09/05/2013 01:02 EDT | Updated 11/05/2013 05:12 EST

Ferry service from Yarmouth, N.S., to Maine to resume in May, government says

YARMOUTH, N.S. - A deal to resume a ferry link between Nova Scotia and Maine next year has been reached, the provincial government announced Thursday, nearly four years after it scrapped a subsidy that led to the previous operation's demise.

Economic Development Minister Graham Steele said STM Quest — a joint venture between U.S.-based companies ST Marine and Quest Navigation — has agreed to run a daily service from Yarmouth to Portland, Maine that would run from May 1 until Oct. 31.

The province is willing to provide the company a $21 million fully forgivable loan over seven years, $10.5 million of which would go towards startup costs in the first year with another $1.5 million set aside annually for marketing.

"This is the news that people had been waiting for," Steele told a Yarmouth radio station.

"We believe that this is the best operator and the best deal for the people of the province to make sure that ferry service resumes and is viable and sustainable for the long term."

Steele said a number of terms and conditions must be met in order for STM Quest not to repay the loan. They include a finalized joint venture agreement between ST Marine and Quest Navigation and the ferry service operating on an agreed upon schedule.

"If the ferry does not run, we want to make sure we get our money back," he said.

The deal comes late in the final year of the government's mandate. When asked, Steele denied the timing of the deal had anything to do with the possibility of an election call.

"This is the track that the ferry issue was on and everybody who's been deeply involved with the ferry issue knows that this is unfolding according to a schedule that it was on, election or no election," he said.

The agreement also includes a clause that would allow the government to step in and run the service if STM Quest were to pull out for any reason.

"In the worst-case scenario, that would leave the province running the ferry service, but what would happen in reality is we would simply find somebody else to operate the ship for us," Steele said.

He said the government will not provide any money to upgrade the Yarmouth ferry terminal, leaving that to be worked out between the federal government, the municipality and business partners.

The previous ferry service to Maine was cancelled in December 2009 after the NDP government cut an annual $6-million subsidy for Bay Ferries when it concluded the money-losing business wasn't viable. The decision prompted protests from residents in Yarmouth who said their tourism industry suffered as a result.

Liberal Leader Stephen McNeil welcomed news of the deal, but said the government will have to do more to improve the region's tourism sector.

"It will take time for the tourism infrastructure to rebuild itself because they have had no extra money to reinvest in their product over the last four years," said McNeil.

Progressive Conservative member Chris d'Entremont, who represents a nearby riding, said the announcement was positive and a sign the government finally realizes the importance of the ferry to southwestern Nova Scotia.

"They've seen over time what it's meant to the local economy, to jobs in the area and to the psyche of people in Yarmouth County," he said.

The Economic Development department said the deal would create 30 jobs mainly through the establishment of a local reservation call centre.

The government selected STM Quest last month to set up and run the service. It also received two other bids from Balearia Caribbean and P&O Ferries.

— By Keith Doucette in Halifax