In the early part of the 20th century, the notion of providing electricity to every farmer and rural town across America seemed almost absurd because nobody believed they could make money from electrification.
But there’s something about the grit of Americans that wouldn’t be denied. Neighbors across the country began starting electric cooperatives that delivered safe and reliable power well beyond our major cities.
In Minnesota, residents of Cass, Crow Wing and Morrison counties came together to form the Crow Wing Power cooperative in 1937. Our customers truly run the cooperative. Unlike with a publicly traded company, our members are electing their neighbors to their cooperative board of directors, and their neighbors manage the cooperative well enough to regularly deliver capital credits back to our members.
When the Star Tribune recently published a news article (“Slow progress on manganese mine raises questions,” Sept. 1) and a column (“Crow Wing Power co-op focus should be members, not board,” by Lee Schafer, Sept. 9) about Crow Wing Power’s investment in the Emily manganese project, the coverage looked at one long-term business opportunity, rather than the diverse mix of businesses that have provided successful returns to our membership.
Crow Wing Power will pursue for-profit investments if we believe they will help us expand revenue sources and improve service. A diverse portfolio of business ventures can help minimize risk and keep costs down. Our investment in Emily is an example of sound stewardship. The Emily manganese deposit is the richest of its kind in North America — between 4 billion and 10 billion pounds of this important mineral is there for extraction. Manganese is a critical component in the production of storage batteries, medical devices and steel.
But mining isn’t a short-term investment. It’s a complicated business, and production often requires years of preparation. Crow Wing Power, through our business Cooperative Mineral Resources, is conducting tests to demonstrate the viability of the deposit to attract investors. As the project moves into production, we will either continue as partners in the enterprise or sell our interest.
We have not used any money from the cooperative’s electricity operations to support the mining venture. All funds used for the manganese project have come from the 2006 sale of Hunt Technologies, a previous enterprise owned by Crow Wing Power. The proceeds from that profitable sale allowed us to distribute $12 million among our members the following year and pursue structural investments to improve electric service. The remainder was set aside for the manganese project.
Investing some profits from one successful business venture into a new one is not unusual, even for an electric cooperative. Overall, these business enterprises have benefited our members and the region, including time and/or money investments in the Crow Wing Power Credit Union and People’s Security. We are hopeful the manganese project will also be profitable, as demand for storage batteries increases in the coming decade.
I would like to clarify a few other issues that were raised in the Star Tribune’s coverage:
1) No one at Crow Wing Power — employees, board members or executives, including me — has received a royalty payment for the Emily manganese project. Early on, royalty payments were proposed by the previous landowner as an incentive to move quickly into mineral production. However, we believe in the careful approach we have taken, and further production will not include royalty payments to individuals.
2) Crow Wing Power never received a $30 million offer for its stake in the mine. It did receive a $1,000 offer for an “option to purchase” within one year for an undisclosed amount not to exceed $20 million. We concluded that the offer wasn’t credible.
3) In most cases, business enterprises owned by Crow Wing Power are overseen by our board members without additional compensation. In fact, they make an average of a little less than $16,000 a year, not the much higher figure suggested by the Star Tribune.
The Star Tribune is correct to remind us that transparency is an important part of preserving member trust. That’s why Crow Wing Power works hard to make sure all our members understand our operations, investments and finances. Regarding the for-profit ventures, we provide information on our website and in our newsletter. Still, it’s important to strive to do even better. Our members expect nothing less, and we won’t let them down.
Bruce Kraemer is CEO of Crow Wing Power.