The Supreme Court of North Dakota has cleared a permitting obstacle posed before Meridian Energy Group, paving the way for the energy startup to move forward with its Davis Refinery project in the Bakken Formation near the Badlands’ Theodore Roosevelt National Park.
Although no Texas lawyers were involved in the litigation, North Dakota-based Meridian’s largest office is in Houston, which currently employs around 45 people and is expected to triple in size over the next year. A group of Kirkland & Ellis lawyers — Washington, D.C. partner Rohit Chaudry and Texas partners Matt Pacey, Chad Michael Smith and Brooks Antweil — are guiding Meridian through completion of development and financing of the project.
Meridian’s next refinery project will be in West Texas’ Permian Basin and is expected to adopt the design approach Meridian is taking with the Davis Refinery, which is being designed by Houston-based McDermott International.
The ruling, issued last Tuesday, brings Meridian one step closer to becoming the first startup company to build a full-scale refinery, Charles Schwenck, the company’s top lawyer and chief commercial officer, told The Texas Lawbook. The company, founded in 2013, says the Davis project will also be the first full-conversion greenfield refinery to be built in the U.S. since 1976.
Schwenck said Meridian is scheduled this week to meet with the Oil & Gas Climate Initiative to discuss what impact the Davis project will have on the energy industry. It is believed to be historic in terms of being a more environmentally-friendly plant that the company says will produce one-eighth of industry average emissions and one-half of the industry’s GHG emissions.
Because extreme cold weather permits construction to only occur “about seven or eight months out of the year” in North Dakota, Schwenck guessed that “about 75% of total labor costs” of the project “will be spent in or around Texas.”
The case before the North Dakota Supreme Court pitted Meridian and the North Dakota Department of Quality against the National Parks Conservation Association, Environmental Law & Policy Center and Dakota Resource Council.
The litigation began after the North Dakota Department of Quality issued Meridian its air quality Permit to Construct (PTC) in June 2018. A lower court declined last year to overturn the issuance of the permit after the plaintiffs brought suit, and then they appealed to the North Dakota Supreme Court. They argued that an independent analysis showed that Meridian significantly underestimated or omitted emissions in its application to the state.
“This permit has been flawed from the beginning,” North Dakota lawyer JJ England, who represented the NCPA, said in a written statement. “NPCA has been on the right side of the facts, science, and law in this fight against the Davis Refinery, and NPCA should be applauded for taking this permit to North Dakota’s highest court. Today’s ruling is disappointing. Although today is a sad day for Theodore Roosevelt National Park, the fight is also far from over.”
But Schwenck said that although Meridian decided to build the refinery as a minor synthetic source, which requires less public participation, the company decided to “do so anyway” in terms of involving the public in its process.
“We identified the people who might be opposed to us, [but] most of the local population was very much for the facility,” Schwenck told The Texas Lawbook.
He said Meridian ensured that the refinery would not be visible“from the highest spot in the park” by “running balloons up 130 feet above the stack.”
Although one more case that challenges the project involving a jurisdictional issue is pending in the North Dakota Supreme Court, Schwenck said the company viewed the current case as a larger hurdle.
“We weren’t spending a lot of resources [on the litigation], but it was slowing our fundraising for the project,” Schwenck said. “It’s been difficult with this Supreme Court case hanging over our head.”
Schwenck said Meridian is currently seeking between $30 and $50 million in preconstruction financing. He estimated about $25 million to $30 million will be necessary for the Davis project.
“If we get $50 million, we will put the rest in the Permian [project],” he said.
North Dakota lawyer Lawrence Bender of Fredrickson & Byron argued the case for Meridian at the Supreme Court.