US Virgin Islands moves to seize Hovensa assets

The US Virgin Islands government has started legal proceedings to seize the mothballed 350,000 b/d Hovensa refinery and fuel distribution facilities after the company defaulted on a $40mn fine for environmental damage, governor Kenneth Mapp said yesterday.

The fine was levied under a suit the government filed against Hovensa in 2005 following an oil leak that contaminated the south shore of St Croix, Mapp said.

Hovensa paid $3.5mn, and agreed with the government that $40mn would be paid "after the sale of the refinery or by 31 December 2014 – whichever came first," the governor said.

The territory's attorney general has been instructed "to take every legal action against Hovensa for breach of contract and to seize the company's assets," he said.

This was Mapp's first public comment on the sensitive Hovensa issue since he took office on 5 January, and followed the rejection by legislators last month of an operating agreement between the government and Atlantic Basin Refining (ABR) that would have re-started the refinery.

The legislators' approval of the agreement was needed to clear the way for start-up firm ABR to purchase the refinery.

Hovensa´s shareholders, US independent Hess and Venezuela's financially strapped state-run PdV, last month filed separate lawsuits in US federal and local courts seeking a combined $236mn they say they are owed by the government in tax refunds.

Mapp did not refer to these lawsuits, saying recent developments between the administration and Hovensa were "like a relationship gone bad, and we are on the verge of a divorce."

Hovensa has not commented, but Hovensa told the government earlier this week it would have paid the government the $40mn if it had been able to sell the refinery, Mapp said. "Hovensa now says it will use those sums to mothball its facilities and then seek to file bankruptcy," the governor said.

Hovensa is the islands' sole fuel distributor, normally providing an estimated 6,000 b/d of gasoline, diesel and propane. But after the legislature rejected the operating agreement, Hovensa began a process of shutting down that is expected to be completed by 1 March.

The US territory has started importing gasoline from Puerto Rico as Hovensa empties its fuel tanks.

The refinery was shut down in early 2012 and converted into a storage terminal.

ABR had planned to revamp the refinery to use US light crude. Hovensa was designed to process heavy crude from Venezuela.

Mapp did not indicate the government's plans for the refinery after its seizure.

cj/pg

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