Prime Minister Stephen Harper warned Newfoundland and Labrador voters to be wary of Liberal energy policies. (CBC)

The Liberals' carbon tax plan would dissolve the wealth that Newfoundland and Labrador is drawing from its offshore oil reserves, Prime Minister Stephen Harper warned Thursday.

In a campaign-style appearance in Cupids — where the federal government will help celebrate in 2010 the 400th anniversary of the first organized English-speaking settlement in what is now Canada — Harper took aim at Liberal Leader Stéphane Dion's plan to curb carbon emissions.

"Newfoundland and Labrador [is] finally experiencing an era of prosperity because of the growth of the oil and gas industry," Harper told reporters.

"A carbon tax is not in the fundamental interests of the province. I think that's obvious."

The issue of the carbon tax could become a fault line in the next federal election, including in Newfoundland and Labrador, where the province has balanced its books and started retiring debt because of oil-based revenues.

Premier Danny Williams has vowed to campaign against Harper's Conservatives in the next federal election over the federal Tories' change of policy in including offshore oil revenues in calculating equalization.

Williams has maintained the change will cost his province billions of dollars over the next 15 years.

However, Harper warned Newfoundland and Labrador voters to consider what the Liberal platform means for a province that has made massive economic strides thanks to offshore revenues.

Although Williams has been sharply critical of Harper — sometimes mockingly referring to him as "Steve" — for almost two years, the Progressive Conservative premier does not necessarily have warm relations with federal Liberals, especially Dion.

Williams, indeed, has had little to say about the Liberal carbon plan.

Harper shied away when asked whether Williams should publicly back Dion's plan.

"I'm not going to, you know, tell Premier Williams what he should or should not do," Harper said.

May have to make 'judgment' on fall election

In an exchange with reporters, Harper also appeared to raise the stakes on whether a fall election is in the cards.

Harper, who last week challenged Dion to end speculation and move to bring down Harper's minority government, reiterated the call Thursday — but said he is also now willing to take action himself, if necessary.

"I think that Mr. Dion will have to make up his mind, and I think quite frankly — I'm going to have to make a judgment in the next little while as to whether or not this parliament can function productively," said Harper, who indicated his patience with Dion is running thin.

"Mr. Dion says he doesn't support the government but won't say, you know, whether he will defeat us or not. I don't think that's a tenable situation," Harper told reporters.

Visit boosts Conservative profile

Harper arrived in St. John's Wednesday for appearances in Avalon riding, where MP Fabian Manning is the only Conservative incumbent in Newfoundland and Labrador who has announced plans to run in the next federal election.

St. John's East MP Norm Doyle will retire with the election call, while Fisheries and Oceans Minister Loyola Hearn has consistently refused to say whether he will seek re-election.

Despite Williams's plans to run an "anyone but Conservative" campaign in the next federal election, Harper told reporters he is not intimidated.

"Our members of our government have demonstrated, categorically, that this government responds to the needs of Newfoundland and Labrador where we're best placed to understand them," Harper said.

"I hope we'll have more seats after the next election, so we can better hear the needs across the province."

The Conservatives hold three of Newfoundland and Labrador's seven seats.

Harper was heading to New Brunswick Thursday to attend a caucus meeting in Fredericton of members of the Conservatives' Atlantic caucus.

More than $3 million targeted for Cupids celebration

Harper announced $3.14 million in federal spending on the Cupids celebrations, which will mark the 400th anniversary of the founding of a settlement led by John Guy, a merchant from Bristol, England, who sought to establish a commercial enterprise in the New World.

Europeans had been staying in Newfoundland for many years — the competition for the fishing resources off Newfoundland led Sir Humphrey Gilbert to claim the island as England's first colony in 1583 — but the Guy initiative in 1610 marked a turning point in Newfoundland's history.

Guy intended to develop a year-round, permanent settlement in Cupids — a Conception Bay community, about 85 kilometres southwest of St. John's — that could exploit the fishery.

The original colony had only 39 members and encountered numerous problems, from piracy to harsh winters. Although the colony eventually dispersed, permanent settlement became common in the area.