Eric Cline, Squandered: Canada’s Potash Legacy. Regina, SK: University of Regina Press, 2024. 170 pages.
Eric Cline is a well respected spokesman in Saskatchewan – on many subjects. For ten years in the 1980s, he practised law in Saskatoon. He entered the legislature in 1991 and served as a senior cabinet minister during much of the NDP reign, 1991–2007, before deciding not to run in the 2007 election. In much of the following decade, Cline served as a vice-president of a private potash company. He resigned from the NDP in 2019 as a result of Jagmeet Singh’s rash ejection from caucus of Regina MP Erin Weir.1
During his stint as a company vice-president, he obviously ruminated over many ideologically motivated decisions concerning the province’s principal mineral resource. Ultimately, he decided to write a book on the history of potash politics from the mid-20th century to the present. His book is not an easy read, especially when he unnecessarily introduces accounting terms, but it is worth reading. The book’s title says it all: ideological decisions by past premiers “squandered” the potential provincial royalty income, income that could have substantially increased provincial “own source” (net of federal transfer) revenue.
Saskatchewan’s potash layer
Three hundred million years ago, the Prairies were covered by an inland sea. Over the next 100 million years, the sea evaporated and ultimately became brine. In the final stage, sodium chloride (table salt) and potassium chloride (potash) formed a stable layer running across what is now southern Saskatchewan, southwestern Manitoba and North Dakota. In the mid-20th century, companies drilling for oil and gas discovered that wherever they drilled in southern Saskatchewan, they found potash.
Potash is one of three components (nitrogen, phosphorus and potassium) in chemical fertilizer required for cereal crops. There was a major obstacle. Above the layer of potash is an underground river, under immense pressure. The first mines relied on thick concrete walls to get to the potash layer and hoist the ore. Within a few years, the water pressure overcame the concrete and flooded the mines. The engineering solution was time-consuming and expensive: freeze a large block of water in the underground river. Once the ice block was large enough, miners drilled a column in the middle of it and installed cast-iron rings, anchored above and below the 200 metres of water.
With the engineering obstacle overcome and high world cereal prices in the 1960s, U.S. mining companies invested the equivalent of about $20 billion in today’s dollars in drilling ten mines. At the potassium layer, mechanical drills tunnelled and created vast underground cities. Political expectations of the economic benefits of potash in Saskatchewan paralleled Alberta’s oil and gas wealth.
Two ideologues: Ross Thatcher and Grant Devine
Ross Thatcher had been a CCF member of Parliament, but had become an apostate who consistently quipped about socialists trying to sell refrigerators north of 60. In 1957 Tommy Douglas, then Premier, challenged Thatcher to what became a famous debate in rural Saskatchewan, pitting socialism (i.e. crown corporations) versus capitalism. Over a thousand people attended the meeting in a village community hall; the CBC broadcast it live across the province. As I recall, the debate was more or less a tie. As the bluest of blue Liberals, Thatcher became leader of the provincial Liberals and, from 1964 to 1971, was Premier.
Thatcher believed in business acumen and encouraged private investment in potash mines. Provincial tax rates were low. However, in 1970 the potash market crashed and the mining companies were on the verge of bankruptcy. Having lost his faith in business acumen, Thatcher damned the mining executives as fools and found himself negotiating with the Governor of New Mexico (a state with potash mines) to save the potash companies from bankruptcy. The duo negotiated an agreement among North American potash corporations to limit aggregate production and respect a price floor. The dubious deal triggered an anticompetition investigation in Washington.
In 1971, the NDP returned to office. Fortunately for the Saskatchewan treasury, the potash market thrived and Thatcher’s deal with New Mexico became defunct. As Premier, Allan Blakeney proposed an increase in provincial royalty payments. The mining companies balked at Canadian “socialism” and sued the province for reneging on low royalty rates. In 1973, the story became more complex. OPEC, the cartel managing Middle East oil production dramatically increased world oil prices. Ottawa and Alberta squabbled over which government should capture the windfall from sale of Canadian oil and gas. The squabble wound up in the Supreme Court, which ruled for Ottawa.
The Supreme Court decision threatened Saskatchewan’s claim on high potash royalties. In 1976, Blakeney decided that the least risky means to capture revenue from potash was to buy out half the provincial mining capacity. (According to a longstanding convention, Ottawa does not tax the earnings of provincial crown corporations.) Furthermore, as a crown corporation the Potash Corporation of Saskatchewan (PCS) would have directors in Saskatoon, not in Chicago. Provincial potash revenue rose from under 5 per cent of sales revenue in 1971 to 25 per cent in the early 1980s.
In 1982, the NDP suffered a devastating electoral defeat. From 1982 to 1991, Grant Devine, an economist from the University of Saskatchewan, led a Conservative government. Like Thatcher, Devine believed public officials were inefficient whereas business leaders had acumen – hence, the province should not be involved in business. In 1989, during a market slump, Devine sold the crown-owned mines for only $630 million CAD, a price that Cline argues amounts to politicians’ squandering a public asset. In 1997, the market value of potash assets was $6.2 billion CAD.
This century, the market value of Saskatchewan potash has continued to rise. In 2010, BHP, a large Australian firm, offered $38.6 billion CAD to buy out shareholders in the privatized Potash Corporation of Saskatchewan. For various reasons, Ottawa blocked the sale.
From financially prudent social democracy to conservative populism
Having risked large sums to solve the underground river obstacle, initial private investors deserved profits. Thatcher’s faith in business acumen ignored the speculative motivation of new mines that dramatically increased North American potash supply and thereby came near to bankrupting the continental potash mining sector. Devine’s belief in public sector incompetence led him to sell Blakeney’s potash crown corporation for an inexcusably low price.
Cline is among the financially prudent CCF-NDP leaders in Saskatchewan – Woodrow Lloyd, Allan Blakeney, Tommy Shoyama and others – who simultaneously initiated many social programs and balanced the books. Since 2007, Saskatchewan’s financially prudent social democratic tradition has given way to conservative populism, which articulates rural concerns and pays little attention to maximizing public revenue from potash sales. Thatcher and Devine’s ideological dismissal of crown corporations has been transmitted to today’s Saskatchewan Party.
From 1976 to 1982, the years during which half of Saskatchewan’s potash capacity was in crown-owned mines, the provincial treasury captured 23 per cent of total sales revenue on average. From 2011 to 2022, the provincial tax share, from entirely privatized mines, averaged only 12 per cent. Admittedly, potash prices were higher in the late 1970s and early 1980s than in much of the 2010s, but price differences do not explain much.
Saskatchewan voted in late October 2024. The Saskatchewan Party comfortably won its fifth uninterrupted majority in the legislature. While the NDP increased the size of its caucus in the province’s cities, it has yet to come to grips with the rural/urban divide, reforms needed in the health and education sectors and the ecological crisis of wildfires and drought. And not to be ignored is the “scandal” of lax potash taxation.
Note
¹I thank Erin Weir for reading an earlier draft of this review, and offering good advice.
