Forum Editorial: State-run oil refinery a silly idea
The notion that North Dakotans will benefit from a state-owned oil refinery is more about pandering than policy. In the past few weeks, Democratic candidates for governor and lieutenant governor have urged the Legislature to fund a study of such ...
The notion that North Dakotans will benefit from a state-owned oil refinery is more about pandering than policy. In the past few weeks, Democratic candidates for governor and lieutenant governor have urged the Legislature to fund a study of such a project. Had they done their homework, they would have found that: 1) studies are under way, and 2) serious projects to increase refining capacity in the state are on the drawing boards.
Ah, but those are private industry plans, say advocates for a state-owned refinery. A government-run refinery would be owned and managed the way North Dakota owns and manages the State Bank and the State Mill and Elevator. At first glance, it looks good. After all, the bank and mill have been successful sacred cows for generations.
But the implied promise in the scheme is that a state-owned refinery would somehow reduce the cost of gasoline in the state. Dream on.
A state-owned oil refinery would be subject to the same speculative energy markets that determine the price of crude oil coming out of the ground in North Dakota and everywhere else. Refineries don't themselves set the price of gasoline at the pump. Likening a state-owned refinery to the state-owned bank and mill is phony. The bank is subject to the same banking regulations, Federal Reserve stimuli and financial market whims as any other bank. The mill operates in the same volatile commodities market as the Cargill elevator down the road.
Another study? There are several state-supported studies and efforts to increase refinery capacity under way:
E The Oil and Gas Research Council provided funds to determine feasibility of a refinery at Williston.
E Tesoro, which operates the state's only refinery at Mandan, is using state sales tax incentives to improve reliability and increase low-sulfur diesel fuel production.
E American Lignite energy is exploring a coal-to-liquids plant that would provide 1.38 million gallons of fuel per day.
E Three Affiliated Tribes is looking into a small refinery on the reservation.
In addition to the in-state projects, several existing refineries in Midwest states that provide fuel to North Dakota are looking to expand or build new facilities. All the plans are being stimulated by high crude oil prices and the expectation that prices will stay high.
No matter how politicians try to sell it, the objective evidence proves that having a refinery (state-owned or private) in your state has no effect on gasoline prices at the pump. The Tesoro operation at Mandan, for example, has not lowered gasoline prices in Bismarck. In fact, the pump price routinely is three to four cents higher there than in Fargo, where there is no refinery. Montana has four refineries, and prices there consistently are higher than in North Dakota.
Don't get bamboozled by election-year pandering. Other than regulation and the occasional tax incentive, the state has no business in the oil refinery business. And even if it did, a state-owned refinery would not lower gasoline prices at North Dakota pumps.
Forum editorials represent the opinion of Forum management and the newspaper's Editorial Board.