photo of oil refinery with North Dakota problem project graphic

After over three years of litigation and financial issues, Meridian Energy Group’s new Davis Refinery — a project estimated to cost more than $1 billion — is finally on track for construction in the coming year, according to company CEO William Prentice.

According to an August 27, 2021, letter from Prentice to the North Dakota Department of Environmental Quality, the company entered into a June 12, 2021, agreement with McDermott, LLC for the “design, engineering, procurement, fabrication, and construction of the atmospheric and vacuum distillation units” for the Davis Refinery.

A June 3, 2021, announcement by Meridian Energy also noted that the company had entered an agreement with transportation and logistics company Savage to cover the “comprehensive rail logistics solutions and related services” needed for the Davis Refinery.

This was a crucial milestone for Meridian Energy, as the company would have forfeited its environmental permit if an agreement was not in place to begin construction by September 12, 2021. Environmental concerns are a huge part of the project, as well: The property where the refinery will be built is a mere three miles east of North Dakota’s Theodore Roosevelt National Park.

State environmental regulators first granted a permit of approval for the project in 2018. However, while the company struggled with legal issues stemming from the controversial environmental nature of the project, the North Dakota Department of Environmental Quality had then allowed for an 18-month extension to the company’s permit, with an additional 90-day extension granted prior to the second deadline on June 12, 2021.

Prentice noted in July 2021 that he believed Meridian Energy had already met the benchmarks for its June 2021 deadline through the 11th-hour deal with McDermott — though adding that, by this point, the project’s second extension had already been requested and approved.

North Dakota Department of Environmental Quality environmental engineer David Stroh noted that, despite the controversy surrounding the project, the department was going to have to accept the company’s successful passing of the benchmark. 

“We don’t really get to make a subjective decision here,” Stroh added. “They showed that they satisfied the law. Now they’ve got to continue to maintain progress.”

With opponents around every corner and state agencies wary of the refinery, Meridian Energy may be on thin ice. Prior to meeting the deadline, Stroh noted that “We don’t want them to keep kicking the can down the road” when it comes to the project’s development.

Financing has been a problem for the refinery, but Meridian Energy sees a successful path forward

In the company’s letter, Prentice acknowledged that the refinery project’s financing has been delayed by “ongoing litigation” and by the effects of the COVID-19 pandemic. 

Though he noted that the legal issues have since been resolved, he also said that negative effects from the pandemic “are still having an impact on economic activity and supply chains globally and on the oil and gas industry and Meridian specifically.”

In an April 14, 2021, letter to the North Dakota Department of Environmental Quality’s David Glatt, Prentice noted that “The effects of COVID-19 on Meridian’s funding and the ability to complete contracts and procure important materials, equipment and services have been severe.”

Additionally, the path forward with construction was not guaranteed to be straightforward: “Although the effects of the pandemic are easing, they continue to make it difficult to establish detailed schedules with the usual degree of certainty,” Prentice said.

However, the company still believes it has the project on the right track despite this. “We are in a very, very strong position in terms of financing this project,” said Prentice in July 2021, adding that the company was confident that it would be in a place to begin construction “well before” September 2021.

Prentice also noted that financing for the project should be simpler following these struggles, as the “cleaner” nature of the refining that the project proposes will be a major selling point. The CEO even went to the extent of calling the project “the world’s cleanest refinery.”

According to Meridian, the Davis Refinery is “the first full-conversion crude refinery to ever be permitted as a Synthetic Minor Source for air quality purposes.”

“Every barrel of Bakken crude processed by Davis will produce less than one-half of the greenhouse gas emissions and one-eighth of the total emissions within the facility of the same oil processed in an industry-average refinery,” the company noted. “This results in a significant reduction in carbon dioxide and other emissions for the entire life cycle of fossil fuels, from oil well to car exhaust.”

These technological advances are meant to improve environmental impact, but Prentice noted that they’ll also make the project significantly more attractive to interested investors given how significantly the oil refining process usually contributes to pollution and environmental problems. “We’re cheating,” Prentice said of the project’s new technology. “Whenever I brag about how clean our refinery is gonna be, I feel bad for a lot of the guys out there trying to operate these old monstrosities.”

The company is going to really need a boost from somewhere financially, too. Prentice said in July 2021 that Meridian Energy had by that point spent over $60 million on the Davis Refinery project, and estimated that the company would need to raise around $950 million more in the course of the following nine months.

Despite company optimism, Meridian Energy’s past issues hang over the project’s delays

Regardless of the rosy outlook taken by Meridian Energy, there are plenty of opponents who see the project as one that’s highly unlikely to move forward smoothly.

“There’s nothing going on there. It’s literally, like, an idea,” said Scott Skokos, director of the Dakota Resource Council, about the Davis project. “The one thing this refinery has is an air quality permit, and it should have expired already.”

Wayde Schafer, an organizer for the North Dakota chapter of the Sierra Club, agreed with this sentiment, noting that he doubted the project’s ability to get off the ground after all of the time put into it so far. Schafer did add, however, that the Sierra Club would be keeping its opposition to the project up due to its extremely close proximity to Theodore Roosevelt National Park, adding that “North Dakota’s a big state, and they could have put it anywhere else.”

Even beside the likelihood of possible further environment-focused litigation, it’s no guarantee that the project will be free of financial challenges going forward — or will be able to win the public over.

Meridian Energy previously dealt with numerous charges of allegedly failing to uphold its contracts and other financial agreements. 

In 2018, a Minneapolis-St.Paul-based contractor filed a mechanics lien claiming that Meridian Energy was responsible for more than $2 million in non-payment over site preparation work, and 2020 also saw a group of former Meridian Energy employees sue the company in Texas over unpaid wages and bonuses in a case that appears to still be pending.

A letter to the Bismarck Tribune from Belfield, North Dakota resident Laura Grzanic claimed that the company had already gone against its word on multiple details and wasn’t to be trusted due to issues like the wage lawsuit.

 “Discussion of a refinery in the area gave many boastful remarks on providing 500 construction jobs, 200 permanent jobs, and trickle-down jobs,” Grzanic said. “Local contractors were to be given first opportunity. Now we learn that much of the construction will be done out of state.”

Claiming that a confidentiality agreement in a settlement held him back from speaking, Prentice declined to comment about the wages lawsuit or other issues, but still added that he “doesn’t feel Meridian was at fault in any of these instances.”