PBJanuary 2013

January 2013

Fighting for Air

Wind industry struggles to expand in face of multiple challenges

pg. 22

ALSO Trade Partners Organizations aid businesses in export opportunities

pg. 24

Looking to Improve Utility tries new technology to stay ahead of emissions regulations

pg. 34

www.prairiebizmag.com

Proud of the Past...

Focused on the Future

1st Generation F.W. “Bill” Mohr Jr.

2nd Generation Fred W. Mohr III “All of us at Dacotah Paper Company strive to provide the best service and the highest quality products at all times.”

–Matthew Mohr, President

Dacotah Paper was founded in 1906. The company’s philosophy was simple and it still holds true today, “Treat people well, and serve customers right.”

Dacotah Paper is a third generation, family-owned business. Bill Mohr and his son, Fred, purchased the business in 1960, and today Matthew Mohr, Fred’s son, serves as the company president. The Mohr family and the company continue their commitment to the original business philosophy and tradition of treating people well and serving customers right.

Customers throughout the region know they can count on Dacotah Paper. With 220,000 square feet of office and warehouse space in Fargo, plus facilities in Bemidji and Virginia, MN, Dacotah provides superior and

3rd Generation Matthew Mohr

timely service.

Dacotah Paper distributes over 6,000 products to more than 8,000 customers. By constantly improving technology systems, Dacotah has been able to provide their customers the best in service and meet their customer’s changing needs. Whether it involves product selection or delivery requirements, Dacotah knows how to treat their customers right. Dacotah sales representatives can instantly check inventory, pricing, and customer order history at the touch of a button, providing the fastest and most accurate service around.

Customers can also be linked directly into Dacotah’s system to check inventory, pricing, and to place orders. Orders transmitted are shipped the very next day, on their own fleet of 50 trucks,

delivering from the Canadian to Nebraskan borders.

For national delivery, Dacotah Paper is a member of Network Services®. This is advantageous for national chains and franchises to maintain consistency and quality everywhere in the country.

Dacotah Paper is proud to provide the best in: • Disposable paper products • Food service supplies and equipment • Sanitary maintenance products and chemicals • Shipping and mailing supplies • Office and computer supplies • Electrical products • Healthcare specialty products

www.dacotahpaper.com

1-800-323-7583

Fargo • Grand Forks • Rugby • Minot • Williston • St. Cloud • Duluth • Virginia • Brookings Jamestown • Bismarck • Dickinson • Brainerd • Fergus Falls • Sioux Falls • Detroit Lakes • Marshall • Watertown

Photo courtesy of Aldevron

North Dakota. Doing Business Better.

Aldevron is one of many biotech companies taking root in North Dakota thanks to the state’s world-class academic resources and favorable economic climate.

Learn how the North Dakota Department of Commerce and companies in the state are doing business better at www.NDBusiness.com

|INSIDE| JANUARY 2013 VOL 14 ISSUE 1

FEATURES

DEPARTMENTS 6 Editor’s Note

BY KRIS BEVILL

Energy’s evolution 8 Business Advice

BY MATTHEW D. MOHR

Inventory control 10 Finance

BY ROB MONTGOMERY AND CHANNING SCHMIDT

Sound financial preparation key to new wealth 12 Research & Technology

BY BRENDA WYLAND

Entrepreneurs: Born or made?

14 Economic Development

BY ALAN ANDERSON

New Innovate ND program is launched across the state 16 Prairie News 18 Prairie People

22

WIND

20 Business Development Industrial activity spurs incentive changes in Jamestown

Hanging in the Breeze Uncertain federal support leaves wind industry struggling to expand

24

28 Red River Valley John Deere invests millions to expand production in ND

TRADE

Exports on the Rise

30 South Dakota De Smet draws in industrial park tenants

Merchandise exports from companies throughout the region are on the upswing

32 Western North Dakota Bidding on Bowman 33 Business to Business 34 Energy 38 By the numbers

Follow us on Twitter https://twitter.com/PrairieBiz

On the Cover

Check us out on Facebook https://www.facebook.com/PrairieBusiness

Lake Region State College students receive hands-on training at a full-size wind turbine as part of the college's wind energy technician program.

PHOTO: LAKE REGION STATIE COLLEGE CORRECTIONS: • The December issue of Prairie Business magazine incorrectly identified Doug Burgum as the founder of Great Plains Software. The company was founded by Joe Larson and Roger Turner.

• The feature article “Immense Inspiration” incorrectly listed the ages of Ryan Boschee and Kory Anderson. Boschee is 33 years old. Anderson is 29.

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Prairie Business Magazine January 2013

Scan this with your smartphone's QR Reader to visit our website.

Next Month February's issue of Prairie Business magazine will cover technology and its role in improving health care. Also in February, how states plan to address the persistent need for health care professionals in rural areas.

|EDITOR’S NOTE|

Energy’s evolution he story of energy production on the northern Plains is one that changes nearly as steadily as the seasons. It is an evolving story as oil production continues to reshape the western region of North Dakota. It is an emerging story as new technologies are introduced to utilize the increasing amounts of natural gas produced at Bakken wells, presenting new opportunities for producers to capitalize on a resource that is too often flared into the atmosphere. It is a survival story as the wind energy industry faces a future without federal support and fights to retain a growing presence in the nation’s energy mix. And it is a story of anticipation, as coal-fired utility plants attempt to deploy technologies to meet anticipated stringent environmental regulations ahead of the regulators’ final rules.

In this issue, we touch on many of the diverse energy resources and the issues facing those industries. In my years covering energy, I’ve found that writing about energy topics would often be much easier if I had a crystal ball, and this month was no exception. As we send this issue to print there is still no final word on a last-minute extension to the wind industry’s production tax credit, although industry members continued to express optimism that Congress would pass an extension prior to the Dec. 31 expiration date. The northern Plains is rich in wind and legislators in the Dakotas have expressed support to extend the credit in some form in order to prevent a total collapse of the industry.

The latest oil production numbers from the North Dakota Department of Mineral Resources, released in mid-December, showed that the state’s wells set another production record in October, up slightly over September’s number to approximately 747,000 barrels per day. The number of operating rigs had dropped slightly to about 180, but it is expected that number will increase in early 2013 to around 200. Daily natural gas production did not increase from September to October but it is expected that natural gas production will continually increase in the coming years and producers will be held more strictly to policies set in place to limit flaring activities.

2013 is shaping up to be yet another interesting year across all sectors of our region’s diverse energy industries.

T

KRIS BEVILL Editor kbevill@prairiebizmag.com

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Prairie Business Magazine January 2013

An SBA Award Winning Publication

MIKE JACOBS, Publisher RONA JOHNSON, Executive Editor KRIS BEVILL, Editor TINA FETSCH, Production Manager BETH BOHLMAN, Circulation Manager KRIS WOLFF, Layout Design, Ad Design Sales Director:

JOHN FETSCH 701.212.1026 jfetsch@prairiebizmag.com Sales:

BRAD BOYD - western ND/western SD 800.641.0683 bboyd@prairiebizmag.com SHELLY LARSON - eastern ND/western MN 701.866.3628 slarson@prairiebizmag.com Editor: KRIS BEVILL 701.306.8561

kbevill@prairiebizmag.com

Editorial Advisors: Dwaine Chapel, Executive Director, South Dakota State University Innovation Campus; Bruce Gjovig, Director, Center for Innovation; Lisa Gulland-Nelson, Communications Coordinator, Greater Fargo Moorhead EDC; Tonya Joe (T.J.) Hansen, Assistant Professor of Economics, Minnesota State University Moorhead; Dusty Johnson, Chief of Staff for South Dakota Gov. Dennis Daugaard’s office; Brekka Kramer, General Manager of Odney; Matthew Mohr, President/CEO, Dacotah Paper Company; Nancy Straw, President, West Central Initiative Prairie Business magazine is published monthly by the Grand Forks Herald and Forum Communications Company with offices at 375 2nd Avenue North, Grand Forks, ND 58203.

Qualifying subscriptions are available free of charge. Back issue quantities are limited and subject to availability ($2/copy prepaid). The opinions of writers featured in Prairie Business are their own. Unsolicited manuscripts, photographs, artwork are encouraged but will not be returned without a self-addressed, stamped envelope.

Subscriptions Free subscriptions are available online to qualified requestors at www.prairiebizmag.com Address corrections Prairie Business magazine PO Box 6008 Grand Forks, ND 58206-6008 Beth Bohlman: bbohlman@prairiebizmag.com Online www.prairiebizmag.com

www.prairiebizmag.com

7

|BUSINESS ADVICE|

Inventory control

BY MATTHEW D. MOHR

ost businesses carry some product for sale to customers, or in the case of a service firm, keep an inventory of needed supplies on hand. But not every product that is bought can be resold or used. The best purchasing departments keep a close eye on merchandise and supplies that may become obsolete, old, out of date or hard to sell. Solid inventory control involves getting a benchmark percentage of what you have on hand which will be allowed to be unsaleable or unusable. Industry benchmarks are available if you look for them. If some of what you purchase regularly becomes bad, a lot of good sales need to be made to cover for the items you can’t get rid of.

Obsolete inventory is a major concern of lenders and potential business buyers. Often a business purchase price will exclude any product on hand older than a certain number of days. When touring a high cost of inventory business a few years ago, I explained this idea to the owner who quickly corrected me by saying they

M

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Prairie Business Magazine January 2013

had to keep all the poor items on their inventory list so they received larger bank loans. The business had sufficient over-all turn-over, but a large share of what they borrowed against was unsaleable. The bank looked at the gross numbers, not realizing they were lending against worthless goods. Had the business gone under, the bank would have sold for pennies what they thought was worth dollars.

Many businesses keep product long past the time it is saleable, inflating their inventory value and profits. This is a tricky game that usually results in a problem which continues to grow until it is unmanageable.

If you carry goods on hand for resale or use, be sure you watch particular items and dispose of the poor selling ones quickly so you don’t end up with a bunch of outdated, unsaleable, unusable product and no profit. PB Matthew D. Mohr CEO, Dacotah Paper Co. mmohr@dacotahpaper.com

|FINANCE|

Sound financial preparation key to new wealth

BY ROB MONTGOMERY AND CHANNING SCHMIDT

ROB MONTGOMERY

CHANNING SCHMIDT

10

orth Dakota is booming with new-found oil wealth and escalating family farm and ranch values. Creating and growing these business operations requires attention to not only the current operations, but also what we want to pass on to the next generation, and that requires important financial preparation right now.

There are three questions any business or farm owner needs to ask themselves when they are thinking about transitioning out of a business or farm: 1) who do I want to transition the business to 2) when do I want to transition out and 3) how do I want to transition it?

Typically, the first step is the easiest because the business or farm owners already have an idea who they want to transition the business or farm to. The answer is usually either a family member or a key employee.

However, there are times when a third party can come in and purchase the business or farm.

The second step becomes a moving target. One of the most difficult decisions a business or farm owner has to make is when to walk away. Many times, the target date moves back because the business or farm owner doesn’t feel they have enough money to retire or have a desire to retire.

The third step is the most difficult decision because many times the business or farm owner needs assistance from their legal, tax and financial advisers.

Many times, a comprehensive financial plan may need to be completed in order to map out their goals, if the business or farm owner is looking to transition into retirement.

Many business or farm owners look at transition of the business at death. Looking at estate plan strategies at death, they can consider three options: Wealth equalization, family management or a one-way, buy-sell agreement.

Wealth Equalization. The assumption for wealth

N

Prairie Business Magazine January 2013

equalization is they want to treat their children fairly but maybe not equally. Here, they will bequest the land or business to child who wishes to farm the land or continue the business. The rest of the assets then will be split among the other children. Since a large amount of the estate will go to the one child, the owner can equalize the estate by placing a life insurance policy in an Irrevocable Life Insurance Trust and have the remaining children be the beneficiaries of the trust.

Family Management. Here, the business owner will put the business or farming operation into a partnership or LLC whereby they will control and receive income from the partnership during their lifetime.

They can bequest the entire operation to all of the children and name one child as a manager of the operation.

The child who becomes manager can then rent the land (or buildings) from the partnership or LLC. Each child will receive income from the operation and the entire operation will pass from one generation to the next.

One-Way Buy-Sell. A third option is that the designated manager (son or daughter) will enter into a buy-sell agreement with the parents where he or she will purchase the land or business upon the death of both parents. For a source of funds, the children would purchase a life insurance policy on the parents.

These are just some of the options and considerations that should be discussed now by business owners experiencing new wealth from the North Dakota energy boom or by family farmers who are witnessing extraordinary land values. PB Rob Montgomery President, Securian Financial Advisors of North Dakota rob.montgomery@securiannd.com Channing Schmidt Attorney, Minnesota Life Insurance Co. channing.schmidt@securian.com

|RESEARCH & TECHNOLOGY|

Entrepreneurs: Born or made?

BY BRENDA WYLAND

re entrepreneurs born, or are they made? At first glance, this question may be along the lines of which came first, the chicken or the egg? At the North Dakota State University Research and Technology Park, we provide an environment that encourages and sustains entrepreneurship, spanning a continuum of age groups.

The most recent U.S. State Entrepreneurship Index from the University of Nebraska-Lincoln placed North Dakota as No. 2 in the annual state-by-state measurement of entrepreneurial activity in all 50 states. Massachusetts was No. 1, with California, New York and Minnesota rounding out the top five.

A

On the Web: The complete U.S. State Entrepreneurship Index can be viewed at: http://bbr.unl.edu/documents/September_2012_BIN.pdf

Economists at UNL’s Bureau of Business Research and Department of Economics developed the index.

North Dakota was ranked No. 8 in 2011 but jumped to No. 2 last year primarily due to high rates of business formation and establishment growth, according to the index’s authors.

At the NDSU Research and Technology Park, we strive to foster innovation and entrepreneurship.

Through our commitment to entrepreneurship education and initiatives, the park contributes to the quality of academic success at NDSU, diversifies the state’s economy and builds an environment for discovery. The partnership works to produce effective results.

NDSU’s Innovation Week builds student awareness for innovation as a precursor to entrepreneurship, empowers students to pursue entrepreneurship as a career choice, expands student access to available resources, and engages current entrepreneurs with students. February will mark the fourth annual Innovation Week on campus and the second year for the Innovation Challenge, an innovation competition which will award three winning teams $5,000 plus the

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Prairie Business Magazine January 2013

chance to win an additional $5,000 for the top product, service or corn-based innovation. Last year’s Innovation Challenge yielded entrepreneurial ideas including innovative dental implants, aphasia therapy for people with a language processing disorder and coatings for industrial applications. Fifty-nine student teams have registered for the 2013 challenge, nearly triple last year’s entries.

Fostering a culture of innovation starts early. Our partnerships with Fargo Public Schools, West Fargo Public Schools, Moorhead Public Schools, South East Education Cooperative, NDSU, and the North Dakota State College of Science further advance science, technology, engineering, entrepreneurship and math skills critical to building a diversified economic environment.

Others across the NDSU community support entrepreneurship as well. The NDSU College of Business partners with the University of North Dakota to offer a program where students can achieve an entrepreneurship certificate. The NDSU Extension Service Center for Community Vitality provides entrepreneurs resources to start or grow their businesses, along with youth entrepreneurship classes.

For business start-ups, the NDSU Research and Technology Park Incubator provides a one-stop center for entrepreneurial tools such as venture capital, coaching and mentoring, networking, talent and technical assistance to advance their growth trajectories.

Whether entrepreneurs are born or made may still be debated. Through our efforts at NDSU and the efforts of many others in state leadership positions through programs such as Innovate ND, we are working to ensure that entrepreneurship becomes second nature to those who generate good ideas. Those good ideas may contribute to the region’s continuing economic success in the future. PB Brenda Wyland Interim executive director North Dakota State University Research and Technology Park Brenda@ndsuresearchpark.com

|ECONOMIC DEVELOPMENT|

New Innovate ND program is launched across the state

BY ALAN ANDERSON

nnovate ND is a program that assists entrepreneurs in the development of their business idea through access to coaches from entrepreneurial centers across North Dakota. The program helps people with innovative concepts build a business from the idea up.

Innovate ND has made exciting changes for 2013 to ensure the program’s success continues well into the future. Until now, the program has been known as a venture competition with deadlines, Top 20 finalists and the opportunity to win cash prizes. As Innovate ND enters its seventh year, the program is taking a more strategic view of its current structure to ensure it is delivering on the original goal of building a statewide entrepreneurial community.

Innovate ND continues to build a comprehensive statewide network of information, educational content and business resources to assist entrepreneurs in establishing their businesses while creating an overall climate in our state that encourages, promotes and supports future businesses which will drive our economy.

Innovate ND’s 2013 program will focus on structure, educational assistance for entrepreneurs and the entrepreneurial community as a whole, rather than a venture competition.

Anyone who is a current or former North Dakotan or an entrepreneur with the desire to build a business in the state is welcome to be part of the Innovate ND program.

There are several benefits for those who enroll in the Innovate ND 2013, including: • Increased individual technical assistance and coaching • More educational boot camps (increase from three to six) in more locations • High-quality, online educational tools • Increased access to free “Coach-on-Call” assistance from one of the best entrepreneurial coaches in the country • Ability to work with entrepreneurial center coaches at their own pace and determine their unique goals Innovate ND fosters innovation and entrepreneurship in all sectors of the economy and in all corners of our state. Entrepreneurial centers in four locations throughout the state will provide technical support and coaching assistance to Innovate ND participants. The centers are located at the University of North Dakota Center for Innovation in Grand Forks, the North Dakota State University Technology Incubator in Fargo, the IDEA Center in Bismarck and the Severson Entrepreneurship Academy in Minot.

Join the program as a participant or strategic business partner. Enrollment is open through May 31, 2013. Additional information about the program is available at InnovateND.com. PB

I

Alan Anderson Commissioner, North Dakota Department of Commerce alranderson@nd.gov Twitter: @InnovateND, @NDAmbassador, @NorthDakota

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Prairie Business Magazine January 2013

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15

Prairie News

Industry News & Trends

RDO provides equipment to NDSCS, takes stake in Aussie dealership

RDO Equipment Co. has partnered with North Dakota State College of Science to provide state-of-the-art equipment and technology for its land surveying and civil engineering technology program. From left to right, NDSCS President John Richman; land surveying and civil engineering technology students Cody Zarak, Wahpeton, N.D., and Shellina Irwin, Wasilla, Alaska; Fred Meyer, RDO Integrated Controls account manager, and Scott Schumacher, RDO Integrated Controls eastern North Dakota account manager.

PHOTO: NORTH DAKOTA STATE COLLEGE OF SCIENCE

Summit Hotel Properties acquires Texas hotel Sioux Falls, S.D.-based Summit Hotel Properties Inc. purchased a 98-room Hilton Garden Inn in Fort Worth, Texas, for $7.2 million in October. The company now owns 82 hotels with a total of 8,674 rooms located in 21 states.

Summit Hotel Properties is a self-managed hotel investment company focused on acquiring and owning premium-branded, select-service hotels in upscale and upper midscale segments of the U.S. lodging industry, according to the company. The majority of its hotels are franchise brands owned by Marriott International Inc., Hilton Worldwide and InterContinental Hotels Group.

Northrop Grumman earns safety award Northrop Grumman Corp.’s New Town, N.D., manufacturing center recently received recognition from the U.S. Department of Labor for its health and safety practices. The company participates in the Occupational Safety and Health Administration’s Merit Voluntary Protection Program, which recognizes private industry and

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Prairie Business Magazine January 2013

Fargo, N.D.-based RDO Equipment Co. recently announced a partnership with Vanderfield Pty. Ltd., an Australian John Deere dealer group. Founded in 1963 by Gordon Vandersee, Vanderfield became a dedicated John Deere dealership in 1970 and currently operates eight locations throughout Australia. Its headquarters in Toowoomba is considered one of the largest individual John Deere dealerships in Australia. RDO now joins the Vandersee family as shareholders in Vanderfield.

In November, RDO Integrated Controls, the company’s positioning division, partnered with North Dakota State College of Science in Wahpeton to provide equipment and technology for the school’s land surveying and civil engineering technology program. RDO will provide free faculty training, support and setup of equipment, which will be updated with the latest available versions each school year. The equipment is valued at $225,000, but is being provided to NDSCS at no cost.

RDO was founded in 1968 by Ron Offutt and continues to be family-owned and operated. The company currently consists of 60 locations in nine U.S. states and in Russia and Ukraine, offering equipment produced by John Deere, Vermeer and Topcon.

federal agencies that have implemented effective safety and health management systems and maintain injury and illness rates below national Bureau of Labor averages.

Northrop Grumman’s manufacturing facility has been in New Town since 1970. It employs 125 workers who produce radio frequency and fiber-optic cables and wire harnesses for the company’s aircraft programs.

NDSU technology licensed to ND start-up Colfax, N.D., technology start-up company c2renew has completed a license agreement with the North Dakota State University Research Foundation that will enable the company to produce biocomposite materials that are used to improve the strength and stability of plastic products. The technology developed by university researchers utilizes agricultural byproducts such as sunflower hulls, sugar beet pulp, flax shive and corn fiber from distillers dried grains as a replacement for petroleum-based plastics in thermoplastic applications such as handles and consoles on agricultural equipment. The company plans to

commercialize the technology to produce environmentally friendly products at a lower cost than the petroleum counterparts.

USD awaits final approval for sports facility projects Officials from the University of South Dakota are expected to appear before state legislators this month to request their approval for a sports performance enhancement facility and an outdoor track and soccer complex at USD. Legislative approval of the sports facilities is the final step necessary before construction can begin on the projects.

The South Dakota Board of Regents authorized the projects in October, as well as a science, health and research lab, which was also approved by the state legislature. The combined cost of the projects is more than $70 million.

The Board of Regents also granted its final authorization in October for an $11.6 million expansion of USD’s Muenster University Center.

The project, which is currently under way, will add 30,000 square feet to the center, improving campus dining options for students.

|PRAIRIE NEWS|

Knowledge ! Dedication ! Commitment

From left to right: Jackie Schumacher, information specialist with youth programs, and Shawna Hall, youth programs program and curricula developer, at the South Dakota School of Mines and Technology accept a $5,000 South Dakota Community Foundation donation from Charles Riter.

PHOTO: SOUTH DAKOTA SCHOOL OF MINES & TECHNOLOGY

SDSMT receives youth camp scholarships donation The South Dakota Community Foundation has awarded a $5,000 grant to the South Dakota School of Mines & Technology to offset camp fees for the school’s summer youth programs. SDSMT’s summer camps have traditionally focused on exposing elementary and middle school students to science and engineering, or immersing high school students in areas such as mining, forensics, chemical engineering and explosives.

For summer 2013, however, the program will shift its focus toward more in-depth camps for high school students and will emphasize the areas of science, technology, engineering and math.

Fisher Sand & Gravel Co. ! Sand/Gravel

! Contract Crushing

! Decorative Rock

! General Highway Construction

! Landscaping Gravel

ND, MN rank high in entrepreneurship index A study recently conducted by the University of Nebraska’s Bureau of Business Research ranked North Dakota as second in the nation in the development of entrepreneurship. Minnesota ranked fifth. The Top 5 states in the 2011 U.S. State Entrepreneurship Index, in ranking order are: Massachusetts, North Dakota, California, New York and Minnesota.

North Dakota jumped six slots from 2010 to 2011, a move attributed primarily to a high rate of business formations and establishment growth. Five components are considered in the index, including the income of entrepreneurs, business formation rates, technological innovation and growth in the number of entrepreneurs.

Sioux Falls home building permits up nearly 80 percent The Home Builders Association of the Sioux Empire reported in October that the number of building permits for new residential singlefamily units for the first nine months of 2012 was up nearly 80 percent compared to the same time frame in the year prior. The total number of building permits issued in Sioux Falls from January through September 2012 was 465, compared to 261 permits issued in 2011 and 302 permits issued in 2010.

General Steel & Supply Co. ! Full Service Steel Center

! Tie Down Chains

! Custom Fabrication

! Tow Ropes/Cables

! Milwaukee Power Tools

! Lift Slings/Chains

! Grade 5 & 8 Fasteners

! Drill Bits

! Snap-On Industrial Hand Tools

! Pipe Fittings

®

®

3020 Energy Drive ! Dickinson, ND (800) 932-8740 ! (701) 456-9184 www.fisherind.com

www.prairiebizmag.com

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|PRAIRIE PEOPLE| Sioux Falls photographer to participate in national contest

Ann Kneip

Tammy Miller

Ann Kneip, owner of Ann Louisa Photography, has been selected to represent Sioux Falls, S.D., in the 2013 Seniors Ignite Model Competition to be held in March in San Diego, Calif. Her photography studio is one of only 46 studios nationwide to be selected to submit portraits for the contest.

Michelle Blakeman

18

Karen Poppe

Border States Electric CEO receives achievement award

TMI Hospitality adds 4 team members

Tammy Miller, CEO of Border States Electric, was recently awarded the L.B. Hartz Professional Achievement award from the College of Business and Industry at Minnesota State University Moorhead, an award given in recognition of a leader’s demonstrated qualities of entrepreneurship, contributions to their community, contributions to the creation of quality jobs, business and personal ethical qualities, and creativity and innovation in business.

Miller joined BSE in 1991 and served in several different positions before becoming CEO in 2006. Since 2006, company sales have grown from $480 million to $1.2 billion and more than 750 new jobs have been created. Miller is a graduate of MSUM and has served on the foundation board of directors and the business school advisory council.

She is the 31st recipient of the professional achievement award.

TMI Hospitality, a Fargo-based privately owned hospitality ownership and development company, has added four new members to its team.

Michelle Blakeman has been hired as manager of talent acquisition. Before joining TMI Hospitality, she recruited for Microsoft, Blue Cross Blue Shield of North Dakota and Eide Bailly.

Melissa Hughes has been hired as human resources manager. She previously served as human resources manager for the Fargo Jet Center Inc. and Weather Modification Inc. Karen Poppe will serve as compensation and benefits manager, a position she held previously at Essentia Health.

Laura Ludwig has joined the company as manager of the sales center. She worked most recently as director of sales for the Fargo, N.D., Hilton Garden Inn.

Laura Ludwig

Long-time BMDA president announces retirement

Russell Staiger

Melissa Hughes

Russell Staiger, president of the BismarckMandan Development Association has announced his intent to retire from the position in June. Staiger has served as president of the group since joining in January 1980, when it was known as the Bismarck Development Association. Since that time, the city of Bismarck asked the association to assume the role as city-wide economic development agency, followed by a similar request from the city of Mandan, the Burleigh County Commission and the Morton County Commission, which resulted in the group’s name change to the Bismarck-Mandan Development Association.

Staiger and the BMDA executive committee will develop a recruitment process to identify his replacement prior to his June 30 departure.

Prairie Business Magazine January 2013

Warberg Block receives entrepreneurial award

Kari Warberg Block

Kari Warberg Block, founder of Bismarck, N.D.-based Earth-Kind, the only U.S. EPA certified natural rodent repellent, was one of the winners of Ernst & Young LLP’s 2012 Entrepreneurial Winning Women program. She was one of 11 recipients selected from a group of 110 applicants as part of a national competition and leadership initiative that connects award winners with advisors, resources and insights to assist in scaling their businesses from second-stage to their full potential. Winners receive a trip to Ernst & Young’s annual strategic growth forum, where they have the opportunity to connect with and present to more than 2,000 market-leading CEOs.

|PRAIRIE PEOPLE|

Alan Amdahl

Duane Bickett

Dave Asbridge

Jennifer Lage Landguth

SD Home Builders inducts 4 into Hall of Fame The South Dakota Home Builders Association inducted four new members into its Hall of Fame during the group’s annual convention held Nov. 2 in Sioux Falls.

Alan Amdahl of Amdahl Construction Co. is a past president of the SDHBA and the Home Builders Association of the Sioux Empire and served as the South Dakota National Director from 1998 until 2003.

Duane Bickett of Bickett’s Construction and has served in various positions at all levels of the association. He continues to serve as part of the state board of directors.

Dave Asbridge and Jennifer Lage Landguth, both of Rapid City, were also inducted into the Hall of Fame.

www.prairiebizmag.com

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|BUSINESS DEVELOPMENT|

Industrial activity spurs incentive changes in Jamestown Proposed energy park projects expected to increase housing demands in south-central ND community

BY KRIS BEVILL ity leaders and economic development officials in Jamestown, N.D., are quick to express satisfaction with the looming flurry of activity at the nearby Spiritwood Energy Park. At the same time, they’re feeling the pressure of anticipated growth in demand for housing as the town of 16,000 prepares to accommodate new workers at energy park facilities.

“We’re scrambling to make it known to those who build houses, apartments and so forth that we have a very short [housing] market,” says Connie Ova, CEO of the Jamestown/Stutsman Development Corp. “We know we’re already behind the curve but we’re diligently working on it.”

Spiritwood Energy Park is a 500-acre industrial park located just 10 miles east of Jamestown. The park is expecting at least two new tenants over the next few years that could provide up to 200 full-time manufacturing jobs to the area. The JSDC and city and county officials have formed a development committee to address the housing situation and are considering crew camps as an option to house construction workers, Ova says. A 90-room Hampton Inn currently being built in Jamestown is targeted to be operational this summer and Ova says development officials are hopeful

C The Spiritwood Energy Park, located 10 miles east of Jamestown, N.D., is situated next to Great River Energy’s existing power plant and a Cargill Malt plant. Projects under development for the energy park are expected to increase housing demands in nearby Jamestown.

PHOTO: JAMESTOWN/STUTSMAN DEVELOPMENT CORP.

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Prairie Business Magazine January 2013

it will also be available in time for construction crews to utilize as they begin work on the first project. But with fewer than 50 single-family homes currently available in Jamestown and few apartment openings, the need for permanent housing is an area of key focus.

To help spur permanent housing projects, the city is working to improve the climate for business development.

In early December, the city council passed a measure by a vote of 3-2 which will allow 75 percent of the developers’ infrastructure costs to be applied in special assessments. The city previously required developers to pay 100 percent of the infrastructure costs. The city is also employing an engineering, planning and design consultant to update its master plan and strategically target areas for future development.

Minneapolis-based SRF Consulting Inc. has offices in Fargo and Bismarck, N.D., and has worked on projects in western North Dakota — an experience that Jamestown officials feel will be useful when guiding them through their growth plan, according to Mayor Katie Anderson.

The first energy park project expected to impact the town is a 65-million-gallon per year corn ethanol plant named Dakota Spirit AgEnergy. Great River Energy has

|BUSINESS DEVELOPMENT| been developing the project for several years and is expected to break ground on the plant in 2013, pending the completion of fundraising efforts.

The project is expected to require $150 million in capital equity, according to Sandra Broekema, GRE business development manager. When the ethanol plant is complete in late 2014 or early 2015, GRE’s nearby Spiritwood Station, a combined heat and power plant, will provide steam to operate the ethanol facility, allowing the power plant to operate at full capacity.

Spiritwood Station will then add 20 to 25 fulltime workers. The ethanol plant is expected to provide up to 40 jobs.

The largest project slated for the park to date is a massive $1 billion nitrogen fertilizer plant.

CHS Inc. announced in September its intent to construct the facility on 200 acres of the energy park and is currently in the pre-FEED (front-end engineering and design) stage of the project.

Construction is tentatively scheduled to begin in 2014. If the current timeline stays in place, the facility will be operational in 2016 and will employ up to 150 workers.

Ova says 100 acres of land are still available within the park and the JSDC has received many inquiries from in- and out-of-state companies that are considering snapping up the available space.

The JSDC is a majority partner in the Spiritwood Energy Park Association, which has pledged 100 acres of the property as well as $3.75 million to install a rail loop to provide the park’s tenants with access to the Burlington Northern Santa Fe rail line. “The rail spur is what the drawing card is,” she says, adding that as soon as ground is broken for the ethanol plant and/or fertilizer plant, construction will also commence on the rail loop.

Anderson says that although construction has yet to begin on either of the proposed energy park projects, she is not fearful of developing the town too soon. She’s confident that both projects will proceed as planned noting that CHS’s $10 million pre-FEED costs implies a definite commitment to Spiritwood Energy Park. “I feel like if someone is willing to commit $10 million to the engineering and design specifically to this site, they’re very serious about moving forward,” she says. “They’re not likely to walk away from that large sum of money without significant reason.”

PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

www.prairiebizmag.com

21

|WIND|

Hanging in the Breeze Uncertain federal support leaves wind industry struggling to expand

BY KRIS BEVILL

Minnkota Power Cooperative purchases electricity from two large wind farms in North Dakota through 25-year power purchase agreements. The U.S. Department of Energy, the National Rural Electric Cooperative Association and the Cooperative Research Network named Minnkota Power Cooperative as the 2010 Wind Cooperative of the Year.

PHOTO: MINNKOTA POWER COOPERATIVE

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Prairie Business Magazine January 2013

ith about two weeks remaining before the Dec. 31 end of the wind energy industry’s 2.2 cent per kilowatt hour production tax credit (PTC) and no real sign of Congressional action to extend it, the American Wind Energy Association began floating a plan to temporarily extend the credit while phasing it out over the next few years. The group suggested that Congress should extend the PTC at its current rate through 2013 and then reduce it by 10 percent each year until it reaches 60 percent of its current value in 2016.

After that, the proposal suggested leaving the subsidy in place at the 60 percent rate for two years before it is completely eliminated in 2018.

In a Dec. 12 letter to Congressional leaders, AWEA CEO Denise Bode said the Dec. 31, 2012 PTC expiration date had already begun to translate into layoffs because project developers had shelved any upcoming projects that would have extended beyond that date. If the subsidy were allowed to expire as planned, Bode said it could result in 37,000 lost jobs throughout the country by the end of the first quarter in 2013. “If the wind industry’s domestic supply chain is lost now, it will take years to build it back up to its current level,” Bode said in the letter.

In the days following the AWEA’s policy suggestion, it remained unclear whether Congress would take up the offer and extend the PTC, but Ron Rebenitsch, executive director of the South Dakota Wind Energy Association, was optimistic that the proposed policy had a chance of success. Rebenitsch said that while a longer timeframe would be preferable, six years “is better than nothing” and would still provide some certainty to project developers on the brink of a collapsing industry.

Rebenitsch says just 2,000 megawatts of wind power are expected to come online nationwide in 2013, compared to a high of 13,000 megawatts in 2012 as project developers rushed to beat the PTC’s expiration. “We went from boom to bust,” he says. “Hopefully this longer term extension will enable [the industry] to recover from that bust,” he said. “It won’t happen in 2013 because these things take time but it will help us begin recovering and make longer-term plans and move forward.”

W

|WIND| Locally, the impacts of an expiring PTC have been visible in layoffs at turbine component manufacturing facilities and in the halt of wind farm project development. At the end of 2012 there were no wind projects under construction in South Dakota, according to Rebenitsch. “There are a number of projects in various stages of development, but most of those developments have been basically stopped,” he said. North Dakota’s industry was in a similar state, according to Mark Nisbet, North Dakota principal manager for Xcel Energy and wind representative for North Dakota’s Empower Commission. He said North Dakota was set to have 1,670 megwatts of wind energy by the end of 2012, ranking it among the Top 10 wind energy producing states, but there were no known new projects on the books for 2013. “Everybody was aware that this might be the last year of the PTC …

It probably wasn’t a year conducive to just deciding in the middle of the summer that you were going to move ahead,” he said.

Multiple Challenges The PTC was created to make up-front capital intensive wind projects more economically competitive with other forms of energy. However, while the continuation of the subsidy is a critical part of the wind industry’s future, several other challenges must also be addressed as the industry works to expand its presence in the U.S. energy mix.

Natural gas and wind can often be combined in a very effective generation partnership for utilities because natural gas is a fuel displacer, Rebenitsch says, and utilities are often able to pay for a wind project thanks to fuel savings garnered from natural gas turbine installations. Bismarck, N.D.-based Basin Electric Power Cooperative has incorporated more than 700 megawatts of wind power into its five-state service region and Minnkota Power Cooperative Inc., North Dakota’s largest supplier of wind energy, supplies more than 30 percent of its customers’ needs via 357 megawatts of wind power.

Rebenitsch says the benefit of wind power is that it has no fuel costs and the cost of the project can be amortized out over 20 years or so at a set price, whereas natural gas requires long-term fuel purchase agreements. But when natural gas prices are low, the benefits of wind projects are less obvious and companies are more likely to push back a decision to invest in wind power. Considering this, North Dakota’s growing abundance of natural gas is “a blessing and a curse” for local wind development, Rebenitsch says. “It offers the opportunity for additional flexible generation that will better enable wind energy to be integrated into systems,” he says. “On the other hand, the surplus of gas makes it difficult to justify the 20-year investment [in wind power] when gas prices are low. That’s where utilities have to be forward looking over the long term in order to make a commitment today.”

Nisbet says Xcel Energy is the largest provider of wind power in the region, based on the size and scope of its system, but his company would likely opt to use the area’s cheap and abundant natural gas to supply future projected growth if there is no PTC for wind power. “Wind has been good for us, but at the same time, with the availability of natural gas, a lot of utilities are looking to that as the right choice,” he says.

Transmission lines are another challenging area for wind development, says Rebenitsch, who compares the lack of adequate lines to a farmer having a bin full of wheat but no road to bring it to the market. “We have the product here and we need to be able to export it,” he says. “That’s something that is evolving, but it’s evolving slowly.” The issue boils down to eco-

nomics and the question of who pays for what, he says. “A North Dakota utility doesn’t really have customers in Minneapolis, so who builds the transmission line from North Dakota or South Dakota to connect with the grid in Minneapolis? And who pays for those upgrades? Those are the knotty questions. It’s a difficult knot to untie.”

Technology Improvements Even with an extended subsidy, the wind industry needs to continually improve its technology to become more economically competitive.

Nisbet and Rebenitsch say advancements are being made, but more time is needed to further develop those improvements. For example, Xcel Energy is collaborating with the National Center for Atmospheric Research to better predict wind availability, Nisbet says, and the industry is working to improve aspects of wind power, such as energy storage. “That’s one of the reasons why we believe in continued research to keep wind energy in the game while they’re working on those next-step type of process improvements,” he says.

Employment With a lack of new orders to fill, at least domestically, blade and component manufacturers still operating in the region are expected to switch their focus to providing maintenance services for existing wind projects, which comprise 60,000 megawatts of power nationwide, according to Rebenitsch. Wind energy technicians are in short supply, and few colleges in the country offer training programs for students interested in that specific career. Lake Region State College in Devils Lake, N.D., began offering a wind energy technician training program in the form of a one-year certificate and a two-year associate’s degree in 2009 and is one of only seven colleges in the U.S. to receive the AWEA’s seal of approval.

Doug Darling, LRSC interim president, says the program was developed after college officials learned of a need for technicians at the state’s existing wind farms. The first eight students graduated from the two-year program last spring. Currently, 19 students are enrolled in the wind energy technician program, he says. Darling expects there will be a shortage of technicians in the U.S. through 2016, noting that the industry’s rule of thumb is one technician for every 10 turbines. However, without an extension of the PTC, he says demand for technicians will likely decrease somewhat as will student interest in becoming involved in the industry. “They need to see wind farms if they’re going to be interested in it,” he says.

LRSC recently completed a nearly 10-year process to install its own 1.6 megawatt turbine near campus which will be used for student training as well as generate power for the college.

Students of the program had been traveling to wind farms around the state for training while the college slogged through the long process of gaining approval for and building its own turbine. Now they will have a dedicated turbine to use for maintenance and training purposes. At the same time, the turbine will provide power for the college as well as excess power to be sold back to the grid. The turbine is expected to begin operating this month. “We’re excited,” Darling says. “We felt like having a functional turbine was the last piece we needed so that we would have a really great program.” PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

www.prairiebizmag.com

23

|TRADE|

Exports on the Rise Merchandise exports from companies throughout the region are on the upswing

BY KRIS BEVILL

Agriculture equipment manufacturers exhibit their products to an international audience in the USA Pavilion at the 2011 Agritechnica show in Hanover, Germany. PHOTO: U.S. COMMERCIAL SERVICE

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Prairie Business Magazine January 2013

ocal trade experts say exports are becoming an increasingly important part of the business plan for many companies in the northern Plains as a way to hedge against domestic market fluctuations and expand their businesses beyond the domestic market’s capabilities. A number of factors have aligned in recent years to boost export opportunities in this region, including a weak U.S. dollar relative to other currencies, booming agriculture industries worldwide and increased demand for U.S. products from developing countries. Merchandise exports were up in Minnesota, South Dakota and North Dakota for the first three quarters of 2012 compared to the previous year, according to data from the U.S. Department of Commerce, and that growth trend is expected to continue in coming years as developing countries such as China demand more U.S. products.

“Companies that are looking to the future have to get into the export market,” says Dean Gorder, executive director of the North Dakota Trade Office. Gorder points out that more than 95 percent of the world’s population is located outside of the U.S., so a company that restricts its products to the domestic market is greatly limiting its potential for growth.

Ag-related products top the list of merchandise exported from North Dakota, according to trade officials, although a quick glance at the commerce department’s data might suggest otherwise. The department currently ranks oil and gas as the top North Dakota export, but local experts say that number is inaccurate because it includes oil that travels via pipeline temporarily into Canada. “Because it leaves the borders of the United States it has to be tracked as an export but it actually all comes back,” says Heather

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25

|TRADE| Ranck, U.S. Commercial Service North Dakota director. “So it’s jacking up our export numbers and is a little misleading.” Gorder says his office doesn’t include oil when it compiles export data and North Dakota still displays “significant growth” in exports. He expects that as pipeline issues get resolved in the U.S., oil export numbers will more accurately reflect the amount actually being exported from the country.

South Dakota exports more value-added ag and food products than any other item. However, the state also boasts a number of uniquely diverse companies that actively export and add significantly to the state’s overall export numbers. Rock Nelson, director of South Dakota’s International Trade Center in Sioux Falls, notes that Brookings-based Daktronics, which specializes in products such as large screen video displays and electronic score boards, and fire engine manufacturing firm Rosenbauer America export large numbers of their products annually. South Dakota is also home to several mining equipment manufacturers, such as MASABA Inc., which recently received the U.S. Small Business Administration’s small business exporter of the year award for South Dakota as well as the surrounding eight-state region.

Nelson says robust export activities protected many South Dakota companies during the recent U.S. recession. “Now, with the economy coming back, they’ll not only have their foreign sales, but also domestic sales, and they’ll be all the better for it,” he says.

Guides for Testing the Waters For companies not yet experienced in exporting their products, getting started can be a daunting task. That’s when the expertise of trade offices can be of crucial assistance.

The NDTO was formed seven years ago as a public-private partnership in order to provide education, research, advocacy and leadership to North Dakota companies to develop and expand their export businesses. The member-based organization is led by a board of directors, chaired by Lt. Gov. Drew Wrigley. Currently, the NDTO has about 70 members, including large equipment manufacturers and valueadded ag producers such as the North Dakota Mill, but the organization also provides assistance to non-members at no cost. It assists with export activities related to commercial products as well as commodities, and collaborates with the USDA Farm Service Agency or the USCS, depending on the product being exported.

The NDTO is the facilitator of STEP (State Trade and Export Promotion) ND, a SBA grant program aimed at strengthening export sales by reimbursing companies for some of the expenses associated with initiating or expanding export businesses. This is the first year North Dakota has participated in the national program. The NDTO was awarded approximately $670,000 in late September and has one year to expend those funds to qualifying businesses. It is expected that up to 75 North Dakota companies could receive assistance through the program, 40 of which are anticipated to be new exporters. Gorder says the program will be useful in attracting new exporters, particularly small businesses, because it helps alleviate some of the financial risk associated with developing international relationships. “There are

26

Prairie Business Magazine January 2013

companies we’ve been talking to that are interested in exporting but haven’t made the commitment,” he says. “Now a portion of their costs to go visit a potential distributor, or attend a trade show in a foreign country, or a show in the U.S. that has foreign buyers can be underwritten. It allows a company to seriously take a look at a market that they may not without that risk sharing.”

STEP funds will be distributed on a first-come, first-serve basis until all funds are exhausted or until the program reaches its September deadline. The NDTO had received approximately 30 applications within the first two months of the program, according to Gorder, who says he expects the funds will be fully distributed by the fourth quarter of the program’s year.

In South Dakota, the ITC is part of the University of South Dakota’s Small Business Development Center and provides its export and import advisory services at no cost. Nelson says he does “anything and everything” to help businesses in their export ventures, from locating interpreters to obtaining freight quotes and clarifying documentation requirements. “I do not profess to know all the answers but I surround myself with an excellent group of third-party service providers who do know,” he says. In the 14 years since his office was established, it has become the state’s “go-to” source for international freight questions, according to Nelson, who says he works closely with the U.S. Customs and Border Protection office at the Sioux Falls Regional Airport. The center’s collaborators also include the Governor’s Office of Economic Development and the Sioux Falls Development Foundation. The ITC facilitates the STEP program for South Dakota and participates in educational workshops hosted by the GOED and the U.S. Department of Commerce at various locations throughout the state that address the regulatory specifics regarding merchandise export activities.

Representatives from Superior Inc., a steel grain bin and grain dryer manufacturer based in Kindred, N.D., received the U.S. Department of Commerce’s Export Achievement Certificate Oct. 1, 2012, in recognition of its expansion to foreign markets utilizing the U.S. Commercial Service. Pictured left to right are U.S. Congressman Rick Berg; Superior Inc. owner Claire Rauser; Jon Engelstad, international sales manager at Superior Inc., and Heather Ranck, international trade specialist with USCS. PHOTO: U.S. COMMERCIAL SERVICE

|TRADE| The USCS is the federal government’s trade agency for commercial products. Its local offices are located in Fargo and Sioux Falls.

Representatives from those locations often work closely with the ITC and the NDTO, providing international support through USCS offices in consulates worldwide. “While I’m only one person here in Fargo, we have a direct line to assistance for companies in every country of the world,” Ranck says. “We are a phone call away from any country for any U.S. company.”

Most of the services provided by the USCS are also free of charge and are customized for each business. The agency does charge a fee for its Gold Key Matching Service, however, which includes meetings arranged with pre-screened potential trade partners, market research conducted by the USCS and travel planning assistance. Ranck estimates that companies interested in Gold Key services can expect to spend about $1,000. When combined with a trade mission to the country of choice, the company’s total costs, including hotel, airfare and interpreter, are generally around $5,000, she says.

enough to include us in their plans and trade missions,” he says.

Canada continues to be the leading U.S. trade partner, and will likely remain the region’s main customer for some time. Other leading markets for northern Plains states include Mexico, China, Japan, Germany and, in North Dakota, Belgium and Australia. Trade growth has also recently been experienced between North Dakota and Uruguay, Ukraine, and Kazakhstan. Gorder says his office has been focused on developing relationships with former Soviet Union countries. “Starting in 2005-’06, there was a very concerted effort to make entry into Russia, Ukraine and Kazakhstan,” he says. “That has been successful.”

Meeting and Greeting For merchandise manufacturers, face time with potential international distributors is an important component of the export process, particularly for makers of specialized products such as machinery, which often require some description of the product, as opposed to agricultural commodities that require little explanation. To help facilitate face-to-face meetings with potential partners, Ranck organizes two to three group trade missions for North Dakota companies each year. International trade shows present another opportunity for face-to-face networking and may be a better option than trade missions for some companies, depending on the type of product they are marketing, Ranck says. She estimates that she arranges about 50 single-company trips, often centering around a trade show, each year.

In March, the NDTO, together with the North Dakota agriculture department and North Dakota State University’s Northern Crops Institute, will host two events in China focused on North Dakota commodities. The China-North Dakota “Better for You Foods” conference and exhibit is part of a larger initiative to help North Dakota companies build strong relationships with China and fulfill the market’s growing need for products, according to the NDTO. “North Dakota’s success in China will initially be on the commodities side,” Gorder says. “We’re also doing a tempered push to get the ag equipment industry in China plugged in to North Dakota manufacturers.” Gorder says the NDTO would like to bring a large contingency of large-scale farm operators and equipment dealers from China to this year’s Big Iron Farm Show, an annual agriculture equipment show held in Fargo and often attended by international delegations recruited with assistance from Ranck’s USCS office.

South Dakota’s export programs are admittedly less robust, Nelson says, but he commends North Dakota’s legislative leadership for including South Dakota in many of its activities and says his state looks to follow in its northern neighbor’s footsteps. “It has a headstart so we’re taking some ideas that North Dakota has, and they’re gracious

Cattle are loaded on an airplane for the first shipment of cattle from North Dakota to Kazakhstan in October 2010.

PHOTO: NORTH DAKOTA TRADE OFFICE

One of the most popular stories to sprout from the export development between former Soviet Union countries and North Dakota has been the sale of beef cattle to Kazakhstan, which Gorder says was initiated during a 2006 trade mission to the country. It took four years to finalize the deal, a length of time which he says is not uncommon for export arrangements, and the first shipment of western North Dakota’s hardy beef cattle was flown from Fargo to Kazakhstan in 2010. To date, more than 5,000 Angus and Hereford cattle have been flown to Kazakhstan and thousands more are expected to be purchased, according to the NDTO. In November, the NDTO organized a reverse trade mission to bring 15 Kazakh ranch owners and cattle handlers to North Dakota to learn cattle ranching from North Dakota ranchers. “As with any successful trade relationship, prior to and after sales it is necessary to continue to share information about the products being exchanged,” Gorder says. PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

www.prairiebizmag.com

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|RED RIVER VALLEY|

John Deere invests millions to expand production in ND Company finishes $22 million expansion in Fargo, begins $20 million project in Valley City

BY KRIS BEVILL ncreasing agricultural demands worldwide have led to expansion projects at John Deere Co. facilities in Fargo and Valley City, N.D., where workers are churning out a variety of components and products to meet the company’s clients’ needs.

John Deere Electronic Solutions held an inauguration event Oct. 9 to celebrate the company’s new $22 million, 90,000-square-foot building in north Fargo. The facility has some manufacturing capabilities but will primarily be used for engineering and product development and testing, according to Tom Budan, general manager of JDES. JDES, which was established in 1987 as Phoenix International and purchased by John Deere in 1999, develops electronic components and systems used in John Deere equipment. The company has been expanding its presence in John Deere Electronic Solutions’ recent expansion in Fargo, N.D., includes a new 90,000 square foot Fargo over the past several years and had outbuilding that will be used primarily for engineering grown its other facilities, Budan says. The new and product development and testing. location allows the company to bring together PHOTO: JOHN DEERE ELECTRONIC SOLUTIONS

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Prairie Business Magazine January 2013

some of the workers who had previously been scattered throughout the Fargo metro area in various locations. “[It] has allowed us to really consolidate some of our operations around the Fargo-Moorhead area,” Budan says, adding that he expects relocation and reorganization activities to continue at the new facility throughout 2013.

Currently, JDES employs approximately 1,000 people at six locations in Fargo. The new facility offers the capacity to accommodate further growth, but Budan says product demand from John Deere’s worldwide customer base will dictate future expansions. Some demand growth is expected to continue domestically, but the bulk of the company’s increasing demand will likely come from emerging markets overseas. “As those markets continue to grow, Deere is going to do everything we can to serve those markets,” Budan says. “Our equipment demands advanced electronics to make it productive and capable and that’s where John

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On Nov. 27, John Deere Seeding Group Valley City broke ground on a $20 million expansion project that will provide an additional 100,000 square feet to the company’s manufacturing operations. John Deere initially opened its Valley City facility in 1996 to build tillage and air seeding equipment for customers worldwide. Now, with more than 300 employees, it is the largest employer in the town of about 6,500 people. The expansion project could add 50 to 100 new manufacturing and administrative positions over the next five years, says Jeff Kennedy, employee relations manager.

“This is going to be huge for Valley City, both for the factory as well as for the city,” he says. The expansion project is expected to be complete by fall 2014 and will increase John Deere’s space in the facility by 33 percent, he says.

North Dakota Gov. Jack Dalrymple attended the Fargo facility’s inauguration and the groundbreaking ceremony at the Valley City location and said in statements released after the events that the expansion projects were a testament to North Dakota’s strong business climate. Budan supported that comment, noting that global companies such as John Deere have many options when considering expansion projects. “When we decide to expand an operation or put a new facility in place we have lots of alternatives and we look at many things when making the choice,” he says. “Certainly when you look at North Dakota, you look at the work ethic, the talent of the people, but you also look at the governmental climate as well. Both at the municipal level … and the state level, we believe John Deere’ story is always very well received.”

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|SOUTH DAKOTA|

Despite its rural locale, De Smet, S.D., is home to a thriving industrial park, due in part to its available workforce.

PHOTO: DE SMET CHAMBER OF COMMERCE

De Smet draws in industrial park tenants Manufacturing companies attracted to rural area, available workforce

BY LORETTA SORENSEN progressive mindset and can-do attitude has brought the 1,100-resident rural community of De Smet, S.D., to the forefront in terms of economic development. The community, birthplace of Laura Ingalls Wilder, recently welcomed two new manufacturing businesses, American Engineered Products Inc. and Sheyenne Dakota Inc. Through SDI alone De Smet workers have approximately 30 new job opportunities. Based on 2010 population comparisons, De Smet’s job growth is equivalent to 4,329 new jobs in nearby Sioux Falls.

Rita Anderson, De Smet director of economic development, attributes the community’s success to the progressive attitude, a longtime hallmark of this east-central South Dakota community where Anderson grew up.

“De Smet’s city leaders began building industry here as early as 1966,” Anderson says. “It’s fun to see people tour our industrial park for the first time. Most don’t realize how many companies are here. Lyle Signs, CMI Architectural Products, UltiMed, Legend Seeds and DeSco Architectural all have long traditions of operating in De Smet. We’re also proud that De Smet is home to Farm Mutual Insurance Company.”

Among De Smet’s assets is a strong infrastructure supporting industrial growth and a thriving industrial park.

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Prairie Business Magazine January 2013

“Three years ago we started working to fill a 10,000-square-foot spec building shell in the industrial park,” Anderson says. “We attended a network of trade shows across the U.S. We targeted medical device companies and sports companies. We also worked with the South Dakota Governor’s Office of Economic Development to identify opportunities. That office played a huge role in helping us achieve our goals.”

Once they identified potential new businesses, Anderson and city leaders as well as other De Smet businesses cooperated to make moving to their community as convenient and trouble-free as possible.

“We contacted businesses that seemed like a good fit and worked to identify resources they needed,” Anderson says. “We focused on needs in the spec building and financial assistance. We did all we could to put them in touch with local resources and worked with them to resolve problems that arose during the process.”

SDI, a wire and cable harness manufacturer headquartered in West Fargo, needed a labor pool to accommodate expansion. The North Dakota oil boom made it difficult for the company to find that resource.

“We worked through the Governor’s Office of Economic Development in South Dakota and let them know what our needs were,” SDI CEO Dave

Ingalsbe says. “We had about 19 South Dakota communities respond to our inquiry about adequate labor. In De Smet we found the type of labor pool we were looking for and a building that fit our needs very well. Everyone in the community seemed welcoming and helpful. We highly compliment the GOED office and De Smet community.

They have all been very good to work with.”

AEP’s Audrey Saylor, company co-owner with Mike Wiese, says they believed their slot bases for casinos and video lottery and flagpole business would thrive in a smaller community.

“We needed to operate in a cost-effective atmosphere,” Saylor says. “We like the lower key lifestyle here. De Smet is more rural, but also a thriving, forward-looking community. Assistance we’ve had in meeting resource needs has been phenomenal. It’s remarkable to see a community this size embrace industrial development. I’m certain that played a key role in growth here.”

Anderson and her team have already plunged into a new development project. Promoting De Smet’s industrial growth will be an ongoing process. “This has all been accomplished through great team effort,” Anderson says. “That’s a longtime spirit of this community. They capitalize on what’s here and build on it.” PB Loretta Sorensen Contributing writer 605-660-0378, sorensenlms@gmail.com

15

LOWERING SUMMER TEMPERATURES

REDUCING

41%

PRODUCING

42

OF ENERGY USE PER YEAR

15%

INCREASING

HOMES WORTH OF ENERGY

STAFF PRODUCTIVITY

DIVERTING

72.6

TONS OF WASTE

ELIMINATING

14%

CO2 EMISSIONS

PREVENTING

15%

IMPROVING AIR QUALITY

90%

OF RAINFALL-RELATED POLLUTION

SAVING

48,260 GALLONS OF WATER PER YEAR

THE UNIVERSITY OF NORTH DAKOTA GORECKI ALUMNI CENTER IS

MAKING ITS MARK ON CAMPUS

BY LEAVING LESS OF ONE

Seeking North Dakota’s First LEED Platinum Certification

jlgarchitects.com

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|WESTERN NORTH DAKOTA|

Bidding on Bowman Pifer’s Auction & Realty builds large auction hall in Bowman County, inaugurates facility with first-ever mineral lease auction

BY KRIS BEVILL owman County, located in the extreme southwestern corner of North Dakota, bills itself as the “heart of North Dakota’s oil and agriculture industries.” The sparsely populated county — about 3,000 total residents, or 2.7 people per square mile, according to the most recent U.S. census data — leaves plenty of wide open spaces for beef cattle, crops and oil and gas development. It is the fifth largest oil-producing county in the state and supports thriving livestock and agricultural industries, according to the county’s website.

It was that combination of energy and agriculture that helped make Bowman County the winning choice for Moorhead, Minn.-based Pifer’s Auction & Realty expansion plans. The full-service auction and real estate firm serves markets throughout various locations in the Midwest and had spent several years analyzing potential locations in western North Dakota before settling on a site near Bowman for its recently opened auction hall.

Company President Kevin Pifer says the county’s rich diversity in energy and ag was a factor in the firm’s decision to locate there, along with the fact that the firm’s existing two-person team in Bowman, Andy Mrnak and Jim Sabe, has been successful in building up business in the area. “They have done an exceptional job in Bowman and have garnered a lot of trust from people in that part of North Dakota and in the northern part of South Dakota and eastern Montana,” he says. “When you factor in what we already have in place down there, the economy and also the city of Bowman and county are very well run entities … it just seemed like such a perfect fit for our company in western North Dakota.”

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Pifer’s Auction & Realty expects to utilize its recently opened auction hall near Bowman, N.D., for large equipment auctions related to energy development in western North Dakota.

PHOTO: PIFER’S AUCTION & REALTY

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Prairie Business Magazine January 2013

The company invested more than $500,000 in the new facility, which Pifer says is “probably the nicest auction hall in the state of North Dakota” and is the firm’s largest investment in a noncorporate office to date. The location now officially serves as Pifer’s western North Dakota regional office.

Before building the facility, Pifer’s typically held equipment auctions at the Bowman County arena and land sales at the Bowman Golf Course. The new facility allows the firm to bring everything under one roof and also expands its auction capabilities to include large machinery and construction equipment, Pifer says.

The facility’s inaugural event was a farm machinery and construction equipment auction held outdoors in early October. Soon after, the firm held its first indoor event at the facility which included thousands of acres of land and the firm’s first ever mineral lease auction, consisting of 800 mineral acres located in the Scranton area of Bowman County. Pifer estimates that about 200 people attended the evening event, most of them interested in land acreage up on the auction block. However, the mineral lease sale was also successful, he says, and brought in slightly higher selling prices than the firm had anticipated. Pifer says between 20 and 25 people showed interest in the mineral lease portion of the auction and four or five entities bid “rather aggressively” on the leases, which were won for about $300 per acre.

Bidders were a mix of private individuals, conglomerates and private equity firms. PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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Minnkota Power Cooperative provides electricity to distribution cooperatives across eastern North Dakota and northwestern Minnesota from its 705,000 kilowatt coal-fired power plant near Center, N.D., known as the Milton R. Young Station.

PHOTO: MINNKOTA POWER COOPERATIVE

Playing the regulatory guessing game Minnkota Power Cooperative tests emissions reduction technology at its coal-fired power plant

BY KRIS BEVILL

s energy consumption continues to rise throughout our region, electricity providers are working to increase the input of electricity available for their customers. At the same time, providers of coalbased electricity are trying to keep ahead of increasingly stringent regulations by installing new technologies aimed at reducing the amount of emissions they produce.

Grand Forks, N.D.-based Minnkota Power Cooperative provides electricity to 11 memberowner distribution cooperatives across 34,500 square miles in eastern North Dakota and northwestern Minnesota. Electricity to serve its members’ needs is generated at a large coal-based power plant located about 40 miles northwest of Bismarck near Center, N.D., and sent through transmission lines to its distribution customers. The plant, known as the Milton R. Young Station is a mine-

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Prairie Business Magazine January 2013

mouth plant, meaning it is located adjacent to its coal source, in this case the BNI Coal Center Mine, and has been operating since 1970. Two electricity producing units at the plant represent a combined 705,000 kilowatts of generating capacity.

In 2011, Minnkota completed a series of environmental upgrades at its plant as required by federal regulators. The changes were installed over the course of several years at a total cost of $425 million and consisted of upgrades to reduce the amount of sulfur dioxide and nitrogen oxides (NOx) emitted from both units. The emission reduction improvements required the support of additional electrical infrastructure, which contributed to the project’s total cost.

Also in 2011, the cooperative embarked on another improvement project at its own behest, installing technology developed by Coloradobased Clean Coal Solutions LLC, which enables

the plant to reduce its mercury emissions by 40 percent and its NOx emissions by 20 percent from previous levels. John Graves, environmental manager at Minnkota, declined to release the cost of the Clean Coal Solutions technology, but says the installation of the technology is part of the cooperative’s strategy to stay in compliance with anticipated tightening emissions regulations.

“Environmental regulations are always becoming more stringent as times goes on,” he says. “So we’re trying out new technologies and participating in improvements that will bring us up to where we think we will need to be. It just makes good sense to do that.”

Minnkota is the first lignite coal plant in the U.S. to apply Clean Coal Solutions’ technology, dubbed CyClean, which is a combustion additive technology designed to improve operability and reduce emissions from cyclone boilers, according to Clean Coal Solutions. Graves says the cooperative will evaluate the technology’s performance at the Young Station for a number of years. “We are really looking at this as a long-term demonstration project because anytime you do something different at a power plant of this type, you don’t really know what long-term impacts it may have,” he says. “We are optimistic that this technology will be a benefit to us but we are always cautious.”

Future environmental improvement projects will be undertaken as required by regulations or as deemed to otherwise benefit the plant, particularly along the lines of efficiency improvements, according to Graves.

Minnkota is also in the process of installing a 250-mile long transmission line that will boost grid stability in the northern Red River Valley. The transmission line will extend from the power plant near Center to Minnkota’s substation in Grand Forks and is expected to be operational by the end of 2013, Graves says. It has been three decades since a transmission line project of this magnitude has been carried out by Minnkota. Graves says the new line is a reflection of the increasing energy demands from consumers and businesses. “We all use more energy today than we did 20 years ago or even 10 years ago, so therefore the time was right and the need was there,” he says.

The total project is expected to cost $312 million, an expense which Minnkota anticipates will translate into increased rates for customers. PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

|ENERGY|

New technologies utilize flared gas North Dakota encourages Bakken producers to deploy strategies that reduce flaring

BY KRIS BEVILL

The addition of gas gathering lines and natural gas processing plants is helping to alleviate flaring in the Bakken region of western North Dakota, but approximately 30 percent of gas produced is still being flared. SOURCE: NORTH DAKOTA PIPELINE AUTHORITY

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he North Dakota Pipeline Authority hosted a webinar Dec. 18 that presented various alternatives to flaring natural gas at well sites throughout the Bakken region as part of an increased effort to encourage producers to begin utilizing methods that reduce flaring.

The state’s historical high for flaring was 36 percent in September 2011. About a third of all gas produced at Bakken wells is still being flared, despite the recent addition of new gas gathering lines and processing plants. Lynn Helms, director of the North Dakota Department of Mineral Resources, said during the webinar that 796 million cubic feet per day of gas was produced in October, of which about 240 million cubic feet per day was flared.

Helms said the state has set a target to reduce flaring in the Bakken to below 10 percent of all gas produced, but because the amount of gas being produced is increasing, by the time the reduction is achieved there will still be more gas flared than at the current time. “So short term and long term, there’s tremendous opportunity for the utilization of flared gas,” he said.

Some of the opportunities to utilize Bakken gas include fertilizer production, conversion to methanol, or for use as a fuel to displace diesel required for drilling rigs, hydraulic fracturing pumps and other equipment. A number of presenters offered their solutions to efficiently capture and utilize gas produced at Bakken wells, several of whom touted their technologies’ mobility, a valuable characteristic for producers who anticipate moving from well to well.

Blaise Energy, a Bismarck, N.D.-based company, is the first company in North America to generate renewable energy credits from recycling flared gas, according to Mark Wald, president. His company has developed a method to convert unprocessed wellhead gas into electricity which can be used to power the site or can be sold back to the grid. The company is also partnered with the University of North Dakota’s Institute for Energy Studies to develop a polygeneration facility that could convert residue gas to methanol.

Jeremy Dockter of Expansion Energy, said one of the uses for the small-scale liquefied natural gas (LNG) technology developed by his company could be to replace diesel fuel needs at a well site. The company recently signed a tech-

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|ENERGY|

nology license agreement with Dresser-Rand, which plans to introduce the mobile LNG production units to the market in the third quarter of 2013. Dockter said oil producers have shown a high level of interest in this type of technology and he encouraged interested producers to get their order for units in the queue as soon as possible.

Helms said that while the Industrial Commission has not rigorously enforced current flaring limitations due to the large price differential between oil and gas, as more technologies are introduced that enable producers to utilize gas, the commission is “eager” to more actively enforce its policies. He said he also anticipates legislation to be introduced this session that will “change the landscape” in terms of tax exemptions, liability concerns and the reporting of utilized natural gas to the commission. “This will be a big piece of the puzzle of North Dakota’s flare gas,” he said. PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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|BY THE NUMBERS| Employment UNEMPLOYMENT RATE

Sept 2011

7,798 6,071

488,066

TOTAL WELL PERMITS Sept 2012 Sept 2011

3 2 1 0 Jan 2000

Jan 2002

Jan 2004

Jan 2006

Jan 2002

Jan 2004

Jan 2006

Date

Jan 2008

Jan 2010

Jan 2012

Jan 2014

Jan 2008

Jan 2010

Jan 2012

Jan 2014

Exchange 7 6 5 4 3 2 1 0 Jan 2000

Date

Natural Gas Price and Production

AVERAGE DAILY BARREL PRODUCTION Sept 2012 728,494 Sept 2011

4

273

0

68

9

66

8

64

7 62

6 5

60

4

56

3 54

2

52

1 Jan 2008

176

Jan 2009

Ethanol Production

Jan 2010

Jan 2011

Jan 2012

Jan 2013

50

Date

1

190

Sept 2011 PRICE PER BARREL Sept 2012 Sept 2011

197

84.98 83.50

Data provided by David Flynn, chair of the University of North Dakota Department of Economics. Reach him at david.flynn@business.und.edu.

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Prairie Business Magazine January 2013

Fuel ethanol, million barrels per day

0.95

AVERAGE RIG COUNT Sept 2012

0.9 0.85 0.8 0.75 0.7 0.65 0.6 0.55 0.5

Jan 2008

Jan 2009

Jan 2010

Jan 2011 Date

Jan 2012

Jan 2013

Natural Gas Total US Marketed Production, billion cubic feet per day

PRODUCING OIL WELLS Sept 2012

10-yr treasury, constant maturity

5 Percent (%)

Sep-11 3.60% 3.5 2.7 4.2 3 1.7 1 3 3.9 4.50% 3.9 4.1 3.3 3.4 3.7 4 3.3 3.1 4 3.2 3.4 6.30% 5.9 6.8 5.4 5 5.4 4.7 7 4.7 6.2 4.5 4.6 5.8

Federal Funds Rate

6

Canadian dollar per U.S. dollar

Sep-12 3.00% 2.8 2.2 3.2 2.4 1.4 0.7 2.6 3.1 4.40% 3.7 4.1 3.2 3.1 3.1 4 3.1 3.1 3.5 2.9 3.4 5.80% 5.3 6.3 4.8 4.6 4.8 4.5 6.3 4.1 6.1 4 4.1 5.1

7 EMPLOYMENT Sep-12 Sep-11 376,592 371,039 117,519 117,859 60,634 60,435 51,774 53,552 32,597 33,484 19,391 18,093 36,393 26,270 9,992 10,802 11,068 11,821 422,824 425,909 123,757 124,427 64,028 64,925 22,561 22,288 18,245 18,169 18,761 18,369 12,298 12,720 13,075 12,809 11,702 11,798 11,265 11,174 9,767 9,678 7,354 7,262 2,799,472 2,785,281 1,764,116 1,750,922 45,086 46,237 28,492 28,657 30,013 30,277 24,905 24,778 23,621 24,598 21,504 21,146 20,690 20,519 18,733 19,910 14,863 14,810 11,272 11,139 10,533 10,989

Natural Gas US Average Wellhead Price. $per thousand cu feet

North Dakota Fargo MSA Bismarck MSA Grand Forks MSA Minot MiSA Dickinson MiSA Williston MiSA Jamestown MiSA Wahpeton MiSA South Dakota Sioux Falls MSA Rapid City MSA Aberdeen MiSA Brookings MiSA Watertown MiSA Spearfish MiSA Mitchell MiSA Pierre MiSA Yankton MiSA Huron MiSA Vermillion MiSA Minnesota Minneapolis-St. Paul MSA Brainerd MiSA Winona MiSA Fergus Falls MiSA Red Wing MiSA Willmar MiSA Bemidji MiSA Alexandria MiSA Hutchinson MiSA Marshall MiSA Worthington MiSA Fairmont MiSA

Interest Rates