At stake in firing of EERC leader is a major employer and $91.2 million in economic impact
The UND-owned lab generates more than $91.2 million of economic impact in the Grand Forks region and has created a job market for engineers, according to university officials. It does so by doing contract work for private companies and government agencies to create concrete technologies that can be applied and used.
The EERC has been mostly self-sustaining in its work with environmental technology. On a daily basis, it does everything from filling nitrogen tanks for the School of Medicine and Health Science to looking at better ways to biodegrade cardboard “camp waste” for the military.
Gerald Groenewold, who led the EERC from 1987 until recently, has always touted the lab’s uniqueness. “It’s a business culture in the middle of an academic bureaucracy,” he said in a recent interview.
Unlike the heads of other campus labs, he reported directly to the president.
Two weeks ago, Groenewold was fired by President Robert Kelley for allegedly lying about the lab’s finances and creating a hostile environment for employees. Groenewold characterized the dispute as a clash of personalities and priorities.
He leaves behind a lab employing 235, most of them North Dakotans and most graduates of the North Dakota University System. Over the years, those employees have developed a 100 percent renewable jet fuel, found a way to push carbon monoxide and water through the ground to allow for faster oil extraction, and developed the technology to extract miniscule amounts of mercury from coal plant emissions for study.
They even developed a flood control plan that involves retaining water on farm fields during the wet season.
The EERC started out in 1951 as a U.S. Bureau of Mines lab, which was taken over by the U.S. Department of Energy in 1977. But the center struggled to make applicable technology for the real world. In 1983, it was de-federalized and became part of UND.
According to the EERC’s website, environmental technology studies started when a former UND chemistry professor named Earl Babcock began studying the state’s coal resources in the 1890s and investigating potential uses for them. Almost a century later in the 1970s, Groenewold said he started trying to build an environmental technology research sector within UND’s Department of Engineering.
He said he has always felt it was important to create things from start to finish that people needed and would actually use. “I got a lot of pushback in those days.”
Then, in 1987, former UND President Tom Clifford gave Groenewold the directive to take a group of about 40 people over to the old Department of Energy building to create the EERC.
“He said, and I remember this word for word, ‘Would you see if you can save that place?’” Groenewold said. “It was an incredible challenge.”
His basic philosophy since that time was for the EERC to compete for contracts rather than seek grants, he said. “Don’t take care of me, give me the freedom to take care of myself.”
Since then, the EERC has become the only lab of its kind in the country that takes the technologies it develops all the way from conception to implementation, Acting Director Tom Erickson said. The lab also survived the 1997 flood and has seen millions of dollars worth of expansion.
Now, the EERC has a 60 percent repeat customer base and 1,265 clients worldwide, according to EERC spokesman Derek Walters.
“We’ve always felt we’re better off being involved in the early stages to create things to improve things and to help advance them all the way to the commercial marketplace,” Erickson said.
Groenewold was at the helm of the EERC until the morning of May 5 when university police officers showed up to escort him out of his office.
Without any explanation, he was put on administrative leave. This came after years of good annual reviews from Kelley and former President Charles Kupchella and a recommendation for a 4 percent pay raise in 2013.
“My life is dedicated to doing something useful,” Groenewold said. “I’m one of those people who can’t sit around and do nothing. It has to be constructive and so that’s why I’ve been doing this all my life. That’s part of the reason this has been really painful for me.”
Finally, on May 23, he received a letter dismissing him with cause and accusing him of “abusive” and “inappropriate” behavior, such as slamming his phone down and refusing to work with employees based on their religious beliefs, engaging in nepotism, misrepresenting the EERC’s finances to the public and university officials, and not putting in eight-hour days.
Groenewold admitted to having an intense management style and to breaking his phone once in the 1980s, but denied most of Kelley’s claims in a response letter on May 28.
“I am very proud of the team we built,” he said in a recent interview. “It’s a family place.”
Kelley and other university officials remain mum on the details of the situation. Though the president’s letter says EERC employees called Groenewold “hostile, abusive and oppressive,” no one will go on record as to how and why that information was gathered.
Kelley has repeated denied requests for comments from the Herald.
“This is a power struggle between Bob Kelley and me for control of the EERC and control of the money,” Groenewold said.
He was fired May 30.
Following the money
Dating back as far as 2008, the EERC listed an annual deficit of more than $1 million on UND’s financial reports. As of June 2013, the center was still about $1 million in debt and Alice Brekke, UND’s vice president of finance and operations, told a State Board of Higher Education Committee in April that the plan designed to eliminate the deficit that had been put into effect nine months earlier wasn’t working.
Groenewold said the center’s financial problems started in 2004 when the EERC ended up in court over an intellectual property dispute that was settled a year later.
But Erickson said recently that the court case had nothing to do with the center’s deficit and instead blamed it on changing government interests. About 80 percent of the EERC’s contracts are from the private sector, but the majority of its income comes from government contracts, since they usually last longer, according to Walters.
“The relationships and the business we do with our clients help us weather those ups and downs with the federal government,” Walters said.
This is a change of tune for Erickson, who penned a memo last January saying the center was losing money because the university was keeping too large of a percentage of its Facilities and Administrative income, which is the money the EERC makes.
The university receives a specific, federally-negotiated percentage of the F&A income while the rest goes to the EERC. Erickson write that the EERC required a higher percentage to cover expenses, even though the center had reduced costs by about $3 million in the last few years.
“It has become very apparent that the EERC certainly cannot thrive and that its very survival is challenged unless there is a change in the distribution of F&A income that is earned from EERC research projects,” he wrote.
Since 2012, the EERC has spent about $38 million each year and an average of 87 percent of that expenditure has been on employees alone, including fringe benefits.
But the EERC’s salaries for its engineers are in line with the national average, according to the U.S. Bureau of Labor Statistics, and UND spokesman Peter Johnson and Erickson both said it was a normal budget model, even though UND as a whole only spent 65 percent of its budget in the same category in 2013.
“You’ll see the impressive toys we have, but they still are dwarfed by the asset of the people,” Erickson said. “They are our greatest capital.”
With Groenewold fired, the future of the EERC temporarily lies with Erickson who was formerly in charge of business, operations and intellectual property.
“We take great pride in the ability that we have to create working solutions that can make it into the marketplace that can create change, that can make the systems more efficient and more environmentally friendly,” Erickson said.
He said the plan to alleviate the budget deficit is to simply concentrate on getting more high-dollar contracts.
Groenewold often met with legislators to discuss the EERC and its projects, according to his annual employee reviews over the years. While some have speculated that was the reason for his dismissal, it is not listed in the official university document as a cause as it is illegal to prohibit a state employee from speaking with legislators.
Sen. Ray Holmberg, one of the legislators Groenewold met with regularly, declined to comment on Groenewold’s dismissal. However, Holmberg said he wasn’t worried about the EERC’s future, since it is still unknown who will assume the position of director on a permanent basis.
“I would hope the lines of communication stay open,” Holmberg said in reference to whoever ultimately ends up running the EERC and legislative officials.
Groenewold has the option to appeal to a university council, but Kelley would still have the final say on the issue. As of Thursday, Groenewold said he had not decided whether to appeal or not.
- 1951: Founded as the U.S. Bureau of Mines Robertson Lignite Research Laboratory.
- 1977: Became a federal energy technology center under U.S. Department of Energy.
- 1983: De-federalized and became the UND Energy Research Center.
- 1987: Gerald Groenewold became director of the Energy Research Center, combining all research entities within the UND School of Engineering and Mines and calling it the Energy & Mineral Research Center. He started with about 40 employees.
- 1992: EERC moved under the UND president. EERC Foundation established.
- 1994: $7.6 million expansion of labs and pilot plant facilities completed.
- 1997: April flooding of the Red River forced the EERC to close for 20 days; EERC flood damages estimated at $40 million to $45 million in lost equipment and business.
- 2003: 47,000-square-foot, $8 million expansion and renovation project opened.
- 2004-2005: EERC eventually wins court case over an intellectual property dispute.
- 2006: Contract awards exceeded $45 million. Broke ground for new 15,000-square-foot hydrogen facility.
- 2008: “EERC Cost of Litigation” begins showing up on UND’s annual budget report as a deficit of more than $1 million.
- 2008: Contract awards exceeded $95 million. Hydrogen facility dedicated.
- 2009: EERC achieved sixth consecutive record year. Contract portfolio exceeded $236 million.
- 2011: Broke ground on Fuels of the Future facility.
- 2013: EERC still posts deficit of about $1 million.
- 2014: EERC employs 235. Groenewold fired and temporarily replaced with the facility’s associate director for business, operations, and intellectual property, Tom Erickson.