JIM FUGLIE: View From The Prairie — Conservation Groups To Refinery: ‘Cease And Desist!’

Lest we let the threat of an oil refinery beside Theodore Roosevelt National Park slip from our minds as we go about our busy fall lives, here’s an update on where things stand right now.

Meridian Energy has started dirt work at the site beside Interstate 94 on the road into the park, flouting the attempt by conservation groups to require a site compatibility review by the North Dakota Public Service Commission.

So Friday, the Environmental Law and Policy Center and the Dakota Resource Council filed a request to the PSC to “issue a cease and desist order requiring Meridian to halt all construction activities for the Davis Refinery to preserve the PSC’s jurisdiction over whether Meridian is required to obtain a certificate of site compatibility for the Davis Refinery.”

That’s the latest volley in the ongoing paperwork battle over whether the state’s PSC should step in and conduct a full site review to see if the proposed location for the refinery is a good one. Public Service Commissioners Randy Christmann, Julie Fedorchak and Brian Kroshus have seemed a bit skeptical of the location and are weighing whether to step in and order such a review.

At issue, though, is what the conservation groups are calling “bait and switch” tactics by the refinery company, changing its story on the refinery’s capacity to come in just under the 50,000 barrels per day limit, which would subject them to regulatory review by the PSC.

I’ve written about this a number of times, but we need to watch these (expletive deleted) because they can’t be trusted after all the times they’ve changed their stories about this project.

What’s triggered the latest round is the decision by the North Dakota Health Department — I’m tempted to call them the Anti-Health Department after watching them continually roll over for the oil industry — to issue Meridian a “permit to construct” their refinery last June.

Within days, the two conservation groups filed a complaint with the PSC, asking it to assume jurisdiction over the refinery and conduct a site compatibility review. That was not unexpected. Last December. The PSC members asked Meridian to come in and meet with them to discuss the refinery plans. Meridian sent in its slick-talking California CEO William Prentice.

Commission member Julie Fedorchak told Prentice, “There are a lot of compelling reasons why you should go through our siting process. In the long run, it would be much better for you to have completed that process.”

Prentice promptly told the PSC members where they could put their site review process, to which PSC Chairman Randy Christmann replied, “I expect when you break ground, somebody’s going to bring a complaint. You could be in court a long time.”

Well, Christmann was right. On June 12, the State Health Department issued a “Permit to Construct” the refinery. Just 17 days later, the ELPC and DRC filed a complaint with the Public Service Commission.

“The Environmental Law and Policy Center (ELPC) and Dakota Resource Council (DRC), on behalf of their members (of which I am one), complain that Meridian Energy Group Inc. (Meridian) is or soon will be acting in violation of North Dakota law through its planning and construction of a refinery with a capacity of over 50,000 barrels per day (bpd) without obtaining a certificate of site compatibility from the North Dakota Public Service Commission (PSC).”

The complaint goes on, “While Meridian has stated to the PSC that it is only currently planning to build the first stage of the refinery, and has no plans to develop beyond the 50,000 bpd capacity threshold, the company has made and continues to make contrary statements in permit applications, in news articles and to potential investors.”

That was on page 2 of the complaint filed with the PSC. The next 2,538 pages of the complaint spell out the details. Meridian first proposed to build a 55,000 bpd refinery in two phases, of 27,500 bpd capacity each. Then it found out about the 50,000 bpd limit, quickly changed its story and said it was just going to build a 27,500 bpd capacity refinery, but might sometime down the road expand. If it did that, then it would have to come in for a site permit. That would be after the first half of the refinery was already in place. Nice try, Meridian. Nobody was buying that. Partly because Meridian applied for an air quality permit from the Health Department for a 55,000 bpd refinery and asked for a water permit from the State Water Commission for a 55,000 bpd refinery.

Still, Meridian insisted it had the right to build without a PSC review because it was only building a first phase of 27,500 bpd capacity, well under the 50,000 bpd limit. Well, the ELPC and DRC pointed out in their complaint that should not be allowed, stating, “Dividing a project into pieces so that individual phases avoid jurisdictional thresholds and avoid review is an approach that has been used and disallowed in many contexts,” and went on to point out similar schemes from around the country which had not worked.

The rest of the conservation groups’ 2,540 pages goes into great detail about the refinery and the process used to permit its construction. It’s the longest, most thorough document I’ve ever seen.

In early August, Meridian filed a response with the PSC, formally called a “motion to dismiss” the ELPC/DRC complaint, with a new story. Instead of a 27,500 bpd plant to be built now, with no current plans to expand to 55,000 bpd, “Meridian has no current plans for any addition to or expansion of the Davis refinery beyond the capacity of 49,500 barrels per day.” (The emphasis on current is mine.)

Meridian concludes “To be clear, the Davis Refinery will only be capable of refining 49,500 bpd. Because the facility’s operating capacity is under the 50,000 bpd threshold for siting review, North Dakota law does not require siting review for the facility. The PSC, consequently, lacks any authority to require siting review and must dismiss Petitioner’s Complaint for a lack of jurisdiction.”

Well, then, with the whole story changed from two 27,500 bpd plants to just one 49,500 bpd plant, on Aug. 20, ELPC and DRC responded to the motion to dismiss the complaint. “Meridian has now changed its story again,” the response says. In its more than 2,500 pages of complaint, there’s a spot where it lists internet links to 77 different stories, news releases, company statements and letters to investors stating that Meridian intends to build a 55,000 bpd refinery in two phases. Want to take a look? You can go here to download the entire complaint. The list of links starts on page 2,525.

Here’s how Link No. 3, a notice to prospective investors on Meridian’s website dated May 3, 2017— not much more than a year ago — starts out:

Refinery: Davis, near Belfield, North Dakota
Owner: Meridian Energy Group, Inc.
Capacity (b/d): 55,000 b/d

Notes: Meridian Energy Group expects to start selling gasoline and diesel in the first half of 2018 from its new-build 55,000 b/d refinery in North Dakota, CEO Bill Prentice said Tuesday.

I wonder how those investors are feeling today?

Well, by this August, after reading Meridian’s motion to dismiss their complaint,  the conservation groups’ frustration became obvious, and they took off the gloves. “The PSC should be especially skeptical of Meridian’s claims because of Meridian’s previous apparent attempts to mislead the PSC,” they wrote. “Meridian appears to be attempting a ‘bait and switch,’ asserting that it could build a refinery with a capacity below the 50,000 bpd threshold, and then ‘after the plants construction’ plan an addition, and only then seek a certificate of site compatibility from the PSC when the siting of the refinery has become a fait accompli.”

Well, of course, Meridian responded to that response last week, stating once again that it was only going to build a 49,500 bpd refinery and that the PSC did not have jurisdiction.

And that’s where it stands today. Because it has a Permit to Construct from the Health Department, Meridian is doing dirt work in preparation for construction. And Friday’s cease and desist motion is under consideration by the three Public Service Commissioners.

Earth movers at work at the site of the proposed Davis Refinery last week. Conservation groups have asked for a cease and desist order to stop the work. (Laura Grzanic photo)
Earth movers at work at the site of the proposed Davis Refinery last week. Conservation groups have asked for a cease and desist order to stop the work. (Laura Grzanic photo)

The PSC has some decisions to make, and probably will start doing that pretty soon. First, it has to decide whether to grant the cease and desist motion and stop the dirt work while it decides what to do about the complaint. Then, very quickly, it needs to decide what to do about the conservation groups’ complaint. They can:

  • Dismiss it, and let Meridian go ahead and build.
  • Approve it, and send Meridian a notice that it intend to assume jurisdiction and do a site review.
  • Call a hearing and let both sides come in and argue their case in public.

I’d bet on a hearing, and then I’d bet that whichever way the PSC decides to rule on the complaint — for or against taking jurisdiction and doing a site review — it will prove PSC Chairman Christmann’s prediction last winter right: this will be in court for a long time. Because if the PSC decides to take jurisdiction and stop Meridian from building until it determines if this is a good place for a refinery (which, at this stage, I wouldn’t bet against), you can bet your ass that Meridian will file a lawsuit challenging that jurisdiction. And then they’ll be in court for a very long time.

It boils down to this:

The company asked the State Water Commission and the State Health Department for permits for a 55,000 bpd refinery “just in case” it ever decides to build a refinery that big. So why did Meridian not just go ahead and ask the PSC for a site permit, “just in case” they decide to build a 55,000 bpd refinery?  Because Meridian knows this is not a good place to build a refinery.

To see the complete docket with the entire history of the process I’ve just described, just click here. Don’t worry, it’s way less than 2,540 pages.

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