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Government Attempts to Foreclose on Hovensa Refinery

Making good on promises made during a press conference earlier this month to foreclose on the Hovensa property, Gov. Kenneth Mapp this week filed a six-page action in V.I. Superior Court to begin the process, which includes the appointment of a receiver that the refinery would have to pay for.

The back and forth between the government and refinery officials has been going on since 2012, when Hovensa announced that it would be closing its doors. Mapp, Lt. Gov. Osbert Potter and members of the governor’s legal team met on Jan. 15 with representatives from Hess Corporation and Petroleos de Venezuela S.A (PDVSA) to get an update on the situation, which Mapp compared the next day to a “messy divorce,” with Hovensa threatening to hold hostage $40 million in settlement funds owed to the government if a deal to sell the refinery was not approved by the end of February.

During the Jan. 16 press conference, Mapp said during the meeting, Hess officials gave a limited set of options: either the facility is sold and the government is able to enter into an operating agreement with the successful buyer, or the corporation would use the money it currently owes the government to completely shut down the facility and declare bankruptcy. The money owed stems from a suit filed by the government against Hovensa in 2005, after it was discovered that the water tables on the south shore of St. Croix had been contaminated by an oil leak.

The government eventually settled the suit for $43.5 million, with $3.5 million received at the settlement signing and the remaining $40 million coming after the sale of the refinery or by Dec. 31, 2014 — whichever came first. As security on the $40 million debt, Hovensa’s owners put up a mortgage lien on the property, and Mapp further announced at the press conference that the government would move to foreclose and “seize all assets” on the site in an attempt to collect on the debt.

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At this point, neither has the refinery been sold, nor the remainder of the settlement money paid.

Mapp took up the issue once again during his State of the Territory Address, saying on Monday night that he had made good on his promise to foreclose on the property by filing suit in V.I. Superior Court. In the six-page action for debt and foreclosure, the government argues, among other things, that by not paying the outstanding $40 million, Hovensa is in breach of the settlement agreement and has defaulted on the mortgage, which stipulates that in the event of a default, the government may foreclose on the lien at any time.

The government also contends that it has given proper notice of default to the refinery and is now asking that Hovensa be removed from the refinery and that the court appoint a receiver to oversee the sale of the refinery property and the payment of $40 million to the government from the proceeds. Any costs the government fronts for insurance premiums, taxes and other fees resulting from the foreclosure — including attorneys’ fees — be included in the amount.

Hovensa is also asked to remain in compliance with all federal environmental obligations.

If a judgment is issued in favor of the government, Hovensa would be barred from the property indefinitely and stripped of all right, title, lien, claim and equity of redemption, according to court documents.

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Making good on promises made during a press conference earlier this month to foreclose on the Hovensa property, Gov. Kenneth Mapp this week filed a six-page action in V.I. Superior Court to begin the process, which includes the appointment of a receiver that the refinery would have to pay for.

The back and forth between the government and refinery officials has been going on since 2012, when Hovensa announced that it would be closing its doors. Mapp, Lt. Gov. Osbert Potter and members of the governor’s legal team met on Jan. 15 with representatives from Hess Corporation and Petroleos de Venezuela S.A (PDVSA) to get an update on the situation, which Mapp compared the next day to a “messy divorce,” with Hovensa threatening to hold hostage $40 million in settlement funds owed to the government if a deal to sell the refinery was not approved by the end of February.

During the Jan. 16 press conference, Mapp said during the meeting, Hess officials gave a limited set of options: either the facility is sold and the government is able to enter into an operating agreement with the successful buyer, or the corporation would use the money it currently owes the government to completely shut down the facility and declare bankruptcy. The money owed stems from a suit filed by the government against Hovensa in 2005, after it was discovered that the water tables on the south shore of St. Croix had been contaminated by an oil leak.

The government eventually settled the suit for $43.5 million, with $3.5 million received at the settlement signing and the remaining $40 million coming after the sale of the refinery or by Dec. 31, 2014 — whichever came first. As security on the $40 million debt, Hovensa’s owners put up a mortgage lien on the property, and Mapp further announced at the press conference that the government would move to foreclose and “seize all assets” on the site in an attempt to collect on the debt.

At this point, neither has the refinery been sold, nor the remainder of the settlement money paid.

Mapp took up the issue once again during his State of the Territory Address, saying on Monday night that he had made good on his promise to foreclose on the property by filing suit in V.I. Superior Court. In the six-page action for debt and foreclosure, the government argues, among other things, that by not paying the outstanding $40 million, Hovensa is in breach of the settlement agreement and has defaulted on the mortgage, which stipulates that in the event of a default, the government may foreclose on the lien at any time.

The government also contends that it has given proper notice of default to the refinery and is now asking that Hovensa be removed from the refinery and that the court appoint a receiver to oversee the sale of the refinery property and the payment of $40 million to the government from the proceeds. Any costs the government fronts for insurance premiums, taxes and other fees resulting from the foreclosure — including attorneys’ fees — be included in the amount.

Hovensa is also asked to remain in compliance with all federal environmental obligations.

If a judgment is issued in favor of the government, Hovensa would be barred from the property indefinitely and stripped of all right, title, lien, claim and equity of redemption, according to court documents.