Jerry Burnes/Iron Range Today
Minnesota’s Executive Council can move forward with issuing state mineral leases this week after a federal bankruptcy judge on Tuesday denied an emergency injunction request from Mesabi Metallics to indefinitely delay the transfer.
The decision cleared a path for Gov. Tim Walz and his cabinet on Thrusday to take up an agreement between Cleveland-Cliffs and the state Department of Natural Resources to award the Ohio-based company with more than two dozen mineral leases at the former Butler Taconite site in Nashwauk.
Attorneys for Mesabi and Cliffs debated the preliminary injunction request for nearly five hours in a Wilmington, Delaware courtroom, where arguments centered on potential damages to each company on either side of the Hon. Craig T. Goldblatt’s ruling.
Cliffs leaned on the past failures of Mesabi and its India-based parent company, Essar Group, to bolster its argument, and generally spoke about the widespread impacts — 950 jobs between its mining and steelmaking operations — of Hibbing Taconite closing when it runs out of ore.
Mesabi said it would “likely die” and proceed to bankruptcy without court intervention and its witness testimony suggested the state would turn back to the company if it prevailed in the larger antitrust case against Cliffs.
In the end, Goldblatt said the state’s sovereignty and an “underwhelming” argument on why it would work with Mesabi again ultimately persuaded his decision. Cliffs, Mesabi and U.S. Steel all submitted applications to the DNR for the minerals, but state officials have remained adamantly against working with Mesabi and Essar again.
“The record does indicate a long and contentious dealing with Mesabi and the state of Minnesota, and it does indicate a lot of frustration from the state of Minnesota,” Goldblatt said.
He added that allowing the injunction would run the risk of blocking Cliffs from the leases and the state from capitalizing on its minerals, without the guarantee of benefit to Mesabi. “The state can still award the leases to Mesabi.”
As part of a final full-court press of lobbying and public relations in recent weeks, Mesabi has run ads in local newspapers and on television stating its case, started a website to encourage comments to the Executive Council and earned a letter of support from the Itasca County Board that asked the state to split the leases between the companies.
The picture it painted Tuesday was far more grim — one of layoffs, contract terminations and the decimation “of any goodwill and the momentum we have going” — but only touched on the potential compromise from Itasca commissioners that could serve as its last lifeline in the coming days.
Larry Sutherland, chief operating officer at Mesabi, said the project’s life of mine would be around 10 years without any division of the state’s leases and he wouldn’t expect Essar or other potential business partners to invest in the project in a meaningful way.
“I would suggest it’s very detrimental to even having a viable mine plan to finish construction of our facility,” Sutherland said. “It’s bleak. The likely outcome would be an ensuing bankruptcy … there’s no real reason to invest in that.”
Robert Faxon, an attorney for Cliffs, said the renewed lobbying effort was too little, too late.
The state leases were tied to Essar and Mesabi for almost 15 years and since the 2016 bankruptcy, Faxon added, it had made no meaningful progress toward starting operations, and on numerous occasions told the state certain actions taken against it for failing to meet necessary goals would spell the project’s demise.
“This is a tune that we’ve heard before … the state is sick of dealing with Mesabi and wants to deal with a credible miner.“
“We’re not a hypothetical business,” Faxon later added.
Throughout testimony, Mesabi questioned if Cliffs would use the state minerals for Hibbing Taconite as CEO Lourenco Goncalves conveyed to Walz in a May 2 letter.
Attorney David Suggs pointed to Cliffs refusing to enter an auction for the leases — a path the DNR could have pursued after the termination process concluded in January — and the company’s failed bankruptcy bid in 2017 that led to Mesabi winning the project.
Faxon countered that Cliffs went through several processes over the years and what’s said in negotiation “isn’t necessarily where we end up” in the end game.
“Part of doing business is there are certain ways the company will or will not live,” Faxon continued. “We don’t know how that would actually turn out in an auction. It wasn’t in our interests at the time. I don’t know if they would have done it.”
If the state’s Executive Council follows through on the DNR’s recommendation Thursday to award the full breadth of its leases to Cliffs, it’s expected the company will immediately begin the process to activate the ore.
Matthew Holihan, vice president of mining and pelletizing operations for Cliffs, testified Tuesday that DNR officials indicated a 30-month timeframe to complete the permitting and environmental review process.
In a May 2 letter to the state, Cliffs said it planned to “proceed immediately with project development, environmental permitting activation and evaluation and subsequent construction of infrastructure required to mine and transport crude iron ore from Nashwauk to Hibbing Taconite for processing and pelletizing.”
In the meantime, Mesabi’s original 2017 antitrust lawsuit against Cliffs is set to proceed with a trial possible next year. The merits at the core of the case were argued numerous times by Suggs and the company, and in his ruling Goldblatt added there’s enough to move the overall argument forward.
One matter that hung over Tuesday’s hearing was the idea of adequate damages for Mesabi should it win the antitrust case and whether a monetary reward would suffice if the company folds under bankruptcy.
“But what if the harm is not fully captured by the economics?” Goldblatt questioned. “There is harm in being forced to disappear. Yes, the facility isn’t complete. It’s like a thing that isn’t quite yet born. What’s the value of having the thing that would be a thing?”