State must figure out how to deal with Essar Steel's deadline miss

In the wake of broken promises and an unmet Oct. 1 deadline, the state of Minnesota will continue working with Essar Steel Minnesota to retrieve $65.9 million in bonds and $6 million in loans that are now due, state officials said Wednesday.

Essar Steel, a subsidiary of Mumbai, India-based Essar Global, promised in 2007 to build and open the only fully integrated iron ore-to-steel mill in Minnesota by Thursday. In exchange, the state issued bonds and $6 million in lines of credit.

But Essar downgraded, then killed its plans to build a steel mill and now says it will build a taconite plant. Minnesota already has seven taconite plants, most of which are hurting right now.

Essar's taconite plant is about 58 percent built.

The Minnesota Department of Employment and Economic Development, the entity overseeing the Legislature-approved project and funding, made the failure of Essar to fulfill the agreement official on Wednesday.

Essar officials could not be reached for comment Wednesday.

In a statement, the department said its agreement with Essar "stipulates that if these projects were not fully constructed and in operation by Oct. 1, 2015, the Essar firms would be responsible for reimbursing the state for $65.9 million. … [However] the state has been in communication with Essar Steel Minnesota and the parent company Essar Global based in India to come to an agreement on the terms of the repayment."

Department spokeswoman Madeline Koch said in a phone interview Wednesday that Essar hasn't complied with its agreement, "but we are certainly grateful for the work that has been done to date to build a new taconite facility and to employ hundreds of Minnesotans. We expect this work to continue."

That hasn't satisfied everyone.

"I want a date. I want them to give me an exact date when production will begin," said Rep. Tom Anzelc, DFL-Balsam Township, who heads the Iron Range delegation in the state Legislature. "I am not sensing panic. I am sensing frustration that it has taken this long to get just a pellet plant built."

Anzelc said people on the Iron Range guess that Essar Steel is again facing cash flow issues, the same problem that shut down construction for the better part of a year between 2013 and 2014.

Construction restarted in the fall of last year, but it's still slow going. Anzelc said he can't imagine the plant being up and running even by midsummer. Right now construction "looks half finished."

"We have to be creative here," he said.