The U.S. Department of Energy has formally redirected a $500 million industrial decarbonization grant to refurbish a 73-year-old coal-fired blast furnace at Cleveland-Cliffs' Middletown, Ohio steel mill — a revision that moves the facility away from, not toward, the net-zero mandate Congress attached to the funding.

Cliffs confirmed the scope change on Friday, after Vice President JD Vance and Energy Secretary Chris Wright visited the plant to promote the federal investment. Middletown is Vance's hometown, and the mill has long served as its economic anchor, producing exposed-grade automotive steel for cars, trucks and SUVs.

"The DOE's support for this project is a testament to the importance of preserving the blast furnace route to produce automotive-exposed grade steels in the U.S.," Cliffs CEO Lourenco Goncalves said in a statement.

The original award, selected under the Biden administration in March 2024, was part of a $6.3 billion DOE program to decarbonize key U.S. manufacturing sectors, funded primarily by the 2022 Inflation Reduction Act. Cliffs' initial plan called for replacing the aging blast furnace with hydrogen-ready technology and electric furnaces, switching from coal to natural gas and eventually hydrogen. That design would have eliminated roughly 1 million tons of greenhouse gas emissions annually.

The revised scope is a different material proposition. Cliffs will refurbish and optimize the existing blast furnace — commissioned roughly seven decades ago — so it can operate for potentially another two decades on coal. The company will also install a cogeneration plant capturing waste gases from the furnace to generate steam and electricity for mill operations. Cliffs says it will match the DOE grant with $500 million of its own capital.

From permit filing to confirmed funding

The redirection was telegraphed well in advance. Cliffs first outlined the new direction in a February air-permit application to Ohio's environmental regulator, though at that point it was unclear whether DOE grant dollars would follow. In July, Goncalves told investors on an earnings call that the company aimed to realign the $500 million award with the Trump administration's priorities. Friday's announcement makes that official, with the DOE having "established a framework for Cliffs to finalize negotiations and implementation plans" for the Middletown project, the company said.

The DOE's own release framed the change as commercially driven: the company "determined that the business case for the original project scope no longer made sense given customers' unwillingness to pay a 'green premium' for steel," and working with the department identified "a viable alternative that will upgrade and improve the efficiency of its existing coal-fired blast furnace" while capturing waste gas.

That framing sits uneasily with the statute. A former DOE official noted that the Inflation Reduction Act legally mandated the funding enable "advanced industrial technology" — defined as technology "designed to accelerate greenhouse gas emission reduction progress to net-zero at an eligible facility." The Middletown project's revised scope moves the mill away from net-zero emissions, the former official said.

Goncalves counters that Cliffs is "going above and beyond a standard blast furnace reline, to include the most advanced technology available," pointing to the cogeneration plant and planned energy-efficiency upgrades. "Cleveland-Cliffs is making a decisive investment in the future of American steelmaking and manufacturing," he said.

Local and sector stakes

The reversal has drawn pushback from green-steel advocates and Middletown residents, who argue that funding meant to cut industrial emissions could instead increase local air pollution. "Cleveland-Cliffs and JD Vance need to get rid of coal and go back to the original project that would clean up the air we breathe and improve our health," Donna Ballinger, who lives near the mill, said Friday in a Sierra Club news release.

The sector context is stark. Iron and steel production generates roughly 9% of global human-caused CO2 emissions annually, and the vast majority of that pollution comes from coal combustion in blast furnaces. Replacing the centuries-old process route is widely considered essential to limiting the worst impacts of climate change, and global clean-steel efforts are advancing, though unevenly.

What happens next hinges on two checkpoints: the outcome of Cliffs' negotiations with DOE over the final implementation plan, and the pending air-permit decision before Ohio's environmental regulator, which will determine whether the refurbished coal furnace — and its emissions profile — is cleared for another two decades of operation.