HALIFAX - The Conservative government is scrambling to dampen a political firestorm by offering Nova Scotia and Newfoundland an "insurance policy'' on their cherished offshore accords, The Canadian Press has learned.
The provinces are being offered "a cumulative/best of'' agreement guaranteeing they won't be out of pocket if they give up their accords, federal and provincial sources said.
The new deal would essentially replace the revenue-sharing deal negotiated with the former Liberal government.
The Conservatives have committed that both provinces will "never get anything less than what was agreed to in the Atlantic accords'' if they choose to sign on to a new equalization formula which was one of the highlights of the March 19 budget.
When the accords are due to be renewed in 2012, the Conservatives are pledging to "calculate the difference'' between what the provinces received under the new equalization plan and what they potentially could take in under the offshore arrangement and to "provide a top up if necessary,'' said a federal source.
"The government of Canada will assume all financial risk.''
The offer to make up the difference has been at the heart of back-and-forth verbal negotiations between the provinces for weeks and was put in writing late Tuesday just before Nova Scotia Tory MP Bill Casey broke ranks and voted against a key budget bill.
Nova Scotia has been prepared to buy in to the notion of Ottawa "mitigating any losses,'' said a provincial source, but a major sticking point involves offshore oil and natural gas projects beyond the ones currently in production and pumping royalties.
"The feds are trying to limit the future application of the accord,'' said the provincial source.
"As far as I know, the offer hasn't been accepted.
"The feds want it parlayed in such a way as to make it appear that they haven't blundered,'' said the provincial source.
Further incentives, such as one-time cash programs, are also on the table, but the province remains focused on the central issue of not being penalized for its natural gas revenues, said the provincial source. Under a complicated equalization formula, as revenues in have-not provinces rise, their equalization payments are reduced.
Casey, who has been ejected from the Conservative caucus, accused the government of breaking its promise not to touch provincial offshore resource revenue. He was ejected even though Foreign Affairs Minister Peter MacKay said the Tories would not punish any MP who voted with their conscience.
Opposition parties have had a field day with Casey's defiance and resulting expulsion. The Liberals introduced a motion in the House of Commons on Thursday demanding Prime Minister Stephen Harper live up to election campaign promises on the accords and equalization payments.
Liberal Leader Stephane Dion said the Tories broke their promise to Atlantic Canadians by imposing a cap on resource revenues.
"The prime minister himself stated in this House on October 26, 2004, that when it comes to the Atlantic accords, there is `a moral obligation to keep these promises: no caps, no clawbacks, no limitations, no conditions, no big exceptions in the fine print,''' Dion said.
"Yet, Budget 2007 had just that. A cap. Fine print. Limitations. Conditions. A broken promise to Atlantic Canadians.''
Saskatchewan is also upset that the Conservatives failed to live up to a commitment over its resource revenues.
During the last election, the Conservative platform stated that non-renewable resource revenues would be excluded from the federal-provincial equalization formula. However, the spring budget didn't include such a commitment.
"Those who voted for the Conservatives in Saskatchewan and Atlantic Canada put their trust in the commitments made by Mr. Harper,'' Dion said.
"That trust was broken.''
Fisheries Minister Loyola Hearn, a Newfoundland MP who has faced his own pressures over the issue, told the Commons that the budget won't take Atlantic Accord money away from the provinces that now receive it, even if their economies improve.
"Some people think, if anything happens, if there are caps, we'll lose (equalization money),'' Hearn said.
"Absolutely not. Let me state it clearly, categorically. The advance money given Nova Scotia >(and) Newfoundland, regardless of what happens, will not be clawed back.''
"The accord will not be capped.''
Finance Minister Jim Flaherty's press secretary insisted the budget doesn't affect the Atlantic accords as they were signed in 2005.
"Nova Scotia can continue to operate under the Atlantic accord, or it has the positive option of going into a new principles-based equalization formula that applies to everybody across the country,'' said Chisholm Pothier.
"There is no cap on offshore resource revenues.''
