Going backwards: Building an oil refinery in South Dakota

Since this essay touches on the topic of Canadian oil sands, Prairie Fire has asked for an oil sands essay from Canadian authorities, which we plan to publish in the near future.

By Peter Carrels

In South Dakota, politicians and business leaders are cheering development of a major new fossil fuels energy center, including a massive oil refinery and gasification power plant, planned for the state’s southeast corner. If built, the oil refinery will be the first such facility constructed in the United States in more than 30 years.

Resistance to the facility is organized and growing stronger, and opponents—led by local groups and the national Sierra Club—recently urged South Dakota’s Board of Minerals and Environment to deny the facility an air quality permit at a four-day hearing. The board will conduct a second multi-day hearing on air quality in late June, and unless a third hearing is scheduled, a ruling will be issued at some point following the June hearing. This is the only state permit necessary before Hyperion is allowed to commence construction. There are, however, pre-operational permits that must be secured before the facility actually begins to refine crude oil.

There are good reasons why oil refineries aren’t being built anymore, but in South Dakota there exists a frontier-era-like zeal supporting fossil fuel industries. The state’s governor, Mike Rounds, appears uninterested in reducing carbon footprints. Instead, he wants the world to use more coal, more corn ethanol and more crude oil. Refinery opponents fear that the Board of Minerals and Environment as well as the South Dakota Department of Environment and Natural Resources, the agency charged with considering the refinery’s environmental and public safety, reflect the governor’s support.

The proposed refinery certainly entices Governor Rounds and other boosters with appealing economic and employment numbers.

Refinery developers—organized as Hyperion Resources—have optioned to buy about 3,900 acres of Union County farmland that has been rezoned by county officials. The refinery complex will cost about $10 billion to build, and some 10,000 laborers will work on its construction. If it becomes operational, the facility, to be called Hyperion Energy Center, will require about 1,800 employees and process up to 400,000 barrels of gasoline and diesel fuel each day.

The prospect of so many new jobs isn’t the only aspect of the project that has economic development advocates excited and aggressively supportive. It has been estimated that the refinery will have a yearly economic impact of $13.7 billion, a massive influence on a state with relatively narrow economic diversity. Refinery-related tax revenue could also be considerable, including at least $50 million during construction, and annual sales taxes associated with the refinery are projected to exceed $50 million. Like other states, South Dakota is enduring a state budget crunch. The prospect of a large new revenue source is tantalizing.

Surprisingly, little is known about Hyperion. It appears the Dallas-based company consists of a small, well-connected cadre of Texans, including a man named Albert Huddleston, who funneled considerable money into the 2004 Swift Boat campaign that crudely distorted the military service of presidential candidate John Kerry. Huddleston, Hyperion’s CEO, is married to the granddaughter of Texas oil billionaire H. L. Hunt.

Hyperion Energy has never owned or operated an oil refinery. Hyperion’s principals do have some experience in the oil industry, but the company’s portfolio appears to be confined to real estate and oil and gas leases, and the building, buying and selling of landfills. It has been reported that the company was shopping for federal assistance to help finance the refinery project.

Refinery opponents have been engaged in a spirited campaign, but they lost in the only public election held thus far. In Union County, site of the proposed facility, 58 percent of the voters endorsed the refinery in a contentious, county-wide election held last June. Economic factors, including new jobs and tax monies, emerged as the primary basis for project support.

Much of the opposition is focused on air pollution, hazardous wastes, traffic, noise and other problems that will occur because of the refinery. Area residents are also concerned because the refinery’s daily need for 10–12 million gallons of water will come from the Missouri River aquifer.

Another worrisome consideration is the source and type of crude oil—Canadian tar sands—to be refined at the Hyperion facility. Canadian tar sands are probably the dirtiest source of oil on earth, and mining tar sands has created what might be the most polluted area in North America.

President Obama has visited Canada, and instead of warning against the pollution caused by the extraction and use of tar sands, he compared the challenges related to developing tar sands to the challenges of using coal in the United States. Environmentalists were disappointed at this “soft” approach, especially since the president has pledged to dramatically reduce greenhouse gas emissions and pursue cleaner energies.

Tar sands development in northeast Alberta has already devastated nearly 200 square miles of boreal forest. The process uses prodigious amounts of fresh water, and much of the water ends up so toxic it kills wildlife that comes into contact with it. Millions of gallons of this poisoned water are now impounded in hundreds of toxic lakes and ponds.

Tar sands oil is low-grade crude requiring heavy refining. Producing a single barrel of tar sands oil releases three times more greenhouse gas than producing a similar quantity of conventional oil. Projected emissions from the Hyperion refinery include 19 million tons of carbon dioxide per year.

So, Hyperion’s existence will encourage tar sands development, and vice versa. It’s not just an expensive, jobs-producing oil refinery that South Dakota officials are embracing, it’s tar sands mining, the fossil fuels industry and more carbon dioxide that will be dumped into sky.

Hyperion claims its refinery will be a “green” facility, minimizing pollution. There is understandable skepticism about this, especially considering the type of crude that will be refined and Hyperion’s vague descriptions about the technologies it will use.

Environmental activists and scientists from across the country have been trying to add stronger regulations to existing oil refineries, but little progress has been made. Last year oil refineries released more than 250 million tons of carbon dioxide into the air. South Dakota’s total carbon dioxide emissions—from all sources—were about 15 million tons. Obviously, Hyperion would substantially add to the state’s total.

It was revealed at the May air quality hearing that the 19 million tons of carbon dioxide to be annually produced at the Hyperion facility will rank the facility first among all the nation’s refineries. Hyperion officials claim that the carbon capture technologies to be installed will limit the amount of carbon dioxide that escapes into the environment to about 10 million tons. Is the public supposed to feel relieved by this?

At a time when we should be de-emphasizing fossil fuels and significantly reducing carbon dioxide emissions, the substantial private and public capital necessary to develop both Hyperion’s refinery and the apparatus—including new pipelines—feeding that refinery with dirty crude oil pushes us in the wrong direction. Why allow a refinery that will exacerbate climate change? Why provide fossil fuel entrepreneurs with the rationale to keep us addicted to oil? A ten-billion-dollar investment helps do that. Permitting an oil refinery to proceed to actual construction is a step backwards for South Dakota, and for the United States.

A version of this editorial was originally published in August 2008 by Writers on the Range, a syndication service of High Country News. This version includes additional and updated information.

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