Ponemah Councilman Rudy Johnson and Red Lake chairman Bobby Whitefeather head the food line at the Legislative Reception following the sixth annual Red Lake Day at the Capitol in St. Paul on February 28.  The reception was held at the Radisson Hotel in downtown St. Paul.  Approximately 230 people attended the dinner, speeches and awards, including about sixty people the tribal council brought from Red Lake.  The featured speaker, Minnesota Lieutenant Governor Mae Schunk, stressed the importance of education and identity.  The legislative reception also included a “Red Lake ‘Project Preserve’ Film Festival” showing Indian Humor, Mother Earth, and Turnover.

Yet another reservation Boondoggle?
A history of the Red Lake Water Bottling Plant

By Bill Lawrence and Clara NiiSka

“at least thirty jobs”

Red Lake Reservation—In early March, arctic winds still blow across the ice of the Red Lakes, piling snowdrifts against the south shore.  And, in the town of Redby, drifting snow gusts across the empty parking lot of the bottled water plant.  The $2.1 million federally funded Water Bottling Plant opened less than a year ago, and was to provide at least thirty jobs to the economically hard-pressed Red Lake reservation.

In early March 2001, the plant sits idle.  Plans for extensive marketing of Redby water, packaged as “Nibi,” have resulted in plastic bottles of water sold at the tribally-owned trading post.  The product is not on the shelves of even the other retail stores on the reservation. There are allegations that money is still owed to people involved in the initial planning and management phases of the bottled water project.

Two and a half years ago, in July 1998, Congressman Colin Peterson announced that the Economic Development Administration had awarded $368,000 to the Red Lake Band for bottling water.  According to public relations releases in the early fall of 1998, the Redby plant was scheduled for completion by February 1999.   Project coordinator Quentin Fairbanks announced that both the water bottling plant and the ice plant would be in full operation by April 1, 1999.  The estimated cost was less than half a million dollars, and initial employment at the plant was expected to be seven to 15 people.  In partnership with Coca-Cola of Bemidji, the Red Lake band intended to market the water regionally, “then, hopefully, nationally,” said Red Lake chairman Whitefeather.  In an August 1998 interview published in the Bemidji Pioneer, Whitefeather touted the project: “We’ve always prided ourselves on the quality of our environment and the quality of our water, especially.”

A few months earlier, in April 1998, the Mille Lacs Band announced plans to invest as much as fifteen million dollars in a bottled water partnership with California-based Indian Wells Water Company.  At that time, hopes were to build a hundred thousand square foot plant in McGregor or Isle, and eventually to employ a hundred people bottling nationally-marketed water.   Indian Wells filed for Chapter 11 bankruptcy protection in August 1999; the Mille Lacs Band lost about nine million dollars and has pulled out of the bottled water business.

But, in 1997, capitalizing on themes of Indian “environmental purity, healing and medicine, and … magic and uniqueness,” bottling and selling water from the rez aquifers seemed a viable economic development project for Red Lakers confronted with clear-cut forests and a depleted walleye fishery.

Documents obtained by Press/ON from the Economic Development Administration reveal that Red Lake chairman Whitefeather and tribal business planner Quentin Fairbanks sought funding from the EDA for a water bottling and ice-making facility four years ago, in an application for federal assistance filed February 28, 1997.  They requested $368,000 from the federal government, to be matched by $123,000 from the Red Lake Band, to build a water bottling plant adjacent to the water tower and sewer in Redby.  The original project proposal projected eighteen full time employees at the water plant by the third year of operation, in the year 2001.  Richard Borgstrom, Red Lake Housing Authority architect, signed documents affirming that the water bottling plant in Redby had an “estimate[d] useful life” of seventy-five years.

The project narrative for the Water Bottling Project—a “top priority” of economic development—indicated that the unemployment rate on Red Lake Reservation was sixty-five percent, and that the average family income for those employed at Red Lake was $15,000 per year (below federal poverty guidelines for a family of four).  According to preliminary figures released last June by Bemidji State University economists Pat Welle and Robert Ley, the average annual wage for the 1,598 people employed in Red Lake tribal enterprises was $9,131.37 last year.  “Tribal enterprise” employment statistics include all jobs in such off-reservation enterprises as the casinos in Warroad and Thief River Falls, but do not include people employed on-reservation by the tribal council, the B.I.A., the Red Lake I.H.S. hospital, schools, or in private enterprises like logging, auto repair and small retail operations.  Current and detailed employment and income statistics for residents of Red Lake reservation were not available to Press/ON at press time.

The Tribal Council’s decision to focus on economic development via the Water Bottling Plant was, according to EDA documents, a “strategic Objective … currently being developed through our Economic Development Task Force team which meets every two weeks.”

The first EDA grant, dated July 24, 1998, approved initial “project costs” for the Redby bottled water plant, budgeted at $491,000.  This included $215,400 for construction, $256,000 for equipment, and $19,500 for administration, legal expenses, project inspection, architectural and engineering fees, and contingencies.  It also included $100 “for cost incidental to transfer of title”—EDA grants require a “valid security interest” to guarantee proper “use and disposition of the machinery and equipment, acquired in whole or in part with” EDA Financial Assistance Award Funds.  The $123,000 of “matching funds” required of the Red Lake Band of Chippewa Indians included two acres of land, “donated as in-kind contribution.”  The actual amount of matching funds actually contributed by the Band toward the project is not itemized in any of the documents furnished by the EDA.  The valuation of the “donated” land was detailed in Exhibit B-111-7, among the documents Press/ON has not yet received.  Redby townsite was created by the U.S. Congress as a part of a “land grant” to the Red Lake and Manitoba Railroad, and the town of Redby includes fee patent land, as well as parcels which have been restored to Indian trust status.

The EDA mandated compliance with more than thirty federal laws, including the Copeland Anti-Kickback Act (40 U.S.C. 276(c); 18 U.S.C. 874), the Civil Rights Act of 1964, and the Drug-Free Workplace Act of 1988.

The EDA grant received by the Red Lake Band required that the Band submit regular financial reports—including immediate written notification of “other Federal financial assistance … received relative to the scope of the work of the EDA award.”  The EDA grant also mandated “organization-wide audits,” performed in accordance with the Code of Federal Regulations, be filed with the Office of the Inspector General.

  The EDA also requires that all grant recipients who receive more than $100,000 in federal funding disclose their lobbying activities (there are certain limited exemptions for Indian tribes).  Exhibit 1B of the first grant application includes chairman Whitefeather’s certification that, “to the best of his … knowledge and belief,” no federally appropriated funds had been expended in lobbying the U.S. Government.  Whitefeather also certified that there were no conflicts of interest, or “appearances of conflict of interest” involved in the Red Lake water bottling plant.  According to EDA guidelines, such conflicts of interest would occur, “for example,” where a member of the tribal council has “a direct or indirect financial interest in the acquisition or furnishing of any materials, equipments or services to or in connection with the project.”  It is probable that the any appearance of conflict of interest created by the interlocking directorates of the Red Lake Housing Authority, Red Lake Builders and the Red Lake water plant were outweighed by EDA policy supporting minority contractors.

After the EDA grants were approved, the Tribal Planning division of the Red Lake Band held public hearings on the proposed water plant, on October 22, 1997.  Among the questions raised by the ten people reported as participating in the public hearings—cookies and coffee provided—was, “If we are selling our water, why can’t everyone on the reservation have equal access to the same water?”  Linda Bedeau, Planning Director, explained that, “we really did not have the statistics or facts available to answer this particular question.”

In February 1999, the tribal project officer reported to the EDA project officer that, “there has been administrating activity since the last quarterly report,” including that the tribal attorney’s office was, “in the process of drafting and setting up a separate corporation” for the water bottling company, with a five-person board of directors.  He noted that construction of the water bottling plant had been delayed due to weather and a site change—the plant was moved about two hundred feet` west of the originally-planned project location.  He also informed the EDA that the Bemidji Coca-Cola Bottling Company had received quotes on equipment and completed a market survey, and that the tribal council had approved a first year operating budget of $185,000.

In October 1999, the Red Lake tribal council applied for $1,443,000 in federal funding from the EDA for “manufacturing of plastic water bottles or containers.”  In his cover letter, the Red Lake business planner explained to the EDA that the tribal council’s proposal for further federal assistance was, “the outcome of research done for our water bottling project.”  Transportation costs for empty water bottles were, he wrote in that letter, prohibitively expensive.  (The EDA files obtained by Press/ON do not reveal precisely how shipping empty plastic bottles from Red Lake could be a viable economic development project, even though shipping them to Red Lake was so expensive.)

The Red Lake tribal council used the $180,000 Rural Development grant from the U.S. Department of Agriculture as the tribal council’s “local match” for the $1.4 million in federal funding requested from the EDA.  In a March 30, 2000 “deficiencies response” to the EDA, the tribal planner explained that the Rural Development grant “was written to cover the cost of the equipment, hook-up and inventory used in the manufacturing of bottles.”

“20-plus new jobs”

In the October 1999 EDA grant application, the tribal council’s “capability to administer, implement and market the project” was detailed: “The Red Lake Band of Chippewa Indians possesses the governmental, administrative, managerial, fiscal systems and capabilities” to administer and implement the project.  “The tribe owns and operates a saw mill, housing finance corporation, large shopping facility, trading post store, construction company, nursing home, module [sic] home factory, all tribal programs – under self governance.”  The $1.4 million project was to provide “20 plus” new jobs.

Red Lake applies for $180,000 USDA Rural Development grant to purchase specific piece of equipment that manufactures plastic containers

The $180,000 grant was made by the Department of Agriculture from Rural Development funds.  As Bemidji Rural Development Manager Rodney Jackson described it in a March 13, 2000 letter, “the grant funds are to be used for the purchase of a specific piece of equipment that manufactures plastic containers.”

On December 21, 1999, the water bottling plant was given a “blessing” in ceremonies held at the slab floor and empty sheet-metal building shell in Redby.  Tribal chairman Bobby Whitefeather and his tribal business planner posed for news photos behind a sign proclaiming “Red Lake Nation, Pure Water,” and predicted to Bemidji Pioneer editor Brad Swenson that by March 2000, “consumers throughout northern Minnesota will be able to buy” bottled Redby water as well as empty plastic bottles.  Dave Beaupre of Coca-Cola envisaged a market for empty bottles which “could exceed 8 million bottles a year,” and a bottling plant with the “capacity to operate 24 hours a day” producing “Paul Bunyan Water” and “Red Lake Nation” water.  Bemidji Coca-Cola pulled out of the reservation water bottling project last fall, over a contract dispute regarding a distribution agreement for its other products on the Red Lake reservation.

In the documents filed with the EDA, the tribal business planner called the December 21 blessing ceremonies and press conference a “public hearing.”  He wrote about the legally mandated public hearing: “the meeting was well attended with 24 or more in attendance. Chairman, Bobby Whitefeather, spoke to the group …”  At the ceremonial public hearing, Whitefeather said that water bottling plant employment would be “up to 30 people to start.” 

In a December 1999 article, the Bemidji Pioneer described the bottled water plant as a $3.5 million dollar project.  The Pioneer reported that in addition to the initial $491,000 investment—$345,000 in EDA grant money and the remainder in tribal matching funds [including the value of “donated” land]—the federal government had invested $180,000 in a “second phase” for the manufacture of plastic bottles, and $1.4 million “third phase” in federal grants to expand the water plant’s capacity for manufacturing additional plastic bottles to sell empty.  Press/ON has been unable to determine where the Bemidji Pioneer came up with their reported total of $3.5 million dollars for the bottled water plant.

Much like the July 1998 EDA grant, the February 17, 2000 grant application boilerplate mandated that the tribal council report to the EDA on both financial and “performance measures.” It stipulated that, “an audit of the award may be conducted at any time,” provided that the Inspector General of the Department of Commerce, or any duly authorized representative, “has access to any pertinent” records, and specified stringent reporting requirements for awards over $1 million.

  As with other EDA grants, the tribal council was required to furnish a “valid security interest” guaranteeing that, “for the expected useful life of the facility assisted with this award, the project will properly and efficiently administered, operated and maintained, as required by Section 504 of P.L. 105-393 (42 U.S.C. 3194) …” 

The conditions detailed in the February 2000 grant boilerplate also provide that in the event of “unsatisfactory performance”: “The Recipient may also be suspended or debarred from further Federal financial and non-financial assistance and benefits, as provided in 15 CFR Part 26,” and may be required to repay money which has been improperly spent. “Payment of a debt may not come from other Federally sponsored programs.”

Correspondence from the EDA files indicates that the Department of Commerce found a number of “deficiencies” in the February 2000 grant application.  Tribal business planner Fairbanks addressed certain of these deficiencies in a March 30, 2000 letter to Department of Commerce project officer William Warren, of the EDA’s Chicago Regional Office.  Fairbanks explained, “a complete market study was never done due to the fact the number of orders and the quantity of said orders that were received before market study could be complete … to continue the study would have served no purpose due to cost and time.  We are receiving inquires almost on a daily basis and have stopped taking orders sometime in January.”  The tribal planning department addressed the EDA’s concerns about legal requirements for competitive bidding and Red Lake’s sole source procurement of bottle manufacturing equipment (Nortek) by writing that, “Nortek A/E was correct in stating that there will be competitive bidding on this project …The Red Lake Band of Chippewa Indians will do all bidding.”  Perhaps he was referring to more than $363,000 in construction contracts, awarded by the Band to the Red Lake Housing Authority.

EDA documents obtained by Press/ON also indicate Department of Commerce concern about unspecified “civil rights deficiencies” at Red Lake.  The civil rights deficiencies, Fairbanks assured Warren, “have been completed and mailed …”

Red Lake tribal officials bolstered their response to the Department of Commerce’s concerns with a March 30, 2000 letter of support from the Headwaters Regional Development Commission.  In that letter, HRDC Executive Director John Ostrem addressed the EDA regional director on a first-name basis.  “Dear Robert,” Ostrem wrote the regional director: “In its most recent full Comprehensive Economic Development Strategy (CEDS) developed for the region (1998), the HRDC highlighted the Water Bottling Project as one of the most important economic development projects in the region. … In addition, at its March 16^th, 2000 meeting, the HRDC unanimously passed a motion to support the Red Lake Water Bottling Project, and to reaffirm the inclusion of the project in the region’s CEDS.  Thank you for your support of this project, Robert …”

Red Lake’s February 2000 EDA grant application was also supported by Rural Minnesota CEP.  The grant application documents include a February 1, 2000 letter from Bemidji CEP operations manager Tom Allen.  In that letter, Allen writes that: “Rural Minnesota CEP has received a Welfare to Work grant from the U.S. Department of Labor and has entered into an agreement with the Red Lake Bottling Plant and the Red Lake Band of Chippewa Indians.  The project will operate over 2 ½ years and will train, employ and provide support services for welfare recipients working in new positions on the Red Lake Reservation …”

On July 17, 2000, the Department of Commerce issued a press release announcing that the Red Lake Band had been awarded the requested $1,550,950 EDA grant. Acting Secretary of Commerce Robert Mallett promised “a minimum of 45 new jobs” from the February 2000 grant.  The Red Lake Band of Chippewa Indians, as the EDA was assured in a March 31, 2000 letter on tribal council letterhead, “will be responsible to fulfill all grant requirements” [emphasis added].

May 2000: $200,000 EPA Grant to study pollution at old sawmill site in Redby

On May 18, 2000, the Red Lake Band diversified its federally funded projects with a $200,000 Brownfields Site Assessment Grant from the U.S. Environmental Protection Agency.  According to a news report in the Bemidji Pioneer, that grant was to “assess the extent of contamination at the former sawmill and wood treating facility operated by the U.S. Bureau of Indian Affairs for more than 75 years in Redby on the shores of Lower Red Lake”—about one city block away from the “magic and uniqueness” of “environmental purity” at the water bottling plant in Redby.  Less than a year previously, the tribal economic development planners had cited the tribally operated sawmill as an example of tribal administrative capability, but in May 2000, the Pioneer quoted chairman Whitefeather as saying the sawmill was “essentially closed down.”  Whitefeather claimed that EPA funding was necessary to determine if there was underground contamination, and whether there are pollutants leaching from the old sawmill site into the lake—although on the initial application for EDA grants to bottle water, Whitefeather had guaranteed that the bottling plant was not located “in or adjacent to an area with known hazardous or toxic contamination.”  At press time, Press/ON was awaiting EPA documents detailing the contamination at the Redby industrial park.

In early March, frigid winter winds still blow across the ice of the Red Lakes, piling snowdrifts against the bluffs along the south shore.  In the town of Redby, drifting snow gusts across the empty parking lot at the bottled water plant.  How will the parents who were promised jobs at the Redby plant as a part of CEP’s welfare-to-work programs … twenty-plus jobs … thirty jobs … at least forty-five new jobs paying a minimum of eight dollars an hour at the Redby Bottled Water Plant … how will those parents feed their children now?  With natural gas and fuel oil prices soaring, how will the “sixty-five percent” unemployed, the “average” families struggling to survive below the poverty level, heat their homes?

Were the federal government’s grants of 2.1 million dollars for the Redby Bottled Water Plant the most cost-effective way of addressing unemployment, underemployment and poverty on Red Lake Reservation?  (If the $3.5 million dollars had been invested in annuities at standard market rates, the income from interest on that investment would exceed even the most optimistic employment income figures provided by tribal planners to the EDA.)   Exactly what has the Economic Development Task Force team been discussing at all of those every-other-week meetings?  Who is on the Task Force team, how were they selected, and how many of their meetings are publicized in advance—and public?

In early March, the snow also drifts across the empty parking lots at the Redby Fishery and the Modular Home Factory, and swirls in cold eddies around the abandoned and possibly contaminated sawmill site in Redby.  The crumbling foundations of the furniture factory and the old fish hatchery are buried in windblown snow.

And, in early March of 2001, the drifting snow rides the north wind across the empty parking lot of the Red Lake Water Bottling Plant.  Is it yet another federally funded boondoggle at Red Lake?