Gov. John deJongh Jr. and Delegate Donna Christensen emphasized the impact of the Hovensa refinery closing to employment and the overall economy of the territory during congressional hearings this week in Washington D.C., according to statements from their respective offices. The testimony of the two top territorial officials highlighted the more acute direct impact it and other recent refinery closures have had upon their host communities, in hearings called to look at the potential for reduced refinery capacity to increase gas prices.
Hovensa’s closure after 45 years of operation, and the nearly simultaneous closures of some Pennsylvania-based refineries, will stress Lower Atlantic and New York Harbor supply routes, deJongh said in his prepared testimony to the Joint Economic Committee.
It will be difficult to compensate for the supply disruptions by employing alternate routes from the Gulf Coast, because the pipeline delivering from those producers is near capacity, and Gulf Coast shipping is under restrictions of the Jones Act, a federal law that regulates the maritime industry and does not apply to the territory’s exports, according to deJongh.
“All of this is to say nothing of the catastrophic impact of the Hovensa closure on the USVI itself, which has lost not only its largest employer and taxpayer but also its sole existing source of gasoline and the fuel oil that powers its electricity and water supplies,” deJongh said in his testimony.
While the hearings were focused on gas prices, Christensen said it was important to look at the other, more severe and more direct effects of the refinery closings. "(I)n addition to the loss of jobs, scholarships, and the purchasing of supplies from local companies, as well as the loss of value to those and other businesses, the closure of Hovensa not only affects consumer prices for gasoline and other petroleum products in the Northeastern states, but has a severe impact in the U.S. Virgin Islands as well," Christensen said.
“Given that the U.S. Virgin Islands being such a small community, the impact of Hovensa’s recent closing has already begun to reverberate throughout the entire community and regionally as well," she said. "With over 2,000 jobs lost due to the shutdown, businesses that rely on Hovensa, their suppliers, hotels and restaurants and even some of our private schools are wondering how they are going to keep their doors open. This coupled with the ongoing recession, couldn’t have come at a worse time with the local government having had to cut salaries, announce layoffs and deal with the impact of federal spending.”
Christensen also said the refinery closure was due to market conditions and not to the implementation of environmental and health protections.
“The truth is that recent refinery closures were not driven by environmental protections and they certainly were not caused by regulations that haven’t even been proposed. The truth is that recent decisions to close or sell refineries along the East Coast are based on market factors such as oil prices, consumer demand and competition.”
Sen. Bob Casey (D-Pa.), the committee chair, outlined a bill he said he would introduce that would fund natural gas development at the state level, suggesting that increasing production of natural gas was one of several approaches, along with regulating oil market speculation and closing that would help reduce energy costs. While aimed principally at increasing production, Casey’s planned bill would also give local control over how those funds are spent.
Help with natural gas infrastructure would be of tremendous value to the territory, Christensen said in her testimony.
“It is clear to me that not having it available was a major factor in Hovensa’s closing, but our utility is also compelled to find a way to replace diesel with natural gas to lower the costs to consumers and to burn a clean fuel. Barriers include transportation and storage of liquid natural gas and our small economy of scale,” Christensen said.