MAPP: ArcLight’s ‘Restart’ of St. Croix Refinery To Bring $600 Million Over 10 Years, 1200 New Jobs
CHRISTIANSTED — Governor Kenneth Mapp held a press conference today at Government House in St. Croix.
What follows is a partial transcript of that statement:
“I am pleased to announce today an agreement between the government of the Virgin Islands and ArcLight Capital, the owners of Limetree Bay Terminals LLC, to restart refining operations on the island of St. Croix. The agreement that we signed this morning, that I will be transmitting to the Legislature of the Virgin Islands, provides that the owners of the refinery will invest, practically immediately, $1.4 billion dollars to refurbish the refinery over the next 18 months and create more than 1,200 construction jobs and as many as 700 permanent jobs once refining operations commence at the end of 2019. The new jobs will be added to the more than 750 jobs that now exist at the terminal storage facility. The initial refining operations under this agreement provides 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 the economy. It is tremendous news for the Big Island, which felt the full brunt of the shutdown of refining operations back in 2012.
“The restart of the refinery will inject hundreds of millions of dollars into our economy, generate new tax revenues to our government and create hundreds of non-refining jobs in addition to those created at the refinery itself. It will also be the impetus of new businesses which may compliment the refining operation. The capital investment in employment alone will significantly boost the St. Croix economy. But it is not only St. Croix that will benefit. As a result of this agreement, the territory’s economy will expand. The Government Employees’ Retirement System will receive a direct flow of revenues to shore up its solvency and a new upscale lifestyle hotel branded at a Hilton, Hyatt or Intercontinental will be constructed on the island of St. Thomas. Today I am submitting this agreement to the 32nd Legislature for its consideration and ratification. I am calling the Legislature into Special Session for 10 a.m. Wednesday July 25, 2018.
“Upon the closing of this transaction, ArcLight Capital will make a closing payment to the government of the Virgin Islands in the amount of $70 million dollars. This closing payment will provide $30 million dollars for the purchase from the government of approximately 225 acres of land and 122 homes. The government had acquired this property as part of its settlement of certain claims against HOVIC (Hess Oil Virgin Islands Corporation), PDVSA (Petróleos de Venezuela, S.A) de Venezuela and Hess Oil Corporation. The government will retain the Vocational School and over 350 acres of land it had received in that settlement. The closing payment also provides a $40 million dollar pre-payment of taxes by the new refinery entity created by ArcLight Capital to operate the refinery. Once refinery operations commence and after crediting the $40 million dollars of pre-paid taxes, Limetree will make annual payments to the government in lieu of taxes, at the base rate of $22.5 million dollars a year, with market adjustments based on the refinery’s performance, this could increase to as much as $70 million dollars per year, but will not in any case, fall below $14 million dollars a year. According to our industry experts and consultants, Gaffney, Cline and Associates, we the government expect to receive more than $600 million dollars over the first 10 years of the restart of the refining operation. This income is in addition to the income now being generated by the government from the oil storage terminal facility which is currently paying the government $11 and a half million dollars per year.
“Just for comparison’s sake, in the over 30 years that Hess Oil operated the refinery on the island of St. Croix, the company paid approximately $330 million dollars in corporate taxes to the government. And as you all may recall, in 2015 Hess Oil filed suit for the return of the complete $330 million dollars. This refinery agreement will shore up the finances and buys additional years of solvency of the Government Employees’ Retirement System. My submission to the Legislature provides that 50 percent of the annual revenues from the refining operation go directly to GERS. This amount over the first 10 years from the refinery payments to GERS is anticipated at $300 million dollars. In addition to the infusion of cash from the refinery to GERS, my bill also provides for the purchase of the Government Employees’ Retirement System, the Havensight Mall and the ground lease of the Port of Sale property owned by the public pension program. In addition to that purchase, the bill provides that GERS will receive 50 percent of the annual net revenues of the mall and the ground lease. The Public Finance Authority will take ownership of these properties and the Authority’s subsidiary, the West (Indian Company Ltd.), will fully manage and develop these properties. From the closing payment and new revenue stream generated by investments made possible by this transaction, the PFA will make a $25 million dollar down payment to GERS and enter into a mortgage with GERS (at) a rate of eight percent per annum. A rate above the pension system’s required rate of return, for the balance of the agreed purchase price of these assets. The balance of the purchase price will be driven by appraisals of the property. Acquisition of these assets by the PFA and WICO will allow the government to enter into an agreement with territory’s new partners or others to fully develop and leverage these assets to generate a much higher degree of revenue for GERS and the government. In addition to the 25 million dollar cash injection, the mortgage payment, one half of the mall revenues, one half of the annual payments from the refinery will be dedicated to GERS. Altogether, based on our industry consultants, these measures will generate more than $380 million dollars into GERS over the next 10 years. The actuary defined that these payments and the infusion of cash will not save the system. But they will extend the life of the system by an additional five years giving all of us, the plan’s sponsor, the plan and the plan’s members some breathing space to rationally find a permanent solution to restore GERS to solvency.”