The ironies are unavoidable: in late November, the first shipment of oil from Newfoundland’s White Rose offshore field arrived at Irving Oil Ltd.’s Saint John, N.B., refinery. At the same time, however, businesses were shutting down in Marystown, Nfld., the community that finished building the oil-production vessel earlier this year.

The problem for Marystown, as it is for so many other areas throughout Newfoundland and Labrador, is that there are few alternatives when a major employer disappears. Especially challenging was 2005; closures included a large Fishery Products International Ltd. processing plant in Harbour Breton, Abitibi-Price Inc.’s paper mill in Stephenville and one of two paper-making machines at Abitibi-Price’s Grand Falls mill.

As if this weren’t bad enough, the crab fishery — crab has replaced cod as the most important fish species — largely failed this year. Tourism also suffered, as high fuel prices and the rising Canadian dollar scared away visitors. If the two industries do not improve next year, the economy of rural Newfoundland could easily descend into crisis.

In St. John’s, however, the outlook is far rosier. The decline of the rural economy has compelled many young people to leave their homes in search of better lives in the city. A housing boom has turned sleepy communities such as Torbay, Paradise and Conception Bay South into suburbs. Farmland is giving way to new big-box stores, complete with the highway infrastructure to support them, and, due to a labour shortage, unskilled high-school students are routinely paid a dollar more per hour than the province’s minimum wage of $6.25 for part-time work.

Province-wide, the economy seems to be booming. In its October forecast, TD Bank Financial Group predicted that unemployment in Newfoundland and Labrador will fall below 15% in 2006 — the lowest level since the early 1980s. The province is also expected to top the nation in GDP growth next year, at 4.7% — far above the Canadian average of 3%.

The oil industry is largely credited with spurring this growth. Among the chief beneficiaries of upward-spiralling oil prices is the provincial government, which is now banking tens of millions of unexpected petrodollars. In a November economic update, Finance Minister Loyola Sullivan reported that a projected deficit of $492.5 million for 2005-06 had been revised to a $1.5-million surplus.

Of this $494-million improvement, $133.6 million is a one-time allocation of oil revenue from a federal/provincial agreement on the Atlantic Accord. Of the remainder, Sullivan expects to gain an extra $240.1 million from offshore oil royalties, as well as $61.9 million in additional corporate income taxes.

This is all wonderful news — except that the wealth is largely focused in St. John’s. In addition, it is debatable whether Newfoundland actually has a bona fide oil industry. So far, the Grand Banks have yielded three oil projects: Hibernia, Terra Nova and White Rose. Another, Hebron-Ben Nevis, may be developed within the next decade.

Beyond these four projects, however, there is a huge question mark. Since 1966, $3.9 billion has been spent on exploration, yet not a single commercially viable oil or natural gas field has been discovered in 20 years.

In fact, the oil companies have lost so much money on east coast exploration that they have all but given up trying; just $205 million was spent on exploration in offshore Newfoundland between 2001 and 2004, compared with almost $252 million in 1999 alone.

This was not the future envisioned by business people and politicians when Hibernia began producing oil in 1997.

This begs the question about Newfoundland’s long-term economic prospects: with St. John’s relying so heavily on the oil industry for its prosperity, how long can it remain protected from the devastation that has hobbled Newfoundland’s rural communities? Without new oilfields to replace Hibernia, Terra Nova and White Rose, how can the government of Newfoundland and Labrador continue to maintain public services?

Without oil, the province’s economy would be in a woeful state, and the government virtually bankrupt. It’s an issue federal and provincial politicians have so far avoided. But unless new oilfields are found soon, or other significant sources of employment are developed, Newfoundland faces a bleak future. IE