Tribe breaks ground on refinery

MAKOTI - As the Three Affiliated Tribes blessed the ground Wednesday where a refinery will be built, one tribal council member called it a new day for the Mandan, Hidatsa and Arikara.

"It's really an important time for our people. It's exciting," said tribal representative Ken Hall. "But we have to be mindful going forward to not lose our culture."

The tribes held a ceremonial groundbreaking for the Thunder Butte Petroleum Services Refinery, which will be constructed in four phases over two years. It will have the capacity to process up to 20,000 barrels per day of Bakken crude that is produced on the Fort Berthold Reservation.

Construction is expected to begin in August on the first phase, a truck-to-rail crude oil transloading facility that later ties into the refinery, said Rich Mayer, CEO of Thunder Butte Petroleum Services.

The transloading facility, which involves building storage tanks and a connection to a Canadian Pacific line near the property, would load and ship one 120-car train every four days, said Kurt Swenson, vice president of Corval Group, a consultant involved with engineering on the project.

The rail facility will be operational by early 2014 while the refinery is being constructed.

The tribe is finalizing a contract with a company called Chemex LLC, which will construct a modular refinery in Bakersfield, Calif., and ship it to North Dakota to be assembled.

Once the contract is finalized, construction is estimated to take 18 to 24 months, Mayer said.

Initially the refinery will produce diesel and sell the byproducts. After the final phase, the refinery will have the ability to refine more diesel and also some gasoline, Mayer said.

The refinery will provide 300 local construction jobs and 75 to 100 full-time jobs after it's operational, officials said.

"I'm just amazed at how big the impact is going to be on these communities," Mayer said.

The refinery is off of Highway 23 on 469 acres northwest of Makoti the tribe bought from Bernice Nelson of Minot, who used to farm on the property with her husband. Makoti, which had a population of 154 in 2010, is about 35 miles east of New Town.

The tribe has contributed $40 million toward the transloading facility portion of the project.

The approximate $450 million total cost will be financed with bonds, said Daniel Eastman, managing director of private investment banking firm John W. Loofbourrow Associates Inc., who traveled from New York to attend the ceremony.

Tribal members and others at the event praised Tribal Chairman Tex "Red Tipped Arrow" Hall for having the vision to pursue a refinery, a plan that began 10 years ago before the Bakken oil boom. Initially the proposal called for refining Canadian tar sands, but in 2008 the plans switched to refine the tribe's own Bakken crude.

During the celebration, Hall reflected about his ancestors.

"We grew up poor. We were lucky if we had a pair of clean overalls," Hall said. "But our parents made sure we went to school and got educated. They did the best they could for us. They didn't know we'd have this oil and gas resource, but now we do. It's our responsibility to manage it and we are."

Three Affiliated Tribes officials are talking to other tribes about inter-tribe commerce agreements to distribute diesel from its refinery. Representatives from several tribes, including the Spokane Tribe of Indians, attended the event and are interested in distributing the diesel.

"They want to buy all of it," Hall said. "I have to slow them down."

Members of a group called Save Our Aboriginal Resources, who protested the tribe's oil and gas expo this week and the groundbreaking, said the refinery should have been put to a vote of tribal members.

Marty Young Bear of New Town called the refinery "another money pit."

Theodora Bird Bear of Mandaree said she worries about the effects on the reservation's air and water.

"They can't regulate it (oil development) now, so I can't see how they can handle a refinery," Bird Bear said.

The tribal project is one of three refineries being developed in North Dakota.

MDU Resources Group broke ground in March on a diesel refinery near Dickinson that is expected to be complete in late 2014. It will have the capacity to refine 20,000 barrels of Bakken Crude per day.

Dakota Oil Processing proposes a diesel refinery near Trenton. CEO Chester Trabucco said Wednesday the project is in final stages of financing and officials plan to make an announcement soon.

The Tesoro refinery in Mandan recently expanded to refine 68,000 barrels per day.

North Dakota produces nearly 800,000 barrels of oil per day.