Potash developments spark Saskatchewan political fight

As PotashCorp and Agrium enter negotiations on a possible merger, Saskatchewan political leaders can agree on one thing: they want to keepjobs in Saskatchewan, and keep potash royalties streaming into provincial coffers.

They differ on their approach to the potash industry's future.

A few hours after both fertilizer companies announced merger talks Tuesday, PremierBrad Wall told reportersat the provincial legislature he'd spoken with both companies' CEOs, and sees positives in a potentialdeal.

"We would want to see Sask's interests protected and furthered," Wall said. "We would view this potentially, if it were to come to fruition, as an opportunity to perhaps pursue an even greater corporate presence in Saskatchewan on behalf of the new merged entity."

Agrium is currently headquartered in Calgary. The fertilizer company would not say how many people it currently employs at its potash mine near Vanscoyand its otherSaskatchewan operations.

Wall noted his governmentintroduced tax credits last year, aimed at luring more corporate head office jobsto Saskatchewan.

Protecting potash jobs 'critical'

PotashCorp said 2,477 of its employees work in Saskatchewan, including258 at PotashCorp's head office in Saskatoon. Thecompany has five potash mines in Saskatchewan and strong historical ties to the province, as it was originallycreated in 1973 as a Crown corporation.

PotashCorp was privatizedin 1989and listed on the Toronto Stock Exchange.

"The industry is very important to Saskatchewan today and forthe future, by way of investment and the jobs itcreates, the revenues it provides back to government," said Opposition leader TrentWotherspoon, who said a potential merger should includecommitmentsto keeping jobs in Saskatchewan.

"But I find it strange that the premier is entering this discussion when he's rubber-stamping one of our biggest customers, China, and its state-owned mine to operate here in Saskatchewan, something that could absolutely undermine our potash industry and our world-class companies," said Wotherspoon.

Chinese state-owned company gainedenvironment approval

FormerSaskatchewan Environment Minister Herb Cox announced announced Aug. 9 thathis ministry had approvedYancoal's3,000-page environment impact assessment. The Chinese state-owned mining company plans to build a solution mine near Southey, drawing water from Buffalo Pound.

Residents in the surrounding area are divided over the development, citing concerns over water supply and environmental impacts.

• Environmental nod for Yancoal potash proposal disappoints area residents

Cox saidYancoal must now meet a number of conditions, including creating a community involvement plan, forming a community advisory committee and committing toisolating the site from nearby waterways to "to ensure no off-site impacts to water quality," the governmentsaid in a news release.

"You'dbe hard-pressed to convince me how it's in our interest economically, to have China, one of our largest potashcustomers, operate a state-owned potash mine within Saskatchewan," said Wotherspoon, who accused the premier of "rubber-stamping" Yancoal'sapprovals.

Potash slump, oversupply has led to one mine's closure

Oversupply concerns led the Mosaic Company to lay off 330 employees last month, at its Colonsay potash mine.

With potash currently selling for approximately $150 USD per tonne, analysts say cost-saving measures have drivenAgrium and PotashCorpto consider a merger.

It's not necessarily going to be an expansion in jobs.- Brooke Dobni, professor, University of SaskatchewanEdwards School of Business

"This is sort of textbook in a sense," said University of Saskatchewan business professor Brooke Dobni. "I'm not surprised at all that they're having these discussions now, but they wouldn't have happened three or four years ago when the price was $400-$500 a tonne."

Dobni warned that the current slump in commodity prices will likely last several more years.

• No quick end to potash doldrums in Saskatchewan as capacity ramps up

"Part of the merger talk would be how could we control costs better in a bigger unit," saidDobni. "It's not necessarily going to be an expansion in jobs."

A merger betweenPotashCorpandAgriumwould require approval from Canada's Competition Bureau.