Sure. I'll start with some background. The 2005 Canada-Nova Scotia arrangement on offshore revenues provided time-limited protection to Nova Scotia to offset the negative impact of offshore revenues on its equalization payments. This arrangement expired on March 31, 2020.
In 2018, Nova Scotia received a one-time settlement after an arbitration process concerning how transportation costs were treated in the Sable offshore energy project royalty calculations. The settlement recognized that transportation costs claimed had been too high and thus past royalties paid were too low. As the equalization program operates with a two-year data lag and a three-year moving average, the one-time settlement payment will reduce the province's equalization payments from 2020-21 to 2022-23. Had these royalties been paid out initially rather than retroactively, their impact on Nova Scotia's equalization payments would have largely been offset under the 2005 arrangement on offshore revenues.
Division 16 amends the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act to extend the Minister of Finance's authority to make additional fiscal equalization offset payments to Nova Scotia until 2022-23. This would ensure that Nova Scotia is not penalized by the timing of a recalculation of past royalties, as discussed earlier.