Which is to be master?

Sir Robert Bond Paper

Fostering public discussion of issues affecting
Newfoundland and Labrador

Which is to be master?
An assessment of the Williams administration proposal
to amend the Atlantic Accord
by
Edward G. Hollett

Number 1, July 2004
Gryphon Public Affairs
41 Grieve Street
St. John’s Newfoundland and Labrador
A1E 3W2
Canada
Tel: 709.745.5988 Fax: 709.745.5988

Which is to be master?
An assessment of the Williams administration proposal
to amend the Atlantic Accord
Edward G. Hollett1
Gryphon Public Affairs
"When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means just what I choose
it to mean - neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master - that's all."
-

A.

Charles Ludwig Dodgson, (Lewis Carrol), Through the
Looking Glass

Introduction

It is now commonplace for people to believe that neither Newfoundland and Labrador nor Nova
Scotia is being treated fairly by the federal government with respect to revenues from offshore
oil and gas resources. As the story goes, the federal government claws back upwards of 85% of
revenues to the two east coast provinces under the Equalization program, contrary to the two
Accords that govern development of the oil and gas fields. Both Premier Danny Williams of
Newfoundland and Labrador and Premier John Hamm of Nova Scotia contend that this clawback
hampers their provinces from developing fully and from realizing the full benefits of the oil and
gas resources off their coastlines.
This paper examines the Williams administration’s proposal to amend the Atlantic Accord based
in light of the Accord and its history and recent statements by the Premier and other officials.
The major conclusions are:
1.

The Government of Newfoundland and Labrador currently receives 100% of
provincial revenues from offshore oil and gas resources.

2.

The Equalization offset provisions of the Accord are functioning as intended,
although amending the Equalization offset provisions is desirable for the

1

Edward G. Hollett is the principal consultant for Gryphon Public Affairs, a Newfoundland and Labrador public
relations, government relations and public policy consulting firm. He studied political science, history and public
policy at Memorial University and the Royal Military College of Canada, Kingston. A former special assistant to
two premiers of Newfoundland and Labrador, Mr. Hollett is a public relations professional with 15 years diverse
experience in the public and private sectors.

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Sir Robert Bond Paper No. 1 • July 2004
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provincial government. A better deal is attainable based on the stated intentions
of the Trudeau administration before 1984.

B.

3.

Altering the definition of “principal beneficiary” to refer only to provincial
government revenues may jeopardize other benefits the Accord provides to
the province.

4.

Disposition of the federal government’s share of the Hibernia project is
outside the Atlantic Accord. Acquiring the shares must be examined in greater
detail since they carry responsibilities and financial implications once the field is
exhausted.

The Williams Administration and the offshore

There is no single, concise, public statement of the Williams government’s proposal to amend
the Atlantic Accord. To date the provincial government has released only a copy of an overhead
slide presentation, apparently made to federal officials on 04 March 2004. 2 In addition, the
Premier has made public statements and issued at least three news releases on the subject. No
other correspondence between the Government of Canada and the Government of Newfoundland
and Labrador is in the public domain. The Blue Print, the Progressive Conservative election
platform, contains several references to resources and revenues from the offshore. Since they are
the party’s platform they must be taken as statements of policy for the new government, or at
least a statement of intentions to guide the government’s overall policy. This assessment is
based on these documents, statements by senior officials of the Williams administration
published before October 2003 as well as comments by John Crosbie.
The Blue Print commits the Williams government to “seek jurisdictional control and ownership
over petroleum and other economic resources in the offshore as a means to achieve greater
prosperity for our Province and more opportunity for our people. ” 3
With respect to oil and gas revenues and revenue sharing, the Blue Print commits the Progressive
Conservative party to “press the federal government to remove all non-renewable resource
revenues from the calculation of equalization payments. In exchange, we will commit, in a
formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize
economic infrastructure in the Province and to bring down the provincial debt, so that future
generations of Canadians living in this Province will continue to benefit long after the resources
are used up.”4
2

“Atlantic Accord: Newfoundland and Labrador – The Principal Beneficiary”, Government of Newfoundland and
Labrador, 04 March 2004. A version of this slide presentation was released to news media on 16 April 2004 and
tabled in the House of Assembly in June 2004. Hereafter cited as Overhead slide [#], 04 Match 2004
3
Our blueprint for the future, Progressive Conservative Party of Newfoundland and Labrador, October 2003,
(www.pcparty.nf.net/plan2003h.htm). The online version of the Blue Print does not contain any pagination. Hence
specific references are difficult. [Hereafter, Blue Print]
4
Blue Print.

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Sir Robert Bond Paper No. 1 • July 2004
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The only specific reference to the Atlantic Accord is a commitment to use its industrial offset
provisions to the fullest extent possible. The Blue print also commits the provincial government
to seeking transfer to the provincial government of the 8.5% share of the Hibernia project held
by the Government of Canada.
In early 2004, Premier Danny Williams began discussions with the province’s federal cabinet
representative John Efford to ensure that the province received what Premier Williams described
prior to a February meeting between the two as “100% of our offshore revenues.”5 According to
Williams, Ottawa gave a bad deal to Newfoundland and Labrador in the Atlantic Accord. 6 The
proposal would change the Equalization offset provisions of the Atlantic Accord to “provide a
payment equal to 100% of the net direct provincial offshore revenue”. 7 Net direct revenue is
defined as “Royalties and Corporate Income Tax which is generated in the NL offshore area, the
equalization clawback (currently at 70%)”. 8
The objective was described in similar terms by a March news release: “Premier Williams has
been actively pursuing the federal government to allow Newfoundland and Labrador to receive
100 per cent of the provincial revenues from offshore oil and gas.”9 A similar statement was
made in April: “Premier Danny Williams today reiterated his government’s position on the
Atlantic Accord and reaffirmed the province will continue to aggressively pursue the federal
government to allow Newfoundland and Labrador to receive 100 per cent of the provincial
revenues from offshore oil and gas.”10
Changes to the offset formula would end what both the Blue Print and Premier Williams have
repeatedly described as a “clawback” of resource revenues by the federal government through
reductions in the province’s Equalization entitlement. The notion of an Equalization clawback is
clearly described in the Blue Print:
A Better Deal on Oil and Gas Revenues
The Government of Newfoundland and Labrador will collect billions of dollars in
revenues over the next 20 to 30 years from oil, natural gas, and other minerals.
Less than a quarter of the revenues will stay in the Province. Ottawa will simply
deduct most of the increased revenues from equalization payments. This
deduction is known as "the equalization clawback".
The clawback denies us the opportunity to build a better future for our children
and grandchildren. We should not have to consume our non-renewable resources

5

NLIS 1, 25 February 2004.
Scrum with Stephen Harper, 04 June 2004.
7
Overhead slide 22, 04 March 2004.
8
Ibid..
9
NLIS 1, 12 March 2004.
10
NLIS 2, 16 April 2004.
6

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Sir Robert Bond Paper No. 1 • July 2004
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for current expenses and leave none of the inheritance for our children and
grandchildren. 11
Of particular interest, both Premier Williams and other Conservative party commentators have
linked provincial government offshore revenues with the concept of the province being the
principal beneficiary of offshore development under the Atlantic Accord. In his news release of
12 March 2004, Premier Williams said:
"Essentially, we are asking the federal government to live up to the spirit and
intent of the "principal beneficiary" component of the Atlantic Accord. Currently,
the federal government receives 86 per cent of the revenues of our offshore
petroleum resources, while the province receives a meager 14 per cent," added the
Premier. "This revenue sharing is completely contrary to the spirit and intent of
the accord and must be addressed now before these non-renewable resources are
gone forever. Our province is facing a very serious fiscal situation which must be
addressed. We are making tough choices to manage our expenditures and to grow
our revenues at the provincial level. We, as a province, are putting into place a
long-term plan to grow our economy; however, Ottawa must also be a part of the
solution." [Emphasis added.] 12
The overhead slide presentation describes the Atlantic Accord as being a ‘“Memorandum
of Agreement between the Government of Canada and the Government of Newfoundland
and Labrador on offshore oil and gas resource management and revenue sharing.”’ 13
The paper includes several slides purporting to confirm that “[a]nalysis shows that
Newfoundland and Labrador will not be the principal beneficiary of the revenues
generated from oil and gas developments.”14
Similar arguments have been advanced by John Crosbie, who served as co-chair of the federal
Conservative Party’s 2004 election campaign in Newfoundland and Labrador.
9. Mr. Martin’s commitment is worth nothing unless he puts in writing that
“principal beneficiary” means that Newfoundland and Labrador is to receive 100
per cent of all offshore revenues, including royalties, provincial corporation
income taxes, all fees and bonuses etc. on a net basis with no clawback effect and
to be received until we become a “have” province with agreed benchmarks as to
when “have” status is achieved. [Run-on sentence in the original. Italics added.] 15
Flowing from these statements of the provincial government position, four issues must be
addressed. These are ownership of offshore resources, the origins of the Atlantic Accord and

11
12
13
14
15

Blue Print.
NLIS 1, 12 March 2004.
Overhead slide 3, 04 March 2004. Emphasis in original. This quote is the title of the Atlantic Accord.
Overhead slide 5, 04 March 2004.
John Crosbie, “The world according to Crosbie”, The Express, June 26, 2004, p. 7.

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Sir Robert Bond Paper No. 1 • July 2004
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federal government intentions, the existence of a “clawback” in the Equalization program, and
definition of the term “principal beneficiary”.
C.

Ownership of resources offshore Newfoundland and Labrador

The Blue Print does not define the phrase “jurisdictional control”, although it clear commits a
Progressive Conservative government to seeking it. There term is not specific and there is no
plain language interpretation of the words which can give any clue as to their meaning.
Jurisdictional control could mean co- management. If that is so, then the Atlantic Accord already
establishes that right. Jurisdictional control could mean ownership. Ownership of offshore
resources was resolved in the Supreme Court of Newfoundland (Court of Appeal) and the
Supreme Court of Canada. While the reasoning of both courts was slightly different, both held
that the Government of Canada held all rights to offshore oil and gas resources and any other
mineral resources beyond the 12 mile territorial sea surrounding Newfoundland and off the coast
of Labrador. 16
The Government of Newfoundland and Labrador did not establish any reservations or objections
on resource ownership when it signed the Atlantic Accord in February 1985. As such, barring the
ruminations of some clever lawyer or comments from the province’s pseudo-nationalist
community, Newfoundland and Labrador’s legal claim to offshore resource ownership ended 20
years ago.
The only way this matter could be revisited is on the basis of a political agreement between the
Government of Canada and the Government of Newfoundland and Labrador. 17 It is beyond the
scope of this paper to review in detail the likelihood of such an agreement. It should be
instructive to observers, however, that the Government of Newfoundland and Labrador has not
elected to pursue its current proposal on the basis that the offshore resources belong to this
province as a matter of right.
D.

Provincial Offshore Revenues

Brian Mulroney’s proposal on offshore oil and gas resources, dated 14 June 2004, provided that
“Newfoundland will be entitled to establish and collect resource revenues as if these resources
were on land.”18 Mulroney’s proposal contained 15 provisions covering the areas of
16

Supreme Court of Canada, in the matter of a reference by the Governor in Council concerning property in and
legislative jurisdiction over the seabed and subsoil of the continental shelf offshore Newfoundland, judgement, 08
March 1984 . Supreme Court of Newfoundland (Court of Appeal), in the matter of a reference by the Lieutenant
Governor in Council concerning the mineral and other natural resources of the continental shelf appurtenant to the
Province of Newfoundland, judgement, 17 February 1983.
17
Of all federal governments, only the short-lived Clark government was prepared to establish that Newfoundland
and Labrador owned offshore resources to the edge of the continental shelf. The Right Honourable Joe Clark to
Brian Peckford, 14 September 1979, “Basic Principles Concerning Offshore Mineral Resources”, p. 1, “1. The
Province of Newfoundland should own the mineral resources of the continental margin off its coast insofar as
Canada is entitled to exercise sovereign jurisdiction over these resources in accordance with international law.”
18
Brian Mulroney to Brian Peckford, 14 June 1984, p. 3.

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Sir Robert Bond Paper No. 1 • July 2004
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management, revenue sharing, Crown share, local benefits, Equalization offset, entrenchment of
the agreement in the Constitution and implementation. 19
That single sentence, however, contains the essence of the Mulroney proposal on revenue
sharing: the provincial government gains the right to set its revenues as if the resources were
within its jurisdiction. The Government of Newfoundland and Labrador determines its direct
revenues by legislation and through specific development agreements for each of the three
projects currently producing oil offshore Newfoundland and Labrador.
Sections 36, 37 and 38 of the Atlantic Accord define the basis of revenue sharing between the
Government of Canada and the Government of Newfoundland and Labrador, establish a
definition of revenues to be collected by the Government of Newfoundland and Labrador and set
a mechanism as to how these revenues are to be collected. Section 37 states:
On the basis of the foregoing, Newfoundland shall receive the proceeds of the
following revenues from petroleum related activity in the offshore area:
(a) royalties;
(b) a corporate income tax which is the same as the generally prevailing
provincial corporate income tax in the province;
(c) a sales tax that is the same as the generally prevailing provincial sales tax in
the province;
(d) any bonus payments;
(e) rentals and licence fees; and,
(f) other forms of resource revenue and provincial taxes of general application,
consistent with the spirit of this Accord, as may be established from time to
time. 20
While the Atlantic Accord (Section 38) provided that these revenues were to be collected by the
Canada-Newfoundland Offshore Petroleum Board (CNOPB), these revenues are actually
collected by Natural Resources Canada (NRCAN) with the consent of the Government of
Newfoundland and Labrador. They are remitted by NRCAN in full to the provincial
government. 21
19

Mulroney to Peckford, 14 June 1984. The sections described above are taken directly from the letter. It is
important to note that Equalization offsets were not included in the section on revenue sharing.
20
“The Atlantic Accord: memorandum of understanding between the Government of Canada and the Government
of Newfoundland and Labrador on offshore oil and gas management and revenue sharing”, 11 February 1985, pp. 89. It may be found in pdf format online at www.cnopb.nfnet.com/publicat/reg/aa_mou.pdf.
21
There is no indication that NRCAN withholds any money from the amounts it collects. The Government of
Newfoundland and Labrador also collects indirect revenues related to the offshore from the various support and
supply businesses established since the 1960s. Government of Canada, Department of Finance, “Newfoundland

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Sir Robert Bond Paper No. 1 • July 2004
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The Government of Newfoundland has never released the full amount of direct revenues it
receives under the se provisions of the Atlantic Accord. The only figure to be made public is the
royalty amount, which Premier Danny Williams stated was $123.8 million in 2003. 22 There can
be no doubt that these revenues are received in full.
E.

Equalization and the Accord’s offset provisions

The current provincial proposal to amend the Atlantic Accords focuses on its Equalization offset
provisions. Bria n Mulroney stated definitively in his letter of 14 June 1984 that the Government
of Newfoundland and Labrador should not see a “dollar- for-dollar” decline in Equalization as
revenues from offshore development increased. 23 In light of the provincial government’s current
argument it is interesting to note that Mr. Mulroney did not include the idea of Equalization
offsets in the section of his proposal dealing with revenue sharing. Rather, it was contained as a
separate provision in the original letter, in the Atlantic Accord and in the implementation
legislation that followed.
From the outset of this discussion, it is important to appreciate the premise of Equalization and
how the program operates. Officially, Equalization is a “[f]ederal transfer program that allows all
provinces, regardless of their ability to raise revenue, to provide roughly comparable levels of
services at roughly comparable levels of taxation. Eligibility to receive equalization funding is
determined by a formula measuring each province's revenue-raising capacity against a fiveprovince standard. Currently, eight provinces receive equalization: Newfoundland, Prince
Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba, Saskatchewan and British
Columbia.”24 Two provinces do not receive Equalization. No provincial government pays into
Equalization since the program funds come out of the federal government’s general revenues.
Essentially, Equalization is a top- up scheme for provinces. The federal government determines a
national standard amount each province should theoretically be able to raise from its own sources
of revenues. 25 These “own-source” revenues include royalties on resources, personal income tax,
corporate tax, sales tax, park fees, vehicle licensing fees and so forth. The federal government
then compares the provinces actual income against the per person standard. A provincial
government falling below the average gets a cheque for the difference. Meet or exceed the
standard and a province will get nothing.
It is also important to appreciate that there is no indication that the either the federal government
or the provincial government intended that the Atlantic Accord would exempt Newfoundland
and Labrador from the Equalization program. There is no provision which allows offshore oil
Offshore Accord”, www.fin.gc.ca/FEDPROV/nae.html . Government of Newfoundland and Labrador, Budget 2004.
See also Government of Canada, Department of Finance, Newfoundland Offshore Accord,
www.fin.gc.ca/FEDPROV/nae.html.
22
Budget 2004 gives the figure for resource royalties as $129.0 million. (www.gov.nl.ca/budget2004)
23
Mulroney to Peckford, 14 June 1984, p. 6.
24
http://www.fin.gc.ca/gloss/gloss-e_e.html#equal.
25
Equalization is a simple concept although it grows complex in the application. Different sources of income are
given different weights or values. In the case of Upper Churchill revenues, the federal government includes that
income in Quebec’s provincial income. Difference sources of income are given different weights or values.

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Sir Robert Bond Paper No. 1 • July 2004
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and gas revenue to be treated differently in the calculation of Equalization entitlements. Rather,
Brian Mulroney’s initial offer to the province is perfectly clear: “The Current [sic] Equalization
provisions will apply”. 26 The overhead slide presentation, in fact confirms that the Equalization
program was understood to apply. 27
Section 39 of the Atlantic Accord provides the Government of Newfoundland and Labrador with
an Equalization offset payment in addition to its direct revenues. According to Brian Mulroney,
for the first four years the province would receive an amount equal to “90% of a year’s reduction
in equalization payments. Beginning in the fifth year of production, this offset rate would be
reduced by 10% for each subsequent year.”28
The trigger for the offsets was production of a specific quantity of oil, irrespective of the price
per barrel of oil or the overall economic impact of the production. The offset was triggered in
1999/2000 and will expire in 2011/2012. In 2003, the federal government transferred $178.0
million to the Government of Newfoundland and Labrador under this provision of the Accord. 29
The total of royalties plus offsets was $301 million in revenue to the Government of
Newfoundland and Labrador in 2003. Since the Premier has only discussed specific figures for
royalties in public, total direct revenues may be higher. Indirect revenues are not included.
F.

The Williams administration’s rationale for change

The Williams administration is seeking changes to the Equalization offset provisions of the
Accord so that the province will receive both direct and indirect revenues and the maximum
possible Equalization payments. The provincial government’s position is based on three
contentions. First, reductions in any Eq ualization payment attributable to increased nonrenewable resource revenues amounts to a “clawback” since these resources are finite. Second,
as David Norris has argued for example, declines in Equalization amount to added revenue for
the Government of Canada and hence violate the commitment that Newfoundland and Labrador
should be the principal beneficiary. 30 Third, the existing offset mechanism will run out before the
most significant revenue benefit can be realized. Let us examine these in order.
The non-renewable “clawback”: The Equalization program has consistently operated as a
form of top-up for certain province’s revenues. Any increase in a province’s own-source
revenues would mean a lowering of the top-up amount. If Newfoundland and Labrador
experienced a growth in revenue from information technology, it could reasonably expect to see
its Equalization entitlement reduced. Newfoundland and Labrador is treated like all other
provinces when it comes to the application of the Equalization program.
26

Mulroney to Peckford, 14 June 1084, p. 6.
Overhead slide 9, 04 March 2004. The chart presents an assessment of anticipated royalties and the impact of
Equalization and offsets for the Hibernia project. It is clear that the provincial government anticipated that the
Equalization program would apply unaltered after the offset provisions expired.
28
Mulroney to Peckford, 14 June 1984, p. 6.
29
Government of Canada, Department of Finance, “Newfoundland Offshore Accord”,
www.fin.gc.ca/FEDPROV/nae.html.
30
David Norris, The fiscal position of Newfoundland and Labrador, (Royal Commission on renewing and
strengthening our place in Canada, March 2003). Hereafter cited as Norris, 2003.
27

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Sir Robert Bond Paper No. 1 • July 2004
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Clawback is a simple concept and applies in many areas of individual and business life. A
clawback is defined by the Concise Oxford Dictionary as meaning to “regain gradually or
laboriously, to take back (allowance by added taxation, etc.)”31 WordNet and Dictionary.com
similarly define clawback as “finding a way to take money back from people that they were
given in another way; ‘the Treasury will find some clawback for the extra benefits members
received’”.
Since the Government of Canada remits in full offshore revenues to the Government of
Newfoundland and Labrador, and applies no special tax or levy on those revenues, there is no
clawback of these revenues as the term would be generally understood. Since the Atlantic
Accord contains specific provisions to offset losses in Equalization, there is also no clawback of
direct offshore revenues in that sense either.
The “clawback” argument is based on the contention that non-renewable resources hold a special
status among provincial revenue sources. As the argument goes, these resources are finite and
hence the period of time in which a province can derive benefit from the resources is finite. A
province cannot achieve maximum benefit from non-renewable resources if it loses Equalization
as revenues grow from these non-renewable resources. Hence these revenues should be
exempted in some fashion from the Equalization calculation. 32
Two aspects of the argument on non-renewable resource “clawback” approach are worth
considering in greater detail. First, no source of revenue will exist for all time. Non-resource
enterprises that generate sales tax and corporate and personal income taxes succeed and fail
based on many factors. Western countries, states and provinces, that a decade ago made
substantial income from the information technology sector and call centres, are now watching
these revenues migrate to India and other Asian countries.
Even supposedly renewable natural resources such as fish can be destroyed by folly or a
fundamental misapprehension of the circumstances affecting the health of the stocks. The
reasonable lifespan of a mine or oil field may be 50 to 100 years. It took a mere 50 years for
human misadventure to decimate the supposedly renewable fish stocks that had fed most of the
Western world for five centuries.
31

Concise Oxford Dictionary of current usage, (Oxford: Oxford University press, 1982).
The federal Conservative Party’s proposal to remove non-renewable resources from the complete calculation of
Equalization was a centerpiece of their 2004 election platform. It is based in large part on work done by Kenneth J.
Boessenkool for the Atlantic Institute for Market Studies (AIMS). Mr. Boesenkool proposes calculating the national
Equalization standard using all provinces, less non-renewable resources. The impact of this approach according to
Mr. Boesenkool would see Newfoundland and Labrador losing approximately $3.0 million per year in Equalization
entitlements. Kenneth J. Boessenkool, Taking off the shackles: Equalization and the development of non-renewable
resources in Atlantic Canada, (Halifax, NS: Atlantic Institute for Market Studies, May 2001). Loyola Sullivan,
Minister of Finance and President of Treasury Board, apparently believes differently. His assessment of the federal
Conservative proposal contends that such an approach would increase provincial revenues by more than the
Premier’s proposal would. See letter from Loyola Sullivan reproduced in Loyola Hearn Campaign brochure, federal
general election 2004. Since Mr. Sullivan’s letter did not provide details of his calculations, it is difficult to assess
the accuracy of his conclusions.
32

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Second, the “clawback” argument is one most often advanced by advocates of increased federal
Equalization transfers to provinces. 33 No one should forget that the Equalization program is
funded entirely through federal general revenues. In other words, a significant portion of federal
revenues derive from the very same sources for which the provincial governments claim a
theoretical exemption from Equalization. Logically, what is sauce for the provincial fiscal goose
should be sauce for the federal gander. The federal government holds obligations to provide
services to residents of Canada just as the provinces do. Therefore, if one accepts that some
revenues come from “non-renewable” sources, it would be logical for the federal government to
seek the same exemption for its revenues as the one demanded by some provinces. It is beyond
the scope of this paper to calculate the level of federal funding from “non-renewable” sources.
Were the amount to reach $10 billion – approximately the total outlay for Equalization – it is
conceivable that the federal government would seek to eliminate the Equalization program
altogether, possibly transform the system to one of low-interest loans or seek to control how
province’s spend the Equalization transfer.
The 85:15 revenue split: In the overhead slide presentation, the provincial government
includes several colourful charts that purport to show that the federal government receives 85 per
cent of revenues from the offshore with the Government of Newfoundland and Labrador
receiving only 15 per cent. A similar argument and similar slides are also found in the report of
the Royal Commission on Renewing and Strengthening Our Place in Canada and in two research
papers completed for that Royal Commission, one by David Norris and the other by John
Crosbie.
Sadly for those wishing to assess the argument, none of these documents contain the data used to
compile the charts. Neither the provincial government overhead slides nor Mr. Crosbie’s paper
contain any figures. 34 Mr. Norris does provide some evidence of his calculations. David Norris
was a member of the provincial government team that negotiated the Atlantic Accord. A former
provincial deputy minister of finance, Mr. Norris is currently a senior advisor to Premier Danny
Williams. In 2002/2003, Mr. Norris served as senior researcher for the Royal Commission on
renewing and strengthening our place in Canada. Mr. Norris is also author of one of the research
papers the Royal Commission released with its final report. The fiscal position of Newfoundland
and Labrador is broad overview of the provincial government’s financial status. It includes
prominent sections on offshore revenues that undoubtedly form much of the basis for current
government policy. In it, Mr. Norris argues, among other things that “The revenue analysis
concludes that the Government of Canada is the “principal beneficiary” of future offshore oil

33

Ironically, a subsequent paper for AIMS by Kenneth Boessenkool argues that Equalization distorts provincial
economies and promotes abnormally high levels of taxation. Kenneth J. Boessenkool, Taxing incentives: how
Equalization distorts tax policy in receiving provinces, (Halifax, NS: Atlantic Institute for Market Studies, June
2002).
34
John C. Crosbie, Overview paper on the 1985 Canada-Newfoundland Atlantic Accord, (St. John’s: Royal
Commission on renewing and strengthening our place in Canada, 2003), pp. 276-7. Mr. Crosbie’s paper contains no
footnote references. References in the ext to certain documents, tables and charts are not sufficiently clear to allow
the reader to track his sources. Hereafter cited as Crosbie, 2003.

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revenues.”35 Given the obvious connection between Mr. Norris and current government policy
and the fact that his paper is reasonably detailed, the remainder of this section will discuss the
revenue split argument as he presented it.
Mr. Norris’ conclusion follows a lengthy preamble in which he sets the bases for his remarks and
his assumptions on revenues and relative amounts flowing to each of the provincial and federal
governments. He also quotes from section 2 (c) of the Atlantic Accord, the now famous
“principal beneficiary” clause and deduces that “[a]ccordingly, revenue offset provisions were
incorporated in the Accord which were intended to protect the province against sharp downturns
in equalization entitlements.”36
He produces a chart showing the revenue sharing based on his analysis:

35

Norris, 2003, p. 114. Pagination in the online version of this document is problematic. The table of contents is
sometimes off by as many as two pages from the actual location of certain sections. As well, Acrobat shows a total
number of pages exceeding the actual numbered pages in the document. The page references for this paper refer to
those printed on each page where the reference was actually located.
36
Norris, 2003, p. 109.

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Table 3-137

Overall Sharing of Total Government Revenues
Federal and Provincial Government Revenues from Offshore Oil
(billions of constant dollars)
Newfoundland and
Labrador

Canada

Total

Royalties

5.7

-

5.7

Provincial
corporate income
tax

1.0

-

1.0

Federal corporate
income tax

-

4.0

4.0

[Sub-total]38

6.7

4.0

10.7

[Revenue split –
without
Equalization
impact]

62%

38%

100%

Equalization impact

(4.2)

4.2

-

[Total]39

2.5

8.2

10.7

Overall revenue
split

23.4 %

76.6%

100%

On the face of it, his argument is persuasive. It does not stand up to closer scrutiny, however.
One of the fundamental problems with any economist’s projections is that they are based on
assumption. Adjust the assumptions and the outcomes change, sometimes dramatically. Aside
from the traditional economist’s folly of assumption, there are at least five reasons to doubt the
validity of Norris’ contention.

37

Norris, 2003, p. 113.
Notations in square brackets are additions intended to clarify the table from the original. The heading “Revenue
split without Equalization impact” was added by the author of this paper.
39
Sub-total plus Equalization impact.
38

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Sir Robert Bond Paper No. 1 • July 2004
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First, the “principal beneficiary” provisions of the Atlantic Accord are undefined. It is erroneous
to conclude that the phrase is synonymous with provincial government revenues. As a member
of the negotiating team for the Atlantic Accord, Mr. Norris may be privy to information that does
not exist in the public domain. Until such time as his contention is properly documented, we
must remain skeptical of it. The matter of principal beneficiary is dealt with in greater detail
below.
Second, as discussed above, the Atlantic Accord is based in part on the premise that the
Equalization program would continue to apply. Knowing the premises on which the Accord was
based, it is ludicrous for Mr. Norris and others to argue now the opposite of what was said 20
years ago. That single point is sufficient to cause Mr. Norris to remove the Equalization
adjustment from his revenue chart above. Eliminate that single contention and the revenue
sharing split moves from being a 76:24 split favouring the federal government to a 62:38 split
favouring the province. 40
Third, the Accord’s Equalization offset provisions were never included in any public statement
as being part of the revenue sharing arrangement between the Government of Canada and the
Government of Newfoundland and Labrador. Mr. Mulroney’s original proposal is absolutely
clear on revenue sharing: “Newfoundland will be entitled to establish and collect resources
revenues as if these resources were on land.”41 As such, it is ludicrous to now suggest that the
Government of Canada and the Government of Newfoundland and Labrador intended
Equalization to be used in the calculation of relative incomes. In fact, the Atlantic Accord makes
no mention of how much revenue or what proportions of revenue are to flow to each order of
government. The intention of the two parties, as evident from the signed agreement, is merely
that the province may have the opportunity to raise such revenues as it can.
Fourth, and flowing in the same vein, the Accord Equalization offset provisions are not
structured to ensure that the flow of maximum financial benefits to the province, i.e. revenues
plus offsets, are timed to coincide with the maximum level of revenues based on actual
development of the offshore fields. Simply put, the offset provisions begin when oil reaches a
defined level - irrespective of value - and decline until an arbitrary period has expired, in this
case 12 years. As it turned out, and indeed as anyone may have reasonably expected in 1985,
production from one discovery was sufficient to trigger the offset provisions. It would be
ludicrous to suggest that anyone believed all four commercially- viable discoveries that existed in
198542 could have been fully developed and in production within four years.
Fifth, even if one allows that his contentions about revenue sharing are correct, Mr. Norris
presents only a portion of the revenues flowing to the province. As noted in Section D of this
40

Overhead slide 23 indicates that the provincial government expects that “[E]qualization savings would equal the
cost of the revised offset payments”. It is not clear how this would work since the existing offset payments
apparently exceed the province’s losses through Equalization. Slide 25 is a table that purports to show the
provincial government’s proposal would change the share of existing project revenues to 61:39 favouring Ottawa.
Slide 27 is a table showing revenue sharing on new projects under the revised Accord would yield a 53:47 revenue
split between the two orders of government, favouring the Government of Canada.
41
Mulroney to Peckford, 14 June 1984, p. 3.
42
Hibernia, Terra Nova, White Rose, Hebron/Ben Nevis.

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Sir Robert Bond Paper No. 1 • July 2004
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paper, the province is entitled to collect revenues of no fewer than six general types. In addition,
the provincial government receives indirect revenues from such sources as personal income tax,
new business start- ups and revenues that come from the construction and development phase of
each project.
In his chart, Mr. Norris includes only royalties, which the federal government does not claim and
corporate taxes, which are in fact collected by both the federal and provincial governments. The
total economic impact of offshore oil development is not considered in his argument. If these
wider sources of revenue are included in the province’s claim or the paper by John Crosbie,
sadly, we cannot tell. 43
The offset runs out too soon: Under the existing Atlantic Accord Equalization offset formula,
the period of maximum potential benefit expired last year. The maximum offset existed only for
the first four years after the oil production trigger was reached. Within that time, the provincial
government received the largest type of Equalization offset. After four years, the level of offset
declines, such that while provincial direct revenues may well grow as White Rose and later,
Hebron/Ben Nevis, come on stream, the level of additional money received from the
Equalization offset will diminish by 10% per year. On this point, proponents of an amendment to
the Atlantic Accord are correct.
In assessing this argument, it is important to compare the intentions of the Trudeau and
Mulroney governments on the issue of resource revenue sharing. The intention of the Mulroney
government is clear: the Government of Newfoundland and Labrador would receive the right to
set its own direct revenues for offshore resources, as if the resources were on land. Additionally,
for a period of 12 years, the province would receive additional money in the form of an
Equalization offset. The province would also receive local job and industrial spin-off benefits.
That is what the Atlantic Accord provides; that is what has occurred.
The Trudeau government approach was different in one key respect. “The province will receive
all provincial- type taxes and the largest remaining federal tax, the Petroleum and Gas Revenue
Tax, the PGRT. No one can question the generosity of this proposal. When would the
provincial government be expected to share some of these revenues with other Canadians? Not
until the Newfoundland Government’s fiscal capacity reached 110 per cent of the national
average, with an adjustment for regional unemployment that would now raise this to about
125%.”44
More significantly, the Trudeau revenue sharing arrangements reflect the strategic policy
commitment the Government of Canada was prepared to make prior to 1984. The federal
proposal made in September 1982 ‘ “recognizes the Government of Newfoundland and
Labrador’s fundamental goal of attaining economic development and self-sufficiency by creating

43

For a similarly vague approach, see Roland Martin, “What does 100 per cent of offshore revenues mean?”, The
Telegram, 07 July 2004, p. A6. Mr. Martin refers to revenue estimates or offers ranges of revenues without
indicating the sources of the estimates or the types of revenues discussed.
44
Chretien, 05 April 1984, p. 2.

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Sir Robert Bond Paper No. 1 • July 2004
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a strong and diversified provincial economy able to contribute fully to prosperity throughout
Canada.” This goal is shared, the document states, by the Government of Canada.’ 45
Therein lays the major flaw in the Atlantic Accord as it was originally proposed and signed: the
duration of the province’s added revenues is determined by oil production levels, irrespective of
the actual market value of the oil or the impact of oil development on overall fiscal capacity.
Under the Trudeau proposal, it would have been linked to overall economic development.
Given the nature of industrial megaprojects of the type offshore Newfoundland and Labrador, it
is not at all surprising that each project takes a considerable period of time to bring on stream.
The Hibernia development agreement was signed in September 1990; first oil was achieved fully
seven years later. It was fully two years after that date that Hibernia reached a sufficient level of
production to trigger the Accord’s Equalization offset provisions.
Admittedly, the provincial government did not have the benefit of experience in making its
calculations about the Atlantic Accord’s various benefits. However, as the recent overhead slide
presentation indicates, the provincial government anticipated rapid development of the existing
fields, continued offshore discoveries at the pace experienced between 1979 and 1984/85, the
royalty regime would be higher and oil prices would remain around then-prevalent levels. 46
It is beyond the scope of this paper to assess the validity of these assumptions in detail. Such an
effort has been undertaken to date and, in fact, much of the information required would be
exempt from public disclosure since they were contained in documents submitted to cabinet. On
the face of it, however, it would appear that the provincial government used optimistic
projections when assessing the Mulroney offer. Any downward revision of their assumptions –
for example, lower per barrel prices for oil – and the revenue impacts alter significantly.
Interestingly, according to slide 7, the provincial government expected that “ha ve status” for
Newfoundland and Labrador, i.e. that the province would no longer receive Equalization was “a
foregone conclusion. The one data table from 1985 that has been released (overhead slide 9)
does not appear to support that contention, at least in so far as the chart might represent an
anticipated worst case scenario. “Revenue and Equalization – 1985 Expectation” examines only
royalties, instead of all revenue sources, and only from the Hibernia project. The graph clearly
shows that royalties alone from Hibernia would not be sufficient to replace Equalization. In fact,
anticipating the Accord offset provisions would begin in 1991, the graph shows the province
expected Equalization transfer to climb beginning in 2004/05 and exceed pre-Hibernia leve ls by
2013.
That said, there can be no doubt that the Atlantic Accord Equalization offsets are working as
intended by the Government of Canada and the Government of Newfoundland and Labrador.
The provincial government expectations provided in the overhead slide presentation are not
reflected in any aspect of the Atlantic Accord or the subsequent implementation legislation.
45
46

Crosbie, 2003, p. 263.
Overhead slide 7, 04 March 2004.

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Sir Robert Bond Paper No. 1 • July 2004
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Given several years of experience and based on the intention of the federal government prior to
1984, it is possible to make a case for amending the Accord’s Equalization offsets. This will be
addressed below.
G.

Why is Alberta different from Newfoundland and Labrador?

This question has been asked many times in relation to oil and gas development. In some senses,
it is like asking why a duck is different from a horse. Two significant differences are important
to bear in mind when assessing oil and gas resources.
First, note that Alberta’s resources on onshore. They are physically within the jurisdiction of the
Government of Alberta. More importantly, however, and with the exception of the tar sands,
Alberta’s oil and gas resources are relatively easy to develop. A small group of middle-class
investors can raise the funds - scarcely more than $100, 000 - needed to drill an oil well in
Alberta. Located as they several hundred kilometres out to sea in the North Atlantic, oil and gas
resources offshore Newfoundland and Labrador can only be exploited by the combined efforts of
multi- national oil companies able to invest the hundreds of millions needed for a comprehensive
exploration and drilling program. A structure like Hebron/Ben Nevis which is fragmented and
contains heavy oil demands even greater investment to bring to on stream.
Second, note that Alberta’s oil and gas resources ha ve been exploited since the late 1940s. As
such, Alberta is home to a well-established oil industry with secondary and tertiary development
and a sophisticated, experienced support system of government and business. By comparison, the
Newfoundland and Labrador offshore is scarcely seven years old if measured from the time of
first oil production. It takes time to develop fully a mature oil and gas industry. Newfoundland
and Labrador is still in the early years of its growth.
In that light, the Atlantic Accord offset provisions are also deficient. They fail to account for the
relative underdevelopment of the offshore industry in this province. They also fail to consider
the length of time which was likely required to bring existing fields on stream or that would be
required to find any new, commercially- viable fields.
H.

The federal share of Hibernia

When Brian Mulroney first proposed a deal on offshore oil and gas resources to Brian Peckford,
it was done in the context of the National Energy Program. That program included significant
federal revenues from oil and gas developments throughout the country and, at one point,
anticipated the federal government would hold a 25% interest in every development on what was
termed frontier lands. Mr. Mulroney proposed that “[i]f, on assuming office the new government
decides to vest in itself the Crown carried shares offshore Newfoundland and Labrador, then
these rights and shares will be shared equitably by both governments.”47

47

Mulroney to Peckford, 14 June 1984, p. 5.

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Sir Robert Bond Paper No. 1 • July 2004
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This Crown share proposal survived in the Atlantic Accord as section 40, however, by the time
the Accord implementation act was drafted and passed, the Mulroney government had eliminated
federal shares in oil and gas fields except as may have been obtained through PetroCanada.
The Hibernia shares held by the federal government are not the type of shares anticipated by the
Atlantic Accord. Hence, their disposition cannot be governed by any intentions signaled by the
Accord. The Government of Canada invested in the Hibernia project as a means of salvaging it,
at a time when one of the commercial partners withdrew. The federal government invested in
Hibernia under very specific circumstances, not as part of a broader government policy on oil
and gas resources. Moreover, these shares would not exist as Crown shares if the project had
proceeded as originally proposed by the consortium of oil companies or had other commercial
partners emerged who were willing to purchase the interest owned by Chevron in Hibernia. As a
consequence, the federally-owned shares fall outside the scope of revenues to which the
Government of Newfoundland and Labrador could reasonably have expected to have some
portion.
It is interesting to note that the overhead slide presentation makes no reference to transferring the
federal shares. The only publicly available reference to share transfer remains the Blue Print and
letters to the three federal Conservative leadership candidates and the letter inadvertently sent to
New Democratic Party leader Jack Leyton. 48
The Hibernia sha res carry with them a prospect of immediate cash return either through their sale
or through a transfer from the Government of Canada to the Government of Newfoundland and
Labrador. They also carry with them liabilities; the owners of the shares must be prepared for
the costs associated with closing the Hibernia field whenever it runs out. It would be foolhardy
for any Government of Newfoundland and Labrador to acquire shares in Hibernia without
considering, and disclosing publicly, all the implications of owning a portion of the Hibernia
field.
I.

Being the “Principal Beneficiary”

The Atlantic Accord is as much a child of politics as it is one of policy. Brian Mulroney was
leader of the Progressive Conservative Party and Leader of the Opposition when he wrote to the
premiers of Nova Scotia and Newfoundland and Labrador to propose an agreement that he
believed would settle the ongoing negotiations on offshore resource development. In truth, the
Government of Nova Scotia had already reached an agreement with the Trudeau administration.
The Government of Newfoundland and Labrador had not and it was chiefly to Brian Peckford
that Mulroney’s correspondence was addressed in June 1984. 49
48

See the reply by Stephen Harper, leader of the Conservative Party of Canada, Harper to Williams, 26 March
2004.
49
It is remarkable that the Peckford administration accepted the Mulroney letter as presented. Subsequent
negotiations apparently were limited to turning the original proposal into a legal document. This suggests one of
three scenarios: either the provincial government had already negotiated the offer before it was made, or Mr.
Mulroney authored a diktat which was not subject to alteration, or the provincial government as thoroughly satisfied
with Mr. Mulroney’s offer.

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Sir Robert Bond Paper No. 1 • July 2004
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The Mulroney proposal “would recognize the right of Newfoundland and Labrador to be the
principal beneficiary of the wealth of the oil and gas off its shore, consistent with a strong and
united Canada.”50 This sentence appears in the second paragraph of Mulroney’s letter. It sets
one of the basic principles underlying the Accord. This phrase is particularly interesting since the
idea of “principal beneficiary” had not previously appeared in public discussions of offshore
resources.
While the phrase “principal beneficiary” is undefined in Mulroney’s original correspondence, it
is clear from a reading of the original proposal and the subsequent Atlantic Accord that the
province as a whole was to benefit in four significant ways.
First, the provincial government would gain the right to manage the offshore jointly with the
federal government, particularly with respect to setting the mode of production. This had
significant implications for local benefits, as evident from construction of the gravity-based
system (GBS) for Hibernia. Second, the provincial government gained the right to collect
revenues from the resources as if they were on land. This established that the provincial
government would determine its own revenues to be collected from offshore oil and gas
development and production just as a province like Alberta is able to do. These revenues would,
de facto, be treated as “own source” revenues like income tax, sales tax and other similar levies.
Third, the province as a whole would benefit from the development of local jobs. Mulroney
committed that oil-related infrastructure would be sited in the province, where possible. This
was no small matter. Mulroney’s letter contains strong language and conveys a deliberate intent
on the part of the future Prime Minister to provide this province with significant job and business
benefits. “Local job creation and labour development would be of paramount concern. ”51
Fourth, the province would benefit since the provincial government would not see a dollar- fordollar loss of Equalization payments that would naturally result from growth in the government’s
own-source revenues. The Government of Newfoundland and Labrador would receive all of its
own-source revenue, potentially a portion of any federal shares in the offshore, and as well,
additional payments to offset any losses from Equalization.
The same general approach was taken by the Liberal administrations which preceded Mr.
Mulroney. For example, the comprehensive proposal made by the Government of Canada in
1982 stated that “it is recognized that Newfoundland should enjoy the major share of the revenue
that offshore resources are expected to generate…” and that “the people of the province would
realize the greatest and the most direct benefits from the development of offshore oil and gas
resources in terms of growth and income, jobs, opportunities for new businesses, and significant
new provincial government revenues.”52 The federal Liberal proposal on revenue sharing was
linked inextricably to the overall performance of the provincial economy and hence may be taken
as further evidence of the extent to which federal government before 1984 viewed the benefits

50
51
52

Mulroney to Peckford, June 14, 1984, p. 1.
Mulroney to Peckford, June 14, 1984, p. 4.
Crosbie, March 2003, pp. 261-262.

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Sir Robert Bond Paper No. 1 • July 2004
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from the offshore to this province to be greater than just the sums flowing to the provincial
government ’s treasury.
While local job benefits merited two short paragraphs in the original Mulroney letter, both the
Accord itself and the enabling legislation provide an elaborate structure aimed at managing local
benefits. No one can underestimate the value of local industrial benefits to the province; nor can
anyone easily dismiss the contention that the architects of the Atlantic Accord saw local
industrial development as a significant factor in establishing this province as the principal
beneficiary of offshore oil and gas development.
The Atlantic Accord and enabling legislation predate both the North American Free Trade
Agreement and various inter-provincial accords on free trade. The Schedule of Canada, Annex 1,
“Reservations for Existing Measures and Liberalization Commitments” of the North American
Free Trade Agreement (NAFTA) specifically exempts the Atlantic Accord implementation
legislation and its local benefits provisions from NAFTA.
It has long been the contention of those familiar with the Atlantic Accord that any substantive
change would negate the reservation or, at least give an interested party sufficient grounds to
challenge the reservation established when NAFTA was signed. 53 The Williams administration
has not addressed the issue of the Accord and NAFTA, likely since it believes the changes to the
Equalization offset section are not sufficient to trigger a NAFTA-related review of the Accord or
jeopardize the Accord’s current NAFTA exemption. A simple change to the offset provisions
would not normally constitute a significant change to the Accord itself and hence the NAFTA
reservations would remain intact.
A change to the Accord’s fundamental principles would constitute a substantive change to the
Accord. The objectives of the Accord are enumerated in Section 2 and include the commitment
that Newfoundland and Labrador is to be the principal beneficiary of offshore resource
development. Their ordering is no accident or whim; the words used are not selected by
happenstance. They reflect the considered view of the signatories as to the major purposes the
agreement is to achieve.
It appears that the Williams administration is seeking to alter a fundamental principal of the
Atlantic Accord. By linking the argument on Equalization offsets to the objectives of the Accord,
the provincial government may well open the industrial benefit provisions of the Accord will be
lost and offshore Newfoundland and Labrador will be subject to international free trade for
goods and services. If this is an objective of government policy, then it should be debated in full
so that the general public can make an informed choice. If it is not, then the provincial
government must make clear the scope and impact of the changes it is proposing. The overhead
slides are not sufficient.
J.

53

Amending the offset: an alternative approach

The author did not seek a legal opinion on this matter for this paper.

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Sir Robert Bond Paper No. 1 • July 2004
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As presented by the Williams administration, the proposal to amend the Atlantic Accord
Equalization offset provisions is founded on somewhat shaky ground. It relies primarily:
-

-

on general confusion over what benefits currently are provided by the Accord;
an argument about supposed “clawbacks” that is either flawed in theory or
which ties the province to other logical arguments that would work against the
province’s overall revenues;
a re-definition of the concept of “principal beneficiary” that may jeopardize
substantial benefits to the province as a whole;
an approach that ignores the intentions of the Government of Canada through
two administrations; and that
ignores the practical circumstances affecting development of resources
offshore Newfoundland and Labrador.

The Atlantic Accord Equalization offset provisions are clearly deficient when viewed from the
standpoint of development of the province’s economy. The existing Accord approach is built on
a simple calculation that makes no allowance for issues affecting development of the fields or the
overall impact which offshore oil and gas resources have had and will continue to have in
developing and diversifying the economy of one of the country’s financially weakest provinces.
Based on the foregoing, the provincial government should reformulate its proposal to the federal
government to produce an amendment that is simple, based on logical, practical and historical
premises and which will have a definite termination. Disentangle the Accord proposal from other
arguments and make it as straightforward as possible. What remains is a robust concept:
Amend the Atlantic Accord offset provisions to give the provincial
government a full Equalization offset, as currently calculated by the Accord
for the first four years , until such time as the province’s fiscal capacity
reaches 110% of the national average and its employment rate meets or
exceeds the national average or for a period of 25 years, which ever comes
first.
It is hard to imagine that any Liberal administration in Ottawa could reject a proposal that is
founded on the very ideas it predecessors advanced 20 years and more ago. The proposal leaves
intact the broader benefits which two national governments have intended for this province to
receive from oil and ga s resources off its shores. It is a proposal that is divorced utterly from the
extreme and often partisan rhetoric which has surrounded recent discussions of public policy in
this province. 54
54

See for example, Danny Williams’ comments to a Nova Scotia Progressive Conservative audience in June 2001:
“The more that I see, the more nauseous and angry that I get. The way that our people and our region have been
treated by one arrogant federal Liberal government after another is disgusting. The legacy that the late Prime
Minister Trudeau and Jean Chrétien will leave in Atlantic Canada is one of dependence on Mother Ottawa, which
has been orchestrated for political motives for the sole purpose of maintaining power. No wonder the West is
alienated and Québec has threatened separation. Canadians - and Atlantic Canadians, in particular - realize the
importance of dignity and self-respect while Ottawa prefers that we negotiate from a position of weakness on our

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Sir Robert Bond Paper No. 1 • July 2004
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K.

Conclusion

This paper has reviewed the Williams administration proposal to amend the Atlantic Accord, to
the extent that accurate information has been publicly disclosed.
The major conclusions are:
5.

The Government of Newfoundland and Labrador currently receives 100% of
provincial revenues from offshore oil and gas resources.

6.

The Equalization offset provisions of the Accord are functioning as intended,
although amending the Equalization offset provisions is desirable for the
provincial government. A better deal is attainable based on the stated intentions
of the Trudeau administration before 1984.

7.

Altering the definition of “principal beneficiary” to refer only to provincial
government revenues may jeopardize other benefits the Accord provides to
the province.

8.

Disposition of the federal government’s share of the Hibernia project is
outside the Atlantic Accord. Acquiring the shares must be examined in greater
detail since they carry responsibilities and financial implications once the field is
exhausted.

One day the sun will shine and have not will be no more.
If Brian Peckford is remembered for nothing else, he will be known for his colourful and
emotionally charged rhetoric. That phrase, about sun and “have not” embodied for many people
their hopes about the future of Newfoundland and Labrador and the unprecedented opportunity
offered by oil and gas for ending our status as a people dependent on hand-outs from richer
cousins in the rest of Canada. The very term “have not” derives from the Equalization program –
receiving provinces are said to be “have nots”; the money comes from the “haves”.
Misperception it may be, but in politics, misperception counts for plenty.
Peckford’s goal for oil and gas was to use it to produce the kind of wealth for Newfoundland and
Labrador that would end the indignity of a proud people living on a form of national dole. At the
time he spoke, more than 60 per cent of the province’s annual budget came from federal
transfers, much of that from Equalization. The Atlantic Accord may not be perfect, it may not
cover all contingencies, but it is the deal that has produced tremendous economic and social
benefit in Newfoundland and Labrador. The language Brian Peckford used was plain enough.
He didn’t need other words. We understood what he was talking about because the issues had

hands and knees.” Danny Williams, Williams sees cooperation among Atlantic provinces as the key to battling
Ottawa, Halifax NS, June 2001.

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Sir Robert Bond Paper No. 1 • July 2004
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been discussed in public for more than a decade. Offers and counter-offers were dissected in the
media. Unless we are cautious, we tamper with the Accord at our peril.
How much has changed in 20 years. Federal transfers today account for 40% of the provincial
government’s annual revenues. The Williams administration is proposing to alter a landmark
document in the province’s economic and political history, the net effect of which, at the very
least, would increase federal transfers to the province. 55
The Atlantic Accord is not holy writ, but it is central to our wealth today. More importantly, it
holds the prospect of providing considerably more wealth with future discoveries offshore
Newfoundland and Labrador. The Premier is proposing his changes, however, without an
informed public discussion, without releasing a concise statement of the provincial government’s
position and, as it would seem, without relying on the plain meaning of words.
It should not escape notice that in making its proposal, the Williams administration is merely
picking up where the Grimes government left off. 56 There is precious little difference among the
three political parties in the province on this issue. In itself, that should be cause for concern as
Mark Twain warned. The absence of debate prevents a thorough discussion of options, a chance
to see dangers and avoid them. Getting more cash from Ottawa is one thing. If it comes at a
larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public
support to continue on his path. The cost has nothing to do with his political career or his future
as Premier; rather it is a cost that Newfoundlanders and Labradorians may be asked to bear a
decade and more hence. They have a right to know what is being talked about because they will
either reap the reward of these changes or bear the burden.

© 2004 Gryphon Public Affairs
55

Interestingly, the recent review of the province’s finances does not raise concern over the dependence of the
Newfoundland and Labrador government on federal transfers. PriceWaterhouseCoopers, Special review of the
financial condition of the Province of Newfoundland and Labrador: Directions, choices and tough choices, 22
December 2003. p.52. Compare this view to Boessenkool et al. in the works on Equalization produced for AIMS.
They argue that Equalization, among all federal transfers, hampers the development of the economy in Atlantic
Canada.
56
Government of Newfoundland and Labrador, Budget 2003, Budget Speech, “Ottawa’s stake in our future”, ‘Now
that our offshore oil industry is poised to generate significant revenues it is more important than ever for
mechanisms to be put in place to ensure the Province will be the principal fiscal beneficiary of this industry over the
longer term. This is the most practical way for the Province to get access to the financial resources necessary to
grow and diversify our economy so we can close the disparity gaps that persist between us and the rest of the
country.’

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Sir Robert Bond Paper No. 1 • July 2004
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Sir Robert Bond
Born in St. Johns, in 1857, Sir Robert Bond served as Prime Minister of Newfoundland
from 1900 to 1908. Bond was educated in law at the University of Edinburgh but never
called to the bar. He entered politics at age 25 and served both Speaker of the House of
Assembly. In 1889, Bond was appointed Colonial Secretary in the administration of Sir
William Whiteway.
Bond is best known for negotiating two reciprocity treaties with the United States and for
bringing about an end to the French Shore in Newfoundland. During Bond’s
administration, Newfoundland enjoyed a period of relative prosperity including advances in
agriculture and the establishment of a paper mill at Grand Falls. In 1902, Bond attended the
Imperial Conference and authored a paper on the defence of Newfoundland. The paper
displayed Bond’s grasp of international relations and defence issues, describing both the
strategic importance of his country and the defensive works needed to secure it. His
suggested defence preparations presaged installations built in the 1940s.
As Colonial Secretary in 1894, it fell to Bond to deal with the consequences of the Bank
Crash in December 1894. Bond negotiated with the Government of Canada about
Confederation, but the talks failed when the Government of Canada refused to assume
Newfoundland’s public debt. Bond was able to secure a loan to stave off the country’s
financial collapse by putting up his own property as collateral.
Bond retired from politics in 1914, retiring to an estate he called The Grange located at
Whitbourne. He experimented with agriculture, including the importation of dairy cattle. A
knight Commander of the Order of St. Michael and St. George, Bond was sworn to the
Imperial Privy Council in 1902. He died at Whitbourne in 1927.

Sir Robert Bond Papers
Named in honour of one of the greatest Prime Ministers of Newfoundland, the Sir Robert
Bond Papers are intended to foster public discussion of issues of importance to
Newfoundland and Labrador.
They are published by Gryphon Public Affairs as a public service and in the interest of
developing better public policy for Newfoundland and Labrador.
Views expressed in this paper are those of the author.

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