Tilting at windmills: Atlantic Canada’s new energy economy.

Guests found the idea so amusing that Begner and her chef husband Axel, the restaurant’s co-owners, made it a regular dinner offering.

The Begners decided to open the popular European fusion dining spot about four years ago. They’d heard the Irvings, the family that has dominated New Brunswick business for decades, were redeveloping a block of uptown properties and figured the location offered a good opportunity to capitalize on the steady stream of executives and professionals arriving to work on the New Brunswick city’s major energy projects, many of them involving Irving Oil.

“My husband and I both felt that the Irvings wouldn’t tackle something where there wouldn’t be a good return,” says Begner. “It was just a sign of things to come.”

Such projects – among them the $1.3-billion refurbishment of the nearby Point Lepreau nuclear plant and construction of Irving Oil’s Canaport liquefied natural gas facility, a joint project with Spain’s Repsol YPF – have helped insulate the city from the worst of the economic downturn.

In fact, there are people in New Brunswick, and across Atlantic Canada, who say that if you didn’t read about the recession in the papers, you wouldn’t know there was one.

The economic indicators not only back up that feeling, they point to a dramatic reversal of fortune between the country’s traditional engines of growth and the long-suffering East Coast. That’s no better illustrated than by Newfoundland’s recent escape from have-not status, just as Ontario receives the first federal government handouts in its history.

While once-booming Alberta finds its small-business operators the most pessimistic in the country, optimism is at its highest in New Brunswick and Newfoundland and Labrador.

Housing prices, while having fallen an average 9.2 per cent across Canada over the past year, remain above year-ago levels in three of the four Atlantic Canadian provinces.

As B.C., Alberta and Ontario continued to post massive job losses in March, the unemployment rate actually dropped in Prince Edward Island and Newfoundland and Labrador.

While interprovincial migration has historically drawn workers West, the flow of people has changed direction, at least for the time being, as Atlantic Canadians return home and displaced workers elsewhere seek new opportunities in the East.

“We’re doing remarkably well,” says Charles Cirtwill, executive vice- presidentof the Atlantic Institute of Market Studies. “And we’re not used to it.

“I think Atlantic Canadians, being the worriers they are, are scratching their heads and saying `How is it that we’re not suffering the way other people are?”’

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The answer, says Leanne Hachey, Atlantic vice-president for the Canadian Federation of Independent Business, is energy.

In the shorter term, other factors – such as the region’s lower dependence on trade, its smaller manufacturing base and its higher concentration of public sector workers and military staff- have cushioned the recession’s blow.

But the bigger picture is energy, helping provinces cut deeply into heavy debt loads and creating the “buzz” that for so many years has been missing, Hachey said. Beyond corporate boardrooms and provincial treasuries, the sector’s benefits have worked their way to street-level beneficiaries like Margret and Axel Begner.

Energy is also emboldening provincial leaders to reach for the brass ring:to become a “have” province, now that the means to do so appear within their grasp.

The goal has already been declared, and reached, by Newfoundland Premier Danny Williams, and espoused more recently by New Brunswick Premier Shawn Graham, whose widely heralded March budget will produce the lowest corporate taxes in all of Canada and, if everything goes according to plan, let New Brunswick shed its “have-not” status by the year 2026.

“New Brunswick is not looking for a handout. We’re looking for a hand up . . . we want to generate our own wealth and prosperity so we can stop relying on others,” Graham said in a recent address in Toronto to the Economic Club of Canada.

Renewable energy will be the cornerstone of that drive, Graham said, as abundant sources of hydro, wind and possibly tidal power are channelled through the New Brunswick energy hub to hungry New England markets.

To get it there, Graham is proposing a north-south energy corridor capable of exporting between 1,200 to 1,500 megawatts through to the state of Maine, a co-signatory to the project.

Only days after Graham’s mid-March statement, federal cabinet minister Peter MacKay announced Ottawa’s interest in developing what it called an Atlantic Energy Gateway, with $4 million in funding and an 18-month study to assess future prospects.

Unlike other “grand visions” of the past, which were long on promise but short on results, Atlantic Canada’s push into renewable energy sources is already underway.

Wind farms are popping up across the region. Nova Scotia last year signed six long-term contracts for wind energy projects. Prince Edward Island Premier Robert Ghiz has stated that his province intends to produce 500 megawatts of wind energy by 2013, a $1-billion project that would be the biggest undertaking since the building of the Confederation Bridge in the mid-’90s.

On a far bigger scale, Newfoundland’s $10-billion Lower Churchill hydro project could eventually produce more than 3,000 megawatts of electricity – enough to power 1.5 million homes, according to the Newfoundland and Labrador government. It is slated to begin delivering power by 2015.

Already, new projects are lining up behind the north-south proposal, which would be built by Irving Oil and increase four or fivefold the volume capacity of existing hydro lines.

Irving Oil is considering a 500- to 600-megawatt natural-gas-fired cogeneration plant to feed into the pipeline. Nova Scotia utility Emera Energy Inc., which also owns Bangor Hydro, said it would build a $2-billion underground transmission line between Bangor, Maine, and Boston if the project goes ahead.

Other long-discussed projects, like the development of a second nuclear power station in New Brunswick, suddenly become more viable with the presence of the energy corridor, said Cirtwill of the Atlantic Institute.

But for all its promise, or perhaps because of it, no sooner had the energy gateway plan been announced than talk about it degenerated into a political hissing match.

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New Brunswick’s Graham called the federal government a “Johnny-come- lately” in the Maritimes energy game.

In an interview following MacKay’s announcement, he vowed, “We’re not going to simply position New Brunswick for the construction of some wires crossing our province in pursuit of a lucrative U.S. market with no economic benefit for our province.”

To which Mackay shot back: “We could always just bypass New Brunswick and go through Maine.”

New Brunswick newspapers immediately filled with angry rebuttals.

“MacKay guns for N.B.,” declared Saint John’s Telegraph Journal.

“An energy war with Ottawa,” the Times & Transcript of Moncton fumed.

Newfoundland’s Williams and Nova Scotia Premier Rodney MacDonald quickly chimed in, with MacDonald repeating MacKay’s warning that New Brunswick “can always be bypassed.”

All of which points to the fact that while “Atlantic Canada” sounds like a unified whole, it’s the farthest thing from the truth.

For regional observers like Cirtwill and the business federation’s Hachey, the region’s petty rivalries and jealously guarded interests are one of the first concerns that come to mind regarding the area’s economy and its future.

Writing in the Times & Transcript, columnist Alec Bruce said:”The larger issue, of course, has nothing to do with access or tariffs or fairness or perceived insults by the federal government.

“It has to do with the long-term prospects for unity in a part of the world that, despite its small and sparse population, despite its internecine traditions and inherent kinship, remains stubbornly wedded to the principle of balkanization as a matter of public policy and economic development.”

Although perhaps the region’s greatest challenge, it is certainly not the only one. As for the oil and gas motherlode offshore, Nickle’s Energy service recently declared “the outlook remains strikingly good,” with hundreds of millions of development dollars budgeted this year for Newfoundland’s three producing oilfields and millions for Nova Scotia’s Deep Panuke and Sable Island natural gas projects.

But looking further out, veteran industry analyst Ian Doig, editor of Doig’s Digest, is far from optimistic.

“In spite of all the politicians running around the world saying this is a world-class play, you wonder why industry isn’t listening,”Doig says.

“There hasn’t been an offshore well drilled in Nova Scotia for about two and half years.”

The region’s oil output has been steadily declining since 2007, and without additional discoveries will only decline further over the longer term.

“The ironic thing,” says Doig, “is that who could come out of this a winner is New Brunswick, what with everything that’s going on in Saint John. The irony is that all that is happening above ground and not below ground, like in Nova Scotia or Newfoundland.”

For all its strengths, the regional economy cannot escape the global downturn. Acciona Wind Energy, a unit of Spain-based Acciona Energy, recently put two major New Brunswick wind projects on hold, saying liquidity for capital projects has dried up.

The likelihood is that economic conditions will delay the major projects – like the Irvings’ proposed second Saint John refinery, an $8-billion plan on which it has partnered with international oil major BP – by up to two years, said economist Adrienne Warren at Scotia Economics.

Yet some of the region’s challenges would leave others envious. Like how to find all the workers necessary to undertake the many planned projects.

More important, there is a key difference between the emerging energy strategy and the tilting at windmills of the past, in which taxpayer dollars were thrown at politically driven or wayward projects like Newfoundland’s infamous hydroponic cucumber fiasco, says Cirtwill at the Atlantic Institute.

Oddly enough, the region is tilting at windmills once again, but this time the game has changed.

“The interesting thing here,” says Cirtwill, “is that it is being driven for the most part by private-sector investors, which is always a good thing because it tells you if they’re willing to risk their own money, then there must be money to be made.”