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C O N F I D E N T I A L COPENHAGEN 000324 
 
SIPDIS 
 
E.O. 12958: DECL: 06/01/2018 
TAGS: PGOV PREL SENV KGHG ENRG EPET CA
SUBJECT: DEPUTY SECRETARY'S MEETING WITH CANADIAN RESOURCE 
MINISTER LUNN N GREENLAND 
 
 
Classified By: Regional Environmentl Officer Erik Hall. 
For reasons 1.4 (b&d). 
 
¶1.  (C) Summary:  Deputy Secretary Negroponte met with 
Canadian Minister of Natural Resources Gary Lunn on May 28 
following the Arctic Ocean Conference at Ilulissat, 
Greenland.  They discussed the recent U.S. listing of the 
polar bear as a threatened species, energy resource 
exploitation in the Canadian Arctic, climate change and 
carbon markets, trade and legal issues.  End Summary. 
 
¶2.  (U) Background:  The Deputy Secretary was accompanied in 
this meeting by Ambassador Cain, OES A/S McMurray, Legal 
Advisor Bellinger, D Special Assistant Wittenstein, and REO 
Hall (note-taker).  Minister Lunn was accompanied by 
Ambassador to Denmark Fredericka Gregory; Legal Advisor Alan 
Kessel; Claude Carriere, Associate Deputy Minister of Natural 
Resources; and Monique Carpentier, DirGen in the Ministry of 
Natural Resources. 
 
Polar Bear Listing 
------------------ 
 
¶3.  (C) Minister Lunn explained that Canada's decision on 
whether to list the polar bear was different from that of the 
U.S., since the polar bear hunt was economically important to 
some Canadian communities.  A bear trophy could bring up to 
$50,000 from hunters.  Lunn said Canada had entered into an 
MOU with the U.S. Department of Interior over protection of 
the polar bear, which had also raised some concerns among 
indigenous communities of the far north.  A/S McMurray said 
the U.S. was interested in continuing these discussions. 
 
Energy in the Canadian Arctic 
----------------------------- 
 
¶4.  (C) After agreeing the outcome of the conference had been 
positive, Lunn proceeded to outline tremendous potential for 
Canadian energy exploitation to supply the U.S. market. 
Canada is working with the U.S. to open up the Mackenzie 
River basin bordering Alaska, he said.  Gas hydrates and 
methane potential is vast in the far north (10 times Canada's 
oil sands reserves), if methods can be developed to exploit 
it.  Joint research is ongoing with Japan, he said.  Asked by 
the Deputy Secretary about cooperation with the U.S., Lunn 
said he had discussed the issue with Energy Secretary Bodman. 
 Canada has the potential to supply 25 percent of U.S. energy 
needs, he said. 
 
NAFTA/Trade 
----------- 
 
¶5.  (C) The Deputy Secretary acknowledged that border 
"thickening" with Canada was an unfortunate consequence of 
national security concerns.  Lunn said NAFTA had given Canada 
a new relationship with Mexico, but had complicated Canada's 
border relations with the U.S., its sole market for energy 
due to infrastructure constraints.  Canada is working on 
diversifying  to permit export of its energy to Asia, to cut 
the "captive market discount" estimated at U.S. $10/barrel of 
oil.  Canada is now considering seeking bilateral discussions 
with the U.S. on border trade issues, outside of NAFTA. 
Kessel said Canada is working on a police ship rider program 
with the Coast Guard, which is nearing agreement.  Lunn said 
that for 32 U.S. states, Canada is the number one trade 
partner.  PM Harper and President Bush had held positive 
discussions in New Orleans, he said. 
 
Climate and Carbon Markets 
-------------------------- 
 
¶6.  (C) Lunn admitted that Canada's greenhouse gas emissions 
had risen 32-33 percent since 1990, while the U.S. increase 
during the same period was 17-18 percent.  He said that in 
the future, Canada's stringent carbon constraints would 
increase the cost of Canadian fossil fuels.  All new oil 
collected from sands as well as coal extraction must meet new 
carbon capture and storage requirements from 2012.  Canada 
wants a "real" carbon trading system, "unlike Europe and 
Russia's 'hot air' system," he said.  Lunn expressed hope 
that a U.S.-Canadian carbon trading system will evolve.  The 
largest carbon sequestration and storage project in the world 
was transporting 10 million metric tons of carbon emitted 
 
from U.S. power plants in Wisconsin to Saskatchewan, where it 
was being injected into oil fields where 99% would be 
captured for at least 5,000 years. 
 
Legal Issues 
------------ 
 
 
¶7.  (C) The Deputy Secretary raised the importance of 
resolving outstanding boundary disputes between Canada and 
the U.S., saying our respective legal advisors are "talking 
about talking."  Legal Advisor Bellinger asked whether Canada 
had heard from Sweden, Finland or Iceland, who had not been 
invited to this conference.  Kessel said the issue had come 
up at the first meeting of the Arctic Council coastal states 
in Oslo in November.  The Canadian view was that if the other 
three Arctic Council members had an interest, it was better 
to invite them.  Keeping the group limited to the five 
littoral states also risks appearing to exclude the 
indigenous permanent participants of the Arctic Council.  The 
Deputy Secretary said he understood the Danish rationale for 
use of the five as an Arctic Council core group on certain 
issues, but not for everything. 
 
¶8.  (U) The Deputy Secretary's party reviewed this cable. 
CAIN