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September 2012

Taking Off Airports expand to meet increasing passenger demand

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ALSO Rail Support Railroads beef up infrastructure as customers establish new facilities

pg. 30

Doubling Dickinson The Bakken's southern boom town prepares for rapid growth

pg. 34 www.prairiebizmag.com


Photo courtesy of Great River Energy

North Dakota. Doing Business Better. Great River Energy chose North Dakota as the site of three power plants for two primary reasons: the state’s ample energy sources and its business-friendly environment. This has helped Great River Energy generate and transmit reliable, competitive and environmentally friendly electricity over four decades. Learn how the North Dakota Department of Commerce and companies in the state are doing business better at www.NDBusiness.com


|INSIDE| SEPTEMBER ISSUE 2012 VOL 13 ISSUE 9

FEATURES

DEPARTMENTS 6 Editor’s Note BY KRIS BEVILL

On the move 8 Business Advice BY MATTHEW D. MOHR

Business debt should be a temporary necessity 10 Finance BY JOE WITT

Too good to be true or real deal? 12 Research & Technology BY DWAINE CHAPEL

SDSU biofuels research will assist Navy 14 Economic Development BY HAROLD STANISLAWSKI

New programs offer entrepreneurs opportunities

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TRANSPORTATION

16 Prairie News

Taking Off Airports throughout the region experience record passenger numbers

30 34

20 Prairie People 24 Business Development Sanford begins building Fargo medical center

RAIL

Investing for the Long Haul Railroads expand infrastructure to meet growing demand

44 Red River Valley Regional railroad celebrates 25 years of steady growth

EXPANSION

46 South Dakota Website designed with oil in mind

The Boom Builds South

48 Western North Dakota Burlington plans for population explosion

Dickinson prepares to double in size as the oil industry moves in full force

50 Energy 54 Business to Business

Scan this with your smartphone's QR Reader to visit our website. Next Month In October's health care and technology issue, we'll provide an overview of Sanford Health's plan to greatly expand its services to the region over the next five years and ask company leaders how these changes might impact health care throughout the prairie. We'll also explore various approaches being taken by small businesses and communities to be noticed on the internet.

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|EDITOR’S NOTE|

On the move s the mother of two young boys, I spend a lot of time talking about things with wheels. Cars, trucks, trains and planes are all subjects of ongoing fascination for the little people in my house, as I imagine is the case in nearly every house that contains small children. So naturally, we notice every train on the tracks, every big rig on the highway and every plane that flies over our house. It seemed fitting then, if not also a little ironic, that my inaugural issue as editor of Prairie Business magazine is focused on transportation. While curious youngsters may be most impressed with the sheer size of each plane and train, transportation infrastructure has become an increasingly important topic to communities and industrial sectors in our region as they expand and begin requiring a variety of infrastructure updates to deliver a growing number of people and products from place to place. A large number of infrastructure expansion projects have already been conducted or are in the process of being completed in the region but everyone I spoke with for this issue offered one similar sentiment: infrastructure expansion in this area is only just beginning. This is perhaps best illustrated in the passenger statistics from airports throughout the Dakotas. Many of these airports have set all-time records in the past 12 months and are adding carriers and flight times to meet the new demand. Yes, activity in the Bakken region is responsible for a large share of the growth, but other factors are at play, too, including an increased number of Canadian travelers in North Dakota and improved economic conditions throughout the entire region thanks to profitable agricultural industries, leaving more residents with more money in their pockets for leisure travel. Business travel is also strong and a number of airport managers said more private planes are gracing their runways than ever before as companies choose to charter employees to their destinations. Railroad traffic is also growing, due partially to oil production in western North Dakota and partially to agriculture-related businesses. As farmers increase yields in the field, more cars are needed to haul the grain, for example. Also, larger grains, namely corn, are being grown in greater quantities throughout the northern Plains, which again means more rail cars and more elevator space is required to transport and store the crop as opposed to smaller grains. In most cases, the customer foots the bill for infrastructure improvements, but railroad companies are hustling to keep up their end of the deal by carrying out track maintenance and other projects to increase capacity. These projects are long-term, according to the railroads, and they expect demand for freight shipments to grow for at least the next 30 years. Finally, a quick note about me. As I mentioned, this is my first issue as editor of Prairie Business magazine and I am thrilled to begin this new journey. As a North Dakota native, I take great pride in being able to deliver stories of interest from the region to some of the hardest working people in the nation at a time when there are so many success stories to share. I wouldn’t be true to my Scandinavian roots if I didn’t mention that challenges also need to be overcome as our region adapts to its enviable economic surroundings, but I think communities are up to the challenge and it will be a pleasure to report their progress.

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KRIS BEVILL Editor kbevill@prairiebizmag.com

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Prairie Business Magazine September 2012


An SBA Award Winning Publication

MIKE JACOBS, Publisher RONA JOHNSON, Executive Editor KRIS BEVILL, Editor TINA FETSCH, Production Manager BETH BOHLMAN, Circulation Manager JOE GREENWOOD, Multi-Media Consultant KRISWOLFF, Layout Design, Ad Design Sales Director:

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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.

If growth is in the game plan for your business, count us in. Whether you’re starting from scratch or looking to expand, Bremer Bank is ready with a full range of financial solutions, backed by more than 100 years of experience and nearly $8 billion in assets. We can help you get where you want to go. Talk to a Bremer business banker near you today.

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|BUSINESS ADVICE|

Business debt should be a temporary necessity BY MATTHEW D. MOHR business goes into debt for various reasons, just like personal debt is common for the homeowner. One of the most common forms of business debt is a building mortgage,but other standard debt inducers include expansion, new sales growth, and acquiring plant and equipment. Most businesses also have lines of credit which are used for temporary or peak-seasonal cash needs, somewhat like a wellrun household uses credit cards to even out monthly expenses and income. Some business managers are under the impression that debt should be a continual part of the business operation. Some debt may be needed for the long-term operating of a business, but like personal loans, a business should eventually be in the position to operate without borrowing. Last year a group of local capitalists put together a deal to buy a North Dakota manufacturing company. As

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we investigated company financial statements, multiple loans were uncovered. The local bank had made “processing� errors with the U.S. Small Business Administration applications and was too deep in debt with the business. As all the loans came to light, the deal fell apart and the bank took over the business. The bank tried to restructure the operation to make its loans whole, but in all likelihood the loans will not be repaid and everyone will lose. Regardless of what the debt is, the objective should be to repay it. Positive cash flow from earnings is the right way to pay back debt. Few businesses operate debt free, but those which are debt free have more flexibility and security. PB Matthew D. Mohr CEO, Dacotah Paper Co. mmohr@dacotahpaper.com


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|FINANCE|

Too good to be true or real deal? BY JOE WITT

here is an old saying that if a deal sounds too good to be true, it probably is. But how do you know for sure? How do you weed out the scams from the best deal of a lifetime? Unfortunately, there are lots of people out there who are more than willing to scam you out of your life savings. Financial fraud is a major problem. In order to stave off becoming a victim to these financial predators, you have to remain diligent, and you have to use common sense. Also, do not be afraid to get another opinion. Talk to a few of your trusted friends about your potential deal. Sometimes repeating the deal out loud to another person helps you answer your own questions. For example, some fraudsters were contacting people to tell them that they won thousands of dollars in a foreign lottery. All they had to do was send a wire transfer equal to 10 percent of the winnings to the foreign country to cover the taxes. Oh, and the winner was also supposed to send them detailed bank account information so that the foreign government could then deposit the money directly into the person’s bank account. At first blush, it might be fun to think that you won a huge windfall from a foreign lottery. However, as you give it more thought, the deal gets a little more troubling. First, how can you win a lottery if you did not enter? Second, remember that once you wire funds out of your account, it is extremely difficult or even impossible to get them back. Finally, giving out detailed bank account information can be very dangerous. Because there are so many different types of

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Prairie Business Magazine September 2012

financial transactions out there, we started giving consumers and businesses this piece of advice: If you have questions about a financial transaction, contact your local banker. Your local banker has seen a wide variety of transactions and can help you determine whether that loan agreement, deposit account, investment account or other financial transaction makes sense. Here are a few other tips that will help you avoid financial missteps: ■ Monitor your financial accounts and immediately report any unusual transactions. ■ Never give out personal or financial information unless you’re absolutely sure who’s getting it and how it will be used. ■ Sign your own checks. Don’t sign a blank check and then allow another person to complete it, unless someone else you trust can witness it for you. ■ Do not add another person’s name to your bank or insurance documents unless you fully understand all the implications of doing so. ■ Before agreeing to withdraw any large amount of money, seek trusted financial or legal advice. Any major transaction should have a written agreement that can be reviewed by trustworthy professionals. PB JOE WITT Executive director, Minnesota Bankers Association 954-835-3900, joew@minnbankers.com


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|TECHNOLOGY|

SDSU biofuels research will assist Navy BY DWAINE CHAPEL

esearch is a vital element to our economic success because it inspires people and their talents,” says Kevin Kephart, vice president of research at South Dakota State University. “Research creates jobs and opportunities that attract talented people. Research attracts investment and creation of wealth. Perhaps most importantly, research builds upon our knowledge base to support even-hire education.” With more than $70 million in research expenditures, SDSU leads the state in research. The National Science Foundation increased SDSU’s ranking from 195th place in 2005 to 176th in 2008. The upward climb continues each year. Funding from grants has increased dramatically over the past several years. Grants are received from federal agencies, state funds and industry, among others. The research strengths at SDSU cover several areas, including: agriculture, engineering, human health and nutrition, renewable energy and pharmaceutical sciences. One key area of research is biofuels. The importance of solid research to accelerate the public use of biofuels is an important research component at SDSU. The state of South Dakota has initiated a funding component to assist research at the university. The South Dakota State Legislature has identified $1.35 million over a three-year period to develop a “drop-in” equivalent fuel that allows it to be mixed with petroleum products. Research will be completed through the Oilseed Crops Initiative. Bill Gibbons, professor of industrial microbiology at SDSU, is the director of the program. He outlined the timeline and process that his team has embarked upon to develop

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the initiative when Chris Tindal, director for operational energy for the U.S. Navy, made a visit to Sioux Falls, S.D., this summer. The focus of the program will be to develop a fuel produced from non-food crops that can be used as a 50 percent blend to create green diesel fuel for the Navy. This will assist the Navy in meeting its initiative to go green by 2020. Gibbons also discussed South Dakota’s legislative mandate, which is to promote the state’s participation in the national initiative for green diesel and jet fuel by leveraging research acquired from the South Dakota Agricultural Experiment Station. Gibbons’ team goal furthers that concept by aiming to identify and remedy value chain needs, create linkages and facilitate commercial deployment of those fuels. This example is only one opportunity that is being developed at SDSU. The partnership between the university and the community is strong. The development of a research park has created additional opportunities. As this research is ready to launch into its commercialized phase, the park provides the facility, equipment and additional room for growth. SDSU, in partnership with the state legislature and Navy, has taken strong steps in creating new value in the biofuels arena. The research may also lead to additional innovation, commercialization and job growth. PB Dwaine Chapel Executive director South Dakota State University Innovation Campus 605-696-5600, dwaine.chapel@sdstate.edu


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|ECONOMIC DEVELOPMENT|

New programs offer entrepreneurs options BY HAROLD STANISLAWSKI

e’d like to make you aware of two programs, one proposed and one recently released by the Minnesota Department of Employment and Economic Development.The programs will be implemented through the State Small Business Credit Initiative, which uses federal funding to stimulate private-sector lending and improve access to capital for small businesses and manufacturers that are creditworthy but not getting the loans they need to expand and create jobs.

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Early Stage Fund The state proposes to use $1 million in SSBCI funds to provide additional investment in early stage businesses throughout Minnesota. These investments would be made alongside angel investment groups and angel investors. The Early Stage Fund is intended to help accelerate the growth of companies seeking angel investments; accelerate private capital investment in Minnesota companies; help position companies to attract additional, later stage investments; and provide angel investors additional capital to close investment rounds. Eligibility for the funding is restricted to businesses with no more than 500 employees. Funds may be used for any business purpose, including, but not limited to: start-up costs, working capital, business procurement, franchise fees, equipment, inventory, as well as the purchase, construction, renovation, or tenant improvements of an eligible place of business. Projects that include passive real estate are only allowed on a limited basis as determined by U.S. Department of the Treasury guidelines. The maximum Early Stage Fund side-car contribution may be between $25,000 and $150,000. Qualified investment entities accept applications on a rolling basis. Application forms and procedures vary by investor. Interest rates and terms are negotiated between borrower and investment entity. Businesses should apply with participating Investment Entities. DEED is notified of all investments approved to ensure that all program guidelines are followed. There is currently a request for proposals issued to solicit investment entities for this program. Once the

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process is completed, a list of qualified investment entities will be provided.

Emerging Entrepreneurs Fund The Emerging Entrepreneurs Fund primarily supports micro-enterprises and small businesses with fewer than 50 employees, targeting minority- and womenowned businesses and those located in economically distressed areas. Distressed areas are measured by population loss, higher than statewide average unemployment rate, and lower than statewide median household income. EEF funds may be used for start-up costs, working capital, business procurement, franchise fees, equipment, inventory, as well as the purchase, construction renovation, or tenant improvements of an eligible place of business that is not for passive real estate investment. Projects that include passive real estate are only allowed on a limited basis as determined by U.S. Department of the Treasury guidelines. Financing of existing debt is not permitted. Funds may total up to $150,000 per loan and must be matched on at least a one-to-one basis. Participating lenders are encouraged to structure loan proposals to achieve at least a five-to-one leverage of program funds. Each qualified program lender has authority to determine interest rates and collateral requirements within program guidelines. Qualified lenders accept applications on a rolling basis. Application forms and procedures vary by lender. Businesses should apply with participating lenders. DEED is notified of all loans approved to ensure that all program guidelines are followed. It’s good to see programs for entrepreneurs being implemented and we encourage entrepreneurs to give these tools a closer look. Additional information about both programs is available at www.positivelyminnesota.com/ssbci. PB HAROLD STANISLAWSKI Executive director, Fergus Falls Economic Improvement Commission 218-332-5428, harold.stanislawski@ci.fergus-falls.mn.us


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Prairie News

Industry News & Trends

Bakken area gets extended-stay hotel Target Logistics has opened a 246-room extended-stay hotel in Stanley, N.D. The Stanley Hotel, located adjacent to the Target Logistics Stanley Cabins, is the re-birth of an existing hotel originally constructed in the 1960s. The company gutted and remodeled the facility in less than six months, updating the property and expanding it to accommodate 350 guests. Amenities at the property include a full-service restaurant, a game and recreation room, free self-service laundry, parking, security and controlled entry. Approximately 25 people are employed at the hotel. The Stanley Hotel is the first Target Logistics property in the Bakken region that is not available exclusively to oil and gas workers. The turnkey workforce housing provider currently operates eight man camps throughout the Bakken region and will open an additional 300-bed lodge in Williams County in September and a 334-bed lodge in Watford City in October, bringing the total number of North Dakota man camp beds provided by Target Logistics to more than 4,000. A company representative said the company is also considering building hotels similar to the Stanley Hotel elsewhere in the region that would not be exclusive to Bakken workers, but discussions are in the preliminary phase. The newly remodeled Stanley Hotel will provide lodging for up to 350 guests. PHOTO: TARGET LOGISTICS

Foundation to fund hospital kids’area

S.D. offers incentive for rural health care

The Cullen Children’s Foundation is providing $1 million to the Sanford Health Foundation to create a 3,000-square-foot children’s area in the Fargo hospital. Cully’s Kids Area will be a one-ofa-kind, hockey-themed facility aimed at providing a space for kids to simply be kids while in the hospital, according to the foundation. The facility will be staffed by certified child life specialists and is planned to include areas for play, arts and crafts, a resource library and a stadium theater, among other features. Approximately $750,000 of the donation will be used for design, construction, furniture, fixtures and equipment. Remaining funds will go towards a permanent endowment to support ongoing operations of the play area. The Cullen Children’s Foundation was founded in 2003 by Minnesota Wild National Hockey League player Matt Cullen and his wife Bridget.

South Dakota has launched a program to help rural health facilities recruit nurses, pharmacists, physical therapists and other health professionals. The Rural Healthcare Facility Recruitment Assistance Program pays a $10,000 incentive to eligible health professionals who complete threeyear service commitments in communities with at least 10,000 people. The employing facility and the state will split the cost of the incentive, with smaller communities paying a smaller share. The state covers 75 percent of the total for communities with populations up to 2,500 and 50 percent for larger communities.Applications must be submitted by the employing facility and can be found online at www.ruralhealth.sd.gov.

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Prairie Business Magazine September 2012

New architecture firm focuses on cooperative design A new architecture firm based in Sioux Falls, S.D., and Aberdeen, S.D., will focus on bringing

“cooperative design” to the state and surrounding region. CO-OP Architecture includes seven employees and is led by Tom Hurlbert, who previously served as the principal at Hula Design/Build, and Kyle Raph, who most recently served as project manager for the Sioux Falls Events Center. “Cooperation is a theme in South Dakota, both for business and in our rural communities,” Hurlbert says. “We want to do great architecture that enhances and evokes that cooperative spirit, and to elevate design on the upper plains in a way that serves our communities.”

Choice Financial named top N.D. ag lender Choice Financial, a provider of financial solutions with nine North Dakota locations, was recently ranked the No. 1 farm lender in North Dakota in the American Bankers Association Top 100 Farm Lenders by Dollar Volume. With $212 million in total farm loans in 2011, the lender ranked 59th in the nation.


|PRAIRIE NEWS| NCTC gets $10K for aerospace foundation Northrop Grumman recently donated $10,000 to the Northland Community & Technical College Foundation to assist in the startup of the Northland Aerospace Foundation. The NAF is being formed in response to the growth of the college’s aerospace programs, which include aviation maintenance technology, unmanned aerial systems and imagery and data analysis. The unmanned aerial systems and imagery and data analysis programs are the first of their kind in the nation. Northrop has provided several donations to the college, most notably a full-scale unmanned aircraft system model in 2011. NCTC has campuses in Thief River Falls, Minn., and East Grand Forks, Minn.

Northrop Grumman presents representatives from the Northland Community & Technical College Foundation with a $10,000 donation. From left to right: Eric Icard, Northland Aerospace Foundation; Anne Temte, NCTC president; Ed Walby, Northrop Grumman; Jared Davidson, NCTC Foundation. PHOTO: NORTHLAND COMMUNITY & TECHNICAL COLLEGE FOUNDATION

N.D. completes first state-funded housing

Minn. utility rewards foundry for improving efficiency

Pipe manufacturer expands to S.D.

The first affordable housing project in North Dakota supported by state tax dollars via the Housing Incentive Fund has been completed in Crosby. The development consists of 12 units of various sizes and will rent for $515 to $1,200 per month. Capitalized by contributions by state taxpayers, HIF supports the development of rental housing for low- and moderate-income households. The program is administered by the North Dakota Housing Finance Agency. Since September, NDHFA has pledged $8.5 million to support developments in Beach, Belfield, Bowman, Dickinson, Kenmare, Grand Forks, Minot, Ray, Watford City and Williston. About half of those projects had secured resources to begin construction by July, according to the state. More contributions are needed before the remaining projects can break ground. Contributors to the fund receive a dollar-for-dollar state income tax credit.

TEAM Industries recently received a rebate check in the amount of $33,687 from natural gas utility Minnesota Energy Resources for efficiency improvements made to equipment at its foundry and aluminum die casting facility in Detroit Lakes, Minn. The rebate is part of Minnesota Energy Resources’ commercial and industrial turn-key efficiency program, designed to help customers who use over 100,000 therms per year. Franklin Energy, an engineering firm specializing in the implementation of energy efficiency, assisted TEAM in identifying and implementing the project, which included the removal of the existing protective coating inside one of the foundry’s aluminum melting furnaces and the installation and sintering of a new lining. The improvements cost more than $67,000, but Franklin Energy estimates that the reconditioned furnace will save 2.9 billion BTUs of natural gas per year, representing an energy cost savings of about $17,000 annually.

Texas-based pipeline manufacturer Pipeline Plastics LLC has announced plans to establish a high density polyethylene (HDPE) pipe production facility in Belle Fourche, S.D. The facility is expected to become operational in the first quarter of 2013 and will provide 25 to 40 full-time jobs to the area. The plant will service the growing energy market in the Bakken region as well as energy markets in Wyoming, Colorado and Utah, according to the company. “We have an aggressive growth strategy to position our company as a major player in the HDPE pipe industry on a national level,” Pipeline Plastics President and CEO Monty Fisher says. “We are bullish on the industry for both the energy and water sectors.” Belle Fourche was selected for a plant location due to its geographic advantages, including rail access and proximity to Interstate 90, as well as the positive business environment in South Dakota. Keith Fischer, vice president of Pipeline

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|PRAIRIE NEWS|

PHOTO: UNIVERSITY OF NORTH DAKOTA

UND gets $5 million for mobile simulation training The Leona M. and Harry B. Helmsley Charitable Trust has awarded a $4.98 million grant to the North Dakota simulation, teaching and research center for healthcare education center (ND STAR) at the University of North Dakota School of Medicine to establish a program called SIM-ND (Simulation in Motion – North Dakota) which will provide education and training to emergency personnel in rural parts of the state. As part of the program, four trucks outfitted with custom-made classrooms will be stationed in Grand Forks, Fargo, Bismarck and Minot. Three-person crews representing each of the state’s major hospital systems — Altru Health System, Essentia Health, Sanford Health, St. Alexius Medical Center and Trinity Health — will teach in each mobile simulation unit. ND STAR will train educators, manage the operation of the units, schedule programming and provide monitoring, evaluation and development. Funding from the trust has been made available as a three-year grant. During the first year, the grant will cover the costs of the trucks, simulators, equipment and a portion of the crews’ salaries. Expenses in the following years will be covered partially by the grant, with additional funding being supplied by the six hospital systems. The Helmsley Charitable Trust has also invested in a similar system in South Dakota.

Plastics, says the company looks forward to experiencing the “can-do” attitude and South Dakota work ethic of the state’s residents.

Smart Sand, CP Railway partner for N.D. facility Smart Sand Inc., a provider of proppant and logistics services to the oil and gas industry, and Canadian Pacific Railway Ltd. have formed a strategic long-term partnership to supply and ship Northern White frac sand for unconventional oil and gas operations in several regions throughout the U.S., including the Bakken formation. The partnership’s first initiative will be to build a frac sand transloading facility in Makoti, N.D., to service operations in the Bakken. The facility is expected to be operational in early 2013. “We believe the new North Dakota transload facility offers a unique combination of cost effectiveness, reliability and product flexibility,” Charles Young, Smart Sand founder and president, says.“We look forward to offering similar services in other producing regions while building strong relationships in the Williston Basin.” Smart Sand’s primary facility opened in June and is located on the CP rail line in Oakdale, Wis.

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Prairie Business Magazine September 2012

Avera McKennan ranked No. 1 S.D. hospital Avera McKennan Hospital & University Health Center has been ranked top hospital in South Dakota by U.S. News and World Report. Rankings are based in part on patient safety, reputation and advanced technologies. U.S. News & World Report’s annual Best Hospitals rankings showcase more than 720 of the nation’s 5,000 hospitals. Rankings were published in collaboration with RTI International, a research organization based in Research Triangle Park, N.C. Avera McKennan was also ranked as the 38th best hospital in the nation in gynecology and received high-performing status in nine other medical specialties. The hospital is part of an integrated delivery network that includes the location in Sioux Falls, S.D., as well as 115 locations in four states.

N.D. APUC awards funding requests The North Dakota Agricultural Products Utilization Commission awarded funding requests for eight projects totaling $348,165 at its quarterly


|PRAIRIE NEWS| meeting held July 19. Award recipients included: • StopSensor in New Salem received $25,000 to fund the production of 15 prototype devices which will be used in a variety of agricultural field tests. • VFM LLC in Fargo received $28,500 to defray the costs associated with prototype development and other costs associated with the development of its mobile application auto-steer technology. • North Dakota State University’s mechanical engineering department received $24,465 to assist with a project at Masonite PrimeBoard Inc. in Wahpeton to identify the feasibility of using soy and corn fibers for manufacturing fiber boards. • Food First LLC in Walhalla received $36,000 to defray the costs used to quantify the impact prebiotics from wheat, oats, barley and flax have on stimulating growth of beneficial bacteria to improve digestive health. • Dakota College at Bottineau received $11,200 to assist with the purchase of a tea compost system, compost tumblers and an injection system which will be used to research the effectiveness of compost tea for nutrient management in high tunnel vegetable production. Other projects selected to receive funding upon the completion of contingencies include a Northern Corn Development Corp. project to develop a plan that will target gas being flared in the Bakken for fertilizer production; a website redevelopment and marketing project at Amberland Foods Inc. in Harvey; and a project at Progressive Nutrient Systems in Fargo aimed at demonstrating the technical feasibility of a distributed modular ammonia synthesis process.

Kraus-Anderson celebrates 20 years in Bemidji Kraus-Anderson Construction Co. recently celebrated its 20th year of business in Bemidji, Minn., and reiterated its commitment to the community. “Kraus-Anderson’s footprint is evident throughout the region,” said Bob Fitzgerald, director of operations at the Bemidji office.“We are thrilled with our growth and contributions, and excited about continuing to serve our communities for generations to come.” Since opening its office in 1992, Kraus-Anderson has completed more than 500 projects in the Bemidji area, totaling 6.5 million square feet in excess of $825 million. The Kraus-Anderson Walleye Classic is the office’s biggest civic event and has become one of northern Minnesota’s premier annual fishing tournaments. To date, the tournament has raised more than $440,000 for area non-profits.

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Bismarck med centers sign management agreement St. Alexius Medical Center, a 306-bed full service healthcare system located in Bismarck, N.D., and Ashley Medical Center, a 20-bed critical access hospital in Bismarck, have entered into a management agreement. Under the agreement, St. Alexius will assist Ashley Medical Center with physician recruitment and human resources and will supply visiting specialists. Ashley Medical Center will retain full control and governance over its operations while benefiting from the added resources and leadership of St.Alexius, according to hospital officials who stressed that the agreement does not indicate a merger or acquisition.

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|PRAIRIE PEOPLE|

Gary Smith

Eide Bailly grows financial institutions team

Lund to chair state advisory committee

Gary Smith recently joined Fargo, N.D.-based Eide Bailly’s financial institutions team where he will plan, supervise and review financial institution audit engagements, ranging in size up to $10 billion. Smith has 20 years of experience in public accounting. He specializes in providing audit, accounting and consulting services to the U.S. Securities and Exchange Commission and in providing services to large bank clients.

Keith Lund

Keith Lund, vice president of the Grand Forks Region Economic Development Corp., has been appointed chair of the North Dakota Public Finance Authority advisory committee and began serving his term on July 1. The PFA, a self-supporting state agency under management of the Industrial Commission of North Dakota, provides financing to local political subdivisions. The PFA advisory committee provides input into lending and policy recommendations to the PFA. Wade Williams of Jamestown, N.D., and Robert Frantzvog of Minot, N.D., also serve on the advisory committee.

Phil Ostlie

Randy Hovde

BSE names Williston branch manager

Mark Christopher

Julie Edman

Fargo, N.D.-based Border States Electric, a supplier of products and services to construction, industrial and utility industries, has hired Mark Christopher to manage its Williston, N.D., location. Christopher joined BSE in 2011 and has served as quotations representative and branch manager for the company’s Grand Forks, N.D. location. Prior to joining BSE, Christopher worked as an electrical contractor and managed his own firm in Grand Forks. He is a licensed master electrician in North Dakota and Minnesota.

Edman to manage Altru aesthetic center

Fisher hires new managers

Truyu Aesthetic Center, which offers aesthetic surgical and non-surgical procedures and services under the direction of Altru Health System in Grand Forks, N.D., has hired Julie Edman as business manager. In this role, Edman will manage all business operations and oversee approximately 25 employees at the center’s current location in Grand Forks as well as a second location to be opened this fall, also in Grand Forks.

Vehicle sales and leasing company Fisher Leasing Corp. has selected Phil Ostlie to serve as vice president of business development. Ostlie will work with Fisher’s vendor network and be based at the company’s headquarters in Fargo. Ostlie specializes in finance and leasing and has more than 20 years of experience in the financial services industry. Randy Hovde has been hired as sales manager for F.F. Fisher Sales Corp. and will manage the Fisher Sales business. Hovde has 27 years of experience in the auto industry in Fargo-Moorhead (Minn.) and will be based in Fargo.

Burgum joins software provider board

Doug Burgum

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Doug Burgum, former chairman of the board of SuccessFactors and former CEO and chairman of Great Plains Software, has taken on the role of chairman of the board for collaboration software provider Atlassian. With offices in San Francisco and Sydney, Australia, Atlassian provides products to more than 20,000 large and small organizations, including Citigroup, eBay and Nike. Burgum was selected to serve as chairman due to his “magical combination of attributes,” including experience, ability to question and push the executive team, and “the right cultural DNA to be a champion for Atlassian,” according to company co-founder and board member Scott Farquhar. Burgum founded Great Plains in 1983 and grew the company for more than 10 years until taking it public and eventually being acquired by Microsoft in 2001. He then served as a senior vice president at Microsoft, and later served as chairman of the board at cloud-based human resources management software provider SuccessFactors. He currently serves as board member and interim CEO at Intelligent InSites, a real-time location systems provider for hospitals and long-term care facilities.

Prairie Business Magazine September 2012


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|PRAIRIE PEOPLE|

Seth Hansen

Daktronics taps Hansen for new leadership role

Minot firm expands engineering team

Brookings, S.D.-based display systems provider Daktronics has appointed Seth Hansen, company vice president of information technology, to lead its project management operations within the sports and entertainment industries. Hansen began his career at Daktronics in the customer service and engineering departments. He later took on the role as a systems engineer and served as project manager on multiple legislative voting systems, as well as projects for multiple Olympic Games, Major League Baseball clubs and Division I colleges. He has served as the company’s information technology group leader for the past five years.

Sharatchandra Bandugula has joined Minot, N.D.-based Ackerman-Estvold Engineering and Management Consulting Inc. as a project engineer. Bandugula most recently worked in Texas and has expertise in land development, including subdivisions and commercial sites. AckermanEstvold provides planning, design and construction services for public and private clients throughout North Dakota and surrounding states.

Sharatchandra Bandugula

Fargo restaurant manager receives national recognition

Prairie Business hires new editor

Kris Bevill

Kris Bevill of Fargo, N.D., has been named editor of Prairie Business magazine. Bevill, a North Dakota native, has spent the past eight years in the magazine and conference business. She recently worked for Grand Forks, N.D.-based BBI International, providing editorial content and support for three international biofuels trade magazines — Ethanol Producer Magazine, Biodiesel Magazine and Biomass Magazine. Bevill has tackled many tough, technical topics and has extensive knowledge of business, politics, regulations and energy issues in this region and beyond.

George Neu

Hegg receives master pilot award

Ackerman staff earns N.D. registration

Jason Main

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Minot, N.D.-based Ackerman Surveying & Associates Inc. announced that two of its staff members have become registered professional land surveyors in North Dakota. Jason Main recently joined the firm as a survey project manager. He brings more than 11 years of experience in survey field work and project management to the position and also holds a land surveyor registration in Indiana. David Nash has been working as a survey technician at Ackerman Surveying since 2011. He is also registered as a land surveyor in Wisconsin, where he worked for more than 20 years.

Prairie Business Magazine September 2012

George Neu, general manager of the Red Lobster in Fargo, recently received the Darden Restaurants’ Joe R. Lee Diamond Club award in recognition for his outstanding leadership while demonstrating the restaurant chain’s core values of respect, integrity, genuine caring, hospitality and teamwork. The Fargo location also achieved top financial performance in the previous fiscal year. Neu was one of 34 general managers selected to receive the award from more than 700 restaurant locations throughout North America. This is the fourth time Neu has received the award.

Peter Hegg

Peter Hegg, chairman of the board at Hegg Companies, a Sioux Falls, S.D.-based investment and commercial real estate firm, has been honored with the Wright Brothers Master Pilot award from the Federal Aviation Administration. In order to be eligible to receive the award, pilots must have 50 years of U.S. experience and must have been a U.S. citizen during those 50 years. Only about 2,000 pilots have received the award since it was originally issued in 2003. Hegg has logged more than 15,000 hours since piloting his first solo flight on Jan. 1, 1958.According to Hegg, having the ability to fly planes has provided the company flexibility and immediacy of presence and has been key to the company’s growth, particularly during the 1980s when Hegg would personally visit each hotel managed by the company once a month. “One trip stands out,” he says. “I left Sioux Falls and in five days I visited our hotels in Pierre, S.D.; Billings, Bozeman and Helena, Mont.; Couer d’Alene, Idaho; Spokane, Wash.; Portland, Ore.; Salt Lake City; Denver; and Lincoln, Neb. The ability to meet with our employees and inspect the properties with such speed and ease of travel was invaluable.”


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|BUSINESS DEVELOPMENT|

Sanford begins building Fargo medical center Four-year project is largest private construction project in N.D. history BY KRIS BEVILL

Local and state officials join Sanford Health representatives and other project stakeholders for a ceremonial groundbreaking held July 31 at the future site of Sanford’s $541 million medical facility, located on the south side of Interstate 94 between 45th St. and Veterans Boulevard in south Fargo, N.D. The facility is expected to open in 2016. PHOTO: JOSHUA LECLAIR, SANFORD HEALTH

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Prairie Business Magazine September 2012

y the end of September, construction crews will begin preliminary work on the largest private construction project in North Dakota’s history — a 1.3 million-square-foot medical center in Fargo owned by Sanford Health. The project is expected to cost $541 million and will employ 600 construction workers to build the facility which, when finished, will cover an area equivalent to 22½ football fields. Construction of the 10-story facility and surrounding grounds will commence next spring and is expected to be complete in 2016. The medical center will be capable of serving more than 4,200 patients daily and will employ 2,000 full-time staffers, bringing the total number of Sanford employees in FargoMoorhead (Minn.) to nearly 10,000. The company celebrated its major undertaking with an over-the-top groundbreaking celebration held July 31 at the facility site. The three-hour evening event was part music festival, part company pep rally, culminating with a performance by nationally known rock band Train and a post-show fireworks display. North Dakota Gov. Jack Dalrymple, Dennis

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|BUSINESS DEVELOPMENT|

“You are witnessing medical history, but also a major point in history for this entire region.” Millirons, president at Sanford’s Fargo medical center, Kelby Krabbenhoft, president and CEO of Sanford Health, and hospital namesake Denny Sanford delivered words of thanks to the estimated 15,000 attendees before participating in a ceremonial groundbreaking prior to the concert. “You are witnessing medical history, but also a major point in history for this entire region,” Millirons said. Sanford noted that North Dakota is the fastest growing state in the U.S., which is one of the reasons for the project’s massive size. The initially announced plan in 2010 called for a smaller facility, but the state’s booming population caused Sanford to increase the project’s size. Sanford Fargo’s number of hospital admissions increased by 9 percent last year over the previous year and the company continues to see growth in deliveries, outpatient surgeries and heart surgeries. The invitation-only groundbreaking event was open to employees of Sanford, their families

and other project stakeholders. “Tonight is all about you,” Krabbenhoft told the crowd. Sanford currently employs 25,000 throughout several states and is the largest employer in the Dakotas. Krabbenhoft expressed optimism that the company will continue to grow for years after the Fargo medical center is complete. Addressing the throng of youngsters crowded along the front of the concert stage, Krabbenhoft said, “Stay close to home kids. We’ll need you.” Sanford has recently undertaken several other projects in the Dakotas, including a new medical center in Aberdeen, S.D., which officially opened on July 16. The 48-bed facility was established for a total project cost of $60 million. On July 2, Sanford Health completed a merger with Medcenter One in Bismarck, N.D., and committed to investing $200 million over the next decade to enhance health care services in BismarckMandan and throughout western North Dakota,

including establishing a super clinic in Dickinson to accommodate increased demand from oilrelated population growth. Those activities, along with the Fargo medical center’s construction and other expansion plans set to be carried out later at other Sanford locations, will require the company to invest about $200 million annually over the next five years in construction costs. The organization’s annual revenues top $3 billion, which allow it to take on major projects, according to Krabbenhoft, but much of the company’s recent explosive growth is also credited to Denny Sanford’s $400 million gift in 2007, the largest donation ever to a health care organization in the nation. Sanford contributed another $100 million to the company in 2010. PB KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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|TRANSPORTATION |

Taking Off Airports throughout the region experience record passenger numbers BY KRIS BEVILL

hances are good that if you’ve traveled by aircraft anytime during the past 12 months in the northern Plains you’ve noticed a change. Airport traffic is up everywhere and many airports are carrying out expansion projects to accommodate the rising demand. Others are updating runways and other pieces of infrastructure that have simply outlived their usefulness. What can travelers expect for the coming year? According to airport officials, passenger numbers will continue to increase, triggering additional carriers to enter the market and current carriers to add more flights, translating into more competitive airfares and convenient local travel options.

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Bakken Boarders

Crews work on a runway reconstruction project at Hector International Airport in Fargo, N.D. PHOTO: DARREN ANDERSON, HECTOR INTERNATIONAL AIRPORT

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Prairie Business Magazine September 2012

According to state statistics, boardings during the first half of this year at North Dakota’s eight commercial airports were up 26 percent over the previous year. The increase has been most noticeable in the western part of the state, where traffic into and out of the Bakken region continues to outpace expectations. At Williston’s Sloulin Field International Airport, demand is greater than the airport can accommodate and work is under way to decide whether the airport can be expanded to handle larger aircraft or if it should be relocated to another site. An environmental assessment is being conducted by engineering firm Kadrmas, Lee & Jackson and sites for a new airport are being scouted as part of a $700,000 grant awarded by the Federal Aviation Administration last year to determine a solution to the airport’s problem. A final decision could be made by early next year, but how long before travelers get a new and improved Williston airport? “That’s the million dollar question,” Steven Kjergaard, airport manager, says. “We hope to be one of the quickest airport relocations the Federal Aviation Administration has ever been a part of. It’s a possibility that we can be. We’re hoping we can have a new airport up and running in 2016-’17. That’s the goal.” A number of


|TRANSPORTATION|

major factors need to align before that can happen he says, including funding. Early estimates set the tab for either airport option at a range between $100 million and $150 million. Great Lakes Airlines, a code share partner with Frontier Airlines and United Airlines, is the only carrier currently offering services in Williston. The small airline provides six flights to and from Williston each day and Kjergaard says it’s routine for the airline to run out of seats and turn away customers wishing to purchase a ticket and fly the same day. Considering the airport expects up to 35,000 passengers to pass through its doors this year, a 10,000 passenger increase over last year, this is to be expected. Some relief for travelers should come in early November, when United begins offering three daily flights on 50seat regional jets from Williston to Denver. In order for United to begin servicing Williston, the city agreed to take responsibility for the runway and will pay for any repairs that may become necessary, Kjergaard says. The current airport also needs more parking spaces and some additional capacity has been added, but the airport is otherwise in a holding pattern until a decision is made on airport relocation versus expansion.“Until we can determine what the selected choice is, the city and the FAA and the state will not be spending money on things that cannot be moved,” he says. The Bismarck Airport has also experienced record passenger numbers recently and is on pace to increase the total number of passengers this year by at least 20 percent over 2011. Airport Manager Greg Haug attributes the increase to the booming energy industry in western North Dakota as well as the addition of a new carrier. Frontier Airlines began offering round-trip flights from Bismarck to Denver last summer and “the response has been fantastic,” he says. Frontier’s flights have been at least 95 percent full since it began offering service in Bismarck. Haug says the airport is always in discussions with carriers to add services, but that process is a work in progress.“It’s not something where you just ask, it has to fit well with [the airline’s] business strategy and plans for expansion,” he says. “But as the demand for air travel continues to increase in North Dakota, we’ll have more opportunities to expand in the future.” Parking has been an issue of focus for the Bismarck Airport for several years. The airport is currently carrying out its fourth parking lot expansion since 2005, which will add 300 spaces and should be complete early next year. The extra spaces are sorely needed, as was evident last winter when the airport’s existing 850 spaces were not enough to accommodate travelers during the Christmas season. The airport was short 300 parking spaces during that time, Haug says, and the airport had to find room outside of the normal parking lot for those vehicles. The crunch is not only an inconvenience to passengers, but can also result in a loss of revenue for the airport, which uses parking fees to

“The growth in North Dakota when it comes to air service over the next five years is probably going to be greater than during World War II when most of the airports we have today were developed. There’s going to be a big push and there’s going to need to be continuous growth at all airports in North Dakota.”

help maintain the facility. “So we certainly want to try to capture as much of that as we can,” Haug adds. Next summer will mark the third consecutive year of apron construction at the airport to improve aircraft access to the terminal building, after which incremental adjustments will be made as necessary. Additionally, a car wash facility is being considered for rental car agencies, which should improve their efficiency. “They’re very busy and if they can turn them faster, they can rent more cars,” Haug says. “We’re trying to do some of those incremental changes to keep our operation running as smooth and efficient as possible.” Haug says Bismarck’s airport leaders are more than willing to make necessary changes to accommodate increased demand. “Ten years ago, when the energy boom wasn’t like it is today, if we saw a 3 percent increase in some years we were happy,” he says.“To have airports now with 20 percent increases … times are good.”

Thank Canada The Grand Forks International Airport Mark Andrews Field (GFK) is on track to set a passenger boarding record for the fourth consecutive year this year, with numbers from January to July coming in at nearly 20 percent more than last year. The Bakken can’t take all the credit for Grand Forks’ booming demand however. Additional flights from Allegiant have increased passenger traffic and the return of United’s services this fall is expected to further boost passenger traffic numbers. If predictions hold true, GFK could serve 135,000 passengers this year, up from 118,000 last year. Aside from additional flights, Patrick Dame, executive director of the Grand Forks Regional Airport Authority, says Canadian customers are the real driving force behind the airport’s increasing numbers. Many Canadian travelers opt to drive to Grand Forks and catch Allegiant flights to destination locations rather than fly from Winnipeg, Manitoba, according to Dame. As Allegiant continues to grow its business in Grand Forks, the airport will continue to work on expanding its reach into the Canadian market. “We’ve continuously

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|TRANSPORTATION | grown that market over the past four years and my opinion is we’ve only scratched the surface,” he says. Increased traffic to the airport benefits the entire community because Canadians who drive to Grand Forks often stay in the city’s hotels, visit the restaurants and partake in shopping trips before and after their flights, he says, adding, “All those things are growth items that come along with that niche market that we have in Grand Forks.” Parking is also an ongoing issue at GFK. The airport is carrying out its third recent parking lot expansion this year and is already planning a fourth parking lot project for next year.“It’s been very difficult to plan for the growth we’ve had, however, we’re really working to make sure that we’re re-investing in the infrastructure that we need to stay ahead of the curve,” Dame says.

New Carriers, More Passengers Business is also on the upswing at the Sioux Falls Regional Airport in South Dakota. Airport Director Dan Letellier attributes this year’s 20 percent increase to additional carriers and an improving economy. Allegiant expanded its services in Sioux Falls recently and Frontier has also entered that market, opening up the opportunity for more frequent, less expensive travel to destinations in the west, he says. “Even though it was only one flight a day, it really brought a lot of low-fare competition to the market, specifically to the western half of the U.S.” Necessary runway replacement work prompted the airport to make the rare decision to close for four weekends in August and September in order to complete the project. The nearly $8 million project is being funded mostly by the FAA and will consist of replacing a concrete runway section that is more than 30 years old. Letellier says every effort was made to ensure the airport closure delivered minimal impact to the community but admits it is impossible not to inconvenience someone.“Aside from not doing it, this is probably the best time of year to do it,” he says, adding that weather and past passenger data were factors in the date selection. Passengers planning air travel during times when the airport is closed will need to drive at least 80 miles to the nearest airport in Sioux City, Iowa, or even further to Aberdeen, S.D., but because those airports offer limited flights, Letellier expects that many will fly from Omaha, Neb., or Minneapolis. Passengers won’t notice a difference when the runway project is complete, but they will notice that much-needed additional parking space is also being added. As with other area airports, Letellier says Sioux Falls was consistently about 300 parking spaces short last year so the airport is adding 800 spaces, bringing the total number of parking spaces to 2,650, in order to ensure enough room for everyone during the busy winter holiday travel season. All parking spots will be within walking distance of the terminal, but considering that the parking lot will be at its fullest during the coldest time of year airport officials are also considering adding a shuttle service for passengers’ comfort. At Fargo’s Hector International Airport, growth rates have been notably less than at other airports around the state, but

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Prairie Business Magazine September 2012

Executive Director Shawn Dobberstein says he’s satisfied with this year’s passenger numbers. In July, an average of 2,123 passengers arrived and departed daily, which is actually a slight decrease when compared to the same month a year earlier, but the June numbers were up about 3 percent compared with the year before and the total number of passengers at Hector during the first half of the year showed an increase of 6 percent over 2011. Fargo is one of Allegiant’s top markets, according to Dobberstein, and as the airline has added seats, passenger traffic at Hector has reflected the increase. Frontier will return service to Fargo in November, offering three weekly flights to Denver on 138-seat Airbuses. Frontier last served the Fargo market in 2010 using 74-seat regional turboprop aircraft. The introduction of larger planes to the market will make Frontier the only full-sized jet service between Fargo and Denver, according to the airline. Meanwhile, the airport is wrapping up an $8.7 million reconstruction project on one of its runways in September and is in the midst of constructing a new $1 million U.S. Customs and Border Protection facility that will replace the current customs office space in the terminal building. This is the fourth year of parking lot expansion work at Hector as well, with work under way to add 300 spaces in the form of a credit card-only parking lot as well as additional room for rental cars.

Private Business Unknown to most commercial air travelers, private plane traffic has also rapidly increased at several of the area’s airports. On what he said was a slow day one afternoon in August, Kjergaard counted nine private aircraft on Williston’s ramp, including a jet capable of seating 12 passengers. “That kind of activity was unheard of four or five years ago in this area,” he says, adding that at one time it was notable to see just one private plane at the airport. On average, oil company crews alone currently account for between 1,200 and 1,500 enplanements each month on charter planes at Williston’s airport. Bismarck tracks private plane traffic by the amount of jet fuel sold and Haug says sales have been on the rise for a number of years. Private plane traffic is up in Grand Forks as well and is expected to continue to increase as the city markets itself as a convenient location for businesses that are doing work in the Bakken but do not need to be based there. Dame anticipates that both private and commercial air traffic will continue to grow at a rapid pace throughout the area and airports will require future expansions to accommodate the increase. “The growth in North Dakota when it comes to air service over the next five years is probably going to be greater than during World War II when most of the airports we have today were developed,” he says. “There’s going to be a big push and there’s going to need to be continuous growth at all airports in North Dakota.” PB KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com


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|RAIL|

Investing for the Long Haul Railroads expand infrastructure to meet growing demand BY KRIS BEVILL

Canadian Pacific is investing $90 million in the Midwest, primarily to expand oil-to-rail services in relation to activities in the Bakken region. PHOTO: CANADIAN PACIFIC RAILWAY LTD.

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Prairie Business Magazine September 2012

ailroads have been a part of the U.S. landscape for nearly two centuries, but the ongoing agriculture and fossil fuel production booms in the northern Plains provide a reminder of the important role rail plays in all types of freight movement throughout the nation. Experts have predicted that U.S. freight shipments will increase by 40 percent over the next 30 years, and railroad companies say they can provide the best shipping option, so long as adequate rail capacity is available. The Association of American Railroads says the industry invested more than $23 billion into rail infrastructure in 2011 and will probably match or beat that investment amount this year. In the northern Plains, improvements have been most noticeable in the Bakken region, where new facilities are being constructed at a steady pace. But it’s not necessarily the railroad companies footing the bill for these expansions and each railroad appears to have a slightly different strategy to continue building business capabilities throughout the region.

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Inbound Traffic Canadian Pacific Railway Ltd. hauls large amounts of grain and other products, but the company has recently also taken a keen interest in hydraulic fracturing operations in the Bakken region. The railroad is working to expand its energy franchise and has committed $90 million to ongoing capital investments in the Midwest, primarily to expand capacity for oil-by-rail services. Some of the infrastructure work being undertaken by the railroad will support a new crude terminal in the ghost town of Van Hook, N.D., near New Town, which is being developed by Texas-based U.S. Development Group (USD). The terminal is currently capable of handling up to 35,000 barrels of crude oil per day, which means the terminal can fill up to 17 104-car unit trains per month. Eventually, the terminal will be expanded to accommodate up to 30 unit trains per month. USD declined to release costs associated with the project, but company leaders commended CP for its dedication to expanding rail infrastructure for new facilities. “CP’s continued on page 32


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|RAIL| continued from page 30

commitment to joint market development, service and infrastructure enhancements in the Bakken region make them an important partner as USD continues to grow our network of crude origins and destinations,” USD President and CEO Dan Borgen said in a statement.“We have a strong market opportunity in front of us — by working in close collaboration with CP, our customers and the community, we can safely and rapidly maximize rail shipments of Bakken crude.” CP executives say the Van Hook terminal agreement reinforces the company’s commitment to increasing capacity in order to match its customers’ growth, particularly within the energy sector. CP recently forecasted its crudeby-rail business to grow from 13,000 carloads of crude in 2011 to 70,000 carloads in 2014, but business has been increasing faster than expected, according to railroad spokesman Ed Greenberg. “We now expect to reach that runrate by 2013,” he says. “That’s not just the Bakken, but certainly the Bakken is a significant area for our oil-by-rail business.” Sand used for hydraulic fracturing operations has become another significant focus of CP’s energy sector. The railroad has already been delivering some sand to the region, but it recently signed agreements to serve as the exclusive rail provider for three major frac sand facilities in Wisconsin, positioning itself to become a key supplier of the product to the Bakken region. In June, CP signed a multi-year commitment with U.S. Silica Holdings Inc. to deliver frac sand from U.S. Silica’s facility in Sparta, Wis., via unit train to the Bakken beginning in early 2013. Earlier this year, Connecticut-based mineral supplier Unimin Corp. agreed to work exclusively with CP to deliver sand to Bakken producers from a 2-million-ton facility in Tunnel City, Wis. That facility is also expected to be complete early next year. In July, CP took its involvement in frac sand supply operations to the next level, signing a long-term agreement with Smart Sand Inc., a logistics and proppant supplier to the oil and gas industry, to build a frac sand transload facility in the tiny town of Makoti, near Minot, which will serve the Williston Basin beginning in 2013. The project is unique in that CP is a direct partner with Smart Sand for the facility. Typically, railroads provide mainline infrastructure improvements as needed while the customer

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Prairie Business Magazine September 2012

retains full responsibility for the facilities.

Customer Support Burlington Northern Santa Fe Railway Co.’s budget this year includes $30 million for infrastructure updates and railway expansions in South Dakota, $100 million for similar work in Minnesota and $86 million for projects in North Dakota. Denis Smith, vice president of marketing for industrial products at BNSF,says that while the railroad has funded some recent expansion projects in the area, including a new storage yard and carshop in Minot, the railroad’s customers, specifically in the Bakken region, are doing the lion’s share of the region’s railroad build-out. “We’re spending money in terms of infrastructure and upkeep and maintenance, but the customers are the ones who are truly putting in the big dollars to move the oil out of North Dakota and to accept the oil,” he says. “The oil companies have spent upwards of a billion dollars in terms of building facilities and that only includes the rack, the rail, the connection to the mainline for us, and the cars they’ve purchased.” Smith declined to reveal exactly how much Bakken oil BNSF is transporting to destination points, but says the railroad is hauling about 75 percent more petroleum than last year.The increase in business in the Bakken has simply been “astounding,” he says. “That part

of the state has always been agriculture and carload-type business, but for the most part it was just a place where the trains went through coming from the Pacific Northwest or from Chicago going west,” Smith says. “It’s a place that saw maybe 15 or 20 trains a day passing through. Now it’s the origination and destination point for tens of thousands of cars on a monthly basis.” Elsewhere in the region, agriculture continues its reign as king of the railroad and business is booming, although this year’s drought will have a negative impact on railroad activity, according to Smith. “Agriculture is a very important part of our business, so when we have a drought it’s very painful,” he says, adding that the situation in the northern Plains will not be nearly as severe as further south. Export demand for products from the region, particularly agriculture products, is a major component to BNSF’s business and will continue to be a factor in the railroad’s decision-making process for expansions in years to come across all sectors, including grain, coal, and Bakken petroleum headed for domestic destination points in the Western U.S., Smith says. He assures smaller customers that the railroad is not headed exclusively toward unit train-only operations, noting that some existing facilities were simply not built to accommodate trains hauling 100 or more cars.

The amount of Bakken petroleum shipped by BNSF is up 75 percent this year compared to the previous year. The railroad has been able to mostly keep up with demand, according to a company spokesman, and will continue to expand infrastructure as necessary. PHOTO: BURLINGTON NORTHERN SANTA FE RAILWAY CO.


|RAIL| Western North Dakota Private Aircraft Shuttle However, the new projects are all being built to load multiple unit trains per week because, for certain types of products, big trains are the most efficient way to go. “If we’re going to grow the business and utilize the existing capacity we have to do it as efficiently as possible,” Smith says. Railroad companies say that, for the most part, they have been able to keep up with the area’s increased demand. It’s been a different story for tank car availability however. High demand from the Bakken region has caused tank car shortages nationwide, causing issues for many types of customers. Ethanol producers, for example, have been subjected to skyrocketing lease prices for tank cars because of the short supply. Smith says BNSF doesn’t own tank cars and so has no control over prices or supply, but he notes that the drought and consequent rise in corn prices has lessened demand from the ethanol industry as producers have reduced their output, making more cars available to haul crude.

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Passenger Traffic In addition to increased freight traffic, more people are riding the region’s rails than ever before. Ridership on Amtrak’s Empire Builder route in Williston, N.D., and Stanley, N.D., has doubled since last year according to Marc Magliari, Amtrak media relations manager, although he points out that flooding in the Minot area last year resulted in the temporary closure of that station and some riders were diverted to Rugby, N.D., and Stanley stops instead. Amtrak service will be disrupted in the region again this fall due to water-related issues. In October, BNSF will replace two bridges that are being threatened by rising water in the Devils Lake, N.D., area. The $100 million project is being equally funded by BNSF, Amtrak and the state of North Dakota, with BNSF providing the financing for Amtrak’s share of the project. Track work has been conducted in the area previously, but the bridge project is a significant undertaking and will be the railroad’s largest project in the state this year, according to BNSF. At the height of activity, BNSF will have 75 crew members working on the bridge replacement. Magliari says the bridgework will make several weeks of detours necessary, but parties involved in the project are committed to do what it takes to retain service to the Devils Lake region.“We want to stay there, BNSF wants to stay there and the state wants us to stay there,” he says. PB

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KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

www.prairiebizmag.com

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|EXPANSION|

The Boom Builds South

Dickinson prepares to double in size as the oil industry moves in full force BY KRIS BEVILL

Heavy equipment prepares a site for what will become the West Ridge Center, a mixed-use development in Dickinson, N.D. PHOTO: ROERS DEVELOPMENT INC.

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Prairie Business Magazine September 2012

ickinson, N.D., a town of about 18,000 located in the southwest part of the state approximately 90 minutes west of Bismarck along Interstate 94, is situated on the southern edge of North Dakota’s oil patch and has seen oil booms come and go, most recently in the 1970s. But this time the boom is bigger, the economic impacts are more significant and the industry believes it’s going to be around much longer than previously thought. The community has already been feeling the impacts, even though the Bakken boom has been most visible in northwest North Dakota towns over the past few years, while Dickinson’s oil industry growth and growing pains have received slightly less attention. That will soon change as experts believe Dickinson will become the latest example of the Bakken's full impact. A recent study conducted by engineering firm Kadrmas, Lee & Jackson and researchers at North Dakota State University found that if oil industry activity continues at its current pace, Dickinson’s population could skyrocket in the coming years — doubling the city’s size to 40,000 by 2020. It’s difficult to fathom the amount of infrastructure changes and expansions that will be necessary to accommodate a population increase of that magnitude, which is one reason why the city of Dickinson asked Kadrmas, Lee & Jackson and NDSU to lay out the options for population growth and obtain the community’s input on a growth plan. “Basically, we’re doubling the size of our

D

community in a very short period of time,” Shawn Kessel, city administrator, says. “It’s always more expensive to do it that way, especially in the environment that we have in western North Dakota right now.” Kessel says one of the biggest lessons learned by Dickinson officials in oil booms past is to control the amount of debt taken on by the city during periods of rapid growth.“Dickinson right now has very little debt,” he says. “That will probably change by the end of this year or early next year. We’re probably going to have to issue a bond to cover some of our expenses. But we’re very cognizant that we take on as little debt as possible. The last boom, we were over $20 million in debt. We want to avoid that if we can.” Kessel is confident that the state will support the effort. “The state has been an excellent partner for us in the past and we’re going to be looking for that relationship to continue,” he says. “Our projects are becoming larger in scope because of the population gain and we don’t want to pass along all of those costs to our residents, at least not the ones who’ve lived here for a long time.”

Relief for Residents The impact of the oil boom on Dickinson’s current residents was the focus of the initial survey work conducted by Kadrmas, Lee & Jackson. The firm surveyed 189 residents to gauge their opinions on the quality of life in Dickinson, issues in need of attention and the


|EXPANSION| location and type of developments that should be added to the town. Available, affordable housing tops the list of needs among residents, according to the survey, followed by improved traffic infrastructure. Additional retail and grocery options are other must-haves for residents. “They don’t want to have to go to Wal-Mart at three in the afternoon just to beat the rush, or go on a Sunday and find that there’s no bread on the shelf,” says John How, community planner for Kadrmas, Lee & Jackson. In early August, the engineering firm’s final calculations for the city’s infrastructure needs were still being tallied, but results from the residents’ survey were already being put into action. Fargo-based Roers Development Inc. and Minneapolis-based Oppidan Investment Co., a property development firm, were making headway on a 500acre lot known as the West Ridge Center which will be a mixed-use development that will include both single and multifamily homes as well as commercial real estate. About 60 percent of the development will be residential. The remaining 40 percent of the development will house commercial properties including Menards, Cash Wise Grocery, Cash Wise Liquor, a Holiday gas station and car wash, Petco and Dollar Tree. The commercial phase of the project could be complete by the end of this year. Residential areas will be developed next year. Roers is the master planner of the development. Larry Nygard, vice president of Roers Development, says his company actually began researching desirable land near Dickinson more than two years ago. The company’s first project was an 80-acre section of land which was developed into apartment units to meet the town’s growing need for housing. The buildings will also provide housing for Roers’ crews, alleviating the otherwise difficult task of finding shelter for construction workers. Roers collaborated frequently with city planners while researching its development projects and Nygard expects the latest project, while being much broader in scope than the first project, will serve the town’s needs successfully. Roers began readying the site for building in late July, a project which is expected to cost about $25 million. The value of the site when ready, however, could reach into the hundreds of mil-

lions of dollars. “It’s hard to put a finger on it, but it’s significant,” he says. Part of the site development costs include drilling work that needed to be completed underneath the interstate in order to extend city services to the area.Nygard says the city has contributed $400,000 to that portion of the project. When site work is complete, Oppidan will develop 55 acres for the various commercial tenants. “We will kick our portion of the project off with Menards and they hope to begin construction on Sept. 1,”says Jay Moore, a real estate project developer at the firm. In July, Oppidan announced plans to invest $100 million in mul-

ence has been very positive.” Roers also foresees future work in the Bakken, but specifically in Dickinson, according to Nygard. “Dickinson was one of the last of the cities to see the impact of oil, but we think the whole development of oil is moving that way,”he says. “I think it’s going to be a great city and a great destination.”

Unique Environment

In areas experiencing extreme growth, such as Dickinson,there is no doubt that developers will be faced with unique challenges. “The problem with anything in the oil patch is the execution and the economical execution,” Nygard says. “It’s not hard to fill up an apartment building. Building it on a timely basis and on budget is the hard part.” Nygard says Roers is able to overcome challenges in that area One of the most interesting findings of the because the company has multiple offices community survey conducted in Dickinson by Kadrmas, Lee & Jackson was the importance of throughout the state and therefore has outdoor spaces to the town’s residents. “Usually resources available, such as housing, that when we do surveys, housing, transportation allow it to execute projects when other infrastructure and employment are the big firms might struggle. ones,” says John How, community planner at the For real estate developers, acquiring engineering firm. “But parks was right up with housing and employment.” land can be the biggest hurdle in the After seeing the value residents place on culBakken, Moore says. “We’re fortunate tural and park facilities, the city and park district enough to have identified land that has re-wrote its land dedication rules, newly requirdesirable sites, is highly visible and is ing commercial and industrial developers as attractive to our tenants,” he says. well as residential developers to pay a fee to the Oppidan’s track record of successful projpark district if they choose not to dedicate a portion of their land for park development. ects, combined with an effort to develop “We’re one of the few cities [in North Dakota] to relationships with city officials in the do that,” says Shawn Kessel, city administrator. Bakken, was critical to it’s successful land “We believe that having an adequate park sysacquisitions, according to Moore. “We tem is important to the quality of life.” spent a lot of time out there,” he says. I think there are a lot of people knocking on tiple projects throughout North Dakota’s everyone’s door, but through research and experiBakken region, including projects in Minot, ence we were able to forge these partnerships.” Kessel confirms that collaboration and Stanley, Tioga, Watford City and Williston. communication is important to city leaders and Dickinson is the firm’s largest project and will be says developers could ultimately save money on one of the first to be executed. Moore says the project by asking what the city needs before Oppidan began researching opportunities in the Bakken about a year ago and, with each trip to trying to carry out a plan. “We really appreciate the area, the developers became more convinced those who come in with a broad idea of what that it was the right place to invest.“We hope that they think they are capable of and then ask us we are in North Dakota for many years to come,” what we really need,” he says. Patience and prophe says.“We view this as a first round of substan- er time management skills are also necessary tial investments into the Bakken, but we envision when working with busy Bakken communities. many more developments in the region for “It's very difficult to squeeze somebody in anymany numbers of years. These cities have been more,” he says. “Give it adequate time.” PB

Keeping it Open

great to work with. Some of these towns are extremely busy with the most business development there has ever been, and so far our experi-

KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

www.prairiebizmag.com

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_ _ _ _ _ _ _ _ _____| ______ ______ _ UMCVB conference

UPPER MIDWEST CONVENTION AND VISITORS BUREAU 2012|

to be held in Minot

Annual event brings together CVB professionals representing seven states

he 15th annual Upper Midwest Convention and Visitors Bureau 2012 Fall Conference is holding its fall meeting Sept. 9-11 at the Holiday Inn Riverside Hotel in Minot, N.D. The conference theme is “Finding True North” and attendees will hail from convention and visitors bureaus, chambers and tourism departments in Illinois, Iowa, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin. The conference theme was developed by a board of directors who represent the seven states involved in the conference taking into consideration current trends and the conference location. “We start talking it over during a conference call early in the year,” says Cole Carley, who is one of the original founders of the annual conference and recently retired as CEO of the FargoMoorhead CVB. “Some of us write down a few ideas that are based on situations that we’re Cole Carley experiencing or we’ve heard from others. What’s going on in destination marketing, what are the challenges we’re facing, and are they universal enough to apply to our attendees? We want the theme to be relevant to our audience and, if possible, the location of that year’s conference. “In the case of ‘Finding True North,’ it was a combination of sensing a lot of uncertainty and confusion about where our focus should be, how we choose from the myriad assortment of issues and demands that just seem to increase every year, and making sure we’re aligning with the basic principles of life and success,” says Carley, who is currently president and CEO of consulting firm Cole Carley

T

Communicates in Fargo, N.D. “It also refers to Minot, which is the farthest north our conference has occurred in the 15 years of our conference. It all just seemed to fit.”

Destination marketing Bill Geist, also one of the original founders of the conference, says one of the most pressing issues for attendees of this year’s conference is the growing realization that the traditional Destination Marketing Organization membership model is obsolete. “With destination Bill Geist content so easily accessed from so many different sources, DMOs cannot let this exclusionary format of only listing and promoting members get in the way of providing rich content to our customers,” he says. “The DMO world is changing more rapidly than at any time in our history of destination marketing. My hope is that this conference helps DMO pros position their organizations to remain relevant in the years ahead.” The conference is also a great opportunity for people in the industry to network and find solutions to the challenges they face. Carley summed up the major challenges as: ★ Some of our attendees have faced funding challenges in their destinations. ★ Economic uncertainty continues unabated. ★ The federal government has exhibited real schizophrenia about the travel and tourism industry. On the one hand, the White House has embraced the value of tourism in a position speech by the president. At the same time, controversy about some government agencies overspending on a

_ _ __ _ _ _ ___ _ _ _ _ _ _ _ _ _ ___ _______ continued on page 38

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Prairie Business Magazine September 2012


Once your meeting starts, there are no do-overs. No one understands that better than the staff at the Bismarck-Mandan Convention and Visitors Bureau. Our expert planners will work with you to ensure that your meeting is an unqualified success. Call Sheri Grossman at 1.800.767.3555 or for more information, visit discoverbismarckmandan.com.

BISMARCK-MANDAN CVB NORTH DAKOTA Pack higher expectations.


_ _ _ _ _ _ _ _ _ _ _ _ | _ _________ ______ __

UPPER MIDWEST CONVENTION AND VISITORS BUREAU 2012|

continued from page 36

few trips gives Congress an opportunity to point fingers and start talking about limiting travel, which is a typical overreaction by people who are always running for office and whose lives seem to revolve around opinion polls. ★ Our attendees are getting tired of being pushed and pulled in various directions while constantly being challenged about the value of travel and tourism. This one isn’t just this year, it’s ongoing. Participants will learn about industry trends, network with their counterparts from seven states and be recharged by motivational speakers and presentations. “We strive to offer a combination of the general and specific,” Carley says. “We have tracks that reflect departmental disciplines like convention/tourism sales, marketing communications, sports sales, and administration. We also have a few more general topics that pertain to everyone. So we want people to walk away with some ideas for best practices and some philosophical thoughts that can sustain us.” Geist, founder of ZeitGeist Consulting in Sun Prairie,

Wis., and former president and CEO of the Greater Madison (Wis.) Convention & Visitors Bureau, and Carley will be sharing their experiences and expertise with attendees.

Conference speakers Other presenters include Stuart Ellis-Myers, who goes by the nickname Twitchy. Twitchy is a professional speaker who has Tourette’s syndrome and is living proof that anyone who overcomes overwhelming circumstances tend to develop extraordinary approaches to everyday challenges — often achieving extraordinary results. Twitchy has worked in the tourism and hospitality industry for the past 25 years. For the past 12 years he has been addressing audiences all over the country on recession lost revenues. John Connelly, who has been involved in the tourism industry for more than 25 years, has been responsible for building sports tourism in the destinations where he has worked. Kris Finger, an event planner and project manager with continued on page 40

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Prairie Business Magazine September 2012

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Minot is growing and becoming an even better place than ever to hold your conventions and conferences. Five new hotels opened in 2012 and at least seven more are under construction, giving you more opportunities, as well as brand new state-of-the art facilities to use. Minot currently offers over 50,000 square feet of convention space and 200,000 square feet of trade show or exhibit space. The city also boasts an expanding number of dining options and numerous shopping opportunities, including specialty shops, super stores and the mall. Plan your convention or trade show today at visitminot.org.

www.prairiebizmag.com

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_ _ _ _ _ _ _ _ _ _ _ _ | __________ _ ___ __

UPPER MIDWEST CONVENTION AND VISITORS BUREAU 2012|

continued from page 38

more than 20 years of experience in the industry, is experienced in planning and coordinating high-profile conferences, international conventions and not-for-profit charity fundraisers. Wendy Howe Wendy Howe, executive director of the Minot Convention and Visitors Bureau and president of the Destination Marketing Association of North Dakota, is involved in various local and state organizations and has worked with other industry leaders to take the tourism message to Washington, D.C. Mark Knutson, founder of Go Far Events and race director for the Mark Knutson Fargo Marathon, oversees the management and ownership of several endurance events in the upper Midwest. Brian V. Matson, a strategist and client services manager for Think! Social Media, has more than eight years of experience working with destination marketing organizations and Brian V. Matson focuses on digital strategies and keeping up with the latest trends. Dave Nolan, who directs talent attraction efforts for Horizonâ&#x20AC;&#x2122;s outreach to convention and visitor bureaus and chambers of commerce, started his hospitality career Dave Nolan with Marriott International. Scott Samuels, founder of Horizon Hospitality Associates Inc., has held executivelevel positions with ClubCorp USA, Hilton Hotel Corp., The Levy Restaurants and Dean & Deluca. Josh Schamberger, president and CEO of the Iowa City/Coralville Area Convention & Visitors Bureau, has been recognized twice by the Upper Midwest CVB Association for Bureau Josh Schamberger Innovation and by the Corridor

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Prairie Business Magazine September 2012

Business Journal as one of the 20 most influential leaders and one of the 40 most influential leaders under the age of 40. Stephanie Schoenrock, account services director for KK BOLD, a Bismarck, N.D., advertising and marketing agency, is adept at developing customer retention Stephanie programs, marketing, branding Schoenrock and strategic planning. Karen Selensky, a certified program planner and conference coordinator for Bismarck State College Continuing Education, Training & Innovation department, is an experienced meeting planner who has worked with the state congressional delegation, the first lady of North Dakota, state and government agenKaren Selensky cies and private organizations. Tracey Smith, a member of Senior Planners Industry Network, worked with SPIN to develop the award-winning program for the first-ever SPINCon North America and will publish her Tracy Smith first book this year. Justin Walsh, chief development officer and co-owner of Todaymade, an online marketing company in Bismarck, N.D., specializes in website development, online Justin Walsh media, Google Analytics, search engine optimization and mobile application development. Berkley W. Young, president of Young Strategies Inc., has 20 years of experience in travel and tourism research marketing, management and retail and his firm focuses in the development of local tourism infrastructure, branding and marketing. PB Prairie Business staff report

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_ _ _ _ _ _ _ _ _ _ _ _ | __________ _ ___ __

UPPER MIDWEST CONVENTION AND VISITORS BUREAU 2012|

UMCVB

Schedule of Events

SEPTEMBER 9 3 p.m.–6 p.m. — Registration (Exhibitor Set-up) 5:30 p.m.–6 p.m. — 1st Timers Mixer (for new attendees) 5:45 p.m.–6 p.m. — Walk to the off-site reception 6–8 p.m. — Off-site Opening Reception at 10 North Main, Sponsored by the Minot CVB 8-8:15 p.m. — Return from the off-site reception SEPTEMBER 10 7:30–8 a.m. — Registration 8–8:30 a.m. — Welcome, Breakfast 8:30–9:30 a.m. — Keynote Speaker–Stuart Ellis-Myers 9:30–10 a.m. — Break and Visit Exhibitors 10–11 a.m. — Concurrent Session 1 11–11:15 a.m. — Break – move to next session 11:15 a.m.–12:15 p.m. — Concurrent Session 2 12:15-12:45 p.m. — Luncheon, McDaniel Award Ceremony 12:45–1:45 p.m. — Keynote Speakers–Wendy Howe and Josh Schamberger 1:45–2:15 p.m. — Break and Visit Exhibitors 2:15–3:15 p.m. — Concurrent Session 3 3:15–3:30 p.m. — Break- move to next session 3:30–5 p.m. — Roundtable Discussion/Shirtsleeves 6:30 p.m. — Dine Around Minot–Sign up at registration table by 2 p.m. on Monday

SEPTEMBER 11 7:45–8 a.m. — Breakfast, 2013 Host Site Presentation (Illinois), DMAI update and announcements 8–9 a.m. — Keynote Speaker–Berkeley Young 9–9:15 a.m. — Break-move to next session 9:15-10:15 a.m. — Concurrent Session 4 10:15–10:30 a.m. — Midwest Meetings’Break-Official Sponsor Recognition and prize drawing, visit exhibitors, refreshments 10:30-11:30 a.m. — Closing Keynote Speaker–Bill Geist

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__


Meet the UMCVB Board of Directors Jim Garrett Executive Director Chicago Southland CVB, Lansing, Ill.

FOR ALL THE RIGHT REASONS EVENT DINING

Julie Weeks Executive Director Ames CVB, Ames, Iowa

HERITAGE THEATER

Watertown Convention & Visitors Bureau

Brent Cory President/CEO Eagan CVB, Eagan, Minn.

! !Excellent Meeting Space ! Over 20,000 sq. feet !Excellent CVB Services ! !Excellent Recreation ! ! Excellent Location

Watertown, SD 57201 TERRY REDLIN ART CENTER

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Jeff Mau Executive Director Lincoln CVB, Lincoln, Neb.

Lisa Scheve Executive Director Yankton CVB, Yankton, S.D.

Wendy Howe Executive Director Minot CVB, Minot, N.D.

Christine Rebout

_ _ _ _Find the perfect place to relax, a short drive _ _ _ into the heart of Minnesota Lake Country _ _ _ _ _ _ _ _ _ _ _ _ _ _ -ahh _ _ _ Alexandri _ _ _ _ _ _ _ _ www.ExploreAlex.com _ _ _ _ _ _ ___ __ _ _ _ __ __ Executive Director Janesville CVB, Janesville, Wis. SOURCE: UMCVB

www.prairiebizmag.com

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|RED RIVER VALLEY|

Regional railroad celebrates 25 years of steady growth RRV&W anticipates continued expansions to meet agriculture-related demands BY KRIS BEVILL

Since its launch in 1987, Red River Valley & Western Railroad Co. has grown its number of employees from 46 to nearly 100. The company’s annual payroll is $5.8 million. PHOTO: KIMBERLY HANSEN PHOTOGRAPHY

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booming agriculture industry and improved customer service can be credited for the steady growth experienced at Red River Valley & Western Railroad Co. in its quarter century of operations, according to RRV&W President and CEO Andy Thompson. The short-line railroad, which recently celebrated its 25th anniversary with a three-day event in Wahpeton, N.D., provides local freight service to primarily rural communities along 577 miles of track in North Dakota, stretching from Maddock in the north-central region to Jamestown in south-central North Dakota and Wahpeton and Breckenridge, Minn., in the southeast corner of the state. Since it first began operating in 1987, the company has moved more than 900,000 carloads of grain, corn syrup, sugar, ethanol and machinery through the region, increasing its annual volume by 141 percent since its first year of operations to total 55,600 carloads last year. Thompson, who has served as CEO of the company for the past seven years, says that while booming agriculture-related business has driven the railroad’s growth in recent years, the company actually began experi-

A

encing almost immediate growth after its launch simply by providing more frequent services to its customers. Prior to RRV&W’s existence, trains were sent out to communities along those rural branch lines infrequently, once a week at best. Once RRV&W took over, it began offering services to communities up to three times a week. “This presented those customers the opportunity to market their products in a more timely fashion,” Thompson says. “And time is money.” RRV&W has also invested its fair share of money into maintaining steady services to its customers, spending approximately $27 million to date for improvements such as heavier rail, bridge upgrades, freight cars and track maintenance equipment. Most recently, it partnered with Wahpeton’s Minn-Dak Farmers Cooperative to build approximately two miles of track to better serve the sugar processing plant. Thompson says the Minn-Dak plant and Cargill Inc.’s corn milling plant near Wahpeton are two of the railroads biggest customers, but the railroad also services large ethanol plants in Hankinson and Casselton, as well as seven high-volume grain elevators capable of


handling 110-car freight trains. Nearly 95 percent of RRV&W’s business is agriculture-related, according to Thompson. However, in a testament to the sheer enormity of demands from oil production in the Bakken formation, RRV&W, with its headquarters located arguably as far as one can get from the Oil Patch while still being in North Dakota, has recently found a small source of revenue in storing railcars that are either destined for the Bakken or are on their way out of the region with full loads.“As the Bakken grows, [companies] are in need of support cars, but the area is not quite ready yet, so we have provided interim staging so that they’re cued up and ready to release when they are ready,” Thompson says. Bakken business may continue, but Thompson says future growth at RRV&W will still be driven primarily by agriculture. As farmers continue to increase yields, for example, more railcars will be needed to transport the crop. RRV&W is also exploring a possible expansion of elevator services and high-speed shuttle services. PB

KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Inspire. Just like vast oceans can be intimidating, the opportunities in business need your confidence and determination.

Let us be part of your journey. Call today to discuss a marketing strategy.

701.212.1026 www.prairiebizmag.com

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|SOUTH DAKOTA|

State agency actively pursues increased oil and gas production BY KRIS BEVILL

Prairie Business Magazine September 2012

Oil & Gas Drilling Permits Issued 80 60 40 20 0 11 20 10 20 09 20 08 20 07 20 06 20 05 20 04 20 03 20

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the DENR’s website also includes information on thousands of other shallow wells located throughout the state. These test wells are not the deep wells traditionally used for oil and gas production, but Iles says they offer the potential to produce so-called shallow gas which can be converted to methane. He believes that type of gas production in South Dakota has been under-explored to date and the DENR would like to encourage closer scrutiny of the area’s potential.“The reason for this initiative is we’re quite simply trying to entice the industry to take a second, third or fourth look at South Dakota,” he says. “In order to get them to take

Number of permits issued

Website designed with oil in mind

outh Dakota leaders have had a close-up view of the massive economic development spurred by oil and gas production in its neighbor state to the north for several years now and, frankly, they don’t want to see their state settle for being an onlooker any longer. The state has taken an active role in pursuing expanded oil and gas production, forming several legislative committees to explore the potential impact of greater production and taking efforts to encourage developers to invest in projects south of the Bakken. Among those efforts is an oil and gas initiative being led by the Department of Environment and Natural Resources. The initiative includes an interactive website, dubbed the“one-stop shop”for oil and gas information, which is loaded with state data on existing oil and gas permits, water wells, historical oil and gas drilling records and other geological survey results. The website was initially unveiled last October but has been consistently updated with additional data and is expected to be a work in progress. “We’ve come a long way, but we still have a lot things to do to make it better,” says state geologist Derric Iles. Information on approximately 100,000 test holes is housed on the website. South Dakota has produced oil and gas in small amounts since 1954 in a region near the Black Hills known as the Red River Formation, and that area is expected to be the first target for expanded production, but drilling hole data on

Fiscal year ■ Gas Well Permits ■ Oil Well Permits (Includes Associated Injection Wells)

South Dakota has been an oil-producing state since the 1950s, but interest has waned recently as developers focus instead on projects in North Dakota. In an effort to spike interest in South Dakota's untapped potential, the state's Department of Environment and Natural Resources has developed an online database that includes permit and geographical information useful to the industry. DATA: SOUTH DAKOTA DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES


that look, we have to make it as easy as possible for them to decide that South Dakota is a good place to invest their money.” Water well information is another valuable aspect of the database. Information related to water wells available on the site includes water well completion reports and records of water-level measurement and water quality. Information provided through the database will allow developers to determine who owns wells located on or near the site of interest. In a presentation recently delivered to a state legislative oil and gas committee, Steve Pirner, secretary of the DENR, told committee members that water is an issue of concern in northwestern South Dakota, but hydraulic fracturing, a process which requires extensive use of water, has not yet been required for oil development in that region. North Dakota may have provided the inspiration for South Dakota to pursue increased oil and gas production, but it also serves as the state’s greatest obstacle, according to Iles.“If you are an investor with $10 million, you are probably not going to come to South Dakota and spend that money wildcatting,” he says.“You are going to invest that in North Dakota where you have a roughly 99 percent success rate in those deep wells. My hope is that through all of the huge interest and economic explosion that’s happening in North Dakota, we will then be able to see increased exploratory activities in South Dakota that will translate into economic development.” In the meantime, he says South Dakota will continue to provide as much information as possible in order to help the industry make that decision. PB KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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|WESTERN NORTH DAKOTA|

Burlington plans for population explosion New developments could quadruple number of residents BY KRIS BEVILL

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Burlington, N.D.’s website currently boasts the title of being the oldest city in Ward County, but the small community of about 1,100, located on the outskirts of Minot, may soon make a run at a new claim to fame — greatest population percentage increase in the shortest amount of time. Considering the rate of growth of many of the towns in western North Dakota, competition for that title would be stiff, but developments being undertaken in Burlington will certainly put the town in the running for first place. After damages from last year’s historic Mouse River flooding resulted in a population dip in Burlington, the town has begun to experience a rebuilding period, no doubt fueled by petroleum activities in the nearby Bakken region. As a result, the Burlington City Council voted in June to annex 700 acres of land southeast of the town for the creation of two developments that have the potential to add 5,000 residents to the existing population. “We’re going to grow a lot,” Mayor

Jerome Gruenberg says. “We’re excited to see our community thriving, especially with all of the challenges we have endured, but we also want to ensure that we can appropriately manage the growth that we are experiencing.” Gruenberg says Burlington has adequate water supplies to accommodate the extraordinary population increase, although he predicts the sewer system will need to be expanded in the future. The local school is planning to make room for additional students by utilizing portable classrooms initially. Eventually, Gruenberg says the school board and city officials expect that the town will need to consider adding a middle school. The larger of the two developments is known as the Highlands Ranch Subdivision and comprises 535 acres of land. The project is owned by California-based real estate development firm Colton Lee Communities LLC. Gary Gorian, president of Colton Lee, says he and his partner, Colton Behr, were drawn to the area as they


followed reports of job growth in the Bakken region. “Being from both California and Montana, we had been enduring the severe recession for several years,” he says.“The more time we spent researching the area, we realized that the best fit for the type of the community that we typically develop would be in the Minot market.” The bulk of the Highlands Ranch development will feature a range of residential housing types, from apartment buildings to estate homes, and open spaces. A small percentage of the development will be used for commercial properties, potentially including a hotel and office and retail spaces. Preliminary construction work began in the residential section in July and the first 200 single-family homes are scheduled to be finished by next spring, Gorian says. The entire development could take up to seven years to complete. Gorian says he and Behr have fielded many inquiries from parties interested in becoming a part of the development. “We have had an amazing amount of interest by both tenants and builders from all over the United States,” he says. Colton Lee is dedicated to working with Burlington to provide a community that will set the standard for others in the area, he says, adding that prospective builders must be able to work within his company’s architectural guidelines and be respectful of the local community. The second development being planned is the Pointe of View Third Subdivision, which includes 187 acres of land. As of late July, work had yet to begin on that development, but Gruenberg says the developer was taking bids for infrastructure work and was expected to move ahead with the project very soon. For current residents of Burlington, sudden growth could present challenges, but Gruenberg says the overall attitude among the population is a positive one. “There may be some apprehension, but they realize we have to expand,” he says. “We were losing population and we can’t allow that to happen.” PB KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Nominate Today! Do you know a young professional who deserves recognition? 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.

To nominate someone, send your contact information along with your nominee’s age, name, title, company name, photo and a short bio to editor Kris Bevill at kbevill@prairiebizmag.com. The deadline for submissions is Oct. 1.

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Great River Energy’s coal-fired power station near Stanton, N.D., will supply up to 3,000 gallons of water per minute for use in hydraulic fracturing operations in the Bakken region. PHOTO: GREAT RIVER ENERGY

Meeting water’s hot demand Power plants, oil industry providers strike hot water supply deal BY KRIS BEVILL resh water, already one of Earth’s most precious commodities,is becoming an increasingly valuable resource in western North Dakota, where oil companies operating in the Bakken formation require the use of millions of gallons of water for hydraulic fracturing procedures. In response to oil’s demand for water, Grand Forks, N.D.-based SBG Energy Services LLC, a water disposal service operating in several locations throughout the Bakken region, has entered into an agreement with Headwaters Resources Inc. to supply fracking operations with hot water from Great River Energy’s coal-fired power plants in Stanton and Underwood, N.D. All agreements are finalized according to SBG and deliveries of water will begin as soon as permits are approved. The state is expected to approve the permits by the end of September. Orley Sinkler, vice president and chief operating officer of SBG, said in a statement that the water supply agreement provides a solution to the oil industry’s water needs in a way that is consistent with SBG’s focus on sustainability and green technologies. “It is our desire to offer this to the industry at a reasonable cost, and to help preserve the existing

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fresh water resources in the state,” he said. Under the agreement, SBG will market heated water from the power plants to the oil industry. Headwaters Resources will operate and maintain loading facilities at the power plants, which will be capable of filling two trucks at a time with between 120 and 140 barrels of hot water in about eight minutes per truck, totaling up to 72,000 barrels of hot water per day. According to SBG, at 50 percent capacity, the loading stations could supply roughly 500 wells per year with water. Great River Energy is responsible for acquiring water use permits for the project. Water will be sourced from the Missouri River and will be heated at the power plants by utilizing waste energy or existing steam capacity or through a combination of both methods, according to GRE spokesman Lyndon Anderson. Each plant will have the ability to provide up to 3,000 gallons of water per minute to the operation through its existing facilities, he says, adding that no new facilities will be constructed on the shores of the river. The power plants are located along Highway 200 near Stanton and Highway 83

near Underwood. Both sites offer trucks accessibility to highways that are less congested than those located further west in the state, which will reduce truck waiting times. According to SBG, the loading system used at the power plants has been designed with the capability to vary the water temperature to ensure that it arrives to the customer at the desired temperature. “Instead of spending money on natural gas or propane systems to heat the water, Great River Energy engineers have designed a system that is focused on meeting the quality, temperature and volume requirements of the oil industry,” Greg Rud, vice president and general manager of Rud Transportation, SBG’s trucking company, said in a statement. SBG is finalizing design work on a pipeline to potentially transport water to depots or well sites, but until a pipeline is in place, the company intends to deliver water using its own truck fleet. PB KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com


|ENERGY|

Local group seeks control over fertilizer’s future Corn growers developing plan to establish natural gas-to-fertilizer plant in Oil Patch BY KRIS BEVILL ate this winter, representatives from Fargo-based Northern Corn Development Corp. will begin approaching the region’s farmers with an offer they hope they won’t be able to refuse: invest now in a project to build a natural gas-to-fertilizer plant in the Bakken and reap the rewards for years to come in the form of plant ownership and more affordable fertilizer. The total expected price tag for this project? A mouth-drying $1 billion. At that price, the plant will need a lot of serious supporters, but after years of paying ever-increasing prices for fertilizer, Tom Lilja, executive director of the North Dakota Corn Growers Association, says he believes there are plenty supporters out there.“Farmers are ready for this,” he says. “They understand that fertilizer used to track natural gas prices. Now it follows corn futures. They know this is a problem.” Lilja says that the U.S. produced a fair amount of nitrogen fertilizer years ago, but when natural gas

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A flare burning natural gas glimmers in front of a pumping unit north of New Town, N.D. PHOTO: FORUM COMMUNICATIONS

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prices spiked in 2008, fertilizer producers moved their operations to Trinidad & Tobago and Canada, where the raw material was much cheaper. Currently, most of the nitrogen fertilizer used by U.S. farmers is imported, even while natural gas production in the Bakken region is booming and most of it is being flared into the atmosphere. Further frustrating to many farmers is the price they are forced to pay for the fertilizer. Lilja says the NDCGA conducted a feasibility study which showed that anhydrous ammonia can be produced for about $221 per ton, but members of the association are at times paying more than $800 per ton. Investing in a regional fertilizer plant will provide farmers with a long-term hedge against these types of bloated price versus cost scenarios, he says. Several sites in the Bakken region are already under consideration for the plant’s location. Industry experts have predicted that natural gas will remain in


The group’s initial plan called for a smaller plant, but economy of scale has resulted in the final target being a “mammoth size” facility. abundant supply for the foreseeable future in the northern plains and a steering committee made up of farm groups representing North Dakota, Minnesota, South Dakota, and several Canadian provinces concluded earlier this year that local production of fertilizer would not only be economically feasible but also prudent considering growers’ requirements for nitrogen. Lilja says the group’s initial plan called for a smaller plant, but economy of scale has resulted in the final target being a “mammoth size” facility. Project leaders estimate that the plant should produce 750,000 tons of ammonia per year, enough to service 10 million acres at an average usage rate of 125 pounds per day. “This is not a small project,” he says. To put it into perspective, a plant able to produce that much ammonia would need to be about five times larger than a plant capable of producing 100 million gallons of ethanol per year. Early supporters of the project include corn growers associations from South Dakota and Minnesota as well as the North Dakota Agricultural Products Utilization Commission, which awarded the group a grant last fall to conduct the feasibility study and provided another $100,000 in July to assist in the development of a business plan and equity drive. There are also likely to be a number of project naysayers, specifically other fertilizer producers. Lilja says concerns have been raised about heavy market retaliation from fertilizer producers if the Bakken plant becomes operational. “There’s always that possibility, but they’re still going to want to profit,” Lilja says. Assuming fundraising efforts are successful, the project’s timeline calls for an engineering firm to be selected in 2013, followed by a groundbreaking and construction of the facility in 2015. Production is not expected to commence until 2016. PB KRIS BEVILL Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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|BUSINESS TO BUSINESS| PRAIRIE BUSINESS

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