Vista Bid Falls Apart: AgStar Taking Both Veblen Dairies

It looks as if AgStar Financial Services will wrest both of Veblen, South Dakota's bankrupt mega-dairies away from serial polluter Richard Millner and his fellow investors. Vista Family Dairies, a front group formed by Richard Millner and other Veblen West dairy partners to keep the dairies in their hands, has declared it will not follow through on the $21.3 million bid it made in September to buy Veblen East.

Veblen East Dairy

According to a motion filed yesterday (U.S. Bankruptcy Court of South Dakota, Case 10-10146, Document 259) by Chapter 11 bankruptcy trustee Lee Ann Pierce, Whetstone Valley Dairy withdrew its backup bid on October 28. That means the the only bidder left at the table is AgStar's Veblen East Dairy Acquisition LLC, which submitted a credit bid for the minimum $16 million for the facility and $800 per cow.

Pierce's motion gives creditors until December 30 to file objections to the sale to AgStar.

Pierce's motion notes that Vista Family Dairy's attempted acquisition was not hampered by regulators. Marshall County granted Vista its conditional use permit on October 19, and the state Department of Environment and Natural Resources granted the manure permit on December 3. The latter is particularly interesting, given that DENR had said on November 10 that it would grant no permit to Vista as long as Richard Millner had anything to do with permit-compliance decisions.

Taking DENR at its word, I assume that Vista Family Dairy had to tell Millner he was out of the power structure. And as I let my speculation run riot, I can imagine that, without Millner the dealmaker able to keep his hands in the pot, whatever investors he'd cobbled together to float Vista's bid fell apart.

Veblen West Dairy

Millner and his gang already lost Veblen West to AgStar after failing to raise enough money for a viable bid on Veblen West last month. Now AgStar appears on its way to closing on both mega-dairies.

If the DENR, the South Dakota economic development honchos, and area farmers are paying attention, we can hope AgStar's acquisitions will mean Rick Millner is done dirtying the South Dakota dairy industry for good.

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Bonus Evidence: In upholding its denial of a permit for the Dairy Dozen's Excel Dairy in Thief River Falls, Minnesota, the Minnesota Pollution Control Agency reiterates Millner's lengthy record of environmental violations at every dairy he's run. For the record, here's what MPCA says about Millner's Veblen dairies:

102. Veblen East Dairy is an 8,176 head dairy facility that consists of six total confinement barns and eight manure storage basins. Veblen West Dairy, previously known as MCC Dairy, is a 5,500 head dairy facility that consists of five total confinement barns and five manure storage basins. Rick Millner is the managing partner for the entity that owns both facilities. On October 23, 2009, the South Dakota Department of Environment and Natural Resources (South Dakota DENR) issued a Notice of Violation, Order, and Settlement Agreement.

103. On July 10, 2008, the South Dakota DENR inspected both Veblen East and Veblen West Dairies. During the inspection, it was noted that the basins at Veblen West were at their maximum operating level, and the basins at Veblen East were below the maximum operating level. On July 18, 2008, the South Dakota DENR approved the transfer of ten million gallons of manure from Veblen West to Veblen East. This manure was to be land applied in the fall of 2008 prior to soil freeze, and the South Dakota DENR was to be notified when this was complete. A notification was not received.

104. In April 2009, the South Dakota DENR received notification from the facilities that the basins at both Veblen East and Veblen West Dairies were above the maximum operating level and into the freeboard of the basins. This was confirmed during a May 6, 2009, site inspection by the South Dakota DENR. On May 20, 2009, Rick Millner contacted the South Dakota DENR to inform them that high winds were causing manure spray to blow over the berms of the north basins and that a line of straw bales was erected to keep the spray from leaving the basins. Various correspondence and inspections in the months of June, July, and August indicated that the basins at both Veblen East and Veblen West were above the maximum operating levels and into the freeboard.

105. The Order, issued October 23, 2009, and amended in March 2010, required both dairies to complete a number of requirements, summarized below, to bring the facilities back into compliance:

1. As soon as possible, remove a sufficient amount of manure to return them to compliance with the freeboard requirements. The Order went on to require the removal of manure from all basins to have no more than one foot of residual material remaining by November 1, 2009. The lowering of the liquid levels in the basins at Veblen West did not happen until December 7, 2009. This lowering of the levels was not sufficient to comply with the October 23, 2009, Order (no more than one foot of manure) but was sufficient to bring the basins back into compliance with the freeboard requirements. Similarly, the lowering of the liquid levels in the basins at Veblen East did not happen until November 23, 2009. This lowering of the levels was not sufficient to comply with the October 23, 2009, Order (no more than one foot of manure) but was sufficient to bring the basins back into compliance with the freeboard requirements.
2. Submit calculations and schedules that demonstrated that the remaining storage capacity within the basins at each facility, after the fall of 2009 pump-down, was sufficient to provide 270 days worth of storage. Sufficient calculations and schedules were never received by the South Dakota DENR. Consequently, the South Dakota DENR concluded that the volume remaining after the fall of 2009 pump-down was not sufficient to provide 270 days of storage.
3. By November 1, 2009, submit an emergency response plan for each of the facilities to identify procedures to be followed in the event of a spill or release. The South Dakota DENR did receive a plan, but it was not sufficient to comply with the specific requirements of the Order. The South Dakota DENR has not yet received sufficient plans.
4. Submit a design report that uses actual water usage and system operation for each facility to assess if the manure management system capacity meets the requirements of the South Dakota General NPDES Permit (270 days of storage). The South Dakota DENR has not received an adequate report to address this issue.

106. On November 17, 2009, the South Dakota DENR performed inspections of Veblen East and Veblen West and also conducted water sampling within the Little Minnesota River (headwaters of the Minnesota River) at areas were there was evidence that discharges had occurred from both dairies. The discharge from Veblen East appeared to reach an unnamed wetland; water sampling confirmed that manure did indeed reach this wetland. Neither of the dairies reported the discharges to the South Dakota DENR as required.

107. Inspections on November 17, 2009, and January 8, 2010, at both facilities revealed that depth markers (designed to clearly identify the maximum operating levels of the ponds) were missing or were broken off.

108. Inspections on July 10, 2008, and January 12, 2010, at Veblen West and December 7, 2009, and January 8, 2010, at Veblen East noted stockpiles of used sand and manure solids in areas not authorized by the permits for the facilities.

109. Inspections on January 8, 2010, and January 12, 2010, at Veblen West and January 8, 2010, at Veblen East indicated that manure application had taken place to fields not identified within the approved manure management plans for the dairies. Also, both dairies had insufficient records of land application dating back to 2008 and including all of 2009.

110. The MPCA has also received complaints about and photos of these facilities, specifically regarding the lack of freeboard, potential for overflow, and pollution resulting from improper land application of manure. The MPCA has received these complaints as the facilities sit at the head of the watershed of Big Stone Lake, located at the border of Minnesota (Big Stone County) and South Dakota.

[Minnesota Pollution Control Agency, In the Matter of the Request for Denial of Contested Case Hearing Requests and Denial of Reissuance of NPDES/SDS Permit No. MN0068594 for The Dairy Dozen – Thief River Falls, LLP (Doing Business As: Excel Dairy) Concentrated Animal Feedlot Facility, Excel Township,Marshall County, Minnesota, Findings of Fact, Conclusions of Law, and Order, 2010.12.14]