Report: N.D. oil expansion aggressive

By MARVIN BAKER, Staff Writer mbaker@minotdailynews.com
Efforts to expand oil refining capacity and pipelines in North Dakota have been aggressive and ongoing, according to an April 22 report presented to the state’s Industrial Commission.


Gov. John Hoeven, a member of the Industrial Commission, spoke about the report and the importance of the oil industry to North Dakota prior to addressing  the Williston Basin Petroleum Conference and Expo in Minot Sunday night.


“We’ve been aggressively seeking expansion,” Hoeven said. “We’ve been working five years to develop oil activity in the Williston Basin.”


As an example, the Oil and Gas Research Council provided funding for a study to determine the feasibility of a private refinery in the Williston area. The study is due out in September.


The Three Affiliated Tribes is working on permitting a refinery within the reservation in which the governor said tribal officials are confident they will get their permits later this year or early in 2009.


American Lignite Energy is exploring a coal-to-liquids plant that would produce more than 1.38 million gallons of liquid fuel per day in the form of gasoline and diesel. That plant would receive up to $10 million in incentives if it is built in the Washburn/Underwood area.


Tesoro, which owns the state’s only refinery in Mandan, is using state sales tax incentives to improve reliability and increase low sulfur diesel fuel production.


“Since 2001, when Tesoro bought the refinery in Mandan, they’ve spent $100 million,” Hoeven said. “And they’ve spent more than that for low-sulfur diesel.”


And finally, the North Dakota Pipeline Authority is working to increase pipeline capacity across the state, from the 480-million-barrels-a-day Keystone pipeline from Walhalla to Oakes, to the Trenton to Clearbrook, Minn., pipeline that has gone from 70,000 barrels a day to the current 115,000 barrels. Plans are to increase that capacity to 165,000 barrels a day.


“So we’re working very diligently to develop more refining in the state and we’re doing it the right way,” Hoeven said. “But it’s expensive and we’re talking billions of dollars here.”


In fact, Hoeven said the Pipeline Authority, in building the pipeline infrastructure, has built it to such a point that oil companies are no longer getting dinged for capacity discounts.


As an example, Bowman County had one pipeline going west to Wyoming. Now, Bowman County oil can be transported north and east, eventually flowing past Minot on its way to Enbridge in Minnesota.


“Some were getting discounts. Now, the discounts are as low as they’ve been,” Hoeven said. “It’s as good as it’s been.”


Incentives have also been put into place to capture the natural gas from oil activity, treat it and send it to market.


“That creates a whole other economic activity and protects the environment at the same time,” Hoeven said. “That’s hundreds of millions in the marketplace. They’re like mini refineries.”


Hoeven said the effort is aggressive, it’s expensive, competition has to be considered since North Dakota produces more oil than it consumes and it’s all a bipartisan effort.


The governor spoke briefly about the possibility of a state-owned refinery and believes refining should be private enterprise.


“For somebody starting today, it’s going to take years,” Hoeven said. “It’s not a short-term solution. I think refining should be in the private sector because its billions, not millions, of dollars.”


North Dakota Dept. of Commerce Commissioner Shane Goettle added the state certainly has a significant role in getting oil refining expanded including feasibility, infrastructure, investment and helping with risk management.


Since the U.S. Geological Survey’s recent announcement that the Bakken Formation of western North Dakota and eastern Montana has 10 times more oil than Alaska’s North Slope, there’s been a lot of activity.


That includes the conference and expo which had to limit its participants to 1,300, up from about 700 a year ago.


According to Hoeven, the state’s stake in that activity began when incentives were created to entice oil companies to return to North Dakota to drill for oil.


“As we develop production, we’re expanding the infrastructure,” Hoeven said. “We’re working to build refining and it’s important to do it the right way. We’ve been doing this five years.”