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Jay Currie

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12/23/2004

Newfi Gall

Is it just me or are the Newfoundlanders utterly out to lunch.

The provinces have been pushing to retain 100 per cent of offshore energy revenues without paying a penalty in clawbacks to equalization payments.

Ottawa now takes 70 cents of every dollar by reducing equalization payments.
Danny Williams

Finance officials have said that under the latest offer, Ottawa will end the clawback scheme. This would result in additional revenues for the provinces, ranging from $2.5 billion to $3 billion, they say.
cbc
I have never understood the logic of wanting the offshore oil and gas royalties (to which the provinces have no constititutional entitlement) and the same level of equalization as would be the case if there were no such revenues.

It is more complicated than that as Premier Williams underscored in a CBC interview:
What the issue is, once we get to equalization, the equalization border - the five province standard - once we get equalized, we are not asking for equalization. That’s where the misunderstanding is: we are saying that once our revenues get to a point where we no longer need equalization, we don’t want it. We’ll be the same as every other province that gets equalization - New Brunswick, Prince Edwad Island, Nova Scotia. What we want, though, is the right, after we equalize, to keep 100% of our revenues, our provincial royalty revenues. The cap prevents us from doing that. So what they’re saying is once you equalize, you don’t take equalization, but when you go beyond you can’t keep 100% of the revenues once you get to Ontario - why not? Alberta does, Saskatchewan could, why couldn’t we? What would deny us the right to keep 100% of our royalties?
cbc
In fact Alberta and Saskatchewan have full ownership of their resources whereas the Newfoundlanders and Nova Scotians do not. However, what Williams is arguing is that the feds should not claw back any equalization payments unless and until Nfld becomes a fully have province.

As I understand it, at the moment if Nfld gets $1.00 in oil revenue, Ottawa takes .70 form the equalization which would be otherwise payable. Under the proposal on the table, Ottawa would stop doing that until Nfld had the same fiscal capacity as Ontario and then would continue the policy of reducing the equalization.

This seems rather generous to me. But I may be missing something.