Meridian Energy Group expects to use a fee-based business model at a 55,000 barrels per day (bpd) refinery it plans to build in North Dakota, CEO William Prentice said.

The start-up company has submitted the first round of permits to the state needed to begin construction of the plant, which will run 27,500 bpd of Bakken crude initially.

When completed, the facility will be the state’s third refinery. However, the operating model for the refinery will be very different from that of Tesoro’s 70,000 bpd Mandan refinery and Dakota Prairie’s 20,000 bpd newly built Dickinson refinery, which operate in a more traditional refining model, buying crude and making and selling gasoline and diesel. Some "70 per cent of the capacity planned is dedicated to tolling arrangements," said Prentice. "People deliver crude to us. We cook it up and give them refined product back."

Prentice declined to discuss ongoing contract negotiations, but said Meridian is targeting small Bakken producers. He expects to be able to share more details on tolling contract partners in May.

"We give the small producer that little sliver of product and he comes out of the refinery with the same hedge as an integrated oil company," said Prentice."The smaller guys take title to the refined product as they deliver the crude to us," he added.

Depending on permitting, Prentice said the first phase of the refinery could be up and running in mid-2017.

"We would expect full commercial operations by the end of 2017," he said.

The remaining 30 per cent of the initial phase will allow Meridian to bring in crude in a way that "allows us to modify our product slate, create specialty chemical products" depending on market conditions, said Prentice.

"We can come up with an idea that we test and match it up with markets," he added.