March 2010 Report on The Plains States: Discovering and Nurturing New Business
Mali R. Schantz-Feld (Feb/Mar 10)
As the national economy just begins to show glimpses of promise, the Plains States - Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota - are already showing slow but steady signs of recovery. Reed Construction Data reported in January that the strongest economy among the nation's regions continues to be in the Plains States. Andrew Gledhill of the Moody's concurs, noting that this region has suffered relatively minor recessions, with comparably minor job losses, making the likelihood of minor gains more predictable as the national economy gains more stability. States that avoided the housing bust, such as Nebraska, North Dakota and South Dakota, will make a quicker comeback, while areas dependent upon cyclical industries such as manufacturing will take more time to mend.

Growth in Alternative Energy
Alternative energy is a common growth niche in the Plains, with each state touting energy-generating resources. Iowa's strong agricultural foundation and penchant for manufacturing have resulted in developments in wind energy, renewable fuels including ethanol and biodiesel, biomass, and other next-generation technologies. Its corn and soybean crops and windy plains offer plenty of alternative energy options. As a result, the state touts a first-place ranking in the nation in the production of ethanol, second in the production of biodiesel, and second overall in wind-generation output. As of February 2009, Iowa housed nine international wind-related manufacturing companies as well as more than 200 suppliers in 26 counties supplying the wind industry, according to the Iowa Office of Energy Independence.

Even before Dorothy's famed trip from her farm to Oz, Kansas' location in the nation's "wind corridor" has garnered national attention. The state is ranked third nationally for wind-harnessing potential. Siemens Energy chose Hutchinson in Reno County for its first U.S. nacelle production facility (nacelle is the structure on a wind turbine that houses all of the components that generate electricity) to contain 300,000 square feet and an adjacent 80,000-square-foot service and repair facility that is expected to create approximately 400 green-collar jobs. Hutchinson provided "the ideal location because of the state and local commitment to wind energy development," says Kevin Hazel, head of Siemens Energy's Americas wind-power supply-chain management.

Minnesota ranks ninth in the country for wind energy potential, much of which is located along the Buffalo Ridge in the south and southwest part of the state. In addition, the state ranks fourth nationwide in ethanol production capacity, according to the Renewable Fuels Association. Companies pursuing innovations in fuel cell products include Entegris, 3M, Donaldson, ICM Plastics, Atmosphere Recovery, and Cummins.

Missouri also participates in the Plains' power play. ProEnergy Services, a third-party service provider to the global energy industry, is adding a turbine services division on its Sedalia headquarters campus. "Our company was founded on the vision to provide service for every phase of a power plant project's life cycle, from conception to long-term operations and maintenance," says John Stevens, vice president of sales. He adds that incentives that ProEnergy received from the Enhanced Enterprise program through the state of Missouri were one of the main reasons for its relocation to Sedalia from Atlanta. "The quality jobs initiative has leveraged the company's ability to expand from a single facility to a spacious campus," Stevens says. He adds, "ProEnergy also received cooperation through the Sedalia Pettis County Economic Development. Because of its central location, Sedalia has proven to be a great location for business and a wonderful community for the employees and their families."

North Dakota's energy sector is buzzing about the development of Great River Energy's (GRE) Spiritwood Station, which will generate two primary products - electricity and steam - when it comes online this year. The enlarged complex will consist of Spiritwood Station, GRE's 99-megawatt combined heat and power plant, and three major production facilities: a large barley malting facility, which is already in place, as well as a biomass refinery and a biodiesel production facility, both of which are planned additions. Program partners include GRE; Cargill Malt; the Jamestown/Stutsman Development Corp. (JSDC), which is working to develop the biodiesel facility; and Otoka Energy Corp. and Inbicon A/S, which are working together to build the biomass refinery.

A favorable business history spurred the GRE development. "Great River Energy has operated two power plants in North Dakota, starting first in the mid-1960s. During that time, we have developed a strong partnership with the state through our positive impacts on jobs and economic activity, and our focus on environmental stewardship, says Al Christianson, GRE's manager for North Dakota business development and governmental affairs. "The state also supports further energy development, and that support is a major reason why we are building a combined heat and power plant - Spiritwood Station - near Jamestown, North Dakota."

According to the Great Plains Energy Corridor, biofuel production has grown in North Dakota with the addition of five biofuel facilities in the last five years. Lignite, a form of coal, is another important component of North Dakota's energy sector, since it generates electricity and produces synthetic natural gas and fertilizer products. The state has the largest proven reserve of lignite coal in the world. Lignite already has an estimated annual impact of $3 billion and directly employs more than 4,000 people in the state. In addition, the Energy Information Administration notes that North Dakota coal production accounts for nearly 2 percent of the nation's total annual production.

South Dakota reports several wind developments. Iberdrola Renewables started construction on the Buffalo Ridge II wind farm in Brookings and Deuel counties; when completed, it will be the state's largest wind farm. In Hand County, the Titan I 25-megawatt project went online in late November. NextEra Energy, formerly FPL Energy, started construction in November on a 99-megawatt wind farm in Day County. The proposed Hyperion Energy Center in Union County - that will consist of a state-of-the-art greenfield refinery and a hydrogen-producing IGCC power plant to generate hydrogen, power, and steam - is anticipated to begin construction this year.

Incentives Pique Interest
All of these states are establishing incentives to pique the interests of potential alternative energy developers. In Iowa, Governor Chet Culver and the Iowa legislature created the Office of Energy Independence and the Iowa Power Fund, a $100 million research and development fund that will be dedicated to the future of renewable energy and reducing the use of fossil fuels.

Kansas created new financial incentives and pro-energy policies as well, initiating a new incentive that authorizes up to $5 million in bond financing for eligible wind and solar projects in the state. This was one of the key factors in Siemens Energy's decision last spring to come to Kansas. Additionally, cost savings are offered to expanding businesses through the elimination of property tax on new business machinery and equipment, as well as income tax credits, sales tax exemptions, and training assistance. In spring 2009, the legislature approved a new incentive, the Economic Revitalization and Reinvestment Act, for eligible wind and solar equipment manufacturing projects. The act authorizes bonds that provide financial support and are repaid from withholding taxes generated from the new job creation. To qualify, a project must create at least 200 jobs within five years, pay at least a $32,500 average salary, and generate a minimum capital investment of $30 million.

Many energy-related incentives and business climate improvements passed in North Dakota's 2009 legislative session including a streamlined siting process for pipeline and transmission infrastructure, property tax reduction for wind towers, a sales and use tax exemption for wind towers, an income tax credit for renewable energy devices, as well as tax exemptions for improved oil extraction and benefits for coal projects.

Educational programs such as the Cloud County Community College's Wind Energy Technician program, the Wind Applications Center at Kansas State University, and the Kansas Wind for Schools program encourage education and training to nurture and encourage a future work force in this sector.

Economic Diversification
Although energy is a prime focus of the Plains States' economy, diversification is still imperative to economic vigor. Nebraska reports development announcements across the state from a variety of firms, including Yahoo!; Specialty Protein Producers; Novozymes; InterSystems Inc.; PayFlex Systems USA; The Buckle; Vireo Resources; and Vantage ILM/Structured Solutions.

Computer database business Structured Solutions of Altadena, Calif., opened an operations center in Grand Island, Nebraska, in January. The deciding factor for this deal was "the educational aspect," says Robert Yuan, the company's CEO. "We are co-developing a curriculum at the Grand Island Community College so people can become certified in our system, and we will create a pool of quality people to choose from." The firm is one of the first technology companies to locate in the area. Yuan notes that Nebraska's reputation for following up on their development programs and dedication to "same message, commitment to execution" made them "take a chance." So far, "heir response rate and cycle time is phenomenal. Like any long range strategic plan, we have to get the right resources in place and be patient."

Nebraska also heralded plans for a data center in La Vista and a customer care center in Omaha for Internet search engine Yahoo! Scott Noteboom, director of data center operations, for Yahoo! Inc. notes, "We are thoughtful about our site locations with the goal of benefiting the local community, local businesses, Yahoo! business operations, and our users worldwide. We took many areas into consideration when choosing the Omaha site to fulfill these goals and maximize our operational efficiencies, including the Nebraska Advantage incentives for web portals; low-cost, publicly owned utilities; solid network and electrical infrastructure; a productive work force."

In Minnesota, Daikin McQuay is dramatically expanding in several areas: 2009 heralded the opening of the Daikin McQuay Applied Development Center, a state-of-the-art facility that serves as the research institute for all Daikin McQuay applied products and will provide the research, design, and testing facilities for its products worldwide, particularly in fast-growing markets like China and India. "This is, in fact, where we designed the custom HVAC systems for use in the new One World Trade Center project," notes Bruce Dorey Ph.D., the firm's senior director of corporate strategy and planning. McQuay has manufacturing plants in Owatonna and Faribault and has added more than 160 new employees in Plymouth in the last year alone, bringing their total Minnesota work force to 850. The company also is relocating 70 researchers from Japan and Italy to Minnesota.

Minnesota appealed to Daikin McQuay for a number of reasons. "The strong research capability of the University of Minnesota was chief among them," notes Dorey. "The fact they have a Center for Sustainable Building Research, an Institute on the Environment, and are tied with MIT for the number-one ranking in the chemical engineering department were certainly strong factors. Also, we have felt strong support from our state government." Dorey also touted the "proximity to such great companies as 3M, Best Buy and Target" for providing "exciting collaborative possibilities."

Pedigree Technologies pointed out "three primary reasons why we've been able to grow our business as a North Dakota company in the face of a difficult economy." Ian McPherson, vice president-sales and marketing, says, "We have benefited from a well-educated talent pool, from very good universities combined with an affordable, business friendly environment, and the presence of core industries in the American economy like agriculture, manufacturing, and energy. Pedigree came out of the technology incubator at NDSU (North Dakota State University) so there are close ties there, but we have employees from universities throughout the region."

The firm is also working with the NAVAIR division of the Navy to build a real time surveillance platform. Pedigree helps companies manage their physical operations by tracking, locating, and monitoring a wide range of equipment and vehicles in the energy, agriculture, and manufacturing sectors to move products through the supply chain.

South Dakota's targeted industries include biotechnology, value-added agriculture, energy development, firearms, and information technology. Ample hunting and outdoor recreation opportunities give the firearms industry a good shot at success. In 2009 as a number of firearms-related companies undertook expansions or relocations-including Remington, Lakota Industries, TDI, and Bar-Sto.

After spending $2.8 million and doubling in size, Illinois-based Enertech in Mitchell, S.D., recently completed a 20,000-square-foot addition to the former Hydron Module facility. In addition to retaining the 21 existing positions, the manufacturer and distributor of geothermal heating and cooling systems plans to add 30 jobs in the Mitchell area. "Enertech Manufacturing has been able to undergo two plant expansions since 2007 thanks in large part to the South Dakota REDI loan program," says Steve Smith, president, CEO, and managing partner of Enertech Manufacturing, LLC, Mitchell. "This financing option is much more generous than those offered by other states and has allowed Enertech to enjoy continued growth."

The corridor between Manhattan, Kansas, and Columbia, Missouri, has become a center for the animal health and nutrition industries. Missouri's animal health sector includes more than 120 companies and 30 U.S. or global corporate headquarters, attracting $638 million in research by private companies, and providing employment to more than 20,000 private-sector employees. The industry has taken root so strongly that the U.S. Animal Health Association moved its headquarters to Missouri in 2007.

The Missouri Science and Innovation Reinvestment Act (MOSIRA) strives to boost the animal sciences and biotechnology and life sciences firms by creating a stable, ongoing funding mechanism. Companies benefiting from MOSIRA that will need trained specialists can participate in the Training For Tomorrow initiative, a component of Governor Jay Nixon's 2010 jobs package that provides $12 million in competitive grants for that state's community colleges to train workers in a variety of high-tech, high-demand fields, including nursing, respiratory therapy, phlebotomy, and veterinary technology.

From wind farms to agriculture, from technology research to technical improvements, the Plains States are discovering and nurturing new business, promoting job growth, and following trends that will lead to a slow, but reliable economic recovery.