A state environmental board voted unanimously Thursday to approve a Texas company's request to extend the deadline for starting construction of a $10 billion oil refinery planned for southeastern South Dakota.
After hearing closing arguments from lawyers representing Hyperion Resources and groups opposing the project, the Board of Minerals and Environment also approved changes in the permit to reflect updated national air quality standards and new technology.
Hyperion's original permit, issued in August 2009, called for construction to begin by Feb. 20 this year, but company officials said the project was delayed because the recession caused problems in getting financing. The amended permit gives Hyperion another 18 months, until March 2013, to start construction.
"Hyperion is committed to this project," company lawyer Rick Addison told the board. "We plan to get in a position where construction can begin timely, without another extension."
Opponents said they expect the board's approval of the amended permit will be appealed to circuit court, where a judge is still presiding over an appeal from the original permit issued two years ago. They argue that the new permit does not do enough to reduce air pollution and that Hyperion should wait to get a completely new permit based on the latest standards and technology after it is ready to begin construction.
"We know they hope to proceed, but they haven't been able to prove when they will proceed. Mere hope, we submit, is not enough," said Robert Graham, a lawyer representing the three groups opposing the project.
Hyperion's proposed refinery north of Elk Point would process 400,000 barrels of Canadian tar sands crude oil each day into low-sulfur gasoline, diesel, jet fuel and liquid petroleum gas. It would be the first new U.S. oil refinery built since 1976.
The project would include a power plant that produces electricity for the refinery. It would use a byproduct of the refinery process, solid petroleum coke, which would be turned into gas and burned to produce electrical power.
Hyperion contends the refinery would be a clean, modern plant that would use the most advanced, commercially feasible emission control technology. The company said the project would hire about 4,600 people during construction and have about 1,800 permanent employees after it begins operating.
The Sierra Club and two local groups, Save Union County and Citizens Opposed to Oil Pollution, argue the refinery could emit too much pollution and hurt the quality of life in the rural area.
Board member Timothy Johns said he doesn't accept the argument that the project has been delayed by a sluggish economy because the oil industry appears to be in good shape. The board then approved language finding that the construction delay also was justified by the court appeal involving the original permit and new national air quality standards for some pollutants.
"To me, it's an excellent project and should go forward," Johns said of the proposed refinery.
Since the original permit was issued, carbon dioxide and other greenhouse gases have become subject to regulation, but Hyperion's amended permit will not require it to capture and sequester carbon dioxide. It's not economically feasible to capture and store that carbon dioxide, Addison said.
Allison Torrence, a lawyer for the project's opponents, said Hyperion has not proved it would be infeasible to capture greenhouse gases. The refinery might be able to sell carbon dioxide or store it underground, she said.
The Hyperion refinery would release more greenhouse gases than any other U.S. refinery and it would increase South Dakota's total greenhouse gas emissions by 50 percent, she said.
Addison said changes in the permit will reduce emissions of many pollutants from the plant.
Basically, there are over 50 instances where this permit is being amended to make it more protective of human health and the environment or more easily enforceable by the state of South Dakota," Addison said.
Graham argued that Hyperion's original permit expired when it failed to start construction by this year's deadline, which would mean the company would have to seek a brand new permit.
However, Assistant Attorney General Roxanne Giedd said the 2009 permit allowed Hyperion to seek an extension for starting construction as long as it filed an application before the original deadline. Such a permit should not be allowed to expire when delays are caused by court appeals and the board's consideration of an extension, she said.