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Martin's revenue deals buy only temporary peace

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Date: Monday Feb. 14, 2005 6:31 AM ET

Prime Minister Paul Martin puts pen to paper on his government's offshore revenue deals with Newfoundland and Labrador and Nova Scotia on Monday.

Unfortunately for Martin, a hero's welcome is unlikely, and he's apparently opened up a Pandora's Box of equalization and resource revenue grievances with other provinces.

While the deal gives Newfoundland $2.6 billion over eight years and up to $1.1 billion to Nova Scotia, Martin was under constant, heavy fire throughout the seven-month process.

Why? For not coughing it up sooner.

"Despite the fact it was an offer he had made, that he didn't have to make, the political benefits haven't been as great as they might have been," Chris Dunn, a political science professor at Memorial University in St. John's, told The Canadian Press.

"He's probably realizing that he hasn't handled this dossier ... as well as he might have. Now is his chance."

During the federal election campaign last June, Martin promised to renegotiate a deal with the two provinces to shield their offshore energy revenues from equalization clawbacks.

Historically, the federal government clawed back all but 30 per cent of such revenues, says The Globe and Mail.

If a province's energy revenues went up, its federal equalization revenue -- designed to ensure health and education standards are comparable across Canada at comparable levels of taxation -- went down.

Reaching those agreements, however, took seven months.

Newfoundland Premier Danny Williams torched Martin by accusing him of reneging on his promise. Martin has denied the accusation.

Williams kept up the pressure. He walked out of a first minister's meeting with Martin in October.

His most dramatic act was ordering Canadian flags removed from provincials government buildings in Newfoundland and Labrador.

Newfoundlanders by the thousands wrote e-mails to berate Martin. They verbally flayed John Efford, the Newfoundland MP and federal natural resources minister, in radio call-in shows and lambasted him in letters to the editor.

When the deal was announced, Williams returned to a hero's welcome in St. John's, with hundreds of cheering people at the airport.

In a Jan. 31 speech, Williams said: "We all know that the promise that was made to us on June 5 was a long time coming. It was something that we wanted for many, many years but it was something that we had never been successful at attaining."

A federal Liberal Party official in Newfoundland and Labrador said the politicians haven't been treated fairly.

"We're delighted there's a deal, but we knew there was going to be a deal," Kevin Hussey, vice-president of the federal Liberal party in Newfoundland and Labrador, told CP. "Paul Martin promised us a deal and he delivered the deal he promised."

Williams has turned around his rhetoric about Martin by 180 degrees.

While that put out Martin's equalization fires in Nova Scotia and Newfoundland and Labrador, it's caused them to flare up elsewhere.

Premier Dalton McGuinty of Ontario -- Canada's largest province and home to the largest provincial caucus of federal Liberal MPs -- has complained about the deal.

He said the deals were "patently unfair" because Nova Scotia and Newfoundland will receive equalization payments and oil and gas revenues. That will push their per-capita revenue capacity beyond Ontario's.

Ontario and Alberta have traditionally been the two "have" provinces, meaning they pay revenues into the complicated equalization scheme for distribution to "have-not" provinces.

Saskatchewan Premier Lorne Calvert -- whose province has recently become a "have" due to surging energy revenues -- wants a similar deal for his province.

New Brunswick and B.C. have started making noises about getting 100 per cent of the royalties from their non-renewable natural resources.

Gilles Duceppe, leader of the sovereigntist Bloc Quebecois, has requested that Quebec's hydro power receive the same treatment as Nova Scotia and Newfoundland's energy resources, according to The Globe and Mail.

This outstretching of hands makes total sense to Wayne McKay, a constitutional expert at Dalhousie University in Nova Scotia.

"If Nova Scotia and Newfoundland get to keep all this, then how could you say B.C. couldn't or anybody else with offshore resources -- or even onshore resources for that matter," McKay told CP.

By putting provinces first in line for resource revenues, "it diminishes the power of the federal government," he said.

Dunn's opinion? Martin must make Nova Scotia and Newfoundland remember how good this deal was for them -- and hope the rest of Canada forgets about it.

With files from The Canadian Press

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