Creditors of a Hess subsidiary have asked a federal judge to lift the oil giant’s bankruptcy filing, claiming its true purpose was to shield the company from lawsuits in the U.S. Virgin Islands, court documents revealed.
The legal filing also lists nearly 60 years of environmental and social ills allegedly caused by the refinery.
The petition filed Thursday asked Judge Marvin Isgur, of the Southern District of Texas bankruptcy court, to either void Chapter 11 bankruptcy for HONX, a Hess subsidiary, or convert it to Chapter 7. Either way, the former owners of St. Croix’s long-troubled oil refinery would have to answer hundreds of lawsuits from Virgin Islanders allegedly hurt by the gas plants’ toxins, according to the court records.
“The debtor did not file this case for its own protection,” wrote lawyers representing a committee of creditors seeking to get the bankruptcy dropped. “Instead, the debtor seeks to protect Hess. But Hess is not subject to the kind of financial distress that would justify even its own bankruptcy filing. To be sure, hundreds of plaintiffs in the USVI have valuable claims against Hess, including direct premises and supplier liability claims that are not derived from the debtor’s liability.”
The HONX bankruptcy, the creditors wrote, is protecting $37 billion from potential exposure to the asbestos suits. The filing claimed Hess settled out of court approximately 1,100 asbestos suits over the last 23 years.
Hess is especially scared of the suit going to trial in the USVI because of a 2021 change in laws, allowing older or sick people to have their cases expedited, the creditors claimed.
“Hess, like every other asbestos defendant in the USVI, has been terrified of having its liability determined by members of the community that it devastated through its reckless and rapacious conduct — and no defendant has permitted an asbestos case to go to trial there,” the creditors wrote. “Every day that goes by in this case, and every day the USVI actions remain enjoined, Hess continues to generate millions in free cash flow, while asbestos claimants suffer, witness memories fade, and evidence grows stale. Like most defendants, Hess would prefer litigation and judgments years into the future to litigation and judgments right now.”
Hess ran the refinery on St. Croix’s south shore from 1965 to 1998, allegedly exposing a generation of Crucians to unchecked toxins in their workplace. Hess sold the refinery to Hovensa, which in turn sold it to Limetree Bay. Who exactly owns the massive refinery now has been a matter of debate since it was sold at a bankruptcy auction early this year, but Hamilton Refining and Transportation claims to be the sole owner.
Residents and would-be developers have called for the refinery to be permanently closed and dismantled. Some claim to have been sickened by fumes from the plant. Others have asked the Environmental Protection Agency to declare the sight hazardous and designate a superfund area. The EPA, however, has been hampered in its monitoring of such matters by recent U.S. Supreme Court rulings. In May 2021, oil spray from the plant coated homes downwind.
The recent court filing dug into the history of oil refining on St. Croix, painting a picture of oil barrens taking advantage of USVI tax breaks and plowing over zoning regulations. Refinery owners were able to sidestep $6.2 billion in expenses by 1992, the filing alleges. USVI leaders demanded Hess hire 75 percent locally, making the refinery an essential part of the territorial economy. But refinery owners leveraged this influence — employing roughly 15 percent of the local workforce — to extract even more favorable tax breaks, the court filing claimed.
“Beginning in 1981, when the original agreement was set to expire, Leon Hess wanted to expand the Refinery and amend the original agreement to include even more favorable terms. He announced a plan to relocate a large portion of his business, which would strip the island of the now much-needed jobs if the USVI government did not consent to his proposed amendments,” the filing alleged.
The new agreement was worth hundreds of millions and lasted 16 years. It was not the last, the court filing reported. Refinery officials sought time and again further tax breaks, threatening to reduce or stop operations should local leaders not comply.
“The USVI’s economic expansion and population growth as a result of the refinery came at the cost of severe environmental damage and asbestos exposure. The refinery’s environmental damage extended to St. Croix’s fresh water supply, brackish water lagoons, and beaches, and the refinery’s operations resulted in enormous amounts of air pollution, eventually catching the attention of USVI and federal environmental agencies despite its intentionally remote location,” the filing read.
Reports of health issues were almost immediate, the filing said.
“Not only did the Refinery contaminate the island’s water supply, but it also produced large amounts of emissions that negatively impacted the health of the island’s inhabitants. Beginning as early as the 1960s, St. Croix residents started complaining about these emissions from the refinery,” the court filing read.
In 1989 alone, the plant released 700,000 pounds of benzene, a carcinogen produced as a by-product of oil refining, the court filing said. Groundwater was poisoned with petroleum; liquefied petroleum gas, naphtha, diesel, and gas oil leaked, sickening school children; thousands of pounds of hydrocarbons and hydrogen sulfide leaked on at least three occasions, the court records claim.
The asbestos exposure was also there from the start, the court filing said.
“In addition to harmful external consequences to the environment, the operations of the refinery also exposed thousands of workers and their families to asbestos. The debtor’s Hess-hired Chief Administrative Officer asserts that the presence of asbestos at the Refinery was first publicly confirmed in 1982,” the court filing said.
The refinery claimed to have stopped using asbestos for new construction projects in 1983, but some plaintiffs in asbestos-related lawsuits against Hess and its subsidiaries claimed that they were exposed to asbestos at the refinery after 1983 and into the late 1980s and 1990s, the court filing showed.
Of the roughly 1,000 asbestos-related suits filed against Hess and its subsidiaries in the USVI, 606 were settled out of court, the filing showed. Most of the plaintiffs suffered from asbestosis, a lung disease resulting from the inhalation of asbestos particles, and others afflicted with mesothelioma, lung cancer, and/or colon cancer from their exposure to asbestos, according to court filings.
In February 2012, the plant, then operating as Hovensa, stopped production, putting 1,800 people out of work, according to the court filing.
“On Sept. 14, 2015, the USVI Department of Justice filed a lawsuit against Hess seeking over $1 billion in damages for a pattern of misconduct by Hess and its subsidiaries, including Hovensa, that allegedly stripped away assets while encumbering the government with pollution liabilities. On Sept. 15, 2015, the day after the USVI lawsuit was filed, Hovensa filed for chapter 11 bankruptcy,” according to the court filing.
The creditors claim Hess subsidiary HONX filed bankruptcy to sidestep future asbestos suits from plaintiffs unwilling to settle out of court. Attorneys for HONX have until Oct. 13 to respond.