Elk Point, South Dakota, isn’t exactly America’s Energy Hub.  As you might expect, this farming community near the South Dakota-Iowa-Nebraska borders is more suited for growing and harvesting corn and soybeans than turning crude into gasoline and other petroleum products that require the presence of a smelly oil refinery.

No wonder the folks of Elk Point  began asking hard questions when a small and little known private company from Dallas, Texas, named Hyperion Resources, showed up at their doorstep one day looking to buy land for what’s now commonly referred to by Elk Pointers as the “Gorilla”  project.

After months of speculating among Elk Point farmers and community leaders, Gorilla was finally unmasked: a huge 400,000 barrel per day “green” oil refinery and related energy facilities that could take a decade to fully develop and cost upward of $10 billion.

Gorilla, so named because of the project’s immense size, also could be the first new oil refinery to be constructed in the United States in more than 30 years. So secret was the project that South Dakota Republican Gov. Mike Rounds kept the proposed refinery under wraps, reportedly for  “competitive reasons,” until Hyperion made the formal announcement in  mid-June.

Gorilla is not your grandfather’s oil refinery

“This is not your grandfather’s oil refinery,” Rounds said in a prepared statement. “This is a major technological breakthrough that will set an example for all future energy development centers.” Hyperion project executive J.L. “Corky” Frank, former president of Marathon Ashland Petroleum, said Hyperion intends to build “the most environmentally sound energy center in the United States.” 

Gas prices are the highest in U.S. history, and the U.S. refining infrastructure hasn’t seen a significant change since 1976,” he said. “The fact is refining capacity in this country has not kept pace with demand. We believe there’s a growing belief among people in this country that North American oil should stay in North America.”

Elk Point, located in Union County in the far southeastern portion of  South Dakota, is said to be on a short list of areas being considered for the Hyperion energy center. Other possible locations were not disclosed. “The Union County site is sufficiently attractive that we’ve taken several options on land there, and we may take a few more,” Frank said. The company said it hoped to decide on a permanent location sometime within the next dozen months.

Kim Quam launches Gorilla website

Meanwhile, concerned local resident Kim Quam, who posted a website (www.elkpointgorilla.com) to track the project and provide updated information, said Gorilla representatives are trying to acquire options on mainly farm land in an area that encompasses 20 square miles.  Approximately 2,000 acres would be covered by the facility and the remainder would be considered a “buffer zone,” he added.

“The project had been shrouded in mystery and there was very little actually known about the project,” Quam says on his website. “Although the name Hyperion and the nature of the project are now known, there are still many questions that remain unanswered.”

In announcing the refinery plan, Hyperion left out numerous details including financial sources necessary to cover the huge $8 billion to $10 billion cost of the project. Bloggers weighing in on Quam’s Elk Point Gorilla website appear to be divided over having a large refinery in their community, with the pros often citing the importance of new jobs and the cons largely worried about pollution and foul-smelling air from the refinery.

“How about a little regard for the people who own land near the prospective refinery,” one blogger commented. “While the people within in the optioned land will get paid, the people nearby will see their land values plummet. So much for caring about your neighbors.”

The central component of Hyperion’s energy center would be the oil refinery, which Hyperion said would process roughly 400,000 barrels of oil per day “into clean, green transportation fuels,” including ultra-low sulfur gasoline (ULSG) and ultra-low sulfur diesel (ULSD).

“The refinery will use only the best available environmental  technologies and will go the extra mile to protect the environment, particularly air and water quality,” the company promised.

Hyperion said construction of the refinery would employ an average of 4,500 workers over a four-year period, with a peak of about 10,000. When operational, the refinery would provide about 1,800 full-time, “good-paying jobs, complete with benefits,” the company said, adding that the refinery would process heavy crude oil from Canada and ship it to markets in the United States. Just who would pay for a pipeline linking Canadian oil with the Gorilla is unclear.

Additionally, the company said the integrated refinery would incorporate a power plant with the latest technology, consuming petroleum coke byproduct from the refinery to supply hydrogen, steam and electricity to the refinery itself. Leveraging integrated gasification combined cycle technology (IGCC), the state-of-the art in power production, emissions would be substantially lower than conventional power generation plants, Frank said.

In addition to Hyperion’s refinery, the energy center is being designed to incorporate a broad range of other facilities, depending on the markets and what’s most appropriate for the region. Hyperion said it would demand that any other companies with facilities at the energy center must also meet the highest standards for environmental protection in the United States.

“Our proposal addresses all those issues and does it in a way that has never been done in this country,” Frank said. “Hyperion is ready to step in to fill this need for additional refining capacity.”

The Gorilla project, located near the Missouri and Big Sioux rivers, would also require the use of 12 million gallons of river water per day for cooling purposes, Union County commissioners have been told. Though Hyperion says the company plans to use Canadian oil for feedstock, it’s unclear just how Hyperion would actually tap into the resource, with no third-party pipeline system in the immediate area of Elk Point to transport the product to market. Reportedly, a Hyperion official said the project is of sufficient size to build and operate its own pipeline. He also said that if needed, undisclosed pipeline operators told Hyperion that a bullet line could be constructed from Alberta, Canada, to the Gorilla refinery in Elk Point.

However, Hyperion spokesman Eric Williams reportedly said 

 that neither Marathon nor TransCanada has any involvement in the refinery plan. But he said that in addition to Frank, the Hyperion refinery team includes two other former Marathon executives: Carl Clay, a former president of Marathon Pipe Line Co.; and Dick White, a former senior vice president of marketing for Marathon.

Hyperion describes itself as an oil and gas company that has “made its mark by achieving maximum value from challenging properties including mature energy fields.” The company is said to be headed by Albert Huddleston, an oilpatch veteran.

Still, local residents continue to question the refinery project. “Why aren’t large oil companies like Exxon, BP, Shell and others clamoring to build ‘green’ refineries?” noted one blogger. Others wrote:

* Petroleum-based products are not considered “green” and should not be labeled as such. That term is better used to describe the renewable fuels industry.

* Many of us could use a financial boost these days to deal with the rising costs of living.  Sadly, Hyperion’s proposed plan is not the answer to our prayers.  No matter how many experts are brought in to convince us otherwise, oil refinery statistics show us that “it just ain’t so.”

* Without a pipeline to bring the oil to South Dakota and without a pipeline to market, Hyperion may not be serious about this site. Are they merely using Elk Point as leverage to secure South Dakota subsidies, then turning to their preferred sites and asking a higher bid from another state?

* With the past seven years of drought and an increase in development and agriculture expansions across South Dakota, water withdrawal such as that required for ... the Gorilla oil refinery will only add more strain to a limited South Dakota resource, already strained. 

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