Nova Scotia Premier Rodney MacDonald asked the Senate on Tuesday to amend the federal budget so that equalization payments to the "have-not" provinces will continue regardless of offshore revenues.

In its present form, the budget - which is expected to pass in the Upper House -  would cap payments to Nova Scotia once its financial position has surpassed that of the province contributing to the equalization payments which has the lowest ability to generate revenue - currently Ontario.

"I am here to appeal to the Senate to use all of its power and all its authority ... by requiring the Parliament of Canada to honour the terms and conditions set out in the 2005 Canada-Nova Scotia offshore accord," he said.

MacDonald claims the budget guts the two-year-old Atlantic Accord, which guarantees equalization payments for 15 years and allows the province to keep 100% of offshore revenues.

The issue of resource revenue has caused considerable controversy of late, with Newfoundland and Saskatchewan also disputing the Conservatives' policy. Saskatchewan Premier Lorne Calvert has said he will bring a constitutional challenge against the federal government, the basis for which is expected to be released today.

"The federal government's efforts to tear up the 2005 Canada/Nova Scotia Accord are not only extremely harmful to Nova Scotia, they do great damage to the reputation of the Parliament of Canada, they fuel public cynicism, create regional divides and they cast a dark shadow over the future of our federation," MacDonald told a Senate finance committee.

Former Conservative finance minister John Crosbie also asked the Senate committee to lift the cap in the payments. "I still intend to support the Conservative government that's in office today, but I'm not going to pretend that this accord is not violated when it is violated, clearly violated," he said.

Earlier, Finance Minister Jim Flaherty said he backed the decision and that the last federal budget brought an end to bickering between the federal government and the provinces.

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