Brian Zinchuk is editor and owner of Pipeline Online
Potash. Photo by Steve Halabura
In late March, 2024, Eric Cline released his book Squandered: Canada’s Potash Legacy. In Part 1, early days of the potash industry in Saskatchewan are discussed, including the sale of Potash Corporation of Saskatchewan. It is available on Amazon.ca here. Here’s Part 2:
The royalty review that never reviewed
The Saskatchewan Party budget of 2015 spoke of a “broader review of the entire potash tax and royalty regime (to) balance the excellent investment and operational environment for this sector, which is so important to the provincial economy, with the need for a fair return for the owners of the resources, the people of Saskatchewan.”
But Cline notes such a review “seemed to disappear.”
Stepping back to Cline’s time as Minister of Industry and Resources, he explains, “In the early 2000s, government believed the forty-year-old mines should be retooled, and we wanted Saskatchewan’s position as world leader in potash production maintained by incenting multi-billion dollar investments in refurbishment and expansion. If we achieved that, the industry would be here, it would be here for decades more, and it would not be in a position to shut things down.”
He notes that the industry was not making huge profits at the time, and the government agreed to a capital cost allowance of $1.20 for every dollar of capital investment. “Perhaps it was overly generous, and I don’t claim everything I was responsible for in government was perfect. One thing I can claim is that it seemed to work,” he writes.
The expansions, which coincided with ballooning potash prices, eventually saw two greenfield mines, K+S and BHP Jansen. When Jansen goes online, Saskatchewan’s potash production capacity “could be 37.35 million tonnes in 2025, representing an almost 84 per cent increase in productive capacity from 2005 to 2025.”
(After his time in government, Cline ended up as a vice president of K+S for six years)
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SaskOil
The book does make brief reference to the Blakeney government’s venture into the oil business. In a section where Cline talks about the public’s current distaste for government-owned resource companies, he writes, “Remember that the Blakeney government of the 1980s involved the province also in the oil business through the Crown corporation SaskOil. It was a successful business that helped develop Saskatchewan’s oil sector and gave the government a window into the industry. The government may not have had as high a profit margin as major private producers, but it did make a profit, all of which was retained in Saskatchewan.
“My personal philosophy is like that of Blakeney’s, in that I believe returns to the Saskatchewan people are maximized when the public owns a share of our unusual endowment of potash and oil. I believe our society has many unmet needs, which could be met with additional resources we would gain through direct involvement in the resource sector. I do not agree with the view of many conservative people that such a policy scares off private investors. Capital will always come in if it can make a good return.”
In the next paragraph he notes that while in ministerial positions, he didn’t always do what he would have preferred. “It is an interesting situation to be in government and to occupy positions like minister of finance or of industry and resources and to pursue policies that, on one level, are not the ultimate ideal in your personal opinion, but, on another level, you see as the best approach to take … There was no apparent public appetite for public ownership in the resource sector.”
Thus, once PCS was privatized, the NDP was not going to try to get back into the potash business.
Cline writes, “The goal of social democrats to redistribute wealth is best served if you have policies in place to create wealth and a healthy economy. A healthy private sector and a robust public one is a good combination. We needed to further develop the potash sector and conventional oil production. There are many people on the left side of the political spectrum who are pretty good at talking about how wealth should be redistributed, and how money should be spent on education and health care, but not so good at describing exactly how and where we’re going to get the money.”
The benefits of the growth of potash “are not being adequately shared with the Saskatchewan people, and that is the issue the province faces today.”
“In retrospect, knowing what has occurred in the world potash market since 2005, I believe the tax concessions to the potash companies to spur expansion were too generous. The expansions would have eventually occurred in any event to meet world demand,” he notes, but said the decision was made based on the best evidence at the time.
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BHP and Nutrien deals
Cline is harshly critical of the Saskatchewan and Canadian government’s actions to block BHP’s effort in 2010 to buy PCS for $38.6 billion, especially since there was hardly a peep when PCS and Agrium merged into Nutrien in 2018, with PCS’s valuation now less than half the 2010 valuation, at $14.2 billion. (As of Jan. 15, 2025, Nutrien’s market capitalization was $36.1 billion.)
Many pages are spent criticizing these two deals. Cline takes issue with the Nutrien merger, providing a quotation that it was essentially a takeover of PCS by Agrium. He especially finds fault with the vertical integration of Agrium then Nutrien. “Nutrien’s stated focus, as the world’s largest potash producer, is not potash production. It is on the ultimate sale of agricultural products to growers.”
The distinction is that a potash producer will seek to maximize return for its product, but a fertilizer company is more interested in a low-cost supply of the product to sell to the end user, the farmer.
“Whether or not it was in Saskatchewan’s interests to have its highest quality mines provide access to Nutrien of low-cost reserves and obtain lowest cost potash for its fertilizer was never subject to any known expression of concern by the Saskatchewan government,” Cline writes.
Next, in Part 3: Windfall profits, economic rent and paying for social services
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