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.)