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