Proposed Range steel plant is $30 million short

Mining truck, Hibbing Taconite
Trucks like this could soon be working the former Butler taconite mine near Nashwauk, idled since 1985.
MPR file photo

If it happens, it will be huge.

The state's first iron mine-to-steel mill operation is intended to mine taconite ore, produce taconite pellets, then direct-reduced iron, and finally slabs of steel -- all within hours of mining the ore. The environmental permitting process is almost complete, and site preparation is expected by late summer.

But company officials say something's still missing.

"It is contingent upon the fact that the state will provide the infrastructure that is required to move the project forward," says John Elmore, president of Minnesota Steel Industries.

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That's an additional $30 million in infrastructure like a natural gas pipeline, connecting roads, and a short-line railroad. The money is supposed to come through Itasca County, but ultimately from the state -- a reasonable investment for Minnesota, according to Elmore.

"Next year will be too late for us."

"This is not just a regional thing. I think sometimes people see that we're up on the Iron Range and it's a regional project," says Elmore. "This project is of a scale and magnitude that this state hasn't seen. And it will have an impact -- a tremendous impact -- economically on the whole state."

Elmore projects some pretty big returns for Minnesota -- 2,800 jobs, including spinoff and support jobs, providing some $160 million a year in new wages. Taconite mine royalties alone would generate $18 million a year.

"For that, we expected the state will put in the infrastructure which then would enable all the additional flow on jobs and support activities to be able to support the mill and support the activities in the area and surrounding area," Elmore says. "So, from a state's perspective, that's really what their role and responsibility is. And the payback to that, obviously, is extremely quick and extremely attractive to the state to move forward."

With construction due to begin late summer, Elmore says that money is critical. An international conglomerate, India-based Essar Steel Holdings, has agreed to buy MSI and build the plant.

But Elmore says Essar won't finalize the deal until, first, the environmental permits are in hand, and second, the money's in place for the infrastructure.

That shouldn't be taken as a bluff, according to Peter McDermott, president of the Itasca Development Corp. in Grand Rapids.

"They have not had a financial close, and Essar hasn't written any check yet for this," McDermott says. "It's just that they've agreed to purchase the company. I've been involved in major deals, and a lot of them have come to fruition, and a lot haven't come to fruition. And so, it's not a sure thing yet."

Some lawmakers cling to hope for a special legislative session. Sen. Tom Saxhaug, DFL-Grand Rapids, says if there is such a session, this project needs to be on the agenda. But Gov. Pawlenty has shown little interest in recalling lawmakers.

There may be another way to find the money, according to Pawlenty spokesman Alex Carey, because Pawlenty did sign an omnibus bill with $14.9 million for Iron Range development through the 21st Century Minerals fund.

"With the expectation that this will be available for the Minnesota Steel project," Carey says. "The governor also fully expects now that the Iron Range Resources Board should be able to match that money, that $15 million, so we can move forward and indeed go ahead with the project."

The IRR board next meets July 19.

As a last resort, there's another shot at bonding money next year, when lawmakers are scheduled to take up a state bonding bill. But MSI President John Elmore says that could be too late.

"We expect something to happen sooner," says Elmore. "I'm not going to speculate on what that might be, but we do expect that something will happen before next year. Next year will be too late for us."

Meanwhile, the DNR is taking public comment on the project's final Environmental Impact Statement until July 23. Issues range from mine pit drainage, to wetlands, to air emissions.

The Minnesota Pollution Control Agency is also drafting air and water permits for the plant, and is holding a public meeting Wednesday night in Nashwauk to take comments on them. The MPCA's public comment period remains open until July 30.