PLAYINGOLD HARRYWHY HASN’T THE LARGEST KNOWN UNDRILLEDMARINE STRUCTURE IN CANADA BEEN DEVELOPED?By Ryan Cleary

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Magdalen Islands coastline.

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is a curious name for a Gulf of St. Lawrenceprospect that could contain billions ofbarrels of oil and trillions of cubic feet ofnatural gas. One theory — the most obvious— is that the prospect was named after thenearest community, which just so happens tobe called Old Harry, a small hamlet on thenorthern-most island of the archipelago ofthe Magdalen Islands. Another theory is thatthe prospect was named after the so-calledOld Harry Rocks, sea stacks located offEngland’s south coast that have been a chal-lenge to sailors for generations. The lattermay be a more fitting namesake for the OldHarry prospect, considering the obstaclesthat have stood in the way of its develop-ment.

Old Harry is described as “the largestknown undrilled marine structure inCanada”, with twice the potential ofthe Hibernia field off Newfoundland (up to2-billion barrels of recoverable oil), andthree times the potential of the Sable Island

gas field off the coast of Nova Scotia (up to5-trillion cubic feet of recoverable gas).Despite that enormous potential — firstidentified by Texaco in the 1970s usingseismic — there hasn’t been any exploratorydrilling on Old Harry, which is the only wayto prove the presence of a commerciallyviable hydrocarbon find.

Still, the clues have been tantalizing.Satellite photos of Old Harry have shown oilseeping from the Earth’s crust and into theocean from at least six locations.

There are two major impediments todevelopment that have been outstanding formore than 30 years.

First, Quebec and Newfoundland andLabrador have yet to agree on an offshoreboundary. Located in the LaurentianChannel, Old Harry is about 29 kilome-tres long and straddles the Quebec-Newfoundland boundary, agreed to byQuebec in 1964, but still disputed byNewfoundland and Labrador.

Considering the chilly relationshipbetween the two provinces as of late overdevelopment of the Lower Churchill hydroproject in Labrador and the transmission of

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OLDHARRY

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power through Quebec — not to mentiona continued bid for redress on the UpperChurchill contract — the chances ofreaching an agreement on the Gulfboundary will be a challenge, to say theleast.

Second, Quebec and Ottawa have yet toagree to a joint management and revenuesharing agreement, similar to the AtlanticAccords that the federal governmentstruck separately with Nova Scotia andNewfoundland and Labrador in the1980s. Drilling cannot take place on the

Quebec portion of Old Harry until thatProvince signs an Accord with theGovernment of Canada.

There are other obstacles as well, notthe least of which are the environmentalconcerns stemming from the ongoing Gulfof Mexico oil spill — the biggest in U.S.history.

Norm Miller, president and CEO ofHalifax-based Corridor Resources, ajunior resource company that holds thedrilling rights to much of Old Harry,acknowledges the challenges, but says his

primary focus is finding a major partnerwith an oil rig to drill an exploration wellon the Newfoundland portion of theprospect. The earliest that could happen is2011.

“We have a valid exploration license onthe Newfoundland side (which expires in2013) and if we make a significantdiscovery perhaps that will speed up reso-lution of the issues holding us up on theQuebec side,” Miller said. “We sort ofmade a decision this past winter that theissues on the Quebec side will unfold intheir own time.”

As for the remainder of 2010, CorridorResources plans to conduct a site surveyon the Newfoundland side of the OldHarry structure in preparation for drillingthe exploration well.

The most desirable location for anexploration well is Quebec’s sector of OldHarry, which Corridor Resources has heldthe license to since 1996, but Miller saidhis company has to go where there are noobstacles.

Still, there is encouraging news.This spring the Quebec government

authorized proceeding with environmentalstudies covering the Quebec sector of the

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“If we make a significant discovery perhapsthat will speed up resolution of the issuesholding us up on the Quebec side, we sortof made a decision this past winter that theissues on the Quebec side will unfold in theirown time.”

NORM MILLER President & CEO, Corridor Resources

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Gulf. “This represents a good opportunityand a lot of money for Quebec, especiallyat a time where we are trying to limitour dependence on oil imports,” saidNathalie Normandeau, Quebec’s NaturalResources minister, in an interview withCanwest News Service.

Indeed, in a November 2009 speech tothe CIM Petroleum Society, Miller said$15-billion departs Quebec every year toimport oil “without the economic benefitsof the development of that oil.”

Old Harry’s potentially rosy economicsaside, that doesn’t change the factthat relations between Quebec andNewfoundland and Labrador are testy.

The Parti Québécois expressed fearsearlier this spring that by drilling a well onthe Newfoundland sector of Old Harry,Corridor Resources will siphon Quebec’sresources through Newfoundland and endup leaving the province short of billions ofdollars in royalties. “We don’t want OldHarry to become payback for ChurchillFalls,” PQ critic Alexandre Cloutier saidat the time.

A master’s research paper prepared forMemorial University this past May exam-ined the factors impeding the development

of Old Harry. Sean Kelly, author of thepaper, says that the industry has notevolved because of the level of uncertaintyaround things like the resource itself, envi-ronmental impacts, the management andregulatory regime, royalties, and theoffshore boundary. He states that, “Theproblem that we see in the Gulf is a realcatch 22. Industry will not invest withoutregulatory certainty, and governments arereluctant to create regulatory certaintywithout a significant discovery.”

The paper, which is dated prior to theblowout in the Gulf of Mexico, found thatthe lack of a Canada-Quebec jointmanagement and revenue sharing agree-ment is a major impediment to industrydevelopment. If management issues wereresolved through an Accord like theAtlantic Accords, then the lack of aboundary agreement would not precludeexploration and development from takingplace in some parts of the Gulf.

Even though the Atlantic Accords weresigned in the mid-1980s, the offshoreboundary between Nova Scotia andNewfoundland and Labrador was notsettled until 2002, when an arbitrationpanel appointed by the federal Natural

Resources minister under the AtlanticAccords Implementation Act was estab-lished to resolve the matter.

This past spring the Quebec legislaturepassed an all-party motion by a vote of101 to one to support a Canada-Quebecoffshore Accord. In fact, industry sourcesindicate that the federal and Quebecgovernments have already initiatedpreparatory Accord talks.

The public, however, has never beenmore sensitive to oil and gas explorationin light of the oil spill in the Gulf ofMexico, described as the biggest environ-mental disaster in U.S. history. TheDeepwater Horizon rig exploded and sankApril 20th, killing 11 workers and threat-ening the Gulf Coast from Louisiana toFlorida. The leak may not be plugged untilAugust.

Still, Miller, who plans to retire fromCorridor Resources on Oct. 1, doesn’tthink Old Harry should be measured bythe same yard stick as the BP catastrophe.He said the ultra-deep well in the Gulf isabout three times deeper than the OldHarry prospect. “Thousands of wells havebeen drilled at the depths we’re lookingat,” he said. “And drilled safely.” | NRM

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