USVI government sues refinery operator for $1.5 billion
ST CROIX, USVI -- A complaint filed in Superior Court in the US Virgin Islands on Monday charged the Hess Corporation with serious violations of the law after the company abandoned operations at one of the largest gas refineries in the western hemisphere nearly a decade before its legal obligations were complete.
The law suit is seeking damages of at least $1.5 billion, a figure that covers at least $150 million per year in benefits to the people of the USVI over the ten-year period from 2012 to 2022 that Hess was obligated under the law to continue operating the refinery. The damages triple under USVI law.
“This not about a business disagreement. It is about Hess breaking the law,” said US Virgin Islands Governor Kenneth Mapp. “The territory of the Virgin Islands expects that the law is followed by every entity that does business here. Hess violated the law and its obligations to the people.”
The Hess oil refinery was established in the mid-1960s as a long-term commercial relationship based on mutual obligations and benefits, involving the construction, maintenance and operation of a large, world-class refinery on St Croix, the largest of the four main islands in the United States territory.
The agreement, which included significant tax benefits for Hess, was enacted by the USVI legislature. The agreement was renewed most recently in 1998 with a legal obligation through 2022. Without any advance warning, John Hess, the CEO of the Hess Corporation, notified the government in January 2012 that the company would shut down the refinery within a month, violating the law that dictated operations through 2022.
As a result of the shutdown of operations at the plant, thousands of jobs were lost as well as income and other benefits for government and people of the USVI. The refinery provided more than a quarter of the private income on the island of St Croix. In addition to the economic hardship, there were significant environmental consequences related to the plant shutdown, for which Hess was fined $40 million. Those fines have not yet been paid.
The USVI government, during the past three years, has tried to reach accommodations with Hess, including the sale of the refinery. As recently as 2013, Hess was given additional concessions to allow it time to sell the refinery, but failed to honour its commitments it made even then.
“This is about one thing: Hess breaking the law and the resulting hardship to the territory of the Virgin Islands,” added Mapp. “There are consequences to breaking the law and Hess must fulfill its legal obligations to the territory.”
The suit charges Hess with violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act and various other violations of the law.