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Keetac idling cited as Bakk decries environmental regs

Senate Majority leader worries rising costs could shut down Iron Range taconite industry

Marshall Helmberger
Posted 3/18/15

REGIONAL—U.S. Steel cited “challenging market conditions” as the reason for the temporary idling of its Keetac plant near Keewatin, which is expected to leave about 400 steelworkers on layoff …

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Keetac idling cited as Bakk decries environmental regs

Senate Majority leader worries rising costs could shut down Iron Range taconite industry

Posted

REGIONAL—U.S. Steel cited “challenging market conditions” as the reason for the temporary idling of its Keetac plant near Keewatin, which is expected to leave about 400 steelworkers on layoff starting in May. But that hasn’t stopped at least one Iron Range lawmaker from citing environmental regulations as the real cause for last week’s announcement by U.S. Steel, which operates the Keetac facility.

Sen. Majority Leader Tom Bakk said earlier this week that he’s deeply concerned about the future of the region’s iron mining industry. While most mining officials and politicians have put the onus on cheap foreign imports and weak demand for steel from China, as well as the slowdown in oil and gas drilling in North America, Bakk said he sees high operating costs for Minnesota plants at the biggest problem facing the region’s mining sector.

“We just can’t keep running costs up like this and expect to compete in the global marketplace,” Bakk told reporters last Friday at the State Capitol. The Northland News Center, in Duluth, aired Bakk’s comments, which focused on the rising cost of electrical power.

“Minnesota Power is spending hundreds, and hundreds, and hundreds of millions of dollars modifying the Clay-Boswell plant, passing costs onto the industry and U.S. Steel projects,” Bakk told the Northland News.

Bakk cited state and federal pollution regulations that have required cleaner emissions from coal-burning power plants, and he said as Minnesota Power is forced to pass those costs onto taconite producers, the cost increases could amount to millions of dollars a year.

One proposed solution to the issue, which Minnesota Power supports, would allow for discounts to large power users, such as the mining industry and paper mills. Those discounts would allow utilities to place more of the financial burden for environmental upgrades onto the bills of homeowners, rather than industry.

Sulfate limits

While electrical costs are a concern, Bakk has suggested that a proposal by the state’s Pollution Control Agency to enforce the so-called wild rice standard for sulfate emissions could be the death knell for the industry.

Bakk and other Iron Range legislators are supporting legislation that would delay implementation of the standard, which sets emissions at no more than 10 mg/l in some cases. The move is an effort to head off a proposal by the PCA to enforce the wild rice standard as it negotiates a new permit for U.S. Steel’s Minntac tailings basin north of Virginia.

Bakk claims there’s no scientific basis for the state’s strict sulfate limit and even suggested that enforcement of a standard was part of an effort by the state agency to close the Minntac plant.

But as the situation at the Keetac plant suggests, such standards are more often viewed as goals than hard and fast rules. Indeed, the two PCA permits under which Keetac discharges water both include the current ambient water quality standard of 10 mg/l for wild rice production waters. That puts the company’s monthly average sulfate discharge limit at 14 mg/l, with a monthly maximum of 24 mg/l. And because U. S. Steel was unable to comply with the sulfate effluent limits when the PCA issued the permits back in 2011, the permits each contain a compliance schedule, according to PCA spokesperson Ann Foss. “The compliance schedules require evaluation of possible reduction strategies and proposal of a final plan and schedule to comply with the sulfate effluent limits,” said Foss. Right now, the PCA has set a deadline for compliance with plant discharges by February 2017, with the tailings basin scheduled to come into compliance by August 2017.

So far, the company has had minor violations over the past several years, although the company remains in “substantial compliance with its permits,” said Foss.

Keetac is planning to conduct a pilot test of a membrane treatment system, followed by lime treatment and an ion exchange technology between May and October of this year. According to Foss, the company will have a much better idea of the cost of water treatment by October when the pilot testing is complete.

As for Minntac’s tailings basin, Foss said its unclear at this point how much compliance with the wild rice standard might cost the company. Given that the PCA is proposing to apply the standard only to discharges to certain lakes, Foss said U.S. Steel’s first step “would be to investigate the sources and pathways for the sulfate that is impacting the lakes, and to evaluate possible reduction strategies.” The company previously addressed discharge concerns into the Sandy River by installing a pumping operation that pumps seepage from the tailings basin, that would otherwise enter the Sandy River, back into the tailings basin. The basin continues to discharge into other watersheds, that aren’t subject to the wild rice standard. As part of an evaluation of its options, Foss said the company and the PCA consider technical and economic feasibility— and if meeting the standard proves too costly, the PCA has the option to issue a variance or to draft site-specific standards that the company can realistically and affordably meet.

Meanwhile, the PCA is finalizing a draft proposal of recommendations for any changes to the wild rice standard, based on the latest scientific research, and PCA officials say that draft should be released later this month. The agency will then meet with the various stakeholders to get more input on the proposal. Later this summer, the agency expects to finalize a detailed technical document and a final proposal for the standard, which will mark the start of a new rulemaking process. That process, which would also establish rules for designating wild rice waters, is expected to take at least two years to complete.

Keetac shutdown

No one else has suggested that Keetac’s latest idling has any connection to environmental regulations. The slowdown in steel demand has left the plant with an estimated five million tons of stockpiled ore, according to media reports, which is equal to about ten months of production. U.S. Steel is referring to the idling as an effort to adjust inventory levels to meet current customer demand.

The company, under the guidance of CEO Mario Longhi, has been more aggressive in taking steps to reduce costs throughout its steel operations in the past two years. That helped boost the company’s profit margins in 2014, even at a time when the steel sector was feeling the effects of lower prices. At the same time, the Pittsburgh Business Times reported this week that Longhi’s compensation more than doubled last year, to $13.2 million, up from $5.6 million in 2013.