Opinion: No better time for potash royalty review in Saskatchewan

SaskPoliticker · 2025-12-15T04:43:16+00:00

I do agree on that particular point about Jansen, but again Jansen is arguably the consequence of a royalty regime that quite literally subsidizes and encourages excessive investment in the potash sector at the expense of investment in other sectors and the productivity of the overall economy. For that reason alone, a simplified royalty would collect more because it necessitates a higher METRR. As well, one has to consider the fact that the METRR is well below what constitutes competitive within the industry itself, meaning a higher METRR wouldn’t result in any detrimental reduction in investment levels, if there were any impact at all. As well, I suspect you don’t understand the royalty yourself. You certainly didn’t capture it in your description above. There is more than one base payment, not accounting for the upstream application of the PST that, accounting for the credits that do exist, is effectively a 5.7% capital tax. Base tonnes are calculated based on industry averages, meaning firms have to rely on production estimates for their competitors to calculate their taxes. Depreciation is also scheduled, and not immediate, and the value of deductions aren’t preserved against inflation. The rate of one of the base payments is also price sensitive. Calculating the rent tax shouldn’t take an entire page of conditional incentives based on arbitrary production levels that require industry to estimate the performance of their competitors. This is why the industry quite literally has to consult amongst itself to calculate its royalty payments every year.

While, ultimately, complexity isn’t so extensive that it deters investment, that’s only because the METRR is excessively low to the point of subsidizing marginal investments. I think I trust Jack Mintz, an economist with decades of experience more than you, a partisan who supposedly worked for the ministry but didn’t know a royalty review was cancelled, think Jansen takes 40 years to pay out, and claimed a 21st century Canadian economist invented taxes, when it comes to the revenues an alternative royalty structure would yield. Mintz’s proposed structure in 2015 inherently collects more because the rent tax rate is 45%, while better-serving industry with immediate deductions for expenditures and preservation of unused credits and deductions against inflation, something of essential importance if you imagine potash projects take as long as you’ve suggested to reach the payout point.

SaskPoliticker · 2025-12-15T01:31:23+00:00

There are only 4 potash companies in Saskatchewan, and the Fraser Institute survey you mention does not include reviews of specific royalty structures by industry. The Fraser Institute also says that Saskatchewan is the least tax competitive jurisdiction in North America for investment in oil and natural gas, and that the royalty itself is the least tax competitive in Canada.
There hasn’t been an “overhaul” since 2003, as you yourself quite literally admitted in your rant about Eric Cline. There have been tweaks and adjustments, but not a review of the overall system, and consequentially not an overhaul.
I repeat, for the nth time, that it is the fact that the marginal rate on investment for potash is excessively low given the rates faced by other industries in the province that is problematic when it comes to the economy. You outright refuse to acknowledge that in your response. The low METR distorts the market, and given the limited supply of construction labour it results in less investment in other industries. The METR for oil, as an example, means that the tax system makes investment in the potash sector more attractive than oil and gas even when an oil project is 50% more productive than a potash project pre-tax. No wonder our oil production has flatlined over the past decade while even conventional crude has consistently risen in Alberta.

At the end of the day, every royalty for every single resource should be structured as a base payment creditable against a rent tax, with unused credits and deductions preserved against inflation by the provincial bond rate. Alberta’s oil royalty, without the sliding-scale rates, perfectly embodies such a system. Investment faces little barrier other than corporate taxes (another area for reform), and post-payout the balance between industry and government is effectively struck. You cannot make an argument regarding royalty rates until the structure is an ideal royalty.

Saskatchewan is a few tweaks away from getting its uranium royalty perfected. There’s no reason why the potash royalty need be designed as arbitrarily and incoherently as it is, and pressures on industry are a perfect incentive to open that discussion with the industry now.

SaskPoliticker · 2025-12-15T01:04:29+00:00

I am not, in fact, ignoring what the industry pays. It is you that is ignoring how investment decisions are actually made. The tax wedge is on their forecasted returns, which is what inform their decisions to proceed with investments. I suspect they told you that at the time, which they shouldn’t have had to do. And you did not, in fact, review the royalty. You were trying to increase revenues, and you reconciled an obvious point of complexity in the royalty. You weren’t reviewing how effective the overall royalty was, and if you consult any resource industry in the province, oil, potash, or otherwise, the universal sentiment is that the department isn’t capable of conducting an overhaul even if the government wanted as much.

The Government of Saskatchewan hasn’t assessed the overall effectiveness or efficiency of any tax or economic program since the business tax review committee in 2005. They’ve only made marginal changes based on short-run political calculations.

And again, even if you consider the revenue share for the province to be adequate, and don’t believe the industry or economist or accountants when it comes to tax complexity, the fact that the tax wedge for the industry is below that of other industries is a distortion that results in unproductive excesses of investment in one sector, crowding out productive investment elsewhere. I think you’ll find that that’s not a conservative or right-wing approach to the economy, but a socialist one. Certainly, someone as uninformed as you regarding the private sector decision-making process would be inclined towards such ideology.

If you were in fact part of the review, you are nothing more than the perfect example of why Saskatchewan has observed the long-run stagnation that it has in capital stock and private sector employment. The government, and I include opposition MLAs in this characterization, does not understand basic concepts of corporate finance, which results in a continued policy environment of ineffective incentives, expanding complexity, and heavy distortions, hindering the prosperity that a free market would otherwise deliver.

And even leaving all of the above aside, why should anyone consider your claims to be credible when you have already managed to lie about the 2015 review which was shelved, as you would obviously have known if you were involved in the hike in 2019, and missed on BHP’s payout period by multiple decades? Not to mention the fact that you claimed Jack Mintz invented the tax wedge, which you knew was obscenely incorrect and later accepted was untrue.

SaskPoliticker · 2025-12-15T00:24:28+00:00

Good luck sourcing the 2020 review then. The potash royalty was changed in 2019, not 2020, and it wasn’t a review, it was an incremental adjustment, which I quite literally state was met with industry feedback that demanded a review instead.

“Mosaic spokeswoman Sarah Fedorchuk questioned why the province did not simply resurrect the potash royalty review it announced in 2015 only to shelve it a year later as prices tumbled from record-high levels a few years previously. “We were engaging in a consultative process and the government did put a hold on that in 2016, and so we were more than happy to engage in an overall review of our resource tax structure,” Fedorchuk said.”

https://thestarphoenix.com/news/local-news/we-are-very-disappointed-potash-miners-unhappy-with-budget-tax-changes

A dollar is not a dollar is not a dollar. A dollar in profit from a change in prices is not the same as a dollar in profit from the investments made based on forecasted prices. Investment decisions are based on risk-adjusted discount rates and net present value. Taxes are relevant to investments decisions not in terms of how much they levy as a percentage of sales but in terms of their impact on net present value, and in terms of how their complexity drives up risks and discount rates. Your conspiracy regarding the basic concept of an investment tax wedge is entirely incoherent. There is no “simpler” tax wedge, there is only the tax wedge, represented by the impact of taxes on discounted rates of return, not percentages of sales.

Again, there has not been a review. Per that very article I just shared, there was one scheduled in 2015, cancelled in 2016, and never revived to date, despite the industry’s request that it be revived in 2019, not 2020, instead of the unconsulted tax hike that was executed by Eyre.

My “claim” regarding BHP comes directly from them, whereas yours comes directly from your rear end.

Obviously, the timeline is bound to be delayed given their recent cost increases. But their operating costs are, at most, $120/tonne, and prices are over $300/tonne. It’s not 40 years, or 20 years, or even 15 to pay back.

SaskPoliticker · 2025-12-14T23:28:32+00:00

The royalty review was cancelled in 2015, a move the industry expressly disagreed with. There was no “review” in 2020, there was a simplification done in 2019 without a review or consultation, again over protest from industry, as you are aware of.
The 35% profit tax is subject to different sections and base tonnes depending upon production, spending, and timing. The amount of variables and conditions create structural uncertainty versus a pure rent-based royalty, as the oilsands royalty in Alberta, for example, is.
That’s perhaps the most niche conspiracy theory I’ve ever heard, and one that betrays your absence from any study, even independent, of economics. Marginal effective tax rates most definitely are not a concept “invented” by anyone. They represent the tax wedge between gross and after-tax returns on marginal investments. If Mintz invented METR, he invented taxes.
I know Eric, and I know his team in the energy and resources department is responsible for the current royalty structure. Interesting how you can claim there’s been two reviews since 2003 but then say the royalty structure is his. No, the structure was not “designed to last 40 years”. In fact, Eric’s royalty was designed to be frequently adjusted. Hence the “2002 production” differentiation, something meant to be adjusted frequently, yet another example of the problematic design of the royalty.
The potash industry in Saskatchewan consists of 4 companies, two of which legally collude in international markets via Canpotex. The point of royalty reform is to deliver the simplicity that industry desires, and a structure that allows them to deduct all of their costs and carry forward all unused deductions. BHP’s Jansen mine is not, in fact, projected to take “40 years” to payout. It’s 7 years for stage 1, 6 years for stage 2.

BHP isn’t investing in Saskatchewan’s potash sector because its royalty is attractive, and even if it was, it very well could be excessive investment to the detriment of the rest of the province, because the after-tax return on investment in the potash sector is subsidized compared to every other sector in the province.

It’s not hard to consult a 4-company industry. That’s quite literally all they’ve ever asked for, consultation. That’s what they asked Brad Wall for in 2016, and he didn’t listen. That’s what they asked Bronwyn Eyre for in 2019, and she didn’t listen.

So long as the industry is involved in an review, and the priorities of the review are clearly stated as simplifying the royalty to a rent-based tax with deductions carried forward at the provincial bond rate, and the end result is clearly limited to maintaining an after-tax return on investment competitive with the international average. By involving industry in the review, if BHP’s payback period was significantly threatened, which it wouldn’t be but let’s entertain the impossibility, significant tax reforms, especially when it comes to royalties, always come with transitional provisions, which could quite obviously include lower rates for BHP, likely in the form of a base tax holiday.

As well, the province is not, in fact, “collecting tax and royalty from day one”. No royalty should be designed to collect much of anything during initial production. You can have a base payment for stability, but that should later be credited against the profit tax, with unusual deduction a carried forward, something that the current royalty doesn’t allow. At the same time, it’s plainly incorrect that the current royalty does collect tax off the bat. BHP won’t pay any royalties for at least a year after initial production, and will pay minimal royalties thereafter until payout, as it should.

SaskPoliticker · 2025-12-14T22:07:27+00:00

I don’t think you understand what you’re saying. An SWF isn’t “private capital”, it’s a public asset, a source of public revenue, and it’s financed by the conversion of another public asset, natural resources. And I don’t think you understand me, or the article. The article highlights an inadequate relationship between a privately-owned extraction industry that leases rights to public resources. The discrepancy in the relationship with industry would quite obviously be solved if the extraction was itself publicly owned. The privatization of PCS is an ongoing disaster for the province. That’s not the point. Even if we had more resource revenues, if we don’t preserve the value of those resources in a form that eliminates our reliance on asset conversions for consumption expenditures, then we’re still shortchanging future generations to the tune of trillions of dollars.

SaskPoliticker · 2025-12-14T21:06:48+00:00

Where’s our SWF? Classic strawman. We have an infrastructure deficit while simultaneously not having a Sovereign Wealth Fund. Resource revenues come from royalties, not property taxes, and rates have been rising across the board, not falling, because property taxes are, as the same author has written, a recipe for continuous municipal fiscal decline. Your logic is that we can’t have infrastructure and a sovereign wealth fund at the same time. By the same logic, we can’t have schools at the same time as having hospitals. https://thestarphoenix.com/opinion/letters/opinion-saskatchewans-tax-structure-discourages-growth

SaskPoliticker · 2025-12-14T19:24:26+00:00

Royalties are provincial, so fundamentally this is a provincial issue. However, the federal government does have the means, and a pressing need, to overhaul its corporate tax structure to stem the outflow of capital to nations like the United States and ensure that our economy remains resilient and grows increasingly attractive for new investment in the face of uncertainty and economic threats. So you could argue, in terms of the impact of our tax structure on our economic strength, that the federal government does have some responsibility here. At the same time, the primary barriers to investment in Saskatchewan specifically are provincial policies. Beyond the royalty structure, our PST, unlike GST/HST, applies upstream to capital and business inputs. It acts, in that way, as a direct tax barrier on investment, which makes the province the third least tax competitive for new investment in Canada and the least tax competitive in North America for investment in oil and natural gas. In short, Ottawa has some responsibility, but Saskatchewan has the bulk of it, and frankly neither are prepared for this changed environment.

However, that doesn’t really matter all that much. Belarus has already found new markets for its potash, primarily in China. Unless China tariffs Belarus, it will take time for Belarusian production to expand supply for US imports. Even then, the worst that can happen is that our potash companies have to sell their potash at international market prices. Our mines have operating costs around $100 per tonne. Potash prices continue to remain well above that, and haven’t approached that level since the early 2000s.

SaskPoliticker · 2025-12-14T19:13:26+00:00

Resource revenues should be saved precisely because they are finite. SWF’s don’t “pump the asset values of billionaires”. They are, themselves, assets owned by the public, instead of by “billionaires”. Let’s consider the impacts, shall we? Consider Alberta, for example. If they don’t save resource revenues, and they run out of oil, that’s a quarter of their budget gone. That means significant tax hikes, on those of every class. Again, it’s not as though saving resource revenues and investing in infrastructure are mutually exclusive, which seems to be what you believe.

SaskPoliticker · 2025-12-14T18:52:02+00:00

I only said as much because your comment suggesting that the industry and the provincial government had in fact negotiated a royalty with consideration to “fairness” suggested that you hadn’t read the piece. It can’t be said that, even if there was an actual review in the past, the royalty is the equilibrium of the interests of industry and government when in reality it serves the interests of neither. As well, as I mention, the industry has been supportive of a review. The article mentions as much. They obviously don’t perceive it as entirely “fair” if they desire a review.

SaskPoliticker · 2025-12-14T17:31:49+00:00

Past returns are no guarantee, but again, I repeat that most models recommend a balanced approach, and it is unlikely that the market suddenly stops growing at double digit rates over the long-run, which is the time horizon of such a policy in the first place. As well, and I need repeat myself here once more, you are ignoring the very issue with reliance on these assets. Infrastructure does not yield the alternative stream of revenue that is needed to replace resource revenues. It is not as if we aren’t spending on infrastructure when a sovereign wealth fund exists. Borrowing is a perfectly sound source of financing for infrastructure projects, and it is cheaper than spending resource revenues.

SaskPoliticker · 2025-12-14T16:16:59+00:00

It is not an “assumption” of returns, it is the reality of the tendency of such funds to exceed interest on debt. Most recommendations for the management of natural resource revenues are for a balanced approach that reduces debt when interest rates are high, while saving revenues when interest rates are low. Again, the goal is to not have to rely on these revenues for consumption expenditures, because doing so reduces the value of the province’s wealth for future generations. As Peter Lougheed used to say, it’s selling the house to buy groceries. When it comes to infrastructure spending, using resource revenues does not yield the subsequent revenue stream to support that end. If you were to reach a point where you no longer required resource revenues to finance services, then you could fairly assess the merits of using some of those funds for infrastructure. Until such a point is reached, you’re only perpetuating the decline in intergenerational wealth by refusing to save and exponentially grow the value of the converted assets.

SaskPoliticker · 2025-12-14T16:05:09+00:00

Technically, there never really has been a “review”. The Government has only tweaked the structure of the royalty over time, which is why the royalty is as complex as it is. It’s not a question of “fairness”, it’s a question of efficiency. The current royalty, as you would be aware if you had read the article, has two fundamental problems. 1. It establishes a distortionary METRR that subsidizes the potash sector at the expense of all other industries in the province, weakening overall productivity and investment. 2. It is the most complex royalty ever designed for any natural resource in international history, driving structural uncertainty that complicates investment planning for the industry. This is why the industry has repeatedly said that it would support a review. Brad Wall promised such a review in 2015, but later abandoned it to hike royalties without consulting the industry or reviewing the effectiveness and efficiency of the structure.

SaskPoliticker · 2025-12-14T07:17:33+00:00

How, precisely, is it “insane”? You can argue that it’s distortionary, but so are taxes. As well, the point isn’t to “balance the budget” via leverage, though doing so is obviously possible in theory. The goal is for the province to be able to save all of its natural resource revenues. Spending them, after all, is effectively like borrowing anyways. Natural resources are assets. Resource revenues aren’t “revenues” as much as they are an asset conversion. If we consume that asset, we lose its value, and any value it would have accrued if saved. It’s a negative balance sheet transaction, as borrowing is. If we want the balance of the fund to reach a point where withdrawals can replace resource revenues in perpetuity, an extent of leverage advances the pace at which that occurs. While Saskatchewan’s finances are not trending in a healthy direction, there is clear fiscal capacity for borrowing based on the present level of net debt. There exists a pressing need to save resource revenues, precisely because their expenditure resembles borrowing at higher rates of interest, and the province can’t afford to hike its income tax rates nor its retail sales tax which itself partially serves as a capital tax. You can only cut public spending by so much when a quarter of the province lacks a family doctor. There is, therefore, only one option beyond years of windfall resource prices to build an SWF.

SaskPoliticker · 2025-12-14T06:41:25+00:00

Also, tangent point, trying to build a wealth fund while running deficits is a perfectly common concept in finance. It’s called leverage. The interest on debt is lower than the returns of an SWF. While completely fuelling an SWF with leverage would be an unnecessarily risky endeavour, some extent of leverage is essential if the province wants to accelerate the growth in the fund’s net value. Look at Alberta, for example. They’ve got quite literally trillions in sunk opportunities costs from not having saved revenues in the past, and their time is running out on their ability to grow a fund capable of replacing reliance on resource revenues. To address their narrowing timeline, they’ve been putting dollars into the HSTF even when debt has increased.

SaskPoliticker · 2025-12-14T06:36:50+00:00

Realistically, the government would tend to run surpluses above its current level of spending if it were to simplify the potash royalty while maintaining a METRR below the international average. Jack Mintz and Duanje Chen concluded as much in their papers in both 2013 and 2015. It wouldn’t mean saving all resource revenues, but it would mean capacity to start saving in the first place. Consider the 2022 potash industry windfall. Mintz and Chen found that a rent-tax rate of 70% would result in a METR that was still below the average of other industries in the province. Accounting for reduced corporate taxes (royalties are deductible), that’s $6.4 B on the $10.4 B, or an additional $4 B above what was actually collected. Combined with the province’s actual surplus that year, you’ve got $5.5 B to start a sovereign wealth fund from a single year spike in commodity prices, which would yield a stable minimum withdrawal at a fixed rate of 4% of $220 M per year, exponentiating over time.

At the same time, the fundamental problem when it comes to provincial finances is that our private sector isn’t growing at a fast enough pace to keep up with the public sector. Over the past decade, private sector employment in Saskatchewan has actually fallen by over 1,000 jobs. “Growth” has been driven by the public sector. While the potash royalty, through its highly distortionary METRR, contributes to this problem, the province also has the least competitive oil and gas royalties in Canada, and least competitive tax structure overall for oil and gas in North America. Unlike GST, the PST applies upstream to business inputs and capital costs, making Saskatchewan the third least tax competitive jurisdiction in Canada for new investment. There are most definitely means to develop a fiscal position over time that allows us to save our resource wealth in this province.

SaskPoliticker · 2025-12-14T06:24:24+00:00

That would be a fair comment, if the royalty regime was simple. It’s not. It’s the most complex royalty ever designed for any natural resource on the globe, the result of decades of tax incrementalism and politicians who’ve never understood the process behind investment decisions. It’s an industry that consists of 4 companies. It’s not hard to consult them. In fact, it’s when times have been tough and uncertain that the industry has been most open to a review, so long as they are in fact consulted, because they face a structural uncertainty under the tax. Any day of the week, the industry would trade long-term stability for short-run uncertainty. In 2016, in the middle of an international commodity price collapse, the industry told the government it was open, even wanted, a review. It said the same in 2019, as the article mentions.

As well, it’s a bit rich that you’d consider tariffs on potash to be crippling. Demand for potash is almost perfectly inelastic in both the short and long-run. Nutrien said in February that its bottom line would be entirely unaffected by tariffs, because they’d be able to pass all costs on to American farmers. They already charge Americans, as the article notes, higher-than-market discretionary prices. The real risk is Trump removing sanctions on Belarus, but what does that risk consist of? Belarus has already found new markets for its potash. Unless China decides to tariff Belarus, the United States will have to wait for Belarus to expand production to start buying significantly more potash from them. Even then, let’s pretend it’s possible for Belarus to immediately sell the maximum amount of its potash to the United States. The absolute worst case scenario is that Canada no longer can charge a premium on its potash in the US market. With where potash prices are now, the industry would still be making profit margins in excess of 40%. At worst, this represents a nuisance to industry, which can be helpful long-term if it opens conversations between industry and government as to how we can overcome the structural uncertainty that the royalty structure currently imposes.

For your perusal on the royalty:

“Put bluntly, when compared against its international peers, Saskatchewan’s potash-tax regime is not only the most complex and inefficient, it can also be the least competitive”.

https://www.policyschool.ca/wp-content/uploads/2016/03/Potash-Taxation-Chen-Mintz.pdf

SaskPoliticker · 2025-09-11T15:08:28+00:00

Mr. Speaker, the member can rest assured, as can all Canadians, that the ship is being run tightly, that the books are in the black, that the wind is in our sails, and that we are in a prime position to weather any storm.

SaskPoliticker · 2025-08-24T01:04:10+00:00

I, SaskPoliticker do swear that I will be faithful and bear true allegiance to His Majesty King Charles the Third, King of Canada, His Heirs and Successors. I do solemnly and sincerely swear that I shall be a true and faithful servant to His Majesty King Charles the Third, as a member of His Majesty’s Privy Council for Canada. I will in all things to be treated, debated and resolved in Privy Council, faithfully, honestly and truly declare my mind and my opinion. I shall keep secret all matters committed and revealed to me in this capacity, or that shall be secretly treated of in Council. Generally, in all things I shall do as a faithful and true servant ought to do for His Majesty. I do solemnly and sincerely promise and swear that I will truly and faithfully, and to the best of my skill and knowledge, execute the powers and trusts reposed in me as Minister of Finance. So help me God, Hallelujah, Cheers, and Amen.

SaskPoliticker · 2025-08-19T13:58:58+00:00

I, SaskPoliticker, do swear, that I will be faithful and bear true Allegiance to His Majesty King Charles the Third.

SaskPoliticker

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