But questions linger over terms, and the deal isn’t done.   6/30/2009 by Beth Bily

(Map: Essar will purchase the county land for $445 per acre, a price based more on recreational than industrial value.)

On June 23, the Itasca County Regional Rail Authority approved terms for sale of nearly 4,000-acres of tax-forfeited land to Essar Steel Minnesota (map).

Those terms were negotiated over several months, but even so, the emotionally charged 3-2 vote ended with County Board Chairwoman Karen Burthwick walking away convinced a sale would leave taxpayers inadequately protected.

Due to a technical procedural error, she’ll have another chance to make her case on July 14 when the deal comes before the same body meeting as the Itasca County Board of Commissioners, the final authority for approval. If a sale is approved it is scheduled to close by Sept. 15.

The county board would have executed the final vote on June 23. But a formal “request for board action” on the matter was inadvertently omitted from the agenda for the county board session that immediately followed the rail authority meeting.

That omission gave Burthwick the latitude to accept or reject the item for county board consideration, and she used the opportunity to muscle more time for consideration. While consistent with board protocol, the maneuver prompted an angry rebuke from Commissioner Lori Dowling, who said, “It borders on abuse of the chair.”

Strong emotions on the Essar Steel Minnesota project are justified. The proposed $1.6 billion iron mining-to-steel-making operation near Nashwauk would potentially employ about 500 in a county with a current unemployment rate of 11.5 percent.

Essar executives have long maintained the acquisition of the nearly 4,000 acres would help move the project forward, assuring potential financiers Essar controls the project’s destiny.

But Essar is requiring certain terms of the sale that trouble the two dissenting county commissioners, Burthwick and Catherine McLynn. Burthwick is concerned over the company’s ability to control county access to tailings stockpiles from previous mining operations that may contain recoverable levels of iron or other minerals.

But she cites this as the biggest issue: The company fought for and won contractual language in the agreement that defines simple taconite production as adequate in meeting the requirement for iron and steel production.

The land sale terms conflict with requirements the state has placed on nearly $66 million in bonding to Itasca County for support infrastructure to move the innovative project forward. That state money was approved with a stipulation that the project be the first iron mining-to-steel-making operation in Minnesota.

The three commissioners favoring Essar’s terms for a sale said the public’s interest is protected. The land must be used for a mining and steel making operation and the terms provide a 15-year reversionary clause: If Essar ceases mining and/or steel making operations for a period of 15 years, the land falls back into public ownership.

Essar has agreed to pay back infrastructure money if the state requirements for the project are not met. One proponent of a sale, Commissioner Mark Mandich, also noted Essar has agreed to pay for any infrastructure costs beyond the $66 million in state funding.

Nonetheless, Burthwick is concerned about Essar’s intentions, given how the company has fought for a more flexible definition of operations. “If Essar wants the ability to run a taconite mine, I don’t think we should subsidize them further with 4,000 acres of public land,” she said in a telephone interview.

Chairwoman Burthwick asked other commissioners to support additional conditions on the sale at the June 23 meeting. She proposed that prior to the land sale there be full execution by Essar of infrastructure agreements with the city of Nashwauk and Itasca County. She also suggested allowing the company full access to the land for construction purposes at no cost while the agreements are completed. A board majority rejected that request.

The Western Mesabi Mine Planning Board echoed her concerns about the land sale. The joint powers board, comprised of officials from Itasca County and western Iron Range cities and townships, sent a June 2 letter to Itasca County commissioners urging caution.

“The Western Mesabi Mine Planning Board recommends to the Itasca County Board that the county defer the proposed sale of land to Essar Steel until after construction of the steel mill has been completed and that any sale be contingent on requiring that uses of any land sold be defined in the Itasca County Comprehensive Plan and the Itasca County 2008 Iron Mining Overlay Zone of the Itasca County Zoning Ordinance,” the letter states.

As with Burthwick’s request, the letter received a chilly reception from some county officials. Mandich suggested the joint powers board already has enough on its plate with the Canisteo Mine Pit overflow issue.

The agreement calls for a purchase price of $1.782 million, about $445 per acre. While that figure came out of a professional appraisal, Burthwick believes it to be low, based on recreational, not industrial, use of the land. If there’s money to be made on the land, she believes profits should benefit taxpayers.

Itasca County Attorney Jack Muhar said that as the deal is proposed, Essar could sell the land to another party willing to operate a mining and/or steel making operation. The terms of a county sale to Essar would apply with any subsequent sale, he said.

Flipping such a property isn’t out of the question. Last year, when the outlook in the iron and steel industry was extremely positive many producers, including Essar, were hunting worldwide for more capacity. Last June, Essar lost a bidding war with Russian steelmaker, Severstal, for West Virginia Esmark, Inc.

“We need to look at all the different scenarios and try to protect ourselves,” Burthwick said.

Commissioner Dowling and others supporting the proposed sale assert adequate protections are in place and the matter has been debated long enough. “I don’t believe we gave Essar everything they wanted,” she said. “This is the best document we’re going to get and it’s time to move forward.”

But, Burthwick maintains proceeding with caution is the county’s best option. “We get too desperate for jobs,” she said. “We are making some critical decisions on this project that deserve serious consideration, not a rush job.”

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