ENERGY: Quenching N.D.’s thirst for diesel fuel

BISMARCK, N.D. — A $250 million diesel facility near Dickinson, N.D., will help ease the diesel fuel shortage in western North Dakota brought on by a robust economy in western North Dakota spearheaded by the oil play.

MDU Resources Group Inc. is partnering with Calumet Refining LLC for the project forming a limited liability company with 50 percent ownership. The facility could boast as many as 100 employees. It will consume 20,000 barrels a day of crude oil and produce up to 10,000 barrels per day of diesel fuel or kerosene. The remaining byproducts will be shipped by rail to Calumet’s refinery in Superior, Wis., for further processing into other products which include lubricating oils, solvents and gasoline.

The facility will be built in Stark County four miles west of Dickinson adjacent to the Burlington Northern Santa Fe LLC railroad. The plant will take up approximately 100 acres of a 200-acre site. Zoning permits were expected in July with the complete final design, engineering and economic evaluation in late July or August. Permitting and construction are expected to take up to 26 months.

Supply and demand

Mike Rud, president of the North Dakota Petroleum Marketers Association, says the project is needed, adding that it won’t solve all the diesel supply issues during peak seasons, but an additional 45 to 50 loads per day will make a difference.

The oil industry has increased the diesel usage. However, Rud says it is not only the oil patch, but a diversified economy that has increased diesel usage over the past five years. “The (diesel fuel) demand forecast in April was 150 percent higher than last year,” he says.

Demand typically increases in the spring when farmers are planting their crop. “We made a push in the fall of 2011 and early 2012 for ag producers or anyone who had storage to fill their tanks early. They did it and that eliminated the crunch on diesel fuel. The shots of rain have slowed down planting and have helped refiners ramp up the diesel supply. Right now I have heard very little about people concerned about diesel supply.”

Rud says that he has heard of others that are discussing building diesel plants, but MDU is the only one moving forward. Even with MDU building a plant, Rud doesn’t believe it will meet the diesel fuel needs in crunch time.

“We will always need more diesel fuel,” he says. Other diesel fuel suppliers have commitments from buyers and that won’t change. “In the slower months, there could be issues and MDU would have to secure contracts and have buyers on a steady basis.”

Overall, Rud says that the demand for diesel fuel won’t slow down as long as the economy stays strong. “Things are good here and things are moving,” he says. “As long as the economy stays strong, it is going to be a good problem to solve.”

The diesel fuel for western North Dakota is currently being supplied from a refinery in Billings, Mont., the Tesoro plant in Mandan, N.D., and other facilities in Jamestown, N.D., Fargo, N.D., and Minneapolis. Because of the distance the diesel has to be shipped that adds 5 to 15 cents to the price.

The plant will help take trucks off the road and less fuel will have to be trucked to the region, says John Stumpf, vice president of strategic planning for MDU.

MDU, a member of the S&P MidCap 400 index, provides value-added mineral resource products and related services for the energy and transportation infrastructure that includes regulated utilities and pipelines, exploration and production and construction materials and service companies.

Calumet Specialty Products Partners LP processes crude oil and other feedstocks into customized lubricating oils, solvents and waxes used in consumer, industrial and automotive products. Calumet also produces fuel products including gasoline, diesel and jet fuel.

The North Dakota Petroleum Marketers Association represents more than 300 retail members that sell petroleum products and 120 associate members. PB

Alan Van Ormer

Editor, Prairie Business

701-371-9578, avanormer@prairiebizmag.com

Tags: north dakota petroleum marketers association, mdu resources group inc., calumet refining llc, energy, diesel, fuel, petroleum, oil, gasoline, gas