Essar Global’s involvement with the state of Minnesota may be no more.
The Minnesota Department of Natural Resources wrote to Mesabi Metallics CEO Gary Heasley on Monday telling him the agency was moving forward on a process to exclude Essar Global and its affiliates from working in the state.
Further, the letter says that the DNR is continuing its review of whether Mesabi Metallics is in compliance with the terms of state permits and mineral leases awarded to the company in July 2018 for the former Essar Steel Minnesota project in Nashwauk.
“DNR is also continuing to evaluate the sufficiency of all information provided by Mesabi to DNR and on which DNR relied upon for reinstatement of the leases in July 2018,” the letter, from DNR Commissioner Sarah Strommen, reads.
Essar Global, the parent company of Essar Steel Minnesota, led the Nashwauk project into a $1.1 billion bankruptcy filing in 2016. Earlier this month, the company announced it repaid debt from the bankruptcy and bought about $260 million in debt currently owed by Mesabi Metallics, as it tries to complete the pellet and value-added plants.
Representatives for Essar Global could not be reached for comment Monday. A spokesperson for Mesabi Metallics said it was unclear how Essar’s potential banishment would impact the project, but the company is maintaining a construction schedule that begins this spring.
“Regarding the Nashwauk site, Chippewa Capital Partners is the sole owner of Mesabi Metallics,” spokesman Darin Broton wrote in email. “Construction continues based on the timeline submitted to the DNR in early January, and will accelerate this spring.”
DNR officials met with the Iron Range Delegation on Monday, when the decision to pursue an Essar ban was supported.
Essar links were made to the project in July shortly after the DNR awarded Mesabi Metallics with state mineral leases. Riverdale Commodities SA, a Swiss company that supported the pellet contract and financing for the project, was an Essar spin-off company that changed its name from PeaKom SA. One of its original board of directors also ran an Essar shipping port in Spain.
Mercuria Energy, a Swiss trader, also committed to financing a large part of the project and last September said it was looking forward to a partnership with Essar Global.
“I’m extremely pleased with the DNR for drawing a line in the sand and refusing to move forward in any way, shape or form with bad actors,” said State Rep. Dave Lislegard, DFL-Aurora on Monday. “It’s important that we move forward with a strong viable company that is proven not by their words, but by their actions. This is a step in the right direction.”
Any blacklisting of the company could be challenged and the DNR has said it is fearful of losing the permits if it were to rescind leases from Mesabi Metallics. The fledgling company has struggled to get the project off the ground and missed a December 2018 deadline to begin construction on the value-added facility.
Still, the company remains optimistic it can start construction on the half-built pellet plant in the spring and complete it by Dec. 31 this year. Lislegard was among the Range delegation members Monday saying they were not supportive of another extension for Mesabi Metallics, which received numerous from former Gov. Mark Dayton as they tried to compile financing for the project.
DFL Gov. Tim Walz said in a statement Monday that he wanted to avoid a repeat of the 2016 bankruptcy, which left local contractors unpaid, with state and county entities on the hook for millions more.
“This is a company that left the Iron Range in the lurch and caused a lot of pain. I want to do everything I can to keep that from happening again,” Walz said in response to the letter.
Sen. David Tomassoni, DFL-Chisholm, echoed those sentiments. After years of runaround from Essar Global, he said during a phone interview that the Range doesn’t want to deal with them again, adding he wants to see a taconite and value-added plant in Nashwauk.
What company leads the project is the $1 billion question.
Cleveland-Cliffs owns a large amount of land and minerals at the project and ArcelorMittal has expressed baseline interest if it becomes available. Mesabi Metallics and Chippewa still control the land, creating a potentially expensive hurdle for a potential new operator.
“We have three very reliable companies on the Range right now,” Tomassoni said, referencing Cliffs, U.S. Steel and ArcelorMittal. “If any of them wanted it, I would think they would be the best way to go ... I would urge them to buy the property and get whatever project they want to do underway.”