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PRAIRIE FORUM Vol. 14, No.2 Fall 1989 CONTENTS Introduction v ARTICLES The Economics of Resource Purchasers Investing in Saskatchewan's Resource Industries -Murrey Fulton 135 Economic Impacts of the SouthSaskatchewan River Project: A Midstream Analysis Buren N. Kulshreshtha and K. Dale Russell 149 Capitalization and InternalDifferentiation Within ManitobaFamilyFarmEnterprises Parvin Ghorayshi 163 Hydroelectric Powerand Indian Water Rightson the Prairies Richard H. Bartlett 177 Mineral Policyin Western Canada: The Casefor Reform Thomas Gunton and John Richards 195 PrairieOil andGas: RecentSignificance and Prospects to 2005 Doug McArthur 209 The ForestIndustry on the Pralnes: Opportunities and Constraintsto FutureDevelopment Michael Howlett 233 BOOKREVIEWS BODDY, Trevor, Modern Architecture in Alberta by Clifford Wiens 259 CANADIAN INSTITUTE OF UKRAINIAN STUDIES, Historical Driving Tour: Ukrainian Churches in East Central Alberta by Bohdan Kazymyra 261 PEACOCK, Don, Barefoot on the Hill: The Life ofHarry Hays by Barry Ferguson 262 STRANGE, Thomas Bland, GunnerJingo'sJubilee by R.H. Roy 264 COY, Helen, Fitzgeraldas Printmaker by Nicholas Tuele 265 AHENAKEW, Freda (editor), washahikaniwiyiniw-acimowinal Stories ofthe House People by Deborah James 267 SCHACH, Paul (editor), Languages in Conflict: Linguistic Acculturation on the GreatPlains by Donald A. Bailey 269 THISTLE, Paul C., Indian-European Trade Relations in the LowerSaskatchewan RiverRegionto 1840 by Frits Pannekoek 272 LUCIUK, Lubomyr, A Time forAtonement:Canada's First NationalInternment Operations and the Ukrainian Canadians 1914-1920 by Victor O. Buyniak 273 FRASER, Brian J., The SocialUplifters: Presbyterian Progressives and the SocialGospelin Canada, 1875-1915 James M. Pitsula 275 KILGOUR, David, Uneasy Patriots:Western Canadians in Confederation Joe Roberts 278 JONKER, Peter, The Songand the Silence:SittingWind by Fraser Taylor 284 LAWRENCE, Elizabeth Atwood, Hoofbeats and Society: Studies of Human-Horse Interactions David C. Jones 285 . FERGUSON, Barry Glen, Athabasca Oil Sands: Northern Resource Exploration, 1875-1951 James P. Hull 287 CONTRIBUTORS 290 PRAIRIE FORUM: Journal of the Canadian PlainsResearch Center ChiefEditor: AlvinFinkel, History, Athabasca, Alberta Editorial Board: I. Adam, English, Calgary J.W. Brennan, History, Regina P. Ghorayshi, Sociology, Winnipeg S. Jackel,Literature, Alberta M. Kinnear, History, Manitoba W. Last, EarthSciences, Winnipeg P. McCormack, Provincial Museum, Edmonton J.N. McCrorie, CPRC, Regina A. Mills, Political Science, Winnipeg F. Pannekoek, AlbertaCulture and Multiculturalism, Edmonton A. Paul, Geography, Regina D. Payment, ParksCanada, Winnipeg T. Robinson, Religious Studies, Lethbridge L. Vandervort, Law, Saskatchewan J. Welsted, Geography, Brandon B.Wilkinson, Economics, Alberta Copy Editor: Brian Mlazgar, CPRC, Regina Book Review Editor: G. Wadsworth Minifie, CPRC, Regina PRAIRIE FORUM is published twice yearly, in Spring and Fall, at an annual subscription rateof $18.00 for individual subscribers, $22.00 for institutions; single copies and special issues$9.00 for subscribers, $11.00 for institutions, $11.00 and $1.50 postage and handling for non subscribers. All subscriptions, correspondence and contributions should be sent to: The Editor, Prairie Forum, Canadian Plains Research Center, University of Regina, Regina, Saskatchewan, Canada,S4S OA2. Subscribers will also receive the Canadian Plains Bulletin, the newsletter of the Canadian Plains Research Center. PRAIRIE FORUM is not responsible for statements, either of fact or opinion, made by contributors. COPYRIGHT 1989 CANADIAN PLAINS RESEARCH CENTER ISSN 0317-6282 Introduction Over the past few years, Prairie Forum has periodically devoted one ofits regular editions to a special topic. These have been organized by guest editors, with authors addressing the topic in a manneroftheir own choosing. Articles are intended to be of interest to a general readership, with contributions from a number ofdisciplines. This edition is in that tradition, focussing on prairie resources. Resources have played an especially important role in the prairie economy; and it is thus appropriate that a journal such as Prairie Forum should give them special attention. Articles included range across a number ofsubjects. The issue of ownership is virtually always of vital concern in resources management; Fulton examines the trend toward greater ownership by outside consuming interests, and the effect that this will have on prices and production. Kulshreshtha and Russell examine the impact of an important water resource management project, the South Saskatchewan River Project, using benefit-cost analysis; a technique which is assuming new importance in assessing major resource developments. Ghorayshi addresses the impact of increased capital intensity in the use offarm land, and in particular the social impacts in terms of farm abandonments and social and economic differentiation in farm communities. The interests of aboriginal peoples have not received the attention they deserve in studies of resources use and management. In his article, Bartlett traces the impact of several major river dams on aboriginal peoples, and argues that the disregard of aboriginal issues so prevalent in the past cannot continue with impunity. Gunton and Richards ask how we are to manage resources in the best interests ofcitizens, and argue that this can only be done if policy makers pursue a policy ofrent maximization. They then examine the cases ofManitoba nickel and Saskatchewan potash in order to gain a better understanding of performance in this regard. Howlett and McArthur undertake surveys of two particular sectors. Howlett looks at forestry in Alberta, a sector which is becoming ever more important in that province. McArthur surveys develop ments in the oil and gas industry, and suggests thatnatural gas will become increasingly important, with a consequent further increase in Alberta's dominance of the industry. Doug McArthur Guest Editor TheEconomics ofResourcePurchasers Investing in Saskatchewan's Resource Industries Murray Fulton ABSTRACT.Investmentby resourcepurchasersin Saskatchewanresourceindustriesis on therise. This article notes that resource consumers have different objectives from resource producers.They are not interestedin solelymaximizingprofitsfrom theproductionof theresource;sincetheyarealsopurchasers oftheresource,theyareinterestedinthemoneytheycansavefrompurchasingtheresourceatalowerprice. The result of thisdifferentobjective is that resource consumerscan be expectedto producemore of the resourcethantheirresourceproducercounterparts.Theimpactof thison theindustryis toreducetheprice andtolowerthelevelofprofitabilityintheindustry,therebyproducinglowerprofitsforresourceproducers and lowerroyaltiesfor governments. SOMMAIRE. Le nombre d'acheteurs de ressources qui investissementdans les industries de la Sas katchewannecessed' augmenter.L'auteurnote,danscetarticle,que lesconsommateurs deressourcesont des objectifs tres differents de ceux des producteurs de ressources. TIs s'interessent non seulement a maximiser les profits decoulant de la production de la ressource mais, en tant qu'acheteurs de la dite ressource,ils se preoccupentaussides economiesqu'ils peuventfaire en achetantla ressourceaun prix moins eleve. En raison de cette differenced'objectifs, il faut s'attendre ace que les consommateursde ressource produisentplus que leurs homologues,les producteurs.Cela a pour effet de reduire le prix et d'abaisser Ieniveaude rentabilitedans l'industrie. De cefait, les producteursrealisentmoinsde profitset les gouvemements touchentmoinsde droitsd'exploitation. Introduction Investment in Saskatchewan's resource industries is increasingly being undertaken by companies and firms that are owned by governments or organizations which, in addition to producing the resource, also purchase the resource for their own use. Forinstance, in the uranium industry, Amok (owned by the French nuclearfuel purchasing company Cogema)owns 80percentofthe CluffLake uranium mine. Uranerz Exploration and Mining Limited, in which the West German utility RWEhas a substantial ownership, owns 33.33 percentof the Key Lake mine and mill. Cogemadirectly and indirectly owns 36.075 percent of the Cigar Lake project. The Korean .Electric Power Corporation, the government-ownedelectrical utility in Korea, also has a 2 percentequityinterest in this project. In addition, utilities and government corporations from Great Britain, France, West Germany, Japan, Italy and South Korea have all invested in uranium exploration in Saskatchewan. In seventeen ofthe twenty-five major exploration projects in which Saskatchewan Mining Development Corporation (SMDC) was part owner in 1987, uranium resource-consuming companies had some degree ofownership.' In the potash industry the governments of India and China, both major importers of potash, haveexpressed interest in investing in a potash mine in either Manitoba or Saskatchewan. Although the development of new production capacity in the potash industry appears to have been put on hold during the period of depressed prices in the mid to late 1980s, interest by India and China will likely emerge again when the market strengthens. The presence of resource consumers in Saskatchewan resource industries raises a number of questions. First, why have these types of firms become so 135 136 FULTON interestedin resource investment.In particular,is there somethingabout these firms,in comparisonto the strictresourceproducer,that