Canada province says reports may have tainted BHP review

* Papers cite unnamed sources in reports on Potash review

* Saskatchewan considering legal challenge of decision

By Rod Nickel

WINNIPEG, Manitoba, Nov 2 (BestGrowthStock) – Unnamed sources
behind reports that Canadian bureaucrats are recommending
approval of BHP’s (BHP.AX: ) bid for Potash Corp (POT.TO: ) 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 Canada’s
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. [ID:nN02206060]

The federal government has until the end of Wednesday (0440
GMT Nov. 4) 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)

Canada province says reports may have tainted BHP review