LNG PLANTS MOVE CLOSER TO REALITY

UNCLAS HALIFAX 000277 SIPDIS E.O. 12958: N/A TAGS: ENRG ETRD PREL CA SUBJECT: LNG PLANTS MOVE CLOSER TO REALITY REF: A) 04 HALIFAX 040; B) 04 HALIFAX 115 ¶1. (U) SUMMARY: Proposals for liquefied natural gas (LNG) plants in Atlantic Canada and Maine are moving forward, with a race of sorts developing among the four most advanced plans to see who can get on stream first. Pipeline capacity through Atlantic Canada to New England can be increased to carry the larger supply of gas. END SUMMARY. ¶2. (SBU) Captain Steve Garrity, Commander of Coast Guard Sector Northern New England, told CG that he received a letter of intent from Quoddy Bay LLC which proposes a plant in Eastport, ME, and that he expected to receive one from Downeast LNG (Robinston, ME) early in the week of December 19. Both entities have done draft waterway suitability analyses. Receipt of the letters will trigger a public notice and meetings to solicit community views on the plants. Garrity, who recently attended a meeting with Canadian officials in St. John, New Brunswick, to discuss aspects of LNG permitting, new ferry service between Nova Scotia and Maine, and improved information sharing on marine domain awareness, said that he told Transport Canada officials at the meeting that Canadian government and public views on the LNG plants would be heard. ¶3. (SBU) Downeast LNG President Dean Girdis (protect) called on CG to discuss his firm's proposal, and in particular the resistance that it is generating from residents of St. Andrew's, NB. Girdis is frustrated with what he says is false and misleading information being circulated by opponents of the project, as well as by the reluctance of town officials to have a meeting where he could speak and seek to address local concerns. Downeast has gone ahead and scheduled its own meeting at a local hotel and advertised it widely for anyone in the community to attend. Girdis expects more than a few brickbats, but also hopes that a clear and factual presentation about the project will help clear up at least some misunderstanding. ¶4. (SBU) On the Canadian side of the border, activity continues as well, with projects in Nova Scotia and New Brunswick moving ahead. The Bear Head, NS, project, backed by Houston-based Anadarko, has broken ground and poured a significant amount of concrete already. Doug Bloom, President of Maritimes and Northeast Pipeline (M&NE) told CG that his firm has met multiple times with representatives of all four projects and is prepared to increase pipeline capacity to accommodate larger gas volumes. He said that M&NE (majority partner, Duke Energy) was well-positioned to bring gas to the U.S. northeast and to benefit from the surge of interest in LNG plants in the region. ¶5. (U) COMMENT: Gas supplies from offshore Nova Scotia have proven to be less than originally estimated, and new discoveries in recent years have been few, so it is not surprising that LNG is becoming the option of choice to provide additional energy to the northeast. We remain skeptical that four plants in such a relatively small area can all be economically viable, but the experts seem to think that at least two and possibly three can make it given growing demand for gas. Hence the race to be first into the market. As the U.S plants begin their trek through the permitting process, New Brunswick's concerns about LNG tankers passing through Canadian waters to unload in the U.S. will eventually be elevated formally to the federal level. In addition, USCG planning that takes account of "zones of concern" around tankers and plants which would extend into Canada could add an additional layer of complexity to the process. END COMMENT. HILL