Terra Nova shutdown pushes N.L. ledger to red: sources

Only months after declaring the days of red ink were over, the Newfoundland and Labrador government is poised to acknowledge it is running a deficit.

CBC News has learned that the provincial government is currently running an operating deficit between $50 million and $60 million, a drop from the $6.2-million surplus announced in this spring's budget.

The revelation, though, comesin advanceof pre-budget consultations that Finance Minister Loyola Sullivan will supervise. Sullivan's statement on Thursday is expected to lay out a more complete picture of the province's finances.

Only last March, Sullivan said the government was planning measures to make deficit financing illegal.

The turnaround is largely due to the halt in production at the Terra Nova oil field, where operators took the platform out of service in May andsent it for repairs at a yard in Rotterdam. The field went back into production on Sunday,weeks later than first thought.

The loss of royalties, which the provincial government had initially estimated to be worth about $100 million, indicate the provincial government's dependency on the fortunes of the oil industry.

Despite a boom in oil-based revenues in the last two years— enough for the governing Progressive Conservatives to wipe out a massive deficit— the government has been pushing an agenda centred on cautious spending.

Just last month, for instance, the government negotiated a tentative deal with the Newfoundland and Labrador Nurses' Union, which includes three annual wage hikes of zero, three and three per cent, respectively.

The provincial government, though, could still finish the year in a better financial position. The government based its oil revenue projections on a price of US $57 per barrel of oil, which has been beneath actual prices this year.