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Northwood oilseed business gets second chance

An oilseed processing venture that left more than $800,000 in unpaid bills when it went broke last year may resume doing business with a $100,000 bond and a promise to pay cash to oilseed suppliers, state regulators decided Wednesday.North Dakota Oilseed Mills LLC, which is based in Northwood,...

An oilseed processing venture that left more than $800,000 in unpaid bills when it went broke last year may resume doing business with a $100,000 bond and a promise to pay cash to oilseed suppliers, state regulators decided Wednesday.

North Dakota Oilseed Mills LLC, which is based in Northwood, about 40 miles southwest of Grand Forks, is a successor company to Northwood Mills LLP, which became insolvent in April 2009 after a large canola oil sale fell through. It had only a $50,000 bond to pay $860,000 worth of claims from unpaid creditors.

The state Public Service Commission voted Wednesday to issue North Dakota Oilseed Mills a new license to store up to 50,000 bushels of grain, with commissioners saying they had heard community backing for giving the venture a second chance. One of Northwood Mills' creditors attended a Wednesday hearing to support the request.

Kevin Cramer, chairman of the Public Service Commission, said the restart of the business would help its jilted suppliers get the money they were owed, although he said the PSC lacks authority to order repayment. Commissioner Tony Clark said the agency's staff oversight of the new business would also be "more aggressive."

The license is contingent upon the new company's obtaining a $100,000 bond, which is twice as large as North Dakota regulators would normally require. It also cannot accept credit from oilseed suppliers, the agreement says. The company must pay cash for all deliveries.

"(North Dakota Oilseed Mills) will not be allowed to have payment terms from anyone, growers or elevators," Rachel Hellyer, the company's treasurer, said in an e-mail to North Dakota regulators. The business expects to buy $82,000 to $96,000 worth of canola each day, Hellyer said.

Of the four partners in both Northwood companies, Hellyer, Paul Sproule and Geoffrey Bengston were principals both in Northwood Mills and North Dakota Oilseed Mills, the Public Service Commission said.

Sproule said Wednesday that he hoped the new company would begin business Aug. 16. He expects it will employ 25 people. The company will process canola into oil suitable for food manufacturing and meal, which is used for livestock feed.

The factory is capable of processing soybeans and sunflowers, but it will stick to canola at first, Sproule said. It should process about 10,000 bushels of canola daily, he said.

A Russian company, the Sodrugestvo Group, recently bought a 26 percent stake in North Dakota Oilseed Mills and has made a $3 million line of credit available to the company, said Mike Diller, the commission's director of economic regulation. North Dakota Oilseed Mills has already drawn $165,000, Diller said in an e-mail to commissioners last week.

The remainder of the company is owned by 41 investors and oilseed producers, Diller said.

"Any profits made will first be used to pay back producers, mostly other elevators in Canada and the United States, who lost over $800,000 when Northwood Mills ceased producing oil," Diller said in the e-mail.

Clark said the matter was "about creating a balance that's right not only for (North Dakota Oilseed Mills), but, more importantly, for the community and the producers in that area."

"It's always a bit of a judgment call when you have a situation like this," Clark said. "You look at what happened in the past, and you try to do everything that you can to make sure that it doesn't happen in the future."

The commission had scheduled an Aug. 31 hearing in Grand Forks to hear public comment about licensing terms the agency should have imposed to grant North Dakota Oilseed Mills a new license. That hearing was canceled Wednesday.

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