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HomeNewsLocal newsArcLight Previews Hovensa Purchase Proposal to St. Croix Chamber

ArcLight Previews Hovensa Purchase Proposal to St. Croix Chamber

ArcLight Capital Partners LLC representatives previewed their proposal for Wednesday’s Legislative hearing to purchase and operate the Hovensa Refinery at a St. Croix Chamber of Commerce meeting Tuesday at the V.I. Cardiac Center.
ArcLight partners Jake Erhard and Evan Schwartz explained that the company is an energy-focused investment firm and the major shareholder of Limetree Bay Terminals, the company that will reopen and operate the closed refinery if the deal is approved by the 31st Legislature.
Erhard talked about the operating agreement crafted with Gov. Kenneth Mapp that the full Legislature will consider for approval during a session on St. Thomas on Wednesday. No session was scheduled on St. Croix to receive input from residents.
“Limetree Bay is executing an innovative plan to remake the St. Croix terminal and refinery site as an environmentally compliant, marquee global energy center,” Erhard said.
The agreement included a commitment of $125 million over the first two years to fund the restart and growth of the terminal facility. The company commits to operate the terminal for 25 years with an optional15-year extension if the company so desires.
Along with a $220 million upfront payment, the V.I. government will also receive 10 percent equity ownership of the refinery. Erhard elaborated that should the facility sell at a future date, the government would receive 10 percent of the sales price or a minimum of $25.5 million. Responding to a question from the audience, he said the government has financial equity but no operational oversight.
“It is a unique construct,” he said, that was added for fairness and to encourage all parties – the company, government and residents – to insure the success of the operation.
The V.I. government also will take possession of the residential area surrounding the refinery that was former housing for Hovensa management staff. Limetree will provide power and water to the 122 houses for a time, Erhard added.
The agreement stipulates at least 80 full-time jobs by the end of the first year and 80 percent of those workers must be full-time residents of the territory. Erhard said as many as 200 workers will be needed for construction and cleanup.
“We expect to exceed those minimum requirements,” he said.
The new management of the refinery will likely be some of the former administrators and staff currently operating the facility, according to Erhard.
Other components of the purchase include up to $30 million for environmental remediation and $15 million in free power to implement the cleanup. Schwartz said two environmental companies have inspected the property and money has been set aside to begin cleanup.
“Nothing releases the parties that contaminated it,” he said, referring to previous fines and remediation orders.
ArcLight’s overall investment could be as much as $800 million, according to Erhard, including environmental cleanup and settling lawsuits.
Limetree Bay plans an “aggressive restart” of the storage terminal that will include replacing equipment and building an offshore buoy system to allow the largest oil tankers access to the port.
The company may reopen the refining operation, but there are “no precise plans,” Erhard said. Other similar refineries have been reopened and the St. Croix infrastructure in still in good operating condition. After an 18-month assessment, economics and the market will drive the decision, he said.
An important component of the ArcLight plan is a 10-year lease with China Petroleum and Chemical Corporation (Sinopec) to utilize 75 percent of the storage tanks. Sinopec, according to Erhard, is one of the largest buyers of crude oil in the world and will lease storage for oil it acquires from the U.S. mainland, Africa and South America.
The agreement also calls for storing two million barrels of fuel for Freepoint Commodities LLC, of Stamford, Conn.
Since the company was started in 2001, ArcLight has gained experience in storage and terminal facilities, Erhard said, with investments of almost $16 billion and have included Gulf Oil, Houston Fuel Oil Terminal Company and Buckeye Partners. Buckeye owns oil distribution and storage facilities on the mainland and throughout the region and is one of the companies that bid on the bankrupt refinery last month.
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