Rising natural gas prices and more flexible number-crunching, not skilled political brinksmanship, gave Nova Scotia a more generous offshore revenue agreement, federal documents show.
The accord with the federal government, formally signed last Monday in Halifax, gives the province $1.1-billion over eight years, with an upfront payment of $830-million.
The provincial Progressive Conservatives, led by Premier John Hamm, have done a great deal of chest-thumping since then, bragging about how they held fast during negotiations by rejecting Ottawa's initial $640-million offer.
At their recent annual meeting, Tories proudly sported buttons that said "640 doesn't equal 830" and made jokes about math-challenged Liberals.
Documents obtained under Ottawa's Access to Information Act confirm, however, that the figures on which the federal government based its offers actually came from bureaucrats in the provincial Energy Department.
"Based on initial discussions and figures provided by your province, Nova Scotia expects benefits of about $640-million over the 2004-05 to the 2011-12 period," an Oct. 24, 2004, letter to Premier John Hamm from federal Finance Minister Ralph Goodale said.
Heavily censored background documents said the numbers were based on revenue forecasts prepared by the province in the late summer on the basis of natural gas prices at the time.
The revised deal came "from estimates done by the province on the basis of current, higher forecasts of natural gas prices."
A provincial official, who insisted on anonymity, confirmed that the initial numbers supplied to the federal government in the late summer were low-balled.
The figures were based on "extremely conservative" royalty figures that the province uses in its budget planning process, not the "best estimate" of what the government actually expects to receive, said the senior Energy Department official.
Federal and provincial Liberals, who were chided by Conservatives for insisting that the province take the initial offer, feel somewhat vindicated.
"The fact is, in October, 100 per cent of the royalties added up to $640-million," said Fisheries Minister Geoff Regan, the province's top representative in the federal cabinet. "In January, 100 per cent means $1.1-billion and hopefully more."
Nova Scotia's Energy Minister insisted that the province won significant concessions by holding out, including a better upfront payment and the inclusion of future offshore projects in the agreement.
"Did we negotiate a better deal? Of course we did," said Cecil Clarke, who led the province's negotiating team.
But when it comes to the factors that influenced bottom-line numbers, Mr. Clarke said the province misunderstood the scope of the agreement that Ottawa was trying to achieve.
He denied that the government made a mistake by initially setting its sites low.
"Let's face it, we were negotiating," he said in a recent interview. "In negotiating, offers are put on the table and they're clarified."
The documents also show that Newfoundland's similar but separate agreement became more generous because of higher, long-term projections for oil prices.
Both East Coast provinces were involved in months of protracted, often caustic, negotiations with federal officials after Prime Minister Paul Martin pledged last June during the election campaign that they could keep all of their offshore royalty payments without penalty.
The agreements, which have prompted an uproar in other provinces, protect Nova Scotia and Newfoundland from having offshore revenues clawed back under the federal equalization program.