Ottawa, two Atlantic premiers agree to 'modified' Atlantic Loop project

OTTAWA -

Nova Scotia and New Brunswick scaled back plans for the Atlantic Loop electricity grid Monday to expanding just one existing connection between their two provinces, rather than also building multiple new lines linking their provinces with Quebec and Newfoundland and Labrador.

What they are now calling a "modified Atlantic Loop" is part of a joint policy statement agreed to Monday in Ottawa during a meeting between federal Energy Minister Jonathan Wilkinson and the premiers of Nova Scotia and New Brunswick.

The agreement commits the provinces and Ottawa to co-operate on eliminating coal as a source of power in Nova Scotia and New Brunswick by 2030 and entirely eliminating greenhouse gas emissions from their electricity by 2035. The first part of that starts with the modified loop, limiting the massive project to only upgrading an existing connection between Salisbury, N.B., and Onslow, N.S., and extending it west to Point Lepreau, west of Saint John.

The full Atlantic Loop project has been bandied about for years and Ottawa had committed up to $4.5 billion, mostly through loans to Nova Scotia, to help fund it. But last week, Nova Scotia backed away from including the full Atlantic Loop in its plans to decarbonize its electrical grid, saying it was too expensive, would increase electricity rates too much and Quebec wasn't committing to sending more power.

"I think when you look at one significant project like the Atlantic Loop, as it was contemplated, it's becoming more obvious that to get that done in the time frame that we need to get off coal is pretty difficult," Nova Scotia Premier Tim Houston said.

"The cost has ballooned in a significant way. It's just not affordable anymore."

The cost for the full loop had nearly tripled to almost $9 billion since 2020. Houston said the modified version will cost somewhere between $1 billion and $2 billion.

Wilkinson said the project was conceived by the Atlantic provinces and they had to take the lead on it, so if they want to scale it back, that's up to them. He said the original concept no longer makes as much sense, in particular with Quebec no longer certain it will have extra power to sell.

There is still no certainty on exactly how the modified project will be funded.

Wilkinson said the loans committed to the full loop earlier this year are no longer on the table because the cabinet approval was given with the full project in mind. But he said there are talks ongoing about funding the modified version, and noted planned new investment tax credits, announced in the last budget, should be in play.

One of the credits was available for interprovincial electricity ties.

The Canada Infrastructure Bank was also in the room for the negotiations Monday and could be leaned on to help, said Wilkinson.

Houston said he's confident the costing will be agreed to eventually.

"I think the fact that we're all on the same page on what's possible is really important and we move on to the discussions about how do we work together to make sure it's affordable," said Houston.

He also said there is nothing preventing the other parts of the loop from being built eventually.

Nova Scotia expects to be able to wean itself off coal by building out new renewable power, including offshore wind power.

The federal government did put some smaller amounts of money on the table for electricity in the two provinces Monday. That includes $11.5 million to help Nova Scotia update its electricity grid monitoring and automation to better enable it to increase wind power in the grid.

There is $7 million for a small modular reactor in New Brunswick and $2 million for a feasibility study to convert the Belledune coal plant to biofuels. Belledune is New Brunswick's last remaining coal plant.

This report by The Canadian Press was first published Oct. 16, 2023.