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ONEOK plans $390 million natural gas plant near Watford City

BISMARCK - North Dakota's largest processor of natural gas announced plans Tuesday to spend up to $390 million on a new processing plant in McKenzie County, a project the company's president says will "considerably" reduce the amount of natural g...

BISMARCK - North Dakota's largest processor of natural gas announced plans Tuesday to spend up to $390 million on a new processing plant in McKenzie County, a project the company's president says will "considerably" reduce the amount of natural gas flared when combined with its other facilities.

ONEOK Partners President Terry Spencer said the new Lonesome Creek processing plant 12 miles west of Watford City will process up to 200 million cubic feet of natural gas per day, more than double the capacity of any of the company's six existing plants operating or under construction in the Williston Basin.

To handle the volume of liquid natural gas that will come from the new plant, ONEOK also plans to complete a second expansion of the Bakken NGL Pipeline, boosting its capacity from 135,000 barrels per day to 160,000 barrels per day in a project expected to cost $100 million.

In total, the company plans to invest $650 million to $780 million by the second quarter of 2016.

Gov. Jack Dalrymple, who made the announcement with ONEOK officials at the Capitol, said that while "no one is going to declare 'mission accomplished' here today," the ONEOK projects represent "a remarkable capital investment" that will help to address the state's ongoing flaring challenge as oil development outpaces the infrastructure needed to capture and process natural gas. He said he hopes other companies also will play a role in the effort to curb flaring.


"The only way we really catch up to it is to have these larger projects come along," he said.

Spencer said ONEOK is committed to being part of the solution to the flaring problem in North Dakota, where about 29 percent of the roughly 1 billion cubic feet of natural gas produced daily was burned off in August because of a lack of pipelines, processing capacity and other infrastructure.

Flaring has become an increasingly contentious issue in North Dakota. Last month, lawsuits were filed in four Oil Patch counties by mineral owners seeking damages from oil and gas companies for lost royalties from flared natural gas. The North Dakota Petroleum Council has formed a task force of industry experts - including from ONEOK - to study ways to reduce flaring and make recommendations to the state Industrial Commission, which is chaired by the governor and regulates oil and gas drilling in North Dakota.

ONEOK estimates the Lonesome Creek plant, when combined with the company's other processing plants, will reduce flaring in the company's Bakken footprint from about 29 percent to 10 percent, Spencer said. The company processes about half of the natural gas captured in the Bakken, he said.

The Lonesome Creek plant is expected to cost $320 million to $390 million and be completed by the end of 2015. It will be ONEOK's sixth processing plant built in the region since 2010 and seventh overall, bringing the company's total processing capacity in the basin to about 800 million cubic feet per day.

Spencer said the Lonesome Creek plant will create about 300 to 400 temporary construction jobs and increase the company's total number of workers in North Dakota from 200 to 250 by the time the plant is up and running.

John Gibson, ONEOK's chairman and CEO, said "construction projects like these are not easy to complete," and he thanked state government and regulatory agencies for their support. He said that relative to other states, North Dakota has been a business-friendly state for the company.

"North Dakota is one of the best places for us to invest money," he said.


ONEOK currently has four natural gas processing plants in operation and two plants under construction in the Williston Basin: The Grasslands, Garden Creek I and Stateline I and II plants have a combined processing capacity of 390 million cubic feet per day. The Garden Creek II and III plants near Watford City, expected to be completed in the third quarter of 2014 and first quarter of 2015, respectively, will each process up to 100 million cubic feet per day.

About 80 percent of the company's activity in the Williston Basin is in North Dakota, the rest in Montana, Spencer said. ONEOK has no Williston Basin operations in Canada.

Dalrymple also announced that ONEOK has made a donation to the state's ongoing Heritage Center expansion, scheduled for completion in November 2014, and will sponsor a new exhibit. The donation is for $250,000 over five years, ONEOK spokesman Brad Borror said.

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