The Environmental Protection Agency (EPA) on Thursday announced that a large idled refinery in the U.S. Virgin Islands will remain shut down until it acquires a new Clean Air Act permit amid a national diesel shortage.
The St. Croix refinery, owned by West Indies Petroleum Limited and Port Hamilton Refining and Transportation, LLLC, has been shut down since June 2021 and will have to obtain a Prevention of Significant Deterioration permit which would require the operators to provide detailed air quality analyses and use sophisticated air pollution control technology, according to the EPA press release.
At the same time, the U.S. only has 26 days of diesel remaining in its commercial inventories and a gallon of diesel is roughly $1.58 more expensive than it was in November 2021, according to the Energy Information Administration (EIA).
The refinery, which was once one of the largest refineries in the world, used to be able to process 600,000 barrels of crude oil per day into gasoline and heating oil, a form of diesel, according to Bloomberg.
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The price of heating oil was 65% higher in October 2022 than it was in October 2021, meaning that Americans in the Northeast of the country will pay significantly more to keep their homes warm during the cold winter months, according to the EIA.
The Biden administration is also mulling a plan that would force oil companies to store a minimum amount of diesel in their fuel tanks, which could potentially exacerbate prices, Bloomberg reported Tuesday.
“I am committed to prioritizing the health and safety of underserved and overburdened communities across this country and holding polluters accountable,” EPA Administration Michael Regan said, according to the announcement. “This will ensure protections for St. Croix by requiring the refinery to operate in compliance with environmental laws designed to protect people’s health and the environment.”
The EPA pulled the refinery’s operating permit in June 2021 after nearby residents complained that they were becoming sick from the facility’s fumes, forcing the previous operator to lay off its workers and sell the plant, according to Reuters.
In late October, EPA inspectors said that the facility could catch on fire or release “extremely hazardous substances” which could harm St. Croix residents, according to an agency report. The agency also found “significant corrosion” on valves, pipes and other equipment at the site, according to an October letter sent to the owners’ lawyers.
President Joe Biden has accused fuel producers of “war profiteering” by refusing to increase refining capacity amid global fuel shortages that were exacerbated by Russia’s invasion of Ukraine.
However, in June, Biden’s EPA rescinded exemptions that would have allowed nearly 70 small-volume refiners to avoid blending renewable biofuels into diesel despite the fact that refiners claimed that this would hike costs and decrease output, according to an agency docket.
Companies in the U.S. have also not built a major oil refinery in 50 years due to regulatory concerns and anticipation that the green transition will kill demand for fossil fuels. Energy executives believe that the administration’s negative attitude towards the industry is dampening investment, according to a June survey conducted by the Dallas Federal Reserve.
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