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Ottawa reaches deal with Nova Scotia 
on resources  
Politics Watch News Services
October 10, 2007, updated 5:17 p.m.

Defence Minister Peter MacKay, Nova Scotia Premier Rodney MacDonald and Prime Minister Stephen Harper appear at a press conference in the foyer of the House of Commons on Wednesday.

OTTAWA  (PoliticsWatch.com) —  Prime Minister Stephen Harper announced Wednesday the federal government had settled a dispute with Nova Scotia on the province's offshore oil and gas revenues. 

The surprise announcement comes less than 24 hours after Newfoundland and Labrador Premier Danny Williams won 70-per-cent of the vote in a landslide victory in Tuesday's provincial elections. 

Newfoundland and Labrador and Nova Scotia were both affected by 2007 federal budget equalization changes that the provinces had argued violated the Atlantic Accord on offshore revenues. Saskatchewan has also criticized the equalization changes and is taking the federal government to court. 

Williams had hoped his resounding election result would further bolster his efforts to pressure Harper on reversing those changes. 

"There is a message here, Steve, if you want to take me and my team on, you've got to take on the people of Newfoundland and Labrador," Williams said during his campaign-victory speech. 

At his press conference in Ottawa Wednesday, Harper denied the announcement was designed to mute Williams' criticisms. 

"I've always believed we can reconcile our differences, that they were reasonably small," Harper said. 

"You know it's up to Premier Williams whether he accepts that reconciliation or not. The fact of the matter is the considerations on the flexibility of the choice will be extended to Newfoundland." 

With Nova Scotia Premier Rodney MacDonald at his side, Harper told a press conference on Parliament Hill that the agreement represents "a historic breakthrough."

In the last federal budget, changes to the equalization formula for the provinces gave Nova Scotia and Newfoundland and Labrador the option to either keep their existing equalization system under the Atlantic Accord or enter the more generous equalization system without the Accord. 

Under the new agreement, the federal government will give the provinces the flexibility in the future to opt in and out of the new equalization formula or the Atlantic Accord based on which one is more financially beneficial to the provinces. 

The prime minister's decision to reach a settlement in the politically sensitive dispute could be another sign the minority Conservative government is preparing for a federal election campaign. 

The government faced a major crisis in the spring after announcing the equalization changes. Both Williams and MacDonald called on Conservative MPs from their respective provinces to vote against their own government on the budget implementation bill. 

The government's popularity dropped in Atlantic Canada in the spring following weeks of negative news coverage and editorials. One poll in May showed the government's approval rating in Nova Scotia fell to 37 per cent from 50 per cent. 

Wednesday's deal gives the government one less problem in Nova Scotia should an election happen this fall. 

Liberal intergovernmental affairs critic Domimic LeBlanc, however, said he does not expect Wednesday's announcement to change Conservative fortunes in Atlantic Canada. 

In an interview with PoliticsWatch, LeBlanc called the announcement a  "pathetic attempt" to save the Conservatives' remaining two seats in Atlantic Canada held by Defence Minister Peter MacKay and veteran MP Gerald Keddy

"I think he saw Premier Williams' overwhelming victory last night as a confirmation that Atlantic Canadians aren't going to accept his betrayal of his commitment on the Atlantic Accord," LeBlanc said. 

Nova Scotia's Bill Casey was the only government MP to vote against the budget implementation bill in the spring. 

He was instantly kicked out of the Conservative caucus and currently sits as an independent. 

On Wednesday, the prime minister categorically ruled out any return to the Conservative fold for Casey. 

"Mr. Casey is not welcome into our caucus and just so I can be as clear as I can be on it, when there is a next federal election there will be a Conservative candidate in Mr. Casey's riding and it will not be Mr. Casey," Harper said. 

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