Essar seeks legislation to avoid paying back public funds

An aerial view of the Essar Construction site last year. Work has resumed with gusto on the site near Nashwauk, but Essar officials will be asking the legislature for help this session. (PHOTO: Essar Minnesota)

An aerial view of the Essar Construction site last year. Work has resumed with gusto on the site near Nashwauk, but Essar officials will be asking the legislature for help this session. (PHOTO: Essar Minnesota)

Iron Range newsLast week, Northern Minnesota media sources, with help from new lobbying activity by Essar Steel Minnesota, finally connected the dots that this proposed new Iron Range taconite mine would really, truly not build a steel mill with its project as originally planned. As such, Essar is due to run afoul of the agreement that brought $67 million in state bonding funds to build roads, lay railroad tracks and extend utilities to the Essar site near Nashwauk, Minnesota.

Readers know I’ve been talking about this for some time. The money’s been spent. The work has been done. In order to avoid having to pay the money back, however, the company would need an act of the Minnesota legislature, signed by the governor, to excuse the project from its requirement to produce “value-added” iron ore products.

A pro-development point of view might say, so what? The company now seems to be on track to get a major new project up and running with about 250 permanent employees. Symbolically, reopening the old Butler Taconite site would mean a lot for economic morale on the Iron Range. However, the region’s existing mines, which already employ a few thousand people, don’t see it that way. They see the state investing tens of millions of dollars in a private competitor, creating a major disadvantage for their established business models. Further, government watchdogs see an example of corporate welfare buried beneath the headlines.

As this John Myers story in the Duluth News Tribune shows, Iron Range lawmakers know they are entering a difficult debate, and it’s not assured that the company will get its way on this. In fact, with the likely opposition of existing mines, it might even be considered a long shot.

For its part, Essar Minnesota has retained Iron Range lawyer Mitch Brunfelt as its general counsel and director of public relations. Further, perhaps more importantly, Essar has hired former State Senator Doug Johnson as its lead lobbyist for the upcoming session. Johnson was once the most powerful member of the Iron Range legislative delegation and is a close associate of his successor and Senate Majority Leader Tom Bakk. And yes, he is the Douglas J. Johnson for whom the Iron Range economic trust fund is named.

Look for this to consume a good deal of energy during the upcoming session. Republicans will face an interesting conundrum. On one hand it’s an opportunity to hit Democrats on a big spending project; on the other, it’s mining. And you can’t be against mining, can you? This is where the other iron mines will have a big role in the debate.

Comments

  1. It is not just mining, it is another shameful waste of our tax dollars being spent with no business sense at all. Of course they hired D. Johnson- crony capitalism as usual.

  2. Tammy Swedberglund says:

    No, you can’t oppose mining ; especially if lobbyists are on point in perceptually shaping it as part of the broader economy-is-national-security picture . Also , speculatively, it may seem to some that Essar’s debt service is staggeringly high , and who knows what absurdly nice forgivement a bargain hunting suitor might seek from the state if the industry sees consolidation through acquisition ( see sidebarred-and-trending DNT piece on Cliff’s alongside above link ) . Sort-of in a similar vein (well , not really, but) , the ” super majors ” have been out and about ,i.e., Antofagasta’s below fire-sale pickup of Twin Metals , and that was just a paper lease package without extant (and possibly on the hook of being publically subsidized ) infrastructure . Essar looks to be attempting a crude yet effective bait and switch leveraged by “facts on the ground” .

  3. Tammy Swedberglund says:

    Of course they can always just put the lights on and call it good :
    http://www.duluthnewstribune.com/features/home/3642516-when-take-down-christmas-decorations

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