Excerpt from Potash: An Inside Account of Saskatchewan’s Pink Gold – by John Burton

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John Burton grew up on a farm in Saskatchewan, studied at the University of Saskatchewan and the London School of Economics, was elected to Parliament, and played a major role in Saskatchewan’s 1975 decision to acquire potash-producing facilities. He was a member of the Board of Directors of the Crown-owned Potash Corporation of Saskatchewan from 1975 to 1982.

Chapter 1 – Introduction

“Potash! What’s that?” would have been the likely response of most Saskatchewan residents upon hearing the word any time before 1950. That would certainly not be the case now. Virtually everyone in the province knows what potash is today and recognizes the vital role it plays in the provincial economy as well as in the Canadian economy.

Potash1 is a naturally occurring mineral created during the evaporation of ancient seabeds. Ninety-five percent of commercial potash production is used for fertilizer, while the remainder is utilized in industrial production. Potash is vital for plant and crop growth, but there is a wide variation in the natural occurrence of potassium in soils throughout the world. For example, an adequate amount of the mineral occurs naturally in most Saskatchewan soils, but in the US Midwest it is very much needed to promote greater yields of corn.

When potash was first found in the province in 1942, there were only a limited number of potash mines in operation around the world. Major producers were in New Mexico, Spain, France, East and West Germany, and Russia. The Europeans had formed a cartel long before 1940, but during and after the war, US influence and control increased and helped to keep prices high. Potash became increasingly important following World War II, as the need to increase world food supply in order to meet the demands of a growing world population was recognized.

The effort that was undertaken became known as the “green revolution,” and one component of that endeavour was the increased use of fertilizers, including potash. Potash demand is growing steadily, but not continuously, as application does not necessarily have to be made each year as is the case with nitrogen and phosphorus.

Nitrogen and phosphorus along with potash are the key plant nutrients. When I was a boy, world population was two billion people. Today, the population is seven billion, and it is expected to be over nine billion by 2050. World capacity to grow enough food was already strained when there were only three billion people in the 1950s, at the time the “green revolution” was undertaken. World-scale famine was avoided in subsequent years because of continuing increases in capacity to grow food. The need for still more increases is ongoing. A diminishing land base makes fertilizers even more essential.

The 1942 discovery of potash in Saskatchewan, which was kept “hush-hush” for some time, was followed by further finds and finally caught the attention of government circles. By 1946, it was recognized that it was a mineral with real potential. A new government at that time was casting about for economic opportunities. Resources received top attention. Public ownership, complete or partial, was favoured initially, but by 1950, the social democratic government in power had to accept the reality that only the private sector was equipped to develop the resource. In the meantime, existing producers became aware of these potash finds and were anxious to gain “a piece of the action” as well as not wanting to upset existing cartel arrangements.

During the 1950s, three potash companies tried to reach potash deposits in Saskatchewan, the closest of which were 3,000–3,500 feet underground. The first company experienced complete failure, while two US companies that already produced potash in New Mexico struggled in vain to overcome the underground water problem. It was not until 1962 that one of them met with success and went into production.

Potash and Saskatchewan might now be regarded as virtually synonymous terms. While wheat dominated the Saskatchewan scene in the first half of the twentieth century, the role of potash increased steadily in the second half of the twentieth century (1950–2000), so that by the end of the century, it equalled or surpassed the value of wheat production. Since then, potash production has regularly surpassed wheat in value.2 This is quite astonishing! Potash is now part of the fabric of Saskatchewan.

Saskatchewan has a huge quantity of potash, now estimated at 52% of world reserves. The fact that 80% of the mineral resource rights in Saskatchewan are owned and managed by the province strengthens its authority over mineral affairs. Historically, in Canada, development was undertaken by the private sector. The original private entrepreneurs who successfully developed potash operations were large multinational firms, most of them foreign owned, most of which in turn were American, some already producing potash elsewhere.

My involvement in the story of Saskatchewan’s potash industry began in 1951, soon after I started my first job following university graduation. I grew up on a farm, and farm work was a significant part of my activities. That included handling fertilizer bags, and I knew that 11–48–0 on the bag meant it was 11% nitrogen, 48% phosphorus, and the zero was for some other stuff I didn’t need to worry about. When I took agronomy classes at university, I learned the zero indicated potash content. In a Saskatchewan setting where it wasn’t much needed, it was only ranked along with a number of micronutrients.

The executive director of the Saskatchewan Industrial Development Office, where I had started work, gave special attention to development of these recently found potash deposits. He needed information and data, which I had to supply, to support his efforts to persuade companies to consider potash development in the province. The director, D. H. F.(Don) Black, was a lawyer originally from Montreal who came to Saskatchewan because he believed in the political agenda being pursued by the Tommy Douglas CCF government. One day over coffee, I asked Don if there was any chance potash could be developed by the province; that is, through public ownership. His response was, “I’m afraid not, John. We just don’t have the finances or personnel that would be required. Besides, the Blairmore sands underground water formation poses too much of a risk for us to tackle.”

Across the hall from where I worked was the Government Finance Office, the holding company for the province’s crown corporations. The corporate secretary there was another person who had decided to come to Saskatchewan because of the new and innovative things being done. His name was Allan Blakeney. Finding him very personable, I got to know him quickly and we soon became friends. We were on much the same wavelength, and occasionally we talked about potash, a subject that was becoming of interest in the province. Little did we envisage the events that would unfold in future years and the role that each of us would play in those events.

Allan Blakeney wanted to have a better idea of how to proceed. He wanted more revenue from the industry and wanted the province to participate actively in further expansion, thus giving it a “piece of the action.” As I started gathering information and talking to people, I found a complex state of affairs. It was difficult to work through the morass, in particular because of the intransigent position of the department that was in charge. One thing that stands out in my mind is that Premier Blakeney was the driving force who was demanding action and wanted a plan of action mapped out. Officials of the Department of Mineral Resources, of course, had to respond to the new government’s outlook, but essentially they wanted to maintain the status quo. The premier was forcing them to address fundamental issues that had never been considered. My meetings with them were often strained and difficult.

The next three years were tumultuous as the government first increased its revenue take modestly but followed up with a major revenue-generating measure and persisted in its desire to be a partner in expansions. Industry resisted the government, but eventually their stance backfired when the government took dramatic action, enabling it to acquire part or all of the potash industry by purchase or expropriation.

Such drastic action had not been contemplated until the private industry challenged the government by launching court actions that stymied all initiatives it had undertaken. This move, coupled with the federal government’s unprecedented action in grabbing a “big piece of the pie,” thus restricting provincial revenues, resulted in Saskatchewan facing a stark choice—cave in or take decisive action. In studying the situation, legal officers determined that constitutional problems eliminated some options, so public ownership became an increasingly attractive choice.

I was part of the task force that made preparations for public ownership in the industry so the government would be ready if it made that choice. We operated in a clandestine manner and were told to tell no one unless authorized. We spent many evenings and weekends at work in room 43 of the Legislative Building in what was dubbed “the bunker room.”

It was obvious to my wife, Zenny, that I was engaged in serious work, but I couldn’t tell her anything. She and the kids did know I had to make a trip to London, England. Later, I learned she said to the kids, “Don’t tell anyone at school that Daddy is going to London. He is doing some very important work and nobody should know about it.” I have to give her full credit because I had not thought of that potential leak.

On my return, the kids of course were excited to find out what I brought them from London. In room 43, I reported on my discussions with British Sulphur Corporation, the world’s foremost potash intelligence-gathering organization, about how to manage marketing. On the morning of November 12, 1975, when the government’s big announcement was made in the Speech from the Throne in the Saskatchewan Legislature, my wife said to me over the breakfast table, “All right, I have figured out what you have been up to. The government is going to announce a takeover of the potash industry.” I said nothing, but I did smile.

The outcome is now history. The roller coaster series of events did not stop with the passage of the necessary legislation, as other major developments continued to follow one after the other, starting with the acquisition of mines. Events before and since 1975 support the conclusion that potash will continue to be an important feature of Saskatchewan affairs long into the future.

 

 

 

 

 

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