Christmas has come early for Nova Scotia Premier Rodney MacDonald and his often-beleaguered minority Conservative government. After years of squabbling, Ottawa has suddenly agreed to ink a deal with the province on Crown share adjustment payments.
That’s bureaucrat-speak for royalty payments. In this case, the payments are for money the province says it was owed by the feds for offshore oil and gas. Those payments, announced in July, are worth an estimated $870 million.
The money — the first instalment of $234 million arrived in September — comes as the result of a study by a panel formed in late 2007. Chaired by former Nova Scotia chief justice Lorne Clarke, the panel had the unenviable task of reviewing the province’s entitlement to its share of oil revenue under the 1986 Canada-Nova Scotia Offshore Petroleum Resources Accord.
That deal was designed to ensure the province receives its share of royalties from the province’s new oil and gas developments, while allowing the feds to redirect some of the revenue to equalization payments; these royalties were expected to materialize once the profits started flowing in. Under the deal’s terms, nothing was owed until the province began daily production of at least four million cubic metres of natural gas or its oil equivalent. That happened in 1993-94, with the Cohasset Panuke project.
But instead of intergovernmental peace, the deal led to a series of disputes over how much the feds owed and when the payments were due. Even the panel apparently couldn’t come to an agreement on precise amounts. But Clarke set the figure at $234.4 million for payments up to March 31, and $633 million for future years for the Sable Offshore Energy Project and the Deep Panuke Offshore Project. Those recommendations were supposed to be confidential — at least, until the federal response team had time to react.
But the premier and his colleagues are reported to have been so gleeful over the result that they might have let the figure slip to a few well-placed journalists, who dutifully reported the sum. That, media observers have speculated, appeared to put Prime Minister Stephen Harper in a tough spot.
Of course, the aura of prosperity is not quite the same as actual prosperity, which one Atlantic province, Newfoundland and Labrador, is actually experiencing. Oil flows freely from that province’s three offshore fields, currently estimated at a gross value of $46 billion. Newfoundlanders also take great delight in noting that this fiscal year, for the first time in the province’s history, it will not receive equalization payments from the federal government.
So, the question for MacDonald is: what does the province do with an unexpected $870 million? The second-youngest premier in Nova Scotia’s history and the second-youngest premier in Canada doesn’t want any youthful indiscretions. So, he is buttering his bread on both sides: 92% of the Crown share payments — roughly $800 million — are earmarked for the provincial debt, now standing at about $12.4 billion. This approach, MacDonald says, will free up millions of dollars in debt-servicing costs each year. And that money will be spent.
“Through strategic investments, we will maximize the benefit of the Crown share,” MacDonald said recently. “We will ensure more research in the offshore, [and that] more land is protected for future generations, and we will invest in our university infrastructure, which will help prepare our young people for the challenges and opportunities of the global economy.”
Fact is, this money is the political equivalent of winning the lottery. It has also left Nova Scotians feeling a little more chipper. IE
Here comes the money
The federal government lavishes oil revenue on Nova Scotia
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