On HOVENSA Deal, ‘A Bird In Hand Is Better Than Two In The Bush,’ Senator Says

ST. CROIX — A protracted Senate hearing held here on Monday to further discuss the Limetree Bay (a subsidiary of ArcLight Partners, LLC) and Government of the Virgin Islands operating agreement, brought to the fore the concerns of residents who reside on the island, and gave ArcLight officials a better understanding of St. Croix’s dynamics.

Arclight officials promised to make certain changes to the agreement before it could be ratified, and said their focus on providing job opportunities has become even more pronounced, recognizing more intimately the impact of HOVENSA’s closure in 2012, which resulted in a substantial migration of the island’s middle class.

ArcLight Partner Jake F. Erhard commended senators for asking tough questions, and for their diligence in making sure that a hearing was held on St. Croix.

“You have all done a very commendable job in asking all of the right questions and pushing us really hard to think about some things that we hadn’t thought about during the negotiation process with the governor,” Mr. Erhard said. “I also think that coming here to St. Croix was in fact very beneficial for us to really better understand the dimensions of the job concerns that you have. And I can assure you that that will be reflected in how we think about managing this facility if we are fortunate enough to see this agreement approved.”

His comments were echoed by the other testifiers, including government representatives Vladimir Collens, the territory’s commissioner of Finance, and Attorney Joel Holt.

Mr. Erhard, however, held to his stance that the agreement struck between the GVI and ArcLight, even before the prolonged Senate hearings — the latter of which went into the wee hours of Tuesday morning — was a solid agreement that would be beneficial to both parties.

“I know this sounds very self-serving, so you can take it for what it’s worth; but in my professional opinion, this is a very, very good deal for the government [and] for the people of the Virgin Islands,” Mr. Erhard said. “It was a competitive process — more competitive that we hoped it would be. And the governor and his team, with Buckeye coming into the process, quite frankly pushed us hard and extracted a lot of value from us — more than we were putting on the table at the very beginning of the process.

“But as I’ve said all along, it ended up being a fair deal. Both of us are here voluntarily; both of us are here because we think it’s the right deal for each of us, and because we want to be partners in this together.”

The ArcLight official then spoke of the benefits associated with the deal in an effort to strengthen his closing remarks’ influence on lawmakers. “I think there’s a real pathway to job creation, and there’s an alignment with us and with the government, where we’re going to put a lot of capital to work to execute on what we think is a pretty unique vision for St. Croix. We think we have the resources and the experience to do it. We think we’ve demonstrated tremendous progress so far by bringing Sinopec and Freepoint Commodities to the table. These are not models; these are actual results that we’ve already delivered upon.

“And going forward I can tell you that we will bring a single-minded focus not only try to expand the facility, but in all sincerity, to try to make the refinery a viable option… We’re not sitting here saying it’s going to happen, but we have every incentive —  financially [and] selfishly to try and make that happen. And the great thing about this deal is that if we’re able to do it, its’ a win-win.”

In answering a question posed by Senator Novelle Francis, Mr. Erhard revealed that it would cost $370 million to complete the operating agreement transaction, with $220 million going to the GVI “within weeks” of ratification, according to Mr. Collens, speaking at the December 16 hearing in St. Thomas.

Residents and testifiers shared concern, including Virgin Islands Refining SA, a special purpose vehicle formed by Global Precious Metal that said it was stonewalled by Lazard Asset Management while attempting to enter the process of acquiring the south shore facility. And a company called Freedom New York testified as well, giving a similar account to that of VIRSA. Former Senator Adelbert Bryan also testified against the agreement, as well as Neb Asarkasaamsu Herishetapaheru.

But Senator Kurt Vialet, pinpointing Freedom New York, said such companies, in his analysis, were not serious players.

“In this day and age anybody could generate letters, anybody could send correspondence,” he said. “And if we are not sure, then you have to remember the premise, or the old saying of the elderly individuals in the Virgin Islands: “A bird in hand is better than two in the bush.” It’s a very old saying, and I think it was probably a phantom bird in the bush,” he said, referring to Freedom New York.

Senator Nereida Rivera-O’Reilly said she was ready to vote in the affirmative. Mr. Vialet gave recommendations to ArcLight that would influence his vote. And Senator Almando Liburd said the Senate’s decision on this matter will give a critical signal to the world on whether St. Croix is open or closed for business.

Mr. Holt, in responding to a question asked by Senator Clifford Graham that sought clarification on the bidding process in light of accusations brought by firms contending that they were not given a fair chance, said anyone with money could have participated.

“They could have participated, they could have easily gone in and bid on it. And, believe me, if they had come in with more [money] than these guys (ArcLight Partners), they would be sitting at the table,” Mr. Holt said.

Seeking further clarification, Mr. Graham asked whether a company that desired reopening the refinery in full could have participated in the bidding process and present whatever amount they thought the facility was worth, Mr. Holt’s response was clear.

“Yes. And as I told the [Delaware bankruptcy] judge in my testimony, if Exxon Mobil had shown up and wanted to buy this refinery, we wouldn’t have talked to these people because Exxon would have brought 2,000 jobs with them,” Mr. Holt added. “So anybody could have showed up and bid, the person with the most money was going to win that auction.”

An unspecified Senate session will be held in St. Thomas before the last day of December, where the 31st Legislature will either ratify or reject the operating agreement.

Indicators, however, point towards the landmark deal’s approval.

Feature Image: Aerial view of some of HOVENSA’s oil storage tanks. 

Image Credit: VIC.