It's on paper, but it's probably not legally binding. Nevertheless, PotashCorp of Saskatchewan revealed its commitment to Saskatchewan on Monday.
While the fine details have yet to be ironed out, at least the surface memos indicate that Bill Doyle, CEO of the huge corporation and his team are prepared to pay back to the province and its people some of the favours they gained when the province and our premier went to bat for them by opposing a hostile takeover bid from Australian giant BHP Billiton this past fall.
Eleven of 14 head office senior administration positions will be in Saskatoon by 2013 instead of the current six. Whether that includes Doyle himself remains to be seen. We're guessing that Doyle will spend time in both centres Saskatoon and Chicago, much like Viterra's current CEO Mayo Schmidt taxis between Calgary and Regina. With communications being such an easy matter these days, the very fact that 11 of the 14 senior positions with the company will be located in Saskatoon while five or six remain in Chicago is significant.
Since there is no memorandum of understanding signed yet to make the commitment legally binding, we'd be shocked if PotashCorp reneged on the deal since it is under close scrutiny.
Much has been made of the fact the company made a $1.8 billion profit last year while paying only $76.5 million in provincial royalties. Critics are claiming that this proved the province's royalty rates needed a major overhaul.
We suggest they might require only a little tweaking at most, mainly because what the critics are overlooking is the fact that PotashCorp continues to invest in this province to the current tune of over $5.7 billion in expansion projects at their Cory and Rocanville mines. When they come into production, a more robust royalty level kicks in along with an increase in taxes.
With an additional pledge to increase head office jobs in Saskatoon by another 100 in the next two years, along with an additional 500 more jobs at the mine sites, it looks like PotashCorp is here to stay. And they intend to be an even better corporate partner by pledging one per cent of their gross income to community project assistance and that will include the new provincial helicopter-based air ambulance program. More details will be forthcoming on that item within the next few days.
A further pledge to stay fully engaged in the Canpotex marketing system deployed by all potash companies in Saskatchewan, which was one major factor that became a deal-breaker with BHP Billiton, was welcomed.
As we noted earlier though, none of these pledges are enforceable if push comes to shove if potash prices sink to less than $100 a tonne again. But as we've seen with the oil industry several times over the past few decades resource-based companies make great partners when things are going just swell and they end up being less than willing participants when they have to retreat into survival mode.
At that point, it's called business, not politics.
Right now there is a bright bloom associated with deals involving our province's No. 1 potash supplier, but we know that this situation can go sideways in a hurry when demand and prices go south, so we have to be prepared, just like we are when the oil patch goes in the tank every decade or so. That's the price you pay when you're in a resource focused province. We should know what to do by now, we've been dealing with agricultural crop variances for about 130 years. We can adjust.
