Jun 03, 2023

Tribe invests $25M to open PE pipe plant in Oklahoma

Shawnee, Okla. — The Citizen Potawatomi Nation has invested $25 million to open a polyethylene pipe plant to meet the needs of its tribe members and others for potable water, geothermal and gas gathering products.

Sovereign Pipe Technologies Inc., a tribal corporation, operates out of a 45,000-square-foot facility with two of four extrusion lines running and room to expand — both within its bright, white, newly built plant and a new industrial park in a foreign trade zone.

CPN, the first tribe to extrude pipe domestically, is adding manufacturing to its 30-some enterprise operations. There are two casinos, four grocery stores and gas stations, 10 bank branches, a sod farm, a ready-mix concrete business and electrical contracting.

Now a PE pipe plant decades in the making is extruding product following a pandemic-driven false start in 2020. Anxious tribal leaders see opportunities to meet infrastructure needs in the central south U.S. and beyond as well as lure back members to an area they settled after the Civil War.

In some ways, progress has been slow at the 900-square-mile tribal area. Street lights were just installed 10 years ago and improvements to Rural Water District No. 3 have been ongoing for about 12 years.

However, some big steps are being taken in 2023 to provide more jobs and housing.

On the heels of the pipe plant, which has created about 25 jobs so far, CPN is building 66 rent-controlled, energy-efficient duplex units for Native Americans.

Like CPN's casinos, health clinics and museum, the housing will be hooked up to a buried loop of flexible, corrosion-resistant HDPE pipes that carry a solution of water and safe antifreeze. The geothermal system takes advantage of the constant 55-degree temperatures just 15 feet below the earth's surface to heat and cool buildings, which lowers electrical costs.

The use of renewable energy is an area where CPN has made great progress. Tribe employees got some of their early training in geothermal systems from fittings supplier GF Piping Systems, which is part of GF Fischer AG. The company has a 550,000-square-foot plant called GF Central Plastics in Shawnee that employs 550 people.

CPN also has been advised by professors and researchers at Oklahoma State University, which in June 2022 was selected by the U.S. Department of Energy to receive up to $6 million to speed up the deployment of geothermal heating and cooling technology at federal sites.

"We're probably the most advanced tribe in the country in ground-sourcing pump geothermal," CPN Chairman John "Rocky" Barrett said during an interview at SPT.

CPN also is the first U.S. tribe extruding pipe — an accomplishment celebrated unlike any enterprise since the opening of the Grand Casino in 2006.

SPT eventually will create 45-50 manufacturing jobs to extrude products for some promising applications: upgrade rural drinking water systems, including its own; build more energy-efficient houses with radiant heating and cooling; and one day make conduit for fiberoptic networks.

Tribe officials hope their 39,000 members take note. About 12,000 members live in Oklahoma, including 5,500 in the Shawnee area, but the other 27,000 live all over the world, with clusters in California, Washington, Arizona, Texas, Kansas and Missouri.

The eighth generation of CPN leaders is calling them back.

"My generation has to build community, and then the next generation will have something to grow on," said Barrett, whose Potawatomi name, Kiweoge, means "He Leads Them Home."

The pipe plant is the first business to open in the tribe's 700-acre Iron Horse Industrial Park, which is about 35 miles from Oklahoma City. Pipe sales and industrial park deals will be new sources of revenue for the tribe, which has an annual budget of about $650 million a year.

"All of our 30 businesses are related," Barrett said. "We wouldn't be in the pipe business if we hadn't been in the rural water district business and the ground pump geothermal business. Pipe became an issue when the price kept going up and up and up."

U.S. infrastructure for water and sewer systems have aged and deteriorated to the point of becoming a crisis, Barrett said.

In the meantime, he noted, a trenchless pipe installation method called pipe bursting has gained acceptance. The method uses a winch to pull flexible, bendable PE pipe through an old pipeline of equal or smaller size. The process breaks and expands the existing buried pipe while simultaneously replacing it with new pipe, which minimizes construction disruption. There's no excavating and fewer tree removals and detours for traffic and pedestrians.

"The whole ability to go into these older systems and burst them from the inside and put in HDPE pipe, that's a huge technological breakthrough," Barrett said. "The federal government just passed a $1.7 trillion [bill] for infrastructure. I see that as an HDPE pipe windfall."

SPT CEO and General Manager Ronnie Wear sees an advantage from operating out of Shawnee, a city of 31,000 people considered by many to be in the flyover zone and others to be an exurb of Dallas, which is about three hours away.

"We're not on the East Coast or West Coast. We're here in the middle, where the competition in our industry has made strategic moves that have left a void," Wear said. "Sovereign will be able to fill it and grow in new markets."

Plastic pipe demand will increase at least 5-7 percent year over year for the next 20 years, according to Jeremy Hohn, SPT's vice president of international sales.

"We have aging infrastructure, and there's more specification acceptance for HDPE, which is getting traction on the East Coast," Hohn said.

With the pipe plant now operating, some big puzzle pieces are coming together for tribal leaders. They plan to make a quality product and deliver it on time. And they hope they are closer to answering some questions about their scattered members.

"How do you bring them back home? How do you get the smartest, best and brightest to come back here and be part of what we're dreaming of?" Barrett asked. "The first thing is get them drinking water, because without it, they won't build houses and schools and all the things it takes to grow a community."

CPN got into the water business about 12 years ago by buying the leaking, financially failing Rural Water District No. 3 following a two-year legal dispute with the U.S. Department of Agriculture.

The water district serves south Pottawatomie County.

"Some leaks were so bad, people thought they had springs on their land," Barrett said. "We'd test the pond, and if it was chlorinated, we knew it was a leak in the water system."

Tribal leaders argued the water system — all of which was PVC — needed more investment and better management.

"Because we were an Indian tribe, they didn't think we were capable of running it," Barrett said. "We filed a lawsuit and ended up assuming the defaulted note. We paid it off and started adding to the water system."

CPN went with HDPE pipe. Barrett said it's more durable and leak-proof for the rural water district, which has the right to sell water and natural gas, transport sewage and provide solid waste disposal.

"Those are all reasons why these bitty towns haven't grown," Barrett said. "They don't have a water system, and they're on expensive propane instead of natural gas. To unleash the economic potential of the county, you have to build up this infrastructure, and that's what we have been chugging away at all these years."

The pipe plant is a big part of the development plan. While the first products will go to oil and gas gatherers, pipes for drinking water pipe will be next and eventually geothermal and fiberoptic applications.

SPT products will range from three-quarters of an inch to 48 inches in diameter when all four extrusion lines, which were purchased from Battenfeld-Cincinnati in Germany, are running.

As dieheads melted resin and water jets cooled the extrusions to a solid form for a circular saw to cut into 40-foot sticks for a customer, Hohn said, it's a green operation.

"Plastics get an unfair rap. Everyone likes to talk about how wasteful they are," he said. "We're proud that we recirculate our cooling water and there's no dumping outside the plant. We're responsible with water, power and scrap."

The first pipes are going to the energy market, but others soon will be served by SPT, which is on a mission of "building tomorrow's infrastructure today." Wear expects early demand from the municipal water market in central Oklahoma.

"Distributors in Texas and central Oklahoma tell us there's a void right now for product sizes X through Y," Wear said. "We have an estimated backlog in excess of 75 million pounds. It's enough to book the plant out for our first year."

SPT currently is capable of running up to 100 million pounds of HDPE annually, but Hohn said output capacity could reach 160 million pounds when all six lines are operating.

"Considering the advancements that have been made in the last five to 10 years, SPT has the capability of running pipe sizes at rates that are 25-30 percent higher than the other manufacturers," Hohn said. "That, coupled with the technology we have in place for our closed-loop chiller system, we have the capability to cool the additional water that would run two or three of these facilities."

Looking ahead, SPT and CPN officials are considering another extrusion plant focused on the fiberoptics and telecommunications market or a recycling facility.

"There's more to bolt onto our business here at Sovereign Pipe Technologies," Hohn said.

CPN also operates Sovereign Bank, the largest tribally owned national bank in the United States, with 10 branches and assets of more than $800 million.

The word "sovereign" holds great meaning to Native Americans, Barrett said, noting tribal sovereignty is a political status that recognizes the inherent authority of tribes to govern themselves and preserve their cultures. The status is protected by the U.S. Constitution and treaties and upheld by the U.S. Supreme Court.

"Tribal sovereignty was the turning point for Indian country. It freed us to pursue opportunities," Barrett said.

For SPT management, the company name communicates that they do business by the book in a regulated industry.

"Our intent is to be associated with a quality product traced back to an organization chartered and run like an actual government," Wear said. "There are 27 federally recognized tribes and just more than a handful have a chartered structure. CPN is one."

SPT's name also ties into the company's fundamental foundation, Wear said.

"Sovereign takes on a context of a superior level of expectation in terms of quality, process and environment," he said.

Wear joined SPT in October 2022. He is part Choctaw and has more than 20 years experience in the pipe industry at Pipeline Plastics LLC, Advanced Drainage Systems Inc. and Poly Pipe.

Wear brought on Hohn, whom he had worked with at Pipeline, as well as Barb Donaldson from WL Plastics to be vice president of quality — she has 20 years' experience — and Joe Joseph from Pipeline Plastics to be plant manager.

"We're a very diversified team in terms of expertise, which gives us an advantage as a startup. I think it'll serve us well, and we're in good shape," Wear said.

Hohn said of the operation and his colleagues: "We're running with the best equipment in the field and some of the strongest leaders."

Since SPT is on federally recognized tribal land, the company assets and infrastructure can only be owned by the tribe. That's a refreshing change for pipe plant managers weary of private equity owners that tend to sell assets and shed jobs.

"So much of private equity is about cuts and micromanagement and the dollar driving every decision," Wear said. "Here's our chance to build something and grow it without worry that it'll be sold from underneath us, literally."

SPT's managers also talk about the growing demand for drinking water.

"Water is becoming more and more of a precious commodity," Wear said. "There are people moving to Texas and Oklahoma on a daily basis from all over the world, and no one is bringing water with them. We're going to have to — not only for us but our children and their children — come up with solutions that will mean a better life for them."

SPT sits in an industrial park with Union Pacific and AOK rail service where tribal landowners envision five or six other businesses, perhaps all HDPE-related.

CPN received a grant for its train, which has a rebuilt engine from 1956. The tribe christened her like a ship and named her Linda in honor of CPN Vice Chairman Linda Capps.

Capps, who holds the second-highest elected position in the tribal government, is a retired adult education instructor from Gordon Cooper Technology Center, which is training the SPT workforce.

Linda hauls raw materials to the vacuum system at SPT, which will share the train with its industrial park neighbors.

The vision for Iron Horse started taking shape back in 2008 after Barrett drove James C. Collard, director of the CPN Planning and Economic Development Corp., to a washed-out rail bridge over the Canadian River.

The chairman wanted to get the rail line back in service. The bridge had carried cargo trains between Shawnee and McAllister, Okla., in the southeastern part of the state until it was damaged during a flood about 20 years ago.

Collard recalls seeing a break in the trees where the train tracks lay hidden by overgrown grass and waist-high brush.

"I remember thinking, 'OK, this is a cornfield on high ground with a Class I railroad. This is an industrial park,'" Collard said. "If we can get the bridge repaired and put it in a foreign trade zone, we're in international networks."

CPN met resistance from the rail owner and the Oklahoma Department of Transportation for about four years.

"Union Pacific wouldn't put back the rail because they didn't think there was an economically viable use for the line," Barrett said.

To state transportation officials, the rail line was abandoned, according to Collard, who countered their position.

"I ended up in D.C. for two to three trips with beltway attorneys going through documents in the bowels of the transportation board," Collard said. "We proved the rail was not abandoned. It was simply not in use. That's a key point."

To get the rail line back in use, CPN shored up the riverbanks with crushed rock and concrete and prepared the area for eventual bridge repair work.

"We stabilized the bank so we could get the bridge back. Then we could get rail service in here. That was an eight-year project," Barrett said. "Then we started building this plant."

Sovereign Pipe broke ground in 2019 with Pro-Pipe USA LLC as the partner to manufacture HDPE pipe for the oil and gas, mining, irrigation, sewer, telecommunications, geothermal and municipal water markets. Pro-Pipe is a Canadian Cree-owned pipeline manufacturing firm.

"The CPN was to build the plant and provide the land rights and the previous investors were to provide the know-how," Hohn said. "But COVID changed everything."

Borders closed. Lockdowns shuttered factories. Business plans paused and faded.

Hohn said, "The pandemic prevented the investment group from Canada from coming down and finalizing their commitment."

The tribe and manufacturer parted as friends with no bitterness or anger about the obstacles that blocked their partnership.

Except for one extrusion line, SPT sat vacant for two and a half years.

The tribe launched a new search for a partner.

"We let the word go out into the plastics world that there was a potential plastics plant available. We were deluged by people from various companies interested in locating a plant on this site," said Bob Crothers, chief operating officer of CPN Community Development Corp., which is the lending institution.

The big response gave the tribe pause. CPN officials feared most companies would begin operations and try to flip it.

"We looked at where we were, what we had done and how much we invested. We thought, 'Why don't we just do it ourselves?'" Crothers said. "We have most of the ground work done. We know where to find qualified people. Let's just follow this dream. And that's how it kicked off."

Industry connections brought CPN to Wear, who supports the mission. He put together his team of experts.

"They are a remarkable team, and the tribe is committed to making this a success," Crothers said. "But we still have to take a deep breath every now and then at how much it costs. It's certainly not a cheap venture."

The community development firm put together an $8.5 million financial package.

"With that we were able to start this building and build a power substation to service the entire park," Crothers said.

Another $11.5 million was invested in equipment and $3 million to $6 million for other operating overhead.

"And we are now making pipe. Talk about happy folks," Crothers said.

Because there is a good supply of domestic resin, making pipe in a foreign trade zone won't benefit the tribe. However, the FTZ could help SPT's neighbors become eligible for tariff and tax exemptions related to purchasing or importing raw materials, components or finished goods for their factories or warehouses.

Businesses pay tariffs when their materials, parts or products hit U.S. shores — unless they are located in an FTZ.

"The moment those parts hit the shores of the United States, they stop. They will not move until the U.S. Treasury Department notifies the Customs and Border Protection people that you have paid the tariffs on the entire shipment," Collard said.

"However, if the factory is in an FTZ, CBP will check the seals and paperwork, stamp it, and it goes directly to your company. The savings and the expedition of the process of supply chains are very promising."

Also, with the industrial park being on federal Native American Trust land, it is exempt from all state and local taxes. Under certain circumstances, the tax savings can be applied to the companies within Iron Horse.

For example, CPN can obtain equipment for industrial park tenants at a lower cost.

"We can buy equipment and sell it to them with no sales tax," Crothers said. "So, on a $20 million setup package of machinery in Oklahoma, we just saved you $2 million right there — boom — before you even start."

In terms of factory construction, industrial park occupants also can build their own facilities, sell them to CPN and then lease them back for tax advantages.

In addition to GF Fischer, CPN has been advised by OSU professors and researchers who also are involved with a federal effort to adopt the geothermal technology, which uses the constant 55° F temperature just 10-20 feet below ground to heat and cool buildings.

"Geothermal heating and cooling is renewable, versatile and critical to decarbonizing buildings as well as the economy as a whole," Kelly Speakes-Backman, principal deputy assistant secretary for energy efficiency and renewable energy, said in a DOE press release. "Scaling up deployment of geothermal heating and cooling technology on federal sites will help reduce costs and energy demand, ultimately saving taxpayer dollars and leading by example to decarbonize our economy."

CPN has been trying to lead by example, too. The tribe began studying geothermal applications in 2000, when it dug its first 10 wells to heat and cool half of a health clinic.

"The identical opposite half was conventional. We compared the cost of operation before committing to convert all we could to geothermal," Barrett said.

The transition began in earnest in 2014. CPN built a chiller plant and fed it with water from a geothermal pond to provide air conditioning for Fire Lake Arena, a 3,500-seat, 57,000-square-foot space for concerts, conventions and community events.

Less than 10 years later, about two-thirds of CPN buildings are equipped with geothermal systems.

At the Grand Casino, 400 wells with heat exchangers were installed under the parking lot to heat and cool the 125,000-square-foot casino, 14-story hotel and travel plaza.

Another system was installed with horizontal HDPE rather than vertical wells.

"We went into a backyard, bored down 20 feet, went under the house and street to another house, bored back, and laced the entire neighborhood with horizontal pipe," Barrett said. "There's a common heat sink, and all their heat pumps are hooked to it."

The average electric bill for an 1,100-square-foot duplex unit hooked to the system is $35, according to Barrett.

"Geothermal is really the smartest way," he added. "We think small towns through the county will eventually get revenue by selling access to the geothermal system. So, when it comes time to replace the condenser for your air conditioner, rather than doing that, get a heat pump from us and we'll install it and hook it on to the geothermal system. You'll lower your utility bills."

It's all another facet of the CPN pipe dream.

"Just look at the vertical integration possibilities of a little Indian tribe sitting in the middle of Oklahoma that gets in the plastic pipe business," Barrett said.

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Shawnee, Okla. —