Wednesday, October 15, 2014

Virgin Islands Oil Refinery Should Be Operating


By Norris McDonald

The Virgin Islands St. Croix Refinery (HOVENSA), the second largest refinery in the United States, has been closed for two years.  Approximately 2,500 jobs were lost when the refinery closed in 2012.  The refinery is the largest private employer in the Virgin Islands, which has approximately 108,000 residents.

A new governor will be elected in the Virgin Islands on Tuesday, November 4, 2014. U.S. Congressional Delegate Donna Christensen won the primary, which will probably translate into victory in the general election. Christensen would be the first Black female Governor of the Virgin Islands. Christensen is an energy expert having served on the House Natural Resources Committee for years. It will be interesting to see if the new governor can get this refinery reopened so that the needed jobs can be restored.

HOVENSA Refinery
HOVENSA is a petroleum refinery located on the island of St. Croix United States Virgin Islands and is a joint venture between USA-based Hess Corporation and Petroleos de Venezuela. 

HOVENSA generated a minimum of $60 million a year in revenue for the government, about 1/10th of its $700 million annual budget.

The facility has also been plagued by serious economic and environmental challenges.  HOVENSA was losing money when it closed.  HOVENSA entered into a consent decree with the U.S. Environmental Protection Agency and Justice Department and agreed to invest $700 million on pollution controls after a series of chemical releases affected people living downwind from the refinery. Hovensa also agreed to pay a $5.4 million penalty for violating the Clean Air Act.

Although the plant has some serious economic and environmental challenges, I believe this plant can operate profitably and its environmental challenges can be mitigated. This is also a prime opportunity for African American ownership of energy infrastructure and resources.  Currently, Blacks own virtually no energy infrastructure and resources in the United States.

HOVENSA is currently vetting potential buyers for the refinery through investment banking firm Lazard. Lazard is marketing the refinery through its offices in New York City, Houston and Paris.

Negotiations between HOVENSA and the Virgin Island's government led to a fourth amendment agreement that had HOVENSA agreeing to a sale process with an experienced investment banking firm (Lazard) and the government agreeing to allow HOVENSA to operate the refinery site as an oil storage terminal while the refinery is up for sale.

For most of its operating life as HOVENSA it supplied heating oil and gasoline to the U.S. Gulf Coast and the eastern seaboard with the crude mainly sourced from Venezuela. At a capacity of about 500,000 barrels per day as of 2010 it was in the top 10 largest refineries in the world. Hess Oil Virgin Islands Corporation started refinery construction and operations in 1966. (Wiki, Virgin Islands Daily News, 4/25/2014)

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