Where's the Logic?

November 19th, 2008
Where’s the Logic?
Let me first begin by retracting a statement I made in last week’s article of the “Akron Hometowner.” I said that I believed that Higman Sand and Gravel was owned by L.G. Everit Company. That is not correct. I apologize for any inconvenience caused to Mr. Higman by that statement. I can assure you it was not intentional.
I guess I do not understand big business and the logic of the economic development. Just who is taking the risk by having Hyperion build this refinery? I’m not worried about where Hyperion is seeking funding for this; well I am, but there is nothing I can do about it. I am worried about where our money that is going to be used in this venture is coming from. You know this isn’t going to be a situation where we sit back and see what develops. What I see is a lose-lose situation for the State of South Dakota and its people. According to the planned development rezoning issue that was passed by the voters in Union County last June, nothing was said about where the money that was going to be spent by Union County was coming from. I know for a fact that Brule and Spink Townships don’t have funds to even build the one mile of road that the ordinance directs that is to be built. I doubt very seriously that the state has funds available for rebuilding the road because I believe that anything that large must be appropriated by the legislature, and with the economy going in the toilet, revenue for roads etc. is not there
In an earlier article I said that the oil industry is a boom or bust industry. With the price of oil dropping more every day I can’t help but think truer words were never said. The problem as I see it is that if this project were already underway Hyperion would be laying off people because they could not afford to build the refinery for the tar sands when the price of oil is so low. Preston Phillips is quoted as saying that it is not economically feasible to refine tar sands when the price of a barrel of oil is below $90. Look where the price is today. Remember when people outside of Union County were upset because they couldn’t vote on this issue. I will bet they are glad now that they don’t live in this county.
Hyperion can say what they want to about economic development, greed is the driving force behind this and the only one that is going to profit from this is Hyperion. This is a disaster waiting to happen. I don’t mean to stand here and say the sky is falling, but reality should tell us this is not a wise decision. We are amateurs in a field of wolves, and Hyperion is taking us to the cleaners. They are backing us into a corner and it will be next to impossible for us to recover from it once construction starts.
Look at what is happening right now today in Canada. Thousands of workers are being laid off because of the slowdown of production. If Canada doesn’t mine the tar sands, there is nothing for Hyperion to refine and the domino effect takes over. I can’t understand why someone would be in a business that doesn’t have control of the product they are producing. I could understand if this was a company refining its own oil from its own wells, but things are very volatile in this market, and it is a very distinct possibility that this company could go bust before it even gets off the ground.
That doesn’t relieve us of having to pay for the infrastructure that must be built before Hyperion can even begin construction. The roads must be built. The equipment that will be needed for construction can’t be brought in on the current road system. The railroad must be built before construction can start because I’m sure that what cannot be brought in by road will come by rail. These are just two of the things that must be done before anything else can start. So who is going to pay for it? Hyperion keeps asking us to do it for them and I can see why. Talk about a bridge to nowhere, how about a rail line and a road to nowhere?
In order for oil to get above $90 per barrel, the commodities market will cause it to spike. We aren’t producing any more gas at $2.00 a gallon than we were when it was $4.00 a gallon. In fact we are producing less and the price is still dropping. What does that tell you? It tells me that the speculators have lost control of the market and it is going back to supply and demand. So where does this leave Hyperion? It leaves them out of business.
There was an interview on KELO-TV last Wednesday with TransCanada and Hyperion. TransCanada (Keystone) said they weren’t concerned about the downturn in the oil market because they had signed contracts for their pipeline. Hyperion said they weren’t really concerned because they aren’t due to start production till 2014 and things may change by then. Duh! This goes back to my original question. How can you take the risk to spend billions of dollars on a chance that your supplier may quit supplying you with the goods you need to refine? It’s easy, use someone else’s money. This is a no-brainer.