business

Even as it fills the railroads of the Upper Midwest with oil tank cars, the Bakken has allowed its natural gas riches to languish.

Less profitable than oil and more difficult to transport, natural gas has been so secondary in North Dakota that drillers still burn off more than a fourth of what rises from the ground. In satellite pictures, the flames sprawl across the Williston basin, lighting it up like a giant suburb.

A quiet transformation is underway, however, as the state bids to turn natural gas into a native business and drive down flaring.

A growing network of pipelines and processing plants has made North Dakota a recent target for billions of dollars of investment toward factories that convert natural gas into other products like fertilizer and plastic.

“It’s the natural progression of OK, now we’re pretty fully developing on the drilling side of things, and now comes the next component, which is the value add,” said Cullen Goenner, an economist at the University of North Dakota. “That’s where you really get the biggest bang for the buck, in terms of the employment and all those supplemental jobs, is in the value-added industries, more so than in just the extractive industries.”

A group called Badlands NGL announced in a news conference with Gov. Jack Dalrymple two weeks ago that it wants to convert cheap, abundant ethane into polyethylene, the raw material of plastic bags and bottles. The $4 billion factory would churn out rail car loads of the tiny, milk-white plastic beads.

A month earlier, Inver Grove Heights-based agriculture giant CHS Inc. said it will build a $3 billion fertilizer plant 90 miles west of Fargo. Another group with board members from the North Dakota Corn Growers Association, called Northern Plains Nitrogen, is trying to raise money for a $2 billion fertilizer plant just north of Grand Forks.

None of these projects has broken ground, and flaring remains a huge and growing problem. The state flared 28 percent of its natural gas in August. By contrast, Texas flares less than 1 percent.

But a shift into the chemical industry in North Dakota could create new markets for the state’s natural gas, and would signal a new chapter in the oil boom.

“When the field first started going, there was a lack of gathering systems and we did a lot of flaring, and that’s not abnormal for immature fields,” Andy Peterson, president of the North Dakota Chamber of Commerce, said. “You start capturing some of the stuff and using everything. That’s what industry wants — they want to use every little bit of the raw product that they can.”

High-ethane gas

North Dakota natural gas contains high levels of ethane, propane and butane — the natural gas liquids — which helps explain the industry’s delay in building the infrastructure, said Justin Kringstad, director of the North Dakota Pipeline Authority.

“The Bakken gas is incredibly rich,” he said. “It’s a very high-density, high BTU gas, so much so that a lot of the plants being constructed here, they’ve taken some very special engineering and expertise to get them to work properly.”

The high-BTU gas is what attracted Bill Gilliam, CEO of Badlands NGL, the firm raising money for a petrochemical plant in northeast, south central or southwest North Dakota. The factory will need ethane, which accounts for up to roughly 6 percent of raw natural gas. By conservative estimates North Dakota is producing enough gas to make 150,000 barrels per day, enough to fill 10 Olympic swimming pools.

Badlands would need about half that much, and would employ 500 people at the plant and at a headquarters in Bismarck. Net job creation would be 2,375 positions, Goenner, the economist, said, based on similar projects. The plant’s plastic beads — created using steam and ethane and high pressure — would travel by train to factories or shipping ports.

Such a plant in North Dakota would enjoy not just an abundance of the necessary raw material — Gilliam believes key pipelines passing through North Dakota are close to taking on dangerous levels of ethane — but also easier shipping to key industrial centers than polyethylene plants on the Gulf of Mexico.

“Let’s look at the markets that actually buy polyethylene in the United States. They’re in the industrial Midwest, which by rail is closer to North Dakota than it is to the Gulf Coast,” Gilliam said. “Taking finished polyethylene by rail to Vancouver or to Seattle, or even to Duluth on the St. Lawrence Seaway are all things that are easy to do in North Dakota, and easier than going through the Panama Canal.”

The obstacles