N.D. needs measured role in refinery projects

Developing refining capacity in western North Dakota — in particular, producing diesel fuel — would certainly appear to make good sense. The Tribune has supported the concept in principle, knowing full well that a new refinery hasn’t been constructed in this country for decades. Presently, three refinery projects are in development stages in North Dakota. It bodes well for the future.

None of this is easy. The costs are tremendous. A new refinery starts somewhere around $200 million. There’s a rigorous permitting process, pages of regulation and miles of red tape.

Dakota Oil Processing, which intends to develop a refinery near Trenton in western North Dakota, also wants financial help from the state. The company wants the state to guarantee construction bonds and provide tax breaks if the price of fuel does not hold up. It wants to be able to tap into the $800 million bonding authority administered by the state Pipeline Authority.

Unlike refineries, pipelines are being built. The companies, however, are not taking advantage of state bonds because they can find plenty of private capital. That might tell us something about the risk involved in bringing a refinery online.

In addition to Dakota Oil’s project, MDU Resources’ WBI Holdings group and Calumet Refining are involved in a public comment period on their air quality permit for a refinery near Dickinson, and the Three Affiliated Tribes is even further along in the approval process. These companies have already spent years developing their projects. It’s a long haul.

The people of North Dakota, through state government, are making a large investment in the oil industry in the state. They are doing so by providing capital for roads and bridges, schools, law enforcement and other support services. The state is not just banking all of its oil revenues. Two years ago, the Legislature appropriated $1 billion for infrastructure improvements. It is expected to do even more in the next two-year budget cycle.

Dakota Oil wants the state now to pick up more of the risk of developing refineries in the state. The company wants the state to do more. Frankly, that runs against the experience the state has had on pipelines.

Before lawmakers partner the state with refinery developers, they need to do due diligence. Before there are any additional tax breaks given, lawmaker need to consider the consequences — obvious and not so obvious — for refiners, producers and taxpayers.

The Legislature’s response to requests for financial help from refiners must be carefully measured.

Tags: opinion, editorials, energy