One of our long time SDA readers writes;
As a long time advocate and supporter of the party I believe the core Reform message on this BHP matter is not being told. Non renewable resources are of Provincial jurisdiction (see section 92A of the BNA act below).
When a duly elected Premier of a province is leading his/her province on an issue that is of the provinces sole jurisdiction Canada should respect same. Example where this has been done was bill 101 in Quebec. The Liberals when in power have trampled over provincial rights for the last 40 years. I thought from the beginning that we would have a better stronger Canada when sections 91 and 92 of the BNA act are respected.
Canada has crept into the exclusive powers of the Provinces particularly, Quebec and that simply leads to separation sentiments. Another clear example is the NEP in Alberta. Nothing good ever happens when Canada tramples on anyones rights.
The investment Act of Canada should be amended to respect the BNA act.
Relevant excerpts from the BNA are posted in the extended entry. That ought to jump start* the week.
92A. (1) Laws respecting non-renewable natural resources, forestry resources and electrical energy. — In each province, the legislature may exclusively make laws in relation to
(a) exploration for non-renewable natural resources in the province;
(b) development, conservation and management of non-renewable resources natural resources and forestry resources in the province, including laws in relation to the rate of primary production therefrom; and
(c) development, conservation and management of sites and facilities in the province for the generation and production of electrical energy.
(2) In each province, the legislature may make laws in relation to the export from the province to another part of Canada of the primary production from non-renewable natural resources and forestry resources in the province and the production from facilities in the province for the generation of electrical energy, but such laws may not authorize or provide for discrimination in prices or in supplies exported to another part of Canada.
(3) Nothing in subsection (2) derogates from the authority of Parliament to enact laws in relation to the matters referred to in that subsection and, where such a law of Parliament and a law of a province conflict, the law of Parliament prevails to the extent of the conflict.
(4) In each province, the legislature may make laws in relation to the raising of money by any mode or system of taxation in respect of
(a) non-renewable natural resources and forestry resources in the province and the primary production therefrom, and
(b) sites and facilities in the province for the generation of electrical energy and the production therefrom,
whether or not such production is exported in whole or in part from the province, but such laws may not authorize or provide for taxation that differentiates between production exported to another part of Canada and production not exported from the province.
(5) The expression “primary production” has the meaning assigned by the Sixth Schedule.
(6) Nothing in subsections (1) to (5) derogates from any power or rights that a legislature or government of a province had immediately before the coming into force of this section.
The whole potash issue mystifies me.
The resource is in Saskatchewan. The province owns the resource and collects royalties from whomever mines it. The resource cannot be relocated by a new owner of Potash Corp. Residents of Saskatchewan are needed to mine potash no matter who owns the business.
Potash Corp has a CEO who lives in Chicago. Many of the investors in Potash Corp operate outside of Canada. In effect, Potash Corp is already foreign-owned.
So what is the fuss all about if the current foreign owners sell their shares to another foreign entity? The resource and the jobs stay in Saskatchewan and the province continues to collect royalties. What is there to oppose with the proposed takeover?
The share price offered seems to be too low based on current market valuation of Potash Corp but that is an issue for current shareholders, not government. If government wants to call the shots, government should step up, buy the company and return it to the Crown Corporation status it used to have.
Would the province have the jurisdictional power to ‘veto’ the sale of a company that isn’t provincially owned.
PotashCorp isn’t provincially owned now. That’s the small detail that media has consistently avoided.
Maybe somebody can explain to me why its a problem for Saskatchewan (and Canada!) if the company which runs the mine changes hands. Because although I’m all in favor of Canadian ownership of companies doing business in Canada, I just don’t get the issue here.
The mine can’t be moved, the royalties are set by the province not the company, and the company does not own the rail lines, trucks, whatever that get used to transport the product. Said product is already shipped off shore.
Its a publicly traded company. If the share-holders of Potash Corp (me, for example) aprove the move to sell it, how is it the province’s business whose name is on the mine head?
What am I missing here?
The media reports on things that further their own agendas, and yes they have agendas. The question is about who controls the resource, the comment about it beinbg a non renewable resource under control of the province is well founded, there are times when the federal government should be bluntly told go away.
In this case the provincial worries were more of the value of the resource, if BHP or another multinational corporation decided to dump large quantities on the market for some reason . The royalties and price would drop.
The provincial govt in Sask is also looking to make sure they stay in power and this was a no lose for them, ether the deal gets canned and they look like heros or the deal goes through and they blame the feds.
Phantom – there’s a video series of a speech by Brad Wall that lays out the provincial position in the asterisked* link.
Did this commentator actually read the Constitution Act, 1867?
The Investment Canada Act fall fully and entirely withing the jurisdiction of the federal government. It has been challenged and upheld in court a number of times, most recently in the US Steel case (though the ruling was over a Charter claim).
Section 92A deals only with the development and operations and trade of resources. It in no way conflicts with the federal jurisdiction as applied under the ICA.
There is no conflict in jurisdictions here, nor is there any conflict between federal and provincial laws involved here. But to the extent there are any conflicts, the Constitution provides a helpful guide for us all: “Nothing in subsection (2) derogates from the authority of Parliament to enact laws in relation to the matters referred to in that subsection and, where such a law of Parliament and a law of a province conflict, the law of Parliament prevails to the extent of the conflict.”
Also bear in mind that Harper promised two years ago to make the “net benefit to Canada” test even narrower and easier to pass. Had his plans come to be, he would have had even less scope to interfere with the market in order to save 13 Conservative seats.
If Canadian shareholders sell their (38%) shareholding it means they would rather be invested in something else. If they sell to foreigners it means the mine operations continue as before and the ex-owners have about $20 billion coming in from outside the country to invest in whatever that something else is. Sounds OK to me.
If Saskatchewanians (and Canadians for that matter)are so concerned about who owns PCS, why aren’t they buying a majority of shares in the company, or a better question – why haven’t they? Why aren’t the SEU pension buying it, or their teacher’s union, or some other “concerned” Canadian union pension plan?
As for Ralph Goodale: how many shares does he own? The media wags: how many do they own? How many shares does Brad Wall own?
If I didn’t like who Ralph Goodale was selling his house to, can I step in and interfere in the sale? Does he need my permission to make a sale first? Using his logic on this deal, I think I might have a case here.
I live in Alberta.
It’s the way the two companies operate. The owners of PCS basically has the power and money to crush the other companies. BHPB has stated they would not prevent that from happening. Canpotex shares the market with the other producers. BHPB has no interest other than sell product.
Canpotex is sorta like OPEC in that they represent Canadian producers and have enough clout to affect price. If the major producer sells at any price it doesn’t work.
As a resident of the Prov. I do not want to see mines closed and people out of work. That may happen with the sale.
Someone that farms wants the cheapest price. Investors want the best price.
The Province wants revenue stream and employment.
The Feds wants revenue stream and employment.
A mixed bag to start with and it has a special place in the history of the Province.
The first comment (JMD’s @9:57 am) says it all. The general public’s total ignorance of something that is as basic as the ownership of a resource versus its development is mind boggling. I seriously think that there is a lack of economic and financial education in school; that’s my only explanation.
I don’t want to sound too down on BHPB. They were in very early in the Sask. diamond ventures. They are a good company with good employer practices and good conditions. Different values is all.
I think it’s politics and a shakedown Phantom. Brad Wall has seen an opportunity to harness the winds of populism. Brad Wall is Canada’s Sarah Palin.
My question going forward is: where does it end?
Surely there will be another foreign company with interest in PCS. Will they too be denied? If so, can anyone purchase PCS?
Perhaps I’m creating straw-men, but I’m weary of the long-term consequences of such a rejection. That said, it will be very difficult going forward to gauge the cost/benefit of the federal government’s decision. As I said, I disagree with the Premier, but I support his decision.
I wish people would google Potash Corp. They would find that: It operates 5 Potash mines in Sask. It operates a Potash mine in New Brunswick. I t has 28% ownership of a Potash mine in Jordan.
However it is in the fertilizer business. Thats P,K,and N. Potash part I have outlined, Phos. mine is owned and operated by the Corp. in North Carolina, Nitrogen is produced at company plants in Georgia, Louisiana, Ohio, and Trinidad. The key executives live and work in the U.S., and almost 52% of the shares are foreign owned.
I have every sympathy for Provincial rights but Sask. is hardly the only Government involved.
Thanks Speedy for explaining the competing interests. It’s why I remain on the fence with this one.
I believe the fact that Potash Corp has facilities across Canada (it is interprovincial) that the feds can claim some minimal interference as per the doctrine of paramountcy stated here:
“(3) Nothing in subsection (2) derogates from the authority of Parliament to enact laws in relation to the matters referred to in that subsection and, where such a law of Parliament and a law of a province conflict, the law of Parliament prevails to the extent of the conflict.”
My only remaing tie to sask is the riders, but that said, my understanding is that BHP essentially wants to break up and not participate in the canpotex cartel. Whether that is a plus or minus in the real world I don’t know. Curiously, while the feds were making the sask crowd happy they were peeing in BC’s cornflakes over a proposed $800 million gold/copper mine. (with different legislation that is very shakey)
What I’d like to know is where are the guys with the deep pockets prepared to mount some court challenges on the steady erosion of provincial rights? Peace Order and Good Government clearly don’t mean “do what ever you want” given our constitutional structures. From my understanding on health at least, it is the criminal powers act that gives the feds jurisdiction. Just because there have been a couple of precedents set on the purview of the feds on matters such as this does not mean they were well-argued, or more than one-offs. Something stinks with all the public info on this issue.
I’m opposed to government control of the market, but there are rare, unique, exceptional circumstances in which decisions that are conceptually or ideologically sound – “the free market, yay!” – can be bad in a real-world sense, and in those cases political leaders have to bite the bullet and stand up and do the right thing, particularly when you’re talking about a resource that is ultimately owned by the people of a province.
Socialists – at least in Alberta – frequently agitate for decisions based purely on ideology (“Big Business, blah blah blah”) – that would result in a loss of revenue streams for governments and for the people of a province. It seems to me that Walls is doing the opposite, in that, first of all, he’s biting the ideological bullet, as it were, and, more importantly, he’s looking at a highly complicated, multi-factored situation and coming to the conclusion that allowing a particular takeover would substantially harm other businesses in the province, and result in a loss revenue for the people of Saskatchewan. Put differently, he’s being accused of abandoning his pro-market ideals because he’s looking after “business” in the larger, longer-term sense.
It’s easy to be absolutist in ideological terms – at least, it is for me – and to say that the market must decide all things, and that government has no place in business decisions, but there always has to be room for exceptions in unique cases; this is a unique case if there ever was one. First of all, as Walls pointed out – and this can’t be overstated – a takeover that gets access to *30 percent* of one of the world’s most vital resources – increasingly so in this case – is unprecedented. It’s not even remotely comparable to the takeover of any one gold mine, or diamond mine, or, say, a particular oil field.
And, again, if due diligence reveals that a particular action that’s good for one business entity is many times more harmful to other businesses, now and in the future, and to the people of a province, and to the strategic interests of a country and a province, it’s better to be realistic and sensible even if there’s a risk of appearing to compromise one’s ideological outlook.
I understand the arguments of those – including shareholders – opposed to Wall’s decision, but the level of due diligence he took regarding this very complex issue is evident, and his willingness to take a hard stance in this case is commendable.
I think the hard-line ideologues – and the political right has more than it’s fair share of them – need to demonstrate a little more negative capability, and to recognize that adapting to a unique circumstance isn’t the same as a giant, across the board compromise and an abandonment of one’s ideals.
Speedy sums it up briefly and clearly. Kate is right, a believer in free enterprise has mixed feelings about this deal. Politics was the trump card.
As a capitalistic farmer, even if retired, I want to see affordable phosphate, nitrogen and potash prices for the farmer. I also want to see dividends for the shareholder, fair wages for the miner and a resource revenue format for the province that fosters resource development.
A cartel setting prices is not good whether it is oil or fertilizers.
Keep in mind that Canpotex is voluntary.
Any thought that a single company is good for anyone is not a good one.
Does anyone really think that pinching Mosaic and Agrium is that good an idea for the province or it’s miners?
BHP is building it’s mine…and will be partaking in the sale of potash.
The extra mine will help keep wages competive…and the market has room for another player.
So when the inevitable lawsuits from disgruntled shareholders are filed, and possibly compensation granted for lost profits….just who will pay the bill…..I am assuming that it will be the taxpayers of Saskatchewan, right?
what lost profits Stephan. shareholder in Potash can always roll their dough into BHPB if they are believers in potash, and get the benefit of Iron , steel and oil and diamonds.
largest mining company in the world.
BHP has already stated that it prefers to market its own products, i.e., it will not particate in Canpotex, which handles 100% of offshore sales of potash.
That would leave the other Canadian producers (all much smaller than PCS) to try and market offshore on their own. Tough to do that, which is one of the reasons that Canpotex was established. As an example, a one or two mine operation could not hope to effectively negotate a sale of product to China, one of the largest consumers of potash.
The result would be that they (the smaller Canadian producers) would accept lower prices to get the sale and thus keep their mine operating, and that sale at lower than market price would be used by the Chinese to establish a new, and lower, baseline for other purchase from other producers.
These lower prices would negatively impact the financials of all the producers, including the new PCS/BHP company and would not be in the best interests of SK and Canada.
I think both sides of the argument are well understood EBD; the only question is if we should try an get you fired for your heresy(ha ha). My interpretation is we’re sacrificing long-term for short-term gains; whereas you seem to think the opposite. This seems to be the crux of the disagreement. Personally, I’m just weary when doing the right thing will be so politically beneficial for he that is suggesting it.
That would leave the other Canadian producers (all much smaller than PCS) to try and market offshore on their own. Tough to do that…
The Wheat Board argument.
I see over sixty years of socialism still has a lot of influence in the backwards province…
EBD: “First of all, as Walls pointed out – and this can’t be overstated – a takeover that gets access to *30 percent* of one of the world’s most vital resources – increasingly so in this case – is unprecedented.”
Do you mean that Potash Corp already currently controls 30% of the world’s potash supply? In which case, does it really matter which multinational corporation controls it? That is, if it’s an issue that BHP Billiton might, through a takeover, come to have a 30% stake in one of the world’s most vital resources, why isn’t it an issue that Potash Corp already does?
@fiddle @ 4:02PM
Not a Wheat Board argument at all. In fact, the NDP, when they owned PCS, were against Canpotex – they wanted, and tried, to establish their own international marketing group to enable them to leave Canpotex.
When there are a limited number of very large customers, e.g., China and India, sellers need to level the playing field by any tactics available to them, including reducing the number of purchase options (suppliers) the customers can access to drive down prices.
RIM, Research in Motion, ‘The Blackberry’
West Jet
Two Canadian Darlings , I guess they can’t be sold either.
Where r we going with this Logic ?
good point davenport, i agree with your statement.
my question to you is: do you not support Mr.Wall and PMSH’s position, or are you simple making mischief?
When there are a limited number of very large customers, e.g., China and India, sellers need to level the playing field by any tactics available to them, including reducing the number of purchase options (suppliers) the customers can access to drive down prices.
By all means, let’s not compete and get any better at anything. Typical backwards province thinking where only the mediocre are applauded.
No matter, free enterprise will figure a way to do an end run, and the backward province will be left in the dust…again.
Davenport, I wrote “a takeover that gets access to 30 percent…” etc. You re-summarized my point this way: “Do you mean that Potash Corp already currently controls 30%…”
Two entirely different words, two different meanings. It’s understood, I assume, that the Government of Saskatchewan – the people of Saskatchewan, really – controls the resource, and those are the interests Brad Walls is looking out for; nothing I’ve seen or heard from the man would lead me to believe otherwise.
“Does it really matter which multinational corporation controls it?”
Yes. After performing extensive due diligence, including examining the interconnectedness of integral (to the economy of Saskatchewan) businesses surrounding this huge resource, the determination was made that if this particular hostile takeover was allowed to occur, the province would incur losses – in royalties, in jobs – down the road, and the people of Saskatchewan would lose out as well. Now, whether or not you or I believe the determination is the correct one, the fact is that deals involving key (provincially owned) resources do have repercussions on the economy – the business environment – in a province. I can’t imagine that it would be otherwise.
There’s no more important job for a premier than looking after the business environment in his province. It seems to me – and that’s a big “for what it’s worth” – that Saskatchewan has become a far more business-friendly province under Brad Wall. The decision he’s made makes him appear *anti*-business to some people, but I think he’s looking at the big picture – the *business* picture – down the road, and showing leadership by making an unpopular (to some) decision.
Potash was 90$ in July. Investors can’t complain. Provinces quite often make conditions. I owned shares in a copper/gold company in BC. Copper market went nuts but the share price did not follow.
The reason was they were mining the low grade stuff they were obligated by the government to mine. That and they paid down 30% of debt.
@fiddle@ 5:28PM
Fiddle – what the hell do you mean by “let’s not compete and get better at anything”? With whom do you want to compete?
A strong buyer like China could, and does, play one seller off against another. If we play it your way, we will either not get the sales or we will sell at market bottom prices which will keep all the mines operating – hopefully – but with little or no money to pay for upgrades, misc capital, etc.
You might want to read a basic economics text or something on the laws of supply and demand:
Many sellers/few large buyers = low selling prices.
Few sellers/few large buyers = higher selling prices.
If we play it your way, we will either not get the sales or we will sell at market bottom prices which will keep all the mines operating – hopefully – but with little or no money to pay for upgrades, misc capital, etc.
All the old, tired, socialist arguments, over and over.
What happens when your nice little monopoly/cartel is finally broken? Which it most assuredly will be. I can tell you, the backwards province will be left in the dust…again, unable to compete. All because they can’t see beyond their socialist noses and pursue excellence rather than the mediocrity of “one size fits all”.
fiddle – your lack of any knowledge of business is showing.
I don’t happen to be socialist. I am a card carrying member of both the CPC and the SK Party. And my comments are not “old, tired, socialist arguments”, but the product of my years in business – over 40 years – globally.
About your cartel argument. How do you think it will be broken? Some new country coming into the market with some heretofore unknown deposits of potash? Good luck with that.
If you are here trying to masquerade as a conservative, you are failing badly.
Niall:
Potash Corp. produces only 25% of the world’s potash. That is a very large amount, but it also indicates that the industry has many players and some decent competition.
Nothing stops Potash Corp today or next year from deciding to get out of Canpotex (actually getting out, as it would have been for BHP, is a much longer process).
fiddle Nope.
Forgetting about the political interference for a moment…
Was … has … is ….. PotashCorp being managed with diligence and proper consideration for its shareholders and hard assets?
I think not … and that is the reason for it being susceptable to a takeover.
PotashCorp shares were around $100 per and that price discourages dilution of ownership.
Another defensive strategy can be to buy back public shares using the hard assets as colateral for cash. With dividends paid on a percentage of share value makes them really worth hanging on to.
Apparently not considered or not within the means of the corporation.
Dilution of ownership is good for investors because it allows more active trading and broader participation of ownership as well as diversity in the strategy of investors. It also makes unwanted and aggressive consolidation attempts more difficult.
The situation was exactly the opposite with too many shares in too few hands and too easily swayed into giving up control to an outside entity.
They could have prevented this by simply splitting the shares by two or three or four which would have netted other benefits to the existing shareholders and to the corporation.
Now … if the government is going to stick to this meddling agenda it is about time they did the right thing for the shareholders …. can the management be charged with some sort of malfeasance?
Perhaps not … but an investigation is in order and should open the door for a shareholder revolt and new management.
At the very least the board of directors and the executive of PotashCorp are guilty of being foolish and short sighted. Unless the goal was to encourage agressive interest by competitors like BHP.
I’m leaning more to thinking they are incompetent.
All this talk of different levels of government respecting other levels of government and not a word about the most oppressed minority-the individual, whose right to conduct business and treat their property as they wish has been grossly violated by the very entities that should be protecting those rights.
Has Brad Wall done anything but spend more money and screw over investors since he got into power? What a waste of time. I’m sure cons will continue cheering him along with Harper to the end of days.
Fertilizer = life as we know it.
Keep it in North America.
Simple as that.
I don’t happen to be socialist.
You are if you’re in favour of cartels and monopolies that stifle entrepreneurship, innovation and competition.
About your cartel argument. How do you think it will be broken?
New mines, new companies. Or eventual takeover of existing mines. All combined with the comfortable incompetence and lack of innovation and entrepreneurship inherent in a cartel.
Cost of doing business is just as important as price of product. But then, big businessman you would know that, or not.
Brad Wall played his tommy douglas card. He knew this was a SK grass roots issue. The ‘peoples republik’ buy this one every time. If the feds jump on him he wins and by nixing the deal he wins.
Harper also wins by ‘protecting the resource’ and saves his 13 SK seats. He also may undermine Goodale in the next election.
The shareholders end up not cashing out, but is the Canadian way
Do you guys realize that Canpotex does not negotiate prices until the Russians have set theirs?
Potash and it’s pricing is Global…this is more about what is good for Sask and it’s workers versus unregulated Capitalism.
Mosaic is actually owned by Cargil…they have their own port and marketing…but choose to use Canpotex.
How many people posting here actually are miners to boot?