Written By Jessica Kennedy, Keely Cameron, Laura Glover and Martin Ignasiak
Potash is a critical mineral used as a replenishing agricultural fertilizer. As a result, millions of farmers around the world depend on potash. The Canadian province of Saskatchewan is the world's largest potash producer, followed by Russia and Belarus. As the sole producer in Canada, the Saskatchewan potash sector accounts for about 30 percent of global production.
Production in the Saskatchewan potash sector hit all-time record highs in 2021, reaching 14.2 million tonnes and sales hitting $7.6 billion. Despite this achievement, Saskatchewan potash production is expected to grow even more in 2022. Potash has become "geopolitically essential" internationally following Russia's invasion of Ukraine, according to Canadian Finance Minister Chrystia Freeland. In response to increasing global demand and growing concerns about food security, the Saskatchewan government has pledged to ramp up potash production to fill any market gaps left as a result of the sanctions placed on Russia and Belarus.
In light of this commitment, on September 15, 2022, the Saskatchewan legislature introduced The Subsurface Mineral Royalty Amendment Regulations, 2022, and The Potash Production Tax Amendment Regulations, 2022. These new amendments amend The Crown Minerals Act, The Subsurface Mineral Royalty Regulations, 2017 and The Mineral Taxation Act, 1983. Combined, these new amendments reduce the amount of royalties payable on potash production for eligible new mines.
In order to qualify as a new mine under the amendments, a potash mine must begin commercial production on or after January 1, 2023, and achieve an initial annual production capacity of over two million tonnes. Eligible new mines will receive reduced royalty payments for a period of 36-months, subject to prior written approval by the Minister of Energy and Resources.
The royalty reduction will be determined on an annual basis, with the specific amount calculated for individual potash producers according to (a) the overall quantity of potash they produced in the year (in K2O tonnes), and (b) the average price of potash received by the producer in the year.
The amendments will come into force on January 1, 2023.
Overall, these amendments represent the Saskatchewan government's continued commitment to encouraging investment into the province's robust potash-mining industry. The incoming royalty regime will have potash producers enjoying a lighter royalty burden on new mining investments in the province.
One of the objectives identified in Saskatchewan's Growth Plan, published in 2019, was to increase the annual value of potash sales to $9 billion by 2030. With the already record-breaking performance of the potash sector bolstered by these newly announced legislative changes, Saskatchewan is positioned to achieve this objective well before 2030.
If you have questions or comments about the amendments, please contact the authors.
Please note that this publication presents an overview of notable legal trends and related updates. It is intended for informational purposes and not as a replacement for detailed legal advice. If you need guidance tailored to your specific circumstances, please contact one of the authors to explore how we can help you navigate your legal needs.
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Bennett Jones