Meridan Energy Submits Permit to Construct Refinery

BISMARCK – The company planning to build an oil refinery west of Belfield and just three miles from Theodore Roosevelt National Park’s eastern edge has submitted its permit application to the North Dakota Department of Health.

Last Friday, Meridian Energy Group submitted its permit to construct the Davis Refinery as a minor synthetic source of air pollution, said Craig Thorstenson, an environmental engineer who handles permitting for the department’s Division of Air Quality.

The refinery is the first “of its complexity” in history to apply as a minor synthetic source, according to a statement by Meridian. Other refinery projects typically apply as a major source of air pollution.

Meridian’s plans call for the Davis Refinery to eventually refine 55,000 barrels of Bakken crude oil a day. Throughout the process, Meridian officials have said the Davis Refinery will be the most environmentally sustainable refinery ever built. Continue reading “Meridan Energy Submits Permit to Construct Refinery”

Federal Commodities Regulator Believes US Oil Industry Can Wait for Prices to Improve

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One of the nation’s leading commodities market regulators said Monday he’s confident the American energy industry can remain stable through the current period of lower oil prices, despite what overseas competition believes.

Christopher Giancarlo, a commissioner on the U.S. Commodity Futures Trading Commission, discussed North Dakota’s role in world oil markets with Sen. Heidi Heitkamp and two of the state’s energy industry leaders at the Dickinson Public Safety Center before getting an oil rig tour in Dunn County.

“Some of our overseas competitors are hoping we can’t wait it out — that we can’t wait out the low prices,” Giancarlo said. “I think they’re going to be surprised when they see this type of ingenuity, preparing ourselves for the lower prices. We can wait it out.”

Giancarlo received a crash course in the state’s oil and gas industry Monday as part of a visit to the upper Midwest that also included agricultural stops in western South Dakota and northwest North Dakota.

“You can’t really understand how to assist a business with the regulatory concerns if you don’t actually understand how they make their money, how they get up in the morning and put food on the table at night,” Giancarlo said.

‘All about survival’

North Dakota Petroleum Council President Ron Ness and Justin Bethancourt, the Bakken operations and maintenance superintendent for ConocoPhillps in Dickinson, gave Giancarlo a nuts-and-bolts walkthrough of how the North Dakota oil industry came to be and how its economy has been shaped by the most recent boom of the past decade.

Giancarlo said a sluggish world economy is keeping oil prices from climbing back to levels seen when the Bakken oil play boomed. He said volatile currency prices around the globe have spilled over into commodity prices of all kinds and has forced producers to hedge their risks.

“You guys have done enormous, fantastic work in supply — both in terms of discovery and production, and then also in terms of productivity and efficiency,” Giancarlo said. “So the supply side of the equation is in really good shape. The problem is the demand side. The demand side is caught in this sort of sluggish global growth that we’re seeing across the western world, across the developing world. Part of the times we live in right now is that anxiety over that missing global growth.”

Ness and Bethancourt said an oil producer’s ability to drill more than a dozen oil wells on a single well pad, an unheard of practice of at the start of the Bakken oil boom, has helped drive profits while lowering production costs.

“I do come away proud of American ingenuity,” Giancarlo said. “The ability to first ramp up and then build this amazing infrastructure. Then, almost as a reward for their success, to see the fall in prices and then once again readjust to that is tremendous. I don’t know if any other country in the world could have done what we’ve done. But we’re a victim of our own success in some ways.”

Ness said oil companies involved in the Bakken shale play are in a better place now than they were at the beginning of 2016.

“The independents, their stock value has been decimated, their balance sheets have been decimated,” he said. “If you would have been here in January or February, we were at risk of losing two or three of our top-five producers to bankruptcy.”

Ness added later that one of the latest trends in the state’s energy market is that operators are selling interests in their drilled-but-uncompleted wells to hedge funds as a way to finance wells that haven’t been brought into production.

“At this point, it’s all about survival,” he said.

Saudi Arabia’s role 

Heitkamp and Giancarlo also delved into Saudi Arabia’s role in guiding the world oil markets. The senator said she frequently hears from North Dakotans who are quick tell her the Saudis are forcing oil prices down in an effort to push the American shale producers out of the market.

“I think the Saudis have been driving the market down. I’m not convinced the Saudis can drive the market back up,” she said. “At some point, they’re going to have more competition than what they want.”

Giancarlo and Heitkamp both said the Saudis, much like North Dakota, are creating value-added industries to help them move past this period of lower oil prices instead of relying solely on crude oil production.

Heitkamp said she also believes the Saudis have recalibrated their long-term price expectations.

“They’re looking at this as transitional,” she said. “They’re trying to figure out what the new Saudi economy is going to look like. They look at the long-term trends in supply and demand.”

Giancarlo added that the Saudis are fine with prices where they are right now “because it’s causing all this pain in the most innovative oil production area in the world, which is right here. It’s causing a lot of pain. It’s an ideal situation for them to be in. They want to maintain their distribution relationships.”

Exec: Davis Refinery Not Affected by Dakota Prairie Refinery Sale

BELFIELD — The company trying to build an oil refinery just three miles from Theodore Roosevelt National Park in Billings County isn’t slowing down its efforts, even after the Dakota Prairie Refinery sold at a loss earlier this week.

Thomas Johnson, chief operating officer of California-based Meridian Energy Group, said Tuesday’s sale of the Dickinson diesel refinery doesn’t affect his company’s goal of building the Davis Refinery, which would process 55,000 barrels of Bakken crude a day.

“We did economic modeling, what our costs are going to be and concluded that we’re going to make some profits there in the Bakken and the Belfield area,” Johnson said.

Tesoro bought the Dakota Prairie Refinery from MDU Resources Group and Calumet Specialty Products, which broke ground on the refinery in 2013 and opened it in May 2015.

Johnson pointed to the Davis Refinery’s efforts to build a refinery that’ll produce gasoline, jet fuel and ultra-low sulfur diesel fuel as the difference between its plans and the Dakota Prairie Refinery, which processed 20,000 barrels of oil into around 8,000 barrels of diesel fuel a day, along with a set of byproducts.

MDU Resources spent $430 million on the refinery and reported that it lost $7.2 million in its first quarter of operations. The refinery’s construction was plagued by cost overruns and construction delays.

Johnson said he was involved in the building of PetroMax Refining, a 25,000-barrel-a-day refinery in Houston that opened last year, and said Meridian is using a similar business model with the Davis Refinery.

“We were successful last year, so we fully anticipate being successful this time,” Johnson said. “The key is not to get into a situation like Dakota Prairie. It’s unfortunate what happened, but it is a good lesson to learn.”

In an effort to rally community support for the Davis Refinery, Meridian is hosting a public gathering at 5 p.m. Tuesday atop Buck Hill, the highest point in Theodore Roosevelt National Park’s South Unit.

Opponents of the refinery have said it will be clearly visible from Buck Hill, and have used that as ammunition to stop it from being built.

“Basically, we want to give everybody kind of an opportunity to see that the view from Buck Hill towards the refinery,” said Adam Williams, Meridian’s director of corporate communications. “We’re going to have some surveyors out and we’ll be floating several large weather balloons at the exact height as the top of the crude tower from grade. We want to do all we can to give people an opportunity to see what the effects will be, or if there’s any visual line of sight from Buck Hill. My guess is it won’t be too visible from the naked eye.”

The Billings County Commission is scheduled to discuss the Davis Refinery for its third straight monthly meeting at 9 a.m. Wednesday. Williams said Meridian CEO Bill Prentice plans to attend the meeting, along with several other of the company’s key players.

Holtz motivates energy conference in leadup to Trump

BISMARCK — Lou Holtz joked Thursday that the last time he was in North Dakota, oil was $100 a barrel and he wasn’t homeless.

The former college football coach and ESPN commentator, who lost a Florida home in a fire last summer, encouraged energy industry leaders and workers to take the recent oil downturn in stride during a speech preceding Republican presidential candidate Donald Trump’s appearance at the Williston Basin Petroleum Conference.

“Quitting is a permanent solution to a temporary problem,” he said. “Until you fly on solar energy, oil is going to continue to be very, very important.”

Holtz, a former board member for Watford City-based Nuverra Environmental Solutions, only lightly touched on energy in his speech and went through standard motivational material that has made him a sought-after speaker nationwide.

Holtz peppered multiple jokes throughout his 40-minute speech. His few moments speaking about oil were tied into his motivational theme, and for a moment, Holtz even got political.

“We all have injustices done,” he said. “It would bother the daylights out of me in this oil business, where our government subsidizes all kinds of fancy things and puts all kinds of restrictions on me. But you can’t be bitter about it.”

Continue reading “Holtz motivates energy conference in leadup to Trump”

Whiting CEO: We believe in the Bakken

Volker says oil companies still profiting despite lower oil prices

BISMARCK — The chief executive of North Dakota’s largest oil producer said Wednesday that his company is still making big money on Bakken and Three Forks wells despite the industry’s economic downturn.

Whiting Petroleum Corp. President and CEO Jim Volker said during the second day of the Williston Basin Petroleum Conference that he foresees a gradual upturn for the state’s oil industry as crude prices steadily creep upward and more drilled but uncompleted wells are slowly brought into production.

“We’re a big believer in the Bakken, not only its future but even where we are today,” Volker said. “This is why we believe so much in the Bakken. We put our money where our mouth is here.”

Volker pointed to technological improvements for allowing production companies to operate with fewer rigs, allowing them to continue investing in the North Dakota Oil Patch — even if it’s not at the same rapid pace as years prior.

Volker said even at Wednesday’s price of about $50 a barrel — a comment that drew applause from the crowd — a Whiting well is still projected to produce a future net revenue of $27 million at a cost of about $7 million.

Whiting produced more than 4.1 million barrels of crude from nearly 1,500 active North Dakota wells in January 2016. In Stark County, the company had 131 wells that produced around 180,000 barrels.

“This is all happening with improvements in technology and improvements in the way we drill and complete,” Volker said. “Not only are we cleaner, we’re more efficient and we’re doing it for less money.”

Don Hrap, president of the Lower 48 states for ConocoPhillips, echoed that in his keynote address later in the day, as he said innovation and entrepreneurialism created out of necessity by the 2015-16 oil price downturn will make the industry “smarter, better and more efficient.”

“I think that technology innovation is what brought us this renaissance and also it’s what’s going to support us as we move forward,” Hrap said.

Hrap showed charts detailing the ups and downs of oil over the past 150 years, and said while this recent price drop is one of the most sustained in history, it could lead to more level and sustainable long-term prices.

“As we adapt and adjust, we have a tendency to provide the supply that’s needed that kind of moves us to a lower price,” he said. “That’s important to us, because it says we can’t count on $100 oil. We need an industry that’s supportive of a price that’s more moderate.”

Volker, meanwhile, wrapped up his speech with a summary of how Whiting recently paid down $500 million in debt.

Paul Steffes, CEO of Steffes Corp., a Dickinson manufacturing firm heavily invested in the production side of the oil business, said hearing that “certainly makes me feel good.”

“They’re a major player in the Bakken, so it’s an important piece for North Dakota to see Whiting be healthy,” Steffes said.

Lynn Helms, director of the state Department of Mineral Resources, said Volker’s optimism about pushing forward with a slow ramp-up is “consistent with what all the other operators are saying.”

Volker pointed out Whiting’s obligation to continue drilling wells, especially those on federal and tribal land, or risk losing their leases. Helms said those comments prove that rigs will continue to operate in the state, even if there’s only around 30. North Dakota had 28 drilling rigs as of Tuesday.

“I think that’s going to help the state to stay in this 30-rig paradigm that we’re in, because those drilling obligations are really expensive to walk away from,” Helms said.

Changing perceptions: CEO of company building $900 million Davis Refinery emphasizes environment

BISMARCK — Meridian Energy Group CEO Bill Prentice said his company wants to make southwest North Dakota home to an oil refinery that could change the industry, and he’s ready to win over the people trying to prevent them from doing that.

Meridian has proposed building the Davis Refinery in Billings County just west of Belfield and three miles from the outskirts of Theodore Roosevelt National Park’s South Unit.

The $900 million refinery would initially convert 27,500 barrels of Bakken crude oil into gasoline, diesel fuel and various refined products, and could expand to handle 55,000 barrels a day. However, Meridian’s plan expectedly has been met with pushback from park officials and environmental advocates across the state who believe the refinery would impact the park’s pristine air quality.

Prentice, speaking Tuesday at the Williston Basin Petroleum Conference, emphasized his company’s commitment to the environment and said in an interview that the industry eventually has to change mindsets of what it means for an oil refinery to move into an area.

“I think it’s going to define how the hydrocarbon processing industry looks at being a neighbor of everybody,” Prentice said of the Davis Refinery. “There’s no longer going to be this solution that you kick us out into some industrial ghetto. This industry has to know how to build a plant that can be right there (near the park), and that’s what we’re going to do.”

Continue reading “Changing perceptions: CEO of company building $900 million Davis Refinery emphasizes environment”

Keystone XL denial affected Dakota Access Pipeline strategy, executive says

BISMARCK — The denial of the Keystone XL pipeline affected how the company building the Dakota Access Pipeline executed its strategy, one of its engineering executives said Tuesday at the Williston Basin Petroleum Conference.

Joey Mahmoud, the senior vice president of engineering for Energy Transfer Partners, said the $3.78 billion pipeline project now in the early stages of being built emphasized using labor unions and avoiding federal lands as the company watched Keystone XL fail to get built.

Mahmoud said 96 percent of the 1,168-mile, 450,000-barrel-a-day crude oil pipeline’s route from Stanley, N.D., to Patoka, Ill., is set and the project should be completed by the end of 2016. However, about 50 miles of the pipeline’s proposed route in Iowa are still awaiting approval and the U.S. Army Corps of Engineers still needs to approve river crossings.

“Developing a project of this magnitude in this economy, under this administration, has been very difficult,” Mahmoud said.

Continue reading “Keystone XL denial affected Dakota Access Pipeline strategy, executive says”