Clarke jumps from health care into coal, iron ore
Tom Clarke seemed an odd player to jump into dying U.S. coal mining industry in 2015.
A veteran of the health-care industry, Clarke had recently been dubbed an environmentalist, a convert to sustainability who led land preservation efforts. But there he was, starting ERP Compliant Fuels and diving into carbon-spewing coal even as coal companies were filing for bankruptcy.
Now he's started ERP Iron Ore LLC and Chippewa Capital Partners for his two Minnesota mining operations — the former Magentation operations based in Grand Rapids and the former Essar Steel Minnesota project in Nashwauk.
ERP stands for Earth Restoration Project and is a product of Clarke's transformation into an evangelist for sustainability. That transformation was hastened in Africa, where Clarke established nonprofit health-care facilities and where he saw the results of worsening droughts and famine.
"I don't even use the term global warming anymore because it's so polarizing. But we have to do something different. What we're doing now isn't sustainable," he said in an interview with the News Tribune earlier this month.
His ERP Compliant Fuels coal companies specialize in rehabilitating blighted mine sites and planting trees to offset carbon emissions. Coal burned in power plants is among the largest contributors to the greenhouse gas carbon dioxide that scientists say is causing global warming. Trees soak up and store carbon dioxide.
"We are planting millions of trees," Clarke told the News Tribune in an interview earlier this month.
Still, he's mining lots of coal. Clarke says his company just achieved a verified 10 percent offset for the coal company's carbon emissions — more than any other coal producer but still not accounting for the other 90 percent. He says he'd like to hit 100 percent offset someday. And he says he wants to bring his carbon offset ideas to the iron-mining and steel-producing industries, which also are large emitters of greenhouse gases.
In 2015, Clarke paid for a billboard criticizing the environmental record of Roanoke, Va.-based Southern Coal Corp. Within months he was working as a consultant to the company, trying to clean up its act and settle years of regulatory violations — some 254, more than any other domestic coal producer. The company started paying millions of dollars in past-due fines and changed how it mined and what it left behind.
Clarke said the more he looked at the blight caused by coal mining, the more he wanted to get involved. He wanted a long-term system in place to pay for cleanup, water treatment and reclamation of the massive scars coal mines leave behind. More immediately, he didn't want to see coal miners unemployed and the region pushed further into economic ruin.
Later that year he bought his first coal mine. He now owns eight, having purchased the Federal Mine in West Virginia from Patriot Coal; the Oak Grove Mine in Alabama and Pinnacle Mine in West Virginia from Cleveland-Cliffs; the Maple Mine in West Virginia and a coke plant in Alabama from Walter Energy; and Walter Energy's Canadian assets, including the Brule, Wolverine and Willow Creek operations in British Columbia. He also owns the Quinsam Mine on Vancouver Island in British Columbia.
Most were bought for pennies on the dollar in bankruptcy sales. As with the Patriot deal, published reports noted ERP paid little upfront for the Cliffs mines and instead assumed liabilities of about $268 million.
Battle with Cliffs
Clarke appears to be progressing at Nashwauk despite the news in December that Cleveland-Cliffs had purchased access to part of the land where Clarke's Mesabi Metallics hopes to mine. Cliffs purchased the property rights from Glacier Park Iron Ore Properties LLC, which was formerly owned by Houston-based ConocoPhillips but is now apparently owned by Red McCombs, the Texas-based former owner of the Minnesota Vikings.
Chippewa Capital Partners has filed court motions that the deal is contrary to the terms of the bankruptcy settlement. Beyond that, Clarke says Mesabi Metallics has the mining permit for the land Cliffs purchased, has access to state and other private ore in the same area and has permits to build the project.
"At worst, Cliffs becomes our landlord (for that part of the mine) and we pay them for the ore instead of paying Glacier Park," Clarke said. "We've also had several other parties approach us with (mineral rights) they want us to use to make sure this project happens."
Chippewa last year filed court documents accusing Cliffs of sabotaging the effort to revive the Essar Steel Minnesota project. Clarke said Cliffs is desperate to keep anyone from finishing the project.
Cliffs earlier this month finally answered the allegations, filing a 45-page response that claims Glacier Park and Cliffs had the legal right to enter the agreement because Chippewa didn't act by a Oct. 31 deadline. Cliffs also claims that the entire Essar Steel Minnesota/Mesabi Metallics bankruptcy plan should be annulled after the land deal, forcing Chippewa to start over with a new plan.
Cliffs also said it needs the ore for the long-term viability of Hibbing Taconite, which it operates and is part owner of.
Attorneys for both sides argued their case in front of federal Judge Brendan Shannon last Thursday. Shannon is expected to decide the fate of the controversial mineral leases within weeks.
But Cliffs didn't wait for the judge's ruling, and last week circulated written warnings to Chippewa employees and contractors to stay off the disputed land. Cliffs also erected "No Trespassing" signs around the disputed property.
Chippewa claims whoever erected the Cliffs signs themselves trespassed on Mesabi Metallics property. Chippewa also responded with its own legal memos to Cliffs, saying the company has legal access to the entire project, including the disputed land.
Dayton, Range lawmakers urge truce
Clarke says Mesabi will produce taconite for about $40 per ton, far below the roughly $60 mark of most Minnesota producers like Cliffs. (Mesabi will have more-advanced technology, fewer employees and far less transportation — the mine, taconite plant and iron plant will be within about two miles of each other.)
"He's very worried that we are going to undercut him and take away his customers," Clarke said of Lourenco Goncalves, Cleveland-Cliffs' outspoken CEO. "I would be, too, if I were him. ... But that's not our plan at all. We're going to use much of our ore to make pig iron and we're going to sell the rest to China. We don't want to steal his customers away."
Clarke said he's tried to extend an olive branch to Goncalves, through third parties, with no response.
"If he needs the ore for Hibbing Taconite, he can come over here and get it from us," Clarke said. "I'd like to partner with them. ... That's what I do, bring people together."
Patricia Persico, spokeswoman for Cliffs, said Goncalves declined to comment for this story, citing the ongoing litigation. But in announcing the purchase in December of the Glacier Park mineral rights, Goncalves said that he now had a "seat at the table" in how the rich west Iron Range ore at Nashwauk would be used. He also declined then to elaborate on what that meant.
Goncalves had not been shy in saying Clarke's efforts should be thwarted, last year warning Iron Range leaders against supporting "fly-by-night" operators. While Cliffs has a 170-year history, he warned that the newcomers to the Iron Range would leave Minnesota hanging.
"You should be careful. Things are not as good as they seem," Goncalves said last year of Clarke's efforts.
Minnesota Gov. Mark Dayton earlier this month publicly urged the two sides to work out an agreement for the betterment of the Iron Range.
"I think it's very important we find a way for Chippewa and Cliffs to work together and see their roles as contributing to one another's success rather than competing — but I have to work on that," Dayton told the Mesabi Daily News.
On Saturday, Cliffs issued a statement saying Dayton had not yet contacted Goncalves on the issue.
State Sen. Dave Tomassoni, DFL-Chisholm, said the state does not want to do anything to hurt Cliffs, which has more than 1,000 employees at three Minnesota facilities.
"With Cliffs' experience operating mines and Tom Clarke maybe needing some help there, this is a natural for them to get together," Tomassoni said. "I'm hoping we can make that happen."
But it may be a tough truce to broker. In addition to the Iron Range battle, Clarke and Cliffs are locked in yet another legal battle, also in a Delaware court, over ERP's purchase of Cliffs' coal operations two years ago..
Cliffs claims Clarke still owes it $10 million. Clarke doesn't deny that, but said Cliffs was not forthright in its final tally of debits and credits when ERP took over the coal operations.
The battle continues in court and the court of public opinion.
"I fully admit I owe him money," Clarke said. "But he owes me more."
This is the second part of a two-part report on Tom Clarke, the health-care industry executive who is diving into Minnesota's Iron Range mining industry, resurrecting both bankrupt Magnetation and bankrupt Essar Steel Minnesota. But Cleveland-Cliffs, the nation's largest domestic iron ore producer, is trying to thwart the effort.