New council, City voices, new questions, concerns about Epitome Energy
Epitome Energy founder and CEO Dennis Egan was peppered with questions and concerns involving his proposed soybean crush venture on Crookston’s southern edge at this week’s Crookston City Council Ways & Means Committee, and two of the newest voices in the city hall council chambers – Ward 1 Council Member Kristie Jerde, elected in November 2020, and City Administrator Amy Finch, who started in October 2020 – were the most vocal.
As he did earlier this spring at a CHEDA Board meeting, Egan, who’s been working for around four years on his Crookston development, offered an upbeat update – i.e. emerging from a historically bad 2019 harvest followed by the COVID-19 pandemic – on Epitome’s pending submission of an air permit application and Environmental Assessment Worksheet to the state, its equity drive, and changes in the scope and focus of what the $300 million, 42-million bushel per year Epitome Energy will produce as time passes and markets evolve. But unlike at his update to the CHEDA Board, when Egan completed his presentation and asked for questions, he was met with several questions and concerns from the council and was pressed at times, mostly by Jerde and Finch, to provide more documented and timely information on how the development is coming along.
At the heart of most of the questions and concerns voiced in the city hall council chambers is a milestone timeline that Finch said she believes is somewhat out of order, and Jerde’s fear, which she voiced repeatedly, that once a $250,000 loan to Egan provided by the City and CHEDA to help cover costs associated with the air permitting and EAW process is fully expended, the City will be out that money and have nothing to show for it if Epitome Energy never becomes reality.
With the terrible 2019 harvest and subsequent pandemic adversely impacting the critical equity drive in a major way, even if the drive is going better now, Finch suggested to Egan that it might have been better to slow the process down when the equity drive slowed, instead of continuing to go full steam ahead toward securing the air permit from the state. With Egan saying the hope continues to be finalizing the financial package in the fall of 2021 and starting to move dirt in the spring of 2022, Finch said she and other City leaders are still waiting for fairly basic information in regard to the site plan on the 100 acres south of Ingersoll Avenue and adjacent to Highway 75. A new road from the south into the facility will be needed and utility infrastructure as well, Finch noted, and those will come with a significant cost. There is also a road that needs to be vacated and the potential need to purchase five more acres of land, she added.
There was a plan a couple years ago to seek approximately $7 million in state bonding dollars to go toward road and other infrastructure costs associated with the Epitome Energy development, but with the land not yet officially sold and other key components of the project still undetermined, the area’s legislative contingent, District 1B State Rep. Deb Kiel of Crookston and District 1 State Sen. Mark Johnson of East Grand Forks, urged a more phased pursuit of state funding over a longer period of time instead of asking for a big chunk of funding all at once.
And that was before the 2019 harvest finished and 2020 pandemic commenced. But with a much better 2020 harvest and the pandemic finally appearing to fade, Egan says optimism and enthusiasm over Epitome Energy are on the uptick, and that investors, both on smaller scale locally and in the area and on a larger scale nationally, are starting to write checks. He said he’s hoping to announce in the coming days that the equity drive has reached a milestone, exceeding the escrow threshold of $1 million. That dollar amount is significantly more than what Jerde said she’d seen in a Securities and Exchange Commission (SEC) filing, but Egan contended that the SEC number was inaccurate and not an updated figure.
As time has passed and the development has evolved, Egan said it in its current form is better positioned for success. Even though Minnesota still has a 20% biodiesel mandate, he said the renewable diesel market is expanding at a high rate and will outpace biodiesel, so Epitome Energy will focus more on renewable diesel. Also, soybean meal and oil that is produced in the crushing process would have the Crookston facility perfectly positioned to ship oil to markets in this region and also in Canada. (Kiel and Johnson during the 2021 legislative session have each sponsored legislation in their respective chambers to increase truck load limits on Highways 2 and 75, and Egan said the legislation as of now is included in the omnibus transportation bill.)
The Epitome Energy braintrust is also looking at producing food-grade oil at the Crookston facility, which Egan said requires one additional process after the soybeans are crushed. The RBD oil (Refined, Bleached and Deodorized) would give Epitome more flexibility in the markets it can enter.
“On the food-grade side, the potential is fantastic,” he noted.
It’s all part of adding value to the soybeans grown in this area. Polk County is the biggest soybean producer in the state and soybeans are a hugely popular crop among growers in the region, with 160 million bushels produced annually within 60 miles of Crookston. And yet, Egan said, growers in the region are paid less for their commodity than probably any soybean growers in the country. That’s because, he continued, there’s nothing available in this area to add value to their crop. The existence of Epitome Energy and the products it would produce would add value to the soybeans grown here, Egan stressed.
“To be able to put a processing facility here in the center of all that just made a ton of sense,” he said.
Egan said an account at a local bank has been opened and “dollars are flowing in,” including the latest, a commitment of $100,000 to the equity drive. “There’s a lot of good news and a lot of great energy around this project,” he said, adding that several meetings with various area groups are on his schedule in the coming days and weeks.
Among the questions voiced to Egan was the recent announcement that Archer Daniel Midlands (ADM) in 2023 is going to open a similar facility 140 miles from Crookston, at a former Cargill malting facility in Spiritwood, North Dakota. Asked if that facility would compete with and potentially put a dent in the soybean market serving Epitome Energy, Egan said his team’s initial research indicates it would not.
Jerde said she would like to take Egan at his word on various matters, but said she is still uncomfortable with loans being dispersed, a lack of documents and reports and equity drive updates that she said, combined, have not allayed her uneasiness.
“If all this goes to heck, where you get the permitting then nothing else happens…you can’t purchase the land, then the City is out $250,000 with nothing to show for it,” Jerde said. “I want to be sure that I can tell my constituents that this is a good deal.” She added that if the City out of concern over all of the uncertainty puts the brakes on the project, she doesn’t want the blame to be placed on the City.
Jerde and Finch pressed for more updated information on a $1 million Minnesota Department of Agriculture grant to Epitome that initially was a 1-to-1 match but was then scaled back by MDA to a 4-to-1 match. Asked by Finch when he’d be able to start accessing those funds, Egan said he’s already started to.
Finch said there are too many unknowns in regard to what will be asked of the City in order to make Epitome Energy a reality.
“How close are you to fully engineered plans? When can the City review the full site plan? I’ve shared that concern with you as well,” Finch said. “You need easements, setbacks, all kinds of things.”
Egan said projects on a scale similar to Epitome Energy aren’t “cookie-cutter” in nature and adjustments need to be made during the process. But, he stressed, without an air permit from the state, he doesn’t have a project. It’s because of that, and the enthusiasm among potential investors that he said an approved air permit would generate, that has the process continuing on its current trajectory.
“Once you have an air permit in Minnesota, the project is real in the eyes of equity players,” Egan said. “…That has been our sole focus moving forward. I’ve been told by a number of large equity players, ‘Let us know when you have it submitted and when Minnesota awards it.’
“But, yes, I understand that there are concerns and issues that we still need to work through,” he added.
“I would tend to disagree with you; I think a few things happened out of order,” Finch responded, noting that stakeholders involved in the much smaller scale Ag Innovation Campus being built on 10 acres adjacent to Epitome Energy “were very active with the City early on” in regard to their site plan. “We haven’t been involved yet with Epitome on the site plan,” she continued.
At Large Council Member Wayne Melbye wondered if Egan and his leadership team were possibly looking into or at least open to a “re-look” at their timeline and order and speed of their pursuit of various milestones, which in the process would give the City more time to assess all of the information and make some decisions. To that, Egan said some things in relation to that were being put together internally and that those things could be shared with the City.
Asked by Finch if he’s retained a project manager yet, Egan said he hopes to soon. Finch suggested that having a project manager on board “would help you a lot.”
In regard to providing more frequent and timely updates on the project, Egan referred to a recent email he sent to Finch and CHEDA Executive Director Craig Hoiseth requesting more frequent meetings between the three of them. Finch noted that she had several City budget and audit-related items on her plate right now and had not yet responded to Egan’s request.
“I want to have meetings where we have something to talk about,” she said.
Egan said he wasn’t asking Finch to do a long list of things in his email, just “some initial things.” To that, Finch said since their most recent discussion last week, Egan had had no contact with her in regard to the equity drive, Epitome’s business plan or financials. Armed with that kind of useful information, she said she’d be in a better position to guide the council through the due diligence process.
“I wish things could have been done differently,” she continued. “When the equity drive slowed down it would have been prudent to slow down other things.”
Jerde said council members have to be financial stewards and have to be accountable to their constituents, while also exploring economic development possibilities when they arise.
“We have a responsibility to be aware of how these monies are being spent. I’m very concerned about how things are lining up,” Jerde said. “When you don’t have skin in the game, so to speak, it’s easy to move forward on air permitting and spending the loan when you have nothing to lose.
“I know you have a lot of great opportunities and that’s wonderful, but we’re still relying on you and only you,” she continued. “If a constituent comes and asks me, ‘Hey, why is X, Y and Z happening, I should be able to tell them.”
Before Mayor Dale Stainbrook brought the discussion to a close, Ward 6 Council Member Dylane Klatt said he agreed with “every word” Jerde had said.
As he has previously, Brian LaPlante, sitting in the audience, interjected his thoughts, and he noted once again that when projects like Epitome Energy are being considered, it’s important that decision-makers look at the big picture, and that picture is as big as the finite future of the internal combustion engine itself.
“I would stress the importance of critically analyzing business models going forward, especially in the energy industry,” LaPlante said. “…You’ve shifted from biodiesel to renewable diesel, but these things have a timeline, too.”