Potash is an emotional issue in Saskatchewan

The wrong decision could cost Harper a few seats in next election

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The Gazette, Wednesday, November 3, 2010

Never mind that Potash Corporation is already majority-owned by foreigners, including 38-per-cent U.S.-owned. The government and people of Saskatchewan don't want it sold to other foreigners, BHP Billiton of Australia.

Never mind, as well, that Potash Corp's executive office is in Chicago, and that BHP, as part of its $38.6-billion hostile takeover bid, has promised to move it back to Saskatoon.

But BHP also said initially it would quit the Canpotex cartel that sets market prices for the 50 per cent of global potash output produced by three Saskatchewan companies, with Potash Corp., alone accounting for 30 per cent of the world's output of fertilizer. Output and price determine provincial royalties of a reported $6 billion a year.

That was enough for Brad Wall, the Saskatchewan premier, who not only opposes the deal, but has campaigned all-out against it, calling it "a profound betrayal of our province and its people."

And the people of Saskatchewan are with him. Before he started his campaign against the deal two weeks ago, federal government polling showed 70 per cent of Saskatchewanians opposed to it. Since Wall began his campaign, including a speech in Toronto last Friday, he has moved the numbers up to 85 per cent against it in Saskatchewan. You'd think BHP wanted to move the Rough Riders to another province.

Wall has lined up three premiers, including Quebec's Jean Charest, in support of his position. A sort of Coalition of the Willing.

Wall is also saying that if Ottawa fails in its duty to kill the deal today, he might even consider a constitutional challenge based on provincial ownership of natural resources.

He's got to be kidding. Nobody is challenging Saskatchewan's ownership of the resource, but it is private companies that exploit it. And it is the federal government, under the Constitution, that has oversight on investment and international trade. There is no constitutional issue.

But there is a political issue facing the Harper government, which is to announce its approval, or otherwise, of the deal today.

It's very simple: The Conservatives hold 13 out of 14 Saskatchewan seats in Parliament. And as several of them might well inform their colleagues at the Tory caucus meeting this morning, they would lose their seats if the BHP deal is approved. They are terrified at the prospect of Wall, a gifted campaigner, hitting the hustings against them.

Both the National Post's Don Martin and the Globe and Mail reported yesterday that Investment Canada officials have recommended approval of the deal, meaning that in their view it meets the "net benefit test" of the Investment Canada Act.

Industry Minister Tony Clement put out a note yesterday denying that Investment Canada had made any such recommendation to the prime minister. "No recommendation has been provided by Industry Canada officials," he declared. "As per the Investment Canada Act, when a decision is made, it will be made by me in my capacity as minister of Industry, not by the prime minister."

That's his story and he's sticking to it. Certainly, before yesterday, the issue hadn't been discussed at cabinet or any of its powerful committees.

Clement and the government are looking at several choices.

They can approve the deal as it stands. Not likely.

They can approve it with strings attached, as Martin reported, insisting BHP address Wall's concerns on royalties and other issues.

They can kill the deal outright, something successive governments have done only once since 1985, according to Bloomberg News, in 2008 when the Harper government nixed the sale of aerospace icon MDA to Americans. That was about national security and having access to our own technology.

Or, they can punt. It isn't written down anywhere that the government has to announce a final decision today. Nothing prevents it from taking, say, another month to see if Potash Corp can find a white knight rather than a hostile bidder. We have pension funds in this country, such as the Caisse de depot and Ontario Teachers, that might mount a friendly bid north of BHP's offer of $130 a share and closer to current market prices around $145 a share.

In other words, rather than approving or killing the deal, Ottawa can put the company in play. That would make shareholders happy, to say nothing of investment bankers, lawyers, consultants, and lobbyists who've all been doing very well on the BHP bid.

It's hard to make the case that ownership of a fertilizer company involves the national interest. If Apple made a hostile bid for Research in Motion, that would be another matter. But don't tell that to Brad Wall and the people of Saskatchewan. To them, Potash Corp., is part of their identity, even if it's already foreign-owned. It's not business, it's personal.

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