Atlantic Loop energy project seen as an economic shot in the arm for the region

The Atlantic Loop got just a single mention in the speech from the throne this week — but if the project goes ahead, it could transform the energy market of eastern Canada, bringing billions of dollars and thousands of new jobs to the region in the process.

Federal government sees the project as its 'top regional priority'

Workers on the construction site of the hydroelectric facility at Muskrat Falls, Newfoundland and Labrador on Tuesday, July 14, 2015. (Andrew Vaughan/The Canadian Press)

The Atlantic Loop was mentioned just once in the speech from the throne this week — but if the project goes ahead, it could transform the energy market of eastern Canada, bringing billions of dollars and thousands of new jobs to the region in the process.

A senior Liberal source called the Atlantic Loop the "top regional priority" for the federal government. The broad concept is to upgrade transmission capacity on the East Coast to allow hydroelectric power from Labrador and Quebec to displace coal use in the region.

It has the support of the four Atlantic premiers. They met with Quebec Premier François Legault in St. John's in January to discuss the possibility of using both Quebec's surplus hydroelectricity and soon-to-flow power from the Muskrat Falls project in Labrador as a clean energy solution for Atlantic Canada.

"It's clear that we have, right now, some capacity and we can add to this capacity," Legault said in January.  "So why don't we work together on a plan, a complete plan, to serve 100 per cent of clean energy to all our provinces?"

In the months since, the Loop earned the backing of enough key people in the federal government to earn a spot in the throne speech. In early September, Prime Minister Justin Trudeau voiced his support for the project during an appearance on the Newfoundland and Labrador radio station VOCM.

Key allies at the cabinet table

"I think there's a lot of really, really strong interest in the idea of an Atlantic Loop, the idea of investing to get Nova Scotia, New Brunswick off coal," Justin Trudeau told Open Line host Paddy Daly. "We have a lot of opportunities to look at a greener future that involves, strong, strong investments in hydro and Muskrat Falls is certainly going to be part of the mix."

Natural Resources Minister Seamus O'Regan — who is also Newfoundland and Labrador's lone federal cabinet minister — is championing the plan. So is Intergovernmental Affairs Minister Dominic LeBlanc, whose home province of New Brunswick would benefit from a cleaner energy supply and the chance to pursue tidal power developments with an upgraded grid.

"We believe in the idea. Let's work together to make it happen," said Economic Development Minister Mélanie Joly, whose department likely would get involved in the project through the Atlantic Canada Opportunities Agency.

Multiple federal and provincial sources tell CBC News the Canada Infrastructure Bank is also contemplating an investment in the project.

Sources say that Michael Sabia, the chair of the Infrastructure Bank, has been speaking to the regional utility companies about the project. A spokesperson for the Infrastructure Bank would not confirm those conversations when contacted by CBC News.

"While we cannot comment on any specific project, what I can tell you is that we are open to governments and investors bringing forward proposals for further due diligence with us," said Félix Corriveau, the Canada Infrastructure Bank's senior director of communications.

"(The bank) is interested in new infrastructure projects that are revenue-generating, in the public interest and commercially structured to attract private sector investment."

A second chance for Muskrat Falls?

Multiple federal sources say that the Atlantic Loop is the biggest green infrastructure project available to the region — one that could help stabilize electricity rates, which are high across Atlantic Canada.

Eliminating coal use — a key step toward meeting Canada's carbon emissions reduction targets — could lead to a sharp increase in electricity rates. A significant federal investment such as the one represented by the Atlantic Loop could blunt the price impact while also reducing the region's emissions. It also could allow the Atlantic provinces to woo new employers with the promise of long-term stability in electricity prices.

Including energy from the overbudget and behind-schedule Muskrat Falls project in the Loop also creates a path for Ottawa to help Newfoundland and Labrador with its enormous financial problems.

Newfoundland and Labrador Premier Andrew Furey is looking to the federal government to help his province escape a financial crisis. (Government of Newfoundland and Labrador)

Newfoundland and Labrador Premier Andrew Furey is close to both Trudeau and LeBlanc and is counting on those relationships to help find a solution to his province's fiscal crisis, aggravated by the pandemic recession and volatility in resource markets. Furey's predecessor Dwight Ball wrote the prime minister in March warning that the province was unable to finalize its borrowing programs and would be out of money and unable to make its payroll by April.

Soon, Newfoundland and Labrador will face the additional challenge of paying for excess power from Muskrat Falls — a project that has doubled in cost since it was sanctioned and now represents about a third of the province's crippling debt. Ball called Muskrat Falls the greatest economic mistake in the province's history.

But an open path for hydro exports could boost revenue for the beleaguered project. And depending on the scale of federal involvement in the Atlantic Loop, it also could open the door to a restructuring of Muskrat Falls' finances, or even the development of the much larger Gull Island project in Labrador.


David Cochrane is a senior reporter in CBC's Parliamentary bureau. He previously wrote for CBC Newfoundland and Labrador.

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