Evidence of meeting #43 for Finance in the 43rd Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was payments.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
I don't think there were any questions on it.
Does anybody have any questions on division 16, which is on the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act?
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Would it be possible to provide us with the formulae that are used for the calculation? If so, I would be most grateful.
Earlier, I did not thank you for answering in French. I would like to do so now.
Thank you.
Acting Director General, Federal-Provincial Relations Division, Federal-Provincial Relations and Policy Branch, Department of Finance
We can, of course, provide the committee with the formulae used to make this calculation.
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you, Chair.
Ms. Kennedy, I think the formula may not necessarily apply for the piece with Nova Scotia.
Can you confirm whether that's just adjusting the payout to the Province of Nova Scotia, in accordance with the arbitration that took place around the Sable offset transportation costs, and simply puts the royalty where it would have been had the results of the arbitration come through in the initial commercial transaction?
Acting Director General, Federal-Provincial Relations Division, Federal-Provincial Relations and Policy Branch, Department of Finance
That is true that it is to compensate for the timing of the arbitration payment. The way that is achieved is by extending the formula until 2022-23. In the bill, the amount for the first year is just hard coded, but it's still resulting from the application of that formula.
Liberal
The Chair Liberal Wayne Easter
Did you give the explanation on division 16 previously, Ms. Kennedy? Maybe I skipped over it.
Acting Director General, Federal-Provincial Relations Division, Federal-Provincial Relations and Policy Branch, Department of Finance
No, I didn't. I'm afraid I lost my connection before that.
Liberal
The Chair Liberal Wayne Easter
Do you want to give us the explanation now, on division 16, so we have that in the record? Then I'll go to Ms. Jansen, who has a question.
Acting Director General, Federal-Provincial Relations Division, Federal-Provincial Relations and Policy Branch, Department of Finance
Sure. I'll start with some background. The 2005 Canada-Nova Scotia arrangement on offshore revenues provided time-limited protection to Nova Scotia to offset the negative impact of offshore revenues on its equalization payments. This arrangement expired on March 31, 2020.
In 2018, Nova Scotia received a one-time settlement after an arbitration process concerning how transportation costs were treated in the Sable offshore energy project royalty calculations. The settlement recognized that transportation costs claimed had been too high and thus past royalties paid were too low. As the equalization program operates with a two-year data lag and a three-year moving average, the one-time settlement payment will reduce the province's equalization payments from 2020-21 to 2022-23. Had these royalties been paid out initially rather than retroactively, their impact on Nova Scotia's equalization payments would have largely been offset under the 2005 arrangement on offshore revenues.
Division 16 amends the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act to extend the Minister of Finance's authority to make additional fiscal equalization offset payments to Nova Scotia until 2022-23. This would ensure that Nova Scotia is not penalized by the timing of a recalculation of past royalties, as discussed earlier.
Liberal
The Chair Liberal Wayne Easter
Thank you, Ms. Kennedy.
Now I have three questioners on the list: Ms. Jansen, Mr. Falk and Mr. Fast.
Ms. Jansen.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
I'm just wondering if you could give me a Coles Notes version, a kind of “Hibernia for dummies”, because I don't think I quite understand. Did the contract go bad? Is that what you're saying? Is that why this is being done?
Acting Director General, Federal-Provincial Relations Division, Federal-Provincial Relations and Policy Branch, Department of Finance
No. They had an arbitration process that essentially said they should have been paid more royalties earlier, and they received a lump sum payment in 2018. They did not receive the full protection for those royalty amounts under the 2005 offshore revenue arrangement that they otherwise would have.
Conservative
Ted Falk Conservative Provencher, MB
Thank you, Mr. Chair.
This is more of a general question. You asked for general questions before, and that's when I put my hand up. We have a lot of directors general or acting directors general in this meeting, and there seems to be, with a lot of the spending, a lack of reporting and accountability from the provinces with regard to the distribution of the funds they're receiving from the federal government.
My question is this, and I'd like each one of them to answer specifically: Is this due to a decision made by themselves, or have they received a direction from the minister to not require the reporting and accountability?
I think it's a fair question, Mr. Chair.
Liberal
The Chair Liberal Wayne Easter
I'll open it up if somebody wants to take a stab at it, but I think it is more a question for a minister.
Is anybody taking up the challenge?
I don't see anybody.
Conservative
Liberal
Conservative
Ed Fast Conservative Abbotsford, BC
Thank you.
I want to go back to specifically to the offset payment program for Nova Scotia. I don't know if our officials can answer this. Maybe Mr. Fraser can.
Have the offshore oil and gas revenues for Nova Scotia come to an end? Has Nova Scotia exhausted those? What's the status? Do we still expect there to be a revenue stream coming in the future? I understood that we were coming to the end of that program.
Liberal
Conservative
Liberal
The Chair Liberal Wayne Easter
This is the finance committee, Sean, not the House. You don't need a jacket on here. Look at Ed; his tie is loose.
Liberal
Sean Fraser Liberal Central Nova, NS
Well, it's out of respect for my good friend, Mr. Fast.
The revenues from the project that was the subject of the arbitration are coming to an end. There was a dispute, not about the project falling apart but about the amount of royalties that ought to have been paid under it. My understanding of the legislative change is that it essentially puts Nova Scotia in the same place it would have been had the company been paying the royalties in accordance with what the arbitrator found they should have been paying rather than what they in fact were paying.