Governor to HOVENSA: Third Concession Agreement will be reinstated
Published: August 9, 2013
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ST. CROIX - As a first step toward enforcing an existing agreement with HOVENSA, Gov. John deJongh Jr. plans to write the owners of the shuttered refinery and officially inform them about the 30th Legislature's decision Wednesday rejecting a proposed new agreement.
Government House spokesman Jean Greaux Jr. said Thursday night that the governor's letter will also remind HOVENSA's owners that the existing agreement - the Third Concession Agreement - between the government and HOVENSA will soon be reinstated.
The interim agreement will remain in effect until Thursday, after which the Third Concession Agreement will go back into effect, Greaux said.
According to Greaux, that agreement includes the company's obligations to operate an oil refinery and a fuel truck rack to supply wholesale gasoline, as well as requirements to make payments in lieu of property taxes and pay customs duties on imported fuels.
"He will expect that HOVENSA will abide by those obligations," Greaux said.
Since shortly after HOVENSA announced in January 2012 that it was shuttering its refinery and planned to convert to an oil storage terminal, the company and the government have been operating under an interim agreement in principle while negotiations were going on to develop a proposed new fourth amendment agreement.
On Wednesday night, the Legislature overwhelmingly rejected that proposed new agreement, which would have governed how the company went about putting the refinery up for sale and would have allowed HOVENSA to operate the refinery site as an oil storage terminal while it was for sale.
The defeated agreement also would have temporarily reduced the company's payment in lieu of property taxes by half, with HOVENSA to repay the deferred obligations in 2019 if the refinery did not sell - or earlier if it stopped operating an oil storage terminal. Had the refinery sold, it would have entitled the government to a portion of sales proceeds.
Senators on Wednesday defeated the proposal by an 11-3 margin, with one senator absent. In a statement responding to the decision, deJongh said he would move forward with enforcing the existing agreement.
During Senate hearings on the proposal, the parties indicated that they would likely wind up in litigation if the new agreement was not ratified. The government contends HOVENSA breached the existing agreement, while HOVENSA's position is that no breach occurred, according to testimony before the Senate.
DeJongh on Thursday spoke to the St. Thomas Rotary Club about the situation, describing the losses and economic impact when HOVENSA closed its refinery, reacting to the Senate decision and looking to the future.
"We understood that there was a breach of contract, but, to my way of thinking, I would rather spend the money dealing with our social issues than on litigation," deJongh said at one point.
George Dudley, the local lawyer who represents HOVENSA, said Thursday that he was "disappointed" with the Legislature's decision.
The next step, he said, is up to the government.
"The proverbial ball is in the governor's court," he said.
When asked about the chances that the owners of HOVENSA might return to the negotiating table, Dudley referred to a statement released by Senate President Shawn-Michael Malone, which said that senators had "placed on the legislative record their concerns and the conditions under which a Fourth Agreement can be ratified."
"I do not know the conditions to which the Senate president is referring," he said. "I must have missed something."
HOVENSA and its owners are waiting to hear from the governor, Dudley said.
"Our position has been put on the record," he said. "We believe we have certain rights. We do not believe we are in breach of the agreement."
It is, he said, up to the government to decide "how they choose to apply their understanding of the current agreement."
As for the possibility of returning to the negotiating table, Dudley said that until he sees what the government may propose, "I cannot state unequivocally what my clients' position will be."
However, he also noted that "I seriously doubt that whatever is proposed is something my client would entertain - but I don't know."
Asked about the possibility of returning to the negotiating table, Greaux said that at this point, the governor is focusing on enforcing the existing agreement. He said he could not speculate on what conversations might occur.
"I am sure both sides are going to be looking beyond what happens on Aug. 15," he said.
Senators cited a variety of reasons for voting down the agreement, from environmental and health concerns to the need to diversify St. Croix's economy.
There also were concerns about the wording of the agreement, and some senators said the government gave too much away.
Some senators also spoke about hard lessons learned from the mistakes of the past and criticized the way HOVENSA dealt with the closure.
The most vocal proponents of the deal - the territory's Chambers of Commerce - reacted to the vote on Thursday, saying they were disappointed.
Sebastiano Paiewonsky-Cassinelli, president of the St. Thomas-St. John Chamber of Commerce said the chamber commended the governor for "undertaking the arduous task" of negotiating and thanked Senators Donald Cole, Sammuel Sanes and Judi Buckley "for exhibiting intellectual honesty and showing practical, common economic sense in voting yes."
"We believe that a no vote will condemn a generation of Virgin Islanders to poverty," he said, adding that the chamber wants to know what the 30th Legislature's plans are to revitalize the economy.
"We want to know - the community wants to know - what is the 30th Legislature's plan for recouping we lost?" he said. "They said no. Then what's their plan?"
Mark Eckard, president of the St. Croix Chamber of Commerce, also expressed disappointment.
"They seem to have gotten their emotionalism and anger confused because if HOVENSA is who they are angry at, then they should have ratified the agreement, because again, HOVENSA doesn't want to sell the refinery," Eckard said. "They want to sit on that 2,000-acre property in perpetuity and never have to deal with the monstrous cost and headaches associated with truly cleaning up the property. And that is exactly what senators achieved with their enthusiastically angry and emotional votes yesterday."
HOVENSA is a joint venture between wholly-owned subsidiaries of Hess Corporation and Petroleos de Venezuela, S.A. The subsidiaries, Hess Oil Virgin Islands Corp. and PDVSA V.I., Inc., each own 50 percent of HOVENSA.
- Daily News reporter Amanda Norris contributed to this article. Contact Joy Blackburn at 714-9145 or email email@example.com.