Nfld. & Labrador

Quebec strikes oil deal in Gulf of St. Lawrence

Quebec and Ottawa have struck a "historic" deal to allow the province to draw oil and natural gas royalties from the disputed Old Harry area of the Gulf of St. Lawrence, says Quebec Premier Jean Charest.

Deal could fuel dispute with N.L. over deposit that straddles subsea boundary

Experts estimate the Old Harry basin in the Gulf of St. Lawrence could have as much as two billion barrels of recoverable oil. (CBC)

Quebec and Ottawa have struck a "historic" deal to allow the province to draw oil and natural gas royalties from the disputed Old Harry area of the Gulf of St. Lawrence, says Quebec Premier Jean Charest.

Speaking to reporters in Quebec City, Charest said Quebec will benefit from the Old Harry agreement for decades to come.

The Old Harry reservoir, which straddles the border of Quebec and Newfoundland, could represent a windfall of several billion dollars for Quebec. The new deal is expected to give Quebec 100 per cent of the royalties from offshore resources.

A formal announcement is expected Thursday afternoon in Gatineau, Que.

"We're very happy with what will be announced later today, especially given the fact energy issues are issues that play out over a few generations," Charest said Thursday in Quebec City.

"It's more than just a question of day-to-day events and in this case, it's not an exaggeration to say this is a historic agreement."

The premier noted that an ongoing environmental study must conclude before the province exploits any of the Old Harry deposit.

Experts estimate the basin could have as much as two billion barrels of recoverable oil and and 5,000 billion cubic feet of natural gas.

N.L. lays claim to deposit, too

The deposit overlaps the sub-sea boundary between Quebec and Newfoundland and Labrador. The two provinces disagree on where the line should be drawn.

Charest said the new agreement will recognize the 1964 underwater boundary which Newfoundland and Labrador has disputed.

N.L. Premier Kathy Dunderdale welcomed the news Thursday, saying without the deal in Quebec negotiations for a Newfoundland and Labrador stake in the Old Harry reserve couldn't happen.

"Within that accord with the federal government will be a mechanism that we can use to settle the boundary, so it's a good thing," she said.

The Old Harry area is between the Magdalen Islands and western Newfoundland. ((CBC))
Newfoundland and Labrador has already granted a permit to a company to explore in a part of the area that it claims it owns.

Last year the Canada-Newfoundland and Labrador Offshore Petroleum Board gave a Halifax-based company permission to explore for oil and gas in part of the offshore area.

The C-NLOPB granted a permit to allow Corridor Resources to conduct seismic testing at the site.

The environmental impact studies are scheduled for completion in 2012.

Harper raised Old Harry in Newfoundland

The deal comes on the eve of a likely federal election in which the Conservative government is eager to hold onto 11 seats in Quebec.

Last fall, Prime Minister Stephen Harper said he's interested in arranging an offshore resources agreement with Quebec, much like the ones the federal government has with Newfoundland and Labrador and Nova Scotia.

"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," said Harper while speaking in St. John's last October.

In late February, a coalition of environmental groups urged Quebec to maintain its moratorium on drilling for oil and gas in the Gulf of St. Lawrence.

The St. Lawrence Coalition denounced the actions of both Quebec and Newfoundland and Labrador in the area near the Magdalen Islands.

The coalition called on Quebec to wait for the outcome of its own environmental assessment of the gulf to determine if drilling in the area would be safe.

A spokesperson for Quebec Natural Resources Minister Nathalie Normandeau said in February that Quebec intends to continue with that assessment, even if it does come to an agreement with the federal government over offshore drilling.

Corridor Resources map of its Exploration Licence 1105 on the Old Harry area.

With files from The Canadian Press