Prairie Business May 2013

July 2013

Evolving for the Next Era Noridian changes name, launches massive

ALSO

hiring plan to meet growing health

Tech Boosters

care services demand

Investors, state offer support for emerging technology sector

pg. 24

pg. 22

How High for How Long?

Soaring cropland prices continue to impact region

pg. 28 www.prairiebizmag.com

scandesign 110 n. broadway • downtown fargo 701.365.0900 1803 s. washington • grand forks 701.757.2444 www.scandesignnd.com Locally Owned & Operated

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| July 2013 VOL 14 ISSUE 7

DEPARTMENTS

FEATURES

6 Editor’s Note

BY KRIS BEVILL

A day in the life 8 Business Advice

BY MATTHEW D. MOHR

Reinvest to build 10 Finance

BY RICK CLAYBURGH

New law impacts flood insurance policies 12 Research & Technology

BY PHILIP BOUDJOUK

Bridging the other ‘valley of death’ — from lab to market 14 Economic Development

BY DEAN REESE

Development Fund a valuable tool for ND businesses 16 Prairie News 20 Prairie People 22 Business Development ND investors foster growing tech sector

24 Building on a History of Expertise Health Care

Noridian changes name, launches massive hiring plan to meet growing health care services demand

30 South Dakota No-pedal bike company hits its stride

28 How High Will They Go? Land Values

32 Western North Dakota Experiencing the Bakken

Strong commodity prices and low interest rates continue to impact region’s land prices

34 Red River Valley Nonprofit sets example for effective, multi-source funding 35 Business to Business 36 Energy 40 By the Numbers Follow us on Twitter https://twitter.com/PrairieBiz Check us out on Facebook https://www.facebook.com/PrairieBusiness

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

Tom McGraw, president and CEO, Noridian Healthcare Solutions PHOTO: JOHN BROSE

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Prairie Business Magazine July 2013

Next Month The August issue of Prairie Business magazine will highlight business-higher education partnerships and ask if the private investments are worthwhile. Other articles will include an update on the state of manufacturing in the region, South Dakota's efforts to make the most of North Dakota's oil boom, and a teacher internship program designed to provide hands-on experience in various industries.

|EDITOR’S NOTE|

A day in the life o there I was, riding in a van southbound on Highway 85 through the heart of North Dakota’s oil country, having a discussion with a news crew from France about whether traffic in Paris is worse than traffic in western North Dakota.

No, this is not a joke. It was an actual conversation I had with two other attendees of a recent Bakken Field Tour, hosted by Williston, N.D.-based Dawa Solutions Group. (The French crew said Paris traffic is much scarier, although they forgot to consider that the city’s population outnumbers the entire state of North Dakota by more than 2 million.) For a few hundred dollars, the tour offers anyone with an interest in the Bakken region the chance to learn about oil’s history in the area, the current technology-based play and the economic development associated with it, as well as an afternoon driving tour of the impacted area. The wealth of comprehensive information delivered throughout the day is helpful, but the observations made on the driving tour can be downright fascinating. For more on the tour, read “Experiencing the Bakken," on page 30.

This issue also looks into the high prices being paid for cropland throughout our region.

Contributing writer Kylie Blanchard talked to several economists to learn more about where the highest-priced land is located, why it’s commanding such a high price and how long those prices are expected to remain. See “How High Will They Go?” on page 26 to read what she found out.

We also offer a profile of Noridian Healthcare Solutions, formerly Noridian Administrative Services. The company is in the midst of a major hiring spree as it prepares to carry out a massive five-year Medicare contract and will add nearly 400 new jobs in North Dakota by September. The company is also on the forefront of creating healthcare exchanges, which will be used to implement the Affordable Care Act. Tom McGraw, who joined the company in October as the second CEO and president in Noridian’s history, shares his take on hiring in a state with historically low unemployment, and how his company is evolving to address complex changes in the health care industry in “Building on a History of Expertise," on page 22.

Finally, I want to bring to your attention that we are now accepting nominations for this year’s 40 under 40 list. Many of you have emailed or called me throughout the year to request submission details so I know that this year’s pool of candidates is going to be stronger than ever. We are excited to receive your nominations and look forward to sharing the results in our December issue. Visit our website – www.prairiebizmag.com – to submit your nominations.

S

KRIS BEVILL Editor kbevill@prairiebizmag.com

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Prairie Business Magazine July 2013

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

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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, Research Park at South Dakota State University; Bruce Gjovig, Director, Center for Innovation; Lisa Gulland-Nelson, Vice President, Marketing and P.R., 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.

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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

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7

|BUSINESS ADVICE|

Reinvest to build

BY MATTHEW D. MOHR

ew businesses can continually grow and prosper without the reinvestment of profits or acquiring new capital. Reinvesting in a business is like compounding interest. As you earn income, your reinvestment of this income gives you a larger base to grow from.

When considering the successful entrepreneurs throughout our region, most of them kept the bulk, if not all, of their wealth tied up in one main enterprise. Some ventured into other businesses, and some extended their wealth through investing in stocks, bonds and real estate.

Most took the profits earned and put them back to work inside their primary business.

Great farmers learned the rule of reinvestment decades ago, and as a result many have created enormous wealth over generations. A superior crop year gave cash for more land and upgraded equipment. As reinvestments of farm profits continue, large super-profitable enterprises are the result. But agribusiness owners are

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Prairie Business Magazine July 2013

not the only ones who have experienced success through capital reinvestment.

Bell State Bank is a fine example of an enterprise which has grown continually through dedicated reinvestment of profits. Bell State is now one of the region’s premier banking institutions. Not long ago it was a smaller depositor focused bank, but with each successive year the ownership added new locations and bought similar area banks.

By reinvesting profits and adding new capital through the bank stockholder-owners when it could, Bell State has become a premier banking institution of great size.

Through this constant and relentless pursuit of banking excellence Bell State has grown to be a regional power and a leader in our region’s banking community. PB Matthew D. Mohr CEO, Dacotah Paper Co. mmohr@dacotahpaper.com

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9

|FINANCE|

New law impacts flood insurance policies

BY RICK CLAYBURGH

ith the record spring rainfall here in the Dakotas, it is important to be aware of recently passed federal legislation that is expected to have a big impact on flood insurance. The Biggert-Waters Flood Insurance Reform Act of 2012 was signed into law July 6, 2012. In addition to reauthorizing the National Flood Insurance Program through Sept. 30, 2017, the bill brings several substantive changes to the program, including several that alter the way premium rates are calculated.

The law requires that increased flood insurance premiums be phased in and existing premium subsidies be phased out. As a result, property owners in “Special Flood Hazard Areas” may see more expensive insurance rates — in some cases significantly more — than what they are currently paying. The new premiums will reflect the true flood risk of homes and businesses. Premiums have the potential to increase by as much as 25 percent per year for the next four years until full-risk rates are reached.

It is important that property owners repairing and rebuilding structures after storms understand these changes so they can make sound and informed decisions about whether they want to place additional resources in an impacted area, and so they can understand the financial implications of doing so. These include not only questions of rebuilding destroyed homes but repairing them, too. For example, should I replace a damaged water-heater in my basement or should I consider moving it upstairs?

Flood insurance premiums are calculated based on Federal Emergency Management Agency maps and the minimum building requirements for that region. An owner whose home or business is built in compliance with those minimum building requirements, or exceeds those standards, will be at an advantage. Their premiums may still go up but will be lower than those for homes that do not meet the minimum requirements. If you’re rebuilding after a flood, it is important to consult FEMA maps prior to construction. Building in compliance with base flood elevation standards could protect your financial future.

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Here are four things to expect from the BiggertWaters Flood Insurance Reform Act: 1) Automatic increases: Policy rates for primary residences are automatically subject to increases if there has been change in ownership, a lapse in coverage, a change in flood risk according to new FEMA flood maps, or substantial damage or improvement to a building.

2) Diminishing discounts: Existing subsidies for second homes, rental homes, businesses or repetitive loss properties are eliminated. “Grandfather” clauses will also be eliminated, meaning all rates will be based on the building’s compliance with current flood zone recommendations, not the standards when the building was first built.

3) Updated flood zone maps: FEMA is redrawing flood zone maps across the country. That means buildings that weren’t in a flood zone before might be in one now, or in a higher-risk zone. These zones determine minimum building requirements and whether you meet these minimums determines what your insurance will cost.

4) Higher annual increases: In the past, annual premium increases were limited to 10 percent; that limit is now 20 percent.

FEMA offers three programs to reduce your risk and help you save money on flood insurance. To see if you qualify, visit www.fema.gov. For more details on the Biggert-Waters Flood Insurance Reform Act, visit www.nhma.info/nhma-biggert-article/ or call the National Flood Insurance Program Help Center at 1-800-427-4661.

You can also visit the following FEMA websites for more information: www.ready.gov/floods; www.fema.gov/region-vi/national-flood-insuranceprogram-reform-frequently-asked-questions; or www.floodsmart.gov/floodsmart/pdfs/fema_flood_ brochure.pdf. PB Rick Clayburgh President and CEO North Dakota Bankers Association rick@ndba.com

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11

|RESEARCH & TECHNOLOGY|

Bridging the other ‘valley of death’ — from lab to market

BY PHILIP BOUDJOUK

or companies and researchers, bringing a technology to market can be a daunting challenge. The first “valley of death” in business often refers to capital that entrepreneurs need for startups. An equally important “valley of death” centers on taking technology from the lab into marketable product blockbusters.

For companies with lean research budgets, universities continue to play a vital role in R&D worldwide. Whether licensing a North Dakota State University-developed technology to bring to the marketplace, or assisting companies in solving challenges to bring their own products to customers, NDSU has a strong track record for transferring technology from the university lab to the marketplace.

From FY 2007 to FY 2011, NDSU generated 256 invention disclosures, filed 142 new U.S. patent applications and produced 486 licenses. By FY 2012, NDSU licensing revenues topped $2 million, growing more than 77 percent since FY 2006.

On average, NDSU processes one federal grant award daily and a research contract with the private sector every week. Cumulatively, NDSU has executed nearly 300 private sector research contracts over the past five years.

NDSU-developed technologies that are moving toward the marketplace include an anti-corrosion primer for aircraft which was licensed to the world’s largest coatings company, miniaturized ground sensors developed for the military and deployed on three continents to protect military assets, biodefensive coatings in development with a North Dakota company, and RFID (radio-frequency identification) tagging systems for military equipment. Other NDSU-developed technology has been licensed to startup companies, including removable coatings for bronze sculptures and architectural components, biocomposites from renewable crop materials and a vertical data mining algorithm and software.

The North Dakota Economic Development Centers of Excellence program provides a mechanism

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to promote technology-based economic development.

Public/private R&D partnerships at NDSU include technologies such as anti-fouling coatings for ships, biomedical devices such as hearing aids, microelectronics for unmanned aerial systems, mobile phone technologies, new optical materials, and anti-icing and anti-soiling coatings for composite materials and wind turbine blades.

Developing new technologies and helping companies solve technology challenges forges partnerships that lead to technology-led economic development. NDSU students are also provided unique opportunities to work alongside NDSU researchers, established global companies and startups to develop new technologies and products for real-world applications. Students are frequently co-inventors on patent applications.

By fall 2013, NDSU’s efforts to transfer technology from lab bench to market will get a boost from a 35,000-square-foot addition of scientific lab space to an existing building in the NDSU Research and Technology Park. Research objectives include R&D and commercialization of top NDSU-developed technologies via private sector partnerships.

The $9 million addition was funded the by U.S. Department of Commerce/National Institute of Standards and Technology and a North Dakota Centers of Excellence Enhancement Program grant approved in 2009.

The R&D partnership between NDSU and companies enhances business success and economic development. It also means research opportunities for students, leading to a highly skilled workforce for the region. The results are compelling. The opportunities are wide open. All of these components represent a bright economic future. PB Philip Boudjouk Vice president for research, creative activities and technology transfer North Dakota State University Philip.boudjouk@ndsu.edu Twitter: @NDSU

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North Dakota is booming – bringing the opportunity to build a financially-sound state for generations to come. As one of the oldest and largest financial companies in the region, Alerus saw a record 66.9% rise in net income and an unprecedented 63.5% increase in share earnings in 2012, meaning more jobs, more available loans, and more assets for North Dakotans. Now that’s a bank you can count on.

jlgarchitects.com

www.prairiebizmag.com

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|ECONOMIC DEVELOPMENT|

Development Fund a valuable tool for ND businesses

BY DEAN REESE

he North Dakota Development Fund is a valuable financing tool for North Dakota businesses, providing a strong return on investment for taxpayers and contributing significantly to job creation. As we continue to grow our economy in the state and create economic opportunities for our citizens, it is important that financing support is available for startup or expansion projects in North Dakota.

The North Dakota Development Fund was created through legislation in 1991 as an economic development tool. It provides flexible gap financing through debt and equity investments for new or expanding North Dakota primary sector businesses.

The Development Fund makes investments of up to $300,000 in primary sector businesses. The North Dakota Development Fund Board may adjust the limit when deemed appropriate.

In general, the following criteria apply to Development Fund investments: • The entrepreneur must have a realistic financial commitment at stake. Usually principals are required to have a minimum of 15 percent equity in the project.

• Refinancing of debt is not eligible.

• Principal shareholders with 20 percent or greater ownership are generally required to guarantee the debt.

Other shareholders may also be required to guarantee.

• The Development Fund will not participate in more than 50 percent of a project’s capitalization needs.

• Financing is available to any primary sector business project with the exception of production agriculture.

• Primary sector includes individuals and businesses which, through the employment of knowledge or labor, add value to a product, process or service

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which results in the creation of new wealth. Primary sector includes tourism and specific types of investorowned agriculture, and is typically businesses such as manufacturers, food processors or export service companies. Investor-owned agriculture includes livestock feeding or milking operations, or other value-added agriculture located apart from an individual farm operation that is professionally managed and has employees.

Since the launch of the Development Fund, it has invested $97 million in 519 companies with over $30.8 million invested in rural communities. The investments made by the Development Fund have contributed to the projected creation of 10,389 primary sector jobs.

Economic activity continues to be strong in North Dakota. In providing flexible financing, the Development Fund will continue to assist primary sector businesses start-up or expand, which will help to create additional jobs and new revenues for the state of North Dakota.

Loan and equity programs managed by the North Dakota Development Fund include: • North Dakota Development Fund • Regional Rural Revolving Loan Fund • Rural Incentive Growth Loan Program • Small Business Technology Program • Child Care Loan Program • New Venture Capital Program • Entrepreneur Loan Program • Entrepreneurial Center Loan Program For some additional information visit: www.NDDevelopmentFund.com. PB Dean Reese Director, North Dakota Development Fund dreese@nd.gov

www.prairiebizmag.com

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Prairie News

Industry News & Trends

Cooperstown manufacturer receives SBA award

From left: Cris Somerville; Peggy Somerville; Stacy Somerville; Dean Somerville; Tamara Somerville; Alan Haut, SBA lender relations specialist; Carlos Sosa, SBA Office of International Trade regional manager PHOTO: U.S. SMALL BUSINESS ADMINISTRATION

Silicon Plains acquires Acoustic Visions Multimedia Silicon Plains LLC, a Bismarck, N.D.-based business computer support services firm, has agreed to acquire Acoustic Visions Multimedia, a web hosting and business computer support company based in Mandan, N.D. AVM customers will be transitioned to Silicon Plains over the next several months. “Moving this large of a customer base over to our company is a process we take very seriously,” Dan Polk, Silicon Plains president, said in a news release. “Our goal is to ensure no service interruptions occur.”

Steve Barreth, owner of AVM, will remain as a consultant for Silicon Plains for an extended period of time and will continue providing service to former AVM customers, according to the company.

Wells Fargo to relocate Dickinson branch Wells Fargo has announced plans to move its Dickinson, N.D., banking store from the Prairie Hills Mall to the West Ridge Center development sometime this fall. Dickinson-based Tooz Construction Inc. will build the new store, which will offer safe deposit boxes and a multi-lane drive-up with two car-accessible ATMs. While the new location will open this fall, Wells Fargo also plans to maintain its existing drive-up and ATM at the Prairie Hills Mall through fall 2014.

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Prairie Business Magazine July 2013

Posi Lock Puller Inc., a manufacturer of gear and bearing pullers based in Cooperstown, N.D., recently received the 2013 North Dakota Small Business Exporter of the Year award from the U.S. Small Business Administration. The company was selected following a statewide competition and received the award in honor of its successful export program. Posi Lock’s pullers are shipped to every country in the world, according to the SBA, but all of its products are made in the U.S., with most of the outsourcing needs handled within a 200-mile radius of Cooperstown.

The family-run company was founded 35 years ago with the introduction of a patented gear and bearing puller invented by Dean Somerville for use in industrial, agriculture and automotive markets.

“We’re excited to have the opportunity to move into a brand new store in an up-and-coming development,” says Travis Hande, market president and ag industry specialist for Wells Fargo in Dickinson. “The new location will be more inviting to customers and will better fit our needs.”

Metro Plains acquires SD company Metro Plains Management recently acquired South Dakota-based PRO/Rental Management, the company announced this week. PRO/Rental Management has 45 apartment communities with 850 units and 40 employees.

The deal increases MetroPlains’ holdings to 160 apartment communities with 5,000 units and 230 employees, according to the company.

Founded in 1983 and headquartered in Devils Lake, N.D., Metro Plains Management has rental properties and commercial space in North Dakota, Minnesota, South Dakota, Kansas and Oklahoma.

CoBank commits $250K to NDSU CoBank, a cooperative bank serving agribusiness, rural infrastructure and Farm Credit System associations throughout the U.S., will contribute $250,000 to North Dakota State University in Fargo over the next five years. Half of the funds will be used to support the Quentin Burdick Center for

Cooperatives. The remaining funds will support the NDSU Department of Agribusiness and Applied Economics commodity trading room laboratory.

Aberdeen retail study examines consumers, opportunities A coalition of Aberdeen, S.D., groups recently teamed up to back a study conducted by the Buxton Co. to identify the city’s core consumers and better understand its retail sector in terms of areas of surplus and under-served markets. The city will use the research to assist local businesses in making strategic merchandising and location decisions.

“The information from this study will offer new data on our customers, such as where they shop and what they buy,” says Gail Ochs, president of the Aberdeen Area Chamber of Commerce. “It also indicates where there are unmet needs for products and services, which is an opportunity to capture dollars currently leaving our community.”

Walmart to hire 300 for Mandan store Walmart recently announced plans to hire approximately 300 people to work at the Walmart Supercenter scheduled to open in Mandan, N.D., this fall. In June, the retail giant said it expected most of the new hires to begin work that month in order to help prepare the store for its grand opening.

|PRAIRIE NEWS| Kraus-Anderson to manage $12 million BSU project Kraus-Anderson Construction Co. has been selected as construction manager at risk for a $12 million addition and renovation project at Bemidji State University in Bemidji, Minn. Construction is scheduled to start in July 2014 and will include the renovation of Memorial and Decker Halls, including an addition which will accommodate the relocation of the College of Business from Decker Hall to Memorial Hall.

Grand Forks site selected for $1.5 billion fertilizer project Northern Plains Nitrogen has announced plans to build and operate a $1.5 billion nitrogen fertilizer plant facility near Grand Forks, N.D. The group’s plans call for a 2,200 ton-per-day ammonia plant plus urea and urea-ammonium-nitrate (UAN) production facilities to be located on land adjacent to the Grand Forks wastewater treatment plant. The company plans to use natural gas piped from the Bakken region of western North Dakota as a feedstock and could also use wastewater effluent from the water treatment plant as its water supply.

The plant is expected to be complete and ready to provide fertilizer to area farmers for the 2017 growing season. Approximately 2,000 workers will be employed during the peak construction period of the project. Upon completion, the facility is expected to provide 135 full-time jobs.

www.prairiebizmag.com

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|PRAIRIE NEWS|

Bobcat Co.’s Acceleration Center in Bismarck, N.D., is expected to be complete in 2014. IMAGE: BOBCAT CO.

Bobcat breaks ground on $20 million Bismarck facility Bobcat Co. has begun work on a $20 million renovation and expansion project to create the Acceleration Center in Bismarck, N.D. The project includes the expansion of an existing building as well as the development of a new test track and indoor testing facility at the Northern Plains Commerce Centre. Construction is expected to be complete in 2014. Wahpeton, N.D.-based Comstock Construction Inc. is serving as the contractor for the project.

The Acceleration Center will initially house 135 employees, focusing on innovating and advancing designs, testing, prototype engineering and the computer simulation of ideas and concepts. The center will also serve as an educational facility and will be used to provide training and hands-on experience for Bobcat dealers and customers.

Community foundations launch joint effort to promote philanthropy North Dakota’s five community foundations have launched a cooperative effort known as NDGives to promote philanthropy in the state.

Participants include the Fargo Moorhead Area Foundation, Minot Area Community Foundation, North Dakota Community Foundation, Community Foundation of Grand Forks East Grand Forks and Region and Devils Lake Area Foundation.

Made possible by a $100,000 grant from the Bush Foundation, the goal of the campaign is to

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increase residents’ understanding of endowment funds and to raise awareness of the North Dakota Charitable Income Tax Credit.

According to the foundations, North Dakota currently ranks 17th in the country for average adjusted gross income per tax return, but is 48th in the nation for average charitable contribution per return.

Medical providers implement health IT at rapid pace The U.S. Department of Health & Human Services announced in May it has already exceeded its goal for 50 percent of doctor offices and 80 percent of eligible hospitals to implement elec-

tronic health records (EHRs) by the end of the year. According to the agency, use of EHRs by doctors has increased more than 30 percent since 2008 while the use of EHRs in hospitals has skyrocketed from just 9 percent in 2008 to more than 80 percent currently.

The Obama administration has encouraged the use of EHRs in order to improve the efficiency and quality of health care. Doctors, hospitals and other providers that demonstrate meaningful use of EHRs receive federal incentives.

RealTruck.com recognized for record-breaking sales Truck

accessory

e-commerce

site

|PRAIRIE NEWS| Grand Forks plans drone business park Officials from Grand Forks, N.D., state leaders and representatives of the unmanned aircraft systems (UAS) industry came together during the 2013 UAS Action Summit in Grand Forks on May 30 to unveil plans to establish a UAS-specific business and technology park near Grand Forks. The park, dubbed Grand Sky, will be located west of Grand Forks on the Air Force base. The project is a collaborative effort among the state, the county, the city, the Grand Forks Base Realignment Committee, the Grand Forks Region Economic Development Corp., the University of North Dakota and Northland Community and Technical College.

Construction is expected to begin in 2014, with space becoming available for tenants in early 2015.

Northrop Grumman, maker of the Global Hawk drone, has announced its intent to become an anchor tenant of the park.

The Grand Sky announcement correlates with the state and city’s desire to be selected by the Federal Aviation Administration as one of six UAS test sites. At least 50 applicants are vying to become one of the half-dozen sites. The FAA is expected to choose site locations by the end of this year.

RealTruck.com recently received the Growing Jamestown (N.D.) award from the Jamestown/Stutsman Development Corp. in recognition of the company’s strong sales growth in 2012 and positive influence on the local economy. RealTruck.com finished 2012 with a recordbreaking $17.5 million in sales and has continued upward trajectory in 2013.

The company was founded in Spokane, Wash., in 1998 and relocated to Jamestown in 2000. Other than utilizing JSDC’s New Jobs Training Fund to grow its staff after initially opening the Jamestown location, RealTruck.com has financed its growth exclusively with its own profits. The company currently employs more than 40

If built as proposed, the Grand Sky unmanned aircraft systems business park in Grand Forks, N.D., will encompass 1.2 million square feet of space at the Grand Forks Air Base. SUBMITTED PHOTO

people at its offices in Jamestown and Fargo.

Summit Midstream starts up Bakken oil, water gathering system Summit Midstream Partners LLC, announced in May that it has commenced operations of the Polar Crude Oil and Water Gathering System in Williams County, N.D. The system is designed to gather 50,000 barrels of Bakken crude per day and 25,000 barrels of water per day from the Bakken and Three Forks formations. The system is comprised of approximately 50 miles of crude oil gathering pipeline and 35 miles of water gathering pipeline. Oil will be delivered to the

COLT Hub Terminal in Epping under long-term, fee-based gathering agreements. Kodiak Oil & Gas Corp. is the anchor customer on the system.

West Fargo manufacturer wins export award Roll-a-Ramp, a West Fargo-based manufacturer of portable aluminum wheelchair ramps, recently received the “E” award for exports from the U.S. Acting Secretary of Commerce during a ceremony in Washington, D.C. The award is the highest recognition given to U.S. exporters by the commerce department.

www.prairiebizmag.com

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|PRAIRIE PEOPLE|

Brad Kvalheim

David Stende

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Kvalheim named BSE northwest region utility sales manager

Lignite Energy Council chooses new CEO

Brad Kvalheim has been named northwest region utility sales manager for Border States Electric.

Kvalheim joined BSE in 1989 as an electronic service technician in the company’s Fargo location. In 1992, he became utility customer service representative for the upper Midwest including Minnesota, North Dakota and South Dakota. In 1995, Kvalheim moved to Sioux Falls, S.D., and became an account manager. In this role he was integral in coordinating five utility alliance agreements with multi-year commitments. Most recently he was the branch manager in Sioux Falls. In his new position, Kvalheim will be located in the company’s Bismarck, N.D., location and cover Montana, North Dakota, South Dakota and Wyoming.

Jason Bohrer, a Congressional chief of staff, has been named president and CEO of the Lignite Energy Council. He succeeds John Dwyer, who announced his retirement after serving as the group’s CEO for 32 years.

Bohrer has 15 years of experience in public policy and stakeholder relations, serving most recently as chief of staff to Rep. Raul Labrador, RIdaho, and as a legislative counsel to Sen. James Risch, R-Idaho, on energy policy, transmission, cyber security and regulated utilities.

Bohrer is a graduate of North Dakota State University in Fargo and George Mason University School of Law in northern Virginia. Bohrer will begin serving as CEO of the council in mid-July and will be based in Bismarck, N.D.

Jason Bohrer

Eide Bailly announces management change

Ackerman-Estvold hires senior water resources engineer

David Stende, who has served as chief operating officer for Fargo, N.D.-based accounting firm Eide Bailly for the past seven years, has assumed the role of managing partner/CEO of the firm. He is taking the place of Jerry Topp, who served in that role for the past decade and plans to continue working for the next few years, focusing his efforts on growing Practicewise, an association of noncompeting CPA firms, and on ensuring a smooth transition for the firm.

Mike Astrup, partner-in-charge of the Fargo office, is the firm’s new chief administrative officer and will be responsible for the internal functions of the firm, including human resources, training, finance, communications and information technology.

James Lyons, partner-in-charge of the firm’s Colorado offices, has been named strategic growth officer and will be responsible for the firm’s specialty services.

Barb Aasen, partner-in-charge of the Bismarck and Williston, N.D., offices, and Andrew Spillum, partner-in-charge of the Phoenix, Ariz., office, have been named chief practice officers.

They will be responsible for overseeing the growth and profitability of the firm’s 21 operating offices in addition to leading their respective offices.

The change in management structure is part of the firm’s overall goal to continue an aggressive growth pattern over the next five years.

Minot, N.D.-based Ackerman-Estvold Engineering and Management Consulting Inc. has hired Thomas Johnson as a senior water resources engineer.

Johnson previously worked for URS Corp. in New Mexico as a senior engineer specializing in water resources. He holds a bachelor’s degree in civil engineering from North Dakota State University in Fargo and a master’s degree in civil engineering from the University of Minnesota. He is also classified as a certified floodplain manager and is a Leadership in Energy and Environmental Design accredited professional (LEED AP).

Prairie Business Magazine July 2013

Tom Johnson

Basin Electric names new VP of human resources

Ellen Holt

Ellen Holt recently joined Basin Electric Power Cooperative as vice president of human resources. In this role, Holt will provide strategic leadership and oversee the tactical implementation of cooperative-wide employee-focused programs and policies.

Holt served most recently as manager of human resources at Logistics Health Incorporated/United Health Group in La Crosse, Wis., where she led the implementation and development of the human resources function in areas including recruitment, employee relations, and training and development. Prior to that, she served as the human resources director for Gunderson Lutheran Medical Center in La Crosse.

|PRAIRIE PEOPLE| Westra named COO at Hegg Companies Steven Westra has been named chief operating officer of Hegg Companies Inc., a Sioux Falls, S.D.-based real estate Steven Westra investment and development company. Westra has served as CEO of Esprit Memory Care LLC, a business affiliated with Hegg Companies, since 2010 and will continue in that role while taking on additional leadership responsibilities to help manage HCI’s multi-faceted growth. As COO, he will be active in the daily management of HCI’s development management and commercial real estate ventures, which will allow Paul Hegg, president and CEO of HCI, to focus on investor relations.

In a statement, Hegg said he expects the company to experience rapid growth over the next two to three years. The company is developing apartments, offices and other businesses in the Bakken region of North Dakota and is developing a series of Esprit Memory Care centers. It also operates three hotels in Sioux Falls and is developing a fourth — a Hilton Garden Inn that is currently under construction.

Schlittenhard elected to HIBCC board DuWayne (Dewey) Schlittenhard, vice president of heart/vascular and professional services at St. Alexius Medical Center in Bismarck, N.D., DuWayne was recently elected chair Schlittenhard of the board of directors of the Health Industry Business Communications Council. HIBCC is an industry-sponsored, nonprofit standards development organization that maintains labeling standards for hospital and their suppliers.

Prior to his role at St. Alexius, Schlittenhard was the chief operating officer at PRACS Institute Ltd. in Fargo, as well as director of pharmacy at MeritCare Health System in Fargo. He graduated with a bachelor’s degree from North Dakota State University in Fargo and earned his master's degree from Chadwick University in Birmingham, Ala.

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|BUSINESS DEVELOPMENT|

ND investors foster growing tech sector Tax credits, pro-business climate continue to attract new firms, investments

BY KRIS BEVILL

Utah-based Fixes 4 Kids Inc. recently relocated its manufacturing segment to Wahpeton, N.D., to produce the EFix, a system designed to treat broken elbows in children. PHOTO: FIXES 4 KIDS INC.

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Prairie Business Magazine July 2013

orth Dakota may be best known for its agriculture and energy sectors, but there is a growing movement to establish technology as the third leg of the state’s powerhouse economy, particularly in the Red River Valley region. The number of technology-driven companies choosing to locate in the area continues to grow, due in no small part to the state’s business-friendly atmosphere and investors who are willing to foster the industry.

One of the most recent examples is Fixes 4 Kids Inc., a Utah-based company with Silicon Valley roots that has devised innovative products to address pediatric orthopedic fractures. The company recently relocated its manufacturing operations to Wahpeton, N.D., where it is working with ComDel Innovations to produce its first products, designed to treat broken elbows in children.

Kurt Vedder, company founder and CEO, says he had not considered moving the company to North Dakota until he was introduced to Dan Hodgson, founder of the Southern Valley Angel Fund, in 2011.

But after making that connection, which led to a meeting with ComDel’s team and him learning about the state’s business climate, he happily made the move. “We continue to dig our roots into North Dakota and I couldn’t be more pleased,” he says. “It’s a fabulous place to do business. I think North Dakota is leading the country in terms of a strategy to retain and build business. The tax credits the state offers investors is a huge benefit for building businesses and to investments in general. Utah is way behind that and California … [is] the opposite extreme.”

Hodgson, who also serves on the board of directors for Fixes 4 Kids, says he was attracted to the company due to its philosophy that innovative products can be manufactured and brought to the market in a more cash-efficient fashion than is typically seen in large West Coast venture fund models. The Southern Valley Angel Fund, along with angel funds in Fargo-Moorhead and Fosston, Minn., individual investors and the North Dakota Development Fund, invested in Fixes for Kids during its first round of fundraising.

Linn Grove Angel Fund, which was co-founded

by Hodgson, is an investor in the Series B. North Dakota’s willingness to invest in technology in particular has been helped greatly in recent years by the state’s decision to provide a 45 percent tax credit for equity investments in early-stage, high-risk companies, Hodgson says. “We have more companies and investors here that are learning that this can be done here rather than sending our money to the Coasts and letting them do it,” he says.

The tax credit North Dakota offers for those types of investments is one of the highest in the country. Kansas

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|BUSINESS DEVELOPMENT| offers a 50 percent tax credit, capped at $50,000 per investment per company each year. Minnesota had a 25 percent tax credit program in place, and it was quite popular with the investment community, but the state legislature opted not to allocate funding for the program this year, leaving it unfunded as of May. Business investments in Minnesota will be hurt as a result, Hodgson says.

Fixes 4 Kids products have just recently been introduced to the market, but the company’s goal is to generate $2 million in revenue this year. By early June, it had already exceeded $800,000, according to Vedder. The company currently employs a staff of three in North Dakota, but plans to add personnel accordingly as the business grows. Despite the well-reported workforce shortages throughout the region, neither Vedder nor Hodgson believe recruitment will be a hurdle for Fixes 4 Kids, or for other technology companies in the area. “When it comes to building innovation companies, North Dakota has been shipping its talent out of the state for years, and we can attract them back when we have the kinds of opportunities that they left to seek elsewhere,” Hodgson says. “Any time, any day.” PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Dan Hodgson

Nominate Today!

Criteria:

Do you know a young professional who deserves recognition?

Professional Excellence:

The 40 under 40 issue of Prairie Business magazine actively supports and celebrates young professionals. The award honors individuals who strive toward the highest levels of personal and professional accomplishments, who excel in their chosen field, devote time and energy to their community in a meaningful way, and forge paths of leadership.

Community Service:

Demonstrate excellence, creativity and initiative in their business or profession.

Local, state, national or international participation. Charitable services, political pursuits, religious groups, chambers, merchant’s associations, etc.

Personal Leadership: Helping themselves and others reach their full leadership potential. Prairie Business magazine’s 40 under 40 listing is slated to run in the December 2013 issue. We are seeking nominations for candidates from North Dakota, South Dakota and western Minnesota for this year’s 40 under 40. In order to be considered, candidates must be 39 years old or younger (and can’t turn 40 until January 2014 or later).

To Nominate: To nominate someone visit prairiebizmag.com and click on the 40 Under 40 tab at the top of the page. The deadline for submissions is Oct. 1.

To Advertise: Shelly Larson Regional Manager 701.866.3628 slarson@prairiebizmag.com

l Bl usiness l l l l l l l l l l l l l l l l l l Prairie

northern plains business resource

Brad Boyd Regional Manager 800.641.0683 bboyd@prairiebizmag.com

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|HEALTH CARE|

Building on a History of Expertise Noridian changes name, launches massive hiring plan to meet growing health care services demand

BY KRIS BEVILL

s it possible for an existing company to fill nearly 400 open positions for high-demand jobs in a state where the monthly unemployment rate hovers around 3 percent and employers advertise thousands of job openings on a daily basis? Fargo-based Noridian Healthcare Solutions LLC (formerly Noridian Administrative Services) is about to find out. The health care administrative services firm, which already employs about 1,000 people throughout several locations in North Dakota and around the country, was recently awarded a five-year Medicare claims processing contract earlier that will more than double its volume of federal business. The contract, which was awarded through a competitive process, makes it necessary for the company to add about 500 employees in a variety of positions, including customer service representatives, nurses, accountants and information technology professionals, most of whom will be hired to fill new roles at North Dakota locations.

President and CEO Tom McGraw, who himself just joined the company last fall, says that despite hearing reports detailing North Dakota’s shortage of workers and recruitment challenges, he doesn’t think Noridian will struggle to find the qualified workers it needs. “You would think I would be [concerned], but Noridian is considered a very good company to work for so I think we’ve been getting excellent candidates,” he says. “Everybody has told us we are getting a stronger pool of applicants than one might have anticipated.”

By early June, Noridian had already hosted several job fairs in Fargo, including one in late March specifically for employees that had been displaced after PRACS Institute’s unexpected closure. In June, the company attracted 500 potential applicants to a job fair in Fargo. By September,

I

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McGraw says Noridian expects to have 375 new employees in North Dakota — 300 in Fargo, 50 in Jamestown, 15 in Leeds and 10 in Grand Forks. Other staff will be added at the company’s facilities in Bloomington, Minn., and in California.

Noridian will take over the Medicare contract in two phases, Part A in August and Part B in September, so the company will stagger its hirings accordingly, with the first wave of new employees expected to be in place late this month.

According to McGraw, potential new hires represent a mix of local residents and interested parties willing to relocate from elsewhere in the country, although he says most of the applicants at its June job fair were locals. Until hiring is complete, it’s difficult to estimate how many of Noridian’s new employees will represent new residents, and therefore new members of the state’s workforce, but local health care providers will most certainly be keeping a watchful eye on Noridian’s hiring process and the impact it has on their staff numbers. The last time Noridian expanded its workforce, at least one Fargo hospital lost a significant number of nurses to the company and had to spend the next year aggressively replenishing with new hires. McGraw says he sympathizes and hopes that doesn’t happen this time around, but adds that the nurses Noridian hires are generally looking for a way to get out of the clinical setting anyway. “Our nurses are primarily doing medical review-type work, so a lot of times they can do it from home,” he says. “It’s very steady work, but maybe not as high stress [as clinical or hospital settings].” Currently, 10 percent of Noridian’s workforce is nurses.

It's possible for Noridian to utilize remote workers for several types of positions within the company, but McGraw says Noridian is among those companies that have moved

|HEALTH CARE|

Tom McGraw joined Noridian Administrative Services last October as the second president and CEO in the company’s history. Since that time, the company has been awarded a massive federal Medicare claims processing contract, which requires hiring an additional 500 people, and changed its name to reflect an expanded services focus. PHOTO: JOHN BROSE

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|HEALTH CARE|

Noridian Healthcare Solutions is headquartered in Fargo, but employs personnel at facilities throughout North Dakota as well as in Minnesota and California. PHOTO: JOHN BROSE

away from the belief that telecommuters can be based anywhere and now prefer to hire workers who are located near a company office. “I think companies believe that even with telecommuters you’re far better off hiring in your local area so that they can come in for group trainings and things along those lines,” he says.

Medicare and More Noridian currently processes more than 102 million medical claims annually for more than 290,000 health care providers located in all 50 states. Three-quarters of the company’s business volume comes from federal contracts; Medicare contracts now account for 15 percent of the company’s total business.

Noridian’s roots in Medicare contracting stretch back four decades to the program’s very beginning. When Medicare was launched in 1966, Blue Cross Blue Shield of North Dakota provided administrative services for the program. In 1998, BCBS of ND became Noridian Mutual Insurance Co. and in 2002 Noridian Administrative Services was spun-off as a separate entity to carry out Medicare contract work. Noridian is now one of only 10 government Medicare and Medicaid claims contractors in the country and has extensive experience in the administrative services process, but the company is able to provide a list of other health care-related services as well and has recently begun an effort to promote its broader capabilities. The company changed its name in May, from Noridian Administrative Services to Noridian Healthcare Solutions, in order to emphasize this expanded focus, which includes care and delivery management solutions to improve care while decreasing its cost, medical review services to reduce fraud and abuse, data analysis and the development, support and admin-

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Prairie Business Magazine July 2013

istration of health insurance marketplaces. “We’re more than a claims administrator, and ready to help states, federal government and business meet the new challenges they face in health care information, systems and support,” McGraw says.

The utilization and analysis of data is an area of growing importance for health care providers. In the past, claims data was the only source of data analyzed for health care purposes, according to McGraw. But that is changing. In the future, data including electronic health records, family histories, genomics, and even types of purchases and places of residence will be analyzed and used by providers, including Medicare and Medicaid programs, to help determine criteria for care. Noridian wants to expand its role in compiling and making sense of all that data. “We see a role for us there, primarily bringing our expertise in Medicare and clinical expertise,” McGraw says. “For a company that is doing the kind of Medicare administrative work that we’re doing, we have an unusually large number of statisticians, including Ph.D and master’s level statisticians. We think we can help bring a lot of that expertise to the field.”

The Affordable Care Act has proven to be a boost for Noridian’s business already and the company plans to continue growing that aspect of its services. The company is serving as the contractor for the Maryland Health Benefit Exchange and has spent the past year building the system for the state-based health insurance exchange, which is scheduled to open for enrollment on Oct. 1. Building that type of system is an extremely complex task because the exchange must not only display different insurance options and be able to enroll individuals, it must also have the ability to obtain information to determine an individual’s eligibility for

|HEALTH CARE|

federal health care subsidies, according to McGraw. “We have to get the information and validate it against a bunch of different sources and determine if that individual is qualified for a subsidy and, if they are, how much of a subsidy,” he says. “So an individual can choose between different health plans, but we have to tell the help line how much is coming from insurance and how much is coming from the federal government.”

Maryland is one of only a few states, including Minnesota, which has opted to create its own health care exchange in advance of the Affordable Care Act’s Jan. 1 start date. The majority of the states will at least begin complying with the law by using a federal exchange system. McGraw anticipates that will change in the future, however, and Noridian is positioning itself to be a provider of exchange systems and related services for states as needed. “We expect that a number of states that are using the federal exchange initially will want to build their own exchange,” he says. “The other thing we want to be doing with states is providing other services [such as call centers and communications with payers]. We would love to be doing those types of services for them.”

Services related to the Affordable Care Act clearly represent an area of growth for Noridian’s state-based business. On the federal side, McGraw expects Medicare and Medicaid programs to focus on providing more cost-effective care and he believes Noridian can impact that goal through its care and delivery management and program integrity services. Long-term, he anticipates the company will continue to grow, although he says it is currently difficult to speculate at what rate and in what specific areas. “In health care, it’s so dramatically changing that it would be hard to do that, but we have grown substantially in the last couple of years and we anticipate continuing of that growth.” PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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|LAND VALUES|

How High Will They Go? Strong commodity prices and low interest rates continue to impact region’s land prices

BY KYLIE BLANCHARD

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and prices are at historic highs across the region, driven by strong commodities, high crop yields and historically low interest rates. But how long this upward trend will continue and its full impact has yet to be determined.

“We’ve had a perfect storm of factors driving land values,” says Andrew Swenson, extension farm management specialist at North Dakota State University in Fargo. “These include several years of strong crop production, increases in the farmers’ ability to pay for land, low interest rates, positive outlooks and a favorable tax climate.”

This is reflected in similar land price trends across North Dakota, South Dakota and Minnesota, he notes. The previous peak in land prices in North Dakota was in 1981 and prices then dropped 40 percent over the mid- to late-1980s, finally bottoming out in 1987-1988.

“There was then a gradual rise from 1988 to 2003 and then prices picked up,” Swenson says. “Since that time, the rise has been fairly rapid in North Dakota and across the region.”

During 2012, land prices in North Dakota rose over 40 percent and in 2011 and 2010, prices rose nearly 20 percent each year. “We’ve had strong profits in crop agriculture since 2007,” Swenson says, noting this is the result of historically high crop prices mixed with strong yields.

“This has increased both the profitability of producers and their ability to purchase land.”

The most expensive land in North Dakota is found in the Red River Valley, where rich soils produce bountiful crops. “Part of this equation is the price of land is being driven by the earnings of the land,” says Alan Butts, realtor with Pifers Auction and Realty. “The highest prices we are seeing are in Walsh County, where sugar beet and potatoes are grown, but we are seeing strong values all over the state in all classes of land.”

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|LAND VALUES| “We’ve seen a 25-year increase in land values statewide,” says Larry Janssen, professor of agricultural economics at South Dakota State University in Brookings. “Some years have been modest increases, but in the last few years it has accelerated into overdrive.”

Janssen says the state experienced a 33 percent increase in land prices in 2012 and a 26 percent increase in 2011. “The early 1970s was the last time we saw back-to-back years with price increases over 20 percent,” he says.

The most expensive land in South Dakota is located in the eastern portion of the state, south of Brookings and along the Interstate 29 corridor. “We are seeing in some counties in this region an average cropland price of $8,300 per acre,” Janssen says. “Five years ago, this same land was less than $3,800 per acre.”

Minnesota is also experiencing an upward trend in prices for its fertile farmland. “The Morris area has the highest priced land sales overall in our primary trade area,” says Ken Knudsen, senior vice president and chief credit officer at AgCountry Farm Credit Services, which provides credit and financial services to farmers and ranchers in eastern North Dakota and northwest and west central Minnesota.

“Land outside of the Red River Valley has gone up more than land values in the valley, but all areas have seen significant increases and strong demand.”

ers’ ability to purchase land. “The average farmer in North Dakota is between 57 and 58 years old, and has been in the business a long time. They have fixed assets and have paid off their debt with secure capital, and then they have purchased land close to them.”

The decreased risk associated with land purchases has also encouraged the next generation of family farmers to get involved with land purchases. “Agriculture has become more appealing and has become more stable,” Goehring says. “Farmers have the ability to help the next generation transition into the operation.”

He notes the sustainability of current land prices is going to be dependent on the continued ability of landowners to balance the ratio of the land’s market value to production value after purchasing land at current prices. “When you get a loan or buy land, the land has to produce to pay for itself,” he says. “Right now the market value may be, for example, $1,000 per acre, but the productivity value may only be several hundred dollars per acre.”

Goehring says those most impacted by the high land prices are young and beginning farmers who have established their operations in the last 10 years. “It is pretty volatile for them. These producers are establishing debt in good times and that is tricky.”

“Most of the people buying land are adding to an existing land base,” adds Butts. “Prices now make it hard for someone to break into land purchasing.”

Managing Risk

The Future of Land Prices

Rising Land Values in SD and Minn.

Knudsen says rising land prices in the region have created primarily positive impacts. “Often high land prices are talked about as if it is a bad thing, but most people hope what they buy goes up in value,” he says. “It may be a fear that we will see a return of what happened in the 1980s when land values fell 50 to 70 percent in our area.

However, there are many different protections in place today to make those events unlikely. The sound crop insurance programs of today are probably the most important risk mitigators we have.”

The many ways risk is reduced has contributed to strong land prices in the region, according to Knudsen. “Borrowers have locked in good interest rates for longer terms, up to 25 years; loans are more collateralized; there is room in cash rents and some crop inputs to help reduce operating costs; farmers have built up and maintained better working capital positions and overall financial strength; and lenders have maintained good credit disciplines and avoided excess leverage,” he says.

“Ultimately, though, it is still old-fashioned supply and demand that determines land values. Lenders and borrowers just have to be smart to position themselves so they can be in a good position to handle whatever comes,” he says.

Reaching the Land Price Pinnacle North Dakota Agriculture Commissioner Doug Goehring says the price of both land and commodities in the region is reaching an apex. “We are starting to see a trend downward nationwide and we will begin to see this in North Dakota,” he says. “Commodity prices are leveling off and land prices will follow the same trend.”

He says the current land prices have also been driven by farm-

Swenson says land prices in North Dakota are not expected to drop in 2013. “This is a historic time and how long this can continue is questionable,” he says. “The main drivers have been high crop prices and low interest rates.”

The outlook for 2014 is uncertain, but Swenson says his best guess is crop prices will be lower and interest rates will be higher by late 2014 or 2015. As a result, land price levels will flatten out and possibly begin a decline.

“Are people paying more than what is economically sustainable at this time?” asks Butts in regards to what the future holds for land prices. “We’ll have to see how things play out in the next few years.”

How long the high land prices will continue is “the big unknown,” Janssen adds. He believes prices in South Dakota will continue to rise for another year, but could begin to change in the next two years.

Knudsen says landowners’ profits are going to play a key role in the future of land prices. “Profit margins determine the prices. As long as there are profits and the belief that profits will continue, land prices get bid up to those levels. Once the profit margins are low or negative, land values fall to match up with the margins.”

But Janssen says the land prices are a reflection of the positive economy of the region.

“The impacts of land prices are not immediate, but over time, the land prices speak about the wealth of the region.” PB Kylie Blanchard Contributing writer 701-391-0373, kylie.blanchard@hotmail.com

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|SOUTH DAKOTA|

No-pedal bike company hits its stride Sales climb at Strider Sports International as kids, parents see benefits of balance bikes

BY KRIS BEVILL

he Black Hills, home to the Sturgis Motorcycle Rally and miles of scenic bicycle trails, is a great place for anything on two wheels. But it wasn’t location that prompted Ryan McFarland to launch Rapid City, S.D.-based balance bike company Strider Sports International Inc. six years ago. Instead, he has his son to thank for the inspiration.

“I had a two-year-old and was an over-eager dad who wanted to share my passion for riding with him,” McFarland says. An avid motorcycle racer and bike rider, McFarland says he filled his garage and house with every type of child’s riding toy available, but soon realized that every ride-on toy on the market was simply too heavy, too big and too complex for the toddler set. Being an entrepreneur and inventor (he holds several U.S. patents), McFarland’s tendency to tinker kicked in and led him to create the perfect bike for tykes — a no-pedal bike that was light-weight enough for

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Strider Sports International Inc. founder and CEO Ryan McFarland credits the Internet, social media and an aggressive marketing campaign for his company’s recent growth. PHOTO: STRIDER SPORTS INTERNATIONAL INC.

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Prairie Business Magazine July 2013

his toddler to handle and low enough to the ground for his little legs to move it. He had no intention of getting into the bike business, but steady inquiries from would-be customers who saw his son’s bike soon changed his mind. “We realized that there was too much interest not to do something with it,” he says.

McFarland launched Strider in 2007 and spent most of the year working nights and weekends to develop the prototypes and acquire financing while still working full-time at the mortgage company he owned. He received the first shipment of bikes from a manufacturer in China that November and sold a modest 6,000 bikes in 2008. Sales started taking off in 2009 as word spread about the product and the business grew at such a rate that McFarland sold his mortgage company in order to focus entirely on Strider. By 2010, the company had grown to include five employees and moved its operations

|SOUTH DAKOTA| into a large warehouse space in Rapid City to house its inventory. This year, the company expects to sell more than 300,000 bikes worldwide, amounting to $13 million in sales.

Strider currently employs 30 people and will expand to an even larger facility this fall to accommodate the company’s continuous growth.

McFarland credits the Internet, an aggressive marketing campaign and parents, who serve as Strider’s “army of unpaid salesmen,” for the company’s growth.

“I would never even have started the company from Rapid City if the Internet didn’t exist,” he says, adding that exports account for about half of the company’s sales. Social media has also played a prominent role in Strider’s growth.

The company sets up riding areas at events large and small around the world, including parades, home shows, the Indy 500 and Sturgis, attracting toddlers and skeptical parents who can’t help but take photos of their children and share them via social media after seeing their tiny tots ride a bike.

The viral marketing campaign extends to neighborhoods as well. “Every time a bike goes out into a neighborhood, it helps sell more bikes,” he says.

No-pedal bikes are not a new invention, but parents

who likely have envisioned a bike with training wheels as their child’s first bicycle typically need a little convincing to give it a try, McFarland says. For this reason, it’s often other parents who serve as Strider’s most effective sales people.

And Strider’s bikes differ from competitor’s products in that they are designed specifically for very small children, ages 18 months and up, offering kids the chance to begin riding as soon as they are able to walk, which parents often have difficulty believing until they see it, he says.

Strider plans to continue marketing its product around the world, including on its home turf. The company is planning to display its products at three locations during the Sturgis bike rally this year, setting up booths at the Buffalo Chip campground, the motorcycle museum on Main Street in Sturgis and at Black Hills Harley Davidson in Rapid City.

By October, McFarland hopes to be settled into the company’s new building, giving everyone time to gear up for the end-of-the-year rush. “Christmas season is out of control here,” he says. “That’s our No. 1 season.” PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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|WESTERN NORTH DAKOTA|

Experiencing the Bakken Tour provides extensive, first-hand look at Williston Basin boom

BY KRIS BEVILL he local philosophy in the Bakken is that if you want to do business there, you need to be there. There’s an obvious reason for this: Locals are so busy they can’t keep up with phone messages and random requests for information. But there’s another reason, too: Unless you’re there, you can’t truly comprehend the enormity of what is happening. The Bakken boom deserves to be seen with your own eyes, and if you can find a local to show you around, that’s even better.

Jeff Zarling, founder and president of Willistonbased web development, communications and marketing firm Dawa Solutions Group, launched the Bakken Field Tour last year to offer a first-hand look to anyone wanting to better understand the Williston Basin. He says he got the idea for the tour after national media attention in late 2011 led to a sudden influx of inquiries from people all over the world, all wanting to know more about the boom but having no real knowledge about the area in general. The tours have drawn a global audience of investors, developers and

T

The Williston Bakken Field Tour includes a drive along Highway 85, notoriously known as the deadliest highway in North Dakota, where attendees see for themselves the constant flow of truck traffic between Williston and Watford City.

PHOTO: KRIS BEVILL, PRAIRIE BUSINESS MAGAZINE

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Prairie Business Magazine July 2013

media, but local residents and business people also regularly attend the tours, proving that it’s difficult for everyone to keep up with the rate of changes taking place in the region.

This year, Dawa Solutions is hosting tours from Williston and Dickinson. One of the first events of the season, held in May in Williston, attracted a small but diverse group, including representatives from a local trucking company, leaders of a major shipping supplies company and a television news crew from France.

Attendees were there to consider investment possibilities, catch up on the latest developments and educate themselves on the boom and its impacts.

Each tour begins with a 3-hour workshop, delivered by Zarling, which covers the history of Bakken oil drilling, technological developments that made the current boom possible, economic activity, risk factors and current development needs. His goal is to provide attendees with enough information to enable them to conclude independently long the boom will last, which he says is always the No. 1 question.

|WESTERN NORTH DAKOTA|

Attendees see, hear, feel, taste and smell the impacts of the boom, although what they choose to do with the information is as varied as their places of origin.

There is so much ground to cover during the workshop and driving tour, literally and figuratively, that the day stretches easily to eight hours. The Williston-based tour includes a stop at a Target Logistics crew camp on the eastern edge of town, where visitors are given a tour of the facility and treated to a surprisingly high-quality lunch at the camp’s cafeteria.

From there, the day includes a pass through Watford City, Alexander, New Town, Tioga, Stanley, Ray and Epping.

There are few stops on the road — if you exit the highway, the wait to merge back onto the highway amid endless truck traffic can throw the whole day’s schedule off track. But Zarling keeps attendees engaged while on the road and does his best to put the boom’s impact on the region into perspective for all tour attendees. He gets admittedly excited when talking about the development opportunities in the region, but he’s also honest about the difficulties that come with it and provides the perspective of a resident and business person when discussing issues such as housing, traffic congestion and quality of life changes, like hunting grounds that have been lost to oil development. When attendees get a whiff of awful-smelling hydrogen sulfide (H2S) as the tour van drives downwind from a well, Zarling explains what it is (a heavy gas associated with natural gas production) and the hazards it presents to workers. He acknowledges the rampant flaring of natural gas at many of the wells throughout the area, but is quick to point out the difference when the tour enters the “older” part of the Bakken. There, trucks and flares are fewer because the infrastructure to capture and transport natural gas has caught up to drilling. It’s a hopeful indicator of what the future may hold for the rest of the region.

Tour organizers promise an experience that allows attendees to “see and feel the sheer volume and velocity of activity” in the region, and that promise is surpassed. Attendees, see, hear, smell, taste and feel the impacts of the boom, although what they choose to do with the information is as varied as their places of origin. PB

Jeff Zarling, founder and president of Williston-based Dawa Solutions Group, hosts the Bakken Field Tour. PHOTO: KRIS BEVILL, PRAIRIE BUSINESS MAGAZINE

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

Overflowing parking lots, seemingly sprouting up in the middle of nowhere, oil rigs and unit trains hauling Bakken crude are common sights when touring the Williston Basin.

PHOTO: KRIS BEVILL, PRAIRIE BUSINESS

www.prairiebizmag.com

33

|RED RIVER VALLEY|

Nonprofit sets example for effective, multi-source funding Tax credits, grants, donations fuel $15 million Family HealthCare project

BY KRIS BEVILL hen Fargo’s Family HealthCare began planning a project in 2008 to move the center into a larger space that would accommodate the growing need for its services, CEO Patricia Patrón knew she would have to find an innovative way to pull together the $15 million needed for the project. The nonprofit health care organization worked hard to run a sustainable operation, but as with most nonprofits, money was tight and it would be impossible for FHC to fund a major project on its own.

Fortunately, the American Recovery and Reinvestment Act of 2009 included a rare opportunity for Federally Qualified Health Centers like FHC to apply for grant money to support those kinds of projects, and in December 2009, FHC was awarded a $6.6 million grant. That support, combined with local contributions and smaller grants, only provided a little more than half of the money needed to carry out the project, however, so Patron decided to explore other mechanisms that hadn’t been commonly used in North Dakota to supply additional funding. Tax credit programs offered an opportunity, but the process was quite complex and she realized FHC needed guidance to maneuver through the various hurdles involved in funding a project by using a combination of tax credits and grants.

W

Fargo’s Family HealthCare, a nonprofit medical and dental clinic, utilized an innovative funding strategy to raise most of the $15 million needed to relocate to a larger facility.

PHOTO: JOHN BORGE

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Prairie Business Magazine July 2013

After consulting with the U.S. health and human services department for help, she was connected with another nonprofit, Central City Concern in Portland, Ore., which had recently become the first organization in the nation to use a combination of stimulus grant money, multiple federal tax credits and other financing to fund clinic expansions.

“We’d had a lot of prior mixed-used financing experience both in the housing and on the medical side, so we were quickly able to do that,” says Sean Hubert, senior director of housing at Central City Concern.

“FHC was trying to do the same thing, but was hitting some roadblocks and having some difficulties.”

With Central City Concern as consultants, FHC was able to piece together a similar funding package.

Federal and state historic tax credit programs were utilized to provide $1.5 million in funding. The federal New Market Tax Credit program, which encourages investment in low-income areas, was tapped for an additional $4.1 million. As a result, FHC was able to begin construction of the project in 2011 with 90 percent of the project’s cost in hand.

Funding models like those used by FHC and Central City Concern become very complex because each tax credit bears varying legal structures and commercial debt must be provided by a lender willing to be

a second-tier addition in the capital stack, according to Hubert. Patron says she hopes other nonprofits can learn from FHC’s experience and use it as an example for their own projects. “Sometimes you just need to think outside the box and learn about these things that are happening outside of our communities,” she says. “We were the first program in North Dakota to use three different federal funds to complete a massive capital project. These things are out there and we just need to be attentive and keep our heads looking outside the community to see how we can bring wealth into the community.”

The federal grant used by FHC is no longer available, but tax credit programs continue to present the opportunity for creative funding packages, according to Hubert. “Depending on the project, if you can twine historic and new market tax credits into a deal, and you’ve got a good team and good investors, sometimes you can get 40 percent

or so of a project cost covered between those two tax credits,” Hubert says. “Then all of a sudden your project cost is 60 percent and that’s much easier.”

FHC opened the doors to its new facility late last year, but continues to seek funding for the remaining $1 million of the project cost and has until November to meet that goal. Patrón is optimistic the organization will meet its goal, although she admits that nonprofits have found it difficult to fundraise in the post-economic downturn, even in wealthy states like North Dakota. “I think we’re all becoming more sophisticated at fundraising, which is good, but I wouldn’t say it’s easier, even in a state which has a surplus,” she says. PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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Wind forecast: Outlook hesitantly optimistic Regional developments suggest tempered growth in wind energy industry

BY KRIS BEVILL

ongress’ approval of a one-year extension to the 2.2 cent per kilowatt hour wind energy production tax credit (PTC) earlier this year provided some relief to the industry and has spurred renewed interest in manufacturing and production projects, but the long-term fate of the industry remains unclear.

In late May, Quebec-based Marmen Inc. celebrated the opening of its first U.S. plant, a wind tower fabrication plant in Brandon, S.D.

C Patrick Pellerin, president of Marmen Inc., announces the company’s plans to open Marmen Energy during a press conference held May 28 in Brandon, S.D. PHOTO: CATHERINE THURMAN

36

Prairie Business Magazine July 2013

The facility was originally built in 2010 by another company which planned to manufacture wind towers, but the project stalled when the company, Tower Tech Systems, failed to secure enough contracts for towers, says Nick Fosheim, executive director of the Lincoln & Minnehaha County Economic Development Associations. Construction of the building had been completed and some equipment was installed, but the company never hired any of the proposed 150 employees. Marmen plans to

|ENERGY|

add 50,000 square feet to the 150,000-squarefoot space and has already begun recruiting employees, according to the company. It expects to begin operating at the end of this year and will employ up to 250 people when the facility is fully operational next year.

Fosheim says Marmen’s plant opening will have a significant economic impact on Brandon and the surrounding area. “Certainly, we’ll see an increase in the local employment opportunities, but we’ll also see increased residential growth and increases in sales tax revenue,” he says. “It will challenge us to grow our training programs to meet the continued demand by local employers. All of this will impact the entire region, not just Brandon. When you consider Marmen’s international reputation, this really puts us on the map in terms of recruiting new business to the area.”

Brandon, located just a few miles east of Sioux Falls, S.D., has a population of about 9,000. At 250 employees, Marmen would be Brandon’s largest employer, according to Fosheim. Marmen has launched a vast recruitment campaign to locate staff and Fosheim says local and state agencies will assist. “It’s our job in economic development to connect businesses with the right partners so they can be successful here,” he says. “We have an opportunity to prove that even though unemployment is low, opportunity is high and our region is growing.

Marmen has said it is hiring primarily character, not skills, because they are willing to train. That approach may prove beneficial as they ramp up to full production.”

Ron Rebenitsch, executive director of the South Dakota Wind Energy Association, says Marmen’s expansion to South Dakota demonstrates positive movement in the industry, but the ongoing national recovery from the recession and low natural gas prices continue to impact the industry’s overall growth. “On the positive side, projects that have been on hold are coming back, not so much in the Dakotas but in other parts of the country,” he says, adding that locating production facilities in the northern Plains, like Marmen has done, makes strategic sense. “It’s a solid business decision to place a factory in the middle of the industry,” he says.

“By building towers in this region, you can elim-

inate some of the cost of transport.”

Fargo-based Wanzek Construction, a MasTec company, has installed more than 5,000 megawatts of wind generation capacity across the U.S. and is currently actively working on the preliminary stages of a number of projects, but it’s too early to say whether those projects will come to fruition, says Rob Lee, director of operations for Wanzek’s wind energy group. “It seems as though the appetite from utilities is not where it needs to be to build a bunch of projects at the moment,” he says. “The PTC has helped the renewable industry considerably but a one-year extension is tough because it creates a roller coaster of projects, where every other year we are busy.”

Wanzek constructed wind projects in several states and in Puerto Rico last year, but none in the Dakotas or Minnesota. So far this year, the company is bidding on projects throughout the U.S., with a concentration in Iowa, North Dakota, Oklahoma and Texas, according to Lee. Minnesota Power, a division of ALLETE, recently celebrated the completion of the final phase of it its $500 million, 101-tower Bison Wind Energy Center near New Salem, N.D., and could announce more wind energy investments in North Dakota this year, pending permitting approvals and other considerations. Todd Simmons, Minnesota Power’s general manager of wind operations, says he believes there is room for wind energy to grow in North Dakota, particularly for companies like Minnesota Power, which must comply with Minnesota’s requirement that utilities obtain 25 percent of their power from renewable sources by 2025.

Renewables currently account for between 15 and 18 percent of Minnesota Power's supply, but its long-term goal is to generate power from an equal mix of renewable, natural gas and coalbased sources.

Minnesota Power holds wind options on approximately 120,000 acres of land adjacent to the Bison Wind Energy Center, which will remain in place for nearly 50 years. The utility currently provides service to about 143,000 customers across 26,000 square miles in northeastern Minnesota. PB Kris Bevill

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|ENERGY|

Increased oil estimate could boost investor confidence Updated USGS survey predicts twice the oil previously thought held in Williston Basin

Updated estimates on the anticipated size and duration of western North Dakota's oil play is expected to ease investor concerns, spurring more housing and infrastructure developments. PHOTO: KRIS BEVILL, PRAIRIE BUSINESS MAGAZINE

BY KRIS BEVILL he U.S. Geological Survey’s recently updated assessment of oil and gas reserves believed to be contained in the Williston Basin predicts that the region contains twice as much oil and three times as much natural gas as was estimated in 2008. It now believes there are approximately 7.4 billion barrels of technically recoverable oil and 6.7 trillion cubic feet of undiscovered natural gas in the basin.

The significant increase in estimated recoverables is due to the inclusion of the Three Forks Formation in addition to the Bakken Formation, according to the USGS. When the 2008 survey was conducted, little data existed on the Three Forks Formation and it was believed to be unproductive, the agency stated. However, new drilling delivered a new perspective on the formation’s potential, thus leading to the updated estimate.

The updated government assessment likely came as no surprise to the oil and gas industry, which has been building out its infrastructure for a long-term play for several years already, but it could provide muchneeded reassurance for investors and developers who may be skittish about participating in an oil boom area.

Sen. John Hoeven, R-N.D., said he asked the Interior Secretary to conduct a new survey more than two years ago, with the goal of stimulating more private investment activity in the region to support its growing needs. He expressed satisfaction with the survey results and suggested that if the industry is right, even the high end of the USGS assessment — 11.4 billion barrels of oil — could prove to be low. “This is clearly great news for North Dakota and great news for the nation, and we believe it is a conservative estimate, based on industry assessments,” he said in a statement. “This new USGS study further confirms and reinforces the fact that the Williston Basin is a sustainable, long-term play warranting strong private-sector investment for decades into the future.”

Dean Bangsund, a research scientist at North Dakota State

T

38

Prairie Business Magazine July 2013

University in Fargo who has conducted a significant amount of research on the Williston Basin, agrees that the updated USGS assessment is not news for the industry, but provides investors and developers with clarification on the longevity of the activity. “I think that is absolutely critical for the proper flow of investment dollars,” he says. “They need to understand the duration and magnitude of the development and they need to be able to understand what the uncertainty and risk is. I think having the USGS come out and publicly state what they think the numbers are, even if the industry already knew it, it’s important for them to get that information.”

Bangsund says the updated assessment also highlights the tremendous economic opportunity facing North Dakota and should be addressed appropriately. “The economic output from the Williston Basin is likely to continue, which means we’re going to continue to have strong employment in the state, strong business activity, opportunities for new businesses,” he says, adding that it also indicates a long-term, sustainable source of state revenues generated from oil and gas output. But the most significant takeaway for the state, he says, should be the realization that it needs to collectively address the infrastructure needs in western North Dakota in order for the region to handle its bigger economy. “It isn’t just a function of putting homes in; we also have to put in parks, golf courses,” he says. “We have to make sure that the support services that go with that workforce are there. All of that has to be built up to handle a much larger economy in the western part of the state. At the same time, the state can’t ignore that we’re growing elsewhere as well. We have those development concerns that we need to address long term in the state.” PB Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

R001910013

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

Mar-13 3.20% 3.5 4.2 4.7 1.8 4.5 3.9 4.8 1 4.30% 4.6 4 3.7 3.5 4.2 4 3.4 4.6 3.8 4.5 4.2 5.40% 5.4 5.6 8 9.4 5.9 7.2 7.7 5.3 5.9 6.2 4.7 4.4

Mar-12 3.00% 3.6 4.2 5.1 1.8 4.1 3.4 5 0.9 4.40% 4.9 4.7 4.1 3.9 3.8 4 3.7 5 3.5 4.8 4.3 5.70% 6 6 8.3 9.9 5.8 7.2 8.2 5.3 6.4 6.1 5.4 4.5

| SPONSORED BY EMPLOYMENT Mar-13 Mar-12 385,147 378,428 58,054 58,538 114,703 113,629 51,166 51,815 20,968 19,379 9,826 10,404 34,758 33,859 10,987 11,371 41,171 31,758 428,290 426,599 63,095 63,039 128,483 124,765 22,323 22,361 18,548 18,534 9,546 9,466 12,792 12,703 11,608 11,585 12,145 12,158 7,524 7,548 18,193 18,225 11,383 11,205 2,821,531 2,802,850 1,767,024 1,735,317 19,488 19,546 20,041 20,326 40,295 40,757 10,135 11,041 27,746 28,718 17,508 18,221 13,968 14,211 24,143 24,059 22,346 23,642 27,839 27,754 10,813 11,235

Producing Wells

Average Daily Production

Total Permits

8,634 6,932

782,812 577,478

218 181

Mar-13 Mar-12

Average Rig Count 186 205

Mar-13 Mar-11

Price 87.25 76.29

FIRE Employment Finance, Insurance, Real Estate Employment in the Tri-State Area

235 230 225 220 215 210 205 Jan 2000

Jan 2002

Jan2004

Jan2006

Jan2008

Jan 2012

Jan2012

Jan2014

Jan2012

Jan2014

National Average Rate on Business Loans

Interest Rates

Weighted-average effective loan rate, all C&I loans

7

Percent

|

Oil Production

Thousands of Employees

|BY THE NUMBERS| Employment UNEMPLOYMENT RATE

Effective federal funds rate 10-year treasury constant maturity rate

9

6

8

5

7

4

6

3

5

2

4

1

3 2

0

Jan2000 Jan2002

Jan2004

Jan2006

Jan2008

Jan2010

Jan2012

Jan2014

Jan 2000

Jan 2002

Jan2004

Jan2006

Jan2008

Jan 2012

Charge-off Rate for Business Loans and Mortgages

Exchange

3

1.6

Charge-off rate, single family home Charge-off rate, business loan

Canadian Dollars to One U.S. Dollar

1.5

2.5

1.4

2

1.3 1.5 1.2 1 1.1 0.5

1 0.9

Jan2000 Jan2002

0 Jan2004

Jan2006

Jan2008

Jan2010

Jan2012

Jan2014

Jan 2000

Jan 2002

Jan2004

Jan2006

Jan2008

Jan 2012

Jan2012

Jan2014

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 July 2013

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