Limetree Bay refinery to shut indefinitely after just a few months of operating

(Reuters) -Limetree Bay Energy will shut its St. Croix refinery indefinitely due to financial problems, the company said Monday, after a series of operational setbacks shuttered the facility.

FILE PHOTO: Installations of the Limetree Bay petroleum refinery are seen in St Croix, U.S. Virgin Islands June 28, 2017. REUTERS/Alvin Baez

The 210,000 barrel-per-day refinery had only restarted in February after being idle for nearly a decade, but was forced to shut in May after the facility sprayed nearby neighborhoods with a petroleum mist and residents complained of breathing problems.

Last month, the U.S. Environmental Protection Agency ordered the plant shut for at least 60 days after those incidents, which also contaminated the community’s water supply. The EPA also ordered the plant to install and operate 18 sulfur dioxide and hydrogen sulfide monitors on St. Croix in order to restart.

EIG-backed Limetree has been unable to secure the necessary funding to restart the plant and will lay off approximately 271 employees effective Sept. 19, the company said.

“This was an extremely difficult decision for us, and we are truly saddened to announce suspension of our restart plans for the refinery,” Jeff Rinker, Limetree Bay’s chief executive officer, said in a statement.

The refinery will begin preparations for an extended shutdown, including purging gases from all of the units and removing any residual oil and products in the lines.

Earlier this month, Reuters exclusively reported that Arclight Capital, which had a majority stake in the refinery, exited its position and removed the refinery from its portfolio in April after its fund experienced hundreds of millions of dollars in losses.

The oil storage terminal will not be affected by the decision to suspend operations.

The refinery restarted in February under private equity ownership. It was designed to profit from an international clean-air marine fuel mandate known as IMO 2020.

However, the plant suffered repeated setbacks, including high levels of corrosion in pipes and the decimation of demand by the COVID-19 pandemic.

The restart was delayed more than a year and ran more than a billion dollars over budget. Limetree’s chief executive was replaced in November.

The restart of the refinery was controversial on St. Croix because it had created 400 full-time jobs, 80% of which were required to go to island residents, who mainly rely on tourism for employment.

The tourism industry on St. Croix suffered greatly due to various natural disasters as well as the coronavirus pandemic.

In a statement last week, the EPA said it recognized the economic importance of Limetree in St. Croix, but that recent incidents at the facility raised significant health concerns.

“EPA is and has been focused on the health and safety of the St. Croix community,” acting regional Director Walter Mugdan said in a statement on Monday, saying the agency has been in contact with island officials on operating the facility safely.

During Monday’s weekly press briefing, U.S. Virgin Islands Governor Albert Bryan said he is meeting with Limetree executives and St. Croix’s legal team to discuss its island’s deal with Limetree Bay.

He said the Biden EPA’s “aggressive stance” to energy projects is scaring off refining investors and is impacting Limetree’s ability to raise capital.

St. Croix resident Jelani Ritter said he sympathizes with the employees who will lose their jobs, but hopes this will mark the end of oil as a mainstay in St. Croix’s local economy.

“I also view this as an opportunity for our government to seek alternative avenues to diversify our revenue streams and our economic portfolio as a territory outside of the oil business,” Ritter said.

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