The Quoddy Tides

2007 January 26

Pleasant Point offers deal to split LNG funds

by Edward French

The Passamaquoddy reservation at Indian Township is being offered 40% of the profits from a land lease with Quoddy Bay LNG, if that reservation's tribal councillors sign a tax agreement between the tribe and the company. The Sipayik Tribal Council recently voted to offer Indian Township a share of the lease payments, estimated to be about $12 million a year once the proposed LNG terminal is operational, with the amount to be split on a per capita basis, which is approximately 60/40 between the two reservations.

"They're holding us hostage until we coerce the other reservation to sign on the dotted line. That's the type of company they are," says Richard Doyle, the Passamaquoddy chief at Pleasant Point, of Quoddy Bay LNG, since the company is not making any lease payments until the tax agreement is signed by the joint tribal council.

Following the offer, the Indian Township Tribal Council decided, at a January 18 meeting, to hold a referendum before the end of February on whether Indian Township tribal members are in favor of the Quoddy Bay LNG proposal. The referendum question will be similar to the one that Pleasant Point tribal members voted on in August 2004, in which they favored hosting the LNG terminal by a 3-2 margin.

Wayne Newell, an Indian Township tribal councillor, says that he and others have felt that, since all of the members of the tribe are communal owners of the tribe's lands, the Quoddy Bay LNG proposal should have been voted on by the joint tribal council or all of the tribal members when the project was first being considered.

Before the referendum is held, presentations will be given by opponents and proponents of the LNG project. "We did commit ourselves to an open process," notes Newell. If the vote favors the LNG project, Newell believes that the Indian Township tribal councillors would have an obligation to sign the tax agreement, although he notes there is opposition within the council to signing the agreement.

Doyle, though, points out, "They'll be voting and expecting some profits, but without Pleasant Point and Indian Township sitting down to agree how that would work." He is concerned that a negotiated formal document is needed to cover such a profit-sharing agreement. "If they share in the profits, do they share in the risk?" he asks. "Are they subject to the terms of the land lease?" If Indian Township does vote to have the tax agreement signed and the project proceeds, Doyle wonders if Indian Township will then be a participant in the project.

Newell believes that, since the land is owned by all tribal members, the profits should be shared, but he agrees with Doyle's assessment on the risks. "They have to live with it, but we don't here," observes the Indian Township councillor.

Doyle also asks, "If Quoddy Bay needs this tax agreement so bad, and they wrote language that penalizes Pleasant Point, why don't they pay Indian Township separately?"

This is not the first proposal that's been made to try to get the Indian Township councillors to sign the tax agreement. Quoddy Bay LNG is seeking to purchase 300 acres of land in Perry for $1.5 million, to be used as a storage and staging area during the construction of the terminal, and some believe that the offer is an attempt to get the joint council to sign the agreement. The joint council still has not voted on whether to agree to the land sale. Also, this summer Quoddy Bay LNG offered $200,000 for per capita distribution at Pleasant Point, but the proposal was not accepted.

Last February, the joint tribal council had voted to turn down the tax agreement, with all of the Indian Township councillors voting against it. The proposed agreement calls for the exemption of real and personal property taxes and the reduction of the Tribal Employment Right Ordinance (TERO) tax for Quoddy Bay LNG. The tax exemption provisions would be in exchange for lease payments to Pleasant Point.

The "vast majority" of the payments by Quoddy Bay to the tribe at Pleasant Point have been held up because the joint tribal council has not signed the tax agreement, says Brian Smith, project manager for Quoddy Bay LNG. Although the tribe has received repayment for legal and exclusivity fees, no lease fees have been paid by Quoddy Bay. The lease agreement provides that the company would pay Pleasant Point nearly $500,000 in a series of payments this past year.

Doyle believes that the company is in the market for investment partners and is being hindered in that effort by not having a signed tax agreement.

Concerning the lease agreement with Quoddy Bay, Doyle comments, "Personally, I don't think it's a good deal for the tribe." He believes the contract is "very biased toward the company."

"Quoddy Bay can operate under the contract yet stifle the tribe's ability to participate in the contract," he argues. He says the tribe is being required to meet certain thresholds — the signing of the tax agreement by the joint tribal council — or it's not allowed to receive any benefits. "That's not right. If the threshold is not met, the contract ceases for both" the tribe and company, he says.

The recently elected chief believes that the previous tribal council "acted hastily" in approving the lease with Quoddy Bay. "The referendum they relied on as a justification was not correct," he comments, saying it was vague and did not name the site location. At the time of the vote in August 2004, the proposed site was at Gleason's Cove, but later it was changed to Split Rock.

Doyle is not sure if Quoddy Bay has a legitimate lease to the Split Rock site. "The court's the only place to decide, and the tribe doesn't want to go there." He believes if the Bureau of Indian Affairs had performed due diligence, the agency would have helped the tribe scrutinize the lease before it was voted on by the Pleasant Point tribal council.

Smith says Quoddy Bay has a legitimate lease to the Split Rock site. "We wouldn't proceed without a firm lease," he comments.