SAINT JOHN, New Brunswick (AP) – The federal cabinet is “very close” to approving a $55-million package to help convert the idle Saint John shipyard into a site for heavy industrial uses.

Senior officials with Industry Canada say the proposal has reached the highest levels of government and could soon be headed to Treasury Board for final approval.

“It’s bubbling along,” a well-placed official told the New Brunswick Telegraph-Journal.

The federal money would be used for infrastructure improvements around the sprawling and once-thriving yard. Any money left over would then be available for investing in a new use for the site owned by the Irving family.

Government sources said the Irving family has not yet decided what would rise up in place of the shipyard, but they suggested that plans for a state-of-the-art wood-and-pulp processing facility appear shelved.

Instead, the Irving family is reportedly looking at various heavy industrial uses. One proposal would involve producing turbine engines.

Jim (J.D.) Irving, president of Irving Shipbuilding Inc., was in Ottawa this week with his vice-chairman Andrew McArthur to meet with top officials at Industry Canada. But after several false starts trying to close such a deal, Irving refused to discuss the current proposal on the table, adding only that he was in the nation’s capital “on a little business.”

Among the senior politicians he met with, however, was Gerry Byrne, the minister responsible for the Atlantic Canada Opportunities Agency, which would be a central player in any federal role for redeveloping the site.

Byrne played down the urgency of the meetings, but confirmed Ottawa is weighing a diversification plan.

“We are very committed to ensuring that Saint John has a prosperous future,” Byrne said. “They’ve got an incredible workforce there, as well as a strong base to diversify the economy.

“We’re very interested in the shipyard, and diversifying the Saint John economic base.”

John Banigan, an assistant deputy minister with Industry Canada, was in Saint John on Friday along with one of the department’s legal experts for another meeting with the Irvings.

The latest proposal for a federal package comes as cabinet was reportedly divided last spring over a proposed $90-million decommissioning plan for the yard. That package would have included $20 million in severance payments for laid-off workers at the yard.

The closure of the Saint John shipyard, which has been mothballed since April 2000, would end a long shipbuilding tradition in the province. In its heyday, the Saint John yard employed up to 4,000 workers.

Its closure would also leave Canada with only one yard, in Levis, Quebec, capable of handling major military procurements such as the $6.2-billion contract the Irvings had to build patrol frigates for the Canadian navy in the late 1980s and 1990s.

“It’s still unbelievable they’re closing one of the most modern facilities in North America,” said Gary Marr, president of the Marine Workers Federation of Atlantic Canada.