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Saskatchewan Premier Brad Wall

TROY FLEECE/The Canadian Press

Stephen Harper doesn't want Brad Wall turning into another Danny Williams.

What worries the minority Harper government, as it reviews BHP Billiton bid for Potash Corp. is that it risks alienating a provincial Premier on the eve of what could be an election year.

The Conservatives hold 13 of Saskatchewan's 14 federal seats and are facing the prospect that their four-year-old government may be defeated on their 2011 budget.

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The federal government is clearly predisposed, philosophically, to welcome foreign investment and Mr. Harper has made much of the fact that Potash is already majority foreign-owned. Its Investment Review Division is currently engaged in hardball negotiations with BHP over what conditions it might attach to a blessing of the takeover.

Should the Tories green-light the deal without satisfying Mr. Wall that it has obtained sufficient concessions from BHP, they could face the wrath of an angry Premier while campaigning for votes in Saskatchewan next year.

Newfoundland and Labrador Premier Danny Williams gave the Conservatives a taste of how much trouble a provincial leader can cause. In the lead-up to the 2008 election campaign, Mr. Williams repeatedly attacked the party for what he considered a broken promise on equalization payments for Newfoundland. On election day, the Tories lost all their three seats in the province.

But there is more at stake for Mr. Harper than Saskatchewan ridings. The government insists it welcomes foreign investment as a way of bringing badly needed investment and jobs into the Canadian economy, and it would send the opposite signal to the international investment community if Ottawa rejected a deal from Australia-based BHP.

The Investment Canada review is being closely watched in Australia, where several Canadian firms have recently made major investments, including Calgary-based fertilizer company Agrium Inc.'s controversial $1-billion purchase of AWB Ltd., the Australian wheat board.

While Mr. Wall's Saskatchewan Party is avowedly free enterprise, the premier has bowed to the province's socialist past by publicly committing not to privatize Crown utilities like SaskPower. Many Saskatchewan voters have a similar attachment to Potash Corp., which was a Crown corporation until it was privatized in 1989.

Officials from Potash Corp. were in Ottawa this week, meeting with the 13 government MPs from Saskatchewan, who are said to be concerned about having to defend a decision by Ottawa that goes against the wishes of a popular Premier.

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"When you get the kind of opposition that you are seeing to the deal in Saskatchewan, that does make people nervous," said one Ottawa insider close to the deal.

BHP has hired former Harper spokesman and Sun TV founder Kory Teneycke to lobby Mr. Wall's government on the matter. The Saskatchewan-born politico, who has previously worked for the Saskatchewan Party and counts Mr. Wall as a friend, has been enlisted to help keep channels open for negotiations between BHP and Regina.

The Liberals and New Democrats smell political opportunity in the potential split between Mr. Harper and Mr. Wall, the Prime Minister's closest ally among the Premiers.

The Conservatives remain well ahead of both opposition parties in the polls. But Liberal deputy leader Ralph Goodale - who holds the only opposition seat in the province - is ready to pounce if Ottawa approves the BHP deal.

"If Stephen Harper ignores Saskatchewan and approves the takeover of Potash Corp., who will pay the bill when the conditions aren't enforced?" Mr. Goodale demanded. "The Conservative government must stop taking Saskatchewan for granted and take responsibility for its actions. If this deal is allowed to go ahead, Saskatchewan needs assurances that it will not be left holding the bag for any negative consequences if Ottawa's decision goes sideways."

Mr. Goodale also criticized Mr. Harper's comment earlier this week that characterized Potash Corp. as "American-controlled."

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"Potash Corp. is a Canadian industry champion with its board of directors headquartered in Saskatoon," Mr. Goodale said. "Harper's flippant suggestions to the contrary are insulting and give further credence to our fear that the federal government is indifferent to what amounts to the sale of an entire resource sector."

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About the Authors
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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