Mark Phillips

IRRRB Commissioner Mark Phillips talks about upcoming economic development projects in October 2015.

EVELETH — The Department of Iron Range Resources and Rehabilitation's first investment in minerals development was small.

But it helped spur historic change on the Iron Range.

In 1942 and 1943, the state economic development agency made grants of $22,000 to the University of Minnesota Mines Experiment Station for iron ore research projects.

Dr. Edward Wilson Davis, chief scientist at the experiment station, had since 1925 been researching how to turn low-grade taconite into a higher-grade iron product.

Through his research and with funding support, Dr. Davis developed much of the process and equipment needed to make iron ore pellets.

For his work, Dr. Davis became known as “the father of taconite.”

Iron ore pellets produced today at northeastern Minnesota taconite mines remain a primary steelmaking ingredient. Steel made from the iron-containing pellets is used to manufacture cars, trucks, appliances, bridges, buildings, pipe, roads, and other everyday products.

Since its inception in 1941, Iron Range Resources and Rehabilitation, headquartered in Eveleth, has been charged with diversifying northeastern Minnesota's economy.

The agency provides loans to help grow business and jobs. It makes grants to communities to support infrastructure development and improve quality of life. It invests in workforce development and education. And it supports culture, tourism and mineland reclamation projects.

However, the agency's role in mineral development is as long as the agency's history.

From 1942 to 1968, the agency, through the transfer of funds from the state legislature, directed more than $2.5 million to the experiment station for iron ore projects, according to the agency's 1964-1966 biennial report. Another $245,112 was allocated in the agency's early years for other mineral research.

Mark Phillips, Iron Range Resources and Rehabilitation commissioner, says the agency continues to look for opportunities to support minerals projects — especially those which hold promise of jobs.

“We're supposed to develop the remaining resources — over and above minerals that means in some sense,” said Phillips. “When a development gets closer and closer to real jobs, it's a little easier for us to support. I think when the agency senses it gets closer to jobs is when it gets interesting.”

Over its 77-year history, Iron Range Resources and Rehabilitation has helped jump start a variety of mineral development projects within its service area.

The agency, with public and private partners and proven ideas from entrepreneurs, has provided funding for the research and development of new higher-valued iron products. It's supported capital improvements at taconite plants, development of a non-ferrous mining industry and provided business support to local vendors who supply the mining industry. It's also been a behind-the-scenes local voice for mining at the state, national and international levels.

Brian Hiti, a former steelworker who in the early 1980s was laid off from his job as a millwright at Minntac Mine, has for the past eight years served as a liaison between the agency and other state departments as the agency's senior policy advisor–mining. Hiti has also worked at the agency as deputy commissioner, interim commissioner, and manager of mining and natural resources development.

Hiti, who grew up in Sparta, has brought a wealth of mining experience and industry connections to the agency's mineral efforts.

Phillips and Hiti serve on a number of mining committees including the Governor's Mining Subcabinet, Minnesota Minerals Coordinating Committee, and a direct-reduced iron coalition. They also participate in mining conferences to educate potential investors about northeastern Minnesota's mineral resources.

“We're part of the mining subcabinet and I think because of Brian we have a good relationship with the DNR (Department of Natural Resources), the MPCA (Minnesota Pollution Control Agency), fee holders and private landholders,” said Phillips. “We're there as economic developers at meetings and in that role we are also the advocates for the industry in some respect.”

It's often noted that the Iron Range helped America win World War II.

Ore from northeastern Minnesota mines was the raw material used to build wartime ships, airplanes, guns and tanks.

With the need to manufacture military equipment, natural iron ore mines in the region responded to the call. With up to 9,597 men and women at work, ore production jumped from 33 million tons in 1939 to 64 million tons in 1941 and 70 million tons in 1943 and 1944.

During wartime, Iron Range Resources and Rehabilitation, originally called the Iron Range Resources and Rehabilitation Commission, made additional investments to support research and development of new mining technologies.

In 1943, the agency, through legislative appropriation, provided $766,000 to help fund a pilot plant near Aurora. The plant was designed to test how to produce 99 percent pure powdered iron from iron carbonate slate. But the plant folded a few years later, shortly after the plant site was selected when its developer, C.V. Firth of the University of Minnesota Mines Experiment Station, died. A redesign by Continental Machines, Inc., ended in litigation.

At about the same time, a 1943 Minnesota Geological Survey found copper associated with nickel in the Duluth Complex. The agency published and distributed maps to prospective bidders on acreage owned by the state, leading to the leasing of 146,000 acres for exploration. It also helped fund magnetic surveys and deep hole drilling.

In 1966-1968, the agency approved $140,000 to help the Minnesota Geological Survey complete a statewide geologic map.

Over its nearly eight decades of economic development, the agency's role in mineral development has been diverse, admittedly sometimes risky, and without question, consequential.

When LTV Steel Mining Co. (formerly Erie Mining), shut down in 2001, the agency became part of an East Range Emergency Response Team and took action to market the site for new projects. A “Prospectus” brochure, which detailed the facility's 73,000 acres of surface and mineral land, crusher, concentrator, railroad, power plant, and Taconite Harbor port, was printed and distributed at mining events across the nation in an effort to attract new industry to the site.

It took years, but the marketing, plain old footwork, and a desire to bring jobs back to the East Range, found some success.

A trip to Kobe Steel in Japan, tough negotiations, and a $16 million agency loan, helped lead to construction of Mesabi Nugget, a more than $300 million iron nugget facility at the former LTV site.

Owner Steel Dynamics, Inc., a Fortune 500 company, invested more than $500 million in the plant and a Mining Resources iron unit production facility near Chisholm. The facilities idled in 2015 as the result of a decline in pig iron prices, but remains under Steel Dynamics ownership.

“We had 1,400 people out of work there after LTV closed,” said Hiti. “And the big thing was there were partners. Most importantly, one of the partners was Steel Dynamics, an electric furnace steelmaker who would be a customer for the iron nuggets.”

Another minerals developer at the former LTV site, PolyMet Mining Corp., is currently seeking its permit to mine. The agency supported the project with a $4 million loan for a land exchange.

The agency also provided start-up support for the Minnesota Steel & Iron project near Nashwauk, now under development by ERP Iron Ore.

Magnetation's pilot plant at Northshore Mining Co. in Silver Bay and Magnetation's commercial operations on the western Iron Range, now owned by ERP Iron Ore, received start-up funding from the agency.

For 15 years, the agency has also supported the region's mining facilities through a tax rebate.

Since 1993, Iron Range Resources and Rehabilitation has rebated more than $200 million to mining companies from the Taconite Production Tax paid by each of the companies.

Known as the Taconite Economic Development Fund (TEDF), 25.1 cents per ton of the current $2.701 per ton Taconite Production Tax, is under state statute refunded to each taconite and direct-reduced ore producer for workforce development, associated public facility improvement, concurrent reclamation, acquisition of plant and stationary mining equipment, and facilities for research and development in Minnesota on new mining, taconite, iron, or steel production technology.

The production tax, paid on the mining and production of taconite, direct-reduced iron and iron-bearing material, is the largest tax paid by Minnesota's mining industry and is paid in lieu of property taxes.

The rebate has helped northeastern Minnesota taconite producers reinvest in their facilities, improving efficiency, reducing costs and funding environmental capital projects. The rebate, said Phillips, was not intended to be used to help balance operating budgets.

“I think it's been good,” said Phillips of the program. “But it could be tweaked and made better. We should get back to where the TEDF is promoting innovation at the companies. That would be a good thing for the companies and for the area.”

Opportunities and investment in mineral development changes from commissioner to commissioner, said Phillips.

It's now time for northeastern Minnesota to develop value-added minerals projects such as direct-reduced iron or other emerging mining opportunities, said Phillips. But the agency can't do it alone, he says.

“It's about partners and leverage,” said Phillips. “We need the university (of Minnesota) and other partners to work with us to identify those opportunities which have merit and can provide jobs in the near term. If we find such a project, we're willing to take a look at it.”

The agency has worked closely with the University of Minnesota Duluth's Natural Resources Research Institute (NRRI).

In 2016 the agency allocated a $300,000 matching grant to support an NRRI demonstration project which proved nearly pure titanium could be produced from an ilmenite deposit near Hoyt Lakes.

It's hoped that the findings could someday lead to processing ilmenite into a finished product.

“I've said to NRRI that if you have another project like ilmenite that has jobs connected with it, we'd take a look at it,” said Phillips. “Once an idea has been technically proven, it's much easier to find the capital required to turn that idea into a business. The trick is providing key seed capital from which future business opportunities grow. Maybe I'm dreaming, but I'm hoping in my lifetime somebody does something with that ilmenite thing.”

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