ELK POINT, S.D. -- Plans for a $10 billion oil refinery in southeast South Dakota appeared to be at or near an end after the developer opted not to renew its land-purchase options.
The decision means Hyperion Refining no longer controls the 3,292 acres of farmland that was rezoned for the energy center in June 2008. The land is about half an hour northwest of Sioux City, Iowa, across the Missouri River from Ponca State Park in Nebraska.
The Dallas-based company insisted it had not given up on building the first all-new U.S. refinery since 1976. But without the land options, the company is even more in danger of missing a March 2013 deadline for starting construction.
"We are evaluating our various options and opportunities," Hyperion spokesman Eric Williams said in a statement. "We appreciate the longstanding and continued support of the landowners in Union County and are continuing to dialogue with them."
Project opponents cheered the development, while at least one industry expert said it appears the company had thrown in the towel.
"Why would anybody walk away from options unless he just doesn't have the money or doesn't want to do the deal?" asked Malcom Turner, chairman of Turner, Mason and Co., a Dallas-based petroleum consulting, engineering and management firm.
Real estate agents secretly began securing options on Union County farmland in late 2006 for the then-mysterious project, which was nicknamed "The Gorilla." Under a three-year extension Hyperion signed with about half a dozen landowners, the company could have picked up its options on more than 5,000 acres for another year, through Aug. 31, 2013. That would have cost Hyperion more than $1 million in payments, or as much as about $200 per acre, according to sources familiar with the situation.
In August, Hyperion asked the landowners for a longer extension that would have tied the purchase of the land to the conclusion of legal action against the project. Some owners signed the revised deal, but a few held out. To give those owners more time to consider the offer, Hyperion in late August asked for a 30-day extension. That deadline passed at midnight Sunday, as the company opted not to renew the options.
The surprise decision comes days before the South Dakota Supreme Court is scheduled to hear oral arguments in a case involving a state air quality permit for the refinery, which has been the subject of a regulatory and legal battle for nearly five years.
Attorneys for Hyperion still plan to argue the case before the high court Wednesday, Williams said.
Three opposition groups -- the Sierra Club, Save Union County and Citizens Against Oil Pollution -- are challenging a lower-court ruling that upheld a state environmental board's decision to grant the state air quality permit. Attorneys for the opponents also are still ready to argue their case, Ed Cable, a spokesman for the groups, said Monday.
While Hyperion's statement hints at going back to the bargaining table with the landowners, Cable said it's "highly unlikely" that all of the owners in the refinery footprint would agree to option their land again.