Bismarck Tribune - Bismarck News - Options for refinery heard

Options for refinery heard

Feb 20, 2008 - 04:05:43 CST

By JONATHAN RIVOLI
Bismarck Tribune

The permitting process for a small oil refinery on the Fort Berthold Indian Reservation is nearly complete, and construction could begin as early as May, project leaders said Tuesday.

Speaking at the first meeting of a Democratic task force set up to study a state-owned oil refinery, they said the permitting process took five years. The planned refinery, near Makoti, will use Canadian oil piped down through the Enbridge pipeline. It would process 15,000 barrels of oil a day.

The reservation refinery was first conceived of in 1999 - before North Dakota oil was a good alternative for Canadian oil - and approved by tribal government leaders as a good way to produce revenue for the tribe. If built, it would be the first refinery built from scratch in the U.S. since the 1970s.

Robert Woolley, president and CEO of Triad, a Canadian firm that designed the reservation refinery, said its permitting process provides a good blueprint to legislators. He said the U.S. Environmental Protection Agency was eventually willing to issue the necessary permits.

"They've been tough, but they tried to make it happen," he said.

Tuesday's meeting was the first of a series that will be held to study the possibility of North Dakota's state government getting into the refining business. It's the brainchild of three Democratic state lawmakers - Sen. Tim Mathern, D-Fargo, Rep. Kenton Onstad, D-Parshall, and Rep. Shirley Meyer, D-Dickinson - who support the concept.

Mathern is a candidate for the Democratic gubernatorial nomination.

Viewed as a way to save North Dakotans' money on gas and add value to the state's oil resources, a state refinery has been compared to state ownership of the Bank of North Dakota and the state mill in Grand Forks.

But Ron Day, a manager with Tesoro in Mandan, told legislators Tuesday that it wouldn't be that simple.

Day said the cost of a state refinery would run in the billions of dollars and that it would be entering a tough and uncertain economic marketplace. A new refinery in North Dakota would have to find a market to sell its gasoline in an area where 58,000 barrels per day are already produced by Tesoro and about 70,000 are demanded.

It also would have to compete with larger refineries and larger companies that enjoy economies of scale by having engineers, oil traders and other support staff for a whole set of refineries instead of just one.

"This is a complex business and a risky business," he said. "We manage risk every day."

With the fluctuation of the price differential between gas at the pump and oil prices, some refineries have to operate at net loss for some periods of the year, Day said.

The outlook was brighter on the construction side of things, where Woolley presented ideas for building a refinery of manageable size.

He said a construction scheme with truck-size units melded together could provide flexibility in terms of size. A 30,000-barrel-per-day refinery, opened in Alberta in the early 1980s, is a good example of how this can be done, he said.

Woolley also said that the permitting process could take less than five years with the reservation process as a blueprint.

Onstad said the committee would be looking to further investigate the challenges and opportunities presented to them at Tuesday's kick-off meeting.

"Today was a wealth of information, but we don't want to stop here," he said.

(Reach reporter Jonathan Rivoli at 223-8482 or jonathan.rivoli@bismarcktribune.com.)

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Comments

kev wrote on Feb 20, 2008 11:11 PM:

" Will ND have enough oil left over after 10 years or so it takes to build a refinery? I see the 80's oil boom and bust happening all over. Once oil has become to expensive to pump out of the ground the oil companies are going to leave the ND refinery high and dry with taxpayers footing the bill. Tesoro reported a 4th quarter loss in 2007 because of the high cost of oil and the stability of gasoline prices. It doesn’t make a whole lot of sense until you look at the big picture. The profit margins on refining oil are a joke compared to the profit margins oil companies make when they sell the oil. 70% of the cost of a gallon of gas comes from the price of oil. While 10% come from refining costs. Senator Mathern is preying on people’s hopes and dreams for cheaper energy. If the state bank and mill is saving the people of ND so much money how come our pocket books our hurting so much and how come our taxes aren’t the lowest in the nation? If the government is making money on its own why do they need more and more taxes every year. Its all a bunch of hog waste like my grandpa would say. "

Law wrote on Feb 20, 2008 8:31 PM:

" The idea that a refinery in ND will allow ND residents to purchase gas cheap is not reality. The proponents say that the Bakken oil is the best oil in the world demanding the highest price. How can you have the highest input cost and come out with the cheapest fuel? Yes the supply should go up but the big oil companies can shut down any of their refineries at any time to crimp supply. How will the gas get from Dunn county to the population centers? Have to build a pipeline- More cost, The oil coming from ND should be used to reduce dependence on foreign oil. "

RefineryDollars wrote on Feb 20, 2008 7:45 PM:

" So, if there is so much money to be made like some of these Dems are suggesting, then why hasn't Tesoro doubled their capacity? It is obvious the free market knows the risks. Let the free market decided if and when a new refinery is built...the Democrats need to stay out of the business of oil refining. "

Dumb North Dakotan wrote on Feb 20, 2008 5:03 PM:

" I think it's dumb to build a refinery unless they can get their money back in a short amount of time. With the laws changing so much we don't know what the market is going to be.

I also think if it's built they should guarantee that the gas will come only to ND, and only be sold abroad after it fulfilled our needs. I think that's the only way we can see lower gas prices as the transportation costs will be less. I also agree with ndguy that this is probably a ploy. "

ndguy wrote on Feb 20, 2008 12:53 PM:

" Oh come on. Does anyone out there really believe a new refinery is going to get built? This is political Bullpucky at its finest. Listen, you can hear the talk now, "It's an election year so we'll look busy, look like we're doing something and maybe they'll vote for us. Once the election is over and they're not looking, we can make it all go away and blame it on the other party. The people are happy thinking we really did the study. Big oil is happy because nothing gets done. And we're happy since we get reelected." Sorry, I'm trying to be as positive as I can be under the circumstances. I'm positive nothing is gonna get done. "

jimm wrote on Feb 20, 2008 9:56 AM:

" So after the process is nearly complete for the Three Affiliated Tribes, the Democrats put together a group to try to claim credit for their work. If they were truly concerned about getting things done they would have at least included members of the other party on their so called study committee. "

Natural Gasteric Enteritis wrote on Feb 20, 2008 9:23 AM:

" QUOTE - A new refinery in North Dakota would have to find a market to sell its gasoline in an area where 58,000 barrels per day are already produced by Tesoro and about 70,000 are demanded.

Aw, is Tesoro having fits about actually having to compete? Ron Day talks as if Tesoro owns 6/7ths of the market and no one else is allowed to refine those barrels of oil. EXACTLY the attitude that belies the price fixing, collusion and corruption between the oil refiners. Just because no one comes right out and admits it, doesn't mean the dirty dealing doesn't exist. They should take some of that money they've bilked out of North Dakota, and invest in some professional public relations personnel to spin their half-truths.

"

PO3 wrote on Feb 20, 2008 8:55 AM:

" With North Dakota loosing millions in tax's because our oil is discounted in price, I think building a refinery funded partly by the state isn't a bad idea. Need to study it at length and then decide one way or the other whether to go ahead with this project. If the Bakken field produces for more then forty years the state would eventally loose billions in tax's because of these discounts. Not to mention what the people who own the minerals on this oil field will loose over this period. They also pay tax's more they make the more they spend and the more tax's are collected. "

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