Quoddy Bay, tribe at odds over payment -- The Quoddy Tides, Eastport, Maine

Quoddy Bay LNG, after first informing the Passamaquoddy Tribe that it would seek the tribal council's agreement on its proposal to suspend its quarterly lease payments to the tribe, has now informed the council that it is putting a temporary hold on the payments. The tribal government has responded that it believes the company is required to make the lease payments under the land lease agreement for the proposed liquefied natural gas facility at Split Rock, Pleasant Point. A mediation process has now begun to resolve the dispute.

Adam Wilson, deputy project manager for Quoddy Bay LNG, says the company changed its position from seeking tribal council agreement to informing the tribe of its decision to suspend payments because "we were under the opinion that the tribe wouldn't come to an agreement in enough time." Quoddy Bay had given the tribal council until July 29 to inform the company of its agreement with the proposal. Wilson says representatives from the tribal government and Quoddy Bay have been meeting this week to resolve the issue. "We believe we will resolve this amicably." If mediation is not successful, then the land lease calls for a period of arbitration for up to six months.

Rick Phillips Doyle, the Passamaquoddy chief at Sipayik, has no comment on Quoddy Bay's decision. The Pleasant Point tribal council did meet on July 30 after being informed by Quoddy Bay LNG that it would be suspending the lease payments.

The lease agreement calls for Quoddy Bay to make quarterly lease payments of $46,875 to the tribe, with the amount split between the Pleasant Point and Indian Township reservations, provided that the "permitting period commencement date" has occurred. That period begins after a number of conditions have been met, including that the Bureau of Indian Affairs (BIA) has approved the lease agreement. Quoddy Bay LNG maintains that the BIA has not yet approved the contract, although it has approved the lease for limited purposes that allowed Quoddy Bay the right to enter the land to facilitate its permitting. Quoddy Bay argues that the BIA reserved full approval of the lease until the BIA approved the permits that would be granted by the Federal Energy Regulatory Commission (FERC) for the project.

Wilson says that Quoddy Bay does not believe that the question of whether the BIA has given full approval of the lease will affect a state and federal permitting process requirement for the company to have title, right or interest to the property at Split Rock.

A lawsuit brought by Nulankeyutmonen Nkihtaqmikon (We Take Care of Our Land) alleges that the BIA failed to comply with four federal laws in connection with its June 2005 approval of the ground lease and asks the court to set aside BIA's lease approval. Wilson says the lawsuit played a role in Quoddy Bay's decision to suspend lease payments, and the company is proposing an amendment to the land lease that might resolve the issues involved in the lawsuit but might not resolve the payment issue.

Wilson says Quoddy Bay cannot say for how long a period the lease payments would not be made, but the company intends voluntarily to resume the payments when it resumes the active review of its pending applications at FERC and the state, which is expected to be in a few months, according to the company's release.

"Our position on payments to the reservation simply reflects the ebb and flow of the pace of development of a large facility such as this," said Donald Smith, president of Quoddy Bay LNG, in a prepared release. "Through both direct and indirect actions we have postponed the review of our pending applications at State of Maine and at FERC for two reasons. First, the State of Maine has asked us to see whether it is practical to have a single pipeline corridor for up to three LNG projects from the Passamaquoddy Bay to the Maritimes and Northeast Pipeline corridor, approximately 36 miles to the northwest. We are studying the engineering, environmental and economic feasibility of changing our pipeline to accommodate Downeast LNG and Calais LNG in the event those projects might also go forward. Secondly, we are working to determine whether or not to build a nitrogen mitigation plant at the facility which would dilute the heat content of high Btu gas from certain LNG suppliers from around the world. If we can avoid the $100 million nitrogen plant, we can also reduce our environmental impact from the facility because we will need less power generation."

The payment of the lease fees had previously been in dispute, with Quoddy Bay LNG not making the payments until the Passamaquoddy Joint Tribal Council signed a tax agreement. In 2006, the joint council had turned down the tax agreement, but after a proposal was approved to have Pleasant Point split the lease payments with Indian Township, the joint council voted in March 2007 to sign the tax agreement. Quoddy Bay has now paid the tribe nearly $800,000 in lease and other bonus payments associated with the contract.

Concerning Quoddy Bay's decision, Linda Godfrey of Save Passamaquoddy Bay comments, "Quoddy Bay LNG president Don Smith's notice to the Passamaquoddy tribal government that he is suspending payments, and that he doesn't have a legal lease with the tribe, should surprise no one. Smith's business history is repeating itself. The public now knows Smith has no land lease, no product, no activity in the FERC permitting process, no workable project design, no experience in LNG, and no passage through Canadian waters to his proposed project site. To that, he has added no intention to keep his promises some tribal members expected of him, no respect for tribal elders, and no understanding of the depth of commitment many tribal members have to protect their land, culture, and future."

In another matter that has raised questions about Quoddy Bay's intention to continue pursuing the Split Rock project — the apparent closing of its office in Perry — Wilson says the company has made a staffing change, with Fred Moore III replacing Andrea Barstow at the office. The office has not been open as regularly as before, but the company hopes soon to have the office open on a regular basis.