Remarks by Hon. John F. Hamm
Premier of Nova Scotia
Canadian Club
Toronto, Ontario
September 24, 2001

Good afternoon. And thanks so much for the invitation to join you today.

I was asked to come here to speak about offshore fiscal fairness.

But first I want to take a few minutes to talk about what I believe is foremost in the minds of many of Canadians today – the terrorist attack on the United States less than two weeks ago.

Attack on USA
In the aftermath of this truly horrifying event, we have seen an outpouring of sympathy and solidarity across our country.

In Nova Scotia, people were able to express their feelings in a very personal and direct way. Many Nova Scotians opened their homes and their hearts to the 8,000 passengers who were diverted to Halifax on the day the skies were closed.

Today the world tries to return to a semblance of normalcy, but it’s hard to ignore the shockwaves. It’s impossible to ignore the implications as we see foundations of our economy shaking with enormous losses and layoffs.

The world has been reshaped, and our place in it has been altered. There’s no doubt we are treading on new ground. But Canada is a powerful economic and social model in this uncertain world. In short, our country is strong. Our people are resourceful. Our position in North America strategic. And, Nova Scotia is proud to be part of the reason why.

Nova Scotia’s Growing Importance
As you know, Nova Scotia is undergoing significant, important energy development. ...Secure, reliable energy sources have now become very important.

Our province is located on the Great Circle route connecting Europe, Asia and North America.

...Geography has now become more important. Nova Scotia is the east coast base of Canada’s commitment to international security.

...Defense has now become more important.

Nova Scotia now produces the equivalent of a quarter of the natural gas consumed each year in New England and we are set to double that within four years.

...Energy Security has now become more important.

Back to the Future
In some respects we are back into the uncertain and uneasy world of 20 or 30 years ago. At that time international tensions put finding new Canadian energy supplies on the top of the agenda.

Developing oil offshore Newfoundland and natural gas offshore Nova Scotia was seen as a major part of the solution. It was a long-term – national energy opportunity --- a national objective --- a national priority.

But a dispute between the federal and provincial governments over ownership of these valuable, non-renewable resources was a barrier to development. In our view the question of ownership should have been clear.

Provincial Subsoil Rights
There was plenty of precedent. When Canada, gained new land to the north of Upper and Lower Canada those provinces expanded and became Ontario and Quebec.

In the 1930's British Columbia, Alberta and Saskatchewan were specifically granted valuable subsoil mineral rights. Resources that once belonged to all Canadians were granted to some. These resources became the foundation of their successes. The key to building a strong economy.

When a similar expansion occurred with the 1976 Law of the Sea Convention and the 200-mile economic zone, Nova Scotia and Newfoundland believed the same principles should apply.

The federal government disagreed and the matter ended up in court. Most of the provinces intervened on the side of Newfoundland, but the Supreme Court of Canada ruled in favour of the federal case.

As a result of these differences, there was a deadlock in the offshore at the operating and management levels.

Atlantic Canada’s offshore petroleum industry moved forward only after the Government of Canada and the Governments of Nova Scotia and Newfoundland and Labrador negotiated a pair of offshore accords in the mid 1980's.

National Objectives
In those agreements, the issue of ownership was set aside. In its place was a series of very admirable objectives: for Canada there would be the potential of new oil and gas supplies. With increased diversity would come increased security.

Provincial Objectives
For Nova Scotia and Newfoundland, the objective was economic development and new sources of revenues. As provinces we would have the opportunity to dramatically improve our economies and our place in confederation.

Nova Scotia would once again be a net contributing economic partner – as we were when we joined with Ontario, Quebec and New Brunswick some 134 years ago as founders of this great Confederation.

All this was spelled out in the Offshore Accord. The language and intent was clear:

I quote from the Accord:
" to recognize the right of Nova Scotia to be the principal beneficiary of the petroleum resources in the offshore area consistent with a strong and united Canada;"

Importance of Issue to Nova Scotia
This is a core issue for us. Our province has built up a large commutative debt burden, partly to prepare us for the time we would have a new energy industry. We need new revenues to pay back that debt.

We need the new money to improve public service in key areas such as training and education. We need new revenues to make our business climate more competitive and keep up with the energetic tax cutting efforts you see today in Ontario, Alberta and British Columbia and to a lesser extent in most other provinces.

The Case for Fairness
The former federal Minister of Finance, Justice and International Trade, John Crosbie laid the case very well in his recent article in The Globe and Mail. He was there when the decisions were being made; when the debates took place in parliament. He signed the Atlantic Accord on behalf of the federal government.

His article made it clear that none of what we are saying today is new. In fact it has been the core national vision for the offshore from the beginning. Here=s what Prime Minister Trudeau had to say in Parliament on July 16,1980:

"The commitment we have made regarding the offshore is that until the provinces with resources off their shores have reached the average income in Canada, we intend to see that they get the overwhelming part of the resources from the offshore."

One of our main supporters at the time was a seasoned cabinet veteran by the name of Jean Chretien. As Minister of Mines and energy he was responsible for offshore matters.

On June 24, 1984, his parliamentary secretary, Leonard Hopkins was very specific about the goal:

"Until Nova Scotia’s per capita fiscal capacity reaches 110 per cent of the national average ... the province will receive all offshore revenue."

This is the language that later was incorporated in legislated agreements between the Government of Canada and the Province of Nova Scotia passed in 1984. A similar proposal was made to Newfoundland.

Intent of the Accord
So there has always been clear agreement as to intent. Offshore revenues are the means to an end. Offshore revenues are the tool to permanently transform our economy. That is the agreement, signed by both governments.

Since this point has often been misunderstood let me repeat it again: the signing of the Accords allowed each party to reach fundamental objectives: for the nation new energy sources and greater security of supply; for the provinces, new revenue sources to allow for permanent economic transformation.

Offshore a Reality
Fifteen years after the Offshore Accord was signed, offshore development is a reality. The benefits promised for the nation are coming to pass.

The Sable Offshore Energy Incorporated is producing more than half a billion cubic feet fo gas a day for their partners – ExxonMobil, Imperial Oil, Shell Canada and Emera Last year Nova Scotia exported nearly a billion dollars worth of natural gas which helped provide valuable foreign exchange.

Those companies are now working on the second stage of the project. PanCanadian is getting ready to submit a development plan for their natural gas project – Deep Panuke. They are drilling in other areas right now an effort to find more gas.

Marathon will be drilling the first modern deepwater well offshore Nova Scotia later this fall. That area holds out tremendous potential.

In the latter half of this decade the royalties from the Sable Project alone are projected to be approximately $300 million a year. On a five billion dollar budget, that’s a very significant number.

In Newfoundland their royalties could reach $800 million a year. Very large financial numbers in relation to the size of provincial operating budgets.

Canada Gains Accord Benefits
The magnitude of the production today – and the potential ahead – all show Nova Scotia is now part of the North American energy solution. In a world where security is once again a major concern, Nova Scotia natural gas offers the option of reducing your risk.

If consumers in Ontario and Quebec want to buy gas from the east as well as the west, industry is ready to finish the national pipeline from Quebec to the Maritimes.

So Nova Scotians believe that one side of the Accord is being fully implemented. The Government of Canada and many other provinces are receiving major benefits now – and are set to gain even more in the future.

Your side of the deal has worked out very much as planned. But our side has not. The principal beneficiary from offshore development is the federal treasury – not the people of Nova Scotia.

It seems that all the best intentions in the world can be sidetracked by details and unforeseen events. Today Nova Scotians have an agreement with hollow substance. A goal without a proper delivery system.

Accord Failure
Under the various sets of assumptions that Nova Scotia uses to project offshore royalties, corporate taxes and other revenues, we are forecasting that Ottawa will gain tens of billions of dollars from offshore developments.

For every dollar that flows to governments, the federal government is set to gain more than 80 cents. Nova Scotia on the other hand is set to gain less than 20.

The result is that Nova Scotia will not be the primary beneficiary of offshore development. This failure of the Offshore Accord is at the root of my national campaign for offshore fiscal fairness.

Offshore Fiscal Fairness Campaign Launched
We launched our campaign nearly nine months ago. I have consistently delivered this message:

As a nation we grow stronger as our regions grow stronger. And because this is a well-grounded truth, it has resonated with people across this country.

Gaining Support
Provincial and federal politicians, government officials, many business leaders and private citizens such as former Alberta Premier Peter Lougheed and of course John Crosbie have expressed support for Nova Scotia’s Campaign.

Premier Ralph Klein offered Alberta’s endorsement during a visit to Nova Scotia in June. And last month, I met with Premier Grimes of Newfoundland. We agreed we had much in common and that we would proceed jointly in pursuit of a similar set of goals.

And what is the ultimate aim here? It is simple, direct and unchanged:

To carry out the intent of the two offshore Accords, so that both provinces become principal beneficiaries of their offshore development.

As promised, we must keep all offshore revenues – at least until we have diversified and sustainable economy.

Our task is to find a way to take the promise of the Accord and make it real. What we need is an updated mechanism to enable us to keep the revenues from these non-renewable resources – until our economy reaches the national average.

Our request to the Government of Canada is consistent with the commitments made by previous federal governments and supported by most Canadian provinces at the time we signed the Offshore Accords.

From this solution will grow a new strong region of our country. From coast to coast Canada will have prosperous centres attracting growth and innovation. Confederation was founded as a partnership of equals. Implementing the offshore Accords will help deliver on that promise.

Today, I ask for your support.

Underneath all the legal documents, principles and intents is the fundamental issue of fairness. Other provinces used their resources to transform their economies — Nova Scotia deserves the same opportunity. This is Nova Scotia’s turn. We are determined not to lose it.

Thank you for having me here today as your guest speaker. Hopefully you now have a better appreciation of why my vision as Premier of Nova Scotia is to build a stronger Canada, by building a stronger Nova Scotia.