Pawlenty promotes Iron Range project during trade mission

Minnesota Gov. Tim Pawlenty said Wednesday that construction of a $1.6 billion steelmaking plant on the Iron Range looks promising.

"It's a very exciting proposal and an exciting project,'' Pawlenty said in a conference call from Bangalore, India, where he and 73 other state political and business leaders are on a 10-day trade mission. "There's been a lot of exciting projects proposed on the Iron Range that haven't come to fruition, but this one has a chance to come to fruition.''

Essar Steel, an India-based global steelmaker with oil, gas, and communications holdings, on Monday finalized a deal to buy Minnesota Steel's $1.6 billion steelmaking project near Nashwauk.

The plant would employ 700 people, produce 2.5 million tons of steel slabs per year and have a $600 million annual estimated economic impact on the region and state. The steel plant would require 2,000 construction workers and create an estimated 2,100 spin-off jobs.

Pawlenty will meet today with Essar Steel leaders and tour an Essar Steel mill in Hazira, India.

Pawlenty said Essar still needs to finance the mammoth project. However, he said, the project "looks very promising.''

"The involvement of Essar increases the chances of it actually happening,'' Pawlenty said. "It's a project I support.''

The purpose of Pawlenty's trade mission is learning about India's culture, trade practices, marketplace challenges, regulatory system and developing business opportunities that would benefit Minnesota.

Although several Indian companies already do business in Minnesota, Pawlenty said he would like to attract additional investment in the state, which would lead to new jobs.

India's population of 1.3 billion people includes 700 million people under age 25, and there is a growing middle class that is gaining purchasing power, Pawlenty said.

India has massive poverty challenges, but because of its growing middle class, opportunities exist to market to that class, he said.

Indian investors have invested about $1.3 billion in the United States. Construction of the steel plant would double that investment.

Itasca County officials said that during the 2008 legislative session they will seek $45 million to $60 million from a projected $1 billion state bonding bill to help develop roads and railroad lines to the project.

"It's important to remember that this bonding money is not going to Minnesota Steel; it's going to Itasca County and the city of Nashwauk,'' said Sen. Tom Saxhaug, DFL-Grand Rapids. "Itasca County is one of the poorest counties in the state and Nashwauk is no thriving metropolis. They need the cash flow to get the infrastructure up to snuff so the project can be built.''

Because of the plant's economic effect and the taxes it would generate, the state would recover its bonding money within five years, Saxhaug said.

Environmental permits for the project have been approved.

Pawlenty said the state would support infrastructure requests.

"We do anticipate supporting funding requests for the project,'' said Pawlenty.

Ron Dicklich, project coordinator for Itasca County on the steel project, said the bonding money must be approved by April for the project to remain on schedule.

"The bonding is necessary to be able to bid on infrastructure development, the roads, the rail, the gas lines, in order to secure the debt financing," Dicklich said. "No one is going to lend money [to Essar] without a way to get the product to market."

If bonding is approved, the money under current state law would not be available until July 1, which could create financing issues for the project, said Dicklich, a former state senator. But passage of a special bill could release the money earlier, he said.

Sandy Layman, Iron Range Resources commissioner, said Pawlenty has supported the use of $14.9 million from the Minnesota 21st Century Minerals fund for the project.

That money would cover the cost of developing a natural gas pipeline to the plant, she said.

"There's broad support for Minnesota Steel," Layman said. "The timing of the governor's visit to India couldn't be better as it relates to this particular project and his being able to provide a personal welcome to the owners of Essar Steel."

About $23 million in financial support from the state already has been approved for the project, Layman said.

A general target for total state support has been about $53 million, she said.

Full financial closure for the project could come in January, according to Minnesota Steel officials.

"Once the financial closure is complete, the state of Minnesota has insured that provisions would be made to assist with infrastructure," said Layman.

Pawlenty said he will be in Duluth on Monday with explorer Will Steger to speak about low water levels in Lake Superior and the global environment.

LEE BLOOMQUIST can be reached weekdays at (800)368-2506, (218)744-2354 or by e-mail at lbloomquist@duluthnews.com .