Minnesota officials tried to avoid another mining failure
ST. PAUL — Minnesota leaders hope a lease they are offering to a new mining company will reverse a decade of frustrating failure in one area they felt held lots of promise.
Officials who feel they were burned by Essar Steel Minnesota, which did not fulfill state taconite mining requirements, then declared bankruptcy, on Monday, June 19, folded what they hope are iron-clad guarantees into a new mineral lease. They hope the new mining company will produce taconite and turn it into an in-demand iron product where Essar Steel failed for years.
Also Monday, it appeared the White House is on the cusp of a major decision about whether to impose new restrictions on steel imports, a choice that has divided President Donald Trump's administration while sparking global fears about a burgeoning trade war. Steel imports have been blamed for recent years' economic woes on northeast Minnesota's Iron Range, where taconite is told to produce steel elsewhere.
The U.S. Commerce Department has for months been evaluating whether steel imports pose a threat to national security, and it is expected within days to present Trump with its finding and a recommendation. Trump could quickly adopt its prescription or decide on a different course.
Monday's news from Washington and St. Paul was good for nearly 6,000 jobs supported by the Minnesota mining industry. State mines produced $3.27 billion worth of minerals last year, mostly iron ore-taconite.
Gov. Mark Dayton was optimistic after the state Executive Council, which he chairs, voted 3-1 to lease state land to Chippewa Capital Partners and related firms, but only if by Aug. 31 they show they have money needed to reopen a mine and construct an iron-producing facility just west of Nashwauk in northeastern Minnesota. The companies must have $625 million.
If Chippewa falls short, not only will it lose its state land lease, but it will forfeit $4 million to the state Department of Natural Resources.
The leases require Chippewa to meet numerous deadlines, or the state can levy hefty penalties or take back the mineral lease. The lease mandates that iron ore be produced by 2018 and iron to be used in electric-arc furnaces ship a year later.
The lease also requires Chippewa to mine all usable taconite, not just the high-quality material the company will use to make hot briquette iron for the furnaces.
State Natural Resources Commissioner Tom Landwehr said hot briquette iron is in demand worldwide, while Dayton said taconite that Iron Range mines normally produce is not as hot a commodity..
The new lease comes after Dayton became frustrated with India-based Essar for not fulfilling its commitment to produce value-added products from taconite it would mine. He tried to withdraw the state's mineral lease last year, but since Essar entered bankruptcy that was held up until last week.
Landwehr said the Essar situation likely will not be repeated because of deadlines and penalties contained in the new lease.
Dayton said the Essar situation was "a nightmare." He said he was disappointed that Essar failed to perform even after its president promised to open the mine and produce steel nearby.
The governor asked questions about the Chippewa lease until he was satisfied he would not see a repeat of Essar.
If Chippewa is successful, it would go a long way to restoring the Iron Range. It was devastated in recent years as cheap foreign subsidized steel, mostly from China, was replacing products made in the United States.
Trump has said he supports the American steel industry.
Based on the Commerce Department's decision, the White House could impose new steel tariffs, import quotas or a combination of the two, said senior administration officials speaking on the condition of anonymity.
The move could provide relief for a domestic steel industry that says it badly needs it, but it could also raise steel costs at every step of the supply chain — increasing prices for consumers and many of the manufacturing industries Trump promised to protect.
Additionally, the move has the potential to upset some of the country's closest international allies, and it could spark a set of retaliatory trade moves against U.S. companies trying to sell their products abroad.
Restrictions on steel imports would be Trump's strongest move yet to fulfill his campaign promise to radically alter U.S. trade policy, but there has been a big divide within the Trump administration. The Defense Department and National Economic Council have raised concerns about economic and diplomatic fallout from protectionist moves.
Top advisers were scrambling to alter the final decision as late as last week, and there was confusion over whether the White House was ready to make its choice. Top Commerce Department officials were supposed to brief congressional staffers on their planning Friday afternoon, but the briefing was scuttled at the last minute, Capitol Hill aides said. It could be rescheduled this week.
Trump, in late May, wrote in a Twitter post that he would take "major action if necessary" based on the Commerce Department's recommendations, suggesting he was open to following through on threats to try to revive the U.S. steel manufacturing industry by imposing new trade restrictions.
If Commerce does decide that imported steel poses a threat to national security, it will likely be based on the argument that the United States needs a healthy domestic steel industry to manufacture weapons and combat material.
The United States imported about 30 percent of the steel it used in 2016, or 30 million metric tons, up from 23 percent in 2009, according to data from the Commerce Department.
Trump administration officials have argued that a spike in production by China has hammered the U.S. steel industry. They allege that China floods global markets with cheap steel, making it harder for U.S. producers to compete.
However, since the United States already imposes restrictions on imports of Chinese steel, any new barriers are likely to have more of an effect on close U.S. allies, such as Canada, South Korea, Mexico, Japan and Germany, said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
The Washington Post contributed to this report.