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Legislature Lists Changes It Wants to Hovensa Agreement

Well after midnight Tuesday morning, the V.I. Legislature passed a resolution listing changes it wants to see in the government’s negotiated Fourth Amendment to the Hovensa Concession Agreement, signaling that it would approve a modified plan.

However, Gov. John deJongh Jr. has maintained that new negotiations are not an option, but said in a letter to Senate President Shawn-Michael Malone that "clarification" from Hovensa about some of the disputed points could be worked out.

The Hovensa refinery ceased operations in 2012. Earlier this year, the government and Hovensa agreed on a proposed amendment that would have set the stage for the sale of the facility to a company that might operate it again as a refinery. DeJongh and administration officials have characterized the agreement as a compromise that was preferable to potentially years of expensive lawsuits with uncertain outcomes.

But on Aug. 7, the Senate rejected the proposed amendment by an 11-3 vote, citing concerns over property tax abatements, desire for local control of an EPA-mandated environmental project fund, and other issues. Within a week the company announced that, in the face of the deal’s rejection and the re-imposition of the Third Concession Agreement, it could not profitably run the oil storage facility. As a result, officials said, Hovensa would close the facility and the fuel rack, which is the source of fuel oil for virtually everything in the territory, from automobiles to airliners to WAPA’s electrical generators.

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In a Sept. 25 radio broadcast, deJongh called on the Legislature to ratify the Fourth Amendment to the Hovensa agreement. And in a letter to Malone, deJongh reiterated “there is no possibility of re-opening or re-negotiating the Fourth Amendment Agreement."

"However, as I also indicated I believe that there is a realistic possibility that we can obtain certain clarifications and confirmations as to the meanings and effects of certain language in the Agreement that should allay the concerns of many of your colleagues and allow us to move ahead," deJongh continued in the letter.

“I am prepared to seek certain clarifications and confirmations upon which the parties can rely, if you are able to provide me with the written assurance that, upon receipt of these confirmations and clarifications, you have the commitment of a majority of the members of the 30th Legislature to approve and ratify the Fourth Amendment Agreement," deJongh said.

Clarifying what the government would do, deJongh said his administration would take all necessary steps to obtain exclusive control of nearly $5 million in supplemental environmental project funds that Hovensa had to set aside under an EPA consent decree. (See related links below)

The decree gives Hovensa and the V.I. government a say in what projects are funded, while the Legislature wants full control.

DeJongh also clarified that any new concession agreement will require that Hovensa’s exclusive use of the channel and dock facility that service the refinery will be eliminated and others will have access; and that no new owner will be permitted to allow Hovensa to continue operating a storage terminal business on the refinery site absent the specific consent of the government to permit such operations to continue.

DeJongh said the administration would seek several clarifications from Hovensa:
– confirmation that the temporary adjustment in property taxes in section 3b is “only a deferral of the unpaid amount until the refinery is sold or ceases to operate an oil storage facility or until Aug. 15, 2019; and that Hovensa “will make a lump sum payment” once the deferral ends;
– confirmation that deferred payments includes both principal and interest;
– that, upon a sale, Hovensa will pay the greater of the tax payments, or 20 percent of gross sales proceeds up to $50 million;
– confirmation the agreement does not permit the refinery to be sold for uses other than refining or oil storage and the decision to allow other uses is to be made by the government;
– confirmation that the rack will be available to supply fuel to local vendors so long as Hovensa or a replacement is in place;
– confirmation Hovensa has no objection to the government taking control of the $5 million EPA decree fund;
– and confirmation that the amendment does not cause a “loss of legal rights by the parties if the refinery does not sell."

“Upon receipt of the signatures of a majority of senators specifically confirming the terms noted above, I will submit to the Legislature written confirmation of the first three items listed, and will formally request Hovensa’s written confirmation of the remaining seven items," deJongh wrote.

The Senate resolution that was passed in the wee hours of Tuesday morning embodies these same "clarifications," as well as others, but couched in language urging changes to the agreement itself. [30-0249]

The resolution says it "is the consensus of the Legislature … that negotiations with Hovensa should be re-examined and that the changes suggested herein, if adopted and incorporated in a Fourth Amendment Agreement should resolve the issues raised in previous negotiations."

It "urges the governor to adopt its recommendations as delineated herein and incorporate same in a new Fourth Amendment Agreement with Hovensa."

It nearly mirrors deJongh’s "clarifications," saying the government should "take all necessary steps to obtain exclusive control of the nearly $5 million" environmental project fund; that Hovensa should give the government access to the channel and dock facilities while it operates a storage terminal business; and that Hovensa’s exclusive use of the channel and dock should cease.

The Senate resolution also says:
– Hovensa should pay $14 million as a payment in lieu of property taxes annually;
– it is the position of the Legislature the temporary adjustment in the Fourth Amendment Agreement is only a deferral of the unpaid amount until the refinery is sold or ceases to operate an oil storage facility – or Aug. 15, 2019, whichever happens first;
– upon a sale, the government will recoup the value of all deferred payments;
– the refinery should be marketed and sold for uses other than oil refining;
– and the decision on whether to allow uses other than refining is to be made by the government, not Hovensa, and should be subject to the approval of the Legislature in a new concession agreement.

In the one departure from the clarifications or assurances deJongh said he would seek, the Legislature’s resolution says it wants the $500,000 offered by Hovensa for scholarships in the agreement be increased to $1 million.

Senate President Shawn-Michael Malone said the Legislature wanted language added to the actual agreement "so there is no wiggle room."

"On (Hovensa’s) side it is clear what will happen but on our side it is conditional what will happen," he said. Regarding the distinction between clarifications, such as deJongh discussed, versus negotiating changes to the text of the agreement, Malone said, "Our legal counsel advised us any changes must be in the language of the agreement."

Passage of the agreement would not be a panacea, Malone added.

"We have to … dispel the rumor or misunderstanding that ratifying the agreement will mean some sort of automatic economic development for St. Croix. Let me tell you that is not the case. This does not mean, all of the sudden, jobs will be created and businesses reopen because of the agreement," he said.

Sen. Sammuel Sanes, one of the three who voted for the agreement when it was before the Senate, said he hoped the resolution would help bring the parties together.

"If this can assist us in helping our people I am going to vote for it like I did before," Sanes said.

Voting for the resolution were Sanes, Malone, Sens. Craig Barshinger, Judi Buckley, Diane Capehart, Donald Cole, Clifford Graham, Alicia "Chucky" Hansen, Myron Jackson and Clarence Payne. Voting no were Sens. Kenneth Gittens, Terrence "Positive" Nelson, Tregenza Roach and Janette Millin Young. Sen. Nereida "Nellie" Rivera-O’Reilly was absent.

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