Minnesota awards mineral leases to Cleveland-Cliffs, extending Hibbing Taconite

DNR Commissioner Sarah Strommen and Assistant Commissioner Joe Henderson testified to the Executive Council on Thursday. (Jerry Burnes/Iron Range Today)

Jerry Burnes/Iron Range Today

ST. PAUL — Cleveland-Cliffs was unanimously awarded state mineral leases at the former Butler Taconite mine Thursday by the state’s Executive Council, marking a momentous change of fortune for minerals long unused and sought by the company.

Cliffs signed the lease deal with the Minnesota Department of Natural Resources shortly after the hearing concluded, enacting a 30-year agreement on more than 2,600 acres of minerals that could keep Hibbing Taconite open for more than two decades.

Terms of the agreement include Cliffs paying minimum royalty payments in the coming years— prior to production —which DNR Commissioner Sarah Strommen said was an incentive for the company to mine the land and a departure from the agency chasing penalties for inaction from companies, a pivot setup to collect money for local communities from the start.

“The state’s mineral leases, combined with our own private mineral holdings at Nashwauk acquired by Cleveland-Cliffs in 2017, will provide more than two decades of additional ore reserves for Hibbing Taconite, preserving hundreds of good paying union jobs, and ensuring continued supply of iron ore pellets for Cleveland-Cliffs’ steel mills,” said Lourenco Goncalves, chairman, president and CEO of Cliffs, in a statement. “Today we celebrate the resilience of Hibbing Taconite, its workforce and the tremendous potential of these Nashwauk leases. Then, we immediately begin the hard work of securing the next generation of union jobs and economic opportunity for the Iron Range.”

Chris Johnson, president of United Steelworkers Local 2705 at Hibbing Taconite, had trouble putting his relief into words after the hearing Thursday. His members stared down the end of their employer’s mine life for several years leading into the day, and he could now go home and deliver the news ahead of the holiday weekend.

“I’m elated,” he said. “We’ve been waiting for this day. It’s like the Fourth of July, Christmas and everything all at once.”

Mesabi Metallics and Essar officials were not immediately available for comment.

Testimony in front of the Executive Council went for about three hours with speakers representing Mesabi Metallics, Cliffs and local communities around Itasca County and the Hibbing communities.

The most impactful on the council appeared to be that of Essar Group co-owner Ravi Ruia, who pushed blame onto the DNR and the state for not doing its due diligence as he pitched a split of the mineral leases.

“Why do you want to jeopardize the $1.5 billion investment we made?” Ruia asked. “Understand the facts correctly. Come visit and get the facts on the ground. We were not given the courtesy of a meeting.”

That angle invoked an impassioned response from Gov. Tim Walz and members of the council. Secretary of State Steve Simon said Essar “owns some of the desperation” local communities spoke of Thursday. Walz said an $18 million court-ordered payment to the state had not cleared the bank about two weeks after it was made.

“I do blame one entity for the situation we’re in,” he said. “I would have liked to hear an apology to the communities and the DNR.”

Thursday’s hearing was the culmination of a fierce business battle between Mesabi Metallics/Essar and Cliffs over control the state leases, which the former held for about 15 years without an operational mine in place. The fight intensified in 2016 after Essar’s Minnesota offshoot filed for bankruptcy and Mesabi Metallics later emerged with the project in 2017, and later came back under the Essar umbrella.

Years of inaction at the site have plagued Mesabi Metallics. The ore processing plant remained half-built as of Thursday and company officials projected it could be completed in two years if financing came through, which hinged on a share of the state mineral leases in question.

The DNR last year moved to terminate the lease agreement with the company and after a series of legal challenges, the state prevailed this January. An 11th-hour lobbying effort by Mesabi Metallics to sway the agency to consider dividing the minerals between it and Cliffs.

Outside of Mesabi Metallics and Essar employees or advisors, the only support for that plan came from Itasca County and Nashwauk officials, who explained to the Executive Council the potential impact on their communities.

Barb Kalmi, a school board member in Nashwauk, spoke of the Butler Taconite closing more than 30 years and the long recovery process the city has undergone since. School enrollment has dropped to nearly a quarter of its 1980s level, not an unfamiliar situation from other Iron Range districts, and the budget planning process has become increasingly difficult.

Nashwauk Mayor Calvin Saari cited Mesabi Metallics being up to date on its taxes with the county and some new leadership as his reasons for optimism this time around. He pointed to the city’s $1.7 million budget and $570,000 levy this year and spoke to the $170,000 annual property tax bill the mine supplies to its coffers.

“You cut off that lifeline, you’re killing our community,” he said.

DNR officials testified that they considered a split of the leases, but the agency’s desire was to keep them together, citing economics and the increasing difficulty of obtaining new air permits when multiple projects are clustered too closely.

“Large investments, large projects, large footprints are desired,” said DNR Assistant Commissioner Joe Henderson. “History has proven for large projects … they want long life of mine. Shorter life of mine and you run into the problem like you have at Hibbing Taconite.”

United Steelworkers members and local elected officials posed for a photo outside the Minnesota Capital on Thursday following the Executive Council hearing. (Jerry Burnes/Iron Range Today)

United Steelworkers representatives took a line that supported Cliffs, which they said was ready to mine and save thousands of jobs inside and around Hibbing Taconite, crediting local politicians like St. Louis County Commissioner Mike Jugovich and State Rep. Dave Lislegard for their efforts, too.

“The seemingly endless 15-year debacle under the prior operators — full of missed deadlines, failed payments, and broken promises — has finally reached an end,” Lislegard said in a statement . “I’ve worked hard to tell the story of the ways these bad actors have harmed our region and how we must learn from prior missteps.”

Representatives from all active Iron Range mines attended the hearing, from Cliffs and U.S. Steel-owned facilities, in support of the state awarding the leases to Cliffs.

Johnson, the Local 2705 president, countered an earlier argument that denying Cliffs the leases and shutting the mine down wouldn’t be the fault of the Executive Council.

“If you follow this direction, that’s not the reason Itasca County doesn’t have a mining facility there today,” he added.

A similar sentiment was shared by Chisholm City Councilor Travis Vake.

“There was a lot of scare tactic mentality,” he said. “You have a company in Cliffs that has a proven track record. They didn’t have to shut down three times and restart. The opportunity in front of you is very clear.”

Injunction, antitrust argument creates sparks

Thursday’s hearing was almost a moot point.

On Tuesday, a federal bankruptcy judge in Delaware considered and ultimately denied an emergency injunction request from Mesabi Metallics to stop the Executive Council from moving forward until its 2017 antitrust lawsuit against Cliffs concluded.

The Hon. Craig T. Goldblatt allowed the state to move forward, citing its sovereignty with state minerals and the lack of guarantee Mesabi Metallics would emerge with the leases or a share of them if he instated the injunction.

David Suggs, an attorney for Mesabi Metallics, urged the council Thursday to consider waiting for a decision on the lawsuit before deciding the fate of the leases. He estimated the wait time of the 6-year-old could wrap up in six months or in a year.

“It would be a travesty if the council essentially finished the job for Cliffs,” he argued, “and find out in a year that Cliffs violated law” to be in a position to obtain the leases.

Attorney General Keith Ellison sharply questioned the lawsuit’s merit in front of the council. Ellison said the pending litigation “concerned” him but said the lack of an adverse ruling, and Goldblatt setting the injunction aside raised further questions.

The DNR later added that its lawyers felt comfortable with the status of Cliffs’ land holdings at the project after meeting with Essar officials and reviewing the key points of their arguments.

“There might be counterbalancing info, there might not be,” Ellison said to Suggs. “That’s just an observation. I don’t know if you’re cherry picking pieces of the discovery that benefit your client.”

Communities in need

Executive Council members empathized with local officials and specifically those from Itasca County communities.

In 2008, when the Essar Steel Minnesota project first broke ground, it was set to be a beacon of hope for the West Range region after Butler Taconite closed. It has since been a roller coaster of hope and disappointment sitting on top of one of the Range’s most vibrant bodies of iron ore.

“It’s all we’ve ever wanted,” Saari said.

Itasca County is in line to benefit from the ore produced by Hibbing Taconite — about $15 million annually through production taxes and royalties —  DNR officials testified, but the spector of the value-added plant and a new mine promised by Essar is expected to linger.

Walz said he worried about the impact on the Nashwauk community, but hoped the state could provide for the region beyond the Mesabi Metallics project. He said the testimony of Saari and Kalmi weighed on him, but that ultimately moving on from Essar was necessary.

“When you’re from the Iron Range, you’re from the Iron Range and you help each other out,” the governor said, adding that he only wanted to see St. Louis County and Itasca County pitted against each other in hockey. “This situation has caused incredible heartache.”

Walz continued: “I’m worried about Nashwauk as a city. This only starts the process. What is the other alternative? We hope we have a budget that helps, but they’ve heard that before. They were promised a mine. We can’t leave behind this broken dream.”

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