Bailout bill could help Hyperion

By The Associated Press | Saturday, October 11, 2008

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The $700 billion financial-system bailout approved in Washington includes an extension for tax credits that could benefit Hyperion Resources in its quest to finance and build an oil refinery in southeast South Dakota.

The tax break extension adds language that gives companies a break for building or expanding refineries that would process oil shale and tar sands crude. The Hyperion Energy Center north of Elk Point would refine 400,000 barrels a day of Canadian tar sands oil into gasoline and diesel.

The bailout bill contained billions in tax breaks that were added to improve its chances of passing Congress. The refinery tax break was part of the 2005 energy bill that sought to increase domestic oil production.

The Internal Revenue Service released its regulations in September, and since the tax credits were about to expire, the tax break was added to the bailout bill.

Sen. John Thune voted for the $700 billion bailout but had nothing to do with adding the tax break to the bailout package, Thune spokesman Jon Lauck said.

Democratic Sen. Tim Johnson and Democratic Rep. Stephanie Herseth Sandlin voted against the bailout.

The refinery credit could cost taxpayers $894 million over 10 years, according to the Congressional Budget Office.

"Building or expanding a refinery to handle tar sands won't be made or broken by U.S. tax law," said Tyson Slocum of Public Citizen, a Washington-based public interest group. "It will all depend on market conditions and the permitting process."

The extension calls for a 50 percent tax reduction for refineries built or expanded to increase by 5 percent or more their refining capacity of tar sands or oil shale crude.

"It's an affirmation that we need more oil production, increased capacity," Hyperion spokesman Eric Williams said Wednesday.

The company, Williams said, had not calculated what kind of savings it might expect from refining tar sand crude and declined comment on whether the tax break would help attract investors to the $10 billion project.