The state Court of Appeals on Monday turned back PolyMet's wastewater permit, saying state regulators erred in not considering whether seepage from the proposed mine's tailings dam into the groundwater should be governed by the federal Clean Water Act.

The decision sent the reversed permit back to the Minnesota Pollution Control Agency (MPCA) for more work.

The practical impact of the decision isn't clear as the $1 billion mine that PolyMet Mining Corp. wants to build near Babbitt and Hoyt Lakes is already stalled, with major permits in various states of review, reworking or litigation.

Nearly all parties declared a win in Monday's decision, with the MPCA downplaying the significance.

The MPCA and environmental lawyers clashed on interpretations of the reversal. MPCA spokesman Darin Broton said the agency's interpretation is that the decision only partly reverses the permit without striking it down. The reversal was on narrow grounds for the groundwater analysis, he argued, and it does not reopen the entire permit to debate.

The agency is reviewing the court's directive to do analysis that the law didn't require before the permit's issuance, he said. The wastewater permit protects Minnesota's waters.

"For a second time, a Minnesota court has firmly decided that the MPCA's permitting processes for the PolyMet project were rigorous and prudent," Broton said.

PolyMet Mining Corp. spokesman Bruce Richardson downplayed the court's reversal of its water permit and said the company is "very pleased" with the decision. The decision overruled six of seven challenges that mine opponents made, the company said in a news release.

"We are pleased that we have prevailed on the majority of the issues and the court has narrowed the case to just this single issue," said Jon Cherry, chairman, president and CEO of PolyMet.

He noted the court referred to a 2020 U.S. Supreme Court case, County of Maui vs. Hawaii Wildlife Fund, and said he was optimistic the company will meet the standards it established. That case found that wastewater discharge seeping into groundwater is the "functional equivalent" of discharge from a pipe, and so it must comply with the federal Clean Water Act.

"This will mean a little more process, but it gives us a clear roadmap to the reactivation of this permit," Cherry said.

PolyMet is majority-owned by Swiss mining conglomerate Glencore and registered in Canada, but it operates out of St. Paul.

Mine opponents, too, declared victory, while acknowledging the opinion also found that the MPCA did not err in several other respects in issuing PolyMet the permit.

The decision also upheld a lower court's decision that largely cleared the MPCA of accusations of unlawful "procedural irregularities" during its handling of the water permit, such as keeping the written criticisms by federal regulators out of the public comment period and taking them over the telephone.

The practices are "contrary" to state laws about increasing public accountability of state government, said Judge Matthew E. Johnson, writing for the panel.

"But we need not determine whether the challenged procedures are lawful because it is sufficient to determine that the challenged procedures did not prejudice relators' substantial rights," Johnson wrote.

Environmental groups called the permit reversal another sign of what they have declared a failed project.

Paula Maccabee, a lawyer for the nonprofit Water Legacy, issued a news release declaring the decision a "huge victory." "It is long past time for Minnesota to pull the plug on PolyMet and its mega-corporation Glencore," she said.

Both Maccabee and Kathryn Hoffman, chief executive of the Minnesota Center for Environmental Advocacy, said they have never heard of a permit being partially struck down. The decision clearly states the permit is reversed, for consideration of the groundwater issue, they said.

"You can't have part of a permit," Hoffman said. "The permit itself is reversed. The court is clear."

Hoffman's Center, Friends of the Boundary Waters Wilderness, and the Center for Biological Diversity issued a joint statement saying the decision spotlights flaws in the process leading regulators to approve "weak" permits.

"The decision is a victory for downstream communities that would bear the brunt of pollution and be at highest risk from PolyMet's proposed sulfide mining projects in St. Louis County, including the Fond du Lac Band and all people who would be forced to drink the water, eat the fish or harvest the wild rice contaminated by PolyMet pollution," it said. "In fact, in every permit appeal that the Court of Appeals has heard on the PolyMet proposal, it has reversed or remanded a permit back to a state agency."

The company's permit to mine, for example, was also overturned, and the state Department of Natural Resources, which issued it, is preparing to hold a contested case hearing on PolyMet's plan to line the mine's tailings dam with a bentonite clay mixture to help prevent wastewater from leaking out.

The Fond du Lac Band of Lake Superior Chippewa, one of the appellants, did not immediately respond for comment. The band lives on the St. Louis River downstream from the proposed mine, in the direct path of potential pollution.

Shifting their opposition into a new gear, environmental groups plan to demonstrate Tuesday afternoon at the State Capitol. They will deliver a petition with more than 5,000 signatures asking Gov. Tim Walz to "Move on From PolyMet" and help devise a better economic development plan for northeast Minnesota.

"The courts have spoken and the people of Minnesota have seen enough — PolyMet has failed," the petition reads.

Moves to open northern Minnesota to hard-rock "nonferrous" mining — mining for materials other than iron ore — have generated fierce controversy in the state. Backers argue PolyMet's copper, nickel and platinum mine would provide badly needed jobs on the state's Iron Range and metals key to a low-carbon economy. Opponents argue the threat of pollution from acid mine drainage and heavy metals is too high given the region's watery landscape and the industry's track record.

PolyMet's open-pit mine would destroy more than 900 acres of wetlands on former Superior National Forest land and generate more than 200 million tonsof polluted water to be stored behind a dam that would require indefinite maintenance.

It is one of two copper-nickel mines under development in Minnesota. Twin Metals, a subsidiary of Chilean copper mining giant Antofagasta, wants to build a large underground mine just outside the Boundary Waters Canoe Area Wilderness. That project, too, faces legal and regulatory challenges.