June 19, 2025 - It was supposed to be the United States’ grand entry to the global race to make green steel — a symbol of a return to American innovation and of revival in the nation’s rusting industrial heartland.

Instead, Cleveland-Cliffs’ plan to replace coal-based blast furnaces with cleaner, hydrogen-ready technology at its Middletown Works facility in Ohio — the same mill that Vice President JD Vance described as his grandparents’ ?“economic savior” in his ?“Hillbilly Elegy” memoir — now risks being swept away in the undercurrent of Washington’s shifting partisan tides.

Neither the Cleveland-based steelmaker nor the Department of Energy, which put up $500 million to back the project, has formally pulled the plug on the plan to build a direct reduced iron plant capable of using hydrogen and two electric melting furnaces. But updates from the company in recent weeks suggest the ambitious carbon-free version of the project is all but dead.

On a first-quarter earnings call with investors last month, Cleveland-Cliffs’ CEO Lourenco Goncalves said the company was negotiating with the Department of Energy to ?“explore changes to the scope to better align with the administration’s energy priorities.”

Rather than use hydrogen, the green version of which remains expensive and in limited supply, Goncalves said the project would ?“instead rely on readily available and more economical fossil fuels.” At an event earlier this month hosted by the lobbying group American Iron and Steel Institute, Goncalves said the lack of a hydrogen-generating hub nearby made it impossible to source the fuel on the project’s timeline.

“Without hydrogen, the entire thing falls apart,” Goncalves said, according to E&E News. ?“At the very least, I will not have hydrogen at the time I need for that specific project.”

Cleveland-Cliffs did not reply to Canary Media’s emailed questions on Friday, nor did the Energy Department return a request for comment on the status of the federal funding.

But Goncalves could announce the fate of the project as soon as Tuesday, when he’s set to speak at the Global Steel Dynamics Forum in New York City.

“Before all this uncertainty, this project was going to be, potentially, the first green-steel plant in the U.S.,” said Hilary Lewis, the steel director at the climate research group Industrious Labs. ?“With all this uncertainty, and particularly with this potential pivot toward fossil fuels, the future of clean iron and steelmaking in the U.S. is much less clear, and that puts our competitiveness at risk.”

The up-front costs of installing entirely new equipment always outweighed those of simply renovating the existing coal-fired unit.

Relining a blast furnace costs up to $400 million, according to RMI estimates. The total cost of building the DRI plant and electric melting furnaces came out to $1.6 billion, meaning Cleveland-Cliffs was on the hook for $1.1 billion even with the federal grant the Biden administration finalized last September.

The traditional coal-based method of making steel — which involves melting iron ore in a blast furnace then refining the iron into steel in a basic oxygen furnace — produces the cheapest metal, at roughly $390 per metric ton, according to an October report from Columbia University’s Business School. Scrap melted down in an electric arc furnace came out to $415 per metric ton. Steel made with iron from DRI fueled with natural gas and then refined in an electric arc furnace averaged out to $455 per metric ton.

Producing the iron through DRI with entirely green hydrogen, instead of gas, spiked the price to around $800 per metric ton.

The cost of making hydrogen with electrolyzers powered by certifiably clean electricity is among the biggest challenges to green steel in the U.S. That hurdle is now poised to become even higher as congressional Republicans seek to repeal the Inflation Reduction Act’s 45V tax credit, which aimed to make green hydrogen cost-competitive with the gas-derived version of the fuel. The Senate Finance Committee on Monday released its version of the budget bill, which aligned with the recently passed House version in eliminating the incentive at the end of this year.

That isn’t an issue for Europe’s leading green steel project. Formerly known as H2 Green Steel, the newly renamed Stegra plant benefits from the vast amount of carbon-free energy in Sweden, where the overwhelming majority of power is generated from hydroelectricity, wind turbines, and nuclear reactors.

In the U.S., by contrast, green hydrogen plants hinged on massive projects to construct wind turbines and solar panels that needed to be 70% larger in capacity to make up for the intermittency of the renewables, according to Elizabeth Boatman, a lead consultant at the Michigan-based clean energy consultancy 5 Lakes Energy. A dedicated nuclear reactor to generate the power for electrolysis could do so more efficiently, she said, noting that the availability of underground salt caverns to store hydrogen for later use could also further bring down the cost of projects.

“I don’t think anyone on any side of this thought hydrogen at scale wouldn’t be a barrier,” Boatman said. ?“The amount of new renewables the company would have to build out, along with transmission infrastructure, was clearly going to be expensive.”

In 2021, the Biden administration set a target of $1 per kilogram of green hydrogen within the next decade. (Last fall, a Florida-based geothermal startup called Magma Power filed patents that claimed it could generate green hydrogen for less than $1 per kilogram. The company did not immediately respond to an inquiry from Canary Media on whether that figure banked on the 45V tax credit.)

If the U.S. managed to achieve a supply at that price, steel made with green hydrogen-powered DRI and an electric arc furnace could come out to $544 per ton, according to a report published last July by Transition Asia, a nonprofit think tank focused on climate research. That’s marginally less than the cost of steel from gas-powered DRI and an electric arc furnace, at $550 per ton, or blast furnace steel at $565 per ton. If the U.S. were to institute even a modest carbon price, it could reach cost parity with coal-fired steel.

But if the 45V tax credit disappears, those numbers will be near-impossible to achieve.

Regardless of cost challenges, Boatman said, ?“it’s still an attractive solution, not just because of the potential to curb climate-warming emissions but also criteria air pollutants and other hazardous air pollution tied to the production process from a blast furnace with coal.”

The original, low-carbon version of the Cleveland-Cliffs project also has significant potential economic benefits.

The plant overhaul would have spurred $373 million in economic activity around the facility and brought 2,300 jobs to Middletown, according to analysis shared with Canary Media by the Center for Climate and Energy Solutions, a think tank. It’s not clear how a relining project would stack up.

That’s what made the project so significant, not just as a potential climate solution but as a way to revitalize a town in the heart of America’s steelmaking region, said Brad Townsend, the Ohio-based vice president of policy and outreach at the Center for Climate and Energy Solutions.

“Middletown is sort of the quintessential Midwest steel- and paper-making town that is looking for a way to leverage that history and infrastructure and know-how to chart a path forward,” he said. ?“This project would have done exactly that.”