Gov. Dayton Terminates Essar Steel's Mineral Leases

ST. PAUL, Minn. (AP) — Gov. Mark Dayton has pulled the plug on Essar Steel Minnesota's lucrative mineral leases on the Iron Range and turned to Cliff Natural Resources as a possible developer of the Nashwauk site.

Dayton said in a statement Friday that Essar Steel has failed to demonstrate that it will be able to repay $66 million in infrastructure costs to the state, pay its contractors or finish its plan for an iron ore facility in Nashwauk.

"The company has been told for the past nine months that the state would not extend those leases beyond July 1, 2016, unless it paid the full amounts it owed to Minnesota contractors and showed that it had the ability to carry its current construction project through to completion," Dayton said. "The company has not done so, and has provided no reliable assurances that it will be able to do so in the foreseeable future."

The company broke ground in 2008, promising a $1.8 billion mine, iron ore processing plant and steel mill that would be completed in 2011. But the project faltered because of significant financial problems and the collapse in the global steel market. The state incentives were contingent on Essar building the steel mill, but Essar scrapped that plan and focused on a taconite-pellet facility.

Department of Natural Resources Commissioner Tom Landwehr says the state was notified Friday afternoon that Essar Steel Minnesota has filed for bankruptcy. Essar Steel Minnesota owes its vendors about $74 million, Landwehr said.

Dayton said he has met with Cliffs Natural Resources CEO Lourenco Goncalves who has expressed strong interest in developing the site. Dayton said he and Goncalves will meet in the Iron Range Tuesday to discuss the company's plans.

Goncalves said Friday that he's pleased Dayton has directed the termination of the leases with Essar.

"This is the first step in a long-term development process that we believe holds tremendous potential for job creation on the Iron Range," Goncalves said in a statement.

Essar Steel Minnesota is owned by Essar Global Fund Ltd., which is based in Mumbai, India. The company did not immediately return a call to The Associated Press Friday seeking comment.

Essar Steel's project had brought hope for thousands of construction jobs and several hundred permanent jobs on the Iron Range.

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