Minnesota appeals court dismisses Mesabi lawsuit over Nashwauk mineral leases

Mesabi Metallics has lost another bid for coveted mineral leases on the Iron Range after the Minnesota Court of Appeals dismissed an appeal challenging a decision by state officials to award those leases to rival Cleveland-Cliffs.

The Monday ruling by a three-judge panel said Mesabi did not have legal standing to fight the Department of Natural Resources in the case tied to state taconite mining rights for more than 2,600 acres of land in Nashwauk.

The DNR had revoked the leases in 2021 after the beleaguered Mesabi missed a key deadline while pursuing its long-delayed taconite mine and partly built processing plant. The state agency then awarded the leases in 2023 to Cleveland-Cliffs, the largest mining company on the Iron Range, after the state’s Executive Council agreed with a DNR recommendation.

Mesabi had also sued the DNR for terminating the leases, but the agency’s decision was upheld last year by the Minnesota Supreme Court. Mesabi reapplied for the 30 mining leases, but Cliffs won the rights and says it plans to mine and rail Nashwauk ore to its Hibbing Taconite mine to extend the life of the plant.

DNR’s May decision to deny Mesabi hinged on a “history of lease defaults and the outstanding rent and royalty payments owed to the state under the terms of past leases,” the agency wrote. Critically, Mesabi made only half of a $200 million required down payment on the project in 2021, for instance.

The state decision split local interests. Itasca County and the mayor of Nashwauk weighed in at the Executive Council in favor of Mesabi, but Hibbing, Chisholm and the president of the local union at Hibbing Taconite argued in favor of Cleveland-Cliffs.

Gov. Tim Walz blamed India-based Essar Group, the corporate owner of Mesabi Metallics, as the cause of the divide at the time.

“I do blame one entity for the situation we are in — the broken promises and the dreams not met,” he said.

Essar filed for bankruptcy to retain its leases after then-Gov. Mark Dayton moved to terminate them in 2016. The company has lately said it’s debt-free and in better financial shape and Monday said it will move forward with building a mine despite the ruling. The company argued in court that granting leases to Cliffs would impede its completion of the project, but it’s still pursuing a smaller mine with fewer leases.

Mesabi’s lawsuit said awarding the leases to Cliffs undermined its ability to compete, among other arguments.

The appeals court found in part that any blow to Mesabi’s ability to compete and finish its project stem from the DNR’s earlier decision to terminate the leases owned by the company and deny another application. Reversing the decision to grant leases to Cliffs wouldn’t mean the DNR would hand them over to Mesabi.

Mesabi also wanted a chance to win the leases in a public sale, which the court said is the DNR’s only option for issuing mining leases if it doesn’t grant negotiated leases, which it did in this case. The ruling says Mesabi was likely to lose such a public sale.

“Given DNR’s determination that issuing mining leases to Mesabi is not in the public interest, DNR would almost certainly reject a Mesabi bid for the leases,” the decision says.

In a statement, Mesabi president Larry Sutherland said, “Essar Group is one of the leading industrial groups in India and is committed to the Nashwauk project.”

“Since the May 2023 decision made by the DNR, Essar Group has invested $60 million into the company,” Sutherland said. “We will continue to work with the state to bring the jobs and tax revenue benefits of this project to local communities on the Iron Range.”

Jason Quiggin, president of the Iron Range Building Trades, said the union is confident Mesabi and Essar are committed to finishing the project.