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DeJongh Takes Questions on Cruzan Deal

Anthony Babauta, assistant secretary of the interior for Insular Areas, speaks at Wednesday's press conference on the recently concluded agreement to expand Cruzan Rum. To the left is Gov. John deJongh Jr., to the right, Lt. Gov. Gregory Francis and Patrick Koley, senior vice president of strategy and corporate development for Fortune BrandsWith top Cruzan Rum, Fortune Brands and Department of the Interior officials at his side, Gov. John deJongh Wednesday morning met with the media to outline the nuts and bolts of a newly signed 30-year agreement with Cruzan Rum to help boost production, clean-up its waste stream and bring a greater income stream to the government.
Later Wednesday the governor submitted a bill to the Senate that would ratify the agreement with Cruzan and announced that he would call the Legislature into special session at 10 a.m. Oct. 27 to take action on the bill. If approved, the agreement will ensure Cruzan Rum stays on St. Croix for the foreseeable future.
Along with cementing into place for three decades the tax benefits, molasses subsidies and other benefits Cruzan Rum already enjoys, V.I. government will provide financing for the construction of a state-of-the-art wastewater treatment plant and to expand capacity of the Cruzan distillery by more than 50 percent. The agreement calls for up to $30 million in bonds for a wastewater treatment facility to address the long-standing environmental issues at the St. Croix facility, and another $75 million in bonds to expand the capacity of the existing distillery.
The wastewater treatment plant is an essential component of expansion plans because Cruzan’s production has been restricted under an environmental order. Currently, Cruzan pumps its molasses waste into the sea.
"That is a concern the company has been considering for many years, and one Gary Nelthropp has found a way to address," deJongh said. Nelthropp is president and master distiller of Cruzan Rum, a position his father held before him.
"My family came to St. Croix in the 1800s and has been a part of it ever since," he said. "I am looking forward to flying in and not seeing a plume down below but seeing only a clean ocean."
Asked how the system would work, Nelthropp said instead of dumping the molasses waste, it will be dried and sold.
"It’s an evaporative system; a straightforward one-box unit," he said. "We will recycle the water, reducing our use and dry the solids which will be removed from the island to sell for use as cattle feed and other purposes."
This allows the plant to expand, producing more Cruzan Rum as well as Ronrico Rum, another Fortune Brands label, along with bulk rum, he said. Along with the industrial improvements, the plant will become more tourist friendly, with an upgraded, expanded informational tour and tourist amenities, he said.
Along with increased production capacity, Fortune Brands is committed to increasing demand, he said.
"Fortune Brands has a track record of supporting its brands," he said. "They are planning an expensive ad campaign: ‘Cruzan, the Legendary Rum of St. Croix.’"
Asked why the government was financing the plant expansion rather than Fortune Brands, deJongh said Fortune would also invest substantially and that none of the money would take away from tax revenues but would instead be finance out of the future, increased revenues from the expanded plant capacity.
"The funding is all based on future projected rum carry-over revenues," deJongh said.
Fortune Brands predicts significant growth in production on St. Croix, including a 50-percent increase in capacity by 2013, deJongh said. The company projects capacity will reach 15 million proof gallons by 2013, which, if realized, should increase the federal Matching Fund revenues- liquor excise taxes remitted back to the territory – from 2008’s $91 million to about $199 million.
Anthony Babauta, assistant secretary of the interior for Insular Areas, said the agreement and plant expansion showed federal development tax incentives worked.
"Nothing is more pleasing than when development and economic policies begin to help an area," Babauta said. "It is testimony that these policies are working. The Virgin Islands is a success. Other insular areas in the Pacific have similar problems and this agreement demonstrates how federal policy can work."
In his comments, deJongh said the agreement would help promote the St. Croix and Virgin Islands "brand" for rums. Asked to explain what he meant, he said it showed the world the territory is an attractive place for industrial development in general and rum production in particular, setting up future growth potential for St. Croix.
"The fact is, the whole industry knows this is happening," he said. "As they see other major players set up here and do well, that sends a message that this is a good place to do business. … And they become our marketing partners."

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