Oil-pipe dreams in Canada's 'pauper province'

For several months in the summer of 1979, the Chevron drillship Glomar Atlantic burrowed its steel probe into the subterranean rock off the fog-entombed coast of Newfoundland.

The firm was engaged in one of those high-risk searches for that oily soup left behind eons ago by millions of plants and creatures in shallow waters - the substance that overnight turns corporations into empires and small-fry countries into world power brokers. Despite enticing geological clues, several corporate predecessors drilling in the area had left a groundhog's patch of dry holes and millions of dollars in spent expectations.

But after boring almost two miles through marine tongues of sandstone, shale, and limestone, the Glomar's bit wreathed its way into a pool of crude. Almost overnight it has placed Canada's isolated and poor-boy province, Newfoundland, smack in the middle of one of the world's most promising new energy frontiers.

Today this rock-ribbed province high on Canada's eastern edge is trying to parlay these potential offshore riches - plus prodigious forest, hydroelectric, fishing, and mineral resources - into a future of fortune. More important, its 580,000 canny and stubbornly independent people are struggling to undo a slice of history that says Newfoundland is too remote, too harsh, and too poor to survive without being piggybacked by the federal government.

If the province succeeds, this could turn out to be one of the larger Horatio Alger stories of the late 20th century.

All this is heady stuff for Newfoundland. The craggy province, which includes the island of Newfoundland and Labrador on the mainland, has long been Canada's needy and sometimes forgotten partner. It has an unemployment rate almost double the national average. Its scattered people are among the country's poorest. It is laden with a jumbo-size debt. And it has a history of bungled attempts at industrial development. Perhaps most bruising for the provincial ego, it has long been the butt of Canadian jokes.

But today the ''pauper province'' is fighting back. Its best hope hinges on the drawing up of offshore oil and gas. Although oil companies exploring in the area have yet to declare any fields commercial, world-class deposits are known to exist and further probing off eastern Canada is under way.

About a dozen companies have been drilling off Newfoundland's coast the past two years and will spend an estimated $360 million (US $306 million) in 1981. The keystone of the finds is Hibernia P-15, the well poked in late 1979 some 190 miles southeast of here.

Wells drilled since then to determine the size of the reservoir - the most recent completed a few weeks ago - confirm that the structure is the largest deposit yet found off Canadian shores: an estimated 1.85 billion barrels of oil and 2 trillion cubic feet of gas - about one-quarter of Canada's total reserves.

And there may be much more. Newfoundland's Petroleum Directorate estimates the entire offshore area, stretching from northern Labrador to southern Newfoundland, may contain 10 billion barrels of oil and 15 trillion cubic feet of gas - bigger than Alaska's North Slope.

If the submarine booty is to be drawn up, Newfoundland wants to make sure it gets its fair share. The province's fiery premier, A. Brian Peckford, is determined to use any oil-derived revenues to spur other resource developments and upgrade Newfoundland's standing in the confederation.

Not surprisingly, then, the former high school teacher has been steadfast in his parrying with federal officials over who should own and control the offshore mother lode. But lean economic times at home may put the premier, sometimes dubbed the Rene Levesque of the east, in a more compromising mood in the latest round of talks. They kicked off in October and include representatives from Newfoundland and Nova Scotia as well as from Ottawa. Federal officials have said they want to end the impasse by February.

To nudge things along, the parties are downplaying the thorniest issue -- ownership. Newfoundland has long laid claim to anything off its shore, arguing that it never relinquished ownership rights when it joined the confederation in 1949. The Trudeau government thinks otherwise, however, and cites a Supreme Court ruling giving it control of west coast offshore resources as evidence.

Yet to be resolved is how the two sides will carve up the revenues. Equally important to Newfoundland is the desire to control the pace of development. Provincial leaders don't want Newfoundland to be a welcome mat where companies can simply come in, wipe their oily boots for a time, and then leave.

Worries also abound that energy-related developments will siphon off workers from other industries and spoil the insular province's slow-paced rural life style.

Determined not to let Newfoundland turn into a subarctic Appalachia, the province is trying to look beyond the oil age to the time when the wells are capped. Petro bucks are to be funneled into the fishing industry and other resource developments, but just how much money there will be to spread around will depend in part on the outcome of the energy talks.

''We do not want to see oil development to the detriment of the life of our province,'' says Neil Windsor, Newfoundland's minister of development. ''We see oil as a base on which to build.''

The source of much of this concern is Newfoundland's history of watching prosperity pass it by. Like the Greek king Sisyphus, the province seems to have been forever pushing a rock up the hill just to have it roll back down. Newfoundlanders gave up its sovereignty (reluctantly) in 1949 to join the confederation partly to ease the sting of depression. In the 1950s and '60s, provincial leaders tried to lure investors from around the globe and saw everything from chocolate factories to shoe mills rise up, only to have most of them fail.

Two of the biggest white elephants: a linerboard plant in Stephenville (now revived as a newsprint mill) and the Come-by-Chance oil refinery, which shut down four years ago in one of Canada's biggest bankrupticies ever. It has since been bought by Petro-Canada and may be reopened.

Entrenched skepticism may have hardened in the past year because of the tough state of the economy. A dismal year for the fishery has helped bump the jobless rate to more than 17 percent (seasonally adjusted), up from 13.5 percent a year ago. Canada's unemployment rate stands at about 8.3 percent.

Earlier this year government economists had pegged the province's economy to grow in real terms about 3 percent in 1981. But high interest rates and the fishery collapse are now prompting predictions closer to a 1 percent rise in the gross domestic product. Yet that's still well above last year's 3.7 percent dip in the GDP.

''We're going through a difficult year in the province,'' says Clary Bartlett , vice-president and general manager of the Bank of Nova Scotia's office here. ''It is going to take another year or two to shake itself out.''

On top of this, some residents naively thought riches from the offshore energy would flow almost overnight after the 1979 Hibernia strike. But uncertainty over Trudeau's national energy plan, tricky technical problems, and the federal-provincial jurisdictional squabble has prompted oil men to slow down developments. Moreover, sucking oil out of the ocean floor just plain takes time: Even if Ottawa and Newfoundland were to sign an agreement soon, it would be late 1986 at the earliest before any crude could come ashore.

None of this has been lost on Mr. Peckford's critics. Many chide him for spending too much time sniping with federal officials while local matters have come unraveled. Particularly laughable to some in these lean times have been statements by Peckford and his lieutenants that oil could overheat the economy in the future.

''The economy is in such a deep thaw, it is doubtful you could even heat it with a blowtorch,'' says Leonard W. Stirling, leader of the Liberal opposition in St. John's. ''It is almost in a state of total collapse.''