VZCZCXRO5644
RR RUEHGA RUEHQU RUEHVC
DE RUEHHA #0013/01 0742006
ZNR UUUUU ZZH
R 142006Z MAR 08
FM AMCONSUL HALIFAX
TO RUEHC/SECSTATE WASHDC 1256
RUEHOT/AMEMBASSY OTTAWA 0508
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHHA/AMCONSUL HALIFAX 1343

UNCLAS SECTION 01 OF 03 HALIFAX 000013 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CAN, EB/ESC/ISC, EB/PPD, INR/B 
USDOE FOR IA (PUMPHREY, DEUTSCH) 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ETRD PGOV PINR SENV CA
SUBJECT: NEW BRUNSWICK PREMIER PUSHING TO MAKE HIS PROVINCE THE "NEXT 
ALBERTA" 
 
 
HALIFAX 00000013  001.2 OF 003 
 
 
------- 
SUMMARY 
------- 
 
¶1.  (SBU) New Brunswick Premier Shawn Graham and Energy Minister 
Jack Keir are working hard to make energy the catalyst for 
moving their province to economic self-sufficiency.  Their 
agenda calls for their province to be a reliable and long-term 
electricity supplier to the northeastern United States, despite 
a number of hurdles such as insufficient transmission capability 
in the State of Maine, tough competition and environmental 
challenges.  Meanwhile, Irving Oil is exploring new refining 
opportunities and, together with it Spanish partner Repsol, is 
on track to begin operations at the Canaport LNG facility in 
December.  Critics of the Premier view his self sufficiency 
agenda as overly ambitious, but with C$10-15 billion in 
energy-related projects on the horizon over the next ten years, 
no one is underestimating the resolve of the Graham government 
to make this rags-to-riches plan a reality. END SUMMARY. 
 
-------------------------------- 
The Plan - Laying the Groundwork 
-------------------------------- 
 
¶2.  (SBU) Energy matters were the main topic of discussion when 
Consul General and POL/ECON Specialist visited New Brunswick 
February 24-27.  In private conversations with Liberal Premier 
Shawn Graham, Energy Minister Jack Keir, senior bureaucrats and 
industry leaders, CG received an update on the government's much 
touted energy agenda.  The premise of the Graham plan is to 
harness the province's energy potential to achieve economic 
self-sufficiency.  Right now New Brunswick is one of Canada's 
so-called "have-not" provinces, suffering from a lack of 
development opportunities, low investment, high provincial taxes 
and a dwindling (and aging) population. 
 
¶3.  (SBU) The energy/economic development strategy is the chief 
focus of the Graham government and Keir has been quick off the 
mark in laying the groundwork for the plan.  First, he changed 
the mindset of the energy department from its sole focus on 
energy policy to an equal emphasis on the economic development 
opportunities that energy could bring.  Next, Keir uprooted the 
entire energy department from the capital city of Fredericton 
and moved it to Saint John, the de facto hub of energy activity 
in the province.  With the move, Keir also put together a new 
management team which gives equal representation to business and 
development specialists to augment the technical and policy 
staff members. 
 
------------------------------------------- 
The Current Phase:  Changing the Perception 
------------------------------------------- 
 
¶4.  (SBU) In our meeting, Keir and his senior staff were upbeat 
about these changes and the current phase of the plan: 
increasing the province's profile in the United States.  As Keir 
remarked, while there are potentially new markets at home and 
elsewhere in Canada, right now he sees the U.S. northeast as the 
"low-hanging fruit," (i.e., the market that offers the highest 
returns for a given effort).  However, as Keir acknowledged, it 
has been an uphill battle to convince energy industry CEOs and 
policy makers that New Brunswick can be a secure and trusted 
energy supplier.  Undaunted, Keir believes that he and the 
Premier are making progress in changing this perception.  Both 
travel to the United States as often as possible, and in fact 
Keir had just returned from Washington just days before our 
meeting.  There he met with key officials of the U.S. DoE and he 
was one of the speakers at the National Energy Forum, both of 
which he characterized as very productive. 
 
--------------------------------- 
So what is New Brunswick Selling? 
--------------------------------- 
 
¶5. (SBU) Unlike Newfoundland-Labrador and Nova Scotia, New 
Brunswick has no potentially rich supply of offshore or onshore 
oil and gas resources.  What it does have is a diversified 
electricity generation system which Graham and Keir are anxious 
to expand to meet growing energy demands in the U.S. northeast. 
Central to this plan is the possibility of a second nuclear 
reactor at the existing nuclear facility at Point Lepreau 
outside Saint John.  Lepreau I is days away from an 18-month 
shutdown for refurbishing, but once it is operational again, and 
possibly teamed up with a second reactor, it could be the source 
for new electricity export opportunities.  Keir said he was 
encouraged earlier this year when the Canadian Nuclear Safety 
 
HALIFAX 00000013  002.2 OF 003 
 
 
Commission began reviewing the design for the second reactor. 
As he explained, this move meant that the province could start 
recruiting potential partners for the $4 billion project and 
eventually make it possible to start the search for potential 
customers. 
 
--------------------------------------------- ----------- 
The Barriers:  The Impact of Maine's Transmission System 
--------------------------------------------- ----------- 
 
¶6. (SBU) Keir was also candid in outlining the major hurdles in 
this export plan.  First, there is the lack of transmission 
capability in the neighboring State of Maine, which adds 
uncertainty to the prospect of increased sales.  One way around 
the problem would be to lay a new, sub-sea transmission line 
from the Lepreau site directly into Massachusetts.  This 
represents an unpalatable option as Keir was quick to point out 
that neither he nor the premier want to shut out Maine, which 
would seriously damage the warm relationship the Premier enjoys 
with Maine governor John Baldacci.  Equally daunting are the 
environmental considerations.  Eight states in the northeastern 
United States have signed on to the Regional Greenhouse Gas 
Initiative (RGGI), a "cap-and-trade" regime which will 
increasingly drive them to seek out cleaner power sources.  Keir 
is aware that this could prompt the states to discourage the 
importation of so-called "dirty energy" from New Brunswick, 
especially power coming from oil-fired power plants.  Still 
another obstacle is that New Brunswick is not the only province 
looking at the "low-hanging fruit" as Keir explained Quebec has 
expansion plans of its own. 
 
--------------------------------------- 
Irving Oil:  Refinery and LNG Potential 
--------------------------------------- 
 
¶7. (SBU) While future electricity sales form the major 
foundation for the New Brunswick energy growth plan, Keir also 
lauded the potential of the privately-owned Irving Oil Company. 
Just outside Saint John, Irving owns and operates Canada's 
largest oil refinery (300K+ bbl/day) and the company is actively 
considering building a second refinery at the site to supply 
both U.S. and domestic markets.  Irving officials told CG the 
company is looking to find a partner for the project, but so far 
has not yet gotten a firm commitment from any source.  Should 
the company eventually find the partner and pass the regulatory 
process, the company could start construction in late 2009 or 
early 2010. 
 
¶8. (SBU) In the short term, Irving and its Spanish partner 
Repsol have almost finished the Canaport LNG facility on the 
outskirts of Saint John. While other LNG projects in the 
northeast are stalled because of a lack of secure natural gas 
supplies, Irving and Repsol have already firmed up secure gas 
supplies mainly from Trinidad and Tobago.  The Canaport LNG 
facility is on schedule to begin operations in December 2008, 
when it will start injecting one billion cubic feet of 
regasified LNG per day into the New England market via the 
Maritime and Northeast pipeline. This output exceeds the current 
output of Nova Scotia's Sable Island offshore gas production. 
Our industry contacts said Irving will have no difficulty in 
expanding past its current plan for three storage tanks at the 
facility to four or even five, a signal to its LNG competitors 
that the company has the potential to be the major, if not the 
only, LNG player in the region. 
 
-------------------------------------------- 
COMMENT:  The Dynamic Duo of Graham and Keir 
-------------------------------------------- 
 
¶9. (SBU) Premier Graham's energy agenda is not just centered on 
increased energy sales and exports.  He also wants to see the 
province become a hub for oil refining, LNG distribution, and 
possibly a center for nuclear energy research and development. 
Further down the road, the province could also become a conduit 
for power sales from the Lower Churchill project to the United 
States should Newfoundland-Labrador decide to construct a sub 
sea power line to the province.  Critics of the Premier view all 
these ideas as overly ambitious, especially the Premier's 
prediction that the province will some day become the "next 
Alberta."  On the other hand, with C$10-15 billion in 
energy-related projects on the horizon over the next ten years, 
no one is underestimating the resolve of the Graham government 
to make this rags-to-riches plan a reality. 
 
¶10. (SBU) Through his trips across Canada and the United States, 
the Premier is developing a reputation as a highly-charged 
 
HALIFAX 00000013  003.2 OF 003 
 
 
champion for his province.  Invariably, all this attention is 
increasing Graham's national stature, earning him the 
distinction of being regarded one of Canada's brightest new 
political stars.  Also there are no arguments that Graham's 
decision to appoint rookie politician Keir to head up the energy 
portfolio was a wise move.  Viewed as ambitious, tireless and 
keenly focused, Keir has become the Premier's right hand man and 
the province's best salesman in the energy sector.  In all, both 
Graham and Keir exude a great deal of optimism, zeal and 
dedication for making this plan work.  As one of our political 
contacts noted, if drive and ambition were the only criteria for 
a successful implementation of the Graham agenda, New Brunswick 
would already be well on its way to becoming Canada's newest 
"have" province.  END COMMENT. 
FOSTER