Saskatchewan’s Forgone Potash Windfall: Collecting a Fair Public Return
The price of potash doubled in 2022, adding $10 billion to the value of Saskatchewan's pink gold. But the provincial government collected only a quarter of this windfall. This policy paper highlights the need to improve royalties and taxes to ensure a fair return for the people of Saskatchewan.
[url]https://www.schoolofpublicpolicy.sk.ca/research-ideas/publications-and-policy-insight/policy-brief/saskatchewan-forgone-potash-windfall.php[/url]
Saskatchewan has one-third of the world’s potash. This fertilizer’s price doubled in 2022, creating windfall profits of $10 billion.
Although the Potash Corporation of Saskatchewan (PCS) was privatized in 1989,1 the potash itself – like any other mineral – still belongs to the province. For more than a decade, economists including yours truly,2 Jack Mintz,3 Jack Warnock,4 John Burton,5 and Jim Marshall6 pointed out that flawed royalties and taxes under successive governments have failed to capture the value of this resource.
Last year’s windfall highlights the need to collect a fair return for the people of Saskatchewan, who own the resource, from the mining companies that extract it. Although potash prices moderated this year, the value sold in 2023 already exceeds 2021 and every previous year.7
The Ukraine war dramatically increased demand and prices for Saskatchewan potash. Facing economic sanctions, Russia and Belarus slashed their combined potash production from one-third of global output in 2021 to an estimated one-fifth in 2022.8
While Saskatchewan mined the same volume of potash in both years,9 the value of those sales leapt from $7.6 billion in 2021 - already above any prior year - to $18.0 billion in 2022.10 An extra $10.4 billion arose not from additional production, investment or risk-taking by mining companies but from international events beyond their control.
This sum is enormous for Saskatchewan, enough to pay off the provincial General Revenue Fund’s entire operating debt.11 Ten billion amounts to $8,500 for every Saskatchewan resident,12 seventeen times the value of the $500 Affordability Tax Credit cheques the provincial government sent only to adult tax-filers.
The potash windfall could have been distributed to Saskatchewan people through cash transfers or tax cuts, used to pay off debt, saved for future generations, or invested in provincial infrastructure and services such as healthcare, education and housing. To fund these worthy goals, the Government of Saskatchewan would have needed to collect much of the ten billion on behalf of resource owners.
The price of potash doubled in 2022, adding $10 billion to the value of Saskatchewan's pink gold. But the provincial government collected only a quarter of this windfall. This policy paper highlights the need to improve royalties and taxes to ensure a fair return for the people of Saskatchewan.
[url]https://www.schoolofpublicpolicy.sk.ca/research-ideas/publications-and-policy-insight/policy-brief/saskatchewan-forgone-potash-windfall.php[/url]
Saskatchewan has one-third of the world’s potash. This fertilizer’s price doubled in 2022, creating windfall profits of $10 billion.
Although the Potash Corporation of Saskatchewan (PCS) was privatized in 1989,1 the potash itself – like any other mineral – still belongs to the province. For more than a decade, economists including yours truly,2 Jack Mintz,3 Jack Warnock,4 John Burton,5 and Jim Marshall6 pointed out that flawed royalties and taxes under successive governments have failed to capture the value of this resource.
Last year’s windfall highlights the need to collect a fair return for the people of Saskatchewan, who own the resource, from the mining companies that extract it. Although potash prices moderated this year, the value sold in 2023 already exceeds 2021 and every previous year.7
The Ukraine war dramatically increased demand and prices for Saskatchewan potash. Facing economic sanctions, Russia and Belarus slashed their combined potash production from one-third of global output in 2021 to an estimated one-fifth in 2022.8
While Saskatchewan mined the same volume of potash in both years,9 the value of those sales leapt from $7.6 billion in 2021 - already above any prior year - to $18.0 billion in 2022.10 An extra $10.4 billion arose not from additional production, investment or risk-taking by mining companies but from international events beyond their control.
This sum is enormous for Saskatchewan, enough to pay off the provincial General Revenue Fund’s entire operating debt.11 Ten billion amounts to $8,500 for every Saskatchewan resident,12 seventeen times the value of the $500 Affordability Tax Credit cheques the provincial government sent only to adult tax-filers.
The potash windfall could have been distributed to Saskatchewan people through cash transfers or tax cuts, used to pay off debt, saved for future generations, or invested in provincial infrastructure and services such as healthcare, education and housing. To fund these worthy goals, the Government of Saskatchewan would have needed to collect much of the ten billion on behalf of resource owners.
Comment