BISMARCK – A North Dakota company announced plans Wednesday for the state’s first production facility for liquefied natural gas, some of which will be used to supplement diesel fuel burned by oil drilling rigs and fracking operations.

The plant near Tioga will start producing 10,000 gallons of liquefied natural gas this summer, said Patrick Hughes, CEO of North Dakota LNG and Prairie Companies LLC. A second phase will boost production to 76,000 gallons daily by Jan. 1.

Liquefied natural gas, or LNG, is made by cooling methane gas to 260 degrees below zero until it condenses into liquid fuel, Hughes said. Tioga-based North Dakota LNG has contracted to buy methane from Hess Corp.’s natural gas processing plant at Tioga.

Gov. Jack Dalrymple called the LNG plant a “perfect example” of the value-added energy projects that are the focus of a Department of Commerce initiative. North Dakota’s vast supplies of natural gas and crude oil give the state the opportunity “to create industry after industry,” he said.

“That means one thing: good paying jobs,” he said.

Newsletter signup for email alerts

Hughes said the plant will create 25 to 30 jobs in the Tioga area by the end of the year. He wouldn’t disclose the project’s cost.

The 76,000 gallons of LNG that the plant will produce is equivalent to about 44,000 gallons of diesel fuel, Hughes said. A drilling rig burns up to 2,500 gallons of diesel fuel a day, and about 1,000 gallons of that could be supplemented with LNG, he said.

The plant’s first customer will be Slawson Exploration Co., which operates six drilling rigs in the Williston basin, Hughes said. President Todd Slawson said in a news release that his company supports the development of alternative fuel solutions such as LNG “that will provide immediate cost relief for rig operations.”

Hughes said using LNG to supplement diesel fuel will have a net effect of taking trucks off the road because of the closer fuel source and bigger delivery trucks.

North Dakota LNG also is working with companies such as Montana-Dakota Utilities to identify potential industrial users, he said.

Dalrymple said a “tremendous opportunity” exists to expand the use of LNG for purposes such as heating homes and drying grain. North Dakota LNG plans to offer its product to the agricultural industry as an alternative fuel choice to propane, which is often used by grain dryers.

North Dakota LNG is part of Watford City-based Prairie Companies, whose portfolio of oil and gas service businesses includes housing, trucking and disposal companies.

The LNG plant is the second major natural gas plant project to make news in as many weeks. Last week, the North Dakota Public Service Commission scheduled a June 18 public hearing for ONEOK’s proposed $280 million natural gas processing plant near Watford City. The Lonesome Creek Plant would be the state’s second largest gas processing plant behind Hess Corp.’s plant at Tioga, which was recently expanded.