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State Cuts Royalty Rates On Taconite Mined By US Steel

ST. PAUL, Minn. (AP) — U.S. Steel will temporarily pay less in taconite royalties to Minnesota for the ore it extracts from the Iron Range under action taken Wednesday by a board of top state leaders.

The state's Executive Council, which is made up of the governor and four other statewide officials, unanimously granted the 15-month cost relief that could add up to $4.5 million. Retroactive to April, the relief will reduce payments the company must make to a school trust fund and a few other state accounts.

Department of Natural Resources Commissioner Tom Landwehr said the move cuts the fee that the dominant mining company pays on each ton of ore from about 91 cents to 75 cents in the current fiscal quarter, but that rate will be adjusted based on a variety of inflationary factors and could rise or fall. He backed the recommendation to "help them get through tough times."

U.S. Steel executive Lawrence Sutherland told the board the break — combined with energy cost savings in a proposal pending before the Legislature — would help it absorb the effects of low steel prices and cutthroat foreign competition.

"We're in a real battle in our business to maintain our domestic steel footprint as well our iron ore," he said.

While it's not the first time Minnesota has offered a temporary break, Gov. Mark Dayton said he was uncomfortable with providing it due to sparse information about the company's financial position. But with hundreds of Minnesota steelworkers already on the sidelines, he said it was too big of a gamble to say no.

"We're trying to do everything we possibly can for them to keep the door open and re-employ hundreds of people up there who stand to lose their jobs if they shut down permanently," Dayton said.

Pittsburgh-based U.S. Steel has operations in Keewatin and Mountain Iron. It routinely produces 22 million net tons of iron ore pellets each year.

The break is only on the first 25 million tons of taconite ore mined, and, based on current market conditions, Sutherland said it wasn't a certainty the full amount would be taken.

U.S. Steel holds 80 percent of the state's mining leases but its royalty payments account for more than 90 percent of school trust fund infusions. That investment account — fed by timber sales, mining royalties and other revenue from DNR-managed lands — has existed for more than a century and provides annual payouts to school districts around the state.

It's possible that the companies holding other leases will approach the state about similar relief packages.

(© Copyright 2015 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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