Pawlenty says Essar concerns are resolved

Essar Global's reported involvement in the construction of a oil refinery in Iran forced Minnesota officials to rethink their involvement in an economic development project in Itasca County.

Pawlenty had warned that he would not lend state backing to the steel plant project if Essar is violating U.S. laws that prohibit certain investments in Iran. Pawlenty said Wednesday Essar officials have now pledged they will fully comply with all U.S. laws.

"They have clarified their intentions in a way that satisfies my concerns regarding what would otherwise be problematic investments in Iran," said Pawlenty. "They have written to us a letter that provides us those assurances in writing. And that allows us now to move forward with the project in northern Minnesota in a very positive way."

The Essar letter said "no investment or firm commitment will be made in Iran, unless and until permitted to do so under the applicable U.S. or international laws."

Pawlenty was on an official trade mission to India last week when he announced Essar had closed on its purchase of Minnesota Steel Industries, and the company would proceed with plans to build a $1.6 billion taconite-to-steel mill near Nashwauk. Two days later, the Reuters news agency reported Essar was planning to build an oil refinery in southern Iran early next year. Pawlenty said Essar officials say they will no longer fund that project. He praised the company for its response to Minnesota's concerns.

"They understood the severity of our concerns, and the severity of the deterioration of the relationship if they were to go forward with those types of activities," said Pawlenty. "And they were very constructive in addressing these concerns, and very constructive in putting forward their committment to say that they would not go forward with such engagements -- unless and until it was in full compliance with the United States' Iran Country Sanctions Act."

That law aims to punish foreign companies that invest more than $20 million in one year in Iran's energy sector.

The plant is expected to create 700 full-time jobs, as well as 2,000 construction jobs. Pawlenty says funding related to the project will be included in his bonding bill proposal for the 2008 legislative session.

The Nashwauk area needs more than $60 million to help pay for infrastructure like electricity and public utilities to support the project. News of Essar removing a potential roadblock was met with sighs of relief.

"Collectively it's very large. I think I can hear it in Nashwauk right now," said Sen. Tom Saxhaug, DFL-Grand Rapids.

Saxhaug represents the area of Itasca County where Essar plans to build its plant. Saxhaug says he's pleased that a foreign relations dustup didn't derail a project that will create much-needed jobs.

"We've had international economic dealings for a long time up there. We have three foreign paper companies working. One of our taconite plants is half-owned by the Chinese. We haven't really gotten into international politics. I'm happy we can get through that too," said Saxhaug.

Nashwauk Mayor Bill Hendricks is also relieved the project is back on track. He says he looks forward to working with the governor and state lawmakers to get the needed infrastructure money. "This bonding money is an investment. It's an investment in 2,800 jobs," said Hendricks. "When you start drawing income tax off of that, quite a few million dollars in sales tax money coming back off of construction, this $60 million will be returned in a very short time."

Hendricks says it would be difficult for Nashwauk or Itasca County to pay for all of the needed improvements without financial help from the state.

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