Essar Steel Minnesota misses deadline to repay state $66M, could lose mineral leases

Essar Steel Minnesota stands to lose its lucrative Minnesota mineral leases on the Iron Range after missing a July 1 deadline to repay the state $66 million in infrastructure costs related to the company's now stalled $1.8 billion taconite project in Nashwauk.

The failure to repay the state is the latest in a long line of shattered deadlines.

"Gov. [Mark] Dayton is engaged in negotiations and discussions and trading offers back and forth with Essar," said state Rep. Tom Anzelc, DFL, Balsam Township, who chairs the Legislature's Iron Range delegation. "At issue, primarily, is Essar's request for an extension of the mineral leases. That seems to be what they want more than anything else in the short term."

Essar representatives did not return calls and e-mails asking for comment. A spokesman from Dayton's office said the governor had just returned from Croatia and could issue a statement about Essar this week. Other state officials did not return phone calls seeking comment.

An extension of the leases might help Essar Steel Minnesota, which is owned by Essar Global in Mumbai, secure financing that it has been struggling to obtain for months. The company is asking for a nine-month extension for the leases that expired last week.

"Essar is doing all sorts of contortions to buy some time," Anzelc said. "Without having the leases in their hands, their opportunity to be a willing seller of this project is diminished, and their ability to attract real new investments is [nil]."

Without the mineral leases, Essar could be forced into bankruptcy. If the state does not grant the extension, the leases also could go to a competitor such as Cliffs Natural Resources.

But Anzelc and others on the Iron Range said Essar may have run out of goodwill.

After many promises, Essar still hasn't fully paid at least 10 contractors whose crews worked on the Nashwauk project, which remains half built.

The construction project broke ground in 2008 and was supposed to have been finished in 2014. After several delays and a scaling down of the project from a full taconite and steelmaking plant to an iron-ore pelletizing plant, the timeline was extended to fall 2015.

After the last missed deadline, the state asked the company to repay the $66 million the state spent building roads, rail, power plants and other infrastructure for the project.

Dayton threw a final ultimatum at Essar in April: either pay back the infrastructure funds to the state by July 1, or the state would not renew Essar's minerals leases.

"As near as I can tell, between $500 million and $800 million in new dollars will be necessary just to get the iron-ore pellet plant finished," Anzelc said. "Essar has burned every bridge I know of."

Dee DePass • 612-673-7725