Royalty regime may be changed after revenues fall short - Action News
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New Brunswick

Royalty regime may be changed after revenues fall short

The New Brunswick government may explore changes to its royalty regime after projected revenues have consistently missed expectations.

New Brunswick has collected $70M less in potash royalties than it projected

The New Brunswick government may explore changes to its royalty regime after projected revenues have consistently missed expectations.

Finance Minister Roger Melanson said the provincial government may review royalty rates for potash. (CBC)
The government had high hopes for the potash industry in terms of creating jobs and generating much-needed revenue for the province'scoffers.

Actual revenue from potash royalties, however, in the last five years hasfallen $70 million short of the government's expectations.

Finance Minister Roger Melanson stopped short of calling the missed revenue projections from previous governmentsa problem.

I would say it's something to look at, Melanson said.

The finance minister said any royalty program needs to straddle a line between creating revenue and not scaring off investment.

It needs to be maximum benefit for New Brunswickers but italso needs to be a competitive environment for the private sector to invest in jobs, he said.

The New Brunswick economy has benefited from the potash industry for years, primarily in the Sussex area.

Potash Corp. of Saskatchewan, which has an existing mine in the area, announced a $1.67-billion plan in 2007 to build a two-million-ton mine in Penobsquis.

Slumping potash costs forced the company to announce 130 job cuts six months ago.

The New Brunswick economy has benefited from the potash industry for years, primarily in the Sussex area where PotashCorp has a mine. (CBC)
The company confirmed on Wednesday that 81 people did take a voluntary severance package. So the other layoffs were rescinded, partly because potash prices have made a modest improvement.

The global slowdown in potash prices, however,has also created uncertainty with another potash project.

Two years ago, Potash Atlantic, a company with financing from a Chinese company, dangled plans for another Sussex-area potash mine. The company also planned a potash refinery in Saint John.

But the $350-million plant hasnot materialized and neither have the 600 full-time jobs.

'A lot of questions'

Saint John Coun. Gerry Lowe said the company's option on land for the potash refinery project is about to run out on March 31.

There will be a lot of questions by council as to what's been done in two years, he said.

I know they need natural gas, they need a lot of it. And right now, the way the province is, they have a halt to the natural gas so I'm sure that affects it in many ways.

The provincial government has announced a moratorium on hydraulic fracturing.

PotashCorp buys natural gas, which was fracked, from Corridor Resources. Corridor Resources has questioned whether it can continue in New Brunswick with the moratorium.

On Wednesday, Jack Mintz, director of the University of Calgary's school of public policy, criticized Saskatchewans potash royalty regime.

The report rates New Brunswick's system for charging companies to mine potash there as a bit better than Saskatchewan's, but nothing to brag about either.

Mintz said neither province needs to "endure such a muddled and counter-productive approach to potash taxation" but could implement simple solutions.

He suggested profit-based tax reforms to provide more stability to the industry and more rewards to taxpayers when commodities are on the upswing.

They're leaving money on the table by not taxing rents, especially when you have good potash prices, Mintz said.