From the Tuesday Globe and Mail, a comment by John Crosbie and Roland Martin on the Equalization ruckus.
Following is the text, with Bond Papers notes inserted between square brackets.
Atlantic Accord: A deal is a deal, Mr. Harper
The people of Nova Scotia and Newfoundland are neither greedy mice who gobble up cheese, as some, including this newspaper, would have you believe, nor do we, as some federal politicians have accused us, simply want to have our cake and eat it too. What we want is for Ottawa to honour the 2005 Canada-Nova Scotia and Canada-Newfoundland agreements on offshore revenues.
A recent Globe and Mail editorial stated that the current quarrel over equalization formulae "may be reduced to half a dozen simple words: 'as it exists at the time.' " We submit that the key words in the Feb. 14, 2005, agreements are: "The government of Canada intends to provide additional offset payments to the province in respect of offshore-related equalization reductions, effectively allowing it to retain the benefits of 100 per cent of its offshore resource revenues."
"As it exists at that time" is intended to clarify that the 100 per cent of benefits will be obtained by Nova Scotia and Newfoundland no matter what changes are made to the federal equalization program in the future. That is because these two bilateral agreements are economic development arrangements, no different in principle than Ontario's various federal-provincial auto-pact programs, Ottawa's recent multi-hundred-million-dollar funding of Quebec's aerospace industry or B.C.'s "Pacific Gateway" economic opportunity, all of which contribute to building a stronger and more prosperous Canada.
Don't forget that in the 1950s and 1960s, Alberta received both equalization and its oil and gas revenues until its economy had sufficiently developed. [Bond Papers: Actually Alberta received Equalization from 1957, when the program was created, until 1962. While technically correct - 1957 and 1962 are respective in the 1950s and 1960s - the Crosbie/Martin presentation is misleading. See, for example, Thomas Courchene, "A short history of Equalization".]
It might also be helpful to remind the news media, politicians, bureaucrats and the general public that in October, 2004, while the negotiations on the future of the original 1985 and 1986 accords were in progress, Paul Martin's government introduced significant short-term changes to the equalization program and signalled it would appoint an expert commission to study equalization and to recommend a long-term strategy. The commission's report is what the current Conservative government has adopted and is proudly praising.
It would be hard to imagine that in the middle of these fundamental fiscal policy actions by the federal government, Nova Scotia Premier John Hamm and Newfoundland Premier Danny Williams and all of their ministers and advisers would agree to enter into the February, 2005, Offshore Agreement and not insist that any deal protect their provinces against future changes in the equalization program, changes that might cancel out the benefits of these bilateral economic agreements.
[Bond Papers: While it might be hard to imagine, the phrase noted by the Globe editorial and debated by Crosbie and Martin is at the heart of the dispute. The key point not noted by Crosbie and Martin is that the 2005 agreement can be met in full and the Equalization program "as it exists at the time" by simply removing the cap unilaterally applied to the 2005 agreement(s). The federal government can reduce Equalization payments in keeping with the program as it exists, while honouring in full the 2005 agreement.
Federal officials apparently referred to a conundrum in an exchange with Wade Locke on this issue. The conundrum would come from differentiating between qualifying for Equalization and what payment was actually received.
One potential solution would be to consider the phrase in the agreement describing the additional offset mechanism as referring to the amount to which the province would receive without a cap being applied. This would limit the amount of Equalization actually paid to zero in some years but allow the offset to continue to function. This may all now be a moot point since the provincial government will no longer qualify for any Equalization payment at all by 2010-2012.]
It should be remembered that in, in October, 2004, former finance minister Ralph Goodale caused those negotiations to collapse when he proposed in writing that any new offshore revenue agreement include a "fiscal cap" that limited Nova Scotia and Newfoundland to the fiscal capacity of Ontario. Surely all Canadians remember the reaction to Mr. Goodale's proposal, including the emotionally charged lowering of the Canadian flag in St. John's. Then Mr. Martin, with the enthusiastic support of then-opposition leader Stephen Harper, wisely withdrew the concept of a "fiscal cap," and shortly thereafter the three parties agreed to the 2005 Offshore Agreement and related federal legislation.
[Bond Papers: Martin and Crosbie's characterization of the situation in 2004 is essentially bunk. The negotiations did not collapse in October 2004. In fact, they continued until December 22, 2004. The Premier decided on the disastrous flag tactic at that point, but restored Canadian flags once polling confirmed the strength of opinion against the move from across the country. In the subsequent January 2005 agreement, many of the provisions of the October agreement remained, even in slightly amended form. The only point removed was the fiscal capacity cap.]
Those who tell us that Newfoundland and Nova Scotia should stop complaining that the new deal contains a fiscal cap demonstrate a profound lack of understanding for the history of the 1985 Canada-Newfoundland Atlantic Accord and the 1986 Canada-Nova Scotia Offshore Petroleum Resources Accord. Worse, they mislead Canadians by implying the provinces are greedy and want to continue getting equalization once they reach the national average fiscal capacity.
[Bond Papers: This is a remarkable statement given that Crosbie has claimed as recently as last week that the intention in 1985 was to allow Newfoundland and Labrador to receive oil and gas revenues in full and Equalization in full, as if the oil and gas revenues did not exist.
Crosbie now appears to have abandoned that point in light of the historical record, as well as a rebuke from his former cabinet colleague on another aspect of the 1985 Atlantic Accord.
Martin has also previously made claims about the 1985 Accord which do not stand up to scrutiny.]
Quite the contrary. The 2005 offshore agreements do not get renewed in 2011-12 if either province is no longer receiving equalization.
Newfoundland's equalization payments have already declined from a peak of $1.2-billion in 1999-2000 to a forecasted $477-million in 2007-2008. Recent studies estimate it may no longer get equalization by 2009-2010.
The 1985 and 1986 accords were meant to make the two provinces "principal beneficiaries" of their offshore resources. Until the 2005 offshore agreements, the federal government was the principal beneficiary. That recognition of provincial benefit was the battle Dr. Hamm and Mr. Williams fought and won. If these agreements are not fully honoured, Nova Scotia and Newfoundland, and, in fact, all of Canada, will have been done a great injustice.
[Bond Papers: Once again, Crosbie and Martin enter the realm of historical fiction. While it is true the agreements are intended to make the provinces the principal beneficiary of offshore resources, the agreements themselves contain no definition of the term. Contextual and contemporary evidence suggests that principal beneficiary was intended to mean the right to set and collect revenues as if the resources were on land, the right to manage the resources jointly with the federal government and to establish local benefits provisions in any development agreements. See, for example, "Which is to be master?".
Mr. crosbie position on Equalization entitlements and offshore oil and gas revenues has also changed considerably since he was a federal cabinet minister. in 1990, Crosbie dismissed provincial concerns about the so-called clawback of oil revenues through Equalization with these words: "I'm getting a little tired of them trying to have their cake and throwing it up too. They can't do both." Consider the delightful contrast with Crosbie and martin's next sentence.]
We are neither mice, nor greedy cake-eaters. We are proud Canadians.
We just want the opportunity to utilize our natural resources to become self-sufficient. We will resist any attempts to prevent this from occurring.
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John Crosbie, a St. John's lawyer, and Roland Martin, a Nova Scotia business executive, have advised Nova Scotia and Newfoundland on their offshore accords.
