Reeling U.S. Steel asks for relief on state mining leases

U.S. Steel's MinnTac facility is the largest active iron ore operation in the United States, and "king" of the Iron Range mines of Northern Minnesota. U.S. Steel is restructuring its American iron ore operations amid great uncertainty. (PHOTO: U.S. Steel)

U.S. Steel’s MinnTac facility is the largest active iron ore operation in the United States, and “king” of the Iron Range mines of Northern Minnesota. U.S. Steel is restructuring its American iron ore operations amid great uncertainty. (PHOTO: U.S. Steel)

Socked by a global iron and steel price collapse, U.S. Steel is asking the state for a reduction in the cost of its state-owned mining leases, which currently fund trusts benefiting Minnesota universities and schools. The company needs to reduce costs by about $25 million to reopen its Iron Range properties.

The 114-year-old Pittsburgh-based company announced earlier this spring that it would indefinitely idle its MinnTac and Keewatin Taconite operations starting in June. Now company officials say they need to trim production, energy and state lease costs to reopen before the end of the year, portending a shutdown of at least six months no matter what the legislature does.

The news became public last night on the floor of the State House of Representatives as Rep. Tom Hackbarth (R-Cedar) along with Rep. Tom Anzelc (DFL-Balsam Township) offered an amendment to the environment bill requesting that the DNR renegotiate the lease rates for state-owned mining land, which is particularly important for U.S. Steel’s Keewatin Taconite property, which has the most state trust fund land. State Sen. David Tomassoni (DFL-Chisholm) did the same in the Senate bill. The inference is that doing so would shave months off the length of U.S. Steel’s shutdowns.

While U.S. Steel is doing the asking, any mine on state leased land would also see lower costs. The scram mining operation Magnetation on the western Mesabi Iron Range would certainly benefit, though there are scattered pockets of state-owned mining land throughout the region.

A lower lease rate would reduce the amount going into the state’s permanent school trust and funds that benefit the University of Minnesota system. However, the principle of those funds would not be reduced, and they would both continue to pay out annual payments to Minnesota schools and universities — though the funds would grow more slowly.

It would appear that between moving highways, reducing environmental standards and now asking for freedom from state lease obligations, that Iron Range mines are in a ferocious battle for survival. Lawmakers and Iron Range communities will face hard questions about whether to give in to company demands in coming months or to hold firm. The region’s lack of economic diversity gives the Iron Range fewer options, a topic I will address in my Sunday column.

Yesterday, Keewatin Taconite announced it would keep about 175 workers on through June to perform maintenance projects, reducing the blow to some miners. But that’s only about a month of work for some, and the shutdown itself could last through Christmas unless conditions change.


  1. Let’s say I’m non-mining, non-logging, environmentally friendly business looking to expand. Let’s say the Iron Range is where I decide to invest and create 100 new jobs. Things go great for years! Then let’s say down the road due to normal business conditions I have to let 25 people go to stay in business…but I still keep 75 Rangers employed until conditions improve. OK so far?

    However, before I invest I research the history of business / labor relations on the Range, from 1880’s to 2015. I come across this April 25th, 2015 statement from life-time Ranger who claims to be trying to diversify the Range economy – “Lawmakers and Iron Range communities will face hard questions about whether to give in to company demands in coming months or to hold firm”.

    I say hmmm….Do I really wish to invest in an area where when tough times come, which they will, I’m faced with a community where my company is demonized as a bad guy? Where my neighbors give me no credit for not only employing 100’s for years but still 75 people while I weather tough times? Where it’s stated by the media that my legislative representative is faced with “giving in to company demands or holding firm” if he/she tries to help me? Holding firm? To what? What a false, antagonizing starting point for a serious business discussion.

    Sounds like a closed-fisted, unfriendly business atmosphere to me. I think I’ll invest and diversify someone else’s community. What a shame..

  2. Again, just an hour ago, the same guy who falsely claims he wants “new businesses” to in invest in the Range says – “Another reason to diversify”…but yet views business as evil. It’s laughable…if it weren’t so sad.

    • Bobby, you reading my Twitter? Atta’ boy! I didn’t respond to you first comment because it was paranoid and insane. “Hold firm” means hold the interests of citizens (in this case K-12 and college students) as being equal with mining companies. I wonder what the Bennetts or Pillsburys would say to a request for lease rate reductions? I’m sure they’d just roll over and take it, right? I mean, they’re pro-business. Why wouldn’t they?

  3. ” The company [US Steel] needs to reduce costs by about $25 million to reopen its Iron Range properties.”

    Aaron, are you intending to report this as fact?

    I don’t know much about the economics of these operations, but since the problem is global oversupply of steel, it seems unlikely that any amount of giveaways by the State of Minnesota can make that much difference. It would be interesting to know the cost structure of Minnesota ore production compared to competitive operations and what those costs consist of. Without such information it seems hard to make informed decisions. Certainly the pandering of politicians to the industries they represent isn’t convincing in itself.

  4. That’s what the company says, Alan. I can’t speak to the accuracy of the claim. That’s one of the frustrating aspects about this.

  5. So Aaron, are the parents of those K-12 and college students any part of the 4,200 men and women directly employed by the mining companies…or are they part of the additional 13,000 employed by first trier vendors supporting the mines?

    You call it “paranoid and insane” that the iron mines directly contribute $1.8 billion to the economy of Minnesota every year in the form of purchases, wages and benefits, taxes and royalties. Do you call the subsequent business impact induced as the result of iron mining which is responsible for an additional $1.6 billion – making the total economic impact more than $3 billion on the state and region’s economy insane as well? What are you drinking?

    Yet, back to your passion….which is enticing other non-mining businesses to locate to the Range. Do you really believe someone is going to invest time, effort and money in this area when they can go elsewhere and not face your vitriol? You’re not paranoid, you’re nuts!

  6. Aaron…
    When I left the Range for a number of years for jobs elsewhere, I grew out of the Range nickname and name calling thing. I really don’t “feel” good getting back into it but as we used to say growing up…”you started it”.

    (Geez, it still don’t like it, sorry..)

  7. Another rousing piece of performance art, Bob. Good night.

  8. Sharing this from the DNT:

    Reader’s View: Mining not an alternative to a diverse economy

    Posted on Apr 17, 2015

    The News Tribune’s April 6 “Analysis,” “Booming economy can’t help iron ore,” could have used a little more analysis.

    The article quoted a 2012 University of Minnesota Duluth study claiming that mining accounts for more than 5 percent of the statewide economy. The same paragraph claimed that mining has a $3.2 billion impact on the state’s economy.

    Anyone can go to their friendly World Almanac to determine that Minnesota has about a $300 billion economy. Even the relatively innumerate can figure in their heads that mining then is about 1 percent of Minnesota’s economy. At the state level, mining is little more than a rounding error in our budget. It would be nice to know how much pixie dust UMD sprinkled on those numbers to come up with its 5 percent.

    We also should consider our own subsidies to the mining industry. According to the 2014 Minnesota Revenue Mining Tax Guide, the Iron Range Resources and Rehabilitation Board has rebated $232.7 million to the industry in the name of job creation since 1993. Minnesota taxpayers are faced with a bill in the vicinity of $240 million to move Highway 53 for the mining industry.

    Our legislators have supported legislation to mitigate wetlands out of the watershed, meaning mitigation dollars for our destroyed wetlands could leave the Iron Range and subsidize millionaire farmers in the Red River Valley.

    The fundamental problem is that mining corporations are in the business of stripping assets, not building healthy communities. I worked on mining-related projects from Marquette, Mich., to Silver Bow, Mont., and the communities near the mines where I worked all ended up being sacrifice zones. No one ever has responded to my challenge to produce a list of thriving mining communities in the United States.

    Diversification may not be easy, but there is no evidence that mining is an alternative.

    Bob Tammen


  9. Bob T.
    Give us examples of the “not easy” diversification you propose which will last longer than iron ore mining has..

  10. Excuse me Elanne…I see that was you speaking, quoting Bob Tammen.

    Howeveer, you suggest you’re of like mind so….what’s your thoughts on so-called “diversified” businesses that would have an economic life longer than what iron ore has blessed us with? It’s great toss out these academic theories but we live in the real world. Give us something to put bread on the table..and help pay for the ever increasing professor salaries.

  11. Robert Farrell says

    The contract to purchase iron ore from GNIOP by U.S. Steel was a hundred year contract but into a Trust.
    At the end of the contract GNIOP was selling the Iron ore for $2.68/ton when the market was paying 51.45/ton. So the talk of reducing price is confusing at best. This was in 2016

Speak Your Mind


This site uses Akismet to reduce spam. Learn how your comment data is processed.