Amid Keystone Controversy, Another Energy Project Moves Forward

Hyperion Energy makes progress on a South Dakota oil refinery.

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Gregg Laskoski is a senior petroleum analyst for GasBuddy.com.

Often when there's a possibility of something being built somewhere someone inevitably opposes the idea and exercises his or her Constitutional rights to oppose it, protest it, or even prop up a Hollywood actress to make some noise too. That's democracy and it's a healthy part of the process.

But to the relief of many folks in South Dakota and neighboring states, the paparazzi have yet to descend on Sioux Falls and even if they did, they'd have another 60 miles to go to reach Union County, S.D. So logistics make it no match for the media grandstanding associated with a more controversial oil project, the Keystone XL pipeline. Absent are the protest theatrics that might otherwise disrupt the work in Union Count that many believe represents an important step for South Dakota, the Midwestern region, and the United States.

Dallas-based Hyperion Energy began planning the Elk Point, South Dakota refinery in 2005. If permitting, engineering, construction, and baseline work moves according to schedule, the 400,000 barrel-per-day refinery could be fully operational by 2017.

[See a collection of political cartoons on energy policy.]

If you're undecided about whether this refinery is essential consider the following:

  • Over 40 percent of U.S. refinery capacity is found in the Gulf Coast region and our vulnerability there is as uncertain as the weather.
  • The last refinery built in the United States was Marathon Oil's plant in Garyville, Louisiana. It was begun in 1973 and completed in 1976.
  • Since 1976 the U.S. population has grown from 218 million to 307.4 million according to the U.S. Census Bureau, an increase of 89.4 million.
  • To date, the only other proposed U.S. refinery in public discussion was Arizona Clean Fuels' refinery project in Yuma, Arizona and financing has reportedly brought that project to a standstill.

    In addition to the Elk Point refinery, Hyperion intends to build a dedicated "bullet" pipeline to Alberta to bring in the crude oil. Clearly, there are still questions to be answered and issues to be resolved. The exact location of the pipeline has not been made public. Hyperion needs to draw 12 million gallons of water daily from the Missouri River and special permits will be needed depending on how it will extract the river water along with other groundwater and stormwater  permits.

    [Read: Keystone XL Pipeline Decision a Test on Obama, Environmentalism]

    Steadily, the project in South Dakota project moves forward. "If the demand is there and there's certainly demand for fuel, the economics of the refinery and pipeline works," said Hunter Roberts, economics policy director for the Governor's Office of Economic Development.

    While the $10 billion, 12-year project in South Dakota will take three times longer to build than Marathon's Garyville, Louisiana plant, the end-result should alleviate shortages of distillates and have a stabilizing effect on the regional market. Additionally, Hyperion says there are no plans to export refined products. (Perhaps the GOED could persuade Hyperion to put that in writing?)

    Last month the project reached an important milestone when the South Dakota Board of Minerals and Environment unanimously approved the air permit for the refinery. The board also approved an 18-month extension of the window to begin construction which gives Hyperion until March 2013 to start work at the site.

    [Read the U.S. News debate: Should offshore drilling be expanded?]

    Construction is expected to provide full time employment for 4,500 workers over a four and a half year span. Upon completion the refinery would employ 1,800 workers.

    It's interesting to note that just three years ago, voters in Union County passed the referendum that would allow the zoning change necessary for the refinery to be built. It was passed by a 58-42 margin. After seeing the volatility in retail fuel prices this past year one cannot help but think an awful lot of people should thank Union County for making the right decision.

    • See a collection of political cartoons on gas prices.
    • Read: Approving Keystone XL Pipeline Would Create Jobs and Lower Gas Prices
    • See the 10 priciest years in history for gas.