The Quoddy Tides

Eastport, Maine

2007 March 23

Perry ponders yea or nay:
Compensation varies among LNG projects

by Marie Jones Holmes

Liquefied natural gas agreements between developers and municipalities vary from project to project. The incentives offered range from financial deals to planting trees, establishing parks to building a recycling plant for sediments.

This month Broadwater Energy, which is seeking to locate a 1,250-foot-long floating LNG storage vessel about nine miles north of Wading River in Long Island Sound, offered the community of Riverhead's school district approximately $10 million per year and the Town of Riverhead about $2.4 million per year. Broadwater maintains that the Long Island Sound site is not within the town's taxing jurisdiction, but Broadwater has promised to make an additional payment in lieu of taxes of about $15 million. One of the features about the proposed project includes a promise to supply natural gas to the area. The project would not require any municipal services, and it wouldn't present any danger to people on shore because it would be so far away. According to a company representative, there would be no additional resources required from the town — no roads, no traffic. The company representative said, "We are not calling on the local fire departments or police."

Closer to home, the Maine community of Harpswell stood to gain $8 million annually in lease fees and tax revenue for leasing 70 acres to Fairwinds at the former fuel depot in the town. Supporters of the proposal envisioned using a portion of the money for property tax relief. Voters turned down the proposal in March 2004.

On March 1, 2005, the Saint John Common Council passed a resolution creating an "LNG tax zone" and asking the Province of New Brunswick to enter into an agreement with Irving Oil Company to fix the amount of annual property taxes from Irving to Saint John for the proposed LNG facility at $500,000 (Can) per year, for a 25-year term.

Downeast LNG proposes to build an LNG project in Robbinston. The estimated cost of the project is $500 million. Annual payments are to include $1.2 million per year in community development fund payments plus property taxes. Community development fund payments are reduced dollar-for-dollar if taxes exceed $1.5 million per year. Other financial provisions include up to $8.5 million for a new school, sports complex and assisted living facility; $10,000 per year in college scholarships; and $500,000 per year to Washington County Economic Development Trust Fund. Downeast LNG would pay local propane delivery costs or sell natural gas locally.

Quoddy Bay LNG's proposed project cost is estimated to be $250 million, with annual payments to be $3.63 million per year. The start date for full payment would occur upon notice to proceed on project construction. Other financial provisions include $1 million for school expansion and a $100,000 per year college scholarship fund donation.

According to the proposed Quoddy Bay agreement, the company guarantees payments of $3.63 million per year to the town of Perry for 25 years, regardless of the town's mill rate or valuation. Payments are expected to start in FY 2008 and no later than the start of project construction. Payments are to be adjusted annually for inflation. The above is conditional on the town obtaining tax increment financing (TIF). If there is no agreement between the town and Quoddy Bay, the tank farm would not become fully taxable until FY 2010, 2011 or later.

Excelerate Energy negotiated a $23.5 million agreement with the Commonwealth of Massachusetts for a facility to be located in the town of Gloucester, Mass. The $23.5 million is a one-time payment and will have $8 million go to New England fishermen for loss of fishing grounds. The $8 million includes $6.3 million to buy fishing permit days from fishermen leaving the business. An amount of $7 million will go to the Commonwealth of Massachusetts for use of public waters. An amount of $4 million will go for impacts on marine habitats and resources, and $4 million will be used to prevent harm to whales and other marine mammals.

The Rabaska project, located in Levis, Quebec, near Quebec City on the St. Lawrence River, was originally to be located in Beaumont, but community opposition mounted, and the developer moved the project 400 yards upriver to Levis. The developers have signed an agreement with the Levis City Council to pay an average of $10 million per year for the next 50 years in property taxes. They promised to offset any loss in value to the 135 homeowners within 1.5 kilometre radius of the terminal and would pay the cost of any home insurance premium increase, invest $300,000 in the city's public transportation system, pay $475,000 for a new park and recreation area, and plant as many as 15,000 trees around the facility to alleviate the visual impact. A citizens' poll showed that 75% of households within a 2.5 kilometre opposed the project.

As part of a plan to open a new $400 million LNG plant at Sparrows Point near Baltimore, AES Corp. will build a new five-acre recycling plant for sediment dredged from Baltimore Harbor near the LNG terminal. The planned recycling plant will help the company gain favor with state and port leaders who fear the Port of Baltimore is running out of places to relocate dredged dirt and sand from the bottom of the shipping channel.

Golden Pass LNG terminal facility located in Port Arthur, Texas, has an agreement that covers the period 2006-2015. During the term, the city of Port Arthur agrees not to exercise its statutory annexation powers under Texas law with respect to the project site. In return, Golden Pass agrees to make an annual payment in lieu of taxes to Port Arthur starting at $500,000 in 2008, increasing to $2.1 million in 2009 and 2010; $2.2 million in 2011 and 2012; and $2.3 million through 2015. The company also agrees to "act in good faith to provide equal opportunity" to Port Arthur residents, contractors, suppliers and professionals in hiring employees and building the project.

In an existing oil refinery expansion project in Port Arthur, the company has a separate agreement with Jefferson County where assessed county taxes are based on percentage of "local labor" and "local subcontractors" employed in project construction. Abatement percentages range between 35% and 100% over a 10-year schedule, tied to the percentage of the project cost qualifying for the abatement.

For an Exxon-Mobil LNG project in Beaumont, Texas, the company has an agreement that the City of Beaumont will not annex the project site during the term of the agreement; in return, Exxon-Mobil will make an annual payment in lieu of taxes equal to 77.5% of assumed property taxes.

An Exxon-Mobil LNG facility located in Baytown, Texas, makes an annual payment in lieu of taxes to Baytown equal to a percentage of its estimated tax bill should Baytown annex the project site during the agreement term. The agreement expressly provides that the city has no obligation to provide municipal services to Exxon-Mobil land in the industrial district, notwithstanding city's receipt of payments in lieu of taxes. Several other LNG facilities in Texas have similar agreements.


© 2007 The Quoddy Tides
Eastport, Maine
Article republished on Save Passamaquoddy Bay website with permission.