North Dakota would reap greater benefits from refining its crude oil instead of exporting it, but the strategy carries risk and requires added pipeline space to ship gasoline, a state regulator says.

"When you figure in all the multipliers that go with an expanded refinery - the additional jobs, the sales tax revenue … it's always better to add value locally," said Lynn Helms, director of the state Department of Mineral Resources.

However, "the only way that you can economically build or expand a refinery is if you've got the pipeline infrastructure to move the refined products to a market," Helms said. "You cannot, in today's market, build a refinery and truck the refined products to gas stations, or to jet airplanes, or whatever."

Helms spoke Thursday to the Legislature's interim Budget and Finance Committee. It is examining the effects of increased oil production on North Dakota's tax collections, and the risks of relying on oil price forecasting in state budgeting.

The panel's chairman, Rep. Al Carlson, R-Fargo, asked Helms to speculate about the economic benefits and risks of an expansion of North Dakota's refinery capacity. North Dakota has one oil refinery, the Tesoro Corp. facility near Mandan.

The subject is likely to arise in this fall's campaign for governor. Republican Gov. John Hoeven is seeking his third term. A potential rival, Sen. Tim Mathern, D-Fargo, has discussed developing a state-owned oil refinery, and a group of Democratic legislators have formed a committee to study the subject.

North Dakota's oil production has been rising, spurred by development in the Bakken shale rock formation in the western part of the state. Oil production has spiked in some newly explored regions in Mountrail and Dunn counties.

Daily production has risen from 113,000 barrels in December 2006 to 135,000 in December 2007, according to Department of Mineral Resources statistics.

In Dunn County, December production jumped from 3,053 barrels daily in December 2006 to almost 8,000 barrels daily last December. In Mountrail County, it rose from 1,948 barrels daily to almost 13,500 barrels during the same time period.

North Dakota has difficulty exporting its crude oil because of competition for pipeline space from Montana and Canadian oil, although the situation is easing because of construction of added pipeline capacity, Helms said.

TransCanada Corp.'s proposed Keystone pipeline, which would take Canadian crude to Illinois and Oklahoma, would clear even more space for North Dakota crude exports, he said.