Going backwards: building an oil refinery in South Dakota


In South Dakota, politicians and business leaders are cheering a massive oil refinery planned for the state's southeast corner. If built, it will be the first oil refinery constructed in the United States in more than 30 years.

There are, of course, good reasons why oil refineries aren't being built anymore. In South Dakota, however the fossil fuel industries are supported with frontier-era zeal. South Dakota Gov. Mike Rounds appears uninterested in reducing carbon footprints. Instead, he wants the world to use more coal, more corn ethanol and more crude oil.

The proposed refinery certainly entices Gov. Rounds and others with some appealing economic and employment numbers.

Refinery developers -- organized as Hyperion Resources -- have purchased and rezoned some 3,900 acres of farmland in Union County. 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.

It has also been estimated that the refinery will have a yearly impact of $13.7 billion on the state's economy. Refinery-related tax revenue potential will also be considerable, including at least $50 million during construction, and annual, ongoing sales taxes associated with the refinery will exceed $50 million.

Surprisingly, little is known about Hyperion. It appears the Dallas-based company consists of a small 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 a friend of President George Bush, and he's married to the grand-daughter 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. Incidentally, the company has been shopping for federal loans to help finance the refinery project.

Refinery opponents have engaged in a spirited campaign, but they're making little headway. They've failed to sway South Dakota and Union County officials, and 58 percent of the county's voters endorsed the refinery in a recent referendum.

Much of the opposition is focused on air pollution, traffic, noise and other problems that will occur near the refinery.  Another worrisome issue is that the refinery will use 10-12 million gallons of water from the Missouri River aquifer each day.

Largely overlooked in the discussion has been 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. Tar sands development in northeast Alberta has devastated 180 square miles of boreal forest. The process uses prodigious amounts of fresh water, and much of the water ends up so toxic it kills any wildlife that touches 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 that requires heavy refining. Producing a single barrel of tar sands oil releases three times more greenhouse gas than producing a similar quantity of conventional oil.

So, Hyperion's existence will encourage tar sands development, and vice versa.  It's not just an oil refinery that South Dakota officials are embracing. It's tar sands mining and the fossil fuels industry.

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.

At a time when we should be de-emphasizing fossil fuels, 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 provide fossil fuel entrepreneurs with the means to keep us addicted to oil?  A $10 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.

Peter Carrels is a contributor to Writers on the Range, a service of High Country News (hcn.org). He is a journalist in Aberdeen, South Dakota.

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