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The state of Minnesota could issue a new lease for the defaulted Mesabi Metallics Co.’s taconite project in Nashwauk under an amendment proposal the governor’s executive council will review Wednesday.

The lease amendments proposed by the Minnesota Department of Natural Resources (DNR) require Mesabi Metallics to first put $24.5 million into escrow accounts by Tuesday and to pay an additional $11.5 million in past-due rents and royalties owed to the state.

The funds would be overseen and used by the DNR, the state Department of Employment and Economic Development and Itasca County.

If approved by the state’s executive council, the newly amended lease will require Mesabi Metallics and its two partners — Essar Global and HBI Newco — to complete construction of several structures in Nashwauk by specific dates, a task that has proved difficult to date.

Mesabi Metallics “is pleased to announce it has agreed to the terms of an amended mineral lease proposed by the Minnesota DNR that will allow an additional $1 billion to be invested to complete construction of a fully integrated iron ore pellet facility in Nashwauk, Minnesota,” Mesabi officials said in a statement issued Tuesday.

The revised lease proposal has ruffled feathers because it means the state could allow Essar Global, now based in the Cayman Islands, to continue to be part of a drawn-out Iron Range construction project that has yet to materialize despite 14 years of promises.

Essar Global’s subsidiary, the Mumbai-owned Essar Steel Minnesota, is the entity that filed for bankruptcy on the failed $1.9 billion project in Nashwauk in 2016. The bankruptcy came after 10 years of missed payments, missed construction deadlines and broken promises to contractors, the state and municipalities. The project, which sits half built on the Iron Range, owed creditors more than $1 billion in debt at the time of the filing.

The DNR had tried to bar Essar Global from doing business in the state. It has since agreed to allow it to be a financial stakeholder but not to have any operational role in the Mesabi Metallics project.

Now, if approved, an amended state lease in Nashwauk would mean Mesabi must complete construction of the crusher portion of the taconite pelletizing plant by December 2021 and to finish the rest of the plant by June 30, 2024.

It must also have a taconite purchase contract known as a “binding and enforceable” off-take agreement signed by a pending customer by May of next year. That contract must be for the sale at least 4 million tons of taconite pellets, according to the amendment documents.

The state has also demanded that Mesabi Metallics honor the original spirit of the project that started in 2007 with a promise to provide not only a taconite pelletizing factory but also a “higher-value” iron ore processing plant.

Still, there are those unconvinced that the new lease moves the needle on the project. “I have been skeptical about the project for a decade and nothing has changed. The terms of the lease agreement are fine. I just think, based on previous experiences, that they will fail to execute the timeline,” said state Sen. Tom Bakk, DFL-Cook, who is part of an independent caucus in the Senate, in an e-mail to the Star Tribune. Bakk sits on the board of the Iron Range Resources and Rehabilitation Advisory Board.

State Rep. Julie Sandstede, DFL-Hibbing, said the legislative delegation from the Iron Range was caught off guard by the DNR’s new lease agreement. In October, the group recommended the governor “just rip the Band-Aid off,” and let Mesabi’s lease expire Dec. 31 and start fresh with new players. “Since my time in the House, I have just seen this as a real debacle. It’s been a mess,” she said. “It’s been promises made and promises broken and bankruptcy court and courts over and over again.”

When Mesabi asked for a lease extension for 2020 and then failed to restart construction in Nashwauk, Sandstede said “that was the last straw” for the delegation. But now a window is open and it’s “one that I just find it hard to trust after their track record.”

Still, the new lease dangles a highly coveted carrot in the promise of a new higher-value hot briquetted iron (HBI) plant — of which Minnesota now has none.

The state’s newest lease agreement demands that a new HBI plant produce at least 2 million metric tons each year of “value-added iron or steel products.” The state will require HBI Newco and its HBI construction firm to go through a series of survey, engineering and environmental analyses and permitting steps.

In addition to construction dates and demands, the new lease comes with hefty financial guarantees.

Mesabi must obtain binding debt commitments “totaling at least $850 million, including at least $450 million of debt financing from lenders unaffiliated with the equity holders of Mesabi, MHL and HBI Newco,” the amendment said. At least $200 million of the debt or equity financing must be advanced to Mesabi.

The new financing requirements mean that the total project could cost about $3 billion since its start in 2007.

The potential heft of a revised project has won supporters. Nashwauk Mayor Calvin Saari said in a statement that city, county and school officials in the region are among those backing the DNR proposal.

“We support the project because of the obvious economic benefits to our communities and because the DNR has negotiated an incredibly strong agreement that contains protections we just have not seen in other mineral leases,” Saari said in the statement.