Quoddy Bay LLC, a Tulsa-based energy development company, has teamed up with a local Indian tribe to build an LNG import terminal in Maine in a unique arrangement that has tax and developmental advantages.
The announcement came less than a week after Maine officials, including Gov. John Baldacci, touted the then-unnamed project as having a key ingredient for success — local community support.
“I’m pleased that [Melvin] Francis [governor of the Pleasant Point Indian reservation] and his tribal council are working toward a project that will bring jobs to Washington County and more clean energy options to the Northeast,” Baldacci said on Tuesday. “My administration will work hand-in-hand with Gov. Francis and federal agencies to protect and promote local, regional and statewide interests. Outreach and education and more partnerships will be key next steps.”
The project would be located in northern Maine about 30-40 miles east of the Maritimes & Northeast Pipeline on a peninsula called Pleasant Point, the ancestral area of the Sipayik American Indian tribe. It would be located adjacent to the commercial shipping port at Eastport, ME.
Tribal representative Frederick J. Moore said the proposed project “opens up for all of us in eastern Maine new economic development options that previously had not been within the realm of possibilities.”
The Sipayik tribal government is expected to not only provide the host community but also be a project participant. The tribe’s unique legal status could provide an important advantage in the permitting process and could reduce operational costs because of its tax advantages. It essentially would pay no taxes of any kind.
The tribes in Maine are slightly different than the tribes across the rest of the country. They do have some elements of sovereignty, but under Maine law they also have the rights and privileges of a municipality. So they operate as local government entities. If the LNG entity is organized as a tribal entity it would not be subject to federal taxes, nor would it be subject to local property tax, said project spokesman Jim Mitchell. “It would be a locality so it also wouldn’t pay a county tax either,” he said.
“If we are fortunate enough to get a certificate, we do believe that once we get into the marketplace shippers would get an advantage from that cost [reduction]. What it is we can’t say right now because we can’t determine the size of the throughput; the engineering also hasn’t been done yet.”
Mitchell said that preliminary analysis by a well known LNG engineering firm indicates that the site would be a very good location for a terminal. However, an in-depth engineering analysis still needs to be done. The project also would require at least a 36-mile pipeline lateral from Maritimes. “That’s not going to be cheap; we’re talking probably $70 million,” said Mitchell. “But that lateral is not unreasonable given the few number of landowners we have to cross.
“As we put the thing together I think we’re pretty optimistic we have a good site,” he said. “There is maritime infrastructure in Eastport, a commercial port. That includes harbor pilots, tug service, that sort of thing, and that’s a useful element when we are going to develop a facility like this. But we think that the local angle, working from the bottom up, makes us somewhat different than all the other LNG projects that are out there.”
TransCanada Corp. and ConocoPhillips learned that lesson the hard way. The two companies had two potential LNG site locations in Maine rejected in short order because of local opposition. Quoddy Bay believes it has solved that piece of the puzzle.
“That’s not to say that there are not going to be hiccups,” Mitchell admitted; “there are going to be, but we think that because of the kind of relationship we have with the tribal government we will be able to get this on quite a fast track locally.”
The City of Eastport and the Town of Perry, ME, are two communities that would be most affected by the proposed terminal. The company has been meeting with officials in both the city and the town. The government at Pleasant Point will be the local government unit with jurisdiction over the project, “but we are not going to ignore the surrounding area,” said Mitchell. “We’ve already committed to the governor to participate in public information meetings in those communities and in the region in order to give citizens a chance to provide input so that we can try to be responsive to their concerns. Things have gone extremely well so far.”
Project sponsors hope to have an application ready to file at the Federal Energy Regulatory Commission by December of this year. “That’s an enormously tall order, but that’s what we are trying to focus on so that we can move things along as rapidly as possible,” said Mitchell.
He also said there has been “productive dialogue” with potential LNG suppliers but no agreements have been signed so far. The project is expected to have a sendout capacity of 500 MMcf/d initially with expansion capability to 1 Bcf/d.
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