It appears the Saskatchewan government won't support BHP Billiton in its US$38.6-billion hostile bid for PotashCorp, raising doubts that the takeover will receive the necessary regulatory approvals from Ottawa.

BHP offered a C$370-million one-time payment into a proposed infrastructure fund to help cover the revenue the province would lose if the deal goes through, an official with the Saskatchewan government said Tuesday.

But the government official said the offer doesn't come close to offsetting the potential loss -- which the government pegs at $3 billion over 10 years --and the province would need to be appropriately compensated before it would even consider supporting the deal.

"We said it has to be at least $1 billion in combination with other measures to keep us whole on the loss of $3 billion," the official said.

Neither BHP nor PotashCorp immediately commented on the news.

Saskatchewan Premier Brad Wall and Energy and Resources Minister Bill Boyd were not available for comment Tuesday.

The bid needs to be approved by federal regulators before it can go to PotashCorp shareholders for a vote. Federal Industry Minister Tony Clement, who is reviewing whether the offer is of net benefit to Canada, has met with Wall and Boyd and has said he'll take Saskatchewan's concerns seriously.

"The review process is rigorous, and does involve consultations with affected provinces and other government departments," said Erik Waddell, a spokesman for Clement.

"The confidentiality provisions of the Investment Canada Act do not allow me to elaborate further," he added.

Whether Saskatchewan's disapproval is enough to scuttle the bid remains to be seen, but Wall has argued that if the takeover doesn't benefit the people of Saskatchewan then it won't benefit the people of Canada, since the vast majority of PotashCorp's operations are located in the Prairie province.

"It would be extraordinary and it would be a profound slap in the face to Saskatchewan if the federal government were to say yes after the Saskatchewan government has said no," said Ralph Goodale, deputy Liberal leader and a senior Saskatchewan MP.

"This is the most profound commercial transaction ever in the history of that province and maybe indeed in the history of the country. For the federal government to thumb its nose at that would be a huge insult to Saskatchewan."

He added that approval of the bid would "reinforce the reputation that Canada has of being a pushover."

Wall is expected to make a formal announcement Thursday in a speech to the Regina and District Chamber of Commerce before the province provides its views on the takeover offer to Ottawa. The federal government has said it will complete its review by Nov. 3.

A recent report by the Conference Board of Canada, which was commissioned by the province, said there would be few negative effects from a BHP takeover of Saskatoon-based PotashCorp (TSX:POT).

But the report did caution that the province could lose between $2 billion and $5.7 billion in taxes and royalties over the next decade, depending on how much potash the company produces.

This is because BHP would be able to take advantage of favourable tax preferences and a takeover that resulted in higher volumes and lower prices for potash could take a bite out of the royalties Saskatchewan collects on the resource.

The province arrived at its own figure of $3 billion by estimating that it would lose $2 billion from capital expansion writeoffs as BHP develops its existing Jansen potash project, and another $1 billion when the company writes off its interest costs from the money it borrows to finance the takeover.

BHP Billiton has pressed Ottawa on the merits of its bid and noted that the Anglo-American company, the world's largest miner, has operated in Canada for decades and owns the country's first diamond mine, the Ekati project in the Northwest Territories which employs about 800 people.

Montreal-based billionaire investor Stephen Jarislowsky, who is PotashCorp's third largest shareholder, said last week that BHP's bid is too low and should be rejected by Ottawa so Canada can avoid having another major company sold to foreign interests.

The federal government has blocked only one foreign takeover outright under the act, and has approved several controversial deals that saw the ownership of most of Canada's steel and nickel mining industries pass into foreign hands.

PotashCorp has argued BHP's US$130-per-share bid is opportunistic, made just as it believes potash prices are poised for a recovery as fertilizer demand increases amid concerns of a global food shortage. But so far it's the only bid on the table.

The most likely alternative bidder was thought to be China's Sinochem, which was rumoured to be putting together an offer with Canadian pension funds. But reports last week said the state-owned chemical giant had abandoned its plans.

Shares in PotashCorp added $3.06 or more than two per cent to C$148.40 in Tuesday trading on the Toronto Stock Exchange.