Essar sues over state's plans to ban company
Essar Global, the company that left the Nashwauk mine site half built and in bankruptcy, is suing two Minnesota state agencies that are trying to prevent the company from conducting business in the state.
In a complaint filed in Ramsey County on Feb. 20, the Essar claims the Minnesota Department of Natural Resources and Department of Administration are violating state law by seeking the debarment of Essar, a move that would ban the company from doing business in Minnesota. The company also claimed and the state's actions put the future of the Nashwauk project in risk.
"By petitioning to debar Essar Global and its affiliates, the DNR is jeopardizing completion of the Facility and the public benefits that will flow from completion of the Facility," Essar attorneys wrote in the complaint.
After Essar said it would settle $260 million of the debt it left behind and buy its way back into the project, DNR Commissioner Sarah Strommen sent a letter to the CEO of Mesabi Metallics, the company now trying to revive the mine, warning the company of the agency's intention to block Essar from having any involvement in the project.
Essar's complaint called Strommen's letter a "threat."
In an emailed statement to the News Tribune Thursday afternoon, Mesabi Metallics spokesperson Darin Broton said Chippewa Capital Partners continues to be the sole owner of Mesabi Metallics and that the project's construction timeline includes a "Spring 2019 acceleration."
In a statement, DOA spokesperson Curt Yoakum said, "The Department of Administration is currently reviewing the DNR's recommendation for debarment of Essar Global. In regards to the legal action, the department does not comment on pending litigation."
In 2008, Essar took over the Nashwauk project, which was set to be the state's first all-new taconite mine and processing center in decades and employ 350 people by 2014 as it produced some 7 million tons of taconite iron ore pellets each year.
At the time, plans called for an iron and steel plant on the site, which would have created even more jobs.
But in 2015, Essar walked away from the project after spending $1.8 billion on it and left the facility less than half-finished. The company also left behind $1 billion in debt, leading to years of bankruptcy and post-bankruptcy troubles that continue today.
Yet, Essar fully intends to return to Nashwauk and finish the work it started earlier this decade, Essar spokesperson Jon Austin said in an email to the News Tribune on Thursday evening.
“For these reasons, we are puzzled by the position of the DNR and we do not believe it has the authority or a legitimate reason to debar us,” Austin said. “To protect the project, we have asked the Court to intervene.”
But in Strommen’s January letter, she made it clear Minnesota wants Essar out, noting years of failed efforts, broken promises, missed deadlines and financial mismanagement as the state tried to push the Nashwauk project through.
“Essar proved itself over a period of years to be an unreliable partner with contractors, local governments and the state,” Strommen wrote at the time.
The project was then bought by Chippewa Capital Partners, the parent company of Mesabi Metallics, which pulled it out of bankruptcy in December 2017 and vowed to finish the taconite mine and processing center while also building an iron plant on site.
Mesabi Metallics also earned back key mineral leases from the state in July 2018, but an ownership dispute just weeks later forced Chippewa owner Tom Clarke out of the company.
Until September, it appeared Essar was not involved in the project at all until Mercuria, a Swiss energy and commodity company, said it intended to take a majority stake in the project while a draft version of its news release, meant to remain unpublished, said Essar would become a minority shareholder in Mesabi Metallics.
Several months later, Essar announced its purchase of $260 million in notes and that it would "participate" in the project.
Mesabi Metallics missed a key year-end deadline when it failed to start construction on its value-added facility by Dec. 31, 2018, which triggered its rent and royalty payments to the state to double until the facility is completed, according to the DNR.