The Quoddy Tides

2007 Jun 8

Quoddy Bay LNG, selectmen debate payment of legal fees

by Eileen Curry

A letter submitted to the Perry selectmen and discussed during the last regular selectmen's meeting in May from Quoddy Bay LNG addresses the reimbursement of legal fees charged to the town for negotiations and legal representation of the town in regard to the proposed liquefied natural gas (LNG) facility in Perry.

In a May 25 letter to town selectmen, Quoddy Bay LNG Project Manager Brian Smith wrote, "It has been brought to our attention that a difference of opinion has developed among board members with regard to recent legal fees incurred as a result of the requested recount of votes from the March 26, 2007, election. The bill in question is in the amount of $2,304.09 and was submitted by Erik Stumpfel of Eaton Peabody, attorney representing the Town of Perry during that recount." Smith said, "The bill does not necessarily fall within the scope of that agreement, as it involved internal town affairs. However, in consideration of the fact that this issue came about as a result of the vote on the Financial Framework Agreement, Quoddy Bay has determined that it would be appropriate to reimburse the town for this additional expense, regardless of the fact that Quoddy Bay is not obligated to do so."

Smith summarized a procedure for submission of reimbursement requests from the town and that all future bills include: "scope of the service requested, the estimated cost associated with that scope, the estimated date of completion of that scope, and the law firm that will be doing the work." Smith said all requests may be submitted by email or regular mail and that formal authorization would only be granted in writing. "Following these guidelines will ensure there is no debate or confusion."

In the meantime, town counsel Eaton Peabody submitted their quote for legal and related non-legal services to implement the recently approved Financial Framework Agreement between the Town of Perry and Quoddy Bay LNG. The engagement letter sent to selectmen on May 21 included sections listing the scope of work to include the current phase of the project, the preparation of a tax increment financing (TIF) district program and application, up to five meetings with selectmen to discuss the program, two public hearings and/or town meetings, financial projections, municipal approval documents for the TIF district, the TIF credit enhancement agreement, drafting and negotiating assistance on the comprehensive agreement, and assisting selectmen with negotiation and drafting of a final comprehensive agreement between the Town of Perry and Quoddy Bay LNG.

The fee for services as described in the three-page letter is $30,000, payable in full within 60 days. An additional $5,000 would be charged for municipal approval documents for the TIF district and TIF credit enhancement agreement. The document and proposed scope of work from Eaton Peabody was submitted by selectmen to Quoddy Bay LNG for review and authorization.

On May 31, Selectwoman Jeanne Guisinger emailed Erik Stumpfel of Eaton Peabody and fellow selectmen David Turner and Dick Adams and made a request. Guisinger wrote, "It occurs to me that Quoddy Bay LNG should be required to set aside the monies for these legal reimbursements in either an escrow account or the issuance of a bond. Once the Town of Perry signs this document, the town might arguably be bound to make the payments even if Quoddy Bay were to pack their bags and go home." Guisinger also said, "At any time, the developers could simply withdraw their applications and close shop. If that should happen before the initial payments have been made or before all payments have been made, Perry could be left holding the bag and your firm's time investment could be at risk. In order to protect the Town of Perry and ensure that all payments were guaranteed to your firm, how would you suggest this be handled? I would think an amount of $40,000 would be necessary, with at least $50,000 preferable."

Both Quoddy Bay LNG and Eaton Peabody are reviewing the procedures for the LNG project implementation phase. In an interview, Selectman David Turner said, "If you read the document and proposal from Eaton Peabody, the fees are to be paid up front by Quoddy Bay. There is really no need for an escrow account. The majority of the selectmen have voted to accept this quote from Eaton Peabody, and we have sent a copy of it to Quoddy Bay for authorization."

Quoddy Bay LNG Project Manager Brian Smith commented, "My immediate reaction to the matter is that we generally don't pay up front. There really isn't any risk here. We wouldn't need an escrow account set up for this. We just want to see these legal fees in writing, in advance. We are obligated under the Financial Framework Agreement to fulfill our commitments. It seems unlikely for us to spend millions in permitting fees and then up and leave town. We also have binding agreements with the tribe, and it really is an absurd suggestion that we would leave after all of this."

According to Turner, Eaton Peabody is reviewing all correspondence.