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Permit for oil refinery near national park to stay active after developer secures contract
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Permit for oil refinery near national park to stay active after developer secures contract

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DAVIS REFINERY

The site of the Davis Refinery, southwest of Belfield, was posted with a sign as shown on July 31, 2018.

North Dakota environmental officials have determined a company planning an oil refinery near Theodore Roosevelt National Park has made enough progress this summer to keep its construction permit active after it faced delays and received two extensions.

Project developer Meridian Energy Group has entered into what it calls a “critical and central” contract with the engineering firm McDermott to design and construct major pieces of equipment for the Davis Refinery. The project is opposed by environmental groups in part because of its proximity to the national park in the Badlands.

The Texas-based companies say the terms of the contract signed in June exceed 10% of the refinery’s total cost. The project is estimated to exceed $1 billion. Meridian would be on the hook for an amount above the 10% threshold if it ever sought to terminate the contract, according to letters the companies recently sent to the North Dakota Department of Environmental Quality.

Environmental Engineer David Stroh was among the state's air quality officials who met with Meridian last week to go over the contract to see whether it satisfied the conditions needed to keep the permit active.

“They’ve done what they need to do,” he said. “As far as we’re concerned regarding air quality, they’ve commenced construction of a facility.”

The state issued a construction permit in 2018. Dirt work took place at the planned site of the refinery several years ago but the facility itself has not yet gone up. Meridian cited several reasons for the delays, including lawsuits filed by environmental groups over the permitting process, as well as the coronavirus pandemic, which led to a downturn in the oil industry last year.

Project financing has been delayed in part “by the effects of COVID, which are still having an impact on economic activity and supply chains globally and on the oil and gas industry and Meridian specifically,” Meridian Chairman and CEO William Prentice wrote to the state last month.

Environmental Quality has said dirt work alone is not enough to keep the permit active. Construction of the physical refinery either needed to begin at the site or elsewhere if components of the facility were to be built in another location and shipped to North Dakota. Or, the company could show that it had entered into a major construction-related contract.

The state last granted an extension of the permit in June. The permit would have expired this past Sunday had officials determined that Meridian had not met the conditions needed to keep it active.

Stroh said it’s too late in the construction season this year to expect work to take place in the field, but he anticipates it could begin next spring or summer.

“Much of this facility will be built and fabricated off site and then shipped up here and put together,” he said.

Meridian and McDermott have promised to give Environmental Quality updates on the refinery’s progress. A spokesperson for Meridian did not immediately respond to a Tribune request for comment.

“We plan on keeping tabs on them … so we can ensure that construction is continuing,” Stroh said.

Meridian will need to do several more things to keep the permit active, Stroh said. The company must keep up with construction and cannot let the work lapse for longer than 18 months. It also will need to complete the work within a “reasonable amount of time,” he said.

What constitutes a reasonable amount of time is based on the circumstances of a specific project, and Environmental Quality will compare progress on the refinery to that of similar projects completed in recent years, Stroh said.

The refinery is slated to be built in Billings County west of Belfield. It’s expected to process up to 49,500 barrels per day of oil from the Bakken to produce gasoline, diesel fuel, jet fuel, fuel oil and liquefied petroleum gas. Meridian has said the facility will be “the cleanest refinery on the planet.”

The state has had to go to court twice to defend its role permitting the project. The North Dakota Supreme Court issued a pair of rulings last year clearing the way for the refinery to move forward.

Meridian in recent years has also faced lawsuits that called into question its ability to pay workers. One suit was settled, and the company has denied the allegations in another.

Reach Amy R. Sisk at 701-250-8252 or amy.sisk@bismarcktribune.com.

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