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Natural Resources Minister Nathalie Normandeau responds to questions over the Old Harry gas and petroleum field on Oct. 21, 2010 in the Quebec National Assembly. (Jacques Boissinot/THE CANADIAN PRESS)
Natural Resources Minister Nathalie Normandeau responds to questions over the Old Harry gas and petroleum field on Oct. 21, 2010 in the Quebec National Assembly. (Jacques Boissinot/THE CANADIAN PRESS)

Old Harry oil and gas prospect gets a new lease on life Add to ...

Quebec announced that a draft agreement will be reached with Ottawa this fall on the exploration and drilling of the Old Harry oil and natural gas prospect in the Gulf of St. Lawrence.

Minister of Natural Resources Nathalie Normandeau said she based her optimism on a statement made Thursday in St. John's by Prime Minister Stephen Harper, who said Ottawa was prepared to reach a deal.

"In politics there are sometimes windows of opportunity," Ms. Normandeau said. "In this case you have the Prime Minister, Mr. Harper, who said Quebec deserves to have an agreement. … I have never seen the planets so well aligned. So let's take advantage of the momentum. Let's hasten the pace of the negotiations with Ottawa."

Mr. Harper said he saw no obstacles to reaching a deal on offshore resources with Quebec, similar to the one signed in the 1980s with Newfoundland and Labrador leading up to the drilling of the Hibernia oil field.

"The government of Quebec has expressed interest in having a similar arrangement for its offshore resources, and the government of Canada is very much interested in having discussions with Quebec to establish that kind of arrangement," Mr. Harper said.

According to Ms. Normandeau, the Old Harry prospect represents an estimated two billion barrels of oil - twice the size of the Hibernia oil field - and maybe as much as five trillion cubic feet of natural gas. The site remains one of the largest untapped hydrocarbon reserves in Eastern Canada and a major source of potential revenue for the government.

Senior Quebec and federal officials have been meeting regularly in the past several weeks to try to strike a deal. Mr. Harper's comments were seen as a sign that Ottawa was serious about reaching an agreement.

"To have the Prime Minister say he wants to settle Old Harry, we haven't heard that from a Canadian Prime Minister in a long time," Ms. Normandeau said. "This is really encouraging."

There are still several issues that have to be resolved, including Quebec's share of the royalties. Quebec is demanding to be paid all royalties, as is the case with the Newfoundland and Labrador agreement involving Hibernia. The deal with Newfoundland recognizes Ottawa's right to collect the royalties - before turning them over to the province - largely because the federal government insisted on exercising a 1967 Supreme Court of Canada ruling, which upheld Ottawa's claim over ownership of overseas resources.

Quebec has always refused to recognize federal jurisdiction over the ownership of offshore resources, which has been a major stumbling block to reaching an agreement. The province appears willing to set aside its constitutional demand without abandoning it and sign an administrative agreement to eventually allow exploration and drilling at the Old Harry deposit to begin.

There is also the issue of setting up a dispute settlement mechanism to allow for an independent tribunal to rule on an oversees boundary dispute between Quebec and Newfoundland and Labrador.

The oil field straddles a boundary defined in 1964, which was approved by the four Atlantic provinces and Quebec. However, Newfoundland and Labrador now refuses to recognize the portion of the 1964 boundary that separates the province's offshore area from Quebec and has laid claim to most of the Old Harry offshore oil reserve.

"Quebec will negotiate a deal that takes into account its prerogatives and its needs," Ms. Normandeau said. "But I'm not going to negotiate here in public and reveal our negotiating strategies."

An agreement would allow for exploration of the Old Harry site to begin in 2012. That's when the province hopes to lift a moratorium on energy development in the Gulf of St. Lawrence after it receives environmental impact studies.

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