As the Minnesota Department of Health, Pollution Control Agency and Department of Natural Resources begin forming a working group that will eventually designate where the $850 million are deferred from the state's settlement with 3M Corp., department commissioners are tasked with testifying to House committees on their plans.

The settlement agreed upon by the Attorney General's office and 3M was completed in the early hours of the morning Feb. 21. Since then, east metro communities, state agencies and the Legislature have been wondering where that money will be directed.

PREVIOUSLY: State settles for $850M in 3M lawsuit

The Attorney General's office hired outside firm Covington and Burling to take on some of the legal work, racking up $125 million in legal fees from the December 2010 filing date to the recent settlement.

The House Ways and Means Committee questioned the Attorney General's choice to use an outside firm, as those legal fees eat up about 15 percent of the settlement funds.

"As I see it, this is just taking money away from the people in the east metro to address this water problem," said Rep. Sarah Anderson, R-Plymouth.

The contract with Covington and Burling was on a contingency basis, so that if the state did not get a payout from 3M, the law firm would not have been paid.

Another $4.5 million will be used to reimburse the MPCA for the temporary filtration installations placed on Cottage Grove wells last summer when the health-based values for perfluorochemicals in drinking water were lowered by the MDH.

READ MORE: Cottage Grove, Woodbury prepare for 3M settlement disbursements3M settlement money earmarked for water improvements

After those payouts, about $720 million remain to pursue east metro water restoration efforts.

A sticking point for many Legislators has also been the possibility that the settlement funds could be used for recreation projects, such as fishing piers, if their first priority of providing clean, safe drinking water to the east metro is accomplished.

"We could certainly spend over $100 million on non-drinking water related natural resources damages," DNR Assistant Commissioner Dab Naramore told the Environment and Natural Resources Policy and Finance committee March 1.

Health department analysis

MDH Deputy Commissioner Daniel Pollock told the Health and Human Services Finance Committee that the department stands by the decision to release an analysis just before the trial was set to begin that reported opposite findings from Attorney General Lori Swanson's expert witness David Sunding, a natural resources economist from the University of California- Berkeley.

"Holding back our information would have frankly been a disservice in the communities, and all of the parties in the litigation would have suffered, and the comprehensive fact-finding process that is legally required in every trial would not have happened," he said.

The analysis, which looked at the Minnesota Cancer Reporting System and birth records, found levels of cancer, premature childbirth and low weight babies no higher than the rest of the metro. Conversely, Sunding's study found that Oakdale mothers - until the city switched to treated water in 2006 - were 34 percent more likely to deliver underweight babies.

During settlement announcements, Swanson said the actions of the MDH were disappointing and blindsided her office just before trial.

Pollock said during his testimony that he thought "the Attorney General's recent comments disparaging MDH were inaccurate and disappointing."

Naramore also noted that 3M and the state were already in "serious discussions" by the time the report was released.

Pollock told the committee the MDH will continue east metro biomonitoring and to watch cancer levels, as well as the monitoring PFC levels in fish that the DNR, MPCA and MDH partner to complete.

Environmental Health Manager for the MDH Jim Kelly said in the past the department has also tested gardens and produce watered with contaminated water for PFC increases.

"Our conclusions were that the benefits of growing home produce and the benefits of eating fresh produce far outweighed any potential risk from the small amount of PFCs that we could detect in some of the produce that was found," he said.

PFCs are linked to adverse health effects in other studies, but the MDH does not intend to pursue those at this time.

"MDH has not collected public health data on other types of potential health effects of PFCs that are reported in scientific literature, such as liver and kidney effects, thyroid disease, and immune system changes," Pollock said. "While MDH's water value guidance is designed to protect against all of these effects, data on their occurrence in people is not currently available."

Kelly said those health risks were in consideration when designating the lowered health-based values for PFCs in drinking water.

"It's addressed, but not through study, it's addressed through regulation," Environmental epidemiologist Alan Bender said.

Kirk Koudelka, Assistant Commissioner of the MPCA, told the Environment and Natural Resources Policy and Finance committee that the department has tested over 1,200 residential wells in the esat metro, and nearly 600 are above the MDH health-based values for PFCs.

Of the 470 households agreeing to have granular-activated carbon (GAC) filters connected to their water, 385 have been installed so far. Bottled water has been provided for those who do not yet have filters installed.