Magnetation kills plans for Minn. tac plant

An Iron Range company that recycles waste rock from taconite production has quietly revealed it will not build a new taconite plant in Minnesota.

Instead, Magnetation officials say they will build the company's new plant in Wisconsin or Indiana. They've decided to bypass Minnesota despite a new state law passed this year designed to speed up the environmental permitting process for the plant. The decision has upset some people on the Iron Range, but Magnetation still plans to add jobs in the region.

For over a century mining companies have clawed huge amounts of iron ore out of the rocky red earth of northeast Minnesota. For much of that time they only extracted the highest quality ore, and left huge waste piles behind. But the tailings, as they're called, still contain a lot of iron.

Magnetation founder Larry Lehtinen devised a way to recycle the tailings and produce an iron concentrate that can be used to make steel. Since 2009 the company has built two plants on the Iron Range, which employ over 200 people. A third plant is under construction.

Now the company plans to build yet another plant in another state to manufacture taconite pellets, a more profitable use of the iron. But it it needs to start production before the market crashes, said Lehtinen's son, company President Matt Lehtinen.

"For the long term viability of the company we need to produce iron ore pellets, and most experts around the world predict iron ore to fall drastically in price by 2015," Matt Lehtinen said. "So for us to have ample markets to serve to maintain the 200 jobs that we have today as well as the opportunity to grow, this pellet plant being operational by 2014 is super critical for us."

The pellets will feed an Ohio steel mill owned by AK Steel, which owns nearly half of Magnetation. Earlier this year Magnetation officials expressed concern they couldn't meet that deadline under Minnesota's environmental permitting laws. To help the company, state lawmakers passed a bill enacting a pilot program to streamline the permitting process for Magnetation.

But in a letter last week the company informed the Minnesota Pollution Control Agency that it would not build the plant in Minnesota -- not because of the permitting timeline, but because the two locations in Itasca County didn't pass muster.

Magnetation officials said there were land lease restrictions on one location that the company could not overcome in a timely manner. They said the second site required far too many improvements to make it economically viable.

Instead, the company is considering locations in Wisconsin and Indiana. State Rep. Tom Anzelc, DFL-Balsam Township, who pushed through the permitting bill, said the letter marked the first time he has heard of issues with the Itasca County sites.

"This is remarkably new information," Anzelc said. "That the company would say that they're having land problems, infrastructure problems, leasing problems, I have not heard that before. And that's something that we'll have to get down to the bottom of and find out what's going on."

St. Louis County Commissioner Keith Nelson also said he never heard about land or infrastructure problems. Nelson said he is disappointed by the company's announcement because a pellet plant would have added value to the Minnesota iron ore the plant will process.

"That natural resource is going someplace else and it will create wealth someplace else," Nelson said. "So that concerns me greatly to have that happen."

Nelson is skeptical of the reasons Magnetation is giving for going outside Minnesota. He said the only concerns he's heard voiced are over mercury regulations and the permitting process. But company president Matt Lehtinen said that's not the case.

"Sulfates and mercury emissions were not issues for us," he said. "That was mischaracterized in some other reports, to be clear on that.

Whatever the reason, one prominent player in the situation -- the Iron Range Resources and Rehabilitation Board - is not complaining. The board was one of the original investors in Magnetation. The IRRRB and the state Department of Employment and Economic Development provided five loans to the company totaling nearly $6 million, plus another $1 million grant.

Earlier this year Magnetation paid off all those loans ahead of schedule. Company officials say they have paid nearly $1 million in interest and royalties to the state.

Tony Sertich, Commissioner of the IRRRB, notes that Magnetation is planning two new iron concentrate plants to supply the new pellet plant, which will create 200 jobs. He said that means nearly two thirds of the jobs created by the new plant will be in Minnesota.

"This new pelleting plant cannot move forward without two new phases of reclamation plants being built, and those are being built in Minnesota," he said.

Sertich said company officials have indicated to him that they will build the plant in Indiana. But Matt Lehtinen said a final decision won't be made until the end of the year. He expects the new pelleting plant and the two new Iron Range plants to be running by summer 2014.