Diesel supplies may be tight this spring
BISMARCK (AP) -- North Dakota's Oil Patch is fueling unprecedented demand for diesel, and projects to boost production won't come before supplies tighten this spring when farmers head back into their fields and construction projects start up, industry officials say.
State Tax Department records show that diesel fuel consumption in North Dakota has increased 51 percent since 2007, and the oil industry replaced agriculture a few years ago as the biggest user of diesel in the state. Several companies are exploring diesel refinery plants that would use crude oil being extracted in western North Dakota's Oil Patch, but none of those projects could create an immediate salve.
"Things are being done, but unfortunately they are not happening quick enough," said Mike Rud, president of the North Dakota Petroleum Marketers Association.
Rud said his group is advising coal, oil and construction companies along with farmers and other diesel users to stockpile the fuel in anticipation of scarce supplies this spring. Rud said some users have expanded storage facilities.
"We're trying to convince them to get what they can," Rud said. "We could hit critical mass this spring."
Fuel terminals were packed with lines of truck drivers awaiting diesel to arrive by pipeline during fall harvest season last year. Rud said that although fall harvest often spurs diesel shortages in the Upper Midwest, the problem was magnified because of North Dakota's Oil Patch and work related to major flooding in the Dakotas.
Rud said the state's estimate of annual diesel use -- 710 million gallons -- may be low. His group estimated that more than 1 billion gallons was used last year in North Dakota.
North Dakota's seven coal-fired power plants and lignite mines also are big users of diesel. But it's the equipment supporting the drilling in the Bakken and Three Forks oil shale formations in western North Dakota that are the biggest guzzlers.
About 2 million gallons of diesel is currently used daily in the state in the Oil Patch, largely powering the trucks and trains needed to move crude oil and materials, Rud said. It also takes about 3,000 gallons of diesel each day to power one drill rig, he said. On Thursday, there were 204 rigs working in the state.
Work is under way at Tesoro Corp.'s refinery at Mandan -- North Dakota's sole oil refinery -- to boost diesel production by 5,000 barrels per day, to 22,000 barrels by the end of 2013, the San Antonio-based company said. A barrel is 42 gallons.
MDU Resources Group Inc. announced this week that it also was exploring a $500 million facility that would produce 20,000 barrels of diesel per day at a yet-to-be determined site near Dickinson. The Bismarck-based energy, mining and construction company said it would partner with Indianapolis-based Calumet Refining LLC to build and operate the plant.
MDU spokesman Rick Matteson said the company hopes to have the plant operating in 2014.
"We absolutely think there is a need for it and demand will continue to grow," Matteson said.
Dakota Oil Processing LLC announced in 2009 that it was seeking investors for a $180 million, 20,000 barrel-per-day plant near Trenton, a town of about 100 people in northwest North Dakota. The status of that project wasn't clear Thursday. Company officials did not return phone messages from The Associated Press.
The MDU and Dakota Oil Processing plants would be so-called diesel topping facilities, or sort of mini-refineries. A major refinery has not been built in the United States since the mid-1970s.
The diesel supply glitches do, however, show the state's economy is humming, said Ron Ness, president of the North Dakota Petroleum Council.
"Our diesel demand is growing," said Ness, whose group represents more than 200 companies working in the state's Oil Patch. "Clearly, it means North Dakota's economy is not suffering like the rest of the nation."