The Conservatives are getting rid of a long-standing irritant with the Quebec government just days before an expected election call, signing a deal that opens the door to oil exploration in the St. Lawrence and fuels hopes for economic development in poor parts of the province.
The agreement to be unveiled on Thursday in Gatineau, Que., will lead to exploration for billions of barrels of oil and natural gas in the Old Harry field in the Gulf of St. Lawrence, which straddles Quebec's boundary with Newfoundland.
In this politically volatile period, the deal could be useful for the Conservative Party, which is trailing the Bloc Québécois in most francophone ridings in the province. Officially, the agreement will replicate accords with Newfoundland and Nova Scotia by providing Quebec with 100 per cent of the royalties from offshore resources, which the Supreme Court says are federal jurisdiction.
But it also will improve relations between Prime Minister Stephen Harper and Quebec Premier Jean Charest.
Although the deal was still a secret in both capitals on Wednesday, Mr. Charest struck a conciliatory tone, vowing to limit his interventions in the next federal election campaign. The Quebec Liberals attacked the Conservative Party's cultural policies in the 2008 campaign, in which the Tories failed to make any ground in the province.
Conservative officials are predicting the Old Harry deal will be well received in Quebec, especially in eastern areas that suffer chronic unemployment.
"This deal will be welcomed by workers in the regions, which are mostly represented by the Bloc Québécois," a Conservative official said.
The official added that if the Bloc votes to bring down the federal government on Friday, the party will have to explain to Quebeckers why it shut down Parliament before it could enact the Old Harry deal.
The site is considered the largest untapped hydrocarbon reserve in Eastern Canada and a boon for Quebec's cash-strapped and heavily indebted government.
Quebec Minister of Natural Resources Nathalie Normandeau said last fall that the Old Harry site represented an estimated two billion barrels of oil and perhaps as much as five trillion cubic feet of natural gas.
The Quebec government said a moratorium on the exploration and development of offshore resources won't be lifted until after an environmental assessment study is completed next year.
Ownership of the resource has been a major stumbling block to an agreement. That issue was not settled in the administrative agreement reached with Quebec on Tuesday after three days of negotiations.
"This accord is concluded without prejudice to the respective positions of the governments with regards to the constitutional status of the Gulf of St-Lawrence," says the agreement, a copy of which was obtained by The Globe and Mail.
A 1967 Supreme Court of Canada ruling upheld the federal government's ownership of offshore resources.
A joint secretariat will be set up to oversee federal-provincial responsibilities regarding the management of the offshore resources and an independent tribunal will mediate potential conflicts, including an overseas boundary dispute between Quebec and Newfoundland and Labrador. Millions of dollars in royalties are at stake.
The Old Harry site straddles a boundary defined in 1964 by Quebec and the four Atlantic provinces. The boundary places most of the Old Harry oil and gas reserves on Quebec's side of the line. Newfoundland and Labrador is challenging the boundary, and the announcement gives the province an equal say over the makeup of the tribunal.
The announcement on Old Harry is expected to help the Conservatives to fight the Bloc's claims that Mr. Harper's government has "turned its back on Quebec."
In particular, the Bloc has lamented the lack of a $2.2-billion sales-tax harmonization deal for Quebec in this week's Conservative budget, as well as the absence of funds for a new hockey amphitheatre in Quebec City.
The Tories will be able to argue that the Old Harry deal shows they can engage in government-to-government dealings with Quebec.
On the harmonization of the federal and provincial sales taxes, the Harper government has frequently brushed off questions by stating that it is negotiating with the Quebec government, and not the Bloc.
Mr. Charest said on Wednesday that negotiations are going well and that a compensation package could be announced by Ottawa at any time. "They can choose to announce it whenever they want. What counts is that we settle this issue and talks are progressing," Mr. Charest said.