Oil in Our Back Yard

This lengthy response is in reply to a lengthy comment to one of my posts. When it gets this long and deep, and requires graphics, I generate a page to have for it’s own. Original posted comments to myself in RED, all other stuff is mine, in whatever color I felt like.

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To Lemur:

It’s easy for someone from afar to speculate on the situation, but to say that this “sort of behavior is well known when it comes to people who have lost an election fair and square” isn’t really fair given you do not know the situation by which this came to a vote.

There is presently a major lawsuit against Union County’s commissioner’s concerning the way this came to a vote. Hyperion was allowed to “re-zone” the area without having to do an environmental impact statement and a host of other things. The commissioners and planning and zoning members of this county are novices when it comes to dealing wtih something of this nature and Hyperion drafted it’s own zoning ordinance which does not protect the citizens of this county. The re-zoning ordinance was approved in 6 weeks time. Shouldn’t a state/county be a little more thorough before giving a “blank check” to a major oil refinery? (proposed to be the 6th largest in the US)

Also the proposed refinery site is DIRECTLY over top a massive shallow aquifer that supplies water to a vast number of people. This site is not in a desolate part of the state either. It is in the southeastern edge of the state (the most populated part) and will eat up 1,000’s of highly fertile and productive farm ground (some of the best in the US) In a time when crops are becoming more valuable and our food supply

In theory a new refinery isn’t that bad of an idea, but this plan is so thoroughly flawed that it will never get off the ground. If an investor were wanting to invest in a new refinery they would invest in the Yuma Arizona Clean Fuels Refinery which is closer to breaking ground, but even that refinery still has yet to raise all the money needed to do so. (And has been trying to do so for 10 years now)

The proposed refinery in SD has a 3 times higher price tag. In that was in 2007dollars. Given the present state of our economy and the fact that it is more economically feasible to add on to an exisiting refinery, this project is just a “dumb idea.” That is a direct quote from the former CFO and VP of Hyperion Resources who had blocked funding for this project because he realizes it’s not a wise investment. There is no money for this project and Hyperion is on the record as seeking federal funds to help pay for this project or seeking the development of a loan program to do so. SD Senators expressed doubt that this ever would or could happen when approached by Hyperion is Washington this spring.

The only reason that this passed in a referendum vote in Union County (ok more than one reason) was:

1. it was attached to the primary vote (Hyperion’s big push because they knew more people would be out to vote anyway and would vote yes because they would not take the time to fully inform themselves

2. gas prices are at an all time high and people think this is a solution, even though a refinery nearby doesn’t guarantee lower prices or would be a short-term solution

3. a majority of the county voted against this, except for a small more upscale urban area (farthest away from the proposed refinery site) Hyperion worked this area really hard and recruited all the big business people there telling them they would all get rich if this were to be built

4. Hyperion played smart…they outspend the opposition 10 to 1 and hired professional campaign managers to come in

5. South Dakotans are not knowledgable about environmental things by in large…we are a clean state to begin with and Hyperion set it’s sights on it because of lax environmental standards currently in place.

Melissa -

Firstly, I want to address “isn’t really fair given you do not know the situation by which this came to a vote.”

What you think I do or do not know is hardly relevant, and in any event, you don’t have the foggiest notion of what I do or do not know. Yet, you were perfectly willing to toe the line of an ad hominem attack. Just because I am “from afar” it does not banish my right to have views on the issue.

My original post was addressing the thought-processes that prevail in this story and have for quite a few years now elsewhere, ever since it became known to be effective. That is, the mindset that says:

1. We will have an election to decide what we wish to do and, if we win it, we are satisfied
2. If we do not win it, then it is time to take the issue to court.

I spoke only truth: In this type of situation, it is very common to see people use whatever means they have at their disposal to win, at any cost - regardless of the agreed-upon rules at the outset. I still am unable to see how anything I have yet heard does not ultimately fall into a classic case of NIMBY.

Driving a car around is a passive acceptance of a refinery somewhere.

Shouldn’t a state/county be a little more thorough before giving a “blank check” to a major oil refinery?

Hyperion was allowed to “re-zone” the area without having to do an environmental impact statement and a host of other things.

Loaded question.  Where a refinery is concerned there is no such thing as a “blank check”.  If Union County chooses to deny a building permit because it is other than advertised, it doesn’t fly, and Hyperion goes home.

There will need to be environmental impact statements with the EPA (perhaps BLM as in Yuma – I don’t know), zoning commission (current in Union County) – and it will require many many rounds of negotiations with all levels of government, from local to state to federal levels requiring many permits along the way.  DENR will be overseeing local required permits including air quality, surface water and ground water, hazardous waste, storage tanks, and solid wastes.   This is not an out-of-control process. Re-zoning is equivalent to the first 30 meters of a 10K race and is the smallest hurdle of them all.

…commissioners and planning and zoning members of this county are novices when it comes to dealing with something of this nature…

This is (1) your opinion, (2) hardly factual, and (3) even if it were factual that they were/are novices, that hardly invalidates their work and their decisions.  The world is full of novices who have accomplished great things.

Also the proposed refinery site is DIRECTLY over top a massive shallow aquifer that supplies water to a vast number of people. This site is not in a desolate part of the state either. It is in the southeastern edge of the state (the most populated part) and will eat up 1,000’s of highly fertile and productive farm ground (some of the best in the US) In a time when crops are becoming more valuable and our food supply [thought not completed]

The refinery is slated to take a few percent of available land (~2% of 170,000 acres) in Union County.  This is a very small percentage of total overall land available for food production in the US and will not even make a noticeable blip in food output.

Shown below a map that shows the type of aquifer that runs through that area in South Dakota. It is classified by the USGS as an aquifer of type “Other rocks”. This map shows quite a large area of the US under that classification. Below that is a map showing all the aquifer systems in the US. The link: http://nationalatlas.gov/natlas/Natlasstart.asp    Now look at the third image (http://www.energysupplylogistics.com/refineries)

Aquifers of type “other” (USGS)

Aquifers everywhere.

Refineries, also everywhere.

It is evident that there are precious few refineries that aren‘t near an aquifer that supplies water to a lot of people.

In theory a new refinery isn’t that bad of an idea, but this plan is so thoroughly flawed that it will never get off the ground. If an investor were wanting to invest in a new refinery they would invest in the Yuma Arizona Clean Fuels Refinery which is closer to breaking ground, but even that refinery still has yet to raise all the money needed to do so. (And has been trying to do so for 10 years now)

And you have proof of your claim that their plan is flawed?  While that statement is charged with emotionalism and hysteria it conveys nothing factual besides your opinion.

Regarding funding of refinery projects – from the CATO Institute:

Environmental regulations, backed by activists who mix demonstrations and lawsuits, create delays and inflate costs.

One Arizona project begun a decade ago is still at least five years away from completion.

Over the last 10 years the industry has invested $47 billion to comply with new environmental controls rather than construct new capacity, according to the American Petroleum Institute. Compliance with sulfur standards alone cost about $20 billion.

There is a very real reason why investors do not want to invest their money, and that is because an industry that has a hard time making a profitable go of it is being fought on every single front.  I would sit down and think it through before investing if it were my money for that very reason.  More proof that this is not a runaway process:

ABC was the only network that told more of the story behind refining in America. “World News Tonight” on August 16 took “A Closer Look” at the decline of U.S. refining capacity. Betsy Stark’s report included a word with Glenn McGinnis, who has been working to launch a new refinery in Arizona. Stark pointed out that “It’s taken five years to get the air quality permits. The site had to be moved from Phoenix to Yuma for environmental reasons. And after a decade of planning, they still haven’t broken ground.”

Even the alternative you suggested is having problems with getting a refinery going because of funding problems isn’t such a shocker given that investors generally like to see forward progress, not interminable delays.

They have been having a hard time trying to raise the money because investors know that there is resistance all through the process – they are afraid to risk their money.
The proposed refinery in SD has a 3 times higher price tag. In that was in 2007 dollars. Given the present state of our economy and the fact that it is more economically feasible to add on to an existing refinery, this project is just a “dumb idea.” That is a direct quote from the former CFO and VP of Hyperion Resources who had blocked funding for this project because he realizes it’s not a wise investment.

The EX-CFO’s opinion is not only not germane at this time,  it’s unclear. The question that comes up is why would a VP/CFO block funding? He’s not the CEO.  Why did he leave Hyperion and why should he speak in the name of his ex-company?  The practice of listening to former employees is never a wise one because you don’t always know what axe they have to grind.  He can have any opinion he wants on the matter, but the CEO is the leader of the company.

The problems inherent in adding on to an existing design are enormous. A decision has to be made to decide whether it is easier to do that or to start with a blank slate.  Many refineries have had additions, which is why, in spite of a net loss of refineries over the years we’ve kept up with needs, but the margin is shrinking.

There is no money for this project and Hyperion is on the record as seeking federal funds to help pay for this project or seeking the development of a loan program to do so.  SD Senators expressed doubt that this ever would or could happen when approached by Hyperion is Washington this spring.
The only reason that this passed in a referendum vote in Union County (ok more than one reason) was:
1. it was attached to the primary vote (Hyperion’s big push because they knew more people would be out to vote anyway and would vote yes because they would not take the time to fully inform themselves.

I’m going to make an observation here – you’ve just insulted those who may very well have been informed and decided to vote for it anyway.   You have assumed that anyone who did not vote your way was ignorant. Maybe so, but people choose to make decisions based on things outside of your approval all the time.

I would also be shocked to learn of Hyperion not seeking a loan or debt arrangement with the government. It’s not abnormal.  Federal?  State?  Eh.  They’ll work something out.

2. gas prices are at an all time high and people think this is a solution, even though a refinery nearby doesn’t guarantee lower prices or would be a short-term solution

There are no guarantees, but refining capacity is going to be very important. We use 20M barrels a day. That value is not going to go down anytime soon. Lots of refineries have gone bust but the industry has managed to lose only 10% of it’s capacity in spite of this. There is not much margin left, however. Weighing on price alone oversimplifies the issue.

No, a refinery today is not a short term solution.  It is a long-view approach to a solution in a few years.  If you wait a few years after having not done anything, you will still be faced with the statement “(n)or would be a short term solution”.  You have to start somewhere and sometime.

3. a majority of the county voted against this, except for a small more upscale urban area (farthest away from the proposed refinery site) Hyperion worked this area really hard and recruited all the big business people there telling them they would all get rich if this were to be built

A referendum is a vote between two options – a popular vote, in fact.  Obviously a majority of the voters did vote for it since it passed 58% to 42%.   Unless they count the “rich people” in the Dunes twice, it would appear that the popular vote prevailed.

I would be shocked if we were to become a country where people had to be ashamed of hoping to get rich off of a business venture.  Be careful in using this as an argument topic.

4. Hyperion played smart…they outspend the opposition 10 to 1 and hired professional campaign managers to come in

Well, what the hell do you expect? That they hire the kid that works from 7-11 down the road to be a campaign manager? The idea that a win by outspending the opposition by … 10 to 1 (show me numbers, I apparently am acting out of ignorance) is somehow bad is ludicrous. That’s the way politics/business work, and if you are trying to run a business and make it fly you have to invest some money.

5. South Dakotans are not knowledgable about environmental things by in large…we are a clean state to begin with and Hyperion set it’s sights on it because of lax environmental standards currently in place

Again, if I was a self-respecting S.D. citizen that had voted for the refinery, I would have spit on the ground at your feet just hearing that. What an amazing display of arrogance.

If you were the CEO of a company hoping to make detonators for missiles, would you move to someplace like Eugene, Oregon? No, you would move to Albuquerque, New Mexico. Vilifying Hyperion for making a sound business decision is trying to hold sway over an argument via emotionalism.

Hyperion set it’s sights on S. Dakota because it has the things a refinery needs to operate.  It’s a sound business practice.  Assuming sinister motives makes for good theater but is usually not the case – and, it is difficult to prove or disprove.

As I’ve said before, the whole matter still leaves me with the distinct impression that a company is trying to dot the i’s and cross the t’s, and there is a minority group who wishes to be victorious by using the courts.