North America Refining News
Hyperion Refinery: Possibility Or Politics?
by James Carlson The Topeka Capital-Journal
May 19, 2008
Officials called it Project Nicole, and for almost two years they
concealed its details.
While a fight over the proposed $3.5 billion expansion of a coal-
fired power plant boiled in public, negotiations for an even bigger
investment played out in the background.
The details of this secret development dwarfed all others.
Hyperion Resources Inc., a Dallas-based company, was considering
four sites, including Kansas, for a $10 billion oil refinery
producing 8,000 construction jobs and 1,800 well-paying permanent
"Wow is all I can say," wrote Deb Miller, secretary of the Kansas
Department of Transportation, when she learned of Project Nicole in
Then in March 2008, the refinery and coal plant projects
collided. Reporters were summoned to a Statehouse office where Rep.
Richard Carlson, R-St. Marys, revealed that Kansas was no longer in
contention for this previously undisclosed oil refinery. Why?
Because Hyperion's president was unsure of Kansas' regulatory
climate, Carlson said.
This offered the ultimate example of what supporters of the coal-
fired power plant had said all along - the decision by the state's
top environmental regulator to deny the power plant, decried as
outside his authority, was driving investment away from the state.
But others said Hyperion had long ago decided to locate its
refinery in South Dakota and that Kansas was only a fallback site.
Was Kansas in serious contention for the project or was
connecting the coal-plant denial to the lost $10 billion project
just political hyperbole?
In April 2006, Bob Cole, director of the Pottawatomie County
Economic Development Corporation, replied to a request by Hyperion
for possible sites to locate an oil refinery. Over the next 10
months, Cole and others in the Kansas Department of Commerce talked
with Hyperion, and by Feb. 15, 2007, the state was one of four
remaining areas in contention.
The company also was considering Iowa, Nebraska and South Dakota,
according to a questionnaire submitted by Hyperion to state
officials in March 2007.
On April 11, 2007, Lt. Gov. Mark Parkinson and other state
officials flew to Dallas for a meeting with the company. Six days
later, Hyperion executive Preston Phillips e-mailed Bill Graper, a
development consultant with the commerce department.
"Kansas presents many compelling reasons for doing business in
the state," Phillips wrote. "Hyperion wants to move forward with
more detailed discussions."
Between that meeting and the end of May, Phillips and other
Hyperion representatives visited Topeka twice, according to an e-
mail from Graper to Kansas officials involved in the negotiations.
The purpose of these meetings, Graper wrote, was to "begin
permitting protocols" and to "discuss the process for optioning
"You never really know if we were a secondary option (for
Hyperion)," Cole said in an interview. "But suffice it to say, they
spent a lot of money and a lot of time on the Kansas side."
Kansas, a backup
In June 2007, after media speculation about a mystery company
buying up land around Elk Point, S.D., Hyperion announced it was
considering the South Dakota city as a location.
Soon after, RTP Environmental Associates Inc., a consultant for
Hyperion, began work on the permitting process with South Dakota
In September, Colin Campbell, the RTP employee in charge of the
Hyperion project, e-mailed the Environmental Protection Agency,
saying he would be submitting an air-quality permit application for
the South Dakota location soon.
"A different site could ultimately be selected, but we can deal
with that circumstance if and when it arises," Campbell wrote.
Carlson acknowledges South Dakota was moving ahead. "We were
probably a little behind," he said. "(Hyperion was) renewing land
options up there."
The Kansas Department of Commerce points to the South Dakota site
announcement and the subsequent months of dialogue between that
state and Hyperion as a clue that Kansas was a backup.
"All indications in the summer and fall were that the gears were
turning in South Dakota and that South Dakota had emerged as the top
candidate," said Joe Monaco, spokesman for the commerce department.
But also at this time in Kansas, Phillips met with landowners in
Pottawatomie County, according to an e-mail he sent to Kansas
officials in early September 2007.
"She was very nice and receptive to the project," the Hyperion
executive wrote about one landowner.
Meanwhile, Campbell with the consulting firm said he was moving
forward with an air-quality permit application in Kansas, per
instructions from Hyperion.
"South Dakota was definitely where we first filed," Campbell said
in an interview. "But I don't know if that was any indication of
'We need to discuss'
On Oct. 19, 2007, Rod Bremby, secretary of the Kansas Department
of Health and Environment, announced he was denying an air-quality
permit for the 1,400-megawatt expansion of a power plant outside
Holcomb in Finney County that was sought by Sunflower Electric Power
Corp. He cited dangers posed by the plant's projected 11 million
tons of carbon dioxide emissions, a greenhouse gas many scientists
link to global warming.
Critics of the decision said Bremby didn't have the authority to
regulate pollutants not spelled out in the federal Clean Air Act.
Sunflower, opponents said, had met all known requirements, and its
permit denial would scare off other businesses.
Two days after the ruling, Phillips e-mailed Graper at the
"We need to discuss as this is of major concern," Phillips wrote.
He added, "Hyperion has to understand where the state of Kansas is
on this issue."
Keeping on track
If Bremby's ruling scared off Hyperion, it wasn't immediately.
Phillips wrote to commerce officials on Oct. 31, 2007 that he was
flying to Kansas the next day and would meet with another landowner.
But e-mails between the two sides show Kansas' uneasiness with
their claim to the Hyperion project.
"We are trying to keep things on track as best we can while
things sort out," Steve Kelly, deputy secretary of business
development with the commerce department, wrote to KDHE officials in
mid-November. He continued, "I think one of the things these
companies are looking for is information and direction as to process
and standards that will be in place."
On Dec. 6, 2007, Hyperion filed its rezoning application for land
in Union County, S.D., and on Dec. 20, 2007 the company officially
filed its air-quality permit with that state.
According to an e-mail from Kelly on Jan. 4, 2008, Hyperion was
anxious to nail down specifics in Kansas because it was coming up on
a deadline to commit to buying land.
"The cost associated with that transaction is approximately
$500,000, so they understandably would like to have some
conversation prior to that date to determine whether that sort of
financial commitment is prudent," Kelly wrote to KDHE.
Phillips wrote to Kansas commerce secretary David Kerr on Jan. 22
asking for a commitment to approve the air-quality permit if
Hyperion applied in Kansas. Bremby replied Feb. 11, "Kansas remains
open for business."
Bremby wrote he couldn't commit to issuing the permit but said if
Hyperion submitted the same application as they did in South Dakota,
there "should not be a problem with issuance."
Sometime around this time, Hyperion told Campbell, the
environmental consultant, to stop planning for the Kansas air-
quality permit application, Campbell said.
On March 11, Union County officials in South Dakota approved
Hyperion's request to rezone the land, and a few days later Phillips
called Cole at the Pottawatomie Economic Development Commission to
tell him Kansas was no longer in the running.
"Hyperion told me that with the CO2 emissions question up in the
air, there was just too much uncertainty," Cole said.
Cole, Carlson and others contend regulatory uncertainty created
by Bremby's decision on the coal plant cost Kansas its chance. The
state wasn't a fallback, they say.
"I think they were very serious about us," Carlson said.
But others say South Dakota was always Hyperion's first choice
and point to the fact that only days after the company's land was
approved for rezoning in South Dakota, Kansas was removed from
Hyperion has run into some problems lately in South Dakota. The
company's CEO, Albert Huddleston, is being sued by the trustees of
his wife's multi-million dollar inheritance to try to block those
funds from being used for the refinery.
The company also has applied for a $10 billion federal loan
guarantee, which critics say is evidence of the project's shaky
Open for business
The 17 million tons of CO2 the Hyperion refinery is projected to
emit, according to its South Dakota application, is well above that
of the rejected Sunflower plant.
Still, Kansas is interested.
"We cannot speak with any certainty as to what level of emissions
would be generated at a Kansas version of the proposed Hyperion
facility," said Mike Heideman, KDHE spokesman.
Carlson said he has heard there may be renewed interest by
Hyperion in the state, and Monaco with the commerce department said
"fairly recent" conversations with the company have been promising,
though he declined to go into more detail.
Nicole Corcoran, spokeswoman for Gov. Kathleen Sebelius, said
Kansas is still interested. "We're definitely open to continuing
conversations with Hyperion, but we're not saying that this specific
project would be approved," Corcoran said.
(C) 2008 The Topeka Capital-Journal. via ProQuest Information and Learning Company; All Rights Reserved
Hyperion Energy Center
Elk Point, SD United States