A business recycled

  • Article by: DEE DEPASS , Star Tribune
  • Updated: January 12, 2010 - 10:30 AM

The revised firm will make new raw material from waste ag plastic. AGSI will be reborn, but under the name Genesis Poly Recycling and in the city of Mankato.

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John Schmitz, left and Dan Hauschild, run Genesis Poly Recycling and will soon be recycling agricultural plastics like this at vendor Bueckers Sanitary in Sauk Centre, Minn.

Photo: Glen Stubbe, Star Tribune

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A little over a year ago, AGSI Recycling partners John Schmitz and Dan Hauschild were jazzed to become the kings of plastic agricultural waste, transforming millions of tons of trashed silage bags, crop covers and hay bale wraps into neat, clean, plastic pellets for resale.

The process, first of its kind in the Midwest, thrilled the Minnesota Pollution Control Agency (MPCA) and the U.S. Department of Agriculture because it promised to keep tons of plastics from being burned or dumped. But the euphoria was shortlived.

"Are you sitting down?" Schmitz asked a reporter recently. "You know all that plastic? It had to be landfilled. All of it."

Without warning, AGSI's third business partner, Karl Bohn, pulled out of the start-up in September 2008, just before Wall Street banks collapsed and one week before the last piece of the factory equipment was to be installed in the AGSI factory in Savage. The 17 workers who had just begun washing, shredding and converting tons of junked ag plastic into commodity pellets joined the unemployment line.

"I was devastated. I was in shock," said Schmitz. "I didn't sleep. I put on 75 pounds."

Schmitz said he lived off savings for a year while trying to reconstruct the firm he'd founded. What a difference a year makes.

The phone rang inside Schmitz's home office the Sunday night before Thanksgiving. It was Bryan Sowers, U.S. Bank's vice president for southern Minnesota, calling with good news. The bank had approved a loan for $7.44 million. AGSI will be reborn, but under the name Genesis Poly Recycling and in the city of Mankato.

"I was jumping so high, I almost hit the ceiling," said Schmitz, a trucking logistics expert who is president of the new firm. "My wife was looking at me, like 'Who are you talking to?' She soon figured it out. I was very happy. We actually opened up a bottle of wine to celebrate. This last year has been an adventure."

Hauschild, the plastics consultant who is now Genesis' CEO, CFO and co-owner, recalled "lots of cursing" over AGSI's stillbirth. But he said that's "behind us and now we are focusing on going forward as Genesis."

"Nationwide, there are over 800 million pounds of plastic ag film used annually. About 25 percent of that material is available in the Upper Midwest," Hauschild said, adding the Environmental Protection Agency estimates half of that gets burned. Genesis gives farmers an alternative.

It took Schmitz and Hauschild 15 months to bring their dream back to life. They scrounged $738,000 of their own money and won a $3 million investment from their Chicago supplier, Crown Machine. With U.S. Bank on board, they expect to process 60 million pounds of plastic film waste next year.

Trailers packed with dirty silage bags, hay wraps, crop covers and flower pots collected from across Minnesota and Wisconsin already sit in storage awaiting processing. In the future, a network of centralized collection points (13 in Minnesota and 42 in Wisconsin), will be ready, places where farmers may haul their plastic ag trash for Genesis to pick up. Schmitz and Hauschild are also working to secure ag waste from scores of sugar beet manufacturers in South Dakota.

The duo can credit many for their rebirth, said Wayne Gjerde, recycling expert at the MPCA.

The USDA liked the idea of ag waste recycling so much it guaranteed 70 percent of Genesis' U.S. Bank loan. The MPCA kicked in a $100,000 loan, while the city of Mankato's economic development team worked hard to secure the old Spartech plastics plant for Genesis. On Nov. 30, the City Council voted to let the city buy the entire building so it could lease its 97,000 square feet to Hauschild and Schmitz and get production going.

For jobs and the environment

It's all about "jobs, jobs, jobs," said Mankato Community Development Director Paul Vogel.

The Mankato City Council voted Monday night to endorse Genesis for millions in state JOBZ tax credits and $500,000 in state economic development loans.

"It's a wonderful project," said Mankato Mayor John Brady. "It's great for the environment."

Vogel agreed. "What really sold Mankato on this was the potential for job retention. They are looking to start out with 42 jobs and grow in two years to 115 jobs. These are jobs that pay livable wages."

That's just what former Spartech workers Clem Hall and Greg Westphal want to hear. They've been nagging City Council members for weeks about the Genesis deal.

"We've been calling them left and right and coming to the meetings. There were 80 to 90 people like us who lost their jobs," when Spartech closed in August 2008, said Hall, who is still collecting unemployment. "So a lot of these guys are praying like me that they may have a chance of getting in the door at Genesis. Many of them have 10 to 30 years of plastics experience."

U.S. Bank's Sowers said it's a win-win for the community and the environment.

"We believe in this. That's why we did the loan," he said. "The buy-in that we have seen from farm producers and the collection network is impressive."

Many farmers don't know what to do with silage and crop wraps so they burn them. Now that there's an environmentally friendly alternative, farmers are "signing on the dotted line for [Genesis] to come in and collect their plastic and ship it away for free," Sowers said.

On the flip side, Genesis should have a steady stream of buyers for its plastic pellets. "What [Genesis] is producing is an extruder-based pellet that is a commodity product, one that is sold nationwide and in South America. They will have more than enough buyers for their product," Sowers said.

Local firms such as Master Mark, which makes Rhino plastic decking products, and plastics furniture maker By the Yard are likely customers.

Hauschild and Schmitz said their final plastic "regrind" and plastic pellet products should fetch 20 to 65 cents a pound, depending on whether the regrind is cleaned or pelletized. Starting in 2011, the business should produce $18 million to $20 million in annual sales, Hauschild said.

But Sowers said demand for recycled plastic pellets is so great that business could easily double in a few years.

Farmers are optimistic. It's a good idea, said Amanda Schieselbein, whose family runs a 600-head cattle farm and grows corn, wheat and soybeans on 2,000 acres in Kimball, Minn. The silage bags used to store cattle feed at her family's farm stand about 6 feet tall and can stretch the length of a football field, she said. Big chunks of the feed bags get ripped apart twice a day when it's cattle feeding time so that waste "piles up pretty fast," she said.

Her father would be willing to pay $10 to $15 a month for someone to take it off his farm but would prefer to haul it to a centralized collection spot himself each week.

That's good news to Schmitz.

"We are very excited and ready to get going," he said recently while checking over the piles of plastic farm waste already collected at Buecker City Sanitation. "We are coming back alive."

Dee DePass • 612-673-7725

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