In a statement released Saturday afternoon, Governor de Jongh responded to the recent announcement by HOVENSA notifying its customers that come early 2015, it will be forced to shutter the fuel truck rack and fuel supply to St. Croix if the 30th Legislature fails to ratify the Operating Agreement reached between it and Atlantic Basin Refining (ABR). While the Governor said the V.I. Government is prepared to take the necessary legal action to ensure St. Croix residents are not without fuel, it wasn’t before reiterating his long-held desire that the Operating Agreement be approved.
It will have a number of legal options available, including the use of emergency powers, to prevent the territory being cut off from needed supplies of fuel. The Government is prepared to use all of its powers to ensure a steady supply of fuel to the territory, particularly on the island of St. Croix. — Gov. de Jongh.
The Governor opened his statement by cautioning the 30th Legislature about the possible ramifications if it failed to ratify the Operating Agreement, and asked the body to consider whether the possible “misgivings” it has with the agreement outweighs the incoming risks if there is no sale of the refinery.
“The Operating Agreement negotiated by my Administration and Atlantic Basin Refining remains before the 30th Legislature for whatever further analysis and deliberations are deemed required by the Senate Finance Committee,” de Jongh said. “It also remains the decision of the 30th Legislature to determine whether any possible misgivings about the selected buyer, ABR, outweigh the risks that will come if there is no sale of the refinery, no prompt payment of the $45 million to be paid at the closing, and the failure of the Government to obtain a release of claims from the owners of HOVENSA, which would leave the Government without those releases standing between the Government and HOVENSA’s claims that it is entitled to tax refunds totaling in the hundreds of millions of dollars.”
De Jongh would not relent on insisting that if the Operating Agreement was not approved by the Senate, thus preventing the sale of the refinery, the Government of the Virgin Islands will be faced with many challenges, not the least of them being HOVENSA’s stated intent to shut off all fuel products to St. Croix in the early months of 2015. Furthermore, he raised the possibility of the sale still not going through in the event of ABR’s inability to meet its closing financial obligations. He then questioned whether it was wise to reject the ABR Operating Agreement because of skepticism on those grounds, adding that his Administration had already answered that question before it signed the Operating Agreement.
“If there is no sale of the refinery, either because of a failure to approve the Operating Agreement, or because of a failure of HOVENSA and ABR to close on the sale they have negotiated, the Government will be in the same position,” he said. “It will have a number of legal options available, including the use of emergency powers, to prevent the territory being cut off from needed supplies of fuel. The Government is prepared to use all of its powers to ensure a steady supply of fuel to the territory, particularly on the island of St. Croix.”
De Jongh cautioned that it will likely be an expensive litigation process, but one that will have been made unavoidable by the 30th Legislature if, by its action or inaction, it removes the possibility of a sale of the refinery.
“The Senators have been fully briefed and they understand what action is required now, and the magnitude of the risks we all face,” he added.
In closing, the governor rehearsed the process he says that went into moving HOVENSA from not wanting to sell the refinery in 2012, to the current gridlock as the Senate grapples with the Operating Agreement signed between the de Jongh Administration and ABR.
“We have come a long way since January 2012, where we withstood the initial panic and moved HOVENSA’s owners from their ‘no-sale’ posture to their undertaking a sales process conducted by a third party investment bank that cast the broadest of nets to identify potential buyers for the refinery.
“ABR was the only party willing to submit a bid to operate HOVENSA as a refinery, a refinery that lost $1.5 billion over a three year period prior to its closure. These losses are believed to form part of the basis for HOVENSA’s claim of large tax refunds, a future risk eliminated with approval by the 30th Legislature of the proposed Operating Agreement with ABR.
“The Bureau of Economic Research will submit to the Senate early next week their analysis of the economic impact of restarting the refinery, which I am sure will assist in their review of what we have proposed. It is now to the 30th Legislature to decide. If they decide not to approve the Operating Agreement in a timely manner, then we will respond to whatever next action HOVENSA takes in a way that is in the best interests of our community.”
HOVENSA has said, and the V.I. Government has acknowledged, the plant has stated over the last 18 months that its deteriorating financial condition would no longer allow it to continue purchasing fuel and operating as an oil storage facility. HOVENSA has said if a sale of the refinery is not made by mid-December, it would begin shutting down the plant permanently.
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