Tilting toward South Dakota

ELK POINT, S.D. —The controversy over the proposed $10 billion Hyperion oil refinery here has divided friends, neighbors and church congregations into two camps: those who support what a new power plant can do for the local economy, and those who believe it will ruin their rural atmosphere and lifestyle. Kim Carhart, vp-Carhart Lumber, found herself in the former camp, even through she lives across the road from the oil-to-gasoline facility.

“My property will pretty much be a loss,” said Carhart. “But the plant will bring 1,800 jobs to the area. We have to have something for our kids to come back to.”

Carhart Lumber didn’t know about the Hyperion plant five years ago when they decided to enter South Dakota. But the fourth-generation lumber dealers, whose nine locations are all in Nebraska, were willing to bet on the Sioux Falls region. Home to several financial institutions and health insurance firms, Sioux Falls has grown into a population center with 130,000 people. A local philanthropist named T. Denny Sanford—he made his billions from credit card processing—has pledged $400 million to build a 185-acre medical research park in town. The city already has two major medical centers.

Last January, Carhart Lumber opened its 10th location in the town of Tea, on the southern edge of Sioux Falls. The company leased two adjacent buildings in an industrial park, and her landlord is the president of the local home builders’ association. Carhart brought up five employees from the chain’s other locations, two of whom are locals. “In this neck of the woods, people buy from people,” she explained.

Carharts’ other stores do a 75/25 mix of pro and homeowner business, but the Sioux City location will serve mostly contractors. The Carhart family—Kim and her cousin Scott are the fourth generation to run the business—began planning the North Dakota location five years ago. All of their locations were in small towns with populations of less than 10,000 people; some were losing DIY sales to big boxes. Sioux Falls looked like a good place to try an all-pro yard in a bigger market.

“All these new people will need somewhere to live,” Carhart said. She’s also banking on the NAFTA Superhighway, a planned Mexico-to-Canada truck route that will pass through Sioux Falls on Interstate 29.

In the short term, there’s still plenty of pole barns to be built and kitchens to remodel. “Right now the smaller stores are doing well because the ag business is doing well,” said Carhart. “You can’t believe the number of pole barns we’re quoting.” Carhart makes trusses at a component plant in Wayne, Neb., its headquarters, and each yard sells addition lumber and steel to complete the project. Half of the units offer home decor showrooms for kitchen, bath and flooring. Carhart is expecting both sides of the business to be busy this fall.

By the end of the year, farmers know what kind of harvest they’ve had, and they’re [no longer] too busy to put up a building or do some remodeling,” she explained.

Carhart Lumber also has plans to open a unit in Vermillion, S.D., a town of approximately 11,000 people even closer to the Hyperion refinery. Vermillion is also an exit on the NAFTA Superhighway. “You have to have a long-term vision,” Carhart said.