Shuttered Northwood (ND) canola plant looks to reopen

In an unusual case, the same owners who only months ago lost their license to run a Northwood, N.D., oilseed crushing plant after going broke owing $860,000 have applied for a new license from the North Dakota Public Service Commission.

Northwood Mills LLLP said it plans to reopen the same plant to crush canola seed into vegetable oil.

The plant shut down in late January 2009, laying off 20 employees, citing lowering demand for its product.

The $7 million plant broke ground in late 2005 and began crushing soybeans in June 2007 into oil for biodiesel markets with the residue meal going to hog feed markets.

Besides investor money, the plant was fueled by a federal grant.

In fall 2006, the U.S. Department of Agriculture awarded the plant a $500,000 grant to develop a biodiesel product.

But its first year of production, 2007, was the year crop prices, including soybeans, went sky-high, making it more expensive to run the plant.

The plant switched to crushing canola for the food market by early 2008.

A year later, with unpaid bills of $860,000, it shut down.

The PSC, acting as a trustee, took Northwood Mills to civil court in Grand Forks in an insolvency case.

On Wednesday, the PSC discussed the application from Northwood Mills, with the same two principals — Clarence Leschied of Northwood, who ran the plant, and Paul Sproule, Grand Forks, a major partner — for a new license to buy, store and crush canola seed.

Sue Richter, director of licensing for the PSC in Bismarck, says that’s the first such situation in a quarter-century.

“The last time a (grain warehouse) company went insolvent and came back and got a license was in 1984,” Richter said.

That was Dakota Bean Co., which had plants in St. Thomas, Casselton and, by chance, Northwood. (There’s no connection to Northwood Mills.)

Dakota Bean’s owner was Grant Kuhn, a pioneer in the dry edible bean industry in North Dakota, crediting with introducing navy beans. Kuhn, who died in the late 1980s, had enough assets in his company that all of the nearly $1.5 million owed to creditors was paid in full, Richter said.

But in the case of Northwood Mills, there were no assets available.

Distributing the $50,000 bond among the 11 creditors owed a total of $860,000 meant each one got only 5.8 cents on the dollar, Richter said.

According to court documents, all but two of the creditors appear to be grain elevators or commodity brokers who sold canola to the plant.

North Central Grain in Bisbee, N.D., was owed the most: $261,749. It was paid $14,649 from the bond.

Two farmers are listed: one from Grafton who was owed $119,066, and Don Emerson, Pembina, who was owed $14,938.

“I got about 800 bucks,” Emerson said Thursday about his share of the bond money.

He heard about the plant’s license application on the radio Thursday, Emerson said.

“Not till they pay us up,” he said about the plant getting a new license.

“I hauled them some canola about a week before they decided to go broke,” Emerson said. “Which really pissed me off because at that time I’m sure they already knew they were going broke. So, if they get cranked back up without paying everybody off, it’s really going to ... well, it’ll probably be legal but it damn sure ain’t going to be moral.”

Emerson said a plant employee called him in December and promised a full payback.

“I’m not holding my breath,” Emerson said.

He grows 1,000 acres of canola and said he now will haul it only to crushing plants in Canada.

Contacted Thursday about the license application, Sproule said, “I can’t say anything at this time.”

Leschied, too, declined to comment Thursday.

Insolvencies of grain warehouses in the state are fairly regular but rare. According to Richter there were three last year among the 400 licensed grain warehouses in the state.

That was the most in at least a decade.

Since 2000, half of the years showed no insolvencies and the average was one per year.

The PSC discussed the application Wednesday and asked its staff to get more information before a decision is made, Richter said.

According to The Associated Press, Commissioner Brian Kalk said Northwood Mills should give more details about how it would avoid future financial problems. Commissioner Kevin Cramer said, despite the big debts, it might be better for the community of Northwood to get the plant up and running again.