Essar drops plan with Iran; steel mill on Range is a go

  • Article by: LARRY OAKES , Star Tribune
  • Updated: October 31, 2007 - 8:12 PM

The Indian company agreed to shelve plans for a refinery in Iran, meaning Minnesota's offer to help it build an Iron Range steel mill is forging ahead.

DULUTH - Assured that Essar Global Ltd. won't violate U.S. sanctions against Iran, Gov. Tim Pawlenty announced Wednesday that Minnesota won't withdraw support for the Indian corporation's plans to build a revolutionary $1.8 billion steel mill on the Iron Range.

Pressed this week by Pawlenty and U.S. officials in India about Essar's reported interest in building an oil refinery in Iran, the corporation pledged in writing that it won't pursue the project until doing so would no longer violate the U.S. government's Iran Country Sanctions Act, Pawlenty said in a news conference in St. Paul.

"They have clarified their intentions in a way that satisfies my concerns," said Pawlenty, adding that Essar's pledge is good for the state and joking that he can hunt deer this weekend in Hibbing without worrying about "the hunter becoming the hunted."

The news topped a roller-coaster week of changing prospects for building the nation's first fully integrated ore-to-steel processing facility in Nashwauk, on the site of the idled Butler Taconite mine. The mill would require 2,000 construction workers and create 700 permanent jobs in a region hit hard by closures such as that of the Butler mine in 1985.

Nashwauk, a city of 900 people, is on the western edge of the Iron Range, about 200 miles from the Twin Cities. Over the years, it has seen its population erode because of the lack of jobs in the area.

On Oct. 24, while on a trade mission to India, Pawlenty announced that Essar had closed on its purchase of Minnesota Steel Industries, which had been pursuing the Nashwauk project, and that Essar was planning to break ground early next year.

But that same day, Reuters reported that Essar was expected in early 2008 to also start construction on a 300,000 barrel-a-day refinery in southern Iran. Calling Iran "a terrorist state," Pawlenty said that Essar's plans, if carried out, would jeopardize $67 million in state infrastructure subsidies for the Nashwauk project and possibly even construction permits.

Essar 'very receptive'

On Monday, Pawlenty wrote to Secretary of State Condoleezza Rice, asking that the State Department seek to clarify Essar's intentions and determine whether they would violate the federal Sanctions Act. In place for more than a decade, the act imposes sanctions on foreign companies that invest more than $20 million a year in Iran's energy sector.

Pawlenty said Wednesday that "several days of discussions" involving U.S. officials in India resulted in Essar's pledge to refrain from going forward on the refinery project.

"We had to make sure they had a full appreciation for the trade-offs," Pawlenty said. "...They do lots of business with Iran. They will not do any prohibited business with Iran."

He added that, "I have to say Essar was very receptive to trying to get these matters addressed."

Relief in Nashwauk

Nashwauk Mayor Bill Hendricks said he was "happy and relieved." He said being notified Saturday of the hitch in the plans was a "huge letdown" for Nashwauk, but he agreed that Essar's intentions in Iran had to be clarified.

"This project has been up and down many times," he said. "It's so nice to know it's back up. It's nice to see smiles on people's faces."

Pawlenty said the episode was a reminder that the state needs to know who it's doing business with, by taking steps as simple as running the company's name through an Internet search engine.

"In the world of Google and globalization, we'll have to look at all companies that come up for state help in a similar way," he said.

Larry Oakes • 1-218-727-7344

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