Minnesota awards Nashwauk mineral leases to Cleveland-Cliffs

Hardily rejecting a last-ditch plea from Mesabi Metallics, the Minnesota Executive Council unanimously voted Thursday to award the company's former mineral leases on the Iron Range to Cleveland-Cliffs.

Led by Gov. Tim Walz, panel members said they agreed with the Minnesota Department of Natural Resources' reasoning behind its recommendation that Cleveland-Cliffs get the coveted leases for over 2,600 acres of state taconite mining rights.

The DNR had revoked the leases for Mesabi's delay-plagued and half-built Nashwauk taconite plant after the company missed its latest deadline in 2021. The DNR then sought new proposals for the leases.

Cleveland-Cliffs, the largest mining company on the Iron Range, had said that without the leases, Hibbing Taconite — which employs about 750 people — would close after it runs out of ore in the mid-2020s.

"Your approval of these leases will put an end to years of uncertainty over Hibbing Taconite's mine life," Patrick Bloom, Cleveland-Cliffs' government relations vice president, told the council.

He also said Mesabi Metallics' idea of splitting the state ore leases with Cleveland-Cliffs "would fundamentally destroy [Cliffs'] mine plan."

Mesabi Metallics wanted the Executive Council to send the issue back to the DNR, asking that the leases be divided between it and Cleveland-Cliffs. The Executive Council is composed of Minnesota's top five elected officials.

Commissioners from Itasca County and the mayor of Nashwauk urged the council to support Mesabi's pitch.

The mayor of Hibbing and the head of Chisholm's city council — both in neighboring St. Louis County — urged the council to award the leases to Cleveland-Cliffs. So did representatives from the steelworkers' union, which represents workers at Hibbing Taconite.

"The only time I like to see Itasca County and St. Louis County on opposite sides is at a hockey game," Walz said. "This situation has caused incredible heartache."

Walz tagged Mesabi Metallics' corporate parent Essar Group as the cause. "I do blame one entity for the situation we are in — the broken promises and the dreams not met."

Essar Group, a global conglomerate with about $15 billion in annual revenue, was heralded in 2007 when it bought out a moribund effort in Nashwauk to build a new taconite facility.

Essar Steel Minnesota started construction in earnest in 2011 with a planned 2013 completion date. But by July 2016, after myriad missed deadlines, then-Gov. Mark Dayton moved to terminate Essar's leases. Essar Minnesota responded by filing bankruptcy, thus retaining its leases.

By the end of 2017, the former Essar Minnesota — rechristened Mesabi Metallics — had financially reorganized with new owners, but quickly became a shambles. Essar took control of Mesabi Metallics in 2019, and the Executive Council later extended its leases.

Ravi Ruia, Essar Group's billionaire co-founder, and Mesabi Metallics President Larry Sutherland pleaded Thursday for one more chance.

Mesabi Metallics began construction again in April, and $500 million in equipment is waiting to be installed, Sutherland said.

"I recognize the bankruptcy created huge trust issues," he said. "Don't make a decision today that closes the door forever on us."

Ruia noted that Essar has spent $1.5 billion on the project so far and that several million dollars more were invested after the bankruptcy. "Our commitment to the Mesabi Metallics project is clear," he said.

Secretary of State Steve Simon asked Ruia why state officials should believe the company this time around.

Ruia responded: "You should believe us today because we are saying, 'Don't give us any leases.' "

Ruia proposed the DNR save some of the leases now committed to Cleveland-Cliffs for Mesabi should the company finish the taconite plant.

Walz seemed put off by Ruia's presentation.

"I would have hoped to have heard an apology, a 'Sorry we didn't get this done,' " he said. "Instead, I heard denigration of great public servants," meaning the DNR.

Ruia told the Executive Council that Mesabi wasn't "even given the courtesy of a meeting" with the DNR this spring when the department was reallocating the leases. Mesabi Metallics had asked the DNR for the leases again in March.

The DNR did not respond to the company until the day it recommended the leases go to Cleveland-Cliffs. The DNR said earlier this week it does not believe Essar Group is a "credible miner."

Ruia approached Walz after the meeting ended and apologized for any hard feelings.

Pete Hyduke, Hibbing's mayor, and Travis Vake, Chisholm's city council president, both told the council that their communities would be "devastated" if Hibbing Taconite closes — and that Cleveland-Cliffs, unlike Mesabi, is a well-established miner.

"I think you have a company in Cleveland-Cliffs with a proven track record," Vake said.

Itasca County commissioners argued that splitting the leases between Cleveland-Cliffs and Mesabi Metallics would be a "win-win" situation.

"I know we went down the rabbit hole for so many years," said Itasca County Commissioner Casey Venema, whose district includes Nashwauk. "But this is a big thing for us. There's lots of ore out there and Itasca County is slowly sinking."

But DNR representatives said that splitting the leases between two major mining projects simply wouldn't work.

"It wouldn't be win-win," DNR Commissioner Sarah Strommen told the council. "It would be lose-lose for the state."