Dickinson diesel refinery to start receiving Bakken crude next week
DICKINSON, N.D. -- Wisconsin native Dave Podratz has logged 33 years in the oil refining business, but the refinery rising from the frozen North Dakota prairie here carries a distinction from anyplace else he's worked. "It's new," he said. To put...
DICKINSON, N.D. -- Wisconsin native Dave Podratz has logged 33 years in the oil refining business, but the refinery rising from the frozen North Dakota prairie here carries a distinction from anyplace else he’s worked.
“It’s new,” he said.
To put a finer point on it, the Dakota Prairie Refining facility four miles west of Dickinson is the first greenfield refinery of notable size built in the United States since Marathon Oil’s Garyville Refinery in Louisiana was completed in 1976.
Granted, the Dickinson refinery is nowhere near as large or complex as the Garyville Refinery, which processes up to 522,000 barrels per day and is the nation’s third largest oil refinery.
“It’s smaller than most and it’s quite frankly simpler than most,” said Podratz, who will manage the plant as it refines 20,000 barrels per day of Bakken crude oil into 7,000 gallons of diesel and roughly the same amounts of two byproducts. (The newest U.S. refinery began operating in 2008 in Douglas, Wyo., and now processes up 3,800 barrels per day for Antelope Refining.)
But its relatively small stature doesn’t detract from the refinery’s significance, said Ron Ness, president of the North Dakota Petroleum Council .
“I think you can’t underscore enough the significance of somebody getting this done in America, and the fact that it ends up being a North Dakota company, built by a North Dakota contractor like Westcon … it’s just a fantastic achievement,” he said.
WBI Energy, a subsidiary of Bismarck-based MDU Resources Group, developed the project with Indianapolis-based Calumet Specialty Products Partners LP. Bismarck-based Bilfinger-Westcon is the general contractor.
WBI Energy is already looking at using the refinery as a model for a second possible refinery in the Minot area, and a similar refinery has been proposed in Devils Lake.
With construction now at its peak, the Dickinson refinery is abuzz with activity.
About 750 to 800 workers, split up into two 10-hour shifts, are scattered throughout the site, installing piping, wiring and insulation amid the clanking of steel, hum of generators and whirr of metal grinders.
No fewer than eight cranes towered over the site last week, guiding the final pieces of equipment into place. The refinery “pretty much looks like it’s going to look when it’s done,” Podratz said.
Trucks are expected to start delivering crude Tuesday.
“We hope to be in full-bore startup mode by the end of December,” operations superintendent Todd Tooley said.
‘Strong local demand’
Dakota Prairie Refining, which is owned 50-50 by Calumet and WBI Energy, broke ground on the project on March 26, 2013.
Podratz, who has worked in Chicago, Pennsylvania, Louisiana and the United Kingdom and most recently managed the Calumet refinery in Superior, Wis., for 10 years before transferring to Dickinson, said trucks will haul crude to the Dickinson refinery from wells no more than 40 miles away.
Dakota Prairie Refining also has contracted to receive 10,000 barrels of crude per day from Bridger Pipelines LLC through an 8-inch pipeline.
Three storage tanks on site can hold a combined 225,000 barrels of crude, or 9.45 million gallons.
About 45 trucks per day will deliver crude to the refinery when it’s running at full steam, Podratz said. Roughly the same number of trucks will haul low-sulfur diesel fuel away from the refinery.
“Ultimately, that’s not an increase in traffic, because if we weren’t hauling diesel out of here, they’d probably be bringing it in from out of state somewhere,” he said.
Most, if not all, of the diesel will be sold within 100 miles of the refinery, Podratz said, adding there’s “fairly strong” local demand – enough that one local truck refueling station offered to buy the refinery’s entire diesel output. For now, Dakota Prairie Refining isn’t entering into long-term contracts for the diesel, he said.
“We’ve had several folks come to us and say we’ll take every drop you can make,” he said. “So, we’re not going to have any problem with that.”
N.D. natives return for jobs
The plant will employ about 80 people, including four shifts of 12 workers – eight operators, two people in the control room, a lab technician and a shift supervisor – and about 30 employees in maintenance, administration and other roles, Podratz said.
Finding workers for every position has been a challenge, he said.
North Dakota had the lowest seasonally adjusted unemployment rate in the nation in October, at 2.8 percent, according to preliminary figures from the federal Bureau of Labor Statistics. South Dakota ranked second at 3.3 percent, Minnesota fifth at 3.9 percent and Montana 12th at 4.5 percent.
Tooley, whose role as operations superintendent involves recruiting and hiring employees, said the refinery was fortunate to find workers in places as far-flung as New Jersey, Texas and Florida. He said about half of the refinery’s workers are native North Dakotans, many of whom returned to the state -- including him.
The 52-year-old Dickinson native was working for Koch Industries when he transferred from North Dakota in 1993 to a job in the Twin Cities. He bounced between Minnesota and the St. Louis area and was working as a shift manager at Koch’s Pine Bend Refinery in Rosemount, Minn., when his brothers in the Dickinson area started bending his ear about Dakota Prairie Refining.
Like many who’ve returned to the area, Tooley and his wife Carla experienced sticker shock at the housing prices. They’ve signed a purchase agreement for a twinhome, but in the meantime are paying $2,500 a month for a 1,300-square-foot apartment, he said.
Dakota Prairie Refining has offered housing for 30 days and additional housing assistance for six months for employees relocating to the area, he said.
Air quality a concern
Workers have faced another challenge over the past 20 months: the weather.
Initially estimated to cost $300 million, the refinery’s price tag has grown to $360 million, in part because of unusually wet conditions that have hampered construction, said John Stumpf, WBI Energy’s senior vice president of business development and midstream.
The sudden onset of bitterly cold temperatures in November “really couldn’t have come at a worse time,” Stumpf said. Construction crews are burning 3,000 gallons of diesel daily in portable heaters, and the wintry weather has added an extra $200,000 per day to the project’s cost.
But the refinery’s partners didn’t choose the 375-acre site about four miles west of Dickinson for its climate. They picked it because of its access to rail and highways, a nearby supply of high-quality sweet crude oil and its location in the center of a 200-mile market area between the Tesoro refinery in Mandan and the Cenex refined products pipeline terminal in Glendive, Mont.
Dakota Prairie Refining has committed to shipping at least 3.85 million barrels of the refinery’s byproducts, naphtha and atmospheric tower bottoms, through a rail transload facility built by Bakken Oil Express just east of the refinery.
The naphtha, a low-octane gas used as a feedstock for gasoline production and to dilute heavy Canadian tar sands oil, will be shipped to Alberta by rail. The ATBs, which are used for lubricating oils and can be converted to gasoline at complex refineries, will be railed to Calumet’s existing refineries in Superior, Wis., and Shreveport, La., or to other markets.
Water from Dickinson’s new $30 million wastewater treatment plant will meet most of the refinery’s needs of 150 to 200 gallons per minute. It’ll be supplied through a 16-inch, 10-mile pipeline built by Dakota Prairie Refining that also expanded the water system for both Dickinson and nearby South Heart. As part of a closed-loop system, the refinery will send water back to the treatment plant.
“It’s really unique. I’m not aware of any other refinery that’s doing that,” Podratz said.
The refinery also features the most modern emissions-control systems, he said.
Still, environmentalists such as the Sierra Club’s Wayde Schafer are concerned about its potential impact on air quality.
“I’m hoping the North Dakota Health Department will be stepping up their monitoring,” he said.
Diesel in demand
Demand for diesel fuel and kerosene for trucking and industrial uses in North Dakota jumped 80 percent from 2009 to 2012, mostly because of the Bakken oil boom, the EIA reported
Statewide, sales and deliveries of No. 2 diesel fuel and fuel oil averaged about 51,500 barrels per day in 2013 and 56,600 barrels per day through September of this year, according to EIA data.
Industry consultant Turner, Mason & Co. estimated a year ago that drilling activity alone was consuming some 15,500 barrels of diesel per day. Another consultant, Purvin & Gertz, has estimated total statewide diesel demand will peak at more than 75,000 barrels per day by 2025.
But despite leading all states except Texas in oil production, North Dakota produces less than half of the diesel it consumes on a daily basis. The Tesoro Corp. refinery in Mandan is the state’s lone diesel producer, making about 22,000 barrels daily.
North Dakota also has the highest diesel fuel prices at the pump among the lower 48 states. Prices averaged $4.11 per gallon on Monday, about 52 cents higher than the national average, according to AAA.
Mike Rud, president of the North Dakota Petroleum Marketers Association, said lack of supply is largely to blame for the high prices.
Members are driving 500 to 800 miles in one direction to pick up loads of diesel, adding to the cost of doing business as the entire Upper Midwest remains in a high-demand situation, he said.
“Supply is critical right now,” he said, welcoming efforts to build new local refineries. “We’ve got to keep a supply in place to keep this thing moving forward.”
Dakota Prairie Refining by the numbers
20,000 barrels: Bakken crude oil that refinery will process each day
7,000 barrels: Diesel that refinery will produce daily, along with roughly equivalent amounts of two byproducts, naphtha and atmospheric tower bottoms
75,000+ barrels: Demand for diesel in North Dakota by 2025, according to one industry estimate.
100 miles: Distance from refinery within which diesel will be sold
40 miles: Radius from which crude oil will be trucked to the refinery
$360 million: The project’s revised cost, up from the initial estimate of $300 million
21 months: Time it will take to complete project, which had its groundbreaking on March 26, 2013
750-800: Construction workers currently on site
80: Employees who will work at the refinery when it’s operational
200 gallons per minute: Maximum water usage rate
634,000 barrels: Total tank storage on site, including 225,000 barrels for crude oil and 120,000 barrels for diesel
38 years: Time between Dakota Prairie Refining’s startup and the last greenfield refinery completed in the United States