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Permits, progress, and what Davis could mean for future refineries (Expanded Version)

Mikaila Adams
Editor-News

Editor’s note: The North Dakota Department of Health’s division of air quality cleared the way for Meridian Energy Group Inc. to begin construction of its grassroots 49,500-b/sd high-conversion Davis refinery in Billings County east of the Fryburg Rail Facility in Belfield, ND (OGJ Online, June 13, 2018). This marks the first time that a full-conversion refinery of this size and complexity has been reviewed and approved as a Synthetic Minor Source. “We hope Davis becomes the new blueprint for all refinery projects that follow it,” Meridian Chief Executive William Prentice has said. He spoke with OGJ about the project in June. This interview has been lightly edited and condensed for clarity.

 

OGJ: Meridian’s Davis refinery was approved for 55,000 b/sd. What went into the decision to adhere to the lower capacity?

During the past 4 years Meridian has evaluated several different capacity-configuration options for the Davis Refinery, including an initial 20,000-b/d topping unit, a 45,000-b/d configuration incorporating some used process equipment, and then a phased configuration that would begin with a 27,500-b/d hydroskimming facility that would be expanded to full conversion later.

The initial 27,500-b/d hydroskimming plant was the basis of the initial discussions with the North Dakota Department of Health [(NDDoH)] when Meridian was preparing to file for the NDDoH permit to construct [(PTC)]. NDDoH didn’t want to just have Meridian go through the process for that initial plant and then do it again later if it was expanded, but instead wanted Meridian to include in that filing the full eventual expanded capacity of the refinery. Not wanting to overthink the situation, Meridian simply doubled the then-planned initial capacity of 27,500 b/d to 55,000 b/d as the upper-bound on that potential expansion, solely for the purposes of the PTC permit process.

Meridian has now been awarded a PTC that was evaluated on the basis of the conservatively estimated emissions from a 55,000-b/d facility, so based on the air-quality permit alone, Meridian could go at least that high. However, in North Dakota you cannot build a refinery that is designed to, or capable of processing 50,000 b/d or more of crude oil unless you first obtain a siting certificate from the North Dakota Public Service Commission [(PSC)]. Meridian has no intention of exceeding that limit initially, so Meridian will not be constructing a refinery that is capable of processing 50,000 b/d or more of crude oil unless and until Meridian obtains that permit from the PSC.

Now that Meridian has been awarded the PTC, it is undertaking additional engineering to define the capacity-configuration details for Davis. However, because of the need to move the project forward quickly after the permitting delays, Meridian is no longer planning to phase in the refinery as previously planned, and the capacity of Davis will be substantially greater than the originally planned 27,500-b/d first phase.

At no time, however, will Meridian build and operate a refinery capable of processing 50,000 b/d or more of crude oil unless and until Meridian first obtains the PSC siting certificate mentioned before. Meridian has of course been aware of this PSC requirement throughout the planning and permitting of Davis, and at no time has it been Meridian’s intent to design, build, or operate a refinery that is designed to, or capable of processing 50,000 b/d of crude oil unless and until it went through the PSC permitting process.

OGJ: Issuance of the permit to construct by the NDDoH’s division of air quality allows Meridian to proceed with the refinery’s construction, but Meridian notes other approvals may be required. What does the permitting landscape look like moving forward?

The air-quality permit is the last permit required to start construction on the first phase. We have many water issues that require permits, but only if we use certain sources of water. We have alternatives for all that. Like any major plant like this, there are dozens of permits required over time and on an ongoing operating basis. The spreadsheet for these permits is six pages long. We tend to focus on the ones that could stop projects in their tracks and we just got the last of those out of the way.

OGJ: Meridian has said it will soon proceed with the refinery’s detailed design, engineering, procurement, and construction. What will this look like and when do you plan to start?

When we were getting ready to select a contractor for the project, we hired a firm to finish up the FEED. They could likely be the final EPC contractor. Rather than just do a FEED we launched the detailed design. That has been in progress for a while. We also have bid packages out, so procurement has technically begun. We’ve had people out in the field staking, and we’ve drilled and tested some piling to give feedback for foundation design. What we’re waiting on now is permission from the county to begin grading. There, we need county approval of a bond we must post to get earth moving equipment to the site to begin earth work.

OGJ: Alongside becoming the first grassroots refinery in the US to receive the green light in 40 years, Meridian’s PTC application is the first to in history for a full-conversion refinery of this size and complexity to seek and receive permitting to construct under classification as a synthetic minor source of air contaminants. What went into the technology selection process? What costs do you foresee recovering as a result of the selections?

Adopting the objective of making this the cleanest refinery simplified a lot of our choices. Some decisions might have been harder to make without that narrow criteria. With all the modern technology available, there’s a lot to choose from that might not be easy to choose between. Going clean and green requires that you first limit the geographic size of the plant. Pipe run in and of itself opens an opportunity for pollution. You don’t want a plant that would be spread out—that’s not an efficient use of hydrocarbons and results in pollution. Select technologies, including some of the proprietary units from Axens that eliminate a lot of heater usage, also gave us an opportunity to reduce emissions. We’re not using heat to the extent that would otherwise be seen in a refinery of this size. Flaring is a big issue in the area also very interesting because now you can utilize ground level flares—enclosed flares. The elevated flares—the common sight at most refineries these days—are only for emergency use and would probably only be used 10 hr/year at the most. Across the board there are enormous opportunities that will not only increase efficiency but reduce pollution. And that goes hand in hand with costs. Anytime a hydrocarbon leaks out of your plant, that’s something you could have made a penny on. You don’t want to see that happen at all. In terms of remediation and protecting our right to operate under that permit, there’s a lot of monitoring technology out there, including optical sensing that is being used throughout the plant. A lot has happened just in basic information technology over the last several years. We’re happy to have what is arguably the first fully digital information. Some of this is proprietary, but we’re working on a whitepaper that would spell out exactly what’s been done, particularly in the emissions area to make this the cleanest refinery in the world.

When we get into operations, we’ll likely be able to operate at a much more cost-effective level than the industry is used to. In terms of planning and everything from catalyst usage and turnaround activity, manpower, and maintenance required, I think we’re going to end up significantly lower on basic operating costs than the industry average.

OGJ: What does the progress of the Davis Refinery mean for the industry going forward?

We’re really happy to have this permit behind us because it is the best validation we’ve been able to achieve in terms of what we’re attempting to do for this industry. The ability to build and operate these plants where and when they’re needed because they can be done so cleanly will begin to creep into the industry and we’ll see a more distributed type of refinery out there. We’ve been asked to consider putting this know-how to work in other locations and we’re currently engaged in investigations in other areas. All I can say right now is we’re looking at every major shale basin for opportunities.

“Now that we’re rolling there’s going to be a lot happening through the next couple of months,” Prentice said as we concluded the call. Meridian filed the necessary bonds and, in a brief update days later, said the county was ready for the company to begin work June 22. In addition to staking, Meridian has begun surveying, fencing work, and drainage control. Equipment was expected to move onsite for full grading work after the contract was complete the last week in June.

 

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