Feds, Quebec open offshore oil "Accord" talks

It looks like the battle ground of inter-provincial boundaries between Quebec and NL is about to heat up. The following story from the Canadian Press points to a potential flashpoint between the two jurisdictions, and even with Ottawa in the coming months.

Quebec claims the ocean boundary between the two provinces should be based on an agreement (signed by...yes...you guessed it, none other than Joey Smallwood once again) in the mid-sixties. Newfoundland and Labrador feels the Law of the Sea should prevail since the border discussed in the sixties was never presented to Ottawa and never actually ratified by them.

This may leave it to Ottawa to decide where the border lays.

If that happens, God Help thee Newfoundland and Labrador.

Read on:

MONTREAL - Negotiations have been launched between the federal government and Quebec in an attempt to strike an offshore drilling deal similar to those that have enriched Atlantic provinces.

Federal Natural Resources Minister Christian Paradis expressed confidence this week that the sides are moving towards an arrangement that could unlock the potential windfall in the Gulf of St. Lawrence.

"I feel there is momentum — as much on the provincial side as for the federal government," Paradis told a news scrum in Montreal this week.

"I'll do everything in my power to get a breakthrough."

Paradis and his federal colleagues will be walking a fine line as talks go forward. The deposits straddle a much-disputed maritime border between Quebec and Newfoundland.

At stake are the potential riches of Old Harry, a 29-kilometre hydrocarbon field thought to contain either as much as two billion barrels of oil, or five trillion cubic feet of natural gas.
Such oil deposits would be twice as much as the Hibernia project off the coast of Newfoundland, or in terms of natural gas three times Nova Scotia's Sable Island field, according to oil industry representatives.

But unlike Newfoundland or Nova Scotia, Quebec does not have an agreement with Ottawa for underwater extraction.

Quebec, however, feels a breakthrough could be coming soon.

"The differences between Quebec and Ottawa have been simmering for 12 years," Quebec's natural resources minister, Nathalie Normandeau, said this week.

"This is the first time I've sensed such openness from the federal government, and the (federal) natural resources minister in particular."

Details about what the deal would entail, and when it would be implemented, remain vague. But Paradis described the broad outlines while standing next to Normandeau at an event earlier this week.

"We're talking about an administrative deal," he said.

"The goal is to create an office of hydrocarbons, as is the case in Nova Scotia and Newfoundland."

Both those provinces have offshore petroleum boards, joint independent agencies with Ottawa that oversee various elements of oil and gas exploitation.
They were created following accords with the federal government that allow revenues from underwater resources to flow to the provinces.

Paradis said he prefers an administrative deal to a legislative one that could provoke greater federal-provincial bickering.

However, there still remains potential for friction between Quebec and Newfoundland.
Quebec is keen to have any deal recognize a 1964 agreement between the four Atlantic provinces that left the majority of Old Harry inside its borders.

Newfoundland maintains that agreement was negated by a federal-provincial tribunal that ruled, in 2002, that it had never been submitted to Ottawa for approval.

Newfoundland and Labrador's natural resources minister, Kathy Dunderdale, says the border will have to respect the international law of the sea.

Dunderdale was not available for comment on Thursday. But she has said in the past that Newfoundland and Labrador is not seeking to have the line redrawn to place the entirety of Old Harry in its waters.

Instead the province wants any deal between Quebec and Ottawa to include the creation of a tribunal that would settle the border issue.

In the meantime, Newfoundland has granted a Halifax company, Corridor Resources Inc., a license to go ahead with exploratory drilling in an uncontested area of Old Harry.

It is not yet clear whether the hydrocarbon deposits contain oil or whether they contain gas but Corridor is confident that, either way, something valuable lies underneath.

"This would be a company-maker, no question about it," said Norman Miller, Corridor's president and CEO.

Despite the optimism expressed by both Quebec and Ottawa about the potential for a deal in the near future, Miller is not holding his breath.

"We've concluded that it will happen in its own good time," Miller said. "We've done everything we can do to communicate what the potential is."

He accused Newfoundland of complicating attempts to settle the issue by focusing excessively on where the line between the two provinces should be drawn.

"They just say they don't agree with it or they say there is no border, but they don't put forward what they think it should be," Miller said.

"That just serves to frustrate the border issue."

His preference would be to drill on the Quebec side, but the province has had a moratorium on offshore drilling in place since 1997.

Deal or no deal, Quebec has vowed not to lift the moratorium before the scheduled 2012 completion of a series of environmental studies.

Miller says he can't wait that long, as his license with Newfoundland is set to expire in 2013. The company plans to have drilling get underway by 2012.

But following the Deepwater Horizon blowout in the Gulf of Mexico, politicians are increasingly wary about any drilling projects. Quebec promised to keep close watch on Corridor's operations in Old Harry.

"Given the proximity of the drilling to the Quebec border we will be extremely vigilant and we will ask other questions to Newfoundland about it," Normandeau said.

Miller believes both provinces have an interest in finalizing the border line and allowing his company to start drilling.

"In a development spanning both sectors, you would see development going both ways," he said.

"It could have very substantial economic benefits to a part of the country that lags behind the rest of Canada in economic development activity."