Minnesota DNR retains control of Iron Range mineral leases, opening up a new era in Nashwauk

Jerry Burnes/Iron Range Today

Essar Global once promised to do something the Iron Range had never seen.

Almost 15 years later, not one part of that promise has been fulfilled, and after Tuesday it seems more unlikely it will ever be seen.

The Minnesota Supreme Court declined to hear a petition by Mesabi Metallics, whose majority owner is Essar, to review a pair of lower court rulings that allowed the Minnesota Department of Natural Resources (DNR) to terminate a state mineral lease agreement with the company on its long-stalled iron mining project.

Now, the leases at the former Butler Taconite site in Nashwauk are back in the state’s hands, and an era of certain uncertainty begins anew on the Iron Range. The project once billed as a beacon for jobs and economic impact in northeastern Minnesota, turned into a modern day version of the Monorail that fell into a $1.1 billion bankruptcy filing, emerged under the leadership of a healthcare huckster and later a tarnished steel behemoth with no credibility left in Minnesota.

The fallout of Tuesday’s Supreme Court decision, summed up in a mere 19 words by Chief Justice Lorie S. Gildea — “It is hereby ordered that the petition of Mesabi Metallics Company, LLC, et. al., for further review is denied.” — won’t be realized until the dominoes are done falling.

DNR officials are anticipating the leases will generate a fair amount of interest from companies looking to develop the site, most notably from Cleveland-Cliffs and U.S. Steel, and said they will evaluate the state’s options. The DNR could directly negotiate with a company like Cliffs, which has mineral leases and land already within the Butler Taconite footprint, or open the process up for bidding.

“The decision paves the way for the DNR to advance discussions with credible miners,” the agency said in a statement, later adding: “The DNR is committed to securing fair compensation for the state as we determine the best path forward for development of these resources.”

The DNR didn’t comment when asked if any companies had already applied for the leases. It was expected Cliffs would apply in the near-immediate aftermath. The company hasn’t responded to a request for comment on the court decision or its application status.

Cliffs, which owns and operates four Iron Range mines, has aggressively pursued the leases for years as it angles for a path to keep Hibbing Taconite open beyond a 2024-2026 time period when the mine will run out of ore. CEO Lourenco Goncalves, citing the company’s current holdings on the property, said he wants the DNR to work directly with Cliffs and won’t participate in a bidding war for the state leases.

Cliffs has a number of interests at the project site including 553 acres of land acquired by the company and more than 3,200 leased minerals from Mesabi Metallics that expire in 2068.

“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,” Goncalves said in November. “I’m not going to even talk to that entity. That place will be pristine forever. It will be gone for good.”

What level of involvement to expect from U.S. Steel is unknown. The company first expressed official interest in the property in 2021 but have remained on the sidelines. It notably has a 14.7% ownership stake in Hibbing Taconite, but has a fierce rivalry with Cliffs, its business partner. The company had not yet responded to an inquiry about whether it plans to seek the state leases.

For its part, Mesabi Metallics said it plans to move forward with the project despite the setback. The company still owns the land where the half-built processing plant sits and maintains some mineral acreage to mine, but questions have lingered for years if Mesabi can complete a mine plan and meet production goals with the land it controls.

The company said in a press release Tuesday that it’s in “advanced discussions” on forming a joint venture with a “strategic partner in the steel industry,” but didn’t provide further details. A spokesperson for the company said conversations around the partnership are covered by confidentiality clauses and would not disclose more information, but added that Mesabi “believes that the new partner will bring relevant industrial experience and strategic insights” to the project.

Mesabi has had a revolving door of partnerships since emerging form bankruptcy in 2016 including Riverdale Commodities, Mercuria and more.

“Mesabi Metallics is the only entity that has the permits to develop the mine facility at the Nashwauk site,” said Larry Sutherland, president and COO of Mesabi, in a statement. “We are the logical counterparty for the DNR to partner with to develop and mine the rich iron ore resources in Nashwauk.”

A new ally for Mesabi Metallics and Essar would seemingly need to be of blockbuster proportions for the state to withstand the potential scrutiny it would face for reversing course back to the company, especially if a viable alternative is presented.

The Walz administration moved to debar Essar from doing business in Minnesota in 2019, meaning it could still own Mesabi Metallics, but could not run the operations side of the project. It’s unclear, however, if the debarment was ever fully formalized. Local lawmakers and the United Steelworkers have also lobbied aggressively for a new direction and the Minnesota Legislature last year approved a bill that would allow the project’s permits to remain active for two years should it change hands, providing a narrow window of opportunity for a new company.

“I thank Governor Walz and the DNR for their steadfast pursuit to rightfully take back the state’s mineral leases in Nashwauk from Essar Steel and Mesabi Metallics, and leave all their broken promises behind,” said State Rep. Dave Lislegard, DFL-Aurora, one of the first area legislators to call for the leases to be pulled from Mesabi. “Now, residents of the Iron Range expect the DNR to move swiftly to work with Cleveland-Cliffs and utilize these leases to extend the mine life at Hibbing Taconic and ensure a long future for the hundreds of people who work there.”

More recently Essar and Mesabi Metallics have been plagued by late payments on Itasca County property taxes and were court ordered to make payments to the Department of Employment and Economic Development and Itasca County for reimbursement of infrastructure costs incurred by Itasca associated with the project. Those payments are due through 2028, according to the court order.

What direction the DNR takes with the leases is likely to significantly shape the economic outlook on the western Iron Range. The original Essar Steel Minnesota project promised about 500 jobs, up to 2,100 spinoff positions and would put more than 2,000 construction to work on building it.

With dreams of a steel mill long-shattered, the region is now left holding onto hope that the site can transform from a pipe dream into a pipeline of new iron ore production that would ideally save hundreds of jobs from permanently disappearing. Hibbing Taconite employs more than 700 people on the Iron Range and produces about 7.8 million tons of pellets annually, most of which would be lost if it closes down without a solution.

“This is a great thing that should’ve happened years ago,” said Chris Johnson, president of USW Local 2705 representing Hibbing Taconite. “Kudos to the Governor’s office and DNR for doing the right thing. I’m glad the courts sided with them. It gives HibTac and surrounding communities hope that Cliffs and the state can possibly find a pathway to keeping us open. We will see what happens in the coming weeks.”

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