Now that the Minnesota Department of Natural Resources has moved to ban Essar Global from doing business within the state after buying back into a taconite plant project in Nashwauk that it drove into bankruptcy in 2016. The status of the agency’s action now goes into a simple but complicated legal process.
According to state statutes, DNR Commissioner Sarah Strommen is empowered by Minnesota Statute Chapter 16C to move forward with debarring, suspending and reinstating vendors, as well as canceling contracts.
Under Minnesota Rule 1230.1150 the agency has to provide written notice to suspend or debar a company, which can occur as a result of criminal and antitrust offenses, breaches of contract and performance and other missteps determined by the agencies to qualify for disqualifying a business.
Essar Global’s situation will likely be argued as a violation of contract by the state, which defines infractions as a “failure without good cause to perform according to the specifications, time limits, or any terms or conditions in the contract” or “a record of failure to perform, or of unsatisfactory performance, according to the terms of one or more contracts or as measured by standard commercial practices; provided that this failure to perform or unsatisfactory performance was not caused by acts beyond the control of the contractor.”
This argument stems from the 2016 bankruptcy filing at their former operation in Nashwauk, the project which Essar recently purchased debt from the new owners, though their involvement remains unclear.
Essar and the Ruia family conglomerate controlled the Essar Steel Minnesota project in Nashwauk since they broke ground in 2008, promising then a taconite plant and steelmaking facility, along with 700 construction jobs and 350 permanent jobs.
Construction stalled and continued numerous times over the next eight years, as Essar Steel Minnesota claimed funding problems from the parent company, eventually promising former Gov. Mark Dayton it would make certain payments in 2016.
Instead, as the state moved to strip the company of its mineral leases, Essar went into a $1.1 billion bankruptcy filing that left local contractors and municipalities on the hook for millions in lost funds.
“Essar’s ongoing manipulation of this process has gone on long enough, suffocating any real prospect for new opportunities,” said Iron Range State Reps. Julie Sandstede and Rob Ecklund, in a joint statement Wednesday. “After all we’ve been through, debarment of Essar is entirely appropriate.”
Strommen and the DNR will have to outline reasons for debarring the company and the length of time they plan on preventing Essar from doing business through the state’s Department of Administration. Essar Global will have the chance to respond before the administration makes a decision. There is also an administrative and judicial review and appeal process that follows.
A response to the Administration Commissioner Alice Roberts-Davis must be made within 30 calendar days and the commissioner has 45 days to decide.
According to state rule, a vendor can be banned from doing business for one to three years unless a longer time period is effect. The length will depend on the “vendor's past performance, the number and seriousness of the current complaints, and the cost to the state associated with correcting the problem.”
Requests for comment from Essar Global have not been returned.