EDITORIAL PAGE — Big project, big money

New mining developments are getting larger and larger as the years advance. While some might qualify as gigantic, colossal and even leviathan, few, if any, have been described as “megaprojects.” That term seems to belong to the oil industry.

The latest such megaproject, Hibernia, 300 km off the coast of Newfoundland, is a case in point. To cost some $5.2 billion to bring into production by 1997, Hibernia, with an estimated recoverable reserve of 525-650 million barrels of oil, will operate at an average production rate of 110,000 barrels per day.

A wildcat discovery by Chevron in 1979 tested oil. Like a potentially sizable orebody that sits awaiting the right developer and financial backer, Hibernia has moved slowly from one negotiating stage to another, losing a partner here, gaining two more partners there.

The latest development plan calls for Chevron, Mobil, Petro-Canada, newcomer Murphy and the federal government to bring the offshore project into production. Ottawa, which wants to see the project go ahead for obvious political reasons, has agreed to acquire an 8.5% stake in Hibernia. Among the federal government’s commitments are construction expenditures totalling about $290 million during the next four years, $1 billion in grants and $1.7 billion in loan guarantees. Ottawa says it will also assume responsibility for Murphy’s 6.5% interest should Murphy, which has signed a letter of intent, decide to pull out.

Confederation was borne out of political compromise and just as the railway physically bound the provinces together, the transfer-payment system (like it or not) has served to distribute the nation’s wealth from sea to sea. Anyone who has ever visited a thriving mining community can see plainly the economic spinoffs that accrue from the presence of the mine. Thus, the Hibernia project, from the viewpoint of a regional development scheme, shows great potential. Whether the private partners could or should be footing the entire bill remains open for debate.

Just think how far the $1 billion that Hibernia is to receive in government grants would go in the mining industry. It would likely be enough to bring at least a couple of mammoth projects, the huge Mt. Milligan copper-gold property in British Columbia and Canada’s first diamond mine in the Northwest Territories (estimated to cost in the $400-million range) into production, and leave a little for exploration work.