US, Canada can't find common ground on LNG transport

By Mark Davidson on September 24, 2009 5:50 PM, Platts

By most accounts, diplomatic relations between the US and Canada have warmed since Barack Obama was elected president. But in one specific area that could have a profound impact on US energy supply, the two countries are further apart than ever.

This week, on a visit to Washington, Canadian Prime Minister Stephen Harper reiterated Canada's position that it will not allow liquefied natural gas tankers to pass through Head Harbour Passage on their way to proposed LNG import terminals in Maine. That proclamation came just two days after Maine Governor John Baldacci, during a visit to New Brunswick, said the Canadian government was taking too hard a hard line with respect to Head Harbour. "It just seems like this is being done more on emotions and local politics," he told a local newspaper.

Despite behind-the-scenes negotiations between the US State Department and the Canadian government, progress seems elusive on this issue, which is drawing more political players into the fray.

Maine Senator Susan Collins this week urged David Jacobson, Obama's nominee as ambassador to Canada, to press the issue with the Canadians. She also wrote a newspaper column asserting that Canada has no right to stop commercial traffic through Head Harbour Passage -- a stance with which the Canadian government firmly disagrees, citing safety and security concerns.

Resolution is considered important not just to Maine but to the entire Northeast US, which would benefit from the additional gas supplies delivered to a pair of proposed terminals FERC is considering.

But even as the divide between the two countries remains wide and the rhetoric heats up over the Head Harbour issue, one key development may be lost in the debate: the US is so oversupplied with natural gas that the urgency of bringing new LNG to US shores has all but disappeared. Whether those fundamental energy supply dynamics color this politically charged border dispute going forward will be interesting to watch.