Mark Eckard, president of the St. Croix Chamber of Commerce, warned that the government’s ongoing battle with Hovensa could do serious harm to the island’s business community.
“The Senate’s rejection of the fourth amendment agreement has triggered a potentially catastrophic chain of events for our economy,” he said during an interview with the Source on Friday.
During the run-up to the vote, the St. Croix Chamber of Commerce openly supported and lobbied for the agreement, which would have compelled Hovensa to sell the refinery in exchange for tax incentives.
During public hearings before the vote, Eckard told the senate that Hovensa, when operational, had pumped millions of dollars into the local economy in the form of wages.
“Hovensa employees ate in our restaurants, drank in our bars, shopped in our stores, deposited money in our banks,” he said at the time, urging them to ratify the agreement so a new company could come in and help fill the hole in the job market that Hovensa left behind.
The senate rejected the agreement on Aug. 7.
Since then, the government has been gearing up for a legal battle with Hovensa. On Aug. 20 Attorney General Vincent Frazer requested $5 million from the senate to prepare for litigation. He said this amount was only a down payment, estimating the total cost could be more than $18 million and the case could drag on for years.
Eckard believes that if the case goes forward, it is unlikely the refinery will be sold anytime soon, and there are already some indications that he is right.
Calumet Specialty Products Partners, a company that voiced interest in purchasing the refinery during the public hearings before the vote, has since issued a statement that seems designed to cool any expectations.
“To date, Calumet has not begun a due diligence process on the refinery. At this early stage, Calumet is evaluating whether it would participate in a sale process, should one commence,” the statement read.
“It is Calumet’s understanding that any potential sale process for the refinery will require, among other things, various governmental approvals in order to commence,” it continues.
Eckard said that Hovensa could chose to sell the refinery tomorrow if it so wished, but he believes the company has never desired to part with the property. That, he says, is why the chamber was so supportive of the fourth amendment agreement.
“The entire issue as we see it is that Hovensa does not want to sell the refinery. The optimism before the vote and the reason we worked so hard to lobby for the vote—around the clock for several weeks—is because we thought it was a good deal.”
He said that just getting Hovensa to agree to market the refinery was a major victory, especially considering the fact that sitting across the table from the governor’s negotiating team were two powerful and wealthy entities, Hess Oil and the government of Venezuela.
“It was an extremely difficult thing to do. That’s an incredible result that the governor achieved for us. To have seen it rejected for the reasons given on August 7 was difficult,” Eckard said.
While he disagrees with the senators who voted against the agreement because they do not want any refinery operating on the island, Eckard said he understood their position. He said he was surprised, however, by those senators who rejected the deal because they thought it was not good enough.
Following the vote, several senators passed a non-binding resolution calling on Hovensa to sell the refinery on less generous terms that the fourth amendment agreement spelled out.
Eckard pointed out that, unlike the governor’s agreement, the Senate vote did nothing to bind Hovensa to sell and that it would have no effect because the company, for whatever reason, does not believe it is in its best interest to part with the refinery.
“Hovensa doesn’t need an agreement to sell, but they don’t want to sell. That’s why we needed an agreement—to try to pry those 2,000 acres from their hands for the benefit of our economy,” he said.
Eckard said he could only speculate what effects the rejection of the agreement may have on local businesses as the situation was still developing, but he said Hovensa’s threat to shut down the fuel rack was especially troubling to the chamber.
While he objected to Hovensa’s threat, he said there was only so much that could be done because the refinery is a private enterprise and they have rights over their private property.
“As much as it hurts me to say this, we don’t have a right to do what we want with Hovensa’s property. They own that property,” he said.
“You can’t argue with Hovensa’s decision to go out of business,” he added.
He said he had no idea how much gasoline might cost if the fuel rack is shut down and gasoline had to be brought over by barge from St. Thomas, but he was certain it would be more expensive and possibly significantly so.
While an increase in fuel costs would have a direct impact on the economy and the lives of St. Croix residents, he said, an equally disturbing possibility is that flights to the island could be curtailed if the Henry E. Rohlsen airport cannot secure enough jet fuel.
“What about our charter flights from Denmark every year?” he asked. “One thing that the charter flights from Denmark counted on is their ability to refuel cheaply here.”
He said that restaurants and hotels could be heavily impacted if the showdown with Hovensa keeps tourists away.
Eckard said the situation could hurt business in other ways as well. With less economic activity comes lower tax revenues, and any disruption in government services could damage the economy.
“Everything from potholes to health care affects the business community,” he said.
Increased taxes are also a concern. Eckard said the chamber would be strongly opposed if the government sought to recoup lost revenues by raising taxes on local businesses.
“This market cannot support one more dime in taxes on the business community,” he said.
He added that this crisis is coming at an exceptionally bad time for business owners.
Asked what local businesses could do to prepare for what could prove to be years of slow economic activity, he said he wasn’t sure. He said that local businesses didn’t have huge cash reserves they could dip into to weather lean years, and that many business owners had already cut deeply into their operations to survive the last few years.
“This is happening at a time when we’ve already lost businesses. This is happening at a time when businesses are already at their breaking point,” he said.
Eckard said he would like the to see the senate reconsider the fourth amendment agreement, but whether the deal is passed or not he hopes to see greater cooperation between the executive and legislative branch.
“We can’t lose sight of the fact that the party on the other side of the table from us is Hovensa. This is not a battle between the governor and the senate,” he said. “This is a negotiation between Hovensa and the people of the Virgin Islands.”
“We have hope that the Senate will help us through this and find a way to ensure that we achieve an outcome that is healthy for the Virgin Islands, the island of St. Croix and our business community,” he said.
