Canada’s Atlantic offshore arrangements with Newfoundland and Labrador

Backgrounder

Atlantic Accord

The Government of Canada signed the Atlantic Accord with Newfoundland and Labrador in February 1985.  The Accord granted the province the right to co-manage the offshore petroleum resources with the federal government and gave the province the ability to establish and collect resource revenues from the offshore petroleum resources as if these resources were located on land within the province.  The Accord also provided the province with time-limited protection against declines in Equalization payments, which expired in 2010-11.  In total, Newfoundland and Labrador received $2.5 billion under the Atlantic Accord, which was implemented through legislation under the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act

Arrangement between the Government of Canada and the Government of Newfoundland and Labrador on Offshore Revenues

Twenty years later, in February 2005, the Government of Canada signed the Arrangement on Offshore Revenues with the Government of Newfoundland and Labrador.  The Arrangement protected the province from declines in Equalization payments as a result of its offshore revenues, while it remained an Equalization-receiving province.  The Arrangement provided protection from 2004‑05 to 2011-12, with the possibility of an extension to 2019-20.  Newfoundland and Labrador exited Equalization in 2008-09 and thus did not qualify for the extension. The Arrangement was implemented through legislation under the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act

To provide immediate flexibility to address its fiscal challenges, a non-recoverable upfront payment of $2 billion was made to Newfoundland and Labrador in 2004-05 for the 2004-05 to 2011-12 period.  Since the cumulative decline in Newfoundland and Labrador’s Equalization due to its offshore revenues was less than the upfront payment, it did not receive any additional payments in future years.  The 2005 Offshore Arrangement also provided for a one-time transition payment in 2011-12 should the province not qualify for Equalization in that year.  Under this provision, Newfoundland and Labrador received an additional payment of $536 million in 2011-12.

Under the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act there is a legislative requirement for the Minister of Finance to conduct a review of the 2005 Arrangement on Offshore Revenues with a minister from Newfoundland and Labrador before March 31, 2019. 

The legislation specifies that the review should address:

  • the extent to which the Atlantic Accord objectives have been achieved, including the key objective of the Atlantic Accord that Newfoundland and Labrador be the principal beneficiary of its offshore;
  • whether Newfoundland and Labrador has realized lasting fiscal and economic gains from its offshore petroleum resources revenues;
  • the Equalization arrangements then in effect;
  • the fiscal disparities that then exist between Newfoundland and Labrador and other provinces; and
  • Newfoundland and Labrador’s undeveloped offshore petroleum discoveries.

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