November 2, 2010 / 7:30 PM / in 7 years

Saskatchewan says reports may have tainted BHP review

WINNIPEG, Manitoba (Reuters) - Unnamed sources behind reports that Canadian bureaucrats are recommending approval of BHP’s bid for Potash Corp may have tainted Canada’s review, Saskatchewan’s top elected official said on Tuesday.

Premier Brad Wall, who strongly opposes a BHP takeover of Saskatchewan-based Potash Corp, said people who told the National Post and Globe and Mail newspapers about the review process may have violated confidentiality clauses. The papers did not identify their sources by name.

“It may be a problem for the federal government because there may be a case to be made that they haven’t honored their own process,” Wall told reporters in Regina.

“Some brainwave that’s gone ahead and done this chatting with the media, whoever that might be if indeed it has happened, may have actually hurt the federal government’s case in this.”

Industry Minister Tony Clement denied that Investment Canada, which is part of his ministry, had made a recommendation and said he had made no decision on whether to block the bid.

The federal government has until the end of Wednesday to make its decision, based on whether it believes a takeover by the Anglo-Australian mining giant would benefit the country.

Wall said Ottawa has previously cautioned Saskatchewan to respect confidentiality during the bid review. He did not specify whether the province intended to challenge the review itself based on breached confidentiality and it is unclear whether it can.

Wall said the province is prepared to move quickly with a legal challenge based on jurisdictional issues if Ottawa allows a foreign takeover. By law, Canadian provinces hold jurisdiction over natural resources.

Canada accounts for more than half of the world’s potash reserves, mostly in Saskatchewan. Demand for potash, an important crop nutrient, is expected to surge in coming years as China, India and other countries work to boost harvests.

“If we’re going to move now with a legal challenge that will have to happen quickly and it will,” Wall said.

The province would likely base a legal challenge on the Canadian Constitution and an 80-year-old agreement giving western provinces control over their resources, said David McGrane, a political studies professor at University of Saskatchewan.

But litigants in the past have generally used that strategy in matters related to taxation of resources, not corporate takeovers, McGrane said. “I don’t think there’s a high chance of success there,” he said.

Saskatchewan is also considering tax changes -- particularly a resource transfer levy against BHP -- to recoup the C$3 billion ($2.97 billion) to C$6 billion it expects to lose in royalties and taxes over 10 years if the takeover goes ahead.

(Editing by Frank McGurty)

$1=$1.01 Canadian

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