By Laura Sanicola

(Reuters) – A letter from the environmental regulators that was reviewed by Reuters suggests potential bidders to the Limetree Bay refinery, in the Virgin Islands, may have to pay for groundwater contamination at the site as well as other costs.

Next month, Limetree will be up for auction. Following nearly a decade of closure, the St. Croix-based facility was reopened in January under new ownership. The U.S. Environmental Protection Agency closed it down after releasing a number of emission.

In an informational notice to prospective buyers dated Sept. 24, obtained by Reuters using an official records search, the EPA outlined several obligations that a buyer might need to take into consideration if the facility is purchased.

Potential investors are concerned that the EPA requirements could prolong the permit process and reduce interest in a sale. Limetree declared bankruptcy after EIG and Arclight, private equity investors invested $4.1 million in a failed revival of the facility.

St. Croix Energy, a prospective buyer, informed the EPA that it had a plan for a restart. However, placing a bid to buy the property will prove difficult, said Gregg Galardi (the lawyer representing the company). Galardi stated earlier in the week. “The permitting process itself would be longer than anyone would expect.”

Friday’s decision by Judge David Jones of the U.S. Bankruptcy Court, Southern District of Texas granted Limetree an extension for assessing potential bids.

Refiners wanted the facility to be able to again produce gasoline at 210,000 barrels per day. After its planned restart was delayed more than a decade, it only operated for several months before being closed again.

The EPA stated that buyers might have to apply for additional permits if they wish to expand or modify certain areas of the refinery to meet emission standards.

Hovensa was the former owner of Limetree Bay. He stopped running it in 2012, and filed for bankruptcy in 2015.

The EPA said that Limetree, as well as the refinery’s EPA appointed Environmental Response Trust, found groundwater contamination originating from 2015 and beyond. Although Hovensa contamination has been addressed by the trust, future owners of the refinery’s EPA-appointed Environmental Response Trust will need to address the issue.

The EPA said that earlier this year, audit reports of operations at the refinery showed compliance problems with the Risk Management Plan. (RPM) is required by Clean Air Act in areas like process safety, training, and procedures.

The EPA stated that “the recent events at the refinery indicate a possible failure of one/more RPM elements”. A new owner would have to ensure compliance with the requirements,

Elizabeth Green, Limetree counsel, stated earlier this week that assets from the refinery might be liquidated and components could be separately sold if there is no bidding. The U.S. Virgin Islands government and Limetree Bay Terminals would take responsibility for cleanup.