Refineries gaining steam, but capacity would be ‘drop in the ocean’ compared to N.D. output

WILLISTON, N.D. – While the United States hasn’t seen a new refinery in more than 30 years, North Dakota has five refineries proposed that range from planning stages to active construction.

Some of the projects have long been on the drawing board, but with MDU Resources constructing its refinery near Dickinson, the others could be closer to reality, said the head of North Dakota’s oil industry trade group.

“Having one under construction is encouraging more third parties to look at it,” said Ron Ness, president of the North Dakota Petroleum Council. “I’m sure people are going to be watching that and trying to figure out if they can replicate that model. We’ll take them all.”

North Dakota is expected to hit a milestone this year of producing 1 million barrels of oil per day, but refinery capacity is 68,000 barrels at the Tesoro refinery in Mandan, requiring the rest to be transported out of the state.

Meanwhile, the state’s demand for diesel is about double what the Mandan refinery produces, and projected to keep climbing.

Refining more crude oil in North Dakota means less oil will need leave the state by rail or pipeline.

But the difference in transportation likely won’t be noticeable even if all five refineries are constructed, said Sandy Fielden, managing director of energy analytics at consultant firm RBN Energy.

Each refinery would process 20,000 barrels of oil per day, and the byproducts would still need to be transported for further refining. A unit train transports about 65,000 to 70,000 barrels of oil, with North Dakota currently sending about 10 unit trains out of the state each day.

“These refineries are tiny. That’s a drop in the ocean compared to production,” Fielden said. “It’s not going to make much difference.”

– Dickinson: MDU Resources and partner Calumet Specialty Products LP are constructing the Dakota Prairie Refinery between Dickinson and South Heart, projected to be online by the end of the year.

The refinery will process 20,000 barrels of oil per day to produce about 7,000 barrels of diesel per day.

There is room for four to eight similar refineries in North Dakota before the state would export diesel, said Neil Amondson, vice president for NorthStar Transloading, a partner in the latest refinery proposal publicly announced.

– East Fairview: Quantum Energy Inc. acquired land from NorthStar in East Fairview to construct a 20,000 barrel-per-day refinery west of Watford City near the Montana border. The refinery would be next to the NorthStar rail facility that is set to be under construction this month. Construction of the refinery, expected to take about two years, could begin as early as this summer if the project receives approval from the local township board and an air permit from the state, Amondson said.

– Makoti: Phase one of construction is underway on the Fort Berthold Reservation for the MHA Nation Clean Fuels Refinery near Makoti, which involves construction of a rail loading facility.

The rail facility is expected to be complete in September, said Richard Mayer, CEO of Thunder Butte Petroleum Services, which was established by the Tribal Business Council and operates the facility.

Final completion of the refinery is projected for summer or fall of 2016, Mayer said. The refinery is expected to process 20,000 barrels of Bakken crude per day.

– Trenton: Dakota Oil Processing proposes a 20,000 barrel-per-day refinery in Trenton, a project that has been in the planning stages since 2007.

CEO Steve Schneider said the company is working to finalize a partnership arrangement and could break ground on a refinery this spring. The location is still under review by the Williams County Commission.

“We’re in the final stages of putting all the pieces of the puzzle together,” Schneider said. “It’s a very difficult task from announcement to execution.”

– Devils Lake: Michigan-based American Energy Holdings announced late last year it was considering a 20,000 barrel-per-day refinery in Devils Lake that would produce diesel and aviation fuel.

Devils Lake economic development representatives continue to be in discussions with American Energy Holdings, but no agreements have been reached, said Rachel Lindstrom, executive director of Forward Devils Lake.

A representative from American Eagle Holdings did not respond to a request for comment.

An air quality permit from the North Dakota Department of Health is required before refineries can be constructed. The department granted a permit for the Dickinson refinery, but does not have pending applications for any others, said Craig Thorstenson, with the health department’s Air Quality Division.

The department had issued a permit for a Trenton refinery, but it expired and company officials have not yet applied for a new permit, Thorstenson said. He estimated that it takes four to six months for the permit application to be processed.

The state health department does not have jurisdiction over tribal lands.

Building refineries in North Dakota makes sense economically, given the amount of crude oil in and the demand for diesel, Fielden said. But the costs for several of the projects are estimated in the $250 million to $350 million range.

“They’re quite large investments, so the investors in those kinds of infrastructure typically are pretty concerned to make sure there’s good demand for the output,” Fielden said.

The last major refinery built in the lower 48 states of the United States began operating in 1977 in Garyville, La., according to the U.S. Energy Information Administration.

Ness said he’s not aware of new refineries being discussed in other states.

“The only place I hear any discussion about this is North Dakota,” Ness said.

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