Its water pollution permit has been suspended pending a Ramsey County District Court decision on whether the MPCA handled it correctly, and two other investigations into that process area also ongoing.

Meanwhile, a wetlands destruction permit issued by the U.S. Army Corps of Engineers has also been appealed and is in federal district court.

Jennifer Bjorhus • 612-673-4683