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Davis Refinery won't seek more regulation despite concerns

Wild horses roam on the eastern edge of Theodore Roosevelt National Park on Friday, Dec. 8, 2017. An oil refinery is being proposed just a few miles away. John Hageman / Forum News Service

MEDORA, N.D. — During discussions last week with Meridian Energy Inc. about the proposed Davis Refinery in Billings County, North Dakota Public Service Commission officials said they want the refinery subject to its siting requirements, even though the refinery does not need to do so at its current estimated output.

"It's a neat project and we want more refineries in North Dakota to take advantage of this Bakken resource, but we want companies to go about it the right way and make sure they are being as transparent as possible with the public," said PSC Commissioner Julie Fedorchak. "This is a particularly unique location and it warrants further (scrutiny)."

Fedorchak expressed concern that Meridian has been unclear about how much oil it intends to produce per day. Adam Williams, Meridian's director of corporate communications, acknowledged this confusion in a statement.

"Over the past several years, Meridian has evaluated many different configurations for the Refinery, representing several different throughput capacities," he said. "Over time, a great deal of that has found its way into the public domain, creating a great deal of confusion regarding Meridian's future plans for Davis."

The proposed refinery, which will be built on the edge of Theodore Roosevelt National Park, has drawn a lot of criticism, even as it is expected to generate jobs and revenue for Billings County. Fedorchak said the refinery has promised its investors that it will ultimately expand its production up to over 50,000 barrels per day, which would then require them to reach out to the PSC.

"They've been clear that they intend up to 55,000 barrels per day capacity, which would put them within our siting jurisdiction," Fedorchak said. "So when they've been making those promises to investors and others publicly ... we just want to make sure that they are staying true to the intent of North Dakota law."

Williams said the initial phase of the refinery will produce 27,500 barrels per day, and acknowledged there are plans for future expansion.

"Under the anticipated conditions in the final PTC (permit to construct), Meridian will be able to expand the Davis Refinery substantially over time," Williams said. "As soon as it is apparent that any such expansion would result in the throughput capacity falling within the PSC jurisdiction, then Meridian will provide the PSC with its application for a Siting Certificate for those improvements."

Meridian sought out the PSC to discuss this matter. Meridian still maintains it does not need to submit to the PSC's regulatory scrutiny now and Fedorchak said the law doesn't empower the PSC to force the issue.

"I think it's important to understand that we don't have the authority to force them to come to us for siting," Fedorchak said. "We are getting letters from folks ... literally the law doesn't allow us to require them to get the permit, if they don't go above the threshold."

She said communication has been "frustrating."

For now, Meridian is awaiting its final air quality permit from the state Health Department before it can begin working on the proposed refinery. The project has undergone all legally required scrutiny from local entities, and Williams said the PSC is not looking to overstep its bounds.

"Meridian has already met those siting requirements for the initial phase of Davis by applying for and receiving its rezoning and conditional use permit for the Refinery from the Billings County Commission in July, 2016," Williams said in his statement. "Although the PSC has an interest in remaining informed about the plans for Davis if and when it expands, the PSC made it clear that it did not intend to impinge on the authority of Billings County in this matter, nor did it intend to imply that Billings County was not qualified to review and approve a project such as Davis."

The production threshold that binds the PSC was established by the state Legislature, and Fedorchak said she is investigating the rationale for the 55,000 barrels per day threshold.

"It was set many, many years ago when the siting law was first developed, so these kinds of cases invite others to question those thresholds and I wouldn't be surprised if there was an issue in the Legislature to lower that threshold," Fedorchak said.

Williams said Meridian views the conversation as a success.

"Meridian believes that it met its objective of making the PSC fully aware of the plans for Davis and eliminating related concerns and confusions, and regards the meeting as a success," he said. "Most importantly, by establishing the relationship on a personal basis, rather than by written communication through counsel, Meridian believes that it will be able to deal with any further confusion or misinformation as it arises."