P otash Corp. of Saskatchewan Inc. should never be taken over by a Chinese consortium because China would never allow Canadians to take over any of its important resource companies.

Allowing BHP Billiton Ltd. (a British-Australian merged entity) to take over Potash Corp.'s operations is also troublesome but for different reasons.

And the negative implications are not fully understood in Canada, nor is the nature of the potash business.

The fact is most Canadian resource companies, such as Potash Corp., are not private-sector entities that are controlled by market realities and players. In Canada, resource companies often have two completely different sets of "owners" and two different chief executives.

Potash Corp. has a CEO from the private sector as well as thousands of stock market shareholders from around the world. But Potash Corp. also has a CEO from the public sector -- the Premier of Saskatchewan, Brad Wall -- as well as the province's 1.2 million residents, who own the resource that Potash Corp. mines.

In business terms, this means Potash Corp. and other natural resource companies operating on Crown lands are really franchises and the provincial, territorial or federal jurisdictions in which they operate are their master franchisors.

The legal basis for this arrangement is that all sub-surface mineral rights are retained by these governments and, therefore, the royalties paid on production can be revised at any time by the master franchisors.

This legal situation is consensual, by the way, and is contained in every lease or rights deal with every resource company in Canada involving Crown lands.

This fact is not known or discussed in either the marketplace or the media. It does not exist in most parts of the United States. This is why when Alberta raised royalty rates, U.S. investors cried foul. They claimed it was expropriation without compensation. But they were wrong. The royalty increases may have been ill-advised but were totally legitimate.

Potash Corp. was a Crown corporation sold a few years ago. The investors who bought its stock were only buying an entity with equipment, fax machines and a good customer list. They were also getting a licence to produce potash from the people's deposit but not getting title to the world's largest potash deposit.

So now the Australians have made a gigantic bid to buy this entity for billions -- as though they were buying the resources in perpetuity at bargain prices when they are not. They are buying a licence given out to the company at certain royalty rates for a certain term, both of which conditions are at the pleasure of the jurisdiction.

The province is in charge. It should calculate the financial damages that would result from loss of a head office; loss of a corporation that could reinvest to grow internationally; loss of a major Canadian stock market listing; loss of royalty income and so on.

Opposition to this buyout is not about capitalism versus socialism or statism. The potash is the legal property of Saskatchewan, not of Potash Corp. Saskatchewan's in control here, not stock markets nor even Investment Canada. Canadians on the cusp of acceptance should answer the following: Would China allow its most important corporation to be bought by powerful foreigners? Would Australia? Would the United States? Would Japan?