(FROM THE WALL STREET JOURNAL 12/19/14)
By Alison Sider
Robert Moore, a former energy trader in New Canaan, Conn., was
eating dinner at a local Mexican restaurant last year when he
overheard a fellow diner talking excitedly about reopening a
defunct oil refinery in the U.S. Virgin Islands. The very same
refinery, it turned out, that Mr. Moore had been hoping to bring
back to life.
Now, the two diners are part of a team of energy executives that
have bid to buy the St. Croix refinery, once the world's largest.
Taking advantage of cheap U.S. oil and some transportation
advantages, they say, their Atlantic Basin Refining Inc. could
start pumping out gasoline and diesel as early as 2017.
But they need the refinery's special tax treatment extended, a
deal that must be approved by the Virgin Islands Senate. And the
senators, who are to vote Friday, say they have some doubts.
For one thing, while Atlantic Basin's executives are
energy-industry veterans, none has run a refinery. Some senators
say they had been hoping a large oil company would take over the
site.
"I don't know who these people are," Senate President
Shawn-Michael Malone said of Atlantic Basin, which has to raise
about $1.2 billion in financing to fund the project. Mr. Malone and
other senators have expressed doubt the company can pull such a
deal together.
For another, the Atlantic Basin offer for the refinery was the
only bid for the plant, which was closed in 2012 because of
exorbitant operating costs. Since last year, Hovensa, a joint
venture between Hess Corp. of New York and PdVSA, the national oil
company of Venezuela, has been searching for a buyer.
Lazard Ltd., the investment bank handling the sale, talked to
more than 140 refiners, oil companies, trading firms and
private-equity investors but got no other takers. "We didn't select
them," George Dudley, a lawyer for Hovensa, said of Atlantic Basin
during a Senate committee meeting this week. "They were the only
bidder."
Mr. Moore, managing director of Atlantic Basin, says the
partners have raised more than $100 million in cash to close the
deal, and have talked to several Asian banks, private-equity firms
and wealthy individuals who are interested in backing the next
phase of the project.
Some U.S. refining veterans including Tom O'Malley, chief
executive of PBF Energy Inc., are skeptical. "I think the people
are nuts," he said. "It's really tough for me to figure out how the
whole thing is going to work."
But Mr. Moore says the group can resurrect the plant by running
lower-cost U.S. light, sweet crude through it instead of the
Venezuelan oil the refinery used to process.
The group has also come up with a cheaper way to power the
plant. Instead of the fuel oil the plant used to run on, Atlantic
Basin plans to use liquefied petroleum gas, a refinery byproduct
that is cheap and found in abundance alongside the oil the site
will turn into fuel.
"We're going to create a lot of jobs and we're going to pay a
lot of taxes," Mr. Moore said. "Everybody else passed on this
thing. We didn't. We're willing to take a shot."
U.S. oil can be shipped from Texas to St. Croix for even less
money than it takes to move oil from Texas to New Jersey. That is
because a law that requires oil cargoes moving between U.S. ports
to be loaded on to expensive U.S.-owned tankers doesn't apply to
the Virgin Islands, even though it is a U.S. territory.
Mr. Moore spent years trading oil, natural gas and power at
various companies. In 2008, the U.S. Commodity Futures Trading
Commission alleged that while he worked as executive managing
director of the Bank of Montreal's Commodity Derivatives Group, Mr.
Moore turned a blind eye while a trader on his team allegedly
inflated the value of his positions in the market and defrauded the
bank. Mr. Moore was ordered to pay a $150,000 civil penalty to
settle the complaint.
"It was subsequently resolved without any admission of
liability," Mr. Moore said.
Shortly after the refinery closed in 2012, Mr. Moore teamed up
with Jack Thomas, a specialist in revamping aging industrial sites,
and the two worked on a plan to revive the St. Croix refinery. They
later brought in the man at the restaurant, Steven Schmitz, a
refinery-acquisition expert, as well as William Forster, a former
Lehman Brothers banker and former chief executive of Cheniere
Energy Inc., for his experience financing energy deals. Mark
Eckard, a Virgin Islands attorney and chairman of the St. Croix
Chamber of Commerce, manages government affairs.
A major hurdle Atlantic Basin must clear: The company wants to
avoid spending $700 million on new pollution controls mandated by
the U.S. Environmental Protection Agency before the plant shut
down. Atlantic Basin says its simpler refinery will be cleaner and
allow it to resolve the issue. The EPA says it has had
conversations with Atlantic Basin, but hasn't reviewed the
company's plans.
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