Total to pay £550,000 in rent into council coffers plus gas production levy

Shetland Islands Council is to charge Total £550,000-a-year to rent the land for its new gas plant at Sullom Voe once production starts. A quarterly levy will also be payable, based on the amount and value of gas and oil condensate flowing in from Laggan-Tormore.

But with production not due to start until June 2014 the gas company is getting away with paying the local authority a rental of just £100,000 a year in the meantime.

The all-important extra levy on production will ensure that the Shetland community shares in Total’s future profits over the 30-year lease term as gas becomes more expensive and new West of Shetland gas fields join into the Laggan-Tormore gas pipeline.

The Laggan-Tormore Throughput Element and the Additional Throughput Element will be payable every quarter on top of the rent and calculated using two complex formulas.

The information is contained in a 146-page legal document seen by The Shetland Times today which has been lodged with Registers of Scotland to record the historic deal clinched in June last year to enable Total to build its £500 million gas plant.

Council convener Sandy Cluness has previously said the money from the deal was not as important as the overall contribution the economic activity related to the plant was going to generate for the community. He estimated that would be worth around £200 million over 30 years.

The negotiations are understood to have been tough but Total was very keen to make progress with its pioneering £2.5 billion offshore gas development.

In the lease negotiations the council secured the legal right to demand access to Total’s meters and records to check that the gas throughput it has declared is genuine. It has the powers to order independent checks and to impose a penalty surcharge if the gas company is found to have been diddling the local authority.

The rent for the council’s 112-acre portion of the site next to Sullom Voe will also be paid quarterly, rising with inflation over the 30-year lease, which can be ended or extended.

The first rent cheque was paid over on 15th October last year, covering the period from the date of entry to the site in April.

On top of the rent and throughput charges Total also has to pay the local authority’s rates charge for its industrial complex.

The council is not the only beneficiary of Total’s decision to built a gas plant and pipelines next to Sullom Voe. Farmers Bryden Nicolson and A& D Hunter of Scatsta, Agnes and Robert Johnson, Charles and Annie Laurenson, the Sumburgh Company and the Firth Grazings Committee have land involved in the development.

The council’s lease has been granted to Shetland Land Lease, a Total subsidiary.

Total is legally obliged to tell the council of any environmental or health and safety incident and if it is facing, or threatened with, legal action for such incidents.

It also has to provide an emergency plan to the council and to ensure that all the relevant staff are trained and competent to put the plan into action.

Total also has to tell the council two years before it intends running down its operation of the plant. It has to remove the gas plant and make the site safe and clear of debris. The peat contained in the two giant peat stores will have to be reinstated over the site.