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The Progressive Economics Forum

The Politics of Potash

Advocates of low potash royalties are claiming that New Democrats fared poorly in Saskatchewan’s recent election because they proposed higher potash royalties. Of course, potash companies and their boosters would like the NDP to give up this cause. Doing so would be a political mistake for the party and a disservice to the people of Saskatchewan.

Most polling indicates that most Saskatchewan residents support collecting more from potash companies. So, why didn’t the NDP get more traction on the issue? In politics, timing can be everything.

BHP Billiton’s bid to take over the Potash Corporation of Saskatchewan was a golden opportunity for the provincial NDP. The takeover battle focused public attention on potash and underscored loopholes in Saskatchewan’s royalty regime that would have been even more advantageous to BHP than to PotashCorp.

The field was clear for the NDP to propose that whichever multinational corporation operates the mines should pay higher royalties for the resource (as I suggested). Unfortunately, the party leadership chose to narrowly focus on the takeover question, which was fully eclipsed by Premier Wall’s public rejection of BHP’s bid.

The NDP started making the case for reviewing and increasing royalties a few months later. By then, no one was paying attention and Wall had already positioned himself as Saskatchewan’s potash champion.

Even with better handling of the potash file, the NDP almost certainly would still have lost the provincial election. Nevertheless, Wall’s Saskatchewan Party correctly perceived that potash royalties are a strong issue for New Democrats.

Rather than defending low royalties on their own terms, the Sask Party responded by loudly asserting that the province already has the highest potash royalties in the world. (As I again noted last week in the following letter, this claim is not supported by any verifiable evidence and misses the point that Saskatchewan has the world’s richest potash reserves.)

In a desperate effort to distract from PotashCorp’s third-quarter earnings, the Sask Party put out more press releases that day than on any other day of the election campaign. Following a single missive on potash, it sought to change the channel to wind, the federal gun registry and starting school after Labour Day.

The Sask Party wants to avoid a focused debate on potash royalties. New Democrats should advance this debate over the next four years.

Potash: low returns

The Leader-Post, Nov. 8, 2011

John Findlay’s Nov. 5 letter notes that it has been “stated many times that our potash industry pays the highest taxes and royalties in the world.” Unfortunately, repetition is not a form of evidence.

PotashCorp and its apologists have presented no publicly-available comparison of potash royalties in different jurisdictions. They sometimes cite the CRU Potash Cost Report, a document inaccessible to anyone who has not paid CRU’s subscription fee of $24,000.

The Ministry of Energy and Resources’ annual report indicates that Saskatchewan’s Crown royalty and potash production tax amounted to only five per cent of potash sales last year. Saskatchewan people should charge a higher price for the world’s richest potash reserves. Collecting the best possible return on provincial resources is just good business, not “socialist hate.”

– Erin Weir, Regina (Weir is an economist, Canadian National Office, United Steelworkers).

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Comments

Comment from travis fast
Time: November 15, 2011, 7:24 am

Interesting that the Conservatives in Newfoundland and Labrador and the paid pundits have been claiming the same thing about the royalty regime there. I wonder if it is not time to move towards a Danish strategy which looks to target 60% of the take through their fiscal regime.

Too bad the feds threw you under a bus and forced you to sell potash. Too bad the government of the day was not willing to provoke a constitutional crisis to keep it.

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