Developers of a proposed oil refinery near Williston say it should produce mostly diesel and jet fuel instead of gasoline, and that it needs new pipelines to export refined petroleum products.

Air Force bases in North Dakota, South Dakota and Montana are potential customers for jet fuel, and the refinery should assure North Dakota farmers, truckers and oil producers of a ready supply of the diesel fuel they need, said Mel Falcon, chief executive officer of Northwest Refining Inc. of Williston.

"We're sitting on a gold mine here as far as crude oil," Falcon said Friday during a meeting of the state Oil and Gas Research Council. "We're shipping it out of state and then we're bringing it back in. We're paying transportation both ways. That's just silly, in my opinion."

Falcon and Gary Reeves, a process engineering manager for ENGlobal Engineering Inc. of Houston, presented the council with the preliminary results of a study on whether a new North Dakota oil refinery would be feasible.

It should be able to refine at least 100,000 barrels of oil daily, and should concentrate on producing jet and diesel fuel, with minimal production of gasoline, the study says.

It would require new pipelines from Williston to an existing terminal in Minot, and new terminals in Belfield and Spearfish, S.D., the study says. The project, including the refinery and pipelines, would cost between $1.3 billion and $2.2 billion and take at least five years to finish.

Falcon and Reeves said the refinery would spur production of heavy, high-sulfur North Dakota crude that is not currently being pumped because pipelines are reluctant to ship it.

Council members Wayne Biberdorf, a Hess Corp. projects manager in Williston, and Lynn Helms, director of the state Department of Mineral Resources, challenged the assumption. Biberdorf called the belief "a bit shaky" and Helms said state oil production data did not bear it out.

"In a general sense, I'm not aware of a lot of that. Maybe that is something that is going to have to be set aside, and further research done," Biberdorf said.

The research council awarded Falcon a $40,000 grant last year to study the refinery proposal. He said Friday he intends to seek more money to develop the idea further, and to acquire options on potential building sites.

He said his primary objective was to push the idea of refinery development in North Dakota. It is better to process the state's oil production within its border than to export crude out of state, Falcon said.

"We're introducing the concept here. We're not trying to build a refinery on our own," Falcon said. "We know better than that. But we'd like to see it happen."

Council members said they needed more information about the refinery's potential markets, competitors and return on investment.

John Berger, manager of the Tesoro Corp. refinery near Mandan - which is North Dakota's only oil refinery - said the process of forecasting whether a refinery could be profitable was tricky.

"It's all about somebody trying to figure out, 'How does all of this go together? How do alternative fuels fit in? How do the carbon (dioxide storage) issues fit in?'" Berger asked. "We're not opposed to another refinery. We just need help understanding the economics."