Above: US Virgin Islands Delegate to Congress Donna Christensen (Photo: WH)
By Alexander Britell
The US Virgin Islands is in one of the most challenging periods in its history, in large part due to the closure of the HOVENSA oil refinery earlier this year. The refinery, the largest in the Caribbean, was the territory’s single-largest employer and primary source of fuel. Now, the US Virgin Islands is working to recover – from efforts to diversify its economy and find fuel to finding new sources of investment. To learn more, Caribbean Journal talked to Rep. Donna Christensen, the USVI’s Delegate to Congress, about the HOVENSA closure, the importance of the current Supreme Court health care litigation to the territory and the future of the St Croix.
You attended the first day of hearings on the health care law at the Supreme Court. What does that legislation mean for the Virgin Islands?
I’m hoping the court will uphold the individual mandate. I think they’ll find that they can hear the case, which was the argument on the first day when I attended. The individual mandate is the issue — if that goes away, if they strike it down and find it unconstitutional, not just in the Virgin Islands but people across this country would lose. We, like other Americans living in the 50 states, have been enjoying the consumer protection [of the law], so we are now eligible for preventive care like mammograms, colonoscopies and preventive service without having to come up with a co-pay. We’ve also been able to take advantage of what we’re doing to close the doughnut hole in the Medicare prescription plan, which you fall into after you’ve spent about $2,750 on medication. I’ve seen people fall into it and not know what to do, because they couldn’t afford the whole price of the medication. We’ve been able to get an average of $600 in savings just in the last couple of years [since the law was passed], and we’ve been able to start closing the doughnut hole, which will be completely closed by 2020. But we can’t do that if the individual mandate goes away. The USVI is enjoying the consumer protections [in the law], like getting rid of lifetime limits and annual caps, preventing rescission — and we had to fight for those — because they were automatically extended to the states but were not automatically extended to the territories. Looking at the issue [of the mandate], and whether Congress has the authority under the commerce clause to regulate the insurance market, everybody is in the health market. If you’re just going in for a checkup, you’re in the health market. And because everybody is in it, every living soul, the authority is there for the Congress to exercise its jurisdiction under the commerce clause and regulate it.
Talk about the impact of the HOVENSA closure.
For St Croix in particular, this is the worst situation that I think St Croix has ever found itself in. And we’ve had some bad situations. We had Hurricane Hugo, that pretty much leveled the island. But still, I count this closure of HOVENSA as being worse than that. At least, when you have a hurricane, FEMA comes in and you have federal dollars that come in aid to you. In this situation, nobody is coming to bail us out. There is no FEMA for economic disasters, which is the one we’re facing. So we are scouring every federal agency or programme that we can utilize to help rebuild our economy and save our families from utter poverty. And we are finding some, and we’re getting help and support from the federal agencies. But there’s no magic FEMA to come in and say we’ll take care of this for you. It takes a lot of work on everybody’s part. This is the loss of an estimated $100 million in direct tax dollars from HOVENSA on an annual basis. In terms of the full economic impact, our Economic Affairs bureau has estimated a total impact of somewhere over $500 million in direct and other economic losses. Just about every business in the territory has been dependent on HOVENSA to some extent. There are those that are directly dependent because they are suppliers or subcontractors, and there are others like hotels and restaurants, and just about every retail store, is dependent on those 2,000 [HOVENSA workers] and their families, on having a job that enables them to purchase goods and services. So it’s a tremendous loss. But the $100 million [per year] and over $500 million total impacts the entire territory, but St Croix, of course, our schools may have to close because HOVENSA supported so many of the students of their workers, with scholarships as well for private school student. So there will be an impact on our public school system, which is already having challenges.
Is the federal government helping the USVI weather this situation?
As a territory, we are coming under the purview of the Department of Interior, and there’s an Office of Insular Affairs. What happened is that I requested, and [Assistant Secretary of Interior] Anthony Babauta convened an inter-agency working group specifically to discuss the situation in the USVI. Every February we have a general inter-agency working group where we have general discussion about needs and so forth. In addition to that general one, we had a specific one dealing with the economic crisis in the Virgin Islands. The inter-agency working group is jointly chaired by the White House Office of Intergovernmental Affairs.
For St Croix in particular, this is the worst situation that I think St Croix has ever found itself in.”
I think the bulk of the help that we could get comes from the Department of Labour, for one, because they have a national emergency grant, and they actually have been actively working with our local Department of Labour to apply for that grant. The grant means increased dollars in job training and so forth. The other agency that could be of great help, and which is actively working with us to provide help, is the Department of Commerce and their economic development agency. Right now, they have someone on the ground in St Croix, because they have some economic development programmes that could help to rebuild and find ways to rebuild our economy. Another area is the US Department of Agriculture. We have one of the highest utility costs in the country. Guam has a similar issue but they didn’t have a crisis and they’re getting help because of their military bases. We don’t have that. So the US Department of Agriculture has funding for communities that have electricity costs that are at least double what the average cost is in the US. We are about triple or close to quadruple that cost. So we feel we’re eligible. We applied last year, before that happened, and didn’t get it, but I think we’re in a unique position now, and we’re working with the utility [in USVI] and the USDA to help with that.
What did the loss of the refinery mean for the territory’s power supply?
With the loss of HOVENSA, we lost our fuel supplier, which was the fuel supplier at the lowest possible cost. Still, with the international price of oil, our utility costs have been extremely high, and before all of these issues, it caused business to have to close and put a lot of hardships on our families and households. To think that there will be another increase in our electricity costs, because of HOVENSA closing now, it is just unsustainable. And I fear it will cause some civil disruption in the community. It’s almost sure to happen. So we’re looking at ways of how we can reduce the cost of electricity with alternative energies. Our utility continues what they started before this happened, to lessen our dependence on fossil fuels — we’re 100 percent dependent on diesel now. So those initiatives have been stepped up, with support from the USDA to increase our efforts to alleviate our dependence on fossil fuel, which is driving up our costs so high.
What kind of impact could alternative energies have for the territory?
I think everybody has reached a consensus on how we try and find a way we can move to natural gas, and that’d be very difficult, because we’re a small country. Economies of scale don’t work in our favour. There are several proposals that have come out to us, that are being evaluated, that I’ve shared with the government and the utility. That is something we absolutely want to pursue, because it will reduce our costs tremendously. I think the utility has already selected one of the proposals for solar energy. Solar and wind, while they are areas that we need to include in our energy portfolio, cannot be our base supplier of energy. So we need to find a way to change some diesel use to natural gas. I have also been working with someone in ocean thermal energy. They believe they have the financing, and that they can do it. As long as they have an agreement to purchase electricity from the generator, they’re willing to work with us. So we’re looking in any ways at how to diversify, and we’re hoping to find a way to move to natural gas.
Captain Morgan recently opened its new distillery in St Croix. Do you think that can help mitigate the economic damage?
That agreement was signed long before HOVENSA closed, but we’re thankful that it is here, because when they’re at their peak production, the number of gallons of rum that they will produce generates funds for the territory. At peak product, it’s estimated at perhaps $100 million a year for the territory, apart from any subsidies we would have agreed to give to both [parent company] Diageo and Cruzan Rum. We’re looking at Cruzan Rum being able to increase its production, because of the plant being constructed there to treat effluent, which will enable us to produce more rum with Cruzan as well. So those are very, very important to us.
What are some of the other ideas you see as being able to help the economy moving forward?
I have some legislation that would be very helpful. I was discussing it with the Senate, because the House doesn’t appear to be moving to do very much. We can’t even get our surface transportation bill done yet, which is long past due. That would be money the Virgin Islands would be dependent on. I have two piece of legislation. One is the National Heritage Area for St Croix. We’ve already had the study approved and legislation last year, to have the designation. The Republican leadership has no interest in passing any National Heritage Area legislation. So I’m in discussions with the Senate. The territories don’t have a senator, but we do have a Senate committee that has jurisdiction over the territories and energy and natural resources, and they’ve been very interested. The reason I included the National Heritage Area is because there’s a fund that makes available up to $1 million per year over 10 years for each of the National Heritage Areas, depending on what you request. And that’s just for St Croix, which needs it the most. The other is the Virgin Islands Improvement Act, which would create a retirement fund that is based in the Virgin Islands that raises revenue for the Virgin Islands as well as the federal government. The reason we’re pushing that is, in addition to the fact that it raises revenue we’re going to need, having lost HOVENSA, is that as this country is trying to reduce its deficit and looking to offset any new spending, this would provide at least some money — $500 million over the next 10 years. But again, not much is moving in the House, so we’re looking at the Senate to be able to introduce it, and they’re having discussions.