Newfoundland and Labrador will end up getting $5.6 billion more under the federal government's proposed equalization formula than under the status quo, says a Memorial University professor.

In the first attempt at crunching the numbers, Memorial University economist Wade Locke — one of the province's leading experts on offshore revenue deals — has found that if Newfoundland were to stick with the Atlantic Accord and the old equalization formula until 2020, it would receive $18.5 billion in combined revenues.

Memorial University economist Wade Locke says Newfoundland and Labrador could use the new equalization formula to its advantage.
(CBC)

But if the province follows an optimal strategy — where it would leave the accord in 2009 and opt into a formula where a fiscal cap is implemented and 50 per cent of non-renewable natural resource revenues are included — it would receive $24.1 billion over that same period, Locke said.

Locke said he chose 2009 as the best year for the province to jump out of the accord because that's when it will no longer qualify for equalization.

Premier Danny Williams has been roiling because the federal budget delivered two weeks ago only allows the province access to a newer, more generous equalization program if it gives up the Atlantic Accord.

That accord, signed with the previous federal Liberal government, generated millions of dollars of revenue each year for the province because it excluded oil revenues from equalization calculations.

Williams has claimed the province could lose, over time, billions of dollars if it opts out of the Atlantic Accord, which could expire as soon as 2012, though his government has not provided figures since the budget was released March 19.

The federal government has said Newfoundland can simply avoid any penalty by sticking with the existing formula under the Atlantic Accord.

But Williams has argued the accord was never at issue, and he shouldn't have to give it up to gain improvements in the new formula.

Williams has accused Prime Minister Stephen Harper of breaking a campaign promise by introducing a new equalization formula that includes 50 per cent of non-renewable resource revenues, as well as a fiscal cap.

But Harper has said he has broken no promise because Newfoundland has the option of sticking to the principles of the Atlantic Accord, which protects the province from clawbacks in equalization until at least 2012.

If Harper delivered on his promise, as defined by Williams, Newfoundland would receive $28.6 billion, according to Locke's estimates.

Locke, who stressed in a presentation he delivered late Wednesday that he made his calculations without political interference, acknowledged that his figures would likely serve as a source of contention between federal and provincial number crunchers.

"I can't control how people use this presentation," Locke said.

"Suppose you disagree with what I had to say here tonight, you being the province, you being the feds. Well boy, let's put your numbers out, let's all have a look at them."

Locke based his calculations on a range of factors, including a two per cent inflation rate and a $51 US barrel of oil price, and said his numbers were reasonable estimates.