Steep potash sales decline sends Saskatchewan officials scrambling for revenue

As potash prices tumbled this year, companies like major producer PotashCorp of Saskatchewan drastically cut production, causing a C$1.8 drop in revenue for the province of Saskatchewan.

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Saskatchewan Finance Minister Rod Gantefoer said the province's potash industry has experienced the lowest sales volume levels in 37 years with potash revenue plummeting from C$1.8 million to C$109 million.

"Our government is working hard to deal with the significant challenge caused by a historic decline in potash revenue," Gantefoer said. "After considering several options, we've taken action to ensure our debt levels will not raise and the budget remains balanced."

The loss has been partially offset by a projected increase in oil revenue of $379.7 million, $192.8 million and federal transfers of $169.8 million.

Saskatchewan was expecting $1.9 billion in potash revenue when it projected its 2009-10 budget in March. By August, the Finance Ministry has dropped that estimate to $637.6 million.

During his mid-year financial update, Gantefoer told reporters, "I said when I tabled the budget that the one thing that was going to keep me awake was potash. I didn't think it would end up turning it's a bit of a nightmare."

Gantefoer projected 2009 potash sales of 4.4 million tonnes, the smallest production amount in decades.

Next year the province expects potash sales to increase to 10 million tonnes.

Meanwhile, the government said it will end up with a $424 million surplus this year, but had to take $564 million from its rainy day fund, known as the Growth and Financial Security Fund.  The province is also taking $560 million in cash from the sale last year of the Saskferco fertilizer plant. The province received $750 million for its 49% share, with the money earmarked for debt reduction and infrastructure.

The government also deferred $122 million in spending that had been earmarked for new long-term care facilities.

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