INK’S DRY: But Can Limetree Bay Deal Clear Senate And Court Hurdles?
CHARLOTTE AMALIE – Now that Gov. Kenneth Mapp and Limetree Bay Holdings have come to an agreement on the operating terms for the HOVENSA oil storage terminal, the question becomes: Will the Legislature sign off as well?
Mapp said that the deal with Limetree is expected to bring a likely decrease in gasoline prices, given that the ArcLight Capital affiliate has committed to making fuel available to suppliers at local wholesale rack rates.
The deal includes construction of a $6 million asphalt plant, which will in turn lower the local cost of asphalt by as much 75% on the island, experts say.
The deal could also bring the need for government borrowing to a halt for at least three to four years and provide for a guaranteed minimum of $7 million payments annually from Limetree.
Mapp sent the operating agreement to Sen. Neville James, the president of the 31st Legislature on Tuesday for “prompt consideration,” the governor’s office said.
The terms of the deal include $220 million in an upfront payment to the Virgin Islands government and up to $15 million in other payments (as part of a total deal of $36 million).
Limetree has a commitment to operate the oil storage facility for at least 25 years (up to 40 years), and it will hire a minimum of 80 full-time workers, at least 80% of whom must be long-term U.S. Virgin Islands residents.
The terms also include potentially restarting the refinery and dismantling any part that is not being used.
Limetree is committed to donating 330 acres of land and 130 units of housing along with a vocational school and a community center to the Virgin Islands government, what used to be known as the “Hess Man Camp.”
Limetree will pay $150,000 annually in rent for the submerged lands, an increase from the $1 per year.
“Taken together, along with the other benefits, the agreement represents a total value to the government and the people of the Virgin Islands for more than $800 million,” Mapp said Tuesday.
Mapp invoked section 7 of the Revised Organic Act of 1954, as amended, for the Virgin Islands of the United States in calling the 31st Legislature of the Virgin Islands of the United States into Special Session to be held on Dec. 17, 2015 at 10 a.m. to consider the operating agreement.
“The agreement that I have presented to the 31st Legislature represents the government’s best efforts to ensure that there is continued economic activity at the oil refinery and related facilities, which is critical to the economic well- being of the territory and which will bring additional tax revenues, employment and increased commercial activity benefitting the government and the people of the Virgin Islands,” Mapp said.
Meanwhile, the Oil Price Information Service (OPIS) notes that the HOVENSA asset sale process remains mired in controversy.
Limetree Bay was the stalking horse bidder, beating out other interested parties in the auction including Buckeye and about three metal scrapping companies.
Buckeye’s bid for the HOVENSA terminal assets was $345 million, industry sources said. Although Buckeye’s bid was higher than Limetree’s, Buckeye’s bid does not include liabilities.
Also, Limetree’s bid was selected and backed by the Virgin Islands governor’s office, pushing it ahead of Buckeye, they said.
Mapp felt that Limetree’s bid was the highest and best bid, meeting both requirements for the HOVENSA auction process. This is even though Buckeye had the highest bid, but not the best bid in the eyes of the governor’s office.
The governor’s office was also impressed with ArcLight’s potential to make the terminal usable in the future as well as establish a possible path to restart the 500,000 barrels per day refinery down the road, sources said.
Mapp also felt that Limetree understood the environmental liabilities linked to HOVENSA, and Limetree would be in best position to correct any environmental issues.
Buckeye’s bid was deemed second best to Limetree, partly due to a walk-away clause in Buckeye’s bid. Buckeye would drop the HOVENSA bid if it cannot get an approval for the deal from the Federal Trade Commission.
The U.S. Bankruptcy Court in Delaware has scheduled a hearing for December 17 to discuss the auction results. The controversy surrounding the HOVENSA assets could result in a long, drawn-out hearing at the Senate and in the federal and local courts.
Limetree Bay and Buckeye were only interested in the 32-million-barrels capacity terminal at HOVENSA, and traders had told OPIS previously that the St. Croix terminal has an operational
capacity of about 15 million to 16 million barrels. The remaining 50% of the capacity was unused and mothballed.
OPIS reported in September that the earliest date that the HOVENSA oil terminal could return to operational status would be at the end of 2016 if everything goes well. That terminal has been shut since February 2015 after a failed asset sale process.