On Monday night, Epitome Energy CEO Dennis Egan gave an update to the Ways & Means Committee on the progress of Epitome Energy.
The focus remains on bringing value-added to the basis for soybeans in the area. “Absolutely, the study that the University of Minnesota Crookston Extension did still holds true,” said Egan. “When you talk about bringing a $300 million project to the community, and the jobs and value that has in having a soybean utilized in multiple different ways with oil, with the meal, with hulls really is a benefit when you talk about value-added. What does value add mean? All you have to do is look at American Crystal Sugar. If they weren’t here, there would be a huge void in terms of jobs and economic development.”
Since the project was announced, the soybean crush has doubled. Egan said Epitome is no longer looking at including a biodiesel facility initially and instead has shifted focus toward Refined, Bleached, and Deodorized (RBD) Oil. “At this point in time, we’re not looking at biodiesel,” said Egan. “We’re really focused on getting a 42-million-bushel crush facility up and running. We’re now looking at do we add RBD Oil which will allow us to sell into a number of different markets. Markets have changed. The renewable diesel industry has exploded. They are estimating over 2 billion gallons of renewable diesel (needed) in the U.S. marketplace in the next couple of years. To not make those adjustments would’ve been malfeasance on our part not to look at the best available technologies and resources to make it a viable project for the long-term.”
Brian LaPlante commented that reliance on renewable diesel is getting more questionable day by day and that there is a need to be critical of how much of a business model is relying on renewable fuels versus crushing oil. Egan agreed, stating that shifting to RBD oil opens Epitome Energy to several emerging markets, including biodiesel. “It goes into the biodiesel market,” said Egan. “Minnesota still has a 20 percent mandate, and other states are following the Minnesota lead. You have Missouri and Iowa talking about biodiesel. So, that’s not going away, but the new phenomenon seems to be renewable diesel. If we’d do the RBD Oil, we’d also be able to sell it as food-grade. So, Land O’Lakes could purchase it. And then, there is a number of other industries using soybean oil. You have tires being made out of soybean oil right now; you have asphalt protectant being put on roads to preserve the length of a road. There are a number of other industries that are exploring how do they use soybean vegetable oil.”
Additional ag industry expansion has already started to filter into northwest Minnesota since the Epitome project was first announced that would likely utilize product from the plant, explained Egan. “Right now, the soybean meal industry in the region has about 184,000-185,000 tons of soybean meal,” said Egan. “But what we’ve seen is the hog industry is looking to expand, and they’re talking about northwest Minnesota. Down by Gary, they are building a 10,000-head dairy operation. You’ve got dozens of new facilities popping up with the turkey industry. We did sign a letter of intent with a large turkey producer for 150,000 tons of meal. You take the 184,000-185,000 tons of soybean meal in the region, and we’re well on our way to getting to our 900,000 tons of soybean meal sold.”
Local legislators have also gotten load limit increases into the transportation bill, explained Egan. “Representative Deb Kiel and Senator Mark Johnson were both able to put forward truck weight legislation which would allow us to run heavier trucks from our site on Highway 75 to Highway 2 into North Dakota and Canada, giving us a strategic advantage of soybean meal into the Canadian hog industry and west,” said Egan. “We are currently in the Transportation bill as it continues to move forward with other provisions. Our air permitting is moving along quickly. Our EAW (Environmental Assessment Worksheet) we hope to have all submitted by the end of June this year, giving us an opportunity to get our air permits by the end of the year. That’s all very exciting in terms of how this project continues to progress.”
Egan was also asked what the impact of the ADM soybean plant at Spiritwood in North Dakota announced on Monday with $2.5 million in forgivable loans and grants from the local Jamestown/Stutsman Development Corporation as well as the facility being constructed in Shell Rock, Iowa, would be on Epitome Energy. “What I think it shows is that the industry continues to grow,” said Egan. “The demand for soybean oil and soybean meal both domestically and export continues to grow. We do have a brand-new facility in northwest Iowa. ADM and the Governor of North Dakota announced that the project at Spiritwood would be back. Our feasibility study looked at a project, Spiritwood, and being the 140-mile, 150-mile distance from Crookston, there are enough soybeans grown in this region to accommodate both of those facilities. Just our facility and region within driving distance, there are 160 million bushels of soybeans grown currently. We’re going to capture 42 million of that. The rest of that is going to continue to be exported or go to ADM. We welcome the facility, and I think it demonstrates the need for crushing in the United States is strong.”
Egan said that he believes the equity drive is making strides. “It seems as though locally we’ve turned the corner,” said Egan. “People have come to grips with the 2019 harvest. Everybody is coming out of COVID. There is great optimism in the spring of every year when farmers are planting, and they’ve been blessed with a great season here to get everything planted. We have seen an uptick in conversations – individuals and businesses – that want to write checks in terms of our equity side, so things are really positive there.”
City Councilwoman Kristie Jerde expressed confusion about the Department of Agriculture grant referenced in that loan that was initially a $1-to-$1 match for $250,000 during air permitting with $750,000 available during construction that was increased to a $4-to-$1 match for $1 million during air permitting to provide cash flow for the project’s other developmental work. That change from the Department of Agriculture reduced Epitome Energy’s proposal for a $1.25 million loan to $250,000.
She also raised concerns about the previous City Council’s decision to enter into a loan agreement with Epitome Energy due to what she called a lack of repercussion in the business subsidy that could leave the city out $250,000 with nothing to show for it. Jerde also asked whether there was a report highlighting the market for soybeans and the availability of soybeans (feasibility study), indicating the economic study was out of date and questioned the success of the equity drive because Security and Exchange Commission (SEC) filings didn’t match Egan’s statements. Egan said the SEC filings weren’t up to date, and when asked, didn’t know the requirements for filing but said he’d ask with his accountants at Christianson Associates, who, among other things, are responsible for the SEC filing.
City Administrator Amy Finch raised concerns with the site plan for the air permitting process. “My concerns are the site plans being submitted for the air permitting include some assumptions that have not yet been asked of the council,” said Finch. “Some of those include millions of dollars of infrastructure and roads that have been built up for entrance and exit of trucks for the site, the potential vacation of a road, acquisition of property on the south end (from Calumet), and an additional five acres on the site plan on the north not included in the legal description.”
However, former City Administrator Shannon Stassen, Mayor Dale Stainbrook, and Crookston Housing and Economic Development Authority Executive Director Craig Hoiseth had presented a $7 million bonding request for the infrastructure development of the Colborn Property, which included Epitome Energy, the Ag Innovation Campus, and Vertical Malt in October 2019 (here). That came before the city ultimately decided to apply for funding for the property’s development in phases during a Ways & Means Committee meeting with Senator Johnson and Representative Kiel in January 2020 (here).
Egan replied he felt comfortable with any adjustments that may need to be made to the permit once approved. “I think given what we know today and what I know today in terms of permitting, and I’ve spent the last 15-20 years permitting projects across the State of Minnesota along with Wenck and Sunde Engineering. We all feel very comfortable with adjustments that may or may not have to be made.”
Jerde continued to question the air permitting without equity. “I think that there is a way you have to go about doing things, and I also do not quite understand what the rush is to do the air permitting when you haven’t raised the equity for the land,” said Jerde. “There are all these questions. I don’t know if it’s because you want to make sure you use your loans up, and that’s what they’re for, but I’m reading through some of the comments you have made in past things various outlets. It makes it sound like this was just going to get you started. And that by this point in the permitting process, you were already going to have the equity to start purchasing the land and doing all these other things, and that just isn’t the case.”
Egan said getting an air permit is important to large equity players. “You’re right, councilwoman, and as I shared the last two years when you put a pandemic on top of a project; a 2019 fall that devasted the farmers, the local equity has been a challenge,” said Egan. “We have said that all along. That part of it has never been and shouldn’t be a surprise because we talk about that at every meeting where I’m asked – where are we at with the equity? I would say in the State of Minnesota, getting your air permit, and once you have an air permit, a project is real in the eyes of big equity players. So, that is the centerpiece of a project in the State of Minnesota to get your air permit. If you don’t have an air permit, you don’t have a project. So, that has been our sole focus – how do we get the process moving forward? We will have the resources to finish that process, and that will get submitted. We have been told by a number of large equity players – let us know when you have it submitted and let us know when the State of Minnesota awards your air permit.”
Earlier, during his presentation, Egan had provided a review of the Epitome Energy equity drive from its 2019 kick-off into what was a very challenging fall harvest to a reboot of the equity drive in early 2020 before COVID hit, marking another blow for the drive. However, Egan said things have really changed in 2021 with a major announcement possibly just days away. “We’ve had great success and great conversations over the last four months,” said Egan. “As I indicated, we just picked up a new $100,000 equity person. We’ve had a dozen or more other large equity checks that have been written out. We’ve opened up a local bank account here. All those dollars are flowing into the local bank. Our hope is we’ll be coming out with a press release at the end of this week announcing a pretty significant equity development getting us over that threshold of breaking escrow.”
The video of Monday night’s meetings is below. Egan’s presentation begins at 27:50 –
