One of Canada’s largest mining companies stands out from the pack. It does not dig up gold, copper, diamonds, uranium, or iron. Nutrien mines fertilizer, in the form of potash. The fertilizer business these days is a pretty good business, with global demand outstripping supply and driving up the commodity prices. It allowed Nutrien to achieve record financial results in 2021, reporting $27bn of revenue and $3bn of profit (Link). In 2022, they likely did even better.
Nutrien’s six potash mines are located in Canada. Common practice across Canada is for mining companies to negotiate and sign Impact Benefit Agreements (“IBAs”) with local Indigenous communities. These IBAs will typically include a financial section that provides for payments to the impacted Indigenous communities.
Nutrien’s 2021 regulatory filings disclose what Nutrien has paid to Indigenous communities. The total amount for the year was $400,000 paid to two Indigenous communities in Saskatchewan (Link). As a reference, the total value of potash recovered from Saskatchewan in 2021 represented approximately $4b of Nutrien’s revenue for the year and $2.7b of Nutrien’s earnings for the year. The payments to Indigenous organizations works out to approximately 0.01% of revenues. For comparison, the average rate for the 30 largest mines across Canada is approximately 1.13% based on available public data.
Why is this so?
Nutrien clearly isn’t hiding the profitability of these mines. In fact, Nutrien reports paying $466 million to the province of Sasktachewan in 2021.
Nutrien also appears to recognize Indigenous interests and concerns and the prominence they are playing in Canada today. In Nutrien’s 2020 Diversity Playbook, it lays out its position clearly with respect to Truth and Reconciliation Commission’s calls to Action.
“The work of the Truth and Reconciliation Commission (TRC) created a new and broader understanding of the importance of recognizing the injustices of the past and setting a course for a better future for all people. Our company takes tremendous pride in having started down this path long before the TRC began its multi-year process of listening to the experiences and expectations of Aboriginal people and putting forward recommendations for reconciliation.
“The findings of the TRC confirmed the importance of a commitment to reconciliation and our company will continue to advance our plans to increase Aboriginal participation in our activities.” (Link)
The Diversity Playbook is a 60 page document dedicated to increasing the Indigenous content in Nutrien’s business.
Instead, the comparatively small payments arise form a much more prosaic reason. There seems to be an absence of regulatory pressure on Nutrien to sign IBAs with impacted Indigenous communities.
Impact Benefit Agreements are usually negotiated in the context of regulatory uncertainty. When a mine owner needs a permit or license, it applies to the regulator. The regulator will then, in many cases, consult with potentially impacted Indigenous peoples to understand and potentially accommodate their concerns. The degree of consultation, the willingness to offer accommodation, and the pressure that the regulator puts on the proponent to address Indigenous concerns varies by regulatory regime and jurisdiction. In some regimes and jurisdictions, Indigenous parties hold sufficient influence and leverage through this process to encourage proponents to engage with them directly through the negotiation of IBAs. Where proponents have a high degree of certainty that they can get their regulatory approvals without the support of Indigenous communities, there may be little incentive for them to negotiation IBAs and share their revenues.
Saskatchewan is recognized by the Fraser Institute as one of the top mining jurisdictions in the world due to a combination of the high quality of its geological resources as well as due to the perceived friendliness of the province’s policies towards mining investment and development (Link). One of the more unique policies that the government of Sasktachewan has implemented is the 2010 First Nation and Metis Consultation Policy Framework. This policy restricts government’s ability to consult in a number of cases. For example, projects occurring on private lands will generally not be subject to consultation (Link).
The Nutrien potash mines are predominantly old, predating modern protections of Aboriganal and Treaty rights and the Crown’s duty to consult. In addition, the permits and licences it needs to continue operations are mostly issued by the Government of Saskatchewan. Since Saskatchewan’s policy generally limits consultation on activities occurring on private lands (among other constraints imposed on consultation), there is limited regulatory pressure on Nutrien to negotiate IBAs with impacted Indigenous communities.
Nutrien is a public company with an executive team and a board of directors that are accountable to the ultimate owners of the company (primarily retail investors with accounts at places like Vanguard, T. Rowe Price, Royal Bank of Canada, etc). These shareholders have an expectation that the executives and directors will discharge their fiduciary duty. Part of that duty is to follow all required laws and regulations and abide by the necessary permits. But another part is to earn the shareholders a return on their investment. Nutrien appears to have a desire to increase Indigenous communities’ involvement in its business, and has made some payments to Indigenous communities recently (even if minimal compared to other mines). But without a compelling business case it can make to its investors about the need for more significant benefit sharing, it is unlikely to start funding the amount of benefits that would bring it in line with its mining peers.