Hovensa will keep supplying fuel to the V.I. Water and Power Authority at discounted prices until the end of the year, if it can operate an oil storage terminal while negotiations continue, Gov. John deJongh Jr. announced at a press conference Monday morning.
For years, Hovensa has supplied fuel oil for WAPA’s power and water generation at a discounted rate based on the cost of unrefined crude on the open market. Relying exclusively on petroleum for power generation, the territory has suffered with skyrocketing utility costs due to rising oil prices.
With Hovensa ceasing production, WAPA will need to procure fuel on the open market, at market rates that are considerably higher than the discounted rate negotiated between the V.I. government and Hovensa. This will cause an increase in WAPA’s fuel surcharge and in customer’s monthly bills.
Soon after Hovensa announced its impending closure in January, it announced it would continue to supply discounted fuel oil until the end of June, despite no longer producing it. Hovensa also agreed to continue supplying St. Croix gas stations with gasoline until the end of June.
The "interim agreement" deJongh announced Monday would stave off those likely utility increases at least another six months, while both WAPA and the government work on the next steps forward.
Hovensa will not continue supplying gasoline, but has agreed to lease out its rack and storage facilities, deJongh said. This will allow St. Croix gas stations to purchase, store and distribute gasoline – a major concern for many station owners because Hovensa owns and controls the only equipment of that kind on St. Croix.
Hovensa also assured the government it has set aside funds to pay all severance and benefits to laid-off workers, deJongh said.
In exchange, "the V.I. government has agreed to allow Hovensa on a temporary basis to bring in crude oil and petroleum products for storage and export while negotiations on what, if any, permanent agreement with Hovensa makes the most sense for the territory and the company," deJongh said.
This interim agreement "does not commit the government to accept Hovensa’s proposal for the long term, nor did Hovensa concede that it has an obligation to provide discounted fuel to the territory on an on-going basis under the terms of our present agreements," deJongh said.
Asked if the government would agree to reducing Hovensa’s property taxes to reflect the closing of the refinery operations, deJongh said nothing had been agreed to yet, and this temporary agreement would provide time to work out "what outcome serves us best."
"We will use the additional time that this interim agreement affords us to retain an independent expert in the oil refinery sector to assist us as we fully evaluate Hovensa’s proposal to convert its refinery into an oil terminal business, and as we review and consider other potential uses of the refinery site and the territorial lands that have been part of the oil refinery," deJongh said.
Asked about the role of the Legislature in approving any negotiation, deJongh emphasized the temporary, interim character of the agreement at Monday’s telephone press conference, saying it will provide some time to consult with the right experts and begin hammering out a final agreement.
"I am essentially saying I need a little more time to negotiate something for (the Legislature’s) review," deJongh said, adding that he is in regular communication with Senate President Ronald Russell on Hovensa’s closure. "We have spoken, although not necessarily on this," deJongh said.