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Native American Tribe Gives LNG Industry First Victory in Maine

The liquefied natural gas (LNG) industry finally put points on the board in Maine on Thursday night when the Passamaquoddy Native American tribe voted 4-3 in favor of a new agreement with Oklahoma-based Quoddy Bay LLC to build an LNG import terminal at Split Rock on the Pleasant Point reservation.

The company and the tribe previously had an agreement to site an LNG terminal at Gleason Cove but the Town of Perry, ME, which essentially had veto power over the location, rejected that project in March (see NGI, April 4). The new Split Rock site is entirely on tribal land.

"We've now passed the second and most important hurdle with the Passamaquoddy tribe," said Don Smith, a partner in Quoddy Bay LLC, in an interview with NGI. "Last night's vote was a difficult, emotional vote for the tribe, as the leadership was reaching for the stars to elevate the tribe into financial security both for the tribal members and the tribe, when other people were wanting to keep the tribe in a quiet, low key and financially insecure mode."

Smith said that according to the new agreement Quoddy Bay LLC will pay the tribe an annual fee of $8 million for use of the site. However, Linda Godfrey, spokeswoman for the opposition group Save Passamaquoddy Bay, said tribal members really don't know what they got out of the deal because few were allowed to read the 110-page agreement.

She said the opposition intends to take legal action on several fronts and will discuss the project with Canadian officials because shipping will pass through Canadian waters and in close proximity to the Fundy Islands, which have significant tourism and communities.

"We're fighting greed personified in a developer from Oklahoma, Don Smith," said Godfrey. "But there's so much secrecy here that we really don't know who we're dealing with or what was signed." She called it a sad day for the tribe, which gave up a "religious sacred spot" on the shore of Passamaquoddy Bay in exchange for cash. Godfrey also said the terminal would endanger a school and an elderly center, not to mention the environment and the Canadian tourism industry.

The project clearly still faces a difficult uphill battle. The positive vote Thursday by the Passamaquoddy must be approved by the Bureau of Indian Affairs and then the project will move through the state and federal regulatory processes. The $400 million import terminal is expected to be in service in 2009.

The Quoddy Bay project also may face some technical hurdles because there currently is no room for onsite storage tanks. Smith said company plans to have LNG tankers operate as storage by docking for multiple days offshore while the LNG is piped into a regasification facility located at the end of a long pier. The vaporized LNG will then be passed into the onshore pipeline grid. He said that by using the ships as storage, Quoddy Bay will save $200 million that would have been spent on storage tanks but it will have to pay "demurrage" charges to cargo ships for docking for an extended period. "They will roughly cancel each other out."

The plan is different from traditional LNG storage and regasification operations, but at the newest LNG import terminal offshore in the Gulf of Mexico, Excelerate's Gulf Gateways Energy Bridge, cargo ships use onboard regasification and deliver vaporized LNG directly into offshore pipelines.

Smith stressed that unlike the Gulf's Energy Bridge the Quoddy terminal will be open to all traditional LNG cargo ships. He also said that because Passamaquoddy Bay is behind several islands, cargo ships docking at the terminal will not be exposed to significant weather delays due to rough seas.

The tribe's approval of the terminal agreement is a significant step for the LNG industry which has had a long series of negative decisions. "This is the second project I've worked on, and it's a funny feeling to actually be moving forward," said Dennis Bailey, spokesman for Quoddy Bay. Bailey, who worked with ConocoPhillips and TransCanada on an LNG project that was rejected by the town if Harpswell, ME, noted, however, that there will be a lot more challenges ahead for the project.

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