Tempe, AZ-based Quantum Energy Inc. has plans for five micro-refineries in the Williston Basin in Montana and North Dakota, home to the Bakken shale boom, according to congressional testimony Thursday by the company’s Executive Vice President Russell Smith.

Smith told the House Small Business Committee’s subcommittee on agriculture, energy and trade that Quantum intends to create five “similar, if not exact replicas,” of the $350 million Dakota Prairie Refinery, a project by MDU Resources Group’s WBI Energy unit that is expected to start operations late this year (see Shale Daily, Feb. 5).

Publicly held, 10-year-old Quantum, which has yet to turn a profit, has some big plans for its small-scale refineries. Each is planned to have 20,000 b/d capacity, 100,000 b/d natural gas liquids (NGL) capacity and a still-to-be-determined NGL separation capacity to provide local and regional propane supplies.

In addition, Smith told the subcommittee that a “significant part” of Quantum’s business plan is focused on diesel production principally for the North Dakota market, which has growing demand for the transportation and oilfield operations fuel that is being fulfilled largely through imports.

The diesel fuel conundrum in North Dakota underscores the state’s need for more refining capacity, according to Smith. The state’s current diesel demand is 55,000 b/d, and half of that is imported. “The diesel consumption in the state rose by 51% between 2007 and 2012,” he said, predicting that demand will hit 75,000 b/d by the end of 2015, “if not sooner.”

The five proposed refineries would replicate the Dakota Refinery’s 7,000 b/d of diesel fuel. “This will go a long way toward satisfying the thirst for diesel in the region,” said Smith, noting that Quantum hopes to build its refineries as close to existing transload facility sites as possible.

Quantum earlier in June announced the signing of a letter of intent (LOI) for a second refinery on a 400-acre site near Baker in Fallon County, MT, in the Williston Basin. The LOI calls for a “contribution agreement” to be completed by Thursday, allowing the title to the land to be exchanged for shares of Quantum stock.

Earlier in the year, Quantum secured another site with Northstar Transloading LLC on 80 acres adjacent to Northstar’s transload facility in East Fairview, ND, for construction of what the two companies are calling the Fairview Refinery. Both sites have been designated for Quantum’s micro refineries.

Smith’s testimony to the subcommittee ranged well beyond the Bakken Shale to include regulation and the question of lifting the current U.S. ban on crude oil exports (see Shale Daily, June 25).

“If there is a bottom line message in my testimony, it is that government regulations have a very real impact on our business and our business planning for the future,” Smith said. “Perhaps most important is that uncertainty about overall federal policy toward crude oil refining and market availability has an indisputable impact on how all investors view business opportunities in this sector.”

Smith said lifting the ban would not “necessarily increase reliance on imported oil,” and it would allow an outlet for Bakken light sweet crude oil that cannot be easily handled by U.S. refineries. Allowing exports also would lower gasoline prices in the United States, he said.

Rep. Scott Tipton (R-CO) in opening the hearing said there is “a growing mismatch between the increasing amount of light sweet grade crude being produced in the United States and the available utilization capacity of the midstream and downstream refining sector to process this grade of crude into high-value products, such as transportation fuels.”