ELK POINT, S.D. | With no end in sight to a prolonged court battle over its proposed Union County oil refinery, Hyperion Refining may ask the state for more time to start building the $10 billion project, a top company executive said.
"We're committed to meeting the March 2013 (construction) deadline, but we know that will be a challenge," Hyperion Vice President Preston Phillips told the Journal last week.
"One option we have is an extension. We're confident there will be ample justification for that request."
Phillips' comments raise the prospect of further delays for the controversial project, which has been beset by legal and economic obstacles for more than three years.
The ongoing litigation, he said, has made it more difficult to secure financing for the nation's first all-new refinery in 36 years.
The uncertain timeline also has the Dallas, Texas-based company scrambling to rework land-purchase agreements with the owners of the farmland where the 400,000-barrel-per-day refinery and power plant would be located.
Hyperion, which holds options on more than 5,000 acres through Aug. 31, 2013, had until midnight last Friday to renew the agreements or let them lapse. Last month, the company proposed to sweeten its annual payments if the owners agreed to extend the options indefinitely, until after all the litigation over the project is over.
The next major court fight is set for Oct. 3, when the South Dakota Supreme Court hears an appeal of a lower court ruling that upheld a key permit required to build the refinery.
In their appeal, the Sierra Club and two local opposition groups maintain the Prevention of Significant Deterioration air-quality permit approved by the state Board of Minerals and Environment is flawed because it violates environmental laws. The opponents also argue Hyperion should have to restart the application process because it missed the state's original February 2011 construction deadline.
It's uncertain when the high court will rule on the permit, but Hyperion officials estimate it could take months at a minimum.
Under that scenario, Phillips said there would be little time to start construction by the new March 14 start date the Board of Minerals required as a condition of the amended permit.
If it can't meet the deadline, Hyperion could ask the minerals board for another 18-month extension, said Kyrik Rombough, engineering manager with the state Department of Environment and Natural Resources' Air Quality Program. If that request were denied, Hyperion would have to reapply, he said.
The makeup of the nine-member minerals board has changed since it last handled the permit. Gov. Dennis DeGuaard recently appointed two new members, including Union County Commissioner Doyle Karpen of Jefferson.
Karpen presided over the five-member county commission as it unanimously approved Hyperion's request to rezone a 3,292-acre site for the refinery. The issue was sent to a June 2008 referendum, where it was approved by a 58-42 percent vote.
When he accepted the appointment to the minerals board, Karpen said he believed the board's role in the air quality permit was over.
Told last week by the Journal that Hyperion was considering asking for another extension of the construction deadline, Karpen said, "I'd listen to the arguments and make a decision. I think that's only being fair to everybody involved."
After the state Supreme Court rules on the permit, Hyperion will review its options, company president Albert Huddleston said. In a statement, Huddleston noted his company has been working on the energy center for eight years and is "determined not to let the Sierra Club's delay tactics prevail."
The revised contract Hyperion offered last month to landowners would extend the options until the air permit and all other litigation is settled.
With a few owners reportedly balking at such an open-ended agreement, Hyperion in an Aug. 27 letter to the owners offered to extend the current option year for 30 days, until Sept. 30.
If accepted, the change would delay the annual payments to the owners until that date. Hyperion spokesman Eric Williams said Friday the short-term extension is aimed at giving landowners more time to consider the company's earlier proposal to extend the options beyond Aug. 31, 2013.
"This is about the process going forward for the next options," Williams said. "We're just looking for some flexibility so the opponents can't just run out the clock."
One landowner, Luverne Hanson, said last week he expected to accept the longer extension. He said he heard some owners had already signed but that some others were trying to remove the contract language with the indefinite end date.
"If (opponents) keep coming up with litigation, it could go for a long time, until some of us won't probably be around any longer," said Hansen, who turns 81 this month.
Phillips expressed confidence Hyperion would work out new deals with the landowners, which he said have been among the strongest supporters of the project.
"We've always been committed to working with the farmers and making sure we have fair arrangements," he said.
The affected owners have been given the go-ahead to began preparations for next year's planting season, which for many corn farmers includes applying fertilizer this fall. A state law requires landlords with oral leases to notify tenants by Sept. 1 if they intend to terminate the agreements for the next crop year.
Ed Cable, a spokesman for the three opposition groups, said he does not expect Hyperion to meet the March 14 construction deadline. In addition to the potential for more litigation, Cable noted the company still has not applied for a dozen other state, federal and local consents.
CORRECTION: An earlier version of this story had the incorrect number of members on the Board of Minerals and Environment. This version has been corrected.