Premier Rodney MacDonald is taking his rally against the federal budget to Ottawa Tuesday and refuses to rule out legal action against Prime Minister Stephen Harper's government in a bitter dispute over equalization deals.

MacDonald says the budget will cost Nova Scotia hundreds of millions of dollars and wants all MPs, including Conservative members, to "stand up for Nova Scotia" and vote against it. The final vote is expected to be held at 5:15 p.m. ET Tuesday.

Nova Scotia Premier Rodney MacDonald says the federal government went back on its word and changed offshore-oil revenue agreements.
(CBC)

His visit to the capital comes a day after Harper challenged Nova Scotia to take the federal government to court if it is serious about claims that Ottawa went back on its word and changed offshore-oil revenue agreements.

The Progressive Conservative premier told CBC News Tuesday he was surprised by Harper's comments, but his province is still weighing a possible court challenge.

"All options are on the table," MacDonald said. "We haven't ruled that out if necessary, but that's not the direction we want to go."

He said the budget offers new equalization formulas that undermine the Atlantic accords. The accords, signed in 2005 under Liberal Prime Minister Paul Martin, protects Nova Scotia's and Newfoundland and Labrador's offshore oil and gas revenues from federal clawbacks.

MacDonald would not comment on what was said at a Monday night meeting with Foreign Minister Peter MacKay, who is also from Nova Scotia. But the premier warned that public opinion in Nova Scotia was on his side.

"They know a deal has been broken and they want what's rightfully theirs," the premier said.

He plans to meet with representatives from all opposition parties Tuesday and will sit in the gallery above the House of Commons to watch the Conservative MPs during question period.

MacDonald is likely to see little response from the eight remaining Conservative MPs from Atlantic Canada, who sat quietly in the House of Commons Monday as Harper fended off attacks from the opposition.

Liberal Leader Stéphane Dion reminded MPs Monday that Harper promised in the election campaign "no cap, no clawback, no limitations, no big exceptions in the fine print."

Longtime Nova Scotia Conservative MP Bill Casey was booted out of the Tory caucus last week when he voted against the budget. Meanwhile, fellow Nova Scotia Tory MP Gerald Keddy has publicly expressed his concerns with how the dispute is being handled.

Newfoundland and Labrador Premier Danny Williams told CBC News Tuesday that Harper's ultimatum was highly inappropriate.

"What kind of conduct is that for a prime minister of this country?" mused Williams, who has promised to campaign against Harper's government in the next federal election because of what he considers a broken promise.

"For him to say childishly, 'Sue me or I'll sue you,' that's not the way that the leader of a nation should act."

Talks stalled

Despite the government's insistence there would be no side deal cut for provinces, negotiations have been underway between Ottawa and Nova Scotia since the March budget was tabled.
 
But MacDonald said the talks went nowhere, forcing provincial officials to walk away from the table.

"I have exasperated myself day in and day out to try and give them a chance to do the right thing," he said.
 
The budget offers the signatories of the Atlantic accords — Nova Scotia and Newfoundland and Labrador — two options:

• The old equalization formula, along with the benefits from the Atlantic accords, which allowed the provinces to profit from their offshore oil and gas resources without fear of losing equalization money.
• A new, enriched equalization formula that includes a cap on the amount of equalization payments if the province's offshore oil and gas revenues reach a certain level.

Casey, who now sits as an independent in the House of Commons, warned that anger with the Harper government is growing in Atlantic Canada and could spread.

"If the government of Canada signs a 15-year contract and breaks it after two years, that affects the reputation of every Canadian," he said.

"I think people will start to understand this if I repeat it often enough."