ST. CROIX, USVI--US Virgin Islands (USVI) Governor Kenneth Mapp has announced an agreement that would reopen one of the world’s largest refineries, create hundreds of jobs in the territory and shore up the solvency of the Government Employees Retirement System (GERS).
Mapp said the US $1.4 billion agreement was between the government of the USVI and ArcLight Capital Partners, LLC, the owners of what had been one of the largest oil refineries in the world, when it was shut down in 2012. The massive deal includes reopening the refinery portion of the operation that, when restarted, will inject hundreds of millions of dollars into the local economy, generating new tax revenues.
Under the agreement with ArcLight Capital, the owners of what is now called Limetree Bay Terminals, the company will invest approximately $1.4 billion to refurbish the existing refinery located in St. Croix. Over the next 18 months, this will create more than 1,200 local construction jobs.
Once refinery operations commence at the end of 2019, as many as 700 permanent jobs will be created. The new jobs will be in addition to the more than 750 jobs now at the terminal storage facility. The initial refining operations provide for the processing of approximately 200,000 barrels of crude oil feedstock per day.
“This agreement is great news for the people of the Virgin Islands as we continue to grow and expand our economy,” said Mapp, who noted it is tremendous news for the ‘big island,’ which felt the full brunt of the shutdown of refining operations in 2012.
He added that the capital investment would not only benefit St. Croix, as the revenues from the agreement would shore up the solvency of GERS, but it would also help fund a new 110-room, “upscale lifestyle” hotel, flagged by a major four-star brand on St. Thomas.
Mapp has called the USVI Legislature into special session on Wednesday, July 25, to consider and ratify the agreement.
“This landmark deal to jumpstart our recovery and to pave the road to better times ... requires us to move expeditiously if the refinery is to restart on schedule,” Mapp said. “I look forward to working with members of the Legislature and our partners at Limetree Bay to realise its potential for the benefit of all of our people.”
Upon the closing of the transaction, ArcLight Capital will make a $70 million closing payment to the government of the USVI. The payment includes $30 million for the purchase from the government of approximately 225 acres of land and 122 homes. This property was acquired as part of the government’s settlement of certain claims against HOVIC, Petróleos de Venezuela SA PDVSA, Hovensa and Hess Oil Corporation. The government will retain the vocational school and more than 350 acres of land it had received in that settlement. The closing payment also includes a $40 million prepayment of taxes by a new refinery entity created by ArcLight Capital to operate the refinery.
Once refinery operations commence and after crediting the $40 million of prepaid taxes, Limetree will make annual payments to the government in lieu of taxes at a base rate of $22.5 million a year. With market adjustments based on the refinery’s performance, this could increase to as much as $70 million per year, but will not fall below $14 million a year.
According to industry experts and consultants Gaffney, Cline and Associates, the government expects to receive more than $600 million over the first 10 years of the restart of the refining operations. This income is in addition to the $11.5 million currently flowing to the government from the oil storage terminal each year.
“For comparison sake, in the over 30 years that Hess Oil operated the refinery on the island of St. Croix, the company paid approximately $330 million in corporate taxes to the government. As you may recall, in 2015 Hess Oil filed suit for the return of (those tax payments),” Mapp pointed out.
Mapp said: “This landmark agreement did not happen overnight. It is the result of much hard work by the owners of ArcLight Capital and my administration over the past two years. It is the product of complex negotiations with major players in the global oil industry. It required tremendous work with the Trump administration and the President’s Council of Environmental Quality, the EPA [US Environmental Protection Agency – Ed.] and the US Department of Justice. More work remains to be done, but this agreement allows the Virgin Islands to accelerate its recovery, grow its economy, create jobs for its people, propel new start-up businesses, as well as support existing businesses and ultimately provide revenues for our government and our retirement system.”
ArcLight Capital’s plan anticipates a massive capital investment in a compressed period of time in order to capture a market opportunity in the oil industry.
“Timing is of the essence in completing the turnaround and restart of the refinery,” Mapp noted, announcing that, during the legislative process, ArcLight will detail its strategy and its schedule to employ more than 1,200 workers during the accelerated construction period.
“The objective of the overall strategy is to have refined product from the St. Croix refinery in the market come January 2020,” he reported.
Qualified US Virgin Islands residents will be given preference in all hiring. ArcLight Capital will be required, and the local government will assist, to advertise and publicise all job opportunities for local residents. Residents of St. Thomas and St. John, who may be interested in working during the reconstruction of the refinery, will be offered a place to live while working on St. Croix without charge. ~ Caribbean News Now! ~
