Saskatchewan Gets 'Measly' Return On Potash Resource Under Wall Administration
The following appeared in today's edition of the Regina Leader-Post. The author, Erin Weir is a Saskatchewan expatriate working as senior economist with the International Trade Union Confederation in Brussels, Belgium.
"Bruce Johnstone's Feb. 12 column ('If it ain't broke, don't fix it') attempts to dismiss calls from me and others for a review of Saskatchewan potash royalties.
However, the royalty regime is broken. PotashCorp's last quarterly report indicates that it paid only a nickel in provincial royalties for every dollar of gross profit generated in 2010.
Royalties were equally low in 2009. The report projects that they will be again in 2011 ("provincial mining and other taxes are expected to approximate 4-6 percent of total potash gross margin.")
Johnstone endorses Energy and Resources Minister Bill Boyd's claim that "Saskatchewan still has among the highest royalty rates on potash in the world" without any specific comparisons to other countries. Canada, Russia and Belarus account for two-thirds of global potash production.
If Saskatchewan raises its potash royalties, will PotashCorp CEO Bill Doyle sweep aside the oligarchs who control the potash industry of Russia and Belarus in order to invest there instead? The reality, as Johnstone acknowledges, is that "potash companies can't take their mines with them to other jurisdictions."
Johnstone argues that Saskatchewan mines are expanding because of royalty reductions. However, the province has the world's richest potash reserves and it is much cheaper to expand existing mines than to build new mines elsewhere.
Potash prices tripled between 2004 and 2010. If royalty reductions were ever required to spur investment in Saskatchewan's potash industry, they are certainly no longer needed today.
In rejecting BHP's takeover bid for PotashCorp, Premier Brad Wall referred to "your revenue, the rent you should be getting for the resource that you own." Months later, Saskatchewan people are still getting a measly return on the resource they own. A provincial review of potash royalties would be a good first step toward fixing a broken system."