CHRISTIANSTED — The two masters of the former HOVENSA oil refinery property on St. Croix’s south shore will do battle in court over unfettered access to the plant complex.
Port Hamilton, which bought the former Limetree Bay refinery in December 2021, said in court documents that Limetree Bay is refusing to issue new security badges to Port Hamilton’s and its contractors’ operating personnel and management unless they sign a waiver of rights.
For this reason, Port Hamilton filed a Temporary Restraining Order (TRO) in Superior Court on Wednesday saying that Limetree Bay, now doing business as “Ocean Point Terminals,” is unreasonably endangering the health and safety of the St. Croix community.
Ocean Point Terminals currently owns the storage tanks and port facility at the old HOVENSA complex on the south shore of St. Croix, while Port Hamilton owns the refinery portion of that complex.
But, according to the complaint, Ocean Point controls access to each facility because of a federal security requirement that protects Ocean Point’s docks from terrorism.
“Port Hamilton Refining & Transportation, LLLP moves for a temporary restraining order requiring Limetree Bay Terminals, LLC d/b/a Ocean Point Terminals to provide Port Hamilton and its invitees with access to Port Hamilton’s own property,” Port Hamilton said in its emergency TRO. “As described in the accompanying memorandum in support of motion, Ocean Point is denying Port Hamilton’s contractors’ employees—who play a critical role in maintaining the refinery in a safe and environmentally sound condition—access to the refinery by refusing to renew their security badges that expire every year on December 31, 2023.
“Ocean Point is doing this by illegally using its status as the administrator of a federally-mandated Facility Security Plan to require Port Hamilton’s contractors’ employees to sign ‘Individual Access Agreements’ (Exhibit A) that require the individuals to surrender substantial rights. Because the employees refuse to sign this agreement, Ocean Point will deny them access to the refinery in five days: on January 1, 2024, leaving only two business days before then to get the security badges issued.”
The following is the “verified complaint” Port Hamilton filed against Ocean Point yesterday:
PARTIES AND JURISDICTION
- Port Hamilton is a Virgin Islands Limited Liability Limited Partnership that owns
the oil refinery situated on the South Shore of St. Croix. - Limetree Bay Terminals, LLC is a Virgin Islands limited liability corporation that
owns the oil terminal situated on the South Shore of St. Croix. - This Court has jurisdiction under 4 V.I.C. § 76(a).
FACTS
- Port Hamilton has rights-of-use and rights-of-access that allow it and its invitees
full access to its property across Ocean Point’s property. - Port Hamilton’s rights-of-use and rights-of-access are not subject to releasing Ocean Point from liability when Port Hamilton or its invitees exercise those rights across Ocean Point’s property.
- Ocean Point is illegally using its status as the provider of a federally-mandated Facility Security Plan to require Port Hamilton’s contractors’ employees to sign ‘Individual Access Agreements’ (Exhibit A) that require the employees to surrender substantial rights.
- Specifically, Ocean Point’s ‘Individual Access Agreement’ requires the contractor
employees to:
a. agree that Ocean Point owes them no duty regarding their safety; and
b. release and hold harmless Ocean Point, the HOVENSA Environmental Response
Trust, and the Government of the Virgin Islands harmless from any and all
claims unless “caused by the sole gross negligence” of Ocean Point. - If the employees do not sign this agreement, Ocean Point will deny them access to
the refinery on January 1, 2024. - If the employees are unable to enter the refinery, severe damage to the refinery,
terminal, personnel and the environment will result. - The contractors who employ these individuals have agreed to defend and
indemnify Ocean Point for claims made by their employees. They have also named
Ocean Point as an additional insured under their insurance policies to ensure that
the indemnity and defense obligation is covered by insurance. - Ocean Point is nevertheless refusing to allow the employees to enter the facility
for purposes of working on Port Hamilton’s property unless they sign away their rights. - Port Hamilton’s primary contractor, Pinnacle Services, has 31 employees who
perform critical work for Port Hamilton. - On Wednesday, December 20, 2023, Pinnacle advised Port Hamilton that twentytwo of these employees were refusing to sign the agreement and another eight
have stated that they will only sign it under duress to avoid losing their jobs. See
Exhibit B. - At least two other contractors/subcontractors providing services to Port Hamilton have advised that their employees will not sign the Individual Access Agreementbecause of the language in that agreement that is quoted above.
- None of these individuals—business invitees of Port Hamilton—will be allowed to
enter the refinery as of January 1, 2024. Because their employers will not have
work for many of these individuals if they cannot access the refinery, they face the
prospect of being laid off by their employers. - On December 20, 2023, the same day that Pinnacle advised Port Hamilton that its
employees would not sign the Individual Access Agreement, Port Hamilton wrote
to Dan Hudson (a board member of Ocean Point whose LinkedIn profile also
indicates that he is the interim CEO of Ocean Point) and demanded that Ocean
Point cease requiring that Port Hamilton’s contractors’ employees sign such an
agreement. See Exhibit C. - Port Hamilton specifically demanded that Ocean Point remove the language claiming that Ocean Point owed no duty to the contractor employees and the language waiving any claims against Ocean Point unless based solely on Ocean Point’s gross negligence.
- On Friday, December 22, 2023, Ocean Point’s Chief Operating Officer, Jeffrey Charles, responded to Port Hamilton and refused to remove the improper language and stated that one reason Ocean Point would not remove the language was because Port Hamilton had not agreed to pay to Ocean Point sums that Ocean Point claims Port Hamilton owes but which Port Hamilton disputes.
- Ocean Point (a) has overcharged Port Hamilton for shared services and fuel; (b)
used Port Hamilton’s buildings and equipment without compensating Port
Hamilton; (c) damaged Port Hamilton’s equipment due to power outages
throughout 2023 with damages estimated to be $1.5 million; and (d) delayed Port
Hamilton’s ability to respond to smoldering coke in the North Coke Dome in
August 2022 (by preventing Port Hamilton from accessing firefighting equipment
that Port Hamilton owned for more than two weeks) with the resulting delay
costing Port Hamilton an additional $2.3 million in firefighting costs (in addition
to endangering personnel and the community). - As a result, rather than Port Hamilton owing Ocean Point $6.8 million as Ocean
Point claims, it is Ocean Point that is indebted to Port Hamilton by a minimum of
$5.3 million. - The improper actions of Ocean Point, if not halted, will further endanger Port
Hamilton, Ocean Point, and the entire community. - Ocean Point was the successful bidder in the HOVENSA bankruptcy and emerged
from that process in January 2016 with ownership or control over most of HOVENSA’s assets. - Before the bankruptcy, HOVENSA had attempted to shut down the refinery and
only operate the terminal. However, the Government of the Virgin Islands
contended that the terms of the tax breaks it gave to HOVENSA required it to
operate the refinery in order to receive any tax breaks. - On information and belief, in the two years that followed Ocean Point’s acquisition
of the refinery and terminal out of the HOVENSA bankruptcy, Ocean Point
implemented a plan to ensure that if the refinery could not be operated profitably,
it would be able to close the refinery and still operate the terminal while retaining
the favorable tax breaks it receives from the Virgin Islands Government. - Ocean Point convinced the Legislature to allow it to have separate tax breaks for
the refinery and terminal operations, thereby removing the primary “cudgel” the
Virgin Islands possessed to incentivize the owner of the terminal to operate the
refinery (or support another entity operating the refinery. - Ocean Point therefore created an affiliated company, Limetree Bay Refining, LLC
(“LBR”), to own and operate the refinery as a theoretically separate entity. - Because the refinery and terminal had previously operated as a unitary entity,
there were a number of different services that both facilities required but which
only one facility had the ability to provide. - The WastewaterTreatment Plant is owned by Port Hamilton and provides services
for the collection and treatment of wastewater from both the refinery and the
terminal. - Other shared services include security, water supply, and fire safety and
emergency response systems. - Although the refinery and terminal were under common ownership, Ocean Point
and LBR signed a Shared Services Systems Agreement (“2018 SSSA”) under which
Ocean Point supposedly provided the services to LBR but skewed the terms of the
Agreement heavily in favor of Ocean Point. - When Port Hamilton was the successful bidder for the LBR assets in the LBR
bankruptcy, Ocean Point attempted to saddle Port Hamilton with the one-sided
2018 SSSA—including the debt of $69,857,937 that LBR owed to Ocean Point
under that agreement. - Port Hamilton used the Bankruptcy Code’s contract-rejecting provisions to reject
the 2018 SSSA and its accompanying $70 million in debt. - On information and belief, Ocean Point’s disappointment at not getting the LBR
debt assumed and paid by the successful bidder in bankruptcy was the start of its
ill will towards Port Hamilton. - Although Port Hamilton rejected the 2018 SSSA, the bankruptcy court order that
approved the sale of LBR’s assets to Port Hamilton expressly preserved
“all rights, claims, and defenses of the LBT Entities, the Debtors,
and the Purchaser (if any) under or with respect to any agreements
benefitting or in favor of the LBT Entities, the Debtors, or the
Purchaser (if any), respectively are expressly and fully reserved
and preserved, including, without limitation, all easements and
rights of use or access to the Debtors’ property and property jointly
owned by the Debtors and the LBT Entities’ property, including as
set forth in the SSSA, and, for the avoidance of doubt, the LBT
Entities and Purchaser may continue to use and benefit from all
such easements and rights of use or access after Closing in
accordance with the SSSA or any other agreements between the
Debtors and the LBT Entities.”
See Bankruptcy Sale Order, ¶34 (Doc., No. 977 in Case No. 21-32351 in the
Bankruptcy Division of the Southern District of Texas) (emphasis added).
- When LBR owned the refinery, its employees and its contractor employees
accessed LBR’s refinery assets using the same means of access that Port
Hamilton’s employees and contractors presently use. - Port Hamilton is merely continuing the access that LBR enjoyed and which the
bankruptcy court order guaranteed. - Despite not agreeing to be bound by the 2018 SSSA, Port Hamilton initially
entered into a short-term letter agreement with Ocean Point to share services.
The agreement took effect on January 23, 2022, and was extended and amended
through March 21, 2022. - After the letter agreement expired, Ocean Point continued to provide services to
Port Hamilton, and Port Hamilton made payments towards the value of those
services. - On January 13, 2023, the parties entered into a second letter agreement to share
services. Ocean Point unilaterally terminated that agreement effective February
3, 2023. - Nevertheless, despite the absence of a written agreement, Ocean Point continued
to provide services to Port Hamilton and Port Hamilton has continued to make
payments to Ocean Point. - Port Hamilton has now paid over $24.8 million to Ocean Point for shared services
and fuel in the 23 months that it has owned the refinery. - Ocean Point has refused to be transparent in its billings and has repeatedly
- overcharged Port Hamilton, which has prevented the resolution of the ongoing
- dispute between Ocean Point and Port Hamilton regarding payments owed from
- one entity to the other.
- Even though Port Hamilton claims that Ocean Point is indebted to it, Port
Hamiltoncontinues to make weekly payments of $150,000 as a reasonable estimate
of the value of ongoing services provided by Ocean Point. - As one example of the overcharging, Ocean Point invoices Port Hamilton for
electricity used by Port Hamilton. However, three of the electrical meters that
Ocean Point attributes to Port Hamilton’s electricity usage track the electrical
consumption of equipment that is used by Ocean Point (in addition to tracking Port
Hamilton’s usage). Ocean Point’s equipment consumes more electricity than it
acknowledges. Since November 17, 2022, the overcharges for those three meters - have totaled $727,448. The cost of that electricity should be borne by Ocean Point
- (and appear on its financial ledgers as an Ocean Point expense) and Port Hamilton
- should be given a credit of $727,448 (rather than having this sum appear on Ocean
- Points books as part of a receivable from Port Hamilton).
- Although Ocean Point claims that Port Hamilton presently owes it $6.8 million,
when all of Ocean Point’s accounting practices are exposed and other claims that
Port Hamilton has against Ocean Point are reconciled, Ocean Point owes Port
Hamilton more than $5.3 million. - One of the shared services the Ocean Point provides to Port Hamilton is security.
- Ocean Point has admitted that Port Hamilton’s proportionate share of the security
costs for the entire facility is 23% of Ocean Point’s overall security expenses; but,
it continues to invoice Port Hamilton for 40% of those expenses. - Ocean Point also refuses to give Port Hamilton an accounting of how it calculates
its security costs. - Ocean Point attributes a major portion of the security costs to “repairs and
maintenance.” - On information and belief, many of the charges related to security “repairs and
maintenance” are related to repairs of Ocean Point’s security fence, which is an
expense that is solely the responsibility of Ocean Point (just as a repair to Port
Hamilton’s security fence is solely Port Hamilton’s responsibility) - The security for the combined terminal/refinery facility is the subject of federal
requirements because of the marine port (owned 100% by Ocean Point). - The refinery is located inside a security zone created in accordance with federal
law to protect marine ports from terrorism. - Under federal law, a marine port is required to have a Facility Security Plan
(“FSP”) that ensures “the application of security measures designed to protect the
facility and its servicing vessels or those vessels interfacing with the facility, their
cargoes, and persons on board.” 33 C.F.R. § 101.105 (definitions). - Ocean Point’s marine terminal is subject to this requirement.
- The FSP for the terminal was originally developed by HOVENSA and then taken
over, and modified, by Ocean Point before Ocean Point separated the terminal and
refinery into separate entities. - Ocean Point’s FSP continues to apply to both the terminal and the refinery even
though they are no longer owned by related entities. - Any changes to the FSP must be approved by the U.S. Coast Guard.
- Under the existing FSP, Ocean Point controls all access to both the refinery and
the terminal. - The FSP was not modified after Ocean Point spun off the refinery to LBR.
- Part of Ocean Point’s duties under the FSP include controlling access to the
facility. - The purpose of these controls is to ensure that only personnel who have passed
federal background investigations may enter the facility. - Authorized personnel under the FSP include individuals who have Transportation
Worker Identification Credential cards (“TWIC”). - People holding TWIC cards have passed a background check conducted by the U.S.
Transportation Security Administration. - The normal process for Port Hamilton employees and contractors to obtain access
to the refinery under the FSP is to provide Ocean Point with basic information that
allows Ocean Point to confirm that they possess TWIC cards and then Ocean Point
issues a security badge that allows the individuals to enter the facility and proceed
to the refinery location where they will be working. - Ocean Point’s role is administrative only—simply making sure that the individual
meets federal requirements. - The security badges issued by Ocean Point expire on the 31st of every December
and must be renewed annually before then to allow access on January 1 of the
following year. - Ocean Point is refusing to grant Port Hamilton’s contractors the requisite security
badges even though they meet all requirements under the FSP to be granted
access and have been granted access for the last two years. - Ocean Point is using its access control under the FSP for improper purposes. It is
leveraging that control to coerce Port Hamilton’s contractors’ employees to sign
“Individual Access Agreements.” - These one-sided contracts of adhesion require the contractors’ employees to agree
that Ocean Point owes the employees no duty and to waive any claim against
Ocean Point unless the only reason for the claim is solely Ocean Point’s gross
negligence. - The agreements also require the contractor employees to sign arbitration
agreements and waive the right to a jury trial - These contractor employees are not performing any work on behalf of Ocean Point
and are relying upon Port Hamilton’s right-of-access to enter the facility to access
Port Hamilton’s assets. - When accessing the refinery facility through the currently manned security gates,
individuals travel upon roads that are owned by Ocean Point. - Port Hamilton and its invitees have a right of access across those roads (with no
requirement of waiving rights against Ocean Point) by virtue of easements, rightof-use agreements and the order of the bankruptcy court that oversaw the LBR
bankruptcy. - Ocean Point has no legal basis to demand that Port Hamilton’s invitees waive
their rights. - The sole means that Ocean Point has to enforce its demand that the contractor
employees waive their rights is its status as the administrator of the FSP;
however, the waiver of rights is not a federal requirement under the FSP and
contributes nothing to the security of the facility. - Ocean Point has admitted, in writing, that one of the reasons it is refusing to
revise its “Individual Access Agreement” is the lack of “a payment schedule aimed
at resolving the current Port Hamilton account balance for services rendered.” - Port Hamilton has an absolute right to access its property even though doing so
requires its employees and contractor employees to cross Ocean Point property to
do so. - Ocean Point has no right to prevent Port Hamilton or its contractors from
accessing Port Hamilton’s property, even though a portion of the access is over
Ocean Point property, as long as those individuals meet the security requirements
of the federal government. - Ocean Point has also denied Port Hamilton access to its own laundry facilities for
normal washing of bunker gear and recently threatened to turn off power, water,
and withhold security and other services—conduct that is completely unwarranted
given that Port Hamilton has already paid Ocean Point $24.8 million and
continues to pay Ocean Point $150,000 per week to cover ongoing costs while
disputing past overcharges - If the contractor employees are denied access to the refinery on January 1, 2024
have the following responsibilities that will go unfulfilled ifthey are not granted
access:
a. Maintain surveillance of all refinery process units to ensure that there
are no leaks or releases and to immediately respond if a leak or release
develops;
b. Keep the refinery in compliance with requirements of the U.S.
Environmental Protection Agency, the Virgin Islands Department of
Planning and Natural Resources, the Occupational Safety and Health
Administration and the Virgin Islands Department of Labor;
c. Respond to any fire, release, or oil spill;
d. Maintain the air pollution monitors along the facility fence line;
e. Keep the petroleum coke stored in the coke domes wet so that they do not
combust;
f. Maintain all out-of-service process units and flare units in a “nitrogen
purge condition” so that the atmosphere in such units is kept in a nonexplosive condition;
g. Maintain the Continuous Emission Monitoring System for the flare;
h. Provide proper manning for the fire and rescue teams to ensure a prompt
response to any emergency; and
i. Generally maintain the refinery in a safe, healthy, and environmentally
appropriate manner.
- If the personnel cannot perform their duties as outlined above, there is a
substantial likelihood that there will be damage to Port Hamilton’s equipment,
unauthorized releases of regulated pollutants to the atmosphere, and the
potential for catastrophic damage from explosion with resulting personal
injuries, property damage, and widespread environmental damage - Ocean Point’s terminal facility is downwind (based upon prevailing winds) from
the refinery. Consequently, Ocean Point is placing itself at risk by refusing Port Hamilton’s contractors’ employees access to the facility. - These same contractor employees presently have access through the same
means and have had such access without signing away their rights for the past
two years. - Ocean Point’s ability to meet the security requirements of the FSP will not be
affected by a restraining order or injunction that allows Ocean Point to restrict
access to individuals who do not meet federal security requirements and merely
prohibits Ocean Point from using its status as the administrator of the FSP from
leveraging that status to secure protections for itself that are unrelated to
protecting the port from terrorism. - It is against the public policy of the Virgin Islands to put contractors’ employees
in a position where they are required to sign away rights such as demanded by
Ocean Point when Ocean Point offers them absolutely no consideration in
return.
PORT HAMILTON IS ENTITLED TO A TEMPORARY RESTRAINING ORDER,
PRELIMINARY INJUNCTION, AND INJUNCTION PROHIBITING
OCEAN POINT FROM DENYING PORT HAMILTON’S INVITEES ACCESS
TO THE REFINERY FOR ANY REASON OTHER THAN
A FAILURE TO MEET FEDERAL SECURITY REQUIREMENTS. - As established by Port Hamilton’s motion for temporary restraining order,
preliminary injunction and injunction and memorandum in support of motion,
irreparable injury is likely to occur if Port Hamilton’s invitees who meet all
legitimate security requirements of the FSP are not granted their security badges and allowed them access to the refinery before January 1, 2024. - Port Hamilton is likely to succeed on the merits of its claim.
- The harm to Port Hamilton and the public more than outweighs any de minimis
harm to Ocean Point if it is required to continue processing and renewing
security badges in the same manner it did for past years’ renewals. - Port Hamilton is entitled to a temporary restraining order that prohibits Ocean
Point from denying access to Port Hamilton’s invitees if the basis for such denial
is any reason other than failure to meet federal security requirements. - Port Hamilton is also entitled to preliminary and permanent injunctions that
prohibit Ocean Point from denying access to Port Hamilton’s invitees if the basis
for such denial is any reason other than failure to meet federal security
requirements.