'All options are on the table,' N.S. premier warns PM

Premier Rodney MacDonald is taking his rally against the federal budget to Ottawa Tuesday and refuses to rule out legal action against Prime Minister Stephen Harper's governmentin abitter disputeover equalization deals.

MacDonald says the budget will cost Nova Scotia hundreds of millions of dollars and wants all MPs, including Conservative members, to "stand up for Nova Scotia"and vote against it. The final vote is expected to be held at 5:15 p.m. ETTuesday.

His visit to the capital comes a day after Harper challenged Nova Scotia to take the federal government to court if it is serious about claims that Ottawa went back on its word and changed offshore-oil revenue agreements.

TheProgressive Conservative premiertold CBC News Tuesday he was surprised by Harper's comments, but his province is stillweighinga possible court challenge.

"All options are on the table," MacDonald said. "We haven't ruled that out if necessary, but that's not the direction we want to go."

He said the budget offers new equalization formulas that undermine the Atlanticaccords. The accords, signed in 2005 under Liberal Prime Minister Paul Martin, protects Nova Scotia's and Newfoundland and Labrador's offshore oil and gas revenues from federal clawbacks.

MacDonaldwould not comment on what was said at a Monday night meeting with Foreign Minister Peter MacKay, who is also from Nova Scotia. But the premierwarned that public opinion in Nova Scotia was on his side.

"They know a deal has been broken and they want what's rightfully theirs," the premier said.

Heplans tomeet with representatives from all opposition parties Tuesdayand will sit in the gallery above the House of Commons to watch the Conservative MPs during question period.

MacDonaldis likely to see little response from the eight remaining Conservative MPs from Atlantic Canada, whosat quietly in the House of Commons Monday as Harper fended off attacks fromthe opposition.

Liberal Leader Stéphane Dion reminded MPs Mondaythat Harper promised in the election campaign "no cap, no clawback, no limitations, no big exceptions in the fine print."

Longtime Nova Scotia Conservative MP Bill Casey was booted out of the Tory caucus last week when he voted against the budget. Meanwhile, fellow Nova Scotia Tory MP Gerald Keddy has publicly expressed his concerns with how the dispute is being handled.

Newfoundland and Labrador Premier Danny Williams told CBC News Tuesday that Harper's ultimatum was highly inappropriate.

"What kind of conduct is that for a prime minister of this country?" mused Williams, who has promised to campaign against Harper's government in the next federal election because of what heconsiders a broken promise.

"For him to say childishly, 'Sue me or I'll sue you,' that's not the way that the leader of a nation should act."

Talks stalled

Despite the government's insistence there would be no side deal cut for provinces, negotiations have been underway between Ottawa and Nova Scotia since the March budget was tabled.

But MacDonald said the talks went nowhere, forcing provincial officials to walk away from the table.

"I have exasperated myself day in and day out to try and give them a chance to do the right thing," he said.

The budget offers the signatories of the Atlantic accords — Nova Scotia and Newfoundland and Labrador — two options:

• The old equalization formula, along with the benefits from the Atlantic accords, which allowed the provinces to profit from their offshore oil and gas resources without fear of losing equalization money.
• A new, enriched equalization formula that includes a cap on the amount of equalization payments if the province's offshore oil and gas revenues reach a certain level.

Casey, who now sits as an independent in the House ofCommons,warned thatanger with the Harper government is growing in Atlantic Canada and could spread.

"If the government of Canada signs a 15-year contract and breaks it after two years, that affects the reputation of every Canadian," he said.

"I think people will start to understand this if I repeat it often enough."