Tribal council rejects LNG tax agreement -- The Quoddy Tides, Eastport, Maine

A Project Coordination and Tax Agreement between the Passamaquoddy Tribe and Quoddy Bay LLC, the Oklahoma-based company which proposes to build a liquefied natural gas (LNG) terminal at Split Rock at Pleasant Point, has been rejected by the Passamaquoddy Joint Tribal Council. The council voted 7-3 to turn down the tax exemption agreement at a meeting held February 2 at Pleasant Point.

Voting against the agreement were Pleasant Point Tribal Governor Mark Altvater, Indian Township Governor Robert Newell, Pleasant Point councillor Hilda Lewis and four Indian Township tribal councillors. Supporting the agreement were Pleasant Point tribal councillors Dale Mitchell, Darren Paul and Thomas Lewey.

The tax agreement document is in addition to the 84-page lease agreement entered into by the tribal council and Quoddy Bay LLC in May 2005 and approved by the Secretary of the Interior in June 2005. One of the major attractions of siting projects on tribal land is the tax break offered by tribes. Pleasant Point, as part of its sovereignty, does have the right to levy taxes if it chooses to do so.

According to attorney Craig Francis, Quoddy Bay LLC is going to continue moving forward with the permitting process and hopes that Pleasant Point would want to proceed with the agreement. Asked what will happen if an agreement isn't signed, Francis said, "This agreement is a pre-condition to the tribe getting any money, and it won't go away."

In a press release issued by Quoddy Bay on February 3, Quoddy Bay Project Manager Brian Smith said, "We are confident that the two Passamaquoddy reservations will continue to work together to come to a solution that both reservations will embrace. We stand ready to honor our lease commitments as soon as the Pleasant Point band secures the tax agreement from the Joint Tribal Council. This is the only impediment now standing in the way of the commencement of lease payments."

Smith also said, "The tax agreement is not at this time essential to the project's progress, although it is clearly important for the folks at Pleasant Point, who could greatly benefit from this added income. We look forward to beginning our lease payments to the tribe as soon as the two reservations reach an agreement on this issue."

Pleasant Point is presently owed $47,000 by Quoddy Bay. The $47,000 would be paid upon signing of the tax agreement and is the initial payment of several payments scheduled over the next year that would total $500,000.

Dale Mitchell, who voted in favor of signing the tax agreement, believes the tribe has fiscal responsibility, and he advocates that Pleasant Point compromise in the deal, to be sure of getting any near-term money.

Indian Township councillors appear to believe they were left out of the process, according to a videotape that was made of the meeting. Indian Township Governor Robert Newell remarked that he first heard about Quoddy Bay's LNG proposal in the newspaper. "We were told repeatedly that Indian Township had nothing to do with it. But now we're being asked to sign the agreement," he stated at the meeting, according to the videotape. It is the feeling of some of the Indian Township councillors that Quoddy Bay LLC will not simply move elsewhere, and there is a need to renegotiate the terms.

Also according to the videotape, Craig Francis stated that he believes Quoddy Bay LLC does not have the financial resources to make the LNG project happen, so the money paid to Pleasant Point by Quoddy Bay will not have to be paid back.

Indian Township tribal councillor Joe Socobasin stated that Quoddy Bay isn't going to leave and go elsewhere just because of the difficulty in getting the tribal government's approval. He did not like the idea of a 50-year lease. He believes that Indian Township received poor advice concerning the reservation's say in the Pleasant Point project. "There's something going on, and we need to renegotiate the terms."

In a press release, Brian Smith says, "While the lease is already approved and binding on Quoddy Bay LLC and Pleasant Point Reservation, the lease provides for the Joint Tribal Council, which is the body that represents the tribe as a whole, to confirm the tax exemption provisions. The Indian Township band does not directly benefit economically from the lease." According to Smith, the tax exemption provisions were granted by the Pleasant Point Reservation in exchange for substantial annual lease payments to the reservation amounting to an estimated $12 million per year once the proposed LNG facility is fully operational. The lease agreement provides that Quoddy Bay LLC pay the Pleasant Point Reservation about $500,000 in the coming year, but pursuant to the lease terms, such payment will not begin until the Joint Tribal Council approves the tax exemption.

Vera Francis, coordinator for We Protect Our Land, a member of the Save Passamaquoddy Bay 3-Nation Alliance [...] says, "While leveraging for an indiscriminate tax-free zone for a hazardous facility is in and of itself egregious, last Thursday's Joint Tribal Council meeting should alert potential investors and state and federal permitting agencies that Quoddy Bay LLC's ground lease has serious problems, and with the ground lease the foundation of all of their plans, Quoddy Bay's project is very shaky indeed. The rationale that you can get it all for nothing must be a powerful lure for LNG companies in Washington County."

Francis further stated, "The Joint Tribal Council was wise to see through this deception for what it was."

Tax exemption and TERO adjustment

The proposed tax agreement calls for the exemption of real and personal property taxes and the reduction of the Tribal Employment Right Ordinance (TERO) tax. The tax agreement would exempt the tenant, Quoddy Bay LLC, and "the premises as defined in the lease and all real and personal property of the tenant on the premises from any tax, including real and personal property taxes, incurred by, levied by, or otherwise assessed by the tribe, landlord or any governmental authority (as defined in the lease) deriving its power or authority from, or acting on behalf of, the tribe or landlord, including any tax which otherwise might be levied by the tribe, or any such other governmental authority, on goods or services used by tenant for the construction or operation of the LNG project contemplated by the lease, other than the TERO tax, and reduce the TERO tax from 3% of the total gross contract price for civil works at the premises, to 1%, payable quarterly from the construction period commencement date as defined in the lease through completion of the LNG project as defined in the lease, as draw downs are made under tenant's construction loan." TERO is an assessment of taxes on essentially the bricks and mortar of construction. The TERO tax would cease after construction of buildings.