Flaherty had said there would be no side deals for any province as Ottawa tries to settle a dispute with Nova Scotia and Newfoundland over offshore energy revenues.

But the minister now says his officials are working on a deal to make sure Nova Scotia "will be no worse off" once the province decides whether to stick with the existing offshore agreement - known as the Atlantic Accord - or opt into a new, richer equalization deal.

"We have to figure out a formula, it seems to me, a way of reassuring the government of Nova Scotia ... that they will be no worse off depending on their choice and that's the kind of thing we've been talking about," Flaherty told a call-in radio show on News 95-7 in Halifax.

Flaherty conceded that Nova Scotia Premier Rodney MacDonald had some legitimate concerns about Ottawa's latest fiscal moves, and he agreed that what was on the table was an insurance policy for the province.

"That's what we've been talking about, and it's not the only issue, but we've certainly been talking about that," he said.

Meanwhile, MacDonald said talks have resumed with Ottawa, even though he wasn't happy with the outcome of Tuesday's budget vote.

"I met with the prime minister, the minister of finance, Nova Scotia's cabinet minister and MP Gerald Keddy and put something forward for discussion," MacDonald told reporters before his party's weekly caucus meeting in Halifax.

"They are taking a look at that as we speak."

The budget passed final reading in the House of Commons with Nova Scotia MPs Peter MacKay and Gerald Keddy voting with the government despite last weekend's appeal from MacDonald for all MPs to oppose the bill.

Nova Scotia MP Bill Casey voted against the bill at second reading last week and was promptly kicked out of the Conservative caucus.