Update: Legislature Approves Hovensa Agreement

After a long and contentious hearing Monday, the V.I. Legislature voted to approve the fourth amendment to the Hovensa Concession Agreement. The vote puts in place a sales process for the closed Hovensa refinery and settles some tax and liability issues with the company.

The refinery ceased operations in 2012. Early in 2013, the V.I. 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 or might not 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.

The administration spoke to both Hovensa and the Senate, and negotiated to keep the fuel rack open. In a letter to Malone, deJongh reiterated “there is no possibility of re-opening or re-negotiating the Fourth Amendment Agreement.”

At the beginning of October, the Senate passed a resolution listing aspects of the agreement it was concerned about, saying their concerns should be incorporated into the concession agreement.

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 mid-October, the administration announced it had received "clarifications" of the points in question, and Hovensa officials signed a letter saying the terms of the letter of clarification were legally binding, as an addendum to the Fourth Amendment Agreement.

The document signed by Hovensa officials affirms that the temporary adjustment in property tax payments under the agreement is only a deferral of the unpaid amounts until the refinery is sold, or ceases to operate an oil storage facility, or until Aug. 15, 2019, whichever occurs first. Upon any of those taking place, Hovensa will make a lump sum payment to the government of all amounts deferred, plus interest at the statutory rate. It also affirms that:

  • If the refinery is sold, Hovensa will then pay either the amount of property taxes deferred, plus interest, or 20 percent of the gross sales proceeds up to $50 million, which ever is more.
  • Hovensa will consider offers by potential buyers interested in using the refinery for other purposes than refining, subject to V.I. government approval.
  • Hovensa will keep the rack open and keep supplying it with fuel as long as Hovensa continues to run an oil storage terminal on the property.
  • If the refinery is not sold in a year, Hovensa will open the Limetree Bay Channel to commercial vessels heading to St. Croix Container Port, subject to insurance and any federal approvals that may be needed.
  • Hovensa has no objection to the government taking over exclusive control of the nearly $5 million in Supplemental Environmental Project funds, plus interest, that Hovensa has paid as part of its Clean Air Act Consent Decree.
  • The agreement does not cause a loss of legal rights by either party if the refinery does not sell.

During testimony before the Committee of the Whole on Monday, Legislative Legal Counsel Yvonne Tharpes shared an analysis of the agreement and the clarifying letter or addendum. Tharpes raised concerns about the fact that the clarifications were not included in the main agreement and were only signed by Hovensa, among other issues.

Attorney General Vincent Frazer reiterated his legal opinion that the clarifications are legally binding and effectively a part of the agreement, despite the fact the parties are not producing a new document. Hovensa attorney George Dudley and David Herr, managing director of the government’s contracted consultants Duff and Phelps, all testified that the parties affected by the "clarification" have signed statements saying it is legally binding, and that makes it legally binding and effectively a part of the agreement.

After extensive debate and discussion, the Senate voted to approve the agreement, along with the clarifications and changes. Voting yea were: Sens. Judi Buckley, Donald Cole, Clifford Graham, Alicia "Chucky" Hansen, Shawn-Michael Malone, Nereida "Nellie" Rivera-O’Reilly, Clarence Payne and Sammuel Sanes. Voting nay were Sens. Craig Barshinger, Diane Capehart, Kenneth Gittens, Myron Jackson, Terrence "Positive" Nelson, Tregenza Roach and Janette Millin Young.

Afterward, Malone said the agreement would hopefully lead to "a more certain economic recovery for the territory," and that future development or resumed refining at Hovensa would undoubtedly continue to have "a significant impact on the economic conditions and quality of life of the people of the Virgin Islands."

Upon receiving the news, Gov. John deJongh Jr. issued a statement thanking "the eight members of the 30th Legislature who voted for our future,: along with everyone in the community "who stood up and spoke out forcefully in support of the rebuilding of the territory’s economy."

In other business, the Senate approved the nomination of Norbert Rosado to the V.I. Waste Management Authority Governing Board and approved a resolution honoring former V.I. Superior Court Judge Julio Brady for his service as a judge.

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