On the basis of Potash Corporation of Saskatchewan’s (PCS) overall environmental impact and exposure, including the land impact of its phosphate mining operations, its environmental non-compliance record, and systemic accidents and spills, Jantzi Research had previously recommended that PCS be considered ineligible for portfolios that seek to avoid companies with poor environmental records. Jantzi Research now recommends that the company be considered eligible for SRI portfolios. This recommendation is based on the following:

• An overall improvement in recent years in the company’s ESG performance; 
• A significant decrease in the company’s five-year environmental compliance penalties total;
• A substantially reduced number of accidents and spills at the company’s operations in recent years;
• A commitment to address the environmental impact of its phosphate mine operations.

AREAS OF ESG IMPROVEMENT

Improvements in ESG Performance Overall PCS has become a leader in the area of sustainability reporting. Its most recent annual sustainability report was written in accordance with the Global Reporting Initiative (GRI). The company introduced separate sustainability reports in 2002. In 2006, PCS released its first community sustainability reports for each company facility. These reports include information on facility safety and environmental performance, community involvement initiatives, and contracting with local businesses near operating facilities. In 2002, PCS implemented a new safety, health and environmental (SHE) management system, which applies to all of its operations. The SHE management system is comprised of thirteen elements addressing areas such as risk assessment and management, employee training, facility design and construction, and community engagement, among others. Today this system is one of the strongest within its peer group. The company has also improved its performance in the area of human rights, an area to which it has significant exposure through its 20% interest in China-based Sinochem Hong Kong Holdings Ltd., or Sinofert. Sinofert is the fertilizer arm of Chinese state-owned Sinochem Corp., the largest distributor of potash in China. PCS has adopted several policies on human rights issues that are in accordance with the United Nations’ Universal Declaration of Human Rights.

Environmental Compliance

March 2008 saw the expiry of a five-year probationary period imposed upon PCS by the federal U.S.District Court as a result of its felony violation of the U.S. Clean Water Act, under which the company was fined a total of $2.0 million U.S. in 2003. The fines were a result of the PCS’s failure to identify 20 potential sources of air pollution in an air permit application. Since this significant incident, the company has reduced its total number of environmental compliance violations and penalties, and its compliance record now compares favourably with other companies in its peer group.

Accidents and Spills

In 2006, PCS reported 21 accidental and non-accidental hazardous material incidents. The company also reported 11 spills, eight at potash operations and three at phosphate operations. This was a significant decrease from the more than 60 reportable incidents and spills in 2002.

Land Use Impacts of Phosphate Mining

Despite the company’s overall improvement in ESG performance, its Aurora, North Carolina and White Springs, Florida phosphate mines continue to have significant environmental impact, particularly because they are located in or adjacent to ecologically sensitive wetlands.

In 2006, the company reported that it was seeking a Mine Continuation Permit from the U.S. Army Corps of Engineers to continue its Aurora mining operations on a site adjacent to the current mine operations. The company’s application has drawn criticism from the North Carolina-based Pamlico Tar River Foundation (PTRF). The PTRF objects to the disruption of wetlands along the South Creek and Pamilco River, and is concerned that the mitigation efforts by the company will "not function as effectively as a natural wetland." The company reports that it proposes to implement a wetland replacement ratio of one and a half to one, i.e. for every one acre it impacts, it will replace one and a half acres. The original land tract identified by the company for the Mine Continuation Permit in the Draft Environmental Impact Statement was approximately 3,400 acres, more than 2,000 acres of which is classified as wetlands. The Army Corps has subsequently released a Supplementary Draft Environmental Impact Statement, which proposes alternative land tracts for the company to mine.

As of April 2008, the company was waiting for the Army Corps decision on the Aurora Mine Continuation Permit. The company reports that the Army Corps could make a determination as early as the summer of 2008. To date, the company has demonstrated that it is interested in amicably working with the Army Corps to address the environmental concerns outlined by the Army Corps original DEIS and SDEIS.

In 2006, the company reported that it had reclaimed more land (more than 11,000 acres) than it mined over the past decade at White Springs, Florida, a current phosphate mining site, part of which (approximately 4,000 acres) is in a Wildlife Management Area supervised by the Florida Fish and Wildlife Conservation Commission (FWC). According to the company, it used 35 reclamation projects to remediate the mine site. Half of the projects and one quarter the total area involved wetlands restoration.

While the company’s phosphate mine operations continue to have significant environmental impacts, Jantzi Research is of the opinion that the company is committed to minimizing the mine’s environmental impact on wetlands, and that the Army Corps of Engineers will ensure that an approved Mine Continuation Permit addresses the site’s potential environmental impact.

CONCLUSION

On the basis of PCS’s improved ESG record, including strengthened environmental management practices, a decrease in environmental penalties over the past five years, and a decrease in accidents and spills, Jantzi Research recommends that the company be considered eligible for SRI portfolios managed in relation to a broad range of ESG criteria.