Attorney General Vincent Frazer on Thursday rebutted claims made by the Legislature’s deputy chief legal counsel about the proposed deal for the sale of the Hovensa refinery on St. Croix to Atlantic Basin Refinery.
Gov. John deJongh Jr. submitted the attorney general’s opinion to the Senate president and members of the 30th Legislature on Thursday. The Senate is scheduled to vote on the deal Friday.
“I am releasing the attorney general’s legal memorandum because it is important for the senators to have accurate information before making their decision tomorrow – a decision that will have tremendous ramifications for the Virgin Islands and our economy in the many years to come,” deJongh said. The complete memorandum can be seen here.
In her legal opinion, the deputy legal counsel asserted that the proposed operating agreement is not “legally sufficient to protect the interests of the Government of the Virgin Islands,” because it purportedly “lacks mutuality of assent, mutuality of remedies, and [is] unconscionable, severely limiting the government’s legal remedies,” and because “tying all of [the] payment requirements to a nonrecourse mortgage gives the government no recourse against ABRVI for breach of contract.”
Frazer’s legal memorandum said many portions of the deputy counsel’s opinion are "fundamentally flawed," but addressed only what he considered the most significant portions.
"In any event, they are less significant to properly understanding (i) the economic benefits to the government of the operating agreement, and more importantly (ii) the multiple layers of protection afforded the government in the event ABRVI does not fulfill its obligations, protections that the government was sorely lacking in the existing concession agreement when the current owner ceased operation in 2012," he wrote.
In particular, the attorney general’s memorandum concluded that the operating agreement will be fully enforceable upon closing; that it provides the government with specific remedies in the event of a “breach”; that the government has the right to pursue all the remedies for breach of contract available in the common law for any failure by ABRVI to perform any of its obligations not specifically defined as a “breach”; that failure by ABRVI to operate the refinery at the required capacity will constitute a breach of the agreement; that the agreement permits ABRVI to operate the facility as a storage facility only as a means to fund the reconfiguration and restart of the refinery, or failing that, the deconstruction of the refinery and restoration of the site.
The memorandum also points to the agreement’s employment provisions, which Frazer said provides incentives to ABRVI to employ the agreed-upon minimum of 500 full-time employees, 75 percent of whom must be Virgin Islands residents and 100 contractors. He said the government’s interests are protected not only by multiple levels of guarantees, but also by a security interest in the refinery that both safeguards the government’s position and permits ABRVI to obtain the financing that is critical to a refinery restart.
The memorandum was released Thursday night in a statement from Government House
so glad the Senate counsel stated the truth. Frazer is only partly correct. We would have remedies against ABRVI, but since ABRVI has no money we would get nothing when ABRVI declares bankruptcy. Let Hovensa declare bankruptcy and the federal judge would follow the money and make Hess pay.
‘Make Hess pay’ – it sounds so simple. First, PDVSA VI owns half, Hovic owns the other half, both are limited liability companies, as is Hovensa itself. After millions of dollars and years of litigation maybe it would get to the Venezuela government and Hess. What’s there to pay anyway? There’s no more air pollution. The ground water issue was settled in court. The scrap value of the plant may be profitable, certainly not a big liability. It would probably be a plus for the government to inherit the power plants and replace wapa.
Looks like the senators listened to their legal counsel instead of to Fraizer. The ABR deal is dead with only Sanes and Buckley voting for it! The distrust that Gov. DeJongh has fostered has taken its toll.
Now what happens since it seems there’s no contingency plan for the fuel storage facility shutting down in STX?