New book questions Sask.'s share of royalties from potash

Former NDP cabinet minister suggests system needs to be changed, modernized

Saskatchewan's royalty regime is shortchanging the province's people, contends a newly released book on the financial return residents get from potash mined in the province.

“Squandered, Canada's Potash Legacy” was written by former NDP cabinet minister Eric Cline, who also has a professional background working as a mining executive.

The price of potash has increased substantially in recent times, which has changed the economics of the industry, Cline said.

“What we've seen, I argue and try to demonstrate in the book, since 2008 is much higher prices, which take the profits of the companies well beyond a reasonable rate of investment.”

The price of potash was for the most part below $200 a ton before 2008, when it shot up to over $700 a ton, Cline noted. Potash mining companies in the province raked in an additional $3 billion in revenues but Saskatchewan collected only $1 billion while the companies took $2 billion.

Cline said as potash prices have continued to climb due to the growing global demand for fertilizer, the province has continued to get a smaller share of money when compared to the mining companies.

“Since (2008) it's just gone on like that to the point where in 2022 the revenue was $18 billion and it was about $7 billion pure windfall profits, just from a price increase that year, and the government took $1.4 billion, leaving $5.8 billion to the companies.”

Cline said the idea to write the book came to him when he started looking at the financial statements for potash companies in 2019 and noticed the high rate of profit. It caught him by surprise, he said.

“This is something I want to know more about and I think the public should know more about.”

The current royalty legislation is an amalgamation of policies implemented by various provincial governments going back to the 1950s, Cline noted. This has resulted in a royalty system described by experts as messy and incoherent.

When the legislation was originally drafted, windfall profits were not taken into consideration, he said.

“I don't think any particular government is to blame for this, but I think it's time that it was fixed.”

With fertilizer use continuing to grow around the world, demand for potash will continue in the future, which has put the industry in a good place long-term, he added.

On potential alternatives to the current system, Cline cited the works of Jack Mintz, an economist at the University of Calgary School of Public Policy whose area of research focuses on the economics of natural resources.

Mintz has advocated for a system where resource companies are entitled a to fair rate of return on their investment, which is arrived at after looking at the cost of production and what constitutes a good profit for the company.

“Anything above that belongs to the owner of the resource,” Cline said.