ND Supreme Court hears environmentalists' lawsuit over Davis Refinery

Aerial view of construction equipment in use for building the Davis Refinery near Belfield and Theodore Roosevelt National Park. Courtesy of Meridian Energy Group

BISMARCK — The North Dakota Supreme Court heard another lawsuit Tuesday over an oil refinery planned near Theodore Roosevelt National Park, this one asking that state regulators take a second look at issues surrounding the siting of the facility.

The lawsuit brought by a pair of environmental groups against the Public Service Commission and Meridian Energy Group, which is developing the Davis Refinery, focuses on the amount of oil that will be refined and whether the PSC followed proper procedures in determining it does not have oversight of the facility location. Tuesday's attorney arguments came a week after the court heard another challenge to the project that centered around the facility’s air quality permit.

The environmental groups contend that Meridian has made statements that the refinery would process 55,000 barrels of oil per day, an amount exceeding the 50,000-barrel threshold in state law that would trigger the need for a permit from the PSC. Meridian has received permits for the refinery from another state agency and from Billings County for the 55,000-barrel amount.

The groups filed a complaint with the PSC that Meridian had started construction on the project without first securing a siting permit from the commission. Meridian asked the PSC to dismiss the matter. The company says its plans changed and it intends for the refinery to have a capacity of only 49,500 barrels per day, just under the amount that would require a permit from the PSC.

“There’s a contradiction,” said Scott Strand, an attorney representing the Environmental Law & Policy Center and the Dakota Resource Council in the suit. “It raises an issue of fact as to whether or not the statements made by Meridian that it’s going to be a smaller refinery are credible.”

The PSC granted Meridian’s request to dismiss the issue, which is what the environmental groups are challenging. They want the court to send the matter back to the PSC to hold a hearing and discovery process so the parties can obtain evidence on the claims of the complaint.

The PSC maintains that it acted correctly in its dismissal once it received an affidavit from Meridian’s CEO saying that the refinery would handle only 49,500 barrels.

“Plans always change in these large projects, and I think courts and the PSC are somewhat obligated to just defer to what Meridian is going to say because Meridian is the one bearing the risk if they’re being untruthful or if their plans change again,” said Jennifer Verleger, an attorney representing the PSC.

Lawrence Bender, an attorney for Meridian, said the company at first intended to build the refinery in two phases, each at 27,500 barrels per day. It followed guidance from the North Dakota Department of Health to apply for an air quality permit for 55,000 barrels so that the agency would not have to handle the matter twice, he said.

Later on, the company changed its plans and decided to build the refinery in one phase with a 49,500-barrel capacity.

Bender drew a comparison between the refinery dispute and a hypothetical situation involving natural gas processing plants built in North Dakota over the past 20 years. Some of the plants process less than 100 million cubic feet of gas per day and fall below the threshold of a PSC permit.

“(For) every one of those gas plants, a party could make an allegation that it’s going to be more than 100 million cubic feet a day,” he said. “The commission would have to take jurisdiction, the commission would have to allow discovery, and the commission would have to have an evidentiary hearing.”

Strand said it’s incorrect to assume that by allowing the PSC to entertain such complaints, “the floodgates will open and everybody can make any allegation they want,” delaying the permitting process. He said attorneys have to make allegations in “good faith” and if they don’t, they can face professional sanctions.

Strand said the basis of his groups’ challenge has to do with Meridian’s statements about the higher refinery capacity, but there could be other relevant issues that arise if the parties involved in the case go through with a hearing and discovery process, in which they ask each other to produce certain documents and depose of witnesses. The environmental groups could learn, for example, that Meridian is still planning a larger facility, or that there are financial or technical reasons for why the refinery needs to be a certain size.

“That’s all we’re asking in this particular case,” he said.

Tuesday’s hearing comes after a district court judge sided with the PSC and Meridian in May, ruling that “no amount of discovery could have affected the PSC’s decision” to dismiss the case. The environmental groups appealed to the Supreme Court. The justices will rule on the case at a later date.

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