Politics and Government

State agency approves loan for tribal cannabis facility over board's recommendation

A marijuana plant sits on a counter
A marijuana plant sits potted at a booth for Sticky Finger Seeds during a celebration at First Avenue in Minneapolis marking the legalization of recreational marijuana on Aug. 1.
Nicole Neri for MPR News 2023

Updated: 5 p.m.

The Minnesota Department of Iron Range Resources and Rehabilitation is moving ahead with a $2.5 million loan to the Fond du Lac Band of Lake Superior Chippewa to help build a start-up cannabis business on tribal land west of Duluth. The decision comes despite an advisory board’s vote recommending against it.

At its meeting in Eveleth on Tuesday morning, the IRRR Advisory Board voted down the proposal 5-2 along party lines, with all five Republican members voting against it. State Rep. Dave Lislegard, DFL-Aurora, who announced this weekend he will not seek re-election to his Iron Range seat, was not present.

The vote came just over seven months after the Board supported a $10 million loan to a Missouri-based company to build a cannabis operation in Grand Rapids by a 5-3 vote.

But in a news release issued later in the day, IRRR commissioner Ida Rukavina said she plans to move the project forward, saying the project met the agency’s application guidelines, and the agency’s staff thoroughly vetted the project.

“This project will support numerous new manufacturing jobs in a rural area of St. Louis County that will further diversify and strengthen our region’s economy,” Rukavina said. “For these reasons, I will move this project forward."

The Fond du Lac Cannabis Corporation, a subsidiary of the Fond du Lac Band, wants the loan to purchase “furniture, fixtures and equipment” to cultivate cannabis and manufacture cannabis products in an 18,000 square foot building in Brookston, about 25 miles west of Duluth and on the northern edge of the Band’s reservation.

The Band plans to sell cannabis products in a separate retail building to be located in Carlton County along Highway 210, which crosses the southern portion of the Fond du Lac reservation.

The Technical Advisory Committee of the IRRR recommended approving the loan at its May 20 meeting, in addition to a $250,000 loan to pay for infrastructure for the new facility.

The proposed investment package also includes a $2.5 million loan from the Minnesota Department of Employment and Economic Development, or DEED. The Fond du Lac Band would provide $9.45 million in equity for the project.

State Rep. Ben Davis, R-Merrifield, a pastor, was among those who voted against the proposal.

“I don’t support the people’s money going towards funding the recreational use of marijuana,” Davis said.

‘Mining dollars’

The IRRR invests production taxes paid by the region’s six iron ore mining facilities in economic and community development projects around the region.

“I know it’s mining dollars,” said Davis, who also opposed the loan to the Grand Rapids operation for similar reasons. “But those mining dollars do belong to the people.”

State Sen. Rob Farnsworth, R-Hibbing, who also said he does not support spending agency funding on recreational marijuana, asked for the Fond du Lac Band’s position on mining, saying “We’ve had organizations that have come before this Board asking for money and they’ve actively opposed mining.”

In response, Fond du Lac Vice Chairperson Roger Smith said the Band has been very clear on this question. “We are not opposed to mining,” Smith said. “We are opposed to irresponsible mining.”

Smith said the Band is concerned about protecting the Saint Louis River, and upholding its water quality standards. The Fond du Lac Band has filed several lawsuits challenging permits granted to the proposed NewRange copper-nickel mine, formerly known as PolyMet.

But Smith said the Band realizes the economic importance of the industry. “We understand the need for mining, and we understand the need for the jobs that it creates,” he said.

Job creation

State Sen. Grant Hauschild, D-Hermantown, said it’s important for the IRRR to engage with communities that have concerns about mining.

“There is an opportunity here for us to engage with partners that are trying to create jobs,” Hauschild said. “Jobs that are not meant to be a political statement, simply an economic driver in our communities. And we need all the jobs that we can get.”

IRRR staff estimate the project would create 55 jobs, with wages from $16 to $18 per hour, in a rural community where job opportunities often require long commutes.

The Brookston facility would produce 120 to 240 pounds of cannabis flower per month, staff said, and manufacture approximately 15,000 edibles and concentrate products per month.

“This is about creating jobs,” Fond du Lac Band Secretary-Treasurer Robert Abromowski told the Board. “You’re kind of making it a mining issue. It’s really not. It’s completely separate.”

State Rep. Roger Skraba, R-Ely, who voted against awarding the loan, questioned whether the facility would be able to recruit employees at those wages. He also wondered how many other entities — including the Bois Forte and Grand Portage Bands — might come to the Board asking for funding to start cannabis operations.

“How much money are we going to invest in this? Where are we going in the future? Because everyone’s going to come before us,” Skraba said.

While recreational cannabis was legalized in Minnesota last year, the state is still setting up guidelines for the new industry. Tribal cannabis operations are not required to wait for state licensing.

Earlier this year the Mille Lacs Band of Ojibwe began construction on a 50,000 square-foot cannabis growing facility on tribal lands near Onamia. The White Earth Nation and Red Lake Nation already operate dispensaries.

State Rep. Spencer Igo, R-Wabana Township, who supported the loan for the cannabis facility in Grand Rapids, voted against supporting the Fond du Lac operation. He said delays in setting up the state system had changed his “temperament” toward the industry.

“I think one thing everyone in this room can agree on, whether you support marijuana or you’re against recreational marijuana, is that we want a safe and regulated market,” Igo said.

Meanwhile, the IRRR Board unanimously approved a $950,000 loan for Finnegan’s Farm, a company outside Two Harbors that cultivates hemp and manufactures and sells products including CBD beverages, vape cartridges and pens, tinctures and edibles.

The loan will fund the purchase of equipment to extract oils from hemp plants. The company currently sends its hemp material to the Twin Cities metro area for processing.

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