The Quoddy Tides

2007 March 9

Quoddy Bay and tribe sign tax agreement

by Edward French

A tax agreement between Quoddy Bay LNG and the two reservations of the Passamaquoddy Tribe was signed on Tuesday, March 6, a day after the Passamaquoddy Joint Tribal Council voted in favor of the agreement. The acceptance of the Project Coordination and Tax Agreement by the joint council followed a February 27 referendum vote in Indian Township that was overwhelmingly in support of an agreement with the Pleasant Point Reservation to share in the revenues from the proposed liquefied natural gas (LNG) terminal at Split Rock. A year ago, the tax agreement had previously been turned down by the joint council, with all of the Indian Township councillors voting against it. On Monday, March 5, joint tribal councillors voted 9-2 in favor of the agreement, with one abstention and two members absent.

The tax agreement was signed by Chief Rick Doyle of the Pleasant Point Reservation, Governor William Nicholas of the Indian Township Reservation, and Brian Smith, project manager of Quoddy Bay LNG. The agreement will lower the tribe's construction tax from 3% to 1% and eliminate all other personal and property taxes for the LNG project on Passamaquoddy land in exchange for lease payments. The agreement initiates lease payments to the tribe, which will be split between the Indian Township Reservation and the Pleasant Point Reservation on a per capita basis.

"While we have had the support of the Pleasant Point Reservation for years, we're thrilled that the Passamaquoddy Tribe as a whole is now behind the Quoddy Bay LNG development," said Brian Smith, in a prepared release. "We are happily wiring almost half a million dollars in lease payments that have been accruing over the past year."

Governor William Nicholas of the Indian Township Reservation stated, "I am happy to be working on the project with representatives from Quoddy Bay and the administration from Pleasant Point. I look forward to moving forward on the project. The people of the tribe have spoken in overwhelming numbers, and the joint tribal council has finalized the agreement."

Although Chief Doyle was advocating for the joint council not to sign the tax agreement, he comments, "We have to live with the situation as it is and make sure things run in the spirit of the agreements we entered into." He had hoped that the joint council would have explored other options, including possibly having the tribe develop a tax code so a conditional tax break could be given to Quoddy Bay LNG. "I'm comfortable with what I've done, knowing my intentions were for the benefit of the Passamaquoddy people and that we got the best deal we could."

"It doesn't make sense to me, why there was such a hurry, but it's done. There's no sentiment on the council to bring it up for more debate," he observes.

The tax agreement originated in the Ground Lease Agreement between Quoddy Bay and the Pleasant Point Reservation as a prerequisite to the payment of the lease fees to the tribe, according to Quoddy Bay LNG. Although the lease is an agreement between Quoddy Bay and the Pleasant Point Reservation, the tax agreement had to be approved by the tribe as a whole, which includes the Indian Township Reservation. The joint tribal council had turned down the tax agreement in February 2006. Following a number of meetings of each reservation's tribal council and of the joint tribal council, an offer was made in December 2006 by the Pleasant Point council to share the lease payments with Indian Township on a per capita basis. The split in revenues is approximately 60/40, based on the current populations of the two reservations.

"I'm pleased that we are now going forward, working with Quoddy Bay. The tax agreement is a symbol of our combined efforts," said Ed Bassett, a tribal councillor at Pleasant Point who had proposed the revenue-sharing agreement with Indian Township. "I'm also very pleased that we are working with Indian Township and the tribe is united on this project."

"The willingness by the Pleasant Point Reservation to include its sister reservation in the benefits of this project was the key to this agreement," said Fred Moore, Quoddy Bay tribal relations director. "My goal with this project has always been to benefit both reservations, and with the signing of the tax agreement I think that goal has finally been reached."

Once the facility is built, up to $12 million a year would be given in lease payments by Quoddy Bay LNG to the tribe, depending on the amount of natural gas that goes through the facility. Brian Smith notes that, even if the facility was not operating after it was built, the tribe would still receive about $2.4 million a year under the agreement. He is hoping that the facility would be able to operate at 90% of capacity, but it would depend on what contracts for gas supply Quoddy Bay LNG is able to obtain. The company has been approaching gas suppliers from Trinidad and the west and north coasts of Africa. Smith notes that the companies will not sign contracts to supply the gas until Quoddy Bay LNG has all of its permits for the facility. Last month, Anadarco Petroleum, which had already started building an LNG terminal at Bear's Head, Nova Scotia, halted construction because the company was not able to secure a contract with a supplier.

Along with the payments being based on the amount of gas that the facility handles, the land lease calls for the payments to the tribe to be reduced by 25% if the storage tanks are not located on the reservation, but Smith says the $12 million estimate already accounts for that reduction, since the original amount that would have been paid annually at full production would have been $16 million.

The tribal government is also considering other proposals from Quoddy Bay LNG that would provide revenue to the tribe, as the company is proposing to purchase over 300 acres of land in Perry from the tribe for $1.5 million. At the March 5 joint council meeting, no action was taken by councillors on the proposal, but they did agree to seek input from the community, according to Chief Doyle.

In other matters related to the LNG proposal, the Sipayik Tribal Council has decided to create an LNG liaison position, with the liaison acting as the point person for project coordination, Doyle notes. The liaison will represent the tribe in communications between the tribe and Quoddy Bay LNG and will work under the supervision of the tribal administration and tribal council to ensure that due diligence is performed by both parties in meeting the terms of the land lease.