Oil-rich N.L. braces for loot and consequences

The future of Canada's youngest province has never shone brighter. But the prosperity that awaits Newfoundland and Labrador threatens to bring a new set of problems it has never experienced before.

For generations, Newfoundland has struggled with mounting multibillion-dollar debt, staggering unemployment and make-work projects that failed to turn the province's economy around.

National columnists labelled Newfoundlanders "professional welfare cases" words that still sting many residents here.

But the province's outlook has changed dramatically. Back-to-back record surpluses, growing tourism and a boom in mineral development and the offshore oil sector have combined to make Newfoundland the Celtic Tiger of Canada.

For the first time in its 60-year history as part of Canada,Newfoundlandis poised to become a "have" province by March 2009 a great source of pride for Premier Danny Williams.

"We hope to make a significant contribution to this country," Williams said in an interview, echoing the unfulfilled dream of his predecessors.

"We want to pay our way, we want to earn our own keep."

Good times set to roll for years

And the boom is expected to last for some time. Primarily powered by high oil prices and expansions in the offshore industry, economists are forecasting Newfoundland to remain a contributor to the federal equalization program for at least 15 to 20 years.

Citing approved and pending developments such as Hebron, the White Rose extension, Hibernia South and the Lower Churchill hydroelectric project, Prof. Wade Locke says Newfoundland is entering a period of prolonged, unprecedented growth.

"If the price of oil falls below $40, then we've got some issues on our hands here, but nobody's expecting that at this point in time," said Locke, an economics professor at Memorial University.

"All the fundamentals are lining up to provide a sustained increase in economic activity and standard of living and well-being here that up till now has not been realized."

Already, the benefits and drawbacks generated by the province's scorching economic growth of nearly eight per cent this year are beginning to show.

Boutique hotels and upscale restaurants are springing up in St. John's. Help-wanted signs hang in the windows of downtown shops.

Bidding wars have erupted for houses that would've languished on the market a decade ago.

Home sales surge

Home sales in eastern Newfoundland jumped 68 per cent from October to November, the largest single market sales increase that month, the Canadian Real Estate Association reported last week.

The other end of the province is also going through growing pains. Labrador City, fuelled by a soaring demand from China for its rich deposits of iron ore, is experiencing a labour shortage coupled with a housing crunch.

Small businesses have struggled to keep workers, with somebeing forced to shut down.

"If you want a real world example of what might happen, have a look at what's happening in Labrador City right now," Locke warned.

Earlier this month, the province projected a historic surplus of $881.8 million, money it will use to pay down some of its$10.8 billion debt and to fund an ambitious infrastructure program.

"You'll see new hospitals, you'll see new schools, you'll see vastly improved roads which had deteriorated dramatically," Williams said.

"You're going to see a much more modern Newfoundland and Labrador."

But rising revenues have spawned rising expectations. Despite the new flow of riches, the rural-urban gap that divides Newfoundland is expected to grow unless the provincial government devises a plan to share the wealth and stir economic development.

"Anything we do, we want to see that it generates employment," said Steve Carey, mayor of Daniel's Harbour on Newfoundland's west coast.

"If it doesn't generate employment and all of this is just make-work it's no good."

Like other small towns, Daniel's Harbour has seen its young leave in droves. Since 2001, its population has dwindled to 288 from 350 a 17.7 per cent decline, according to Statistics Canada.

"It's just about all of the younger ones, the ones who would be having babies and building homes," Carey said.

"In 10 more years, most of the rural towns in Newfoundland, a good majority, won't exist."

The sudden spurt of affluence is also stoking fears of an anticipated spike in crime.

"Crime does follow prosperity," said Joe Browne, chief of the Royal Newfoundland Constabulary.

Officers with the force have sought the advice of other jurisdictions in Canada that have enjoyed similarly rapid economic growth on how to stem a rise in drug activity.

Investigators have already detected a steady increase in the sale of harder narcotics, such as cocaine, on the streets of St. John's.

"There seems to be more of it available," Browne said, singling out the drug trade as the police force's biggest challenge for the future.

Still, when compared with other regions of the country, the province remains a safe place to live, Browne said.

"We're still a friendly place and I hope that never changes, and we'll do everything on our part to ensure that it doesn't," he said.

"What's happening on the positive side of the province overshadows by a mile our concerns about the increase in crime activity."