Jerry Burnes/Iron Range Today
A new year ushers in a new chapter for the Mesabi Metallics project and state mineral leases in Nashwauk, this time with a finish line in sight for those beleaguered by years of failed starts, ownership changes, legal battles, late payments and general stress.
Adding to the saga is the unknown waiting at the finish line, as the Minnesota Supreme Court weighs whether it will consider a Mesabi Metallics appeal of a state decision to revoke mineral leases from the company. Justices are expected in the coming days to either take the case or uphold the Court of Appeals opinion that would place the leases back in control of the state Department of Natural Resources.
Here’s what you need to know about that upcoming decision and how it could reverberate around the Iron Range.
First, here’s a quick refresher:
Mesabi Metallics took control of the project in 2016 under the purview of healthcare executive Tom Clarke, who was later removed, but missed construction deadlines, state payments and late Itasca County property taxes have plagued them since. The Dayton and Walz administrations have granted some extensions during that time but Gov. Tim Walz ultimately began moving toward nixing the lease agreement after Essar Group, the former owners who plunged into a $1.1 billion bankruptcy filing in 2015, re-emerged as the principal owners of the project.
That’s where we stand today.
What does the Minnesota Supreme Court decision actually do?
By upholding opinions of the lower courts and siding with the state, the high court would free the leases after almost seven contentious and tumultuous years, allowing the DNR to effectively reissue them to another company.
If the court takes up the appeal it will trigger a process of filings and oral arguments before justices weigh an opinion of their own. From there they could ultimately side with the DNR or keep the leases with Mesabi Metallics.
In the grand scheme of things, the former decision is a finish line for the Mesabi Metallics portion of the story, while the latter would extend an already long timeline by a few months.
What happens if the DNR is allowed to take the leases back?
The state would have a few options but it’s expected the DNR will take the route of negotiating lease terms with a credible mining company, likely U.S. Steel or Cleveland-Cliffs, to develop the former Butler Taconite site. The other option is to put them out for bid.
Working with one of two companies is the preferred option right now for local lawmakers, who have committed to a credible successor, with some outright supporting Cliffs as both an adjacent landowner and the best route to save hundreds of jobs at Hibbing Taconite. Either company would give the DNR a known entity to work with and allow the administration to avoid some questions about its decision making.
Process aside, what happens if the court takes up the appeal?
It is probably the last gasp of air for Mesabi Metallics and Essar to develop the project. As mentioned above, taking on the appeal isn’t a reversal of the DNR’s decision, so it can go either way.
The biggest impact is that it would be just another delay for development to go forward with any company. The site has sat in limbo for most of the decade, Hibbing Taconite isn’t generating more ore while this drags on and a bill that would preserve permits should the project change hands has a time limit of two years on it, unless lawmakers can work another deal.
What is Mesabi Metallics/Essar saying?
That they can finish the project and start production with the Iron Range’s newest mining facility.
As their appeal goes, they’re arguing the DNR didn’t have the right to terminate the lease agreement and the company has worked to meet the goals outlined in said agreement. The condition Mesabi Metallics failed to meet, triggering the termination, was owing $200 million into a state account for the project. They got halfway there at $100 million and blamed the Covid-19 pandemic for impacting the other half.
Beyond that, they’re still engaged in a tit-for-tat with Cleveland-Cliffs in a long-running feud between the companies. Most recently, Mesabi Metallics called Cliffs out for having previously identified a solution for Hibbing Taconite and talk of closing it without the Nashwauk ore as misleading.
Did Cliffs find a solution?
Cliffs did identify to Gov. Tim Walz a potential solution for Hibbing Taconite in February 2021 that didn’t involve the Nashwauk leases. It was not previously reported but sources that year told me it was to transfer ore from United Taconite in Eveleth to Hibbing Taconite, making it essentially an ore barn for UTac.
That idea was scratched — it was viable but sources said it was expected to carry a major cost and require some additional permitting to transfer ore between the facilities.
What is the DNR saying?
Not a lot. The standard statement is that the administration is awaiting the Supreme Court decision and will go from there with the leases.
What is Cliffs saying?
A common thread lately has been that Cliffs wants to use the state leases, combined with its current lease holdings in Nashwauk, to extend the life of Hibbing Taconite beyond the mine inevitably running out of crude ore sometime between 2024 and 2026.
At a recent Minnesota Chamber of Commerce event, Cliffs CEO Lourenco Gonclaves told reporters that the land the project sits on would remain “pristine” if the company didn’t get the state leases. He also reiterated that this is the only path for Hibbing Taconite to move forward and the company won’t bid on the leases if the state opts for that route over negotiating with adjacent land owners.
“Listen to me: If they put it to bid, I am not even going to bid. So whoever wins, I don’t give a rat’s behind,” he said. “I’m not going to even talk to that entity. That place will be pristine forever. It will be gone for good.”
Goncalves and Cliffs have been hopeful the Walz administration will see things the same way.
What control does Cliffs have?
Cliffs has a number of acres at the project site including 553 acres of land acquired by the company and more than 3,200 acres in leased surface and mineral acreage from Glacier Park Iron Ore Properties.
Mesabi Metallics last July said it purchased 3,200 acres of land and leases from Butlertac Holdings, a division of Glacier Park, meaning Cliffs would be leasing from Mesabi Metallics. But that lease agreement has been described to me as pretty ironclad, with Cliffs holding lease rights through 2068, according to the company.
With the way this project has gone, one would hope for some resolution and not a pristine land mass by 2068.
What is U.S. Steel saying?
Nothing. Actually. The company in 2021, for the first time, expressed interest in Nashwauk, but have said nothing since. That might change once there’s some finality on the leases.
Are there any other “credible” companies?
None have emerged and with Cliffs’ land and lease holdings, plus U.S. Steel likely in the state’s thoughts, it’s a stretch that any will.
Where is Essar at in the whole situation?
The Ruia family and Essar continue to be the primary owner of Mesabi Metallics as of 2018. There hasn’t been any word lately on the state’s effort to debar the company from operating in Minnesota, meaning they could own the company but not be the operating manager of the mine. That was before the lease termination began.
Now, Essar is mainly behind the scenes letting Mesabi Metallics speak largely through CEO Larry Sutherland, a former manager at U.S. Steel, who left rather unceremoniously in 2020 and became CEO of the now-maligned Prairie River Minerals that tried to restart Magnetation/ERP Iron Ore.
Essar recently struck an agreement with trustees in its original bankruptcy filing at the Nashwauk site, a settlement worth $26.5 million. As a reminder, Essar was sued by Mesabi Metallics in bankruptcy court, claiming they funneled money meant to complete the project in Nashwauk into other global entities of Essar.
Does the settlement mean anything to Nashwauk now?
Not really. Businesses will get paid something from the funds. It’s more the Ruias clearing out the skeletons left in Essar’s closet as they try to salvage any business ties left and re-enter an era of relevance and credibility.