Failed Bidder Contests Limetree’s Sale to St. Croix Energy

The Limetree Bay Refinery, as seen from a residential community, has impacted St. Croix in many ways over the years. (Source photo by Linda Morland)

A backup bidder has objected to the proposed sale of Limetree Bay Refinery to St. Croix Energy in an emergency motion seeking to delay the Dec. 7 sale hearing in the U.S. Bankruptcy Court for the Southern District of Texas.

Bay Ltd. contends in its motion that St. Croix Energy’s bid, while touted as a “going concern” effort to restart the refinery, is really a liquidation bid in disguise and that Bay’s bid in tandem with Sabin Metal Corp. is worth more.

Bay Ltd. and Sabin Metal Corp.’s tandem liquidation bid for the refinery totals about $39 million, compared to St. Croix Energy’s roughly $33 million purchase agreement, according to the Texas-based company’s Wednesday court filing.

“As a result of the Auction, it is now clear that the Back-up Bidders are actually for amounts far higher than for the St. Croix Bid, which was and appears to remain qualified and conditional before, during, and after the Auction,” according to the motion, which states that “Bay’s perception is the Sale Process was tilted from the start, and throughout, to benefit St. Croix, for reasons Bay cannot understand.”

The sale process seemed “to preordain a preference for St. Croix Energy as the winner, regardless of the Auction results,” according to the motion.

“To the extent, it represents an ‘option’ to restart the refinery, the lack of engagement on the several agreements that are a prerequisite to this occurring make plain the bid really is simply another liquidation bid,” but for less value than that provided by Bay and Sabin, the motion states.

Bay Ltd. is asking the court to delay the sale hearing so that its discovery requests can be addressed, “wherein Bay seeks evidence to (i) test the perplexing decision made to favor St. Croix before, during and after the Auction, even though it remains throughout conditional and likely just a disguised liquidation bid, and to test the value thereof, (ii) whether the St. Croix Bid is indeed funded and without conditions since the Winning Bidder Notice makes clear it faces substantial hurdles and remains uncommitted, and (iii) whether the Sale Process truly represents a fair market test confirmed by the Debtors’ independent judgment.”

St. Croix Energy, designated the stalking horse bidder in November, has said it wants to restart the refinery and has touted its deep island ties, though it has yet to announce its leadership team. However, it faces several hurdles to reopening, including Environmental Protection Agency regulations.

The EPA has declined to commit ahead of time what it would require of a new owner to allow the troubled refinery to restart using Limetree’s existing permits.

The refinery encountered numerous problems since its restart in February after being shuttered in 2012 by former owner Hovensa following several years of heavy losses. Hovensa declared bankruptcy in 2015.

The Trump administration had allowed Limetree to restart the facility, built in the 1960s, without modernizing its environmental protection equipment after almost a decade in mothballs.

Limetree was ordered by the EPA to shut down for 60 days on May 12 and undertake corrective measures after multiple major incidents resulted in significant air pollutants and oil releases, including a large accidental flare that sprayed oil over some 137 homes.

On June 21, the refinery announced that it was closing indefinitely due to “severe financial constraints,” and on July 12, it filed for Chapter 11 bankruptcy on Monday in U.S. Bankruptcy Court for the Southern District of Texas.

In its motion, Bay addresses concerns that a liquidation bid would see the end of a refining operation that brought jobs to St. Croix starting when the plant was first developed by Hess Corp in the 1970s, but also a legacy of environmental damage. Gov. Albert Bryan Jr., for one, has pushed for a restart, citing the economic impact of a permanent closure.

To that end, the V.I. Bureau of Economic Research released a report in November claiming that a closure would cost the U.S. Virgin Islands almost $2 billion in lost economic activity and 800 jobs.

“Bay also wants it known that its bid is also in the interests of the Island itself, which while not a restart option for a perennially troubled refinery that sits idle and represents decades of pollution issues, involves a valuable opportunity for the island and its people,” according to the emergency motion.

“In addition to facilitating eventual fixes for longstanding pollution and environmental concerns, the straightforward dismantlement of the plant by Bay will entail that Bay employs many from the Island to facilitate the decommissioning work that will span approximately three years,” the motion states.

“While perhaps not a ‘value concern’ in the strict sense for this bankruptcy, it should be considered that Bay’s bid opens up new opportunities for the Island and will facilitate the resolution of longstanding federal and state concerns over the site and the need to address — with the starting point being the removal of the twin refinery complexes.”

Judge David Jones had not ruled on the motion as of Saturday.