Newfoundland and Labrador's premier ordered the removal of all Canadian flags from provincial government buildings Thursday in retaliation for an offer from the federal government on offshore royalties he calls a "slap in the face."

Premier Danny Williams said that the flags would be taken down and kept out of sight until Ottawa offers his province a fair deal.

"They're slapping us in the face. I'm not willing to fly that flag anymore in the province," Williams told reporters Thursday in St. John's.

Canadian flag comes down at the Newfoundland and Labrador legislature.
Canadian flag comes down at the Newfoundland and Labrador legislature.

"They basically slighted us, they are not treating us as a proper partner in Confederation. It's intolerable and it's insufferable and these flags will be taken down indefinitely."

On Wednesday, Williams said offshore revenue talks with federal Finance Minister Ralph Goodale in Winnipeg had failed to produce a deal, describing the government's latest offer as a "slap in the face."

Danny Williams
Danny Williams

"It's also quite apparent to me that we were dragged to Manitoba in order to punish us, quite frankly, to try to embarrass us, to bring us out there to get no deal and send us back with our tail between our legs," said Williams.

Williams, who had set a Christmas deadline for a new deal, said he has no intention of continuing to bargain with the federal government.

That's not the case for Nova Scotia, though. Premier John Hamm, who was also involved in the discussions, has said he will return to negotiations in January.

The provinces have been pushing to retain 100 per cent of offshore energy revenues without paying a penalty in clawbacks to equalization payments.

Ottawa now takes 70 cents of every dollar by reducing equalization payments.

Finance officials have said that under the latest offer, Ottawa will end the clawback scheme. This would result in additional revenues for the provinces, ranging from $2.5 billion to $3 billion, they say.

But Williams said Ottawa's actual proposal falls short of the 100 per cent figure, and that the province could lose at least $1 billion dollars of offshore revenue over the next eight years.

Williams also objected to a condition that required the province to eliminate its $700-million deficit in order to receive increased benefits from offshore revenues beyond eight years.

Goodale said he was disappointed with Williams' tactics.

"I think it's just terribly disappointing that someone would use the Canadian flag as a tool for partisan politics," Goodale said.