Northern Sands sued for $1.875 million plus interest

By LeAnn R. Ralph

CHIPPEWA FALLS  —  A company working to develop a frac sand mine in the Town of Howard southeast of Colfax has been sued by an investor for $1.875 million plus interest.

Northern Oak Proppants LLC filed the lawsuit against Northern Sands LLC in Chippewa County August 15 for breach of contract.

The summons and complaint lists Northern Oak Proppants as having an address in Minneapolis, while Northern Sands is listed as having an address in Winona, Minnesota.

While the proposed 1,300-acre Albertville Valley sand mine is not named specifically in the complaint, Albertville Valley is the only sand mine Northern Sands has been actively pursuing in the Town of Howard.

The proposed 1,300-acre mine site stretches north and south along the Chippewa County and Dunn County line directly east of the intersection of county Highway N and county Highway A.

According to the complaint, Northern Oak Proppants entered into a development agreement on August 19, 2014, with Northern Sands related to a proposed industrial sand mining, processing and transloading operation in Chippewa County.

The two companies also entered into a collateral agreement on the same date regarding property acquired by Northern Sands.

Under the terms of the development agreement, Northern Oak Proppants paid Northern Sands $1.5 million as an “initial contribution,” and in turn, Northern Sands was to secure a mine licensing permit from the Town of Howard on or before August 31, 2015.

The complaint states Northern Sands “failed to secure the license to mine permit as required under the terms of the development agreement on or before the permit due date.”

In addition, according to the terms of the development agreement, Northern Sands was required to repay Northern Oak Proppants the initial contribution of $1.5 million at a rate of 125 percent, which equals $1.875 million, on or before February 27, 2016.

The complaint points out that Northern Oak Proppants has demanded payment of $1.875 million under the terms of the development agreement, but Northern Sands has failed to pay the money.

Besides the 125 percent on the initial contribution, Northern Sands also owes Northern Oak Proppants for “statutory prejudgment interest” on the $1.875 million from February 28, 2016, until the date that a judgement is entered into the record, according to the complaint.

Lease and purchase

The complaint also alleges under the terms of the development agreement, if Northern Sands defaulted on the agreement, the collateral agreement provides Northern Oak Proppants the right to assume all of Northern Sands’ rights in royalty lease agreements and residential offers to purchase.

The applicable agreements listed in the complaint include a royalty lease agreement dated January 10, 2014, with John R. Bethmann and Nan Torgerson-Bethmann, and a residential offer to purchase dated May 15, 2014, between Northern Sands and the Bethmanns; a residential offer to purchase dated May 12, 2014, between Northern Sands and Sheryl Lemler; and a royalty lease agreement dated November 3, 2013, between Northern Sands and Robert Rasmussen and Karla Rasmussen.

The complaint notes on June 2, 2017, Northern Oak Proppants provided written notice, as was required by the collateral agreement, and assumed all of Northern Sands rights and obligations under the Bethmann lease agreement, Bethmann purchase agreement, Lemler purchase agreement and the Rasmussen lease.

Judgement requested

In addition to asking for $1.875 million, plus interest on the $1.875 million since February 28, 2016, Northern Oak Proppants is asking for a declaratory judgement providing that Northern Oak holds all of Northern Sands rights in the Bethmann lease and purchase agreements, the Lemler purchase agreement and the Rasmussen lease agreement.

The lawsuit is asking for reasonable attorney’s fees and costs as well and “for such further relief as the court deems just and equitable.”

Paul Van Eijl, the property acquisitions manager for Northern Sands, has been a cause of concern for Howard Town Board members and some township residents.

Van Eijl is not named specifically in the lawsuit filed by Northern Oak Proppants in Chippewa County.

At a December of 2015 meeting, out of concern for future litigation, members of the Howard Town Board refused to say exactly why they were leery of Van Eijl’s involvement with the proposed sand mine.

When Van Eijl began obtaining leases for the Albertville Valley sand mine, more than 20 boreholes were drilled to prospect for frac sand, but the boreholes were not properly filled until Red Flint Group became associated with the project.

Town board members and residents in the area have been under the impression Red Flint Group would be the actual operator of the proposed frac sand mine.

At the  December of 2015 meeting, two town board members expressed dismay over Van Eijl signing the Chippewa County mine reclamation permit for the Albertville Valley sand mine as the president of Northern Sands.

On business cards and other documents, Van Eijl has been listed as the the property acquisitions manager and not the president of the company.

Members of the Howard Town Board have gone on record saying the town board would not issue a nonmetallic mining license for the Albertville Valley sand mine if Van Eijl was involved in any part of the operation.

Northern Sands LLC and Ahlgrimm Explosives Company, Inc. were fined a total of $26,000 in June of 2016 for failing to properly abandon 25 frac sand boreholes in the Town of Howard.

Judge Rhonda L. Lanford in Dane County Circuit Court ordered the judgement against Northern Sands and Ahlgrimm in response to a complaint filed by the State of Wisconsin.

Northern Sands was fined $17,000, and Ahlgrimm was fined $9,000.

Chippewa County Land Conservation and Forestry Management held a public hearing on the reclamation plan for the proposed Albertville Valley sand mine in July of 2015 and approved the reclamation permit in December of 2015.

The nonmetallic mine reclamation permit required Northern Sands to complete an assessment of the biological resources at the mine site along with an inventory of the seeps, springs, wetlands and surface waters located within the mine boundaries and adjacent properties.

The original deadline for submitting the reports was July 31, 2016, although the deadline was subsequently extended to December 31, 2017.