U.S. Virgin Islands Governor Kenneth E. Mapp announced yesterday an agreement which would reopen one of the world’s largest refineries, create hundreds of jobs in the territory and buttress the solvency of the Government Employees Retirement System (GERS).
According to a release from his office, Mapp said the US$1.4 billion pact was between the Government of the Virgin Islands 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 on the USVI island of St Croix in 2012. The release said that the deal includes reopening the refinery portion of the operation, which when restarted, will funnel hundreds of millions of dollars into the local economy.
The release said that under the agreement with ArcLight Capital, the owners of what is now called Limetree Bay Terminals, the company will invest approximately US$1.4 billion to upgrade 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 begin at the end of 2019, as many as 700 permanent jobs will be created. The new jobs will be in addition to the over 750 jobs now at the terminal storage facility. The initial refining operations provide for the processing of around 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 added 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 will not only benefit St. Croix since the monies from the agreement will boost the solvency of GERS and will also help fund a new 110-room, “upscale lifestyle” hotel, flagged by a major four-star brand on the sister island of St. Thomas.
Upon the closing of the transaction, ArcLight Capital will make a US$70 million closing payment to the Government of the Virgin Islands. The payment includes US$30 million for the purchase from the government of approximately 225 acres of land and 122 homes. The release said this property was acquired as part of the government’s settlement of certain claims against HOVIC, PDVSA of Venezuela, Hovensa and Hess Oil Corporation.
Once refinery operations begin and after crediting the US$40 million of prepaid taxes, Limetree will make annual payments to the government in lieu of taxes at a base rate of US$22.5 million a year. With market adjustments based on the refinery’s performance, this could increase to as much as US$70 million per year, but will not fall below US$14 million a year, the release said.
The release said that according to industry experts and consultants Gaffney, Cline & Associates, the government expects to receive more than US$600 million over the first 10 years of the restart of the refining operations. This income is in addition to the US$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 US$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 in the release. Hess Oil is one of the partners of ExxonMobil’s subsidiary, Esso in the Stabroek Block in Guyana’s waters.
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 (United States Environmental Protection Agency) and the U.S. 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 startup businesses, as well as support existing businesses and ultimately provide revenues for our government and our retirement system,” he said.
The release added that qualified Virgin Islands residents will be given preference in all hiring. ArcLight Capital will be obligated, and the local government will assist, to advertise and publicize 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, the release added.