The survey estimated that this area in western North Dakota holds up to 4.3 billion barrels of recoverable oil or the largest "continuous" oil accumulation the agency has ever assessed and the largest oil assessment in the contiguous United States.
Because of that, there are four refined gas opportunities that are aggressively being pursued right now in the state of North Dakota.
Included in that mix of state supported efforts is a study to determine the feasibility of a private refinery in the Williston area. The specific location has not been identified, but the area is believed to be west of Williston between here and the Montana border.
Results of the study are expected to be released in September or possibly sooner. So, if the results from the study are positive, how soon will it be before a refinery is built?
"The permit process is at least five years. With construction, it could be as long as a 10-year process," North Dakota Department of Commerce Commissioner Shane Goettle said. "Here you are looking at what's going to happen with crude over a 10-year period, what's going to happen with additional refining capacity in the country in that period of time and what's going to happen with the renewable energy mandates. All of these are factors that translate into a good deal of risk. It's not to say we shouldn't do it. It's just to say that this is very complicated and far more complicated than most of the public realizes."
Why does it take that long?
"It's EPA (Environmental Protection Agency) and there's a whole host of air and water quality issues that you have to walk through," North Dakota Industrial Commission's Department of Mineral Resources Director Lynn Helms said.
Besides the length of the project, there is one other huge mountain to climb.
"There's a tremendous amount of (financial) risk," Goettle said. "If you get up to a 100,000 barrels a day, you're talking at least $3 billion to build a refinery. That's at least four bienniums worth of surplus. That's a huge commitment of future dollars. That's why, over the long term, going bust is a very serious concern."
However, Goettle seems to think those concerns are really not too serious.
"There's plenty of capital out there looking for a home in oil development and refining," he said. "Individuals and companies from out of state and out of country are looking to get into business. We haven't built a refinery in this country in the last three decades. That doesn't mean there isn't room to build a refinery and there's getting to be increasing interest in that all around the country and not just in North Dakota."
Helms agreed that everyone is getting past the fear of the bust.
"This is truly different," he said.
The other projects currently going on in the state are: The Three Affiliated Tribes are working on permitting a refinery within the Reservation, American Lignite Energy is exploring a coal-to-liquids plant that would produce over 1.38 million gallons of liquid fuel per day, Tesoro is using state sales tax incentives to improve reliability and increase low sulfur diesel fuel production and The Pipeline Authority is working to increase pipeline capacity.
Goettle felt that the Three Affiliated Tribes refinery and the coal-to-liquids project would be aimed at niche markets that would be targeted for government set-aside and mandate programs. A refinery near Williston will likely need to compete on the open market for sales.
Refinery expansions, coupled with renewable fuel standards, is estimated by some to cut U.S. gasoline imports in half by 2010 and completely eliminate those imports by 2020.
Currently, there is just one refinery in North Dakota and that's the Tesoro refinery in Mandan. It produces more petroleum product annually than the state consumes in a year.
An increased production through either refinery expansion or new construction would likely have to be exported to external markets outside North Dakota.
Also, a local refinery does not necessarily translate to lower fuel prices. According to AAA, retail gasoline prices in the Bismarck/Mandan area, which has a refinery, are consistently three to eight cents higher than Fargo where there is no refinery. Montana has four refineries and their fuel prices are frequently higher than North Dakota.
North Dakota has four refined product pipelines that either start in North Dakota, cross the state, or end in the state. Those pipelines bring competing product from regional refineries into North Dakota from Montana, Kansas, Minnesota and Canada.
"There has been a lot going on in terms of refinery studies and refined product efforts by the state and your local economic development people," Helms said. "There are other refineries that are expanding that want to sell gasoline in North Dakota. The state has been spending a lot of time and money studying that issue. We're trying to come up with policies that would help."
Besides the state projects, there are other efforts to expand and build refineries in the region. They include: the Coffeyville refinery in Kansas added 15,000 barrels a day, the Flint Hills refinery in Rosemount, Minn. added 50,000 barrels per day capacity at the end of last year, Conoco-Phillips is considering a 10,000 barrel per day expansion in Billings, Mont., and Hyperion, a Texas energy group, is considering a 400,000 barrels per day refinery near Sioux Falls, South Dakota at an estimated cost of $8 billion.
State officials are not the only ones debating whether a refinery can be successful. Democratic officials have been advocating a state owned refinery. The Republicans seem to be supporting incentives to encourage private sector investment to make this happen. Regardless, it will take a solid business plan and a great deal of time, money and a supportive business climate to make it happen.
Another player in this situation is technology. Everyone is well aware that there is a whole lot more oil in the Bakken than can be recovered.
"When we put the number out that we are only recovering 1.4 percent (of the oil), it got a lot of people thinking about what we could do," Helms said. "When we had the conference in Minot, we had a lot of people proposing new ideas. There's a lot being spent on that. There are lots of business opportunities generated by this technology."
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