REGINA – The man who led the fight against a foreign takeover of PotashCorp. is supporting the federal government’s new rules that restrict state-owned enterprises in the oilsands.
“I think it’s just a clear signal to send out that foreign investment is welcomed here, but it’s different if it’s a government-owned enterprise, without distinguishing countries,” Saskatchewan Premier Brad Wall said Tuesday.
In fact, Wall said, Ottawa should go farther.
“We think if it makes sense for the federal government to restrict state-owned enterprises from other countries in terms of these takeovers in the oilsands, that it would make sense just to be explicit about that restriction extending to potash — where we actually have a greater proportion of the worldwide reserves than we do in oil — and in uranium,” he said.
Prime Minister Stephen Harper ended months of uncertainty on Friday by approving a $15.1-billion foreign takeover bid of Calgary-based Nexen (TXS:NXY) by the China National Offshore Oil Co., or CNOOC. Industry Minister Christian Paradis said he was satisfied that the deal would be a net benefit to Canada.
The Alberta government’s reaction to the Nexen deal has been somewhat more tempered than Wall’s. Although happy about its approval, the province has indicated it will seek greater clarity around the updated rules and what they mean to future transactions. Concerns and questions have also been raised in the Alberta oilpatch.
The net benefit test was an argument Saskatchewan used in 2010 when it opposed Anglo-Australian miner BHP Billiton’s (NYSE:BHP) US$40-billion proposed takeover of Saskatoon-based PotashCorp. (TSX:POT), the world’s leading potash producer.
Wall vehemently opposed the deal on the grounds Saskatchewan could lose billions in revenue from taxes and royalties. The premier painted the proposed takeover as anti-Canadian and said the country’s strategic interests would be at risk if the province sold most of its potash industry to an international company.
Ottawa rejected the takeover after concluding it failed to benefit Canada.
Wall said Tuesday that the Nexen deal was different.
“Because of the size of the takeover here, it wasn’t strategic. It didn’t warrant that estimation,” he said.
“You know we went through three filters to come to our conclusion on potash. If we were analyzing it as we did the potash deal — mind you, it was more cursory than say Alberta would have done it — we just didn’t see it meeting that same test.
“And there weren’t state-owned enterprise rules going into it, so this company acted in good faith.”
But Wall also said a case could be made for loosening rules for private firms as long as there are limits on takeovers where the Canadian company involved controls a strategic asset, such as potash.
The premier also said the federal government should relax non-resident ownership restrictions on the uranium industry. Current regulations cap foreign ownership of uranium mines at 49 per cent.
Saskatchewan is the largest uranium-producing region in the world, accounting for about 30 per cent of annual world production.
“We have companies like Rio Tinto that are not state-owned enterprises that wish to build uranium mines in the province, so we think if the federal government replaced the provision with this policy restricting state-owned enterprises from takeovers of uranium investment, we could solve both problems.”