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The Chinese in the US Virgin Islands, Be Concerned

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A Chinese oil company is poised to take over one of the 10 largest oil refineries in the world -- a refinery in a U.S. territory -- threatening livelihoods, the environment, and U.S. national security.

The Virgin Islands Senate recently approved the sale of the HOVENSA oil refinery and storage facility for $420 million to ArchLight, the alter ego of Sinopec, a joint venture of China's second-largest oil conglomerate and the Bank of China. The Chinese aren't interested in refining any oil there. Instead, they want the accompanying tank farm, which would allow them to store as much as 32 million barrels of refined oil and petrochemicals deliverable to New York or Philadelphia cheaper than from our own U.S. Gulf Coast.

That sounds like a good deal for both American consumers and for Virgin Islanders. But it's not -- for several reasons.

First, the refinery was shuttered and mothballed in 2012. The Chinese want to dismantle it, potentially endangering the fragile Virgin Islands environment, and use only the tank farm. And although the Environmental Protection Agency has mandated a cleanup of the site estimated to cost some $800 million, the Chinese claim they can do it for $30 million. To make matters worse, the Chinese say they would like to put an asphalt plant on the site of the refinery, which would further foul the environment.

Second, an American consortium called VIRSA, Virgin Islands Refining SA, has offered some $2.3 billion for the refinery and the tank farm. They would clean up the site, and reopen and upgrade the refinery, bringing it up to EPA standards. This would create as many as 1,500 new jobs for Virgin Islanders, a dramatic development in a territory with only 40,000 people in the workforce.

Third, the VIRSA offer includes a provision for cheap electricity that would replace the expensive and dirty diesel fuel that the Virgin Islands government currently uses to keep the lights on. The government frequently must borrow from the public employees pension fund to pay for this diesel. Cheap electricity from the refinery would allow the government to render its pension fund whole again, further strengthening its economy over the long term.

Fourth, what happens if there is a spill from the tank farm or from Chinese tankers coming or going from the facility? Can the Chinese company be trusted to pay for and carry out a potentially large-scale cleanup? Or will the Chinese simply have their Virgin Islands limited liability corporations declare bankruptcy and let the Virgin Islands government deal with the disaster?

Finally, and most importantly, there are serious national security issues at play with Chinese ownership of this strategic facility. The U.S. submarine base at Roosevelt Roads in Puerto Rico is closed, and the Virgin Islands government has lobbied the Pentagon's Defense Logistics Agency to open a submarine base on St. Croix. The area between the St. Croix Airport and the refinery, called Renaissance Park, has a channel 550 feet wide and 75 feet deep that leads to a turning basin. There is no similar facility in the Caribbean. The channel could easily be dredged, allowing the U.S. Navy a new home in the Caribbean. But this prospect of long-term development is rendered moot by a Chinese tank farm offering to create only 100 jobs. To locate a sensitive naval installation next to a Chinese oil facility would be a potential military intelligence disaster.

So who has dropped the ball on this issue? First, it appears that neither the State Department nor the Defense Department has weighed in with the Virgin Islands government. The National Security Council is missing in action. The EPA doesn't seem to care about the environmental fallout of a Chinese tank farm and asphalt plant in a U.S. environmental paradise. And no member of Congress has made a single statement about the deal, including the Virgin Islands' representative.

Time is short. It looks like the fix is in. A whole host of leaders from the federal and Virgin Islands governments have to ask themselves if they would rather have a modern American refinery or a Chinese tank farm as a neighbor. If the answer is the former, somebody needs to act quickly.

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John Kiriakou spent 14 years at the CIA and two years in a federal prison for blowing the whistle on the agency's use of torture. He served on John Kerry's Senate Foreign Relations Committee for two years as senior investigator into the Middle (more...)

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