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Quebec, Newfoundland square off over offshore oil

Offshore oil worker aboard a Husky Energy's SeaRose FPSO in the Jeanne d'Arc Basin.

Photo Courtesy of Husky Energy Inc

Old Harry sounds more like someone's friendly uncle than the name of a new battleground taking shape in the Gulf of St. Lawrence between Quebec and its old energy foe, Newfoundland and Labrador.

The name, borrowed from a picturesque village in Quebec's Îles-de-la-Madeleine, refers to the location of a rich oil field that lies beneath the sea. And both provinces claim to have jurisdiction over it.

Straddling a disputed offshore boundary more than 450 metres below the surface of the sea, Old Harry is the site of what Quebec's Minister of Natural Resources, Nathalie Normandeau, estimates is two billion barrels of oil - twice the size of the Hibernia oil field - and as much as five trillion cubic feet of natural gas.

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The site remains one of the largest untapped hydrocarbon reserves in Eastern Canada and a potential source of billions of dollars in annual revenue for the two provinces.

Old Harry sparked a heated debate in the National Assembly last week, with the opposition Parti Québécois accusing the government of standing idle as Newfoundland and Labrador moved to allow exploration.

"Who is defending Quebec's interests … while Newfoundland is about to siphon off our resources?" PQ Leader Pauline Marois asked on Thursday.

The PQ wants the government to take court action to stop Newfoundland's plans to explore the oil field. It also wants Premier Jean Charest to demand an apology from Premier Danny Williams, who accused Quebec last month of "getting away with highway robbery in Canada for decades."

Mr. Charest fired back at his critics, saying the PQ did nothing to sign a deal with Ottawa securing Quebec's rights when the party was in power.

"They [the PQ]didn't conclude an agreement because it was too important for them to cultivate quarrels rather than cultivate agreements," Mr. Charest said.

Some experts believe that most of the oil is on the Quebec side of a disputed boundary defined in 1964 by the four Atlantic provinces. The boundary defined the provinces' claim over "submarine mineral rights" and was agreed to by the Atlantic premiers, including Newfoundland's Joey Smallwood and Nova Scotia's Robert Stanfield.

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Mr. Stanfield then sought approval from his Quebec counterpart, Jean Lesage, in the province's campaign against Ottawa claiming ownership of offshore mineral rights. "This is a matter of great importance and it will certainly strengthen our position if the four Atlantic provinces and the Province of Quebec are in agreement," Mr. Stanfield wrote in his letter to Mr. Lesage.

Mr. Lesage responded in a telegram stating that Quebec was "in agreement with the Atlantic provinces on the matter of submarine rights and of the marine boundaries agreed upon by the Atlantic provinces."

The federal government, however, refused to endorse the agreement, arguing that it had jurisdiction over submarine mineral rights. In 1967 the Supreme Court of Canada upheld the federal government's position.

Discussions continued with Ottawa, and in the mid-1980s, as Nova Scotia sought to develop the Sable Island gas field and Newfoundland was eyeing the Hibernia offshore oil field, both provinces signed agreements with the federal government involving revenue-sharing and administration of the resources.

Quebec and Ottawa, however, have failed over the past 12 years to reach a similar agreement. And now that the riches of the Old Harry oil field have become part of the equation, the dispute between Quebec and Newfoundland over the 1964 boundary has become much more politically charged.

"We still recognize the 1964 boundary but Newfoundland and Labrador doesn't. And we see no reason why the boundary should be changed," Ms. Normandeau said in an interview.

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The Parti Québécois is convinced that the federal government has a vested interest in stalling negotiations.

"Offshore resources are Quebec's passport to becoming a "have" province like Newfoundland and Labrador and break our dependency on equalization payments from the rest of Canada," said PQ Intergovernmental Affairs critic Bernard Drainville. "Just imagine how powerful an argument we would have to boost Quebec sovereignty."

Eager to reap the benefits of the Old Harry prospect, Newfoundland isn't waiting for Quebec to sign a deal with Ottawa and is pushing ahead to get exploration under way.

Last week, the Canada-Newfoundland and Labrador Offshore Petroleum Board approved an application for Halifax-based Corridor Resources Inc. to conduct a low-intensity seismic survey, the first step towards obtaining a drilling licence from the board. Within the next few years Corridor Resources expects to invite partners to join in drilling a well as it seeks to determine the best site to tap into the Old Harry reserve.

Corridor Resources recently told the Quebec government that as much as 80 per cent of Old Harry's riches may be located on that province's side of the disputed boundary. Premier Jean Charest's government has imposed a moratorium on the development of Old Harry until 2012, however, as it undertakes environmental assessment studies.

In the meantime Quebec hopes to strike a deal with Ottawa, knowing that Newfoundland and Labrador won't be giving up any of the oil without a fight.

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About the Author
Quebec City political correspondent

Rhéal Séguin is a journalist and political scientist. Born and educated in southern Ontario, he completed his undergraduate degree in political science at York University and a master's degree in political science at the Université du Québec à Montréal.Rhéal has practised journalism since 1978, first with Radio-Canada in radio and television and then with CBC Radio. More

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