Thursday, March 17, 2011

On inevitable results

Apparently they'll let just anybody write a column these days. So please enjoy my debut piece in the Leader-Post.

Meanwhile, there are a couple of points worth expanding on from the column, starting with the expected result of a royalty rate review.

In principle, there's no reason why a review would result in any particular conclusion. And indeed, most of the arguments being raised against a review (such as royalty rates in jurisdictions with less potash reserves) would serve just as well to promote lower rates within a review process as to try to stop such a process before it starts.

What's more, we've seen how the Wall brand of consultation works. Any review carried out under his government would be conducted primarily by industry insiders, with the Sask Party government then picking and choosing which recommendations to put into effect - ensuring that the end result would be as friendly as possible to the same actors who are fighting against such a process.

Which makes it remarkable that both the Wall government and the potash industry seem to recognize that even with the playing field heavily tilted in favour of current producers, any even remotely defensible review is likely to lead to higher royalty rates. And the fact that nobody is pretending for a second that a reasonable look at current market conditions would produce any other result should serve as fairly compelling evidence that a review is long overdue.

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