A former leader of Newfoundland and Labrador's Liberal Party will seek the nomination to carry the party's banner in a byelection for the riding of Labrador.

Yvonne Jones, currently a Labrador MHA, made the announcement Friday morning on the heels of Peter Penashue's resignation from the House of Commons and his federal cabinet portfolio.

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Veteran MHA Yvonne Jones, seen speaking with CBC News on Friday, is seeking the Liberal nomination in the upcoming Labrador byelection. (CBC)

"Obviously, it came as a little bit of a shock," Jones told CBC News, referring to Penashue's decision on Thursday to quit amid the controversy over the financing of his 2011 campaign.

Penashue is already in place as the Conservative candidate in the Labrador byelection that has yet to be called.

Jones, a member of the Newfoundland and Labrador legislature since 1996, said the riding of Labrador — rich in natural resources, but dogged by a variety of social problems — has been neglected.

"Labrador deserves the very best representation," said Jones, who was forced to step down as Opposition leader in 2011 to fight breast cancer.

"We contribute a lot of wealth to this country, and we deserve to be able to share in the wealth of Canada, and to do so fairly, with all Canadians."

Todd Russell, the former Liberal MP whom Penashue defeated by 79 votes in 2011, has not yet decided whether he will seek the party's nomination for the byelection.

Conservatives support Penashue

Meanwhile, the federal Conservative party has thrown its support behind Penashue's decision to resign as the Member of Parliament for Labrador.

Senator David Wells, recently appointed a senator for Newfoundland and Labrador, spoke on Friday about Penashue's decision. 

"He recognized that errors were made during the campaign and he did the right thing by recognizing those errors," said Wells. "Working closely, recognizing the errors and working closely with Elections Canada and on that a resigning and re-offering for the seat."

Wells said Penashue has served his constituents well.

"He has delivered for Labrador on the paving of the Trans-Labrador Highway, on his contribution to the Muskrat Falls discussions, many other things in fisheries and aboriginal and northern affairs files," said Wells. "He's delivered and I think the people of Labrador will recognize that."

Wells said he believes Penashue will win the byelection.

MP casts doubts on Penashue's future

However, an eastern Newfoundland MP said he doubts Penashue will run because of the widening scandal over his 2011 election campaign.

Although the Conservative Party of Canada has said Penashue will be the Tory candidate in the byelection, Liberal MP Scott Andrews said he's not confident Penashue will be able to run.

"I think Elections Canada are on the verge of charging Peter Penashue with breaking serious election laws. That means you're banned from running for five years," Andrews, who represents the riding of Avalon, told CBC News.

"He's been an absolute disaster as a cabinet minister. He's just been Mr. Harper's puppet in Ottawa. He hasn't done anything for Labrador, and nothing for the province."

Penashue blamed inexperience and his volunteer official agent, Reg Bowers, for mistakes in the 2011 campaign. A CBC News investigation revealed that Penashue may have overspent his campaign limit, that Provincial Airlines wrote off $17,000 in flights to remote locations that the campaign could not afford, and that the campaign may have received illegal corporate donations from St. John's-based Pennecon Limited.

Pennecon has secured contracts on Labrador's multibillion-dollar Muskrat Falls project.

Penashue said Thursday he has repaid $30,000 in "ineligible contributions."

Bowers, meanwhile, stepped down late Thursday from the Canada-Newfoundland and Labrador Offshore Petroleum Board, an appointment that Opposition critics had called patronage.

Timing surprises voters

Penashue's decision caught some of his constituents off guard, if only because of its timing. Penashue has said little since last summer when questions were first raised about travel expenses, or last fall when details of possibly illegal campaign contributions to Pennecon surfaced.

"I'm surprised that he [did]

it now," said Happy Valley-Goose Bay constituent Jenny Lyall.

"I think Peter should've resigned when this scandal came out."

But constituent Sherman Rideout said Penashue has delivered the goods in the last two years.

"We've got a bit more than we had. As long as that continues, he may get more votes."

Penashue's decision brought mixed reaction from politicians at Newfoundland and Labrador's legislature.

"It's a very good decision because there's been a lot of speculation out there that there was mishappenings and misdoings," said Progressive Conservative Nick McGrath, the provincial minister for Labrador and Aboriginal Affairs.

"So kudos to him. I think it's a brave move."

But Dwight Ball, the interim provincial Liberal leader, said Penashue should retire in disgrace.

"I think he broke the election rules. The proper thing for him to do was step down, and not run again," Ball said.

"He's really getting a second chance for being the MP for Labrador - not a chance that he deserves, in my opinion."