Refinery Sues EPA Over Permit Requirement
The owner of an oil refinery in the U.S. Virgin Islands is going up against the U.S. Environmental Protection Agency in court requiring the reapplication for pollution emissions permits.
The legal action arrives after the EPA entered into an agreement with Port Hamilton Refining and Transportation LLLP (PHRT) at the end of last year after an inspection identified several safety concerns, including pipe corrosion. The agency’s chemical removal plan for the facility is reportedly underway.
According to reports, PHRT sued the EPA in January over the new source permit, because the EPA interprets “new source” to include new operations at “long-dormant” and shuttered facilities.
Formerly known as the Limetree Bay Terminals and Limetree Bay Refining, LLC, the refinery is located in St. Croix in the U.S. Virgin Islands and was formerly the largest in the Western Hemisphere. It was expected to boost overall supply in the Caribbean, a key transit point for petroleum shipments, when it was built in the 1960s by Hess Oil.
However, the refinery was ordered by the EPA to pause all operations in May 2021, following multiple air emissions incidents due to the imminent and substantial endangerment to public health or welfare of the environment posed by continued refinery operation.
Since February 2021, the refinery reportedly experienced multiple major mishaps resulting in significant air pollutant and oil releases. The May case resulted in a “serious incident” that led to exceedance of the emission limit for sulfur dioxide (SO2), a potent toxic gas, endangering the health of nearby communities. That order was then reportedly augmented and extended by the complaint and stipulation filed in July 2021.
The West Indies Petroleum Limited and Port Hamilton Refining and Transportation, LLLP (jointly WIPL/PHRT) then won the bid for the Limetree Bay refinery from an auction held in bankruptcy court on December 21, 2021, for $62 million.
In March of last year, the U.S. Department of Justice and EPA transmitted letters to WIPL/PHRT, summarizing a number of requirements to be met before restarting the refinery. Later that month, the EPA said, based on the information available to them, the refinery would potentially need to obtain a Prevention of Significant Deterioration (PSD) permit prior to any potential startup of refinery operations.
A PSD permit limits emissions to levels that would result from the best available air pollution control technology. The EPA said this would likely result in significant reductions of emissions of nitrogen oxides and volatile organic chemicals, and reductions in sulfur dioxide, hydrogen sulfide, carbon monoxide and particulate matter at the facility.
In September, the EPA inspected the facility to more broadly determine the general state of chemical safety at the facility. During the inspection, the Agency noted serious deficiencies in the way that this facility is being maintained.
These safety concerns included corrosion of piping and valves, which could result in a chemical release or fire, particularly where large quantities of ammonia, LPG, and amine and hydrogen sulfide are located. The full inspection report detailing the deficiencies can be found here.
As a result of the inspection, the EPA determined in November that the refinery could not resume operations without obtaining a new comprehensive PSD Permit, under the Clean Air Act. The new permit would require detailed air quality analyses and the use of the best available air pollution control technology.
The following month, under the consent order with the EPA, PHRT was instructed to remove all ammonia, liquified petroleum gas (or LPG), amines and hydrogen sulfide from the equipment at the facility. These chemicals had been used for refining processes.
Additionally, beginning immediately, the agreement required PHRT to take certain interim measures during the period before the materials were addressed, including increased monitoring and inspections of the systems containing the amine, ammonia and LPG, and actions to improve emergency preparedness.
The EPA reported that over 40,000 pounds of anhydrous ammonia was present at the refinery, with equipment containing over 37,000 pounds of LPG. The piping and many valves on the LPG unit were reportedly in an advanced state of corrosion and disrepair.
More recently, in February, the EPA conditionally approved plans to safely remove dangerous chemicals from the refinery. PHRT is now moving all anhydrous ammonia, LPG and amine solutions that currently pose risks at the facility and were expected to be completed this summer.
According to the release, the EPA discussed, reviewed and approved the detailed plans for work associated with the agreement that will begin with removal of ammonia. All work will be overseen by the agency and they will conduct around-the-clock air monitoring to ensure safety.
At the end of May, a panel of 3rd U.S. Circuit Court of Appeals judges reportedly questioned whether the federal Clean Air Act allows the agency to require. If required to reapply, the refiner would need to potentially pay hundreds of millions of dollars over several years.
“I’m trying to get you to help me understand how something that you’re not even arguing is new construction is nevertheless new construction,” Circuit Judge Theodore McKee asked U.S. Department of Justice attorney Heather Gange, who represented the EPA.
The permit requires detailed air-quality analyses and the use of the best available air pollution control technology, Reuters reports.
“Each time they tried to restart they had to shut down because they were fogging the island with toxic gas,” Gange said. “Limetree spent three years and $4 billion in trying to resurrect that facility. They were never successfully able to restart.”
However, Gange also noted that the EPA’s letter was not a “final determination” of whether or not the PSD program applies to this facility.
Andrew C. Simpson, representing PHRT, said they have taken the plant’s valve and storage tank corrosion seriously, working to carefully address the EPA’s specific concerns.
“Port Hamilton had a more conservative approach to mechanical integrity than is required by industry standards,” he said. “There is every indication that Port Hamilton will indeed operate this refinery safely and in an environmentally appropriate manner and the EPA has plenty of power to ensure that that happens without imposing a standard that is intended to be applied at a construction setting.”
In April, PHRT had said that that if new PSD permits were required it may abandon the restart altogether. Reports indicate that it was not immediately clear when the court would rule on the case.