Founder and CEO Dennis Egan says the process is still progressing, as he announces a larger facility with a bigger investment.
Pending approval by the CHEDA Board of Directors at a special meeting on Nov. 5, the first withdrawal of just under $50,000 from the $250,000 loan to Epitome Energy from the City of Crookston ($150,000) and CHEDA ($100,000) will be made, as Epitome founder Dennis Egan and consulting firms he’s working with begin the process of securing the necessary environmental permits, which will likely take more than a year to accomplish.
The advisory committee formed to continue to work through the process of making the soybean crush and biodiesel a reality on 100 acres of City-owned land on Crookston’s southern edge – Egan is looking to buy the parcel for $400,000 – this week OK’ed the initial draw on the loan funds.
At the meeting, Egan announced that the facility will officially have double the capacity originally envisioned, with the ability to process 42 million acres of soybeans a year instead of the 21 million in the initial plans. The larger scope brings the total investment involved in the initiative to approximately $215 million, Egan noted, instead of the original estimates of $150 to $180 million.
While the committee’s vote was unanimous, concerns are being raised about a couple of the latest developments involving Epitome’s progress. For one, the Minnesota Department of Agriculture, which previously committed $1 million to the permitting process with the idea being they’d require only a dollar-for-dollar local match, has now changed its match ratio and is requiring $4 locally for every $1 it will put in.
In real dollars, that means MDA will commit it’s first installment of around $12,500 once the $50,000 is spent to get the permitting process off the ground. While everyone agrees MDA is still committed to its $1 million now and going forward – the loan documents for the $250,000 require a $1 million investment from MDA – the fact that it will now require four times as many local dollars to trigger the maximum $1 million from MDA is raising eyebrows. The concern, CHEDA Executive Director Craig Hoiseth and others around the table expressed this week, is that once the $250,000 in loan dollars has been expended and there’s still a big chunk of the MDA’s $1 million to access – around $932,000 to be more specific – Egan and Epitome won’t have enough of their own money to invest from the equity drive currently underway and will come back to the City of Crookston and/or CHEDA for more.
Yes, the equity drive. That’s the other recent development triggering questions. The goal detailed at an open house event in September was to get as much local and area investors as possible in order to keep as much of the Epitome wealth and ownership in the region. But with farmers in the Red River Valley struggling now more than they have in a long time, Egan acknowledged that it’s not only not an opportune time for farmers to be investing significant amounts of money in a venture like Epitome Energy, it’s not an opportune time to even ask them to. While saying area farmers will definitely be approached at some point, Egan said that the equity drive is expanding to a nationwide focus in order to keep the bottom line.
But how much has it grown? There’s a $2 million threshold to be reached in order to establish a necessary escrow account, and the next threshold after that is $10 million.
This week, Hoiseth, while acknowledging that Epitome Energy is a private enterprise, asked Egan if there was any way that he (Hoiseth) could somehow be able to monitor or otherwise keep tabs on how the equity drive is going. Hoiseth added that from the documents he’s read and information he’s been given, he’s not completely confident that once the $250,000 in loan money is spent, the entire project won’t screech to a halt because Egan lacks the money to continue investing in the permitting process. ($4 million would need to be invested in order to get the full $1 million from MDA.) And, Hoiseth added, that makes him uncomfortable over the possibility that the City and/or CHEDA would be pressured to kick in more money to keep the project afloat.
“We don’t want to write you a check for $250,000 and then this thing stops,” Hoiseth said. “That’s the feedback I’ve gotten.”
City Administrator Shannon Stassen echoed those sentiments, saying he was uncomfortable when he first heard in August about MDA possibly changing its funding match ratio. “I didn’t want to get caught part-way through, when the source (for potentially additional dollars) would be the City.”
While not directly addressing Hoiseth’s request to be privy to more details on the progress of the equity drive, Egan said matter-of-factly that he won’t come back to the City and/or CHEDA seeking money beyond the $250,000 already committed by the two entities.
“We will not come back to the City for more money for air-permitting,” he said, adding that based on the latest conversations he’s had with the people leading the equity drive, he’s confident the $2 million escrow will be reached and the process will keep moving forward. Considering how long the environmental permitting process takes, Egan said the decision was made to keep moving on the permitting process even though the equity drive is in its early stages.
“If we kick it down the road waiting for the equity drive to happen, we lose time,” he said, adding that “every day, I work on equity.”
Acknowledging they’re a “ways away” from accessing the full $1 million from MDA, Egan said there are some “big players out there” and that he might get word in a month or two on some big investments in Epitome Energy in Crookston. “…We had some good indications last week from a group that will put a sizable chunk in, and we’re working through that. I had good indications on the breaking of escrow happening sooner rather than later. It’s still a process. Raising money locally became a challenge so we’ve gone to some outside sources.”
Committee members Kurt Heldstab, Betty Heldstab and Jake Fee all made comments to the effect that the City and CHEDA have committed the $250,000 in loan funds, and that in order to stand behind their commitment and keep the permitting process moving, they feel compelled to approve the initial draw on the loan funds, and likely additional draws that will come before the group in the months ahead.
“I’m starting to feel like if we don’t move ahead, it stops,” Arvidson said. “I don’t want to feel like all the burden is on this group or CHEDA or the City, but I feel like we have some responsibility to contribute. The game has changed a little bit, but at the end of the day has it really? The dollars haven’t changed, just how they’re laid out. If we don’t move forward, does it stop?”
“It does,” Egan responded, adding that he met with several Minnesota Pollution Control Agency representative last week, and they left the meeting with the impression that the first bills for the permitting process would be paid.
Other Epitome updates
• The process toward establishing a tax-increment-financing district for the development will continue ramping up. (A TIF district allows new property tax revenue generated by a development to be returned to the development over a period of years to, specifically, service debt. The TIF district for Epitome would be for nine years.)
At some point in TIF process, Egan said, his purchase of the parcel is going to need to be firmed up or otherwise solidified in the land option. “Big players with $5, $10 or $15 million are going to want to see some option on the land and site control,” he said. “I want to be able to demonstrate that we have a signed option. The goal is to lock that in and give everyone some comfort that this is the location.”
• Work will also continue in earnest on the City’s pending $7.5 million bonding request that will go to the Minnesota Legislature in 2020, which is a little behind the eight ball, timing wise, compared to other 2020 bonding requests across the state. Egan and Hoiseth said it’s critical that the request be crafted so that legislators know the $7.5 million, which would cover half of the estimated $15 million in necessary infrastructure costs on the parcel, are benefiting the community and not just Epitome Energy. The infrastructure is also necessary for the proposed Soy Innovation Campus that will be located nearby – the state has committed $5 million toward the project with an estimated price tag of $8 to $12 million – and Hoiseth said other branch-off developments on the land would also benefit from the available infrastructure.
• To those concerned that millions of dollars could be invested in infrastructure and then the Epitome Energy venture fails to become reality, Hoiseth reiterated that “we’re not going to build roads until we know there are buildings going up.”