The Minnesota Supreme Court will decide whether state regulators erred in issuing permits for PolyMet Mining Corp.’s copper-nickel mine without a special hearing, and could impose further review of the $1 billion project.

The state’s highest court became involved Tuesday in the landmark mine project near Hoyt Lakes — a new type of mine for the state — after an appellate court struck down three permits and sent them back to the state Department of Natural Resources (DNR) for a contested case hearing.

The lower court reversed PolyMet’s permit to mine and two dam safety permits in January, partly on the grounds that the DNR did not hold the contested-case hearing to vet significant objections from environmentalists and the Fond du Lac Band of Lake Superior Chippewa, who live downstream from the planned mine.

The groups oppose the copper-nickel mine, saying it will pollute nearby waters such as the St. Louis River, with toxic metals and sulfuric acid, often called acid mine drainage, that develops when sulfide-bearing ore is exposed to air and water.

PolyMet, now majority owned by Swiss mining conglomerate Glencore, had been moving close to actually breaking ground on the fully-permitted mine in northeast Minnesota when the lower court suspended the permits last fall.

A decision requiring the DNR to hold the contested-case hearing would further delay the project because such hearings — trial-like hearings before an administrative law judge — can take about a year.

The hearing would also open the decisionmaking process on a historic project, the state’s first hard-rock mine, to public scrutiny. The state has a history of iron ore and taconite mining, but not nonferrous mining. The DNR would then make new decisions on the three permits.

In Tuesday’s oral arguments, Jonathan Katchen, a lawyer for the DNR, said the agency carefully considered the request for a hearing and has the authority to deny them.

Some of the many objections have already been dealt with, Katchen said, via changes to permit conditions, for example. Other issues have already been “exhaustively scrutinized for years,” he said, and won’t benefit from a hearing. And others are not the sort of factual disputes that contested-case hearings deal with but are matters of law or policy.

PolyMet lawyer Jay Johnson told the judges that some of the issues involved — Glencore’s majority purchase of PolyMet and the deadly failure of a similar tailings dam in Brazil — occurred after PolyMet’s permits were issued in 2018. The DNR’s decision needs to be judged on what it knew at the time, he said.

In a statement, the DNR said the Court of Appeals ruling in January “represented a significant departure from the DNR’s long-standing application of state mining law and exercise of agency discretion in determining when a contested case is warranted.”

“Given the broad implications beyond mining and precedential nature of the Court of Appeals’ ruling, the DNR has sought final clarity from the Supreme Court,” the statement said.

The Fond du Lac Band and environmental groups argue the court of appeals got it right in reversing PolyMet’s permits for its mine, called NorthMet. In that decision, Chief Judge Edward Cleary wrote: “The DNR’s decision to deny a contested-case hearing in relation to the NorthMet project was based on errors of law and unsupported by substantial evidence, and the DNR also erred by failing to include a definite term in the NorthMet permit to mine.”

Among the many issues the groups want a hearing to address are whether the DNR adequately analyzed the mine’s so-called upstream tailings dam design for storing the mine’s processing waste, in light of new information following the deadly failure of the Brumadinho upstream tailings dam in Brazil in January 2019 that killed more than 200 people.

Vanessa Ray-Hodge, a lawyer for the Fond du Lac band, said PolyMet’s plan to indefinitely store the toxic waste in a 900-acre tailings dam after the mine is closed, using bentonite clay to help control seepage and prevent oxygen from contacting and acidifying the sulfide, violates rules for waste storage and reclamation.

A contested-case hearing could also tackle whether PolyMet has provided adequate financial assurances to pay for long-term environmental cleanups, an insurance package that’s part of the main permit to mine. Glencore took a major stake in PolyMet after the permit to mine was issued, and the groups have been pushing to ensure that Glencore’s name is added.

Paula Maccabee, a lawyer for the nonprofit WaterLegacy, testified Tuesday that an open hearing would boost public confidence in the project.

“We need to get this right,” Maccabee said.

Following the oral arguments, several parties issued statements.

A PolyMet spokesman said the company was looking forward to a decision.

Duluth City Councilor Joel Sipress said he and other elected officials in Duluth backed requests for a public hearing in 2017 because they felt key environmental concerns about the projects weren’t resolved.

“If not for PolyMet and the DNR’s stubborn resistance to holding a neutral hearing, these questions might have been answered several years ago,” Sipress said.

JT Haines, Northern Minnesota advocate for the Minnesota Center for Environmental Advocacy, called PolyMet’s plan to pump contaminated water back into the tailings basin indefinitely “pretty incredible.”

“I think it should be obvious why people want a hearing about claims like this,” he said.

The state Supreme Court has no deadline for decisions, but one is expected within a few months.