‘The Wings Have Come Off This Pig . . .’

If you’ve got any friends or relatives out in Stark or Billings Counties, around Belfield, tell them to start getting ready, because Meridian Energy Group is going to build them a refinery as a neighbor. It’ll be there in just three years, 10 months and 15 days–on Friday, December 12, 2025. That’s what Meridian CEO William Prentice told the North Dakota Department of Environmental quality in a letter the other day.

Prentice said Meridian has entered into an agreement with McDermott International, a giant engineering and construction firm, “for the design, engineering, procurement, fabrication and construction of the atmospheric and vacuum distillation units for the Davis Refinery.”

But tell them not to hold their breath. That December 2025 date is a little bit later than expected. Although it’s not surprising. Meridian has missed a lot of deadlines. Back in 2016, they issued a press release that said “Meridian remains on-track to have the Davis Refinery operational no later than early 2018.”

Well, they missed that goal, but in September of 2018 they issued a press release that said they had signed a letter of intent with an engineering firm called GATE Energy to provide “commissioning and startup services” the next year, and that “the refinery will be fully operational in 2020.” They promised that “full construction activities and foundation work” would begin in the Spring of 2019.

Dang. The spring and summer of 2019 went by with no work at the site. The company was pretty quiet that winter, while they spent time trying to figure out when they could get their refinery built. Finally in May of 2020 they came up with a new plan: “Meridian’s Davis Refinery is not scheduled to come online until the second half of 2023 and Meridian is not impacted by the shorter-term issues affecting the energy and financial markets.”

Uh huh. Maybe they weren’t impacted, but they were three more years behind schedule.

I could go on for many paragraphs about the delays and missed deadlines for this project, but for now, we’ll just take the company at its word that the project will be completed in 2025, not 2023. Another two-year delay.

Meanwhile they’ve got a few matters to settle in courts.

  • Billings County officials told me this week that the $2.2 million construction lien against the company, one of its board members Greg Kessel, and the land Kessel owns on which the refinery is supposed to be built, remains in place. Meridian apparently still hasn’t paid for the dirt work done at the site in 2018.
  • A group of former Meridian employees sued the company for $600,000 in unpaid wages almost two years ago. One of the employees told me this week they still haven’t been paid.
  • That Texas-based engineering firm GATE, who went to work for them in 2019, never got paid, and stopped work, sued the company to try to collect $420,000 for the work they did in 2019. Their lawsuit was supposed to go to trial earlier this month, but because of huge backlogs in the Texas court system, it has been postponed until next January. That’ll be almost four years that they’ve been owed the money from Meridian.
  • The latest legal problem facing the company and its former chief operating officer, Lance Medlin, is a lawsuit seeking more than a million dollars in a Houston, Texas court, filed by a fellow named Tyler Chambers, who says Medlin shot him while they were driving in a company vehicle or on company business.

Oh, and there’s one other little detail that hasn’t been taken care of yet either: Meridian still doesn’t own the land they plan to put the refinery on. I talked to Greg Kessel last fall, and he admitted the company still hasn’t paid him for the land, even though they’ve apparently done $2.2 million worth of dirt work on it. I wondered, if they build a refinery on land they don’t own, if Greg might just own a refinery someday.

Given all that, I’m puzzling over McDermott’s willingness to go back to work for Meridian, with all those lawsuits and bad debts. And on top of all that, as recently as last year, my sources in Texas told me, Meridian still owed McDermott more than $3 million for work the engineering firm did before McDermott filed for bankruptcy in 2020. McDermott used the bankruptcy proceedings to shed more than $4 billion in debt, and they were back in business by the end of the year.

Some folks I talked to in Texas were still puzzled too, because with the unpaid bills, they were pretty sure Meridian would have to put up money up front to get McDermott to go back to work. I’ve sent e-mails to McDermott asking them about this, but I haven’t had any response yet. 

Meanwhile, back here in North Dakota, officials at the North Dakota Department of Environmental Quality (DEQ) are monitoring the company’s progress, which Meridian laid out when the DEQ renewed their Permit to Construct last year. Meridian is kind of “on probation” with the DEQ right now. The DEQ extended their permit on the condition that construction work is now underway.

I learned this week that there’s not really much going on. But the DEQ has a new letter from company CEO William Prentice promising that design work has begun, and dirt work will get underway again at the site in June. You can take a look at the letter and their projected timeline by clicking here.

Prentice told the Williston Herald last October that he expects the giant investment banking firm Morgan Stanley will provide financing for the refinery, and the financing will be available in the Spring of 2022. That’s pretty soon.  

I get the sense that the DEQ folks are almost as skeptical as I am, but they’re caught on the horns of a dilemma. They said in no uncertain terms last summer that they would extend Meridian’s Permit to Construct only if Meridian was “constructing.” As of right now, more than six months later, there’s no real construction going on. But if the DEQ pulls the plug, and the whole deal goes belly up, they’re going to be the bad guys when all those senior citizens who have invested their 401(k)’s in Meridian stock lose their money. And North Dakota loses out on the possibility of being home to a billion-dollar refinery. As best I can tell from their SEC filings, Meridian has sold about $10 million worth of stock to mostly out-of-state investors, but judging by the stack of unpaid bills, that’s all gone to executive salaries and lawyers. And unable to pay their office rent, they’re now operating out of a maildrop box in southern California.

This whole thing is a pretty sad tale. I’ve been talking to friends in Texas who know this company inside and out, and it’s clear that six or seven years ago, when these guys first came to North Dakota looking for a place to build a refinery, they really had good intentions, and really thought they could pull this off.

But they put it in the wrong place—too close to the National Park—and that brought out the opposition in a hurry. Even I have said from time to time that if they had just put it 15 miles east of the park, I’d have been a big fan.

But now one of those Texas friends who knows a lot about refineries and the oil and gas industry told me this week that he doesn’t believe that Meridian is ever going to build a refinery, and Meridian executives are at the point where they’re now just hoping North Dakota officials will shut them down, to get them out of this bad deal. Then they can tell their investors that it’s the government’s fault they lost their money.

I came across a story in the Williston Herald the other day, written last October. In it, Meridian CEO William Prentice said that he expects Morgan Stanley will provide financing for the refinery, and the financing will be available in the Spring of 2022. That’s pretty soon.  

But I’ve got a new friend who knows the investment banking business who’s been following this project, and he’s as skeptical as the engineer in Texas. He said he’d be pretty surprised if Morgan Stanley really agreed to raise a billion dollars for a company with all these kinds of problems. He said this week, after reviewing all these lawsuits, “The wings have come off this pig that was never gonna fly in the first place.”

Hmmm.

6 thoughts on “‘The Wings Have Come Off This Pig . . .’

  1. Jim,
    I think you’re right that Meridian wants the state to shut down this sad environmental proposal so it can save face with its investors. Thank you for your diligence in tracking these scammers.
    I hope some group like the North Dakota chapter of the Sierra Club will nominate Jim Fuglie for a Guardian of the Environment award.

    Like

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