Potash emerges as the Saskatchewan revenue powerhouse
NDP casts doubts on government's economic assumptions
The Saskatchewan treasury has a new cash cow — potash.
But a debate is brewing about how reliable that cow will be.
The pink mineral used for making fertilizer is expected to generate $1.9 billion for the province in the 2009-2010 fiscal year that begins April 1.
Revenue from potash is estimated to take in more money than provincial income tax and — assuming all goes according to plan — will account for $1 in $5 the province takes in.
According to the provincial budget released Wednesday, it's also more than all the money expected from all other natural resources combined.
For example, oil revenue this year is expected to total $537 million, about half the $1.05 billion estimated at budget time last year.
Finance Minister Rod Gantefoer, who in the past has said he worries a bit about potash revenues, said Wednesday the budget is based on "strong but cautious" revenue estimates.
"We don't expect to see the massive jump in provincial revenues that we enjoyed last year. However, this year we're expecting revenues to be up by $1.3 billion from the 2008-2009 budget estimate," he said.
'We need to be careful'
But Opposition finance critic Harry Van Mulligen said he questioned the economic assumptions behind the potash revenue projections.
"Twenty per cent — one in $5 of all the revenues in this budget — come from potash royalties and related surcharges," the NDP MLA said. "That's a huge number. And when so many eggs are placed in one basket … we need to be careful."
Van Mulligen pointed out that in the budget summary, the government is projecting potash sales volumes this year of 10.3 million tonnes, but since the budget papers went to print, the Potash Corporation of Saskatchewan has reduced its production by 10 per cent.
Potash price internationally determined
However, a spokeperson for the Agrium fertilizer company said the recent production cutbacks will not be an important factor when it comes to how much money the province takes in.
"The primary factor determining the level of potash tax revenue is the sales price of potash, which is an internationally determined price," Agrium chief financial officer Bruce Waterman said in an email to Energy and Resources Minister Bill Boyd that was released to the media Thursday.
"In fact, as long as producers are producing over our base tonnes for tax purposes, the effect would be fairly minimal, affecting only the profit tax through potentially slightly higher fixed costs per tonne of production," the email said.