Canada politics ties up largest offshore oil area

Production from this continent's largest offshore oil field remains tied up by a political dispute. But H. Neil Windsor, development minister of Newfoundland and Labrador, hopes the pressure of a federal election in Canada, probably in about 18 months, will prompt the politically beleaguered Liberal government of Prime Minister Pierre Trudeau to settle this lengthy dispute over ownership of offshore mineral resources.

At stake are huge tax revenues from the giant Hibernia oil field on the edge of Newfoundland's Grand Banks. Only two fields in the North Sea are larger.

Seven wells have established recoverable reserves of 1.85 billion barrels of oil and 2 trillion cubic feet of gas, Mr. Windsor noted during a visit here.

The provincial government maintains that it owns the oil. Offshore minerals were not mentioned in the terms of federation under which Newfoundland and Labrador joined Canada in 1949. The federal government argues that it has mineral rights for all Canadian offshore waters.

Newfoundland's highest court last winter decided basically in favor of the federal government's position. But the issue is still before federal courts.

The Province of Nova Scotia reached a revenue-sharing agreement with the federal government over the income from an offshore gas find at Sable Island. But Mr. Windsor points out that this agreement includes a clause that should another province get a better deal from the federal government, Nova Scotia would also get those provisions. So if Newfoundland does negotiate a larger share of oil and gas revenues, its sister Atlantic province will benefit. Windsor holds that Newfoundland has a much better case for ownership of offshore minerals than Nova Scota.

He expects the oil companies, which have already invested hundreds of millions of dollars in the field, to put pressure on Ottawa to settle the dispute. First production from Hibernia is expected in late 1988 or in 1989.