REFILE-Ground broken on $300 million North Dakota diesel refinery

Tue Mar 26, 2013 4:08pm EDT

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By Ernest Scheyder

DICKINSON, North Dakota, March 26 (Reuters) - MDU Resources Group Inc and Calumet Specialty Products Partners LP broke ground on the first U.S. refinery to be built since 1976 on Tuesday, aiming to supply locally produced diesel to North Dakota's oil patch.

The $300 million refinery should take about 20 months to complete, the companies said.

The project should help relieve the state's demand for diesel that fuels fracking rigs, trucks and trains key to further development of the Bakken shale, a geological formation two miles under the state that holds a 50 year supply of oil, according to most estimates.

Despite being the second-largest oil producing state in the nation, North Dakota imports more than half of the roughly 53,000 barrels of diesel consumed each day. Only 22,000 barrels are produced in state daily, at Tesoro Corp's small Mandan plant near the state capital.

"The market area for this oil is right in our own back yard," said Dave Goodin, chief executive of MDU Resources.

Roughly 500 workers should be employed during the refinery's construction and there will be about 100 full-time workers after completion, MDU and Calumet said.

"With this refinery we get to use the oil we have in North Dakota," said Gov. Jack Dalrymple, who participated in the groundbreaking by driving a bulldozer on the site.

MDU owns an oil exploration company that will supply crude to the refinery. The refinery will use treated wastewater from Dickinson's treatment plant, a step that will cut down on fresh water usage.

Byproducts from the diesel refining process will be used to make lube oil and to help dilute Canadian oil sands.

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