One day after an Essar Global consultant laid out a plan for the company’s potential future operation of its former pellet project in Nashwauk, the state Department of Natural Resources issued a blistering response to the proposal and construction progress.
Former state representative-turned-Essar lobbyist Ron Dicklich told WDIO on Wednesday that Essar and its proposed partners were seeking a meeting with Gov. Tim Walz to gain an extension on the pellet plant construction deadline, currently set for Dec. 31, 2019. He said they estimate an 18-month construction period from where the project stands now, and said the mineral leases tied to the construction need to be extended in order for nearly $800 million in funding to come to fruition.
DNR Deputy Commissioner Barb Naramore said Thursday the proposed partnerships don’t represent a compelling argument, considering the project’s sordid past.
“If Mesabi Metallics or Essar truly has the funds to ramp up construction, it is simply shocking, and beyond disappointing, that they have not done so already,” Naramore said in a prepared statement. “The DNR reached lease terms with Mesabi Metallics in June 2017, providing more than sufficient opportunity for the company to recommence meaningful construction and meet its obligations under its leases.”
Further, she said Essar lacks credibility with the state after filing for a $1.1 billion bankruptcy case in 2016, just before then-Gov. Mark Dayton said he was pulling the state mineral leases from the company. The bankruptcy threatened the solvency of numerous Iron Range businesses, who were repaid in 2018 after the project emerged under Mesabi Metallics.
Under the Dayton administration last summer, the DNR approved a financial and pellet contract package presented by Mesabi Metallics and Riverdale Commodities SA in order to restore the state mineral leases and begin the march toward the construction deadline. But those agreements are now being further scrutinized by state officials as construction has still not escalated.
Among the first actions by the Walz administration toward the Nashwauk project was to seek debarment of Essar in order to prevent the company from operating the plant or doing business in Minnesota. Essar announced it was officially part of the project’s attempted revival on Jan. 7 this year, hours before Walz was inaugurated as governor.
Naramore stressed that Mesabi Metallics, not Essar, hold the state leases and that the debarment effort is still underway.
“For all the reasons laid out in our debarment action, Essar has absolutely no credibility with the DNR. This cannot be overstated,” Naramore continued. “We strongly advise Mesabi Metallics to position itself as or with a credible controlling owner and operator, capable of securing the necessary construction funding, before it is too late.”
A spokesperson for Mesabi Metallics declined comment Thursday night.
Essar, meanwhile, is finding some support locally. The Itasca County Board approved a letter to Walz urging the governor to open his doors to Essar. More than a dozen other entities consisting of cities, chambers of commerce and others were sought to sign onto the letter, but it is unclear how many ultimately approved it. The Iron Range Building Trades also approved a resolution supporting the new Essar partnership, saying they want to see the project built.
“There are some people who don’t like them. But the question remains, at the end of the day, do you want the plant finished?” Dicklich told WDIO. “And hiring of 300 people, or do you want to sit around and talk about the past?”
Dicklich is registered to lobby for Essar under Essar Capital Americas, with former Essar Steel Minnesota CEO Madhu Vuppuluri listed as the chief executive. Vuppuluri led construction efforts of the Nashwauk project until the 2016 bankruptcy and was later sued with Essar Global for allegedly funneling money from the project to other Essar entities worldwide.
According to Dicklich, as relayed to WDIO, the proposed partnerships would have the engineering and construction firm Fluor, based in South Carolina, bring the project to completion.
Mercuria, a Swiss-based trading corporation, remains interested in being a financial investor. They came onto the scene as a potential investor in September 2018, unknown to the state, during a visit by Dayton to the Iron Range.
Tenova/HYL, based in Mexico and Italy, has the license to the technology for the DRI value-added plant on site. Mesabi Metallics has already missed a state-imposed deadline to begin construction on the value-added site.
Lastly, the Canadian-based steelmaker Stelco is interested in pellets and a potential investment opportunity.
“The DNR has received a handful of letters from the companies Essar now cites as partners, but these are not indicative of a substantive consortium or plan. There are no commitments in these letters, only expressions of interest,” Naramore said. “It is not surprising that a steel company would want to buy pellets, nor that a construction company would want to build a plant. Many other entities have also expressed interest in the project over time, and there is nothing particularly distinctive or compelling about the interest expressed in these letters.”