Nfld. & Labrador

Tory blue book math doesn't add up on 2005 Atlantic Accord benefits

The Progressive Conservative campaign platform overstates the impact of the 2005 Atlantic Accord by nearly $700 million, and has the Tories giving an evolving series of answers to explain their calculations.

Progressive Conservatives overestimate total payments by nearly $700 million

The PC 'Yes With Ches' campaign blue book was released in St. John's last month. (Terry Roberts/CBC)

The Progressive Conservative campaign platform overstates the impact of the 2005 Atlantic Accord by nearly $700 million, and has the Tories offering an evolving series of answers to explain their calculations.

"In 2005, after months of struggle, [then-premier Danny] Williams reached a renewed Atlantic Accord fiscal arrangement with the [Paul] Martin government," the Tory blue book notes.

"Williams negotiated upfront and offset payments of $3.2 billion based on application of the principal beneficiary principle."

That number, however, is incorrect.

The 2005 Accord actually provided just over $2.5 billion in upfront and offset payments over the life of the agreement.

Anytime you're in a negotiation with the federal government about something as far reaching as the Atlantic Accord, everything's on the table.- Ches Crosbie

PC Leader Ches Crosbie told CBC News that the figure cited by the blue book included payments related to the original Atlantic Accord agreement, signed in 1985.

"It's made up of about $2.5 billion that Danny negotiated in additional compensation, or additional monies under the Atlantic Accord offset, and monies that were negotiated or agreed to come to us under the 1985 original Atlantic Accord," Crosbie said.

He suggested benefits from the 1985 Accord were somehow at risk in 2005.

"Anytime you're in a negotiation with the federal government about something as far-reaching as the Atlantic Accord, everything's on the table," Crosbie said.

"So my position would be that Mr. Williams preserved the original agreement from 1985 as to what payments would be, but he negotiated additional supplementary payments."

Different explanations for blue book amount

Crosbie's comments came in the wake of other explanations provided by the Tory campaign for the $3.2-billion blue book figure.

Their initial rationale saw them double-count some revenue from the 2005 Accord — adding together a big advance payment from Ottawa and portions of that same amount that later showed up on the province's financial statements, when it was all actually from the same pot of cash.

Then, the PC campaign offered a revised explanation that was backstopped by a five-year-old federal financial document.

They added payments from the original Accord, reached in 1985, to the amounts from 2005, as referenced on that document, to come up with $3.2 billion.

However, the document describes the 2005 amounts as "notional allocations," not actual cash flow.

The incorrect addition of hundreds of millions of revenue to a long-ago Tory deal comes at the same time the PCs are distancing themselves from the negative financial impact of the more recent Muskrat Falls project.

Crosbie slammed new deal for 'double-counting'

These adventures in mathematics also come in the wake of PC Leader Ches Crosbie's sharp criticism of the new 2019 Accord deal reached by the Liberal government last month.

"The more we get an opportunity to look at the Atlantic Accord deal Dwight Ball just signed, the worse it gets," Crosbie said in an April 3 press release.

"Ball sold us out!"

That news release says "they're double-counting tax revenue we would have received anyway."

Progressive Conservative Leader Ches Crosbie is pictured at his campaign launch on April 17, 2019. (CBC)

Meanwhile, the Crosbie PCs have been accused of double counting themselves, in relation to their energy mitigation plan.

Crosbie brushed aside the suggestion that the 2005 Atlantic Accord blue book number of $3.2 billion could be considered a result of double counting.

"I suppose we could have explained the number and the origin of the number more clearly," he said.

Crosbie instead steered his responses back to what he calls the failures of the recent Accord agreement signed by his Liberal opponents.

2005 Accord explanation

With all those numbers floating around, here's how the 2005 Atlantic Accord actually worked.

Then-premier Danny Williams negotiated a $2-billion upfront payment for future benefits over the eight-year term of the agreement.

Those 2005 Accord payments complemented cash flowing to the province from offset provisions in the 1985 Accord, which kickstarted the local offshore oil industry.

Hibernia is one of Newfoundland and Labrador's producing oil fields. The 1985 and 2005 Atlantic Accords had provisions to protect equalization payments when oil started pumping revenues into the provincial treasury. (CBC)

In the simplest of terms, the offsets were designed to protect the province from reduced equalization payments related to offshore oil revenues.

The fear was that a dollar gained from the offshore would see a dollar lost in equalization.

The Accords acted as a type of shelter for that cash.

At the time, Newfoundland and Labrador was still a so-called "have not" province.

Ottawa sent the 2005 Accord cash in one big lump sum, at the beginning of the agreement.

That ended up being a good thing.

High oil prices and other factors pushed the province into "have" status, and meant that Newfoundland and Labrador actually would have earned less than half of that total in 2005 Accord payments.

But the province got to keep the entire $2 billion anyway.

In 2011-12, Newfoundland and Labrador also got an extra $536 million in cash related to the 2005 agreement, as a transitional payment because the province no longer qualified for equalization or offshore offsets beyond that year.  

In total, the 2005 Accord contributed just over $2.5 billion to the province's coffers.

Meanwhile, the offset provisions of the 1985 Accord accounted for another $2.5 billion.

And the 2019 Accord, signed last month by the Ball Liberals, will also net that same amount — $2.5 billion — but spread out over nearly four decades, between now and 2056.

Read more stories from CBC Newfoundland and Labrador

About the Author

Rob Antle

CBC News

Rob Antle is producer for CBC's investigative unit in Newfoundland and Labrador.

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