HALIFAX -- Newfoundland and Labrador is exploring ways of selling electricity to Ontario, but how to transmit the power halfway across the country remains unclear.

Natural Resources Minister Derrick Dalley said a commitment was made Monday with Ontario Energy Minister Bob Chiarelli at a conference in Halifax to set up a working group to study electricity trade.

"Newfoundland and Labrador has tremendous energy resources -- clean, renewable energy resources that some of the larger markets in our country and certainly in the U.S. are keenly interested in," Dalley said.

"Ontario has some supply needs, Newfoundland and Labrador may have some supply options, so let's take a look at this and see what we can develop."

The announcement follows last week's agreement by provincial premiers at a meeting in Newfoundland to establish a Canadian Energy Strategy, but Ontario and Newfoundland and Labrador have been talking about a power deal since last year, added Dalley.

The two provinces will discuss opportunities presented by the $8.6 billion Muskrat Falls project on Labrador's lower Churchill River and other options.

Chiarelli said Ontario also wants to look at importing electricity from Gull Island, which is considered the next big hydro project in Labrador and is expected to cost at least $12 billion. Firm, long-term purchase agreements in provinces such as Ontario would be required for its development, Dalley said.

The hydroelectric power generated by Muskrat Falls would be through new subsea cables, including a 180 kilometre underwater Maritime Link from the island of Newfoundland to Nova Scotia, where it would be sold to U.S. markets and other provinces.

"There's game changing infrastructure that's being put in place," said Chiarelli. "It's apparently feasible, and it's going to require a lot of technical work to determine whether we will be able to make something happen there or not."

The two provinces formed a working group that includes Newfoundland's Crown corporation, Nalcor Energy, and Ontario's Independent Electricity System Operator. They said the talks will be guided by reducing costs, fighting climate change and improving system reliability.

How to get any new hydroelectric power from Labrador to Ontario is a big question, Dalley said. Newfoundland and Labrador has long accused Quebec of undermining its energy ambitions.

The deal with Ontario may look to bypass Quebec if it wants to charge too much to transmit power from Labrador through its system into Ontario.

"Quebec is probably the ideal route, but we have seen through other creative ways such as the Maritime Link … that there may be other ways to get power to Ontario," Dalley said.

As the premiers wrapped their meeting last Friday, Quebec's Philippe Couillard said the issue is about transmission capacity and upgrade costs, and told reporters his province is open to talks with Newfoundland and Labrador.

Dalley said he was encouraged by Couillard's comments.

Chiarelli said the agreement between Ontario and Newfoundland could be key to creating a national energy grid if it does include Quebec.

"We're excited that for the first time there are realistic options for a very significant start on a national grid," he said. "From Newfoundland and Labrador through into Ontario is a big chunk of Canada, and the premiers have agreed in principle to try to make it Canada-wide, so this is a good starting point."

Ontario has a strong supply of electricity now but will need to import "clean" power from NL for the 12 years or more that it will take to refurbish 10 nuclear reactors in the province, said Chiarelli. The Liberal government would rather not burn natural gas to generate electricity when the reactors are taken off line because of the greenhouse gas emissions that are produced, he added.

"It makes immense sense to us to begin to explore the opportunities that have presented themselves from Newfoundland and Labrador," said Chiarelli.

A report this month from the Ontario Chamber of Commerce said electricity rates in the province are more than double those in neighbouring Manitoba and Quebec, and are "killing small business.