Newfoundland and Labrador will receive $2.5 billion in cash from the federal government from the updated Atlantic Accord agreement.
In total, the province will receive $3.3 billion between today and 2056. The $3.3 billion comes from the redistribution of cash going to the federal government from the Hibernia project. Instead of going straight to Ottawa, the federal share of revenue will go to the province with no catch on that money.
The province will have to make eight annual payments of $100 million as part of the agreement, set to begin in 2045.
With the $800 million going to the federal government, the province will make $2.5 billion from the deal.
The payments from the $2.5 billion will be “front loaded,” meaning $1.9 billion will come before 2030, with the rest coming afterward.
The agreement will have an immediate impact on the province’s net debt, reducing it by $2.5 billion over that time, according to the government. The province estimates a 16 per cent reduction in overall net debt for the province.
Those details don’t mean the money is totally going on the province’s “credit card.” The government will have discretion on how the money is spent.
The agreement is not retroactive, according to government officials, meaning there was no re-evaluation of the revenues received since the last renegotiation of the accord.
The deal is predicated on extending the life of the Hibernia oilfield. As it stands, the platform is expected to be decommissioned in 2046 or 2047. Should Hibernia be decommissioned before 2056, there will be no impact on the agreement.
On rate mitigation, there’s nothing specific in the agreement, other than a commitment from the federal government to examine the issue.
“Canada will engage with Newfoundland and Labrador to expeditiously examine the financial structure of the Lower Churchill projects, so that the province can achieve rate mitigation,” reads documents provided to media in advance of the announcement.
The rate mitigation study will begin on Friday, April 5, with a goal to have the study complete by the time Muskrat Falls is fully online.
Another point of the agreement is joint management of the province’s offshore. The federal government and province will maintain joint responsibility of the offshore oil and gas industry, but with a few changes.
Oil and gas activity will be allowed in the Northeast Newfoundland Slope Marine Refuge – an approximately 46,000-square-kilometre marine refuge near the 200-mile limit off the province’s coast. There will be a prohibition on oil and gas activities in the proposed Laurentian Channel Marine Protected Area.
The new agreement will also see an arbitration process used to settle any disputes between the federal government and province.
More to come