ST. PAUL — State officials awarded a batch of highly sought after mineral leases near Nashwauk to Cleveland-Cliffs, which intends to use taconite mined on those leases to keep Hibbing Taconite open for at least another two decades.
The five-member Minnesota Executive Council — chaired by Gov. Tim Walz and made up of the state’s constitutional officers — unanimously voted on Thursday to grant the more than 2,600 acres worth of leases to Cliffs, which manages and owns over 83% of Hibtac while U.S. Steel owns the rest.
What I would have liked to have heard is, ‘I’m sorry' to communities.
In a news release, Cliffs CEO Lourenco Goncalves celebrated Thursday’s decision as “preserving hundreds of good-paying union jobs.” Hibtac employs approximately 730 people and was expected to run out of ore by 2026 without the Nashwauk leases.
“Today we celebrate the resilience of Hibbing Taconite, its workforce and the tremendous potential of these Nashwauk leases,” Goncalves said. “Then, we immediately begin the hard work of securing the next generation of union jobs and economic opportunity for the Iron Range.”
After the decision was made, Chris Johnson, president of United Steelworkers Local 2705, which represents many of the Hibtac employees, said he was overjoyed.
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"This is like Christmas, birthday and Fourth of July wrapped up in one for us," Johnson said. "The amount of anxiety that's going to go away, our workers will be able to keep their mind on task ... everybody in the communities are going to benefit. It's huge for us."
The approval came after several last-ditch efforts by Mesabi Metallics, which lost the leases in May 2021 after failing to meet what was then considered last-chance deadlines, to convince the state to give back at least some of the leases.
For more than 15 years, iterations of Mesabi, which is owned by Mumbai, India-based Essar Group, has floundered through construction stoppages, bankruptcies, missed deadlines, late payments and other legal battles. It maintained it would eventually complete its half-finished facilities and eventually mine and process it into direct-reduced iron pellets and hot-briquetted iron.
“We can’t be buying this broken dream of what was going to happen in Nashwauk but never did,” Walz said.
In the weeks leading up to Thursday’s decision, Mesabi officials said not getting any of the state leases would likely be a death blow to the company, forecasting possible bankruptcy.
Asked about the future of Mesabi in light of Thursday’s decision, Ravi Ruia, who founded and owns Essar Group with his brother, said: “We’ll see.”
He declined to comment on whether Mesabi would go into bankruptcy.
Larry Sutherland, Mesabi’s president and chief operating officer, declined to comment.
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The Minnesota Executive Committee is made up of Walz, Lt. Gov. Peggy Flanagan, Attorney General Keith Ellison, State Auditor Julie Blaha and Secretary of State Steve Simon.
Before voting, the council heard two and a half hours of testimony from local officials on the Iron Range, the United Steelworkers and officials from both companies.
The one thing that makes me feel a little uncomfortable about it is that we’re not a court and privy to all the information … I don’t know if you’re cherry-picking pieces of the discoveries that benefit your client's perspective, but I don’t know that you’re not.
Barb Kalmi, who is on the Nashwauk-Keewatin school board, said revenues should be kept local.
“I find it unconscionable that the orebody that's in our county will be used for a taconite production tax profit to go to another county, another school district,” Kalmi said.
Joe Henderson, director of the DNR's division of lands and minerals, said that because taconite from these leases, under Cliffs plan, would be mined in Itasca County but processed in St. Louis County, the taconite production tax would be split between the counties.
But revenue from royalties and tax-forfeited parcels would remain local, he said.
Many speakers urged the council to split the leases between Cliffs and Mesabi.
The DNR said it looked into that scenario, but breaking up and sharing mining land is difficult and could put permitting at risk.
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“We were worried, frankly, that rather than a win-win, it would be a lose-lose,” DNR Commissioner Sarah Strommen said of awarding the leases to more than one company.
Walz and other council members said they understood the economic frustration expressed by local officials Thursday and vowed to help Itasca County and Nashwauk find other opportunities and investments.
I find it unconscionable that the orebody that's in our county will be used for a taconite production tax profit to go to another county, another school district.
“These people pour out their blood, sweat and tears,” Walz said. “And they counted on you. They counted on you to help them.”
He placed the blame on Mesabi and Essar and said Ruia should have owned up to that.
“What I would have liked to have heard is, ‘I’m sorry' to communities," Walz said.
After the meeting, Ruia briefly spoke with Walz and several others on the council. He told reporters he apologized to Walz for “any hard feelings.”
During the meeting, Simon challenged Ruia, pointing to the last-chance deal the council gave to Mesabi in December 2020. A few months later, Mesabi only provided half the $200 million required under the new conditions, blaming the COVID-19 crisis in India. That prompted the DNR to terminate its state leases, the same ones ultimately awarded to Cliffs on Thursday.
“Two years or so ago, we were asked to go out on a limb amidst considerable pressure not to do that,” Simon said. “We did that and you failed to keep your end of the bargain. What is different this time?”
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Ruia had said the council should wait to award the leases until Mesabi completed construction and if it didn’t finish, the leases could go to another company, he said.
David Suggs, an attorney representing Mesabi, urged the council to hold off on awarding the leases until an anti-trust lawsuit Mesabi filed against Cliffs in 2017 is resolved.
A number of emails obtained by Mesabi during discovery show what Mesabi alleges were plans by Cliffs, which it called a monopoly, to destroy Mesabi, its competitor. Mesabi alleges that Cliffs told contractors they would not hire them for their projects if they did any work for Mesabi and engaged in other anti-competitive behavior.
“The one thing that makes me feel a little uncomfortable about it is that we’re not a court and privy to all the information … I don’t know if you’re cherry-picking pieces of the discoveries that benefit your client's perspective, but I don’t know that you’re not,” Ellison said.
Before voting, each council member agreed that it was time to move on from Mesabi.
“We have evidence that Cleveland-Cliffs has completed projects, we have evidence that Mesabi Metallics has not … We’ve taken the time, as much as we could, we’ve given as much as we could and it's simply time to move forward,” Blaha said.
This story was updated at 5:27 p.m. May 25 with additional quotes and information from Thursday's meeting. It was originally posted at 2:31 p.m. May 25.
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