Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue No. 44 - Evidence - May 23, 2018
OTTAWA, Wednesday, May 23, 2018
The Standing Senate Committee on Social Affairs, Science and Technology, to which was referred Bill C-45, An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts, met this day at 3 p. m. to continue its study of the bill.
Senator Art Eggleton (Chair) in the chair.
[Translation]
The Chair: Welcome to the Standing Senate Committee on Social Affairs, Science and Technology.
[English]
I am Art Eggleton, a senator from Toronto, chair of the Standing Senate Committee on Social Affairs, Science and Technology. I’ll ask my colleagues to introduce themselves.
Senator Seidman: Good afternoon. Judith Seidman, Montreal, Quebec.
[Translation]
Senator Poirier: Good afternoon. Rose-May Poirier from New Brunswick.
[English]
Senator Wells: Good afternoon. David Wells from Newfoundland and Labrador.
Senator Manning: Good afternoon. Fabian Manning, Newfoundland and Labrador.
Senator Dean: Senator Dean from Ontario.
Senator McCallum: Mary Jane McCallum, Manitoba.
[Translation]
Senator Petitclerc: Chantal Petitclerc from Quebec.
[English]
The Chair: Today we continue with our hearings on Bill C-45, An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts.
Today our subject is particularly with regard to the producers, retailers and one mayor. We have two panels today. This panel is scheduled to go from 3 p.m. to 5 p.m. and then panel two from 5 p.m. to 6 p.m., trusting we have no ringing of bells from the Senate, which could interrupt us.
I’ll ask all of our presenters, and we have four of them in this first panel, if they could give us opening comments of up to seven minutes. Since I have a history and a partiality towards mayors, I’m going to start with the mayor of Smiths Falls, Shawn Pankow.
Shawn Pankow, Mayor, Town of Smiths Falls: Thank you very much. Good afternoon, honourable senators. It’s truly my privilege to have the opportunity to address you here today. I have been invited to speak on behalf of the 9,000 residents of Smiths Falls, a community which, over a short period of time, has risen to become the vanguard to the impending legalization of cannabis.
Although the burgeoning cannabis industry in Canada has led to new employment opportunities and innovation in communities across the country, Smiths Falls stands out as the best example of the incredibly positive impact of a changing landscape. Smiths Falls is a community on the rise, and we are in the early stages of an economic renewal like nothing we have experienced before.
It was not always like this.
When I was elected mayor of Smiths Falls in 2014, I never imagined I would be addressing the Senate of Canada on legislation that will legalize a natural herb, a plant that had been used legally for medical and recreational purposes for thousands of years but was made illegal in Canada in 1923. We may never know the reasons why it was lumped in with heroin, cocaine and other more dangerous drugs, with little recorded discussion or reasoning.
While Canada was one of the first countries to criminalize cannabis use, we must have appeared to be ahead of our time when the U.S. Federal Bureau of Narcotics initiated a strong propaganda campaign of falsehoods condemning marijuana, suggesting it would lead to delirium and insanity.
Although we may never know what motivated the U.S. to start this global movement that included cannabis in the war on drugs, we do know it led to many lives ruined, police resources consumed and untold billions of dollars wasted on trying to control and eliminate the use of an herb that had been enjoyed harmlessly for centuries. Looking back, it is appalling today to consider the tens of thousands of Canadians annually left with a criminal record due to possession of marijuana.
The town of Smiths Falls stands at the centre of eastern Ontario and is the heart of the Rideau Canal. It was the construction of this waterway in the late 1820s that turned Smiths Falls into a centre for enterprise, as the fast-flowing waters of the Rideau served as a source of power for numerous mills, enabling area farmers to participate in the provincial economy.
It was this developing economy and our central location in eastern Ontario that led to the town embracing the new technology of late 1850s — railroads. The town served as a crossroad for multiple railways and, more importantly, as a divisional centre for the Canadian Pacific Railway. At its peak, CPR employed over 1500 men. Growth at farm implement manufacturer Frost & Wood, Malleable Castings and numerous other enterprises formed the foundation of my town’s industrial heritage.
The construction of the Ontario Hospital School, later named the Rideau Regional Centre, led to 1500 good-paying provincial government jobs serving the 2,500 residents of this facility. Numerous other industries came and went, and it seemed every time one enterprise was closing another was opening. Diesel engines changed railway operations in the late 1950s, leading to the loss of hundreds of jobs. Around that same time, Frost & Wood closed down its operation, leading to the loss of hundreds more.
However, it was not long before a large American candy maker, Hershey’s, found its way to Smiths Falls and started operations in 1963. Over time, Hershey Canada expanded its operations and number of employees from 184 in 1970 to 750 by 1990. Smiths Falls embraced its role as the chocolate capital of Ontario and welcomed tens of thousands of visitors annually for tours of the facilities, including a stop at the Chocolate Shoppe. At one point, we branded our town with Hershey’s — it was the icon on our water tower.
These and other industries led to a period of strong economic growth and a high availability of well-paying, industrial jobs. All this changed in February 2007, when Hershey’s quite unexpectedly announced it was closing the Smiths Falls plant. This announcement came on the heels of the province’s plan to shutter the Rideau Regional Centre. In a very short period of time, these losses, combined with layoffs following the closure of other local manufacturers, resulted in close to 2,000 lost jobs in our community of 9000 residents. In many cases, it left both wage earners in a family without employment. It led to the downturn of our local economy as the ripple effect of lost wages reverberated through the town. Suddenly, Smiths Falls was national news for all the wrong reasons.
The people of Smiths Falls have long been known as strong and resilient. However, the continued effort of finding challenges at every turn began to take its toll. People were forced to sell assets, liquidate retirement savings, sell their homes and change their lifestyles considerably. People who were once confident and hopeful about the future became immersed in discouragement and uncertainty.
It was the experience I saw through the lives of my clients in my professional life as a financial planner that motivated me to run for town council in 2010. By 2014, when the next municipal election came around, little had changed except for the small company planning to grow medical cannabis.
In the fall of 2013, a group of entrepreneurs had a dream to get a licence to grow medical cannabis in the former Hershey’s chocolate factory. Early projections suggested they could eventually hire 100 people and maybe occupy one third of the 450,000-square-foot building. Our council was completely supportive. Smiths Falls had a glimmer of hope. Just imagine what could happen if, some day, marijuana could be legalized for recreational use?
Flash forward four years, and Smiths Falls is experiencing an unprecedented economic renewal. A town once known for nothing but bad news was now making headlines across the country for embracing a new, innovative industry. Canopy Growth Corporation has taken root in our community, and a future once clouded in uncertainty now has a shining star lighting our way to a more prosperous future.
The impact to date has been very impressive. Between 2017 and 2018, Canopy will have invested $150 million in the Smiths Falls campus, with $70 million more coming before the end of 2019. Building permit applications representing total construction volume and permit fees in Smiths Falls in 2017 were far greater than the sum of the previous four years combined. The level of construction thus far in 2018 is now three times greater than the total experienced in 2017, now approaching close to $100 million. Although much of this can be attributed to the expansion and renovation of the Canopy campus now spreading across Hershey Drive, construction volumes and new home builds are also on the rise across town and beyond.
We are now facing a housing shortage as new Canopy employees move to our community and settle permanently. We are experiencing a hot housing market as these employees, local residents now working at Tweed and others are competing for homes, driving up prices and initiating bidding wars. In the words of a realtor with four decades of experience in our community, “We have never seen anything like this.”
It is only just beginning. With over 500 people now working out of the Smiths Falls Canopy campus and expectation to more than double this number in the future, the impact of tens of millions of dollars in payroll is multiplying through our town, supporting numerous local businesses.
While I suspect the cannabis trade has been active in our community for generations, its underground economy had little if any positive impact. I hope the legislation soon to be passed by our government commits to regulated, licensed producers and squeezes out any trace of black market activity.
While we are fully supportive of Canopy Growth Corporation and its vision for expanded product line, limited only by ingenuity and innovation, I do encourage senators to challenge the potential for large scale, commercial outdoor cultivation of cannabis. I believe the Government of Canada unintentionally helped create the illicit trade of cannabis with the Opium and Drug Act of 1927. I’m concerned that permitting commercial outdoor cultivation by regulation will increase the possibility of continued domination by the illicit market and will discourage continued investment by licenced producers like Canopy.
Canopy is quickly rebuilding the industrial tax base we relied on heavily for most of the town’s history. We weathered the tsunami of economic upheaval and laid a solid foundation for future generations. Canopy has quickly endeared itself to all 9,000 of our residents and through its philanthropy has provided significant levels of support to our community. Smiths Falls town council sets strategic priorities for this term and established a vision for 2025. Paramount to our objectives is growth in the population, a diverse economy with a strong business sector, attracting new manufacturers and a fully developed industrial park. At the time, these seemed like lofty goals to accomplish in a decade. Thanks to Canopy Growth Corporation, it looks like we are well on our way to checking these items off our list much sooner.
Thank you for the opportunity to share our story.
The Chair: Thank you, Mr. Mayor.
Let me introduce the other three members of this panel. They are from the industry. Canopy Growth has been mentioned. Bruce Linton is here, the Founder, Chairman and Chief Executive Officer of Canopy Growth. We have, from Cannabis Canada Council, Allan Rewak, and from Hydropothecary, Dr. Terry Lake, Vice-president, Corporate Social Responsibility. Let me now proceed to ask for the comments of Cannabis Canada Council.
Allan Rewak, Executive Director, Cannabis Canada Council: Good afternoon. I would like to begin today by thanking the committee for the opportunity to be here and provide our thoughts on Bill C-45. My name is Allan Rewak, and I am the Executive Director of Cannabis Canada Council, the trade association for licensed producers of medicinal cannabis under the ACMPR.
At our most recent annual general meeting, just over a month ago, we underwent an important and positive transition. The members of the Cannabis Canada Association, the Canadian Medical Cannabis Council and large-scale independent companies collectively decided to unify and create one common voice for our sector, which will operate on a go-forward basis as the Cannabis Council of Canada.
Our newly strengthened and enlarged organization can now confidently say we represent the vast majority of licensed producers in this country including all large-scale producers, medium-scale cultivators and new entrants into our marketplace. We believe that this common and inclusive framework will be a significant asset to policy-makers such as yourselves as we look toward the further regulation and design of our growing sector.
Today, on behalf of our industry, I would like to speak toward three primary recommendations related to Bill C-45.
Firstly, we respectfully encourage this committee to move Bill C-45 forward as expeditiously as possible. The commitment to better regulate and control the sale of adult consumer-use cannabis was a key foundational election promise in 2015. The result of that election was a majority government. Bill C-45 fulfills the promise made to Canadians and, as such, we believe it should come into force as quickly as is reasonably possible.
Secondly, we would recommend, as His Worship the mayor recently said, that we amend Bill C-45 as to prohibit the allowance of large-scale commercial cultivation outdoors. The reasons for this are as follows: We believe that there is a heightened degree of risk for a diversion into the illegal marketplace from outdoor cultivation. Secondly, due to the nature of the cannabis plant, we are concerned that cross-pollination and contamination could occur with indoor greenhouse crops from male plants outdoors. Thirdly, and perhaps most importantly, we are concerned around the danger of unintentional exposure to agricultural pesticides. Cannabis Canada has submitted to you for your consideration, through our briefing note, an amendment that we believe would address this issue.
Thirdly, we would recommend that this committee also expand the list of allowable dosage forms in Schedule 4 of the act. As it currently stands, we believe this schedule of the bill is overly prescriptive and hinders the development of new delivery modalities for medical patients. Considering that we are looking at the potential introduction of new dosage forms for adult consumer use in 2019. we believe it is prudent and responsible to expand Schedule 4 at this time for medicinal patients. We have suggested in our briefing note an amendment to this effect for your consideration.
In closing, I would like to extend my deep gratitude to this committee on behalf of my industry for the opportunity to be here, and we are more than ready to answer any questions you may have related to our submissions when appropriate. Thank you.
The Chair: Thank you very much.
Bruce Linton, Founder, Chairman and Chief Executive Officer, Canopy Growth Corporation: Thank you for the opportunity to appear before you this afternoon, and I look forward to answering your questions on our views on Bill C-45.
I thought it would be helpful if I gave a bit of background on Canopy Growth Corporation. We are proud to say that we are the first publicly traded company that has ever been headquartered in Smith Falls, Ontario — no more branch plants. In a town of 9,000 people, this is become the topic of the town.
In 2013, we located our head office in the main production facility of what was the Hershey plant that had been closed in 2008, putting 600 people out of work. As the mayor has indicated, we have about 1,000 people working at Canopy across Canada now, and about 500 of them are in Smiths Falls. More importantly I think, we have 1,200 open job requisitions across the country.
We are pleased that some of you were able to visit the facility earlier this year, learn about the operations and meet some of our team members. Since our beginning, we have produced more 13 million grams of clean, reliable cannabis products to provide to our medical customers. We currently serve about 71,000 customers in Canada directly through Canada Post.
In April 2014, Canopy Growth became the first federally regulated cannabis company in North America to be publicly traded. We followed that with becoming the first complete bought deal with a Canadian bank to fund our operations, the first cannabis company to be audited by Deloitte, the first to diversify our platform to include greenhouses and indoor, the first to acquire a major competitor and the first to be listed on Toronto Stock Exchange and be part of the composite index. We were the first Canadian cannabis company to export to Germany, and we recently announced that we expect to be the first cannabis company listed on the New York Stock Exchange.
I’m delighted that Mayor Pankow is here this afternoon. Mayor Pankow and his colleagues in the Smiths Falls community have been great partners. In fact, upon our arrival in Smiths Falls, we began investing in the community and hiring locally. It has been our mandate. As we go across the country, we look for local acquisitions of talent, supplies and try to keep it local.
Our Canadian operation: Since beginning in Smiths Falls in 2017, we contributed about $166 million to Canada’s GDP, including $32 million in goods and services, $30 million in wages and benefits and about $31 million in capital expenditures. So far in 2018, we have spent over $31 million in additional capital expenditures across the country and are accelerating that rate. We currently operate in British Columbia, Alberta, Saskatchewan, Ontario and Quebec and are currently constructing two new greenfield opportunities in New Brunswick and Newfoundland. By the time we are done next year, we expect to have over 3,000 employees across the country.
To keep things active, we are also expanding internationally. We are actively seeking our licence in Germany, Jamaica, Chile, Brazil, Spain, Denmark, the Czech Republic and Australia. We’ve engaged in production and research partnerships also with the state of Victoria in Australia.
We were first cannabis producer to introduce compassion pricing to make medical cannabis affordable for patients. We remain proud to continue the support of the patient rights for access to legal cannabis. Our commitment to medical education has and always will be unwavering. We are the first to offer Mainpro-M1 accredited and continuing medical education programs to Canadian doctors.
We agree that road safety is a leading concern and needs to be addressed as cannabis legalization comes forward. Education is the key to help prevent an increase in incidents of impaired driving. In this respect, we facilitated and funded a three-way partnership with the Canadian Drug Policy Coalition and Mothers Against Drunk Driving Canada to develop a responsible driving campaign.
We also believe that when cannabis is legalized for adult consumption, it is important there is not a corresponding increase in youth usage rates. Canopy Growth has brought together Parent Action on Drugs with Canadian Students for Sensible Drug Policy to create evidence-based resources for parents and other adults to have informed conversations with youth to make healthy responsible decisions about cannabis use.
The Canadian AIDS Society has been diligently working on issues related to medical cannabis since 2004, and we are thrilled to be part of a multi-year partnership to fund the development of Canadian guidelines on the use of medical cannabis, producing the kinds of tools physicians need to feel more comfortable assessing their patients’ need for cannabis.
Finally, on April 20 of this year, we announced the funding and creation of the Tweed Collective, an initiative founded on the principles of progress, growth and community development. Over the next four years, the Tweed Collective will invest $20 million in communities in initiatives that will transform where and how we live in meaningful ways.
Our commitment to research: We have formed Canopy Health, a cannabis incubator focused on developing research, clinical-ready, whole plant-based drug formulations. The ultimate goal is to validate diversified treatment options for Canadians. The foundation of our research and development plans is to improve the quality of life of Canadians who are suffering from acute and chronic illness. We have medical cannabis research focused on dementia, Alzheimer’s, autism, Crohn’s disease, colitis and fibromyalgia. We currently have 39 provisional patents filed in this respect. We have currently engaged in research activities with four universities and four leading research institutes. We also have partnerships with two community colleges and are in discussion with other universities, colleges and hospitals across Canada.
One particular aspect of Bill C-45 I would like to specifically address this afternoon is our concern about the development of outdoor commercial cultivation in Canada. In this respect, I would like to echo the words of Honourable Benoît Bourque, Minister of Health of New Brunswick, who appeared before this committee on May 9.
We believe that outdoor cultivation is problematic in a number of ways. It significantly increases the potential for diversion of cannabis to the illicit market. Outdoor cannabis cultivation will not be as secure as our current indoor and greenhouse production facilities. The number and small size of these operations will make outdoor cultivation unable to be regulated.
Construction of secure, clean, safe indoor growth facilities, including buildings and greenhouses that operate under the strict regimes of Health Canada enforcement are much better suited to the long-term interests of the sector. Although Canopy Growth would succeed and benefit in the short term operating outdoor cultivation sites, in the long term they would not be sustainable because of the conditions under which the product would be grown.
Finally, the quality is likely to be suspect. Restricting cultivation of cannabis to indoor facilities, both greenhouse and buildings, will ensure a safe and secure production environment.
We strongly support the introduction of a new category of micro-cannabis producers. Canopy Growth has recently allocated $1 million of capital toward investing and supporting micro-growers indoors.
Finally, the future is a legal framework for adult use of cannabis. I want to also take this opportunity to reaffirm our commitment to medical customers. Our focus has evolved to include a focus on recreational, but Canopy will always work to supply the medical market. We have committed that any patient who is a patient on or before July 1, 2018, will receive priority over future recreational customers. Patient supply should not be jeopardized for recreational sales opportunities.
Thank you for your time. I hope I have been able to give you a little introduction, and I look forward to answering your questions.
The Chair: Thank you.
The final panellist before we get to questions is Dr. Terry Lake.
[Translation]
Dr. Terry Lake, Vice-President of Corporate Social Responsibility, Hydropothecary: I am very pleased to be here today. My name is Terry Lake and I am Vice-President of Corporate Social Responsibility for Hydropothecary. I am a former Minister of Health of British Columbia and also a former mayor of Kamloops. I am learning French at the moment but I am still not very good. So I am going to speak to you in English for the rest of the presentation. Thank you for your understanding.
[English]
I would like to first acknowledge someone who is not here presently but who is my good friend: Senator Nancy Greene Raine, who recently retired. I’d like to acknowledge the tremendous contributions she made to Canada. Senator Greene Raine was a constituent of mine for eight years when I represented Kamloops-North Thompson in the B.C. legislature. We worked on a number of healthy living initiatives together. We had many in-depth policy discussions when I was Minister of Environment and Minister of Health. As you can imagine, most of those were in airports.
I should say at the outset that the doctor in front of my name is a doctor of veterinary medicine. If you have any questions about why your cat is vomiting, I’d be happy to answer those afterwards.
Our company, Hydropothecary, is based in Gatineau, Quebec, with production facilities in Masson-Angers, just 30 minutes from downtown Ottawa. We have executive offices in Hull. We employ close to 150 people and hope to double that number in the next year. We have served medical cannabis patients across Canada for three years and are a trusted partner of the Société québécoise du cannabis as the preferred supplier of adult-use cannabis products. We are working closely with the SQDC to develop detailed information of all of our products so that potential customers will have sufficient information to consume our products in a responsible fashion. Hydropothecary has received numerous awards for our innovative products that offer patients non-smoked cannabis that we believe is a much healthier method of consumption.
As mentioned, I served as the British Columbia Minister of Health from 2013 until 2017. While health ministries have many issues, the fentanyl crisis was a top priority during most of that time. While many public health initiatives implemented in those years have no doubt saved many lives, the tragic fact is that, today and every day, four British Columbians will die from an illicit drug overdose. The Canadian Public Health Association recognized our North American-leading efforts to combat the fentanyl crisis, and many jurisdictions across Canada have implemented similar policies. Our ministry was also very proud of other public health initiatives, like the smoking cessation program that helped reduce rates of smoking to an all-time low in B.C.
I mention this to demonstrate my strong advocacy of public health. I firmly believe that Bill C-45, creating a regulated adult use cannabis framework, will produce positive public health outcomes for Canadians, and I believe these fall into three categories.
First, removing criminal organizations from an existing and robust illegal cannabis market will reduce harms related to violent activities used to control that market and also eliminate the negative health consequences that occur when someone is handed a criminal record. Many studies have demonstrated that employment opportunity is severely limited by a criminal conviction, even for a minor offence, and I am sure you are aware that income is an important social determinant of health.
Second, a non-controlled commodity will be replaced by products that are subjected to stringent quality controls and accurate information regarding the strength of active ingredients. This will ensure moulds, pesticides and other potential contaminants, which can be extremely harmful, will be eliminated, and consumers will be better able to gauge the effects of the product on their system. It is very individualized for every person.
Third, there is a growing body of evidence that in U.S. states in which cannabis has been legalized, there is an associated reduction in opioid prescriptions, in overdose deaths and also in alcohol sales. In fact, some alcohol companies have recognized the legalization of cannabis as a potential risk to their financial outlooks. Given the tremendous public health harms associated with alcohol, which are widely recognized as far greater than cannabis, this may prove to be a very good outcome of the legislation.
I know there are some concerns over the timing of implementation of Bill C-45, but Canada has had a legalized medical cannabis system in place for over 18 years, and the transition to an adult-use non-medical regime is not a very big leap, I believe.
Changes in public policy often have bumps along the road, but in my experience, these can be identified and dealt with in an iterative fashion. I know from my many visits to Washington State, where my mother-in-law has a residence, that cannabis legalization did not cause significant social problems, and policy changes such as tax adjustments were able to mitigate those challenges that were identified.
In conclusion, I’ve learned a great deal about cannabis in the last four years, and I am convinced that Bill C-45 is good public policy that will benefit our country and its citizens. Thank you for having me here today to participate in this committee.
The Chair: Thank you very much, and thank you to all four of you.
Just before I go to my colleagues, I want to clarify one thing. Three of the four of you mentioned outdoor cultivation, but I take it you are just talking about the large commercialized cultivation as opposed to homegrown, or are you lumping that altogether as well?
Mr. Rewak: Our concern is specific to large-scale outdoor cultivation on a commercial scale, which would be not relevant to home use. If someone has two plants in their backyard, that’s not the issue we’re concerned about.
The Chair: Okay, thank you. Let’s start questions with the deputy chairs, five minutes each.
Senator Seidman: Thank you all very much for your presentations.
Perhaps I could begin with you, Mr. Linton, on the subject of outdoor cultivation. Indeed, you talked about your concern with the potential for the development of large-scale outdoor commercial cultivation under security and safety issues. I would like to ask you to expand a little more on this. Particularly, we know that micro-growers won’t be subject to the same security and safety requirements as a company like Canopy Growth would be, for example. I am particularly struck by the fact that the only security requirement for micro-growers will be a fence — no camera, alarms or detection systems. What are your views on the impact this will have on your company, for example, and do you think this would create an opportunity for diversion from the legal market to the illicit market and particularly open the door for kids to get quick access to cannabis?
Mr. Linton: We operate across the country. We have had over 200 inspections by Health Canada. When they show up to inspect us, they look at everything from an audit trail of who entered the building, when they exited, how many came and when. With three keystrokes, I can tell you where every gram of cannabis is in production, in storage, in shipment or in a home. Everything about the security of that supply chain results in a clarity of zero loss. When we dry cannabis flowers from their originating state to their shipping state, we track a weight-loss ratio so things don’t disappear. The effect is that we have a supply chain that is, upon living through 200 inspections, very well thought out.
I would think that while outdoor may have a future sometime, I don’t think it is today, because all we’re doing is creating a framework that actually side-steps all the benefits we’ve worked for since 2014 to establish a chain of custody that’s trustworthy. So I’m a bit worried about that.
I don’t know if it would have a negative impact on us directly financially in that if people grew it outdoors, they have to have an offtake that transmits it from being a dried flower into a finished good. That’s an asset base that includes extraction, encapsulation, a great number of steps creating drug identification numbers, beverages or whatever. We do that. I probably have an input that would be less costly.
My bigger concern is that the outdoor grow people will find that their value proposition to me is low because I have a risk on testing. Did it get drift pesticides and do I have to write off costs of already taking product in? I would probably offer them a low price because it is a very uncertain product. My concern is that they might find Johnny down the block who will pay a bit more than me. I do not think we would intend for them to become economically motivated to sell to the black or illicit market, but they might.
I could go on, but I shouldn’t.
Senator Seidman: That is helpful.
Dr. Lake, we are not scheduled to discuss medical cannabis until tomorrow, but I would like to ask you, since this is what you represent particularly, about your views on the government’s approach to medical cannabis in the context of legalization. Do you believe the federal government’s new excise tax on medical cannabis is appropriate?
Dr. Lake: Thank you for asking that question because I was hoping I would get an opportunity to comment on that.
I think the excise tax on medical cannabis is bad public policy. I don’t think you can say, on the one hand, that this is a recognized form of medication and, on the other hand, apply what we have come to believe is a sin tax. An excise tax or duty is designed, through public policy, to be a tax on something you want less of. If you look at what is taxed today, it fits into that category.
However, we can all tell you about people, and I am sure you know people who have benefited tremendously from the use of medical cannabis and who will now have to pay more for their medication. People that depend on medical cannabis might make a choice to use opioids, for instance. In my opinion, that would be a very bad choice. From a public policy perspective, this is a very bad decision.
Senator Petitclerc: My first question is for you, Mr. Linton. You touched on it a bit in your conclusion. Perhaps I should know this, but I don’t know how the recreational versus medicinal markets are planned. How do you foresee the growth of those two separate markets?
If the recreational cannabis market grows, how can we guarantee Canadians who use the medicinal product that it will not have an impact not only on access, because you touched on that, but also on medical research, product development and data collection? Do we have some sort of guarantee? You are a business. We want to ensure that the patients that use it now will not be penalized if the recreational form goes well.
Mr. Linton: As a business, the only answer can be that it is financially good for me to do that. If you say you are a nice person and will do nice things, that is not usually true.
You will find that the direct to the end-patient model enables us to interact directly with our client, our patient. It is both financially beneficial and informationally beneficial. We will always have a priority to that. That is in the short term.
Because larger companies are being formed, we can do medical research, which means we can move through a process of getting RX approval, getting a drug identification number so we can have delivery mechanisms that are true dosages, which will make it an insurable product, I think. When it becomes insurable, I am absolutely certain that the insurance companies will prefer covering the cannabis product over the others because it has less liability, as Dr. Lake commented on. But it is also less costly for the insurer than the other things they are often covering.
I think the medical field will do well. It doesn’t get as much coverage because it is not as exciting to talk about, but I think it has the strength and is becoming a global market. When we export and work in Germany, it is all medical. With 82 million people, I would prefer having a good medical story in Germany which originates from here, has intellectual property from here and allows me to work with the Germans, Italians or the Czechs. With 350 million people in Europe coming under our normalized medical scheme, you can imagine our priority on the next wave is to do well medically.
Senator Petitclerc: Mr. Rewak, I want to hear the position of your organization on the following: Some people have suggested that perhaps it should be a combined system or structure versus separate. I know your organization is going with two different committees.
Mr. Rewak: Absolutely.
Senator Petitclerc: Is that how you wanted it to be? Would you prefer combined?
Mr. Rewak: We are strongly opposed to one common system for cannabis. Cannabis can be used for adult consumer purposes recreationally, but it is also medicine and it is changing the lives of hundreds of thousands of Canadians. We will never abandon our medical patients as an industry. They have helped build us. We support them, and we provided deputations around what we believe is the inappropriate application of excise tax to your colleagues at the Finance Committee and at the House of Commons finance committee.
We believe that the ACMPR has to be preserved well beyond five years, not only for social reasons and responsibility to our patients but also for the global economic opportunity that Canada has in front of us. The Canadian domestic adult consumer-use cannabis market is a $8 billion or $9 billion a year market. Globally, we are the thought leader for a $75 billion global medical market. I want those jobs, I want that development and I want that knowledge based here in Canada, in our communities.
Senator Petitclerc: Thank you.
I have a quick question for our mayor. I don’t want to put you on the spot because perhaps you don’t have an answer, but we have talked about cannabis and normalization of cannabis. I think you are in a unique place where your population and your citizens have been exposed to working in cannabis. It is part of their daily life. Is it having an impact on the perception of cannabis or the normalization of the risks associated with cannabis?
Mr. Pankow: Absolutely. I regularly go to a retirement home to speak to residents. I was at one a couple of weeks ago speaking to residents who are largely in their eighties and nineties, and Canopy and Tweed is always a topic of conversation. Everyone in that room was excited about the growth of Canopy in our community and the role it has played. There were absolutely no negative concerns in the community, from day one when they announced they were coming to town until today. There has been widespread acceptance.
[Translation]
Senator Mégie: In Mr. Mayor’s notes, I saw that they hope to double the number and the financial impact over time. But, as we know, everyone is waiting for it to be legalized. That will produce a sudden economic boom. Afterwards, it should calm down, meaning that there will not be more people who will consume even more of it each day. Have you considered that in your financial forecasts? You say that you are going to invest in research, but if there is not the boom you are hoping for, it will be the research that suffers. Have you thought of that?
[English]
Mr. Pankow: Much of the insight I have is a result of the experience I have with Canopy in our community and having been in the facility countless times, speaking with staff on a regular basis and speaking with visitors regularly.
Canada has an opportunity to truly be the global leader when it comes to cannabis recreationally, and in a variety of forms. Personally, I would never smoke a joint; I am totally opposed to smoking. However, I have no opposition to a cannabis-infused beverage. If I have a beer with cannabis or a beer with alcohol, it is much the same. I see product development, down the road, as becoming much more mainstream eventually.
Obviously, we will hit a peak when it will become stable in our community and we will have turnover there, but economically it will take us from being $10 million of industrial assessment in our community to $50 million over a short period of time,and the number of jobs that will ripple into our community and the stock options that these staff have. That is why we are seeing the housing boom.
Again, one of those perfect moments was a gentleman I knew in our community who had been in our town forever and had worked at Tweed for about a year. I drove by a house on Lombard Street and I saw him hold up the “for sale” sign with “sold” on it on the front step, and someone was taking a picture of him. He was a gentleman who had gotten a job at Tweed early on and saw the economic benefits.
The day will come when I am sure it will level out, but Bruce is probably better qualified to answer some of those questions than I am.
The Chair: Do you want further answers from Mr. Linton?
[Translation]
Senator Mégie: No, perhaps someone else could answer. I have a question about outdoor cultivation. People say that there is a fear of contamination from pesticides and so on, but people do not know. So have you provided a method, a program, to educate people about the fact that they must not grow it outdoors, in order to prevent that problem? Can one of you answer?
[English]
Mr. Rewak: We don’t currently have a program because without lab testing there is no way to clearly delineate between an outdoor and an indoor product. At the end of the day, we have a responsibility to give consumers a safe product, and our concern is that it ultimately will get into our supply chain. We believe that legalization is a process, not an act. At this point in the process, outdoor cultivation is simply unnecessary. Until we have clarity around the intention of the government with outdoor cultivation, we can’t design that program.
[Translation]
Senator Mégie: But you will not be growing it outside. The public will. I do not know whether —
[English]
Mr. Rewak: Forgive me. I believe you are referring, then, to homegrown in the backyard. Forgive me for that.
That is a process that we believe is up to individual choice. We are somewhat agnostic in terms of home cultivation. We believe that public health and safety has to remain paramount. We will seek to work with our provincial and federal partners to educate consumers as much as we can about the risks of outdoor pesticides and cross contamination, but ultimately that is the purview of governments and we will support them in that task.
[Translation]
Senator Mégie: Okay, great. Thank you.
[English]
Senator Dean: Thank you for your presentations.
My first question is to our municipal colleagues; I will stick with the municipal experience. We have heard a fantastic success story, Mayor Pankow, in Smiths Falls, and we need more of them, don’t we? Small towns across the country are in great distress. Is there the potential for Smiths Falls to be replicated across the country as we see more global export deals and the potential for recreational cannabis? Can this be, and is it being, grown and replicated?
Second, we have heard already this is not a cold start. You have been in this business for a long time and have done very well as Canada’s global leader. For those who haven’t commented already, is Canada ready and what are the consequences of extensive delay? If we could start with you, Mr. Pankow.
Mr. Pankow: When we went through the challenges of 2008, 2010 and a bit later with the loss of about 2,000 jobs, it was a huge hit to the community. You are probably aware that at the time we were on the national news for all the wrong reasons.
As a council, we were stuck not knowing where to go from an economic development standpoint. We invested in a new economic development department and team. There were a lot of darts on the board out there trying to see what we could hit. Never in our wildest dreams would we have anticipated a new, innovative industry coming along. At the time, when so many jobs were leaving Ontario and the country, we didn’t see a solution, really. We were looking at tourism and other opportunities and being a bedroom community to Ottawa.
When Bruce and his colleagues came to town, we certainly endorsed it and supported it. I think we believed that some day, perhaps, it could be much bigger if recreational use was legalized. But to take a 450,000-square-foot building that had employed 750 people making chocolate and all kinds of candy products, and not just filling that today but expanding out across the street with a 2,000 plus square-foot addition to that campus, I guess Canada has an opportunity to be a global leader and go where other countries have yet to go. I see no reason why it couldn’t be replicated elsewhere.
Your comment about small communities is still valid because we struggle. We look at urbanization and young people and our knowledge base moving away to go to university and college and, in many cases, not returning. Now we have an opportunity to draw these people back in. In many ways, the Rideau Regional Centre created a lot of professional jobs for us in the 1950s and laid the foundation for a long time. This, in many ways, is the same idea. We’ve got very professional, good-paying jobs with a great future.
Dr. Lake: I can tell you from our experience in Masson-Angers that we have a tremendous impact on that small community that has struggled to find jobs for its residents. If Gatineau Mayor Maxime Pedneaud-Jobin was here, or Councillor Marc Carrière, they would say this has been a tremendous success story for Masson-Angers.
When I joined the company last September, it was easy to find a parking spot. Today, it is not. We have grown. Probably two years ago, we might have had 20 employees. We have 150 today, and within a year we will have 300. A couple of years ago we were growing in 7,000 square feet, producing about 700 kilograms. By the end of this year, we will have 1.3 million square feet, growing 108,000 kilograms.
With that comes a team of people that are experts in their fields, whether it’s in technology, intellectual property, marketing or legal. All of these things are coming together in a small town as part of the greater Gatineau region. We have been a tremendous success story.
I also want to share my experience in the Kamloops area. There is a small town of 2,500 people north of Kamloops called Barriere. In 2003, there was a tremendous forest fire that burned down the largest employer in town, the Louis Creek sawmill. That was turned into an industrial park, and they have struggled to find people to go into that industrial park. Now there is an ACMPR applicant that has plans for growing cannabis there and also a potential partnership with the Simpcw First Nation there.
I don’t want to oversell it because I think a lot of small communities think this is their ticket out of economic doldrums. We have to be careful not to over-promise, but at the same time there are those success stories. Smiths Falls and Masson are two examples, and I think there could be many more.
Mr. Linton: We are ready, to your first question. We could supply somewhere between 40 and 50 per cent of the total demand just from our capable platform. We have about 6 million square feet. The reason there are empty and derelict buildings in towns with high unemployment is economic alignment. If we could pay less for the building and have the same sense of shelter and a bunch of power on the line and have a willing, able and available workforce, that is the perfect equation.
What we are creating are products. What will happen from Canada’s base is the Germans come to see us. They have a problem called East Germany ,and what they want to do is take our platform, competency and technologies and have us create Canadian branch plants, which is a novel concept, rather than being the home of branch plants. I think we are at that tipping point on it. It doesn’t take much looking in every country around the world to find that part of the country that is tough and a little worn out and needs us.
Senator Poirier: Thank you, gentlemen, for all being here. I have a couple of questions.
My first question is for Dr. Lake. In an article that I saw in the Financial Post, it stated that you will be selling product at an average of $5.40 a gram to the province of Quebec, and according to StatsCan, the price in Quebec for the month of March averaged $5.93 a gram. The margin for the province to compete with the illicit market is very thin at this point. In context with Bill C-45, where the government aims to eliminate the illicit market through legalization, would you agree that it is part of your social responsibility to help the government offer a price where there would be more wiggle room than 50 cents?
Dr. Lake: First, thank you for the question. That $5.40 was an average over our entire product line. That includes much lower-priced product and then products that are in the higher end. For instance, our sublingual CBD spray is about $80 for a 15-millilitre bottle. That would be at the higher end. That $5.40 is a bit deceptive in that it includes the higher-end products as well. In terms of the flower product and some of the lower-end products, those would compete very well with the black market.
But I think you bring up a very good point. As Allan stated, this is a process, not the end of the way we are going to go, the evolution. We, as producers, will have to become more and more efficient in the way we produce our product to ensure that the price is able to compete with the black markets. There’s no question that, if we do all of this and still have a thriving black market, it’s not going to work. Washington State saw that happen because they had, I think, a 37 per cent accumulative tax on products, so the black market was thriving a year later. They adjusted that, the price has come down, and the black market has been reduced considerably. So I think all of us, governments in terms of taxes and we as producers, have to make sure we have our eye on the ball and get the prices down so that we can compete.
Senator Poirier: I’ll have another one for you, if I have time when I come back, but I need to go to our mayor with my next question.
According to Dr. Paula Stewart, the rate of cannabis use in Smiths Falls has already been among the province’s highest, showing that half of the town’s youth between the age of 15 and 25 have used cannabis in the last year. Her main message had been that it is a drug, not a leaf. On the other hand, your community has welcomed the industry — and you’ve been very clear about that — with open arms because of the economic boost that it has brought to your community. Yesterday, we heard from a witness in Colorado that, since the legalization, adolescent perception of the risk of marijuana has declined dramatically. Does the potential economic windfall from the cannabis outweigh the risks to public health for cannabis legislation? How does your community approach the normalization of the cannabis, especially for the most vulnerable at risk, which is our youth?
Mr. Pankow: Smiths Falls has always been a bit of a tough town. We have known that, and the figures Dr. Paula Stewart illustrated are, I’m sure, very accurate. Cannabis use, again, involves many of our youth, and not just our youth, some of our adults. I spoke with Lanark County Mental Health after we went through this economic downturn. One thing that became very clear is that, as job losses went up and poverty grew in our community, so did the rates of dependence and addictions. If people are discouraged and depressed and going through some really tough times, it is not uncommon to see them turn to alcohol or drugs. If you have adults who are using, you’ve very likely to see their children using the products.
I think an opportunity for a controlled substance and elimination from the black market puts further restrictions on it. I don’t think we will ever stop youth from using it or trying to get their hands on it, but having it in an environment where it’s harder to reach, harder to get, would make more sense. Canopy has indicated — certainly, I’m sure all producers do — education, trying to make sure that the youth are protected in every manner possible.
It has been a concern. As our community rises and the economy of our community improves, I think we will see some of those challenges of mental health and addictions decline from the peak that we had a few years ago.
Senator Poirier: Is substance-abuse treatment readily available in Smiths Falls, and do you believe that the municipalities have adequate resources to manage the cases of normalization of cannabis among our youth that may rise?
Mr. Pankow: When it comes to treatment, I think it is a problem across the province of Ontario. I don’t think there are enough resources available. My understanding is that the waiting times are enormous. When an addict needs help, they don’t need to wait six months to get there. So that’s a clear problem. I have a friend who has a private-run facility on the St. Lawrence who has left the door open, on an ongoing basis, for anybody from Smiths Falls who needs help. He is willing to help. He is from the community originally. I’m sorry; your second question?
Senator Poirier: Do you feel that municipalities have the resources necessary to deal with the normalization of cannabis or the perception of normalization of cannabis among our youth? Do the municipalities have the resources to actually deal with it?
Mr. Pankow: I don’t think we do at this stage. A lot of education is going to be required, and our police service has been involved in managing this for a long time. It’s going to change their roles and responsibilities, but I think we still have to get our head around it.
I think it goes back to my previous answer. If cannabis is restricted in how it is available and we can eliminate the black market, we have a better opportunity to protect our youth.
Senator Manning: My question is for Mr. Rewak. I’m trying to understand why so many of your member companies have signed various partnership agreements with celebrities when we all know that celebrity endorsements are not permitted under Bill C-45. I’m aware of associations with Snoop Dog, the Tragically Hip, the Trailer Park Boys, Gene Simmons, just to name a few. While the act forbids marketing targeted at youth, I can’t help but notice that many of these celebrities have a solid fan base among our youth. Can you explain what benefit your members are expecting in order to spend a significant amount of money to secure these deals when endorsements are explicitly prohibited under Bill C-45?
Mr. Rewak: I would be happy to answer the question. Some of my response will be, to a degree, speculative. Forgive me for that. But, based on my observations of the industry, we have seen the beginning of a brand new product category. We’ve all been adjusting, collectively, to how to position ourselves within that new marketplace.
You are correct; Bill C-45 does provide clarity in legislation. That is why we’ve encouraged this committee, and will continue to — and all parliamentarians and senators — to move Bill C-45 forward into law as quickly as possible, at which point we will have regulations that will define further clarity. Activities that might go against the spirit of the legislation, once that clarity is provided, can then stop.
Senator Manning: Do you believe that there is an expectation among some of your members that the regulations will be relaxed in the future?
Mr. Rewak: Regulations can’t speak against legislation. The legislation is exceptionally clear, in my opinion.
Senator Manning: Mr. Linton, I read that your company recently signed a deal with the makers of Corona beer to collaborate on the production of cannabis-infused beverages. This is interesting, given that we don’t know what the rules for edible products are going to be like yet. I am looking down the road, in the future. Given your investment, is it reasonable to assume that you are confident that cannabis-infused beverages will be permitted under future regulations? Where do you expect people to consume cannabis-infused beverages given that the provinces have banned public consumption at this point?
Mr. Linton: They are not permitted now, but I anticipate that it is a potential. A socially normal intoxicant, a social lubricant, is in the form factor of a bottle and a liquid. People might come over to a person’s house and have a glass and have a conversation. I think you can make those with cannabis that do not include alcohol. They carry zero calories, potentially, and have very limited or no drug-on-drug interaction. I think that is a more reasonable format than some of the things we have seen in the U.S. states, which involve some kind of gummy chewy thing that has cannabis in it. I think it is probably more suitable to a normalized form factor.
Senator Manning: Is your company preparing for edible products?
Mr. Linton: I like the word “ingestible” because I think “ingestible” is a different thing than edible, meaning that it could be a beverage. We prepare for whatever is permissible. We don’t jump the gun, including that we don’t participate in the U.S. because it is federally illegal. We stay entirely within the jurisdictions that are federally legal.
Senator Manning: Dr. Lake, last year, your company had to halt sales temporarily after Health Canada found traces of fungicide not approved for use by marijuana growers. Would you like to explain that situation to us and what steps were taken to address that?
Dr. Lake: Certainly. This illustrates the rigour of a legal, licensed industry with strong oversight.
There were trace elements of a pesticide. Once we were made aware of that — and this was more than just our company that was involved in this, and Health Canada was adjusting the limits. So there were kind of two issues there, the presence and what those limits were and how they were being adjusted. We immediately did a recall and notified all of our patients. We stopped shipping cannabis immediately and took steps to ensure that future production would not contain any of those pesticides. We also took steps to ensure that all of our fertilizers and pesticides — we only use organic pesticides at the moment and predator insects — anything that is going in the plant is now under a secure area so that we ensure that we know who is going in there and that there is a complete record, as Mr. Linton indicated earlier.
I think that shows the strength of the system. When I was health minister and I toured my first facility in Nanaimo, British Columbia, I could not believe the level of security, the chain of custody, the rigour that was placed on the production of legal cannabis in Canada. It was far greater than I had seen for any other pharmaceutical.
Senator Wells: Thank you, witnesses, for your testimony so far.
Mr. Linton, you recently signed an agreement with Newfoundland and Labrador, my home province, for 8,000 kilograms a year, including a retail agreement. Is that production agreement an exclusivity arrangement?
Mr. Linton: It doesn’t provide us with any protection as exclusive, so other parties will produce in the province. Our obligation is that we will produce up to 12,000 kilograms, even though we will sell only 8,000 kilograms in the province. It becomes an export across the country. We need to create jobs, so we found a site up on the hill behind us, on the hill, and we will build a 120,000-square-foot facility there that’s about $45 to $50 million in total construction costs. It’s one of those things you negotiate. How do we access retail? What jobs do we create? And there wasn’t a production asset in the province at that time. I think there will be several after.
Senator Wells: It’s about a 10-minute drive from my house. From what I understand, there is a guarantee for a certain level of demand from the provincial government?
Mr. Linton: We have to commit that we’ll have it available to them. Many of the eastern provinces — I think we found in New Brunswick, P.E.I. and Newfoundland, and even Manitoba — didn’t want to be in a situation where, when the access program began, they were not committed to an actual supply chain. We committed we would have not less than 8,000 kilograms available in the first year and that we will build this facility and, over time, we will take the transit of cannabis in and replace it with domestic or Newfoundland production.
Senator Wells: Your agreements in B.C., Alberta, Saskatchewan, Ontario, Quebec and New Brunswick — are any of those exclusive production agreements?
Mr. Linton: No. To my knowledge, every market is still open for other producers, and Health Canada licenses them. We have tried to show up first and build, but competition is good for us. If we were the sole provider — and even Germany offered for us to apply to be the sole provider, and we said no. People like choice. I think in all places, we’ll have other parties’ products, even in our stores. We don’t intend it to be just our store.
Senator Wells: Okay. Thanks for that.
I assume you have, within your production facilities, the hazard analysis, critical control points, QA testing, all of that?
Mr. Linton: We have SOPs that stack up about that high.
Senator Wells: The next question I have is for Mr. Rewak. How many of the companies that are in the association do outdoor growth, or is that a cut-off line for membership in the association?
Mr. Rewak: None. There is no outdoor cultivation allowed.
Senator Wells: Is there a cut-off line, or would you accept outdoor growth?
Mr. Rewak: Our cut-off line is following the law and the regulations of Health Canada. At this point, outdoor cultivation is not allowed. Should that be reconsidered in the future, that is something our board and our membership would have to analyze, but I suspect we would have concerns around allowing outdoor growers to become members until we were satisfied that it was safe.
Senator Wells: It does seem there is some protectionism going on with the comments about not being in support of home growth.
Mr. Rewak: I should clarify. We are not opposed to home growth. Our concern is with large-scale, industrial-style, outdoor cultivation, which most likely would be close to indoor greenhouse facilities, the threat of cross-pollination and the threat of pesticides.
Senator Wells: If I had two acres in my backyard, would you be supportive of me being able to grow?
Mr. Rewak: Corn, but not cannabis.
Senator Wells: So no. Is that why you have your micro-growers fund, Mr. Linton? I think you said $1 million.
Mr. Linton: Yes.
Senator Wells: So that you can have a degree of control or maybe support for smaller growers?
Mr. Linton: We support smaller growers. We have the craft grow program coast to coast. People who have small facilities with 5,000 square feet, up to 12,000 or 20,000 square feet, and they produce quality cannabis. But uploading it into the supply chain, where you have to do the QA testing, the containerization, shipping recalls, online ordering — that’s where we take the product and carry out those functions.
Senator Wells: It is expensive for an artisanal producer.
Mr. Linton: Yes, but an artisanal producer can find they get a higher wholesale price for quality products produced under the regulations, and that works for both of us.
Senator Wells: Do you have a marketing program in the hopper for when cannabis becomes legal for recreational use?
Mr. Linton: Education, yes. We always hear about taxes and these programs. I think the migration will be about cleanliness and safety. We can share information about what happens in the illicit growth, and I think Bill C-45 will make it a more dangerous business to be an illicit producer. Our campaign will be about what is not in it. Think of why it’s the absence of sprays, absence of transit with other dangerous products, whether fentanyl or any other drug sale. Our campaign is about education because I think people will migrate when they know.
[Translation]
Senator Maltais: I have three short questions that go to three different people. Mr. Mayor, welcome and thank you very much for your testimony. You have a cannabis industry in your town. What happens with the waste products of cannabis? How does that work with you? You make compost. Is the compost sold in your town or does it go outside? Who looks after the quality of the compost?
[English]
Mr. Pankow: I will turn this question over to Mr. Linton. They deal with all the byproducts from the production and there is nothing lingering in the compost bins in our community.
Mr. Linton: When we harvest the plant ,we weigh the total plant and capture the weight of the flower, the active ingredient, and any of the small leaves adjacent that we retain. Then we take the remaining plant and grind it up and mix it with a compost mixture, and either compost it on site or at a selected site. In the case of Smiths Falls, it’s about a 12-minute drive from our facility where we compost it. As we go forward and look at hemp, it has a much more robust opportunity for using the stems and stalks than we do with cannabis.
[Translation]
Senator Maltais: Who do you sell the compost to?
[English]
Mr. Linton: No, we create the compost and then pay to dispose of it.
[Translation]
Senator Maltais: You just store it?
[English]
Mr. Linton: Yes, it gets aggregated at the site.
[Translation]
Senator Maltais: Mr. Linton, you mentioned earlier that you have a competitive company that wants to do business and move forward. You even talked about doing business in Europe. I imagine that, in the Comprehensive Economic and Trade Agreement, cannabis falls in the agricultural products category. Is cannabis always grown in soil?
[English]
Mr. Linton: The way we are principally governed is the United Nations narcotics act, so when we’re transiting cannabis between countries, we need the ministers of health to pass it back and forth, not as an agricultural product. So it is not treated as a grain. The production methods are seldom in soil. They are in varieties of medium that range from aeroponic, where there is no soil, just air, right up to an organic soil. The majority of our plants are grown in either a rock wool or in peat moss and vermiculite. It is really, truly governed more like a narcotic.
[Translation]
Senator Maltais: Is it considered an agricultural product? I don’t know, I know nothing about it. I have not started growing it at home yet.
[English]
Mr. Linton: When we export it, I believe it’s considered a medicinal ingredient and transited under each country’s agreement as a medicinal ingredient being imported. I think imports are short-term. Most countries are going to wish to have production in their country, which is where we can export our methodologies and create Canadian-owned businesses in Germany, for example.
[Translation]
Senator Maltais: Dr. Lake, in your brief and your answers, you said that legalizing cannabis would mean that black market sales would greatly decrease and that your prices would be competitive with those on the black market. You repeated it, and you may well be right. On what basis are you establishing the black market price? Who told you that the black market price is $X per gram? Who told you that?
[English]
Mr. Linton: Thank you for the question, senator. There are a number of sources of information. Statistics Canada is doing a crowd sourcing survey. People can essentially go online through Statistics Canada and tell them what they are paying on the black market. It’s a methodology that’s new to Statistics Canada, and some people have questioned the methodology and its accuracy, but I think the more data points you get, the more accurate it becomes, and they have received a lot of data points across the country. The Parliamentary Budget Officer has also looked at this and done some work to determine the average price people are paying on the street. Today we talk about the normalization of cannabis, but I can tell you it has been normalized, at least in British Columbia, for a very long time. People aren’t shy about telling people what they pay for their cannabis.
[Translation]
Senator Maltais: How does your company go about comparing the prices with the black market? Are you relying on Statistics Canada? They are not as reliable in this area as they are in others. Have you been to the black market to show them the list of your products and your prices, and to ask them how much black market products sell for? How have you gone about it? Who told you that you were going to be in competition with the black market?
[English]
Dr. Lake: We don’t interact with the black market. We don’t have sit-down conferences with them or do recognizance with the black market. We depend on outside sources for that kind of information.
The reality is we are selling to a government organization — in this case, the SQDC, or Société québécoise du cannabis — and they will determine how much they are willing to pay for our product. If they find that they can’t sell the product because they are competing with the black market, they will come back to us and say that they need us to lower our prices, and we will have to find a way to do that through increased efficiencies.
Senator McCallum: Thank you for your presentations. It’s good to hear about the strong foundation, both as a community and as a business, with how cannabis has been normalized when you have conversations with the people in your community. It’s what I would want from my community, which is a reserve up North.
Because of the colonization and trauma we went through, First Nations are not in a strong position like your town. When there is increased poverty, you said there is increased addictions, and there are a lot of addictions in First Nation communities. For many of the youth who use marijuana, it’s a social issue that has become criminalized. There are a lot of youth incarcerated in juvenile detention centres, and many of them from marijuana use. I have spoken to Gordon Cruse — he has worked with them for 30 to 40 years — and in the next four years, 11,000 children will be coming out in care, and 9,000 will be Indigenous. This is in Manitoba alone.
Mr. Rewak, when you look at the amendment that you had proposed on punishment for an individual who is 18 years and older, and if they are guilty, you are proposing a term of imprisonment of not more than 14 years. Is that here?
Mr. Rewak: We are not proposing that.
Senator McCallum: What is this? That’s what concerned me in the amendment.
Mr. Rewak: That would be for large-scale commercial operations. We have to be honest with ourselves. We still live in a racialized society, and there are disparate and disproportionate impacts on Canadians who are visible minorities, and First Nations populations in particular have faced generations of abuse and at times mistreatment. This will be defined in regulations and be very clear. We are not looking at that for some kids who make a mistake. I’m talking about a large-scale commercial operation, and that would be clarified in the regulatory development under this act.
I work for a not-for-profit. I have no stock options. I’m not here to make money. I’m here because this is the most exciting social industry in generations. We are counter-intuitively investing in communities that need economic development, and we are taking something that has, for generations, unfairly targeted elements of our populations into the sunlight, and we are taking the criminal element out of it. This is positive for our society.
I will not be involved in this, and I will not advocate for punishments for children at an unfair level or for youth in that regard. Instead, I would encourage the tax revenues generated from this nascent industry to be used for education and development in those same communities.
The Chair: Just to clarify this document that you’ve presented, the parts that are shaded are what you are proposing as amendments. The rest of it, as you see there, is the government’s bill.
Mr. Rewak: Yes. That component must be defined in regulations.
Senator McCallum: Yes. You had mentioned that the preventive methods against smoking was one of the most successful, but not in low-income or First Nations communities because of their social determinants of health. Have you any suggestions on how we can approach a public health program to address the smoking and addictions? Because it has been very difficult for me to try and find a way to address this with First Nations.
Dr. Lake: I would be happy to speak to that. As minister, we worked closely, and, as you may know, the First Nations Health Authority was formed in British Columbia where we have a health system designed and administered by First Nations. We had a very extensive smoking cessation program available to all British Columbians that we were very proud of. It drove down smoking rates to the lowest rates ever.
Further to what Mr. Linton said about this industry, the ability to do research on some very novel approaches to addictions medicine is very exciting. The BC Centre on Substance Use is doing very good work on looking at cannabis as an exit drug for people who are dependent on opioids or other hard substances like crack cocaine. Cannabis may be part of the armamentarium for addiction specialists, to get them off those harder drugs.
There is also interesting research going on in CBD, which is the other major cannabinoid in cannabis. It has effects on the nervous system, but it doesn’t give you that high. There is very exciting research going on in terms of using CBD for mental health disorders and addictions. It interacts with the body’s endocannabinoid system to bring you back into homeostasis. There may be some very good research that comes from this legalization and the innovation that will be spurred by this that will help people with addictions across Canada and the world.
The Chair: Before we go to a second round, I would like to ask our panellists about packaging. We heard from some people yesterday on that very issue, and, Mr. Linton, you said in your comments that people will want choice. How will they identify the choice? The proposed regulations from Health Canada, as they are drafted to this point in time, have laid out a pretty clear path in terms of what kind of labelling will be put on the packaging. What are your thoughts about all of that, and do you think that’s reasonable for the industry or are there changes that need to be made?
Mr. Linton: In other forums, I have often expressed that my primary competitor is branded and it’s called Ziploc. They’re baggies. We want to migrate people from that standard of packaging and decision-making to one that gives them information. That way, when we walk into a spot that is already an age-restricted environment — we’re not talking about packaging sitting where youth are; this is an age-restricted environment — people should at least have a visual cue as to which corporations have produced it and which products they can select, because they’re not all the same. I’m not looking to see that it becomes a 12-coloured hippy-dippy shiny thing, but they should have the ability to make an informed decision. We are trying to bring people into a controlled environment for that.
Right now, the data we have to present on the package informs the size of the package more than what people would want to buy. In other words, in order to create a small package with a small quantity, you have no room for the labelling with all the warnings. I’m not trying to get past that, but there has to be a bit more practicality. Could we endure them as they are? Sure. Could they be improved? Yes. Will they be? I expect so.
The Chair: I’ll just throw out another question for others to answer. A lot of the commentary here at our meetings has centred around doing something similar to tobacco, which is highly restrictive, particularly with the new regulations out of Bill S-5. Is that going too far, in your opinion?
Dr. Lake: I’m an ardent anti-smoker, but as I was watching the committee online last night, I was enjoying a cold glass of Sauvignon Blanc, which had a label on it that told me where it was from, how much alcohol was in it and what I could expect from the flavour. I listened to Senator Dean make a very good point about an age-restricted environment where people make a conscious decision to enter because they have a purpose, either to get information or to buy cannabis. If the idea is to provide consumers with information to make them understand what they are buying and the effects it will have on their body, I think the labelling is restrictive. But I also come from government, and I know governments like to start conservatively. Once they and the public get comfortable, then things will loosen up. I suspect that will happen.
I’m with Mr. Linton. I don’t believe we should be marketing the way alcohol is marketed, but you can’t get that genie back in the bottle. But to compare us to tobacco is just not correct, if you look at the evidence, in terms of the health impacts of tobacco versus cannabis. Particularly as more people go to non-smoke forms of cannabis, the comparisons are not really valid. I think consumers need choice.
As a former environment minister, I would say the packaging will create an environmental situation that all of us will have to deal with. As we get more comfortable with this and we know we can manage this in a way that has less of an environmental effect, I think we will move in that direction as well.
Mr. Rewak: There are two points I would like to make. The first is that both alcohol and tobacco are recognized as class 1 carcinogens by the World Health Organization. Cannabis is not. In terms of combustible form, many of you heard Dr. Mark Ware speak at a breakfast a few weeks ago where he said that, based on his review, the only direct linkage for health from combustion of cannabis is increased risk of bronchial infections, and that subsides when use subsides. So I think the risk factors are different, and that changes the way that products should be packaged.
That being said, I concur that we need restrictive packaging, but we should have a greater degree of informational brand differentiation. Here’s the reason: This is not a new market. If no Canadian consumed cannabis, I couldn’t ethically and with a clear conscience come to you and say plain packaging was a bad idea. But you might have figured out, walking down the street, that a lot of people are consuming cannabis in Canada today. Our mission is not to bring new users into the marketplace; I don’t want new users coming into the marketplace. I want to migrate illegal consumers to a legal marketplace. To do that, we need to be able to have a dialogue with people at retail who are adults in an age-gated environment simply about what they are buying.
Senator Seidman: I think probably I’m not going to engage in this conversation, because we did hear the “genie out of the bottle” expression yesterday. You heard it, I’m sure. Once the genie is out the bottle, you can’t put it back. The plea we heard yesterday from scientific and medical experts was that we should be more restrictive at the outset on packaging, advertising and marketing, and then see how it goes. Because once the genie is out of the bottle, you can’t put it back. That was the expression. Okay.
Dr. Lake, I would like to ask you a question. On the website of Hydropothecary, it states, “The health and safety of our clients are very important to us.” We’ve heard testimony here from many witnesses, for example, from the Canadian Centre for Substance Abuse, that Canadians really don’t understand the potential health harms of cannabis use and the fact that it’s being legalized makes them less concerned about the health harms. Being a former Minister of Health, I’m sure you’re concerned, as we are, about the health and well-being of Canadians, especially young people, so what actions are your company taking to ensure that youth are aware of the adverse health effects of marijuana? Has your company undertaken any public education awareness campaigns to educate young Canadians of the risks associated with using recreational marijuana? Why or why not?
Dr. Lake: Not to this point, because we are today a medical cannabis company. All of our current patients have a doctor or nurse practitioner who is guiding their care. They should understand the impacts of the medication they are taking.
As we move forward, we want to support institutions and organizations that will convey those messages to youth. My daughter, actually, is a strategic adviser to the Canadian Students for Sensible Drug Policy. They developed a toolkit that talks about how to talk to young people about cannabis.
I met recently with Dr. Patricia Conrod, a psychiatrist at the University of Montreal. She has developed a program called Preventure, which basically allows educators to be trained to recognize traits in students that may make them more susceptible to substance use. It then provides them with tools that would provide them with resilience.
So we certainly want to support organizations and research in this regard.
Senator Seidman: Okay. When you say “support,” does that mean that your corporation and yours, Mr. Linton, would be putting aside a budget, like all companies should do for R&D? Would you be putting aside a budget for education?
Dr. Lake: Absolutely. And Bruce will speak to it, because he’s the big dog. He has a large social responsibility fund. My budget for corporate social responsibility is well over $1 million. We have been waiting for the Quebec government to pass their legislation. We want to honour the spirit of Bill 157 and wait until it’s passed before we start rolling these things out. They are in the middle of debating the bill, and we don’t want to get in the way of that debate. But certainly that is our intention. I’ll let Bruce speak to that.
Mr. Linton: The conversation enables us to spend our budget, which probably sounds remarkable, but it was challenging even three years ago to have organizations accept capital on an unrestricted basis from us. With Mothers Against Drunk Driving, it was a one-year conversation before we could actually give them a cheque on an unrestricted basis to expend to whatever campaign they felt was prudent. I think it was because the whole dialogue around cannabis and the management of it was not there.
It feels today like it has changed dramatically over the last year. You mentioned at least one of the organizations we are happy to have. Again, you provide the capital, and you don’t provide the guidance, because the experts should do it. Terry mentioned his daughter involved with the Canadian Students for Sensible Drug Policy. We were happy to help on that occasion. I think you see it’s good for business.
Senator Seidman: Right, except as we all know — those of us who work in the research area — that when we are supported by certain corporations, like in the pharmaceutical industry, there are conflicts of interests. How would your companies deal with that?
Mr. Linton: Our CSR approach is that it is a blind, undirected cheque. You spend it as an organization. I know there is always a conflict on how far you can go, but over the next five years, I think you would find that the management of the message and making sure that education occurs is the priority more than manipulating the market and trying to do the pharmaceutical jig. I think we are in good territory for at least the next five years.
Senator Petitclerc: I was going in the same direction. It happens way too often that I have the same idea for a question. Do we have the percentage on the kind of investment you are planning to do on education and awareness? I know some corporations commit to a percentage. For example, this is how much of the revenue is generated and we have this percentage that we commit to give back. Do you have something quantifiable like that?
Mr. Linton: We have been looking at 2 to 3 per cent. Part of it becomes if it is entirely restrictive that when we provide our capital, our logo can’t even be presented at the findings or the outcome if they generated an ad campaign, like MADD, Mothers Against Drunk Driving, if we can’t be visible, as a brewer would be as a sponsor, it starts to curtail that. We are struggling where some of the provinces are actually looking to eliminate all visibility of the existence of cannabis companies. I am not sure that is the best route to getting a maximized CSR budget. There is a little balance there. I would expect you would find that 2 or 3 per cent can be there, but we need to have that balance.
Senator Petitclerc: I have another question for you, Mr. Linton. Mr. Rewak just mentioned that the goal of your organization is not to attract new users but you want to migrate, if I understood correctly, the illicit market user to legitimate markets. I want to hear you on that, Mr. Linton, especially in the context where I believe you applied not too long ago to go on the New York Stock Exchange. As a business person, how do you articulate that kind of commitment from the organization to stockholders, for example, that you don’t want to grow a new user market?
Mr. Linton: To be truthful, I expect the market for medical to continue to grow dramatically. On what basis? Benzodiazepines as sleep aids and some of the other ketamine approaches are very unsuitable for humans but are the best choices, so I expect to grow the medical market. I expect to see a migration in two to three years, when the format is permissible to be in a beverage format, and people will reduce the selection of alcohol and choose beverages that don’t have the same drug on drug interaction profile or the same calorific content. I think you will see a transition from other markets — not just the black market but alcohol markets. I think there will be a health and business benefit, but I wouldn’t be truthful if I said it will only be the black market transition. That will not be the case over time for medical or recreational.
Mr. Rewak: I would like to add some clarity to my statement. When I speak of migration, I am speaking of adult consumer use, consumers of cannabis, not medical patients, and I am speaking specifically to the recreational side of Bill C-45.
Senator Petitclerc: Thank you.
Senator Poirier: I am still along the lines of my two colleagues. That is where my questioning was going, so I will continue to expand on that.
A few weeks ago when we had the Minister of Health from New Brunswick, Minister Benoît Bourque here, I questioned him about the amount of money they were investing in education, specifically directed toward our youth, schools and training parents so they know the risk of marijuana for people under age 25. He mentioned at the time that they were going to start investment but they were just starting it in April. I thought he told me, if I am not mistaken, that industry would also help out financially with the education, which is what we are talking about.
When we are talking about industry, are we talking about the industry that is growing the product, which is what your companies are doing, or are we talking about industry that will be selling the product, which is in the stores? If it is the industry on the growing product, when you get a licence to be in a province like New Brunswick or wherever you are working, is there any negotiation at that point to get the licence that is made between the province to invest a certain percentage of your profits into education specifically for the youth and the risk for those under age 25?
Dr. Lake: I can speak to the situation in Quebec where their legislation, Bill 157, explicitly sets up the cannabis research and education fund, which will be a minimum of $25 million a year.
Also, as you know, the SAQ has Éduc’alcool, which is a tolling process on alcohol producers that goes into an education program. We have yet to hear if a similar program will be developed for cannabis, but it would not surprise me if that happened, in which case all of the producers will help to pay for that program.
I want to remind you that recreational cannabis will be subject to an excise tax and to sales taxes that will generate significant resources for all levels of government to deal with this issue. I think we are all in this together. It is a shared responsibility between industry and governments.
In Colorado, in the last two years, over $230 million went toward education either constructing schools or education programs. In fact, the revenue from taxes from cannabis in Colorado now exceeds that from alcohol. So it does fund a lot of important social programs. I suspect that we will find, when the market matures, that will happen in Canada after a number of years.
Mr. Linton: I don’t have the precise details for each province, but each of them has included in the wholesale transfer price to some extent a contemplated single digit portion, which would be at their discretion, to my knowledge.
Senator Poirier: And that will only come into play once the legislation becomes legal?
Mr. Linton: Right.
Senator Poirier: Thank you.
Senator Dean: We have big producers with us. We speculate a lot here about what is happening and not happening, what will happen and what won’t happen. Tell us about what you are selling today. Tell us about the nature of the adult medical market. What are people buying? What is the range like? Is that any indicator of what we might see in the recreational market if it is legalized and regulated? Tell us what the demand side of this looks like.
Dr. Lake: When Hydropothecary first started, we were almost exclusively selling our patients a flower product, so most of it was a smoked product. With time and innovation, we developed two products that have become very popular.
One is a milled, dried decarboxylated powder. As you probably know, if you took a cannabis bud and ate it, you would not feel anything from it. It has to be activated by removing a carboxyl group. That is why people usually smoke it, because the heat will do it. We have developed a proprietary process to do that ahead of time so people can use it in an ingestible form. That has become very popular, particularly in lower doses. People will microdose to manage their symptoms, and they are not using huge quantities.
The other products that have been very popular are our sublingual spray, our elixir spray. We have had a THC product on the market for about a year. You spray it under your tongue. For a medical patient, this is very convenient and discreet. There is some absorption across the mucus membrane, but some is swallowed and absorbed that way. Again, that provides people with a non-smoked option.
We came out with a high CBD that is not giving you that euphoric high but reduces inflammation and pain. In the last few months, that has become one of our best-selling products among our patients because they are not looking to get high; they are looking to manage their symptoms.
We were down in Seattle and Portland and saw the whole gamut of products there. People will self-select where they want to be. That will vary in age, in social demographics and in managing their symptoms. I think a lot of people, baby boomers in particular, will use cannabis as a wellness product, not to get high, although the odd weekend they may use it that way, but I think people will be using it to manage life and reduce inflammation and still be able to play soccer at 60 years old, for instance, with CBD.
Mr. Linton: In our world, we have been producing and selling cannabis for four years. Four years ago, we were only permitted to sell dried cannabis, but if you became a patient today, you are about 50/50 likely to buy it in an oil format. We are restricted in the oil formats because for everything in cannabis, there is a rule. Our cannabis has to be bulked up with an adjacent agent, like an MCT or sunflower oil typically, and sold similar strength to the plant. Even in that format, it is about half of our business, or it could be, for anyone who has just come on as a patient.
Interestingly, over four years, the average purchase for a medical patient has been 1.2 grams per day for that entire time. It hasn’t gone up. It hasn’t gone down. That has been a fairly interesting constant.
The average price per gram for which the product sells increases as you migrate to those products. Our average price has gone from a price three or four years ago, of about $7.35 a gram to about $1 higher now. Clearly, if you treat the flower as an ingredient and you process it into the next finished formats and you start to apply technologies to make it more approachable, then the price will go up.
Where it will go down in medical is we are working diligently, and we are in phase 2b clinical trials. These will become things that will be covered by insurance, and that will change the whole price equation.
Most of the companies in the sector over the past four years have been doubling their revenues in the last few years and substantial growth.
Senator Manning: Mr. Linton, in your opening remarks you talked about 200 inspections that your company has received. I’m wondering about the inspection process. Is it random? How many times do they go into your facilities, and are they in different places? Give us some idea of the inspection process.
Mr. Linton: There has been an evolution. The frequency has decreased because if you show that you are risk-rated as an unlikely offender, they less frequently show up.
What will happen is on an unannounced basis, a Health Canada inspector or inspectors arrive and present you with the identification, which includes a badge to say who they are, and they pick a theme. They may say, “Can I see the video from two months ago for the Tuesday in which the plants went into that room?” And they observe who was moving them and how many plants. And then they ask you to show the files that relate to the individual codes related to those plants. And then they want to see the resulting product and whether or not the total number of plants that went into that room two months ago turn into product today. Or they may turn to the cameras and say, “We saw three people on camera. On the timestamp on the camera it said 11:12 a.m., and you only wrote down two.” Now you have a problem.
So it goes from physical transit of people to plants and production to shrinkage ratios. They look at medical registration forms to ensure everything is done in compliance and if you have verified the doctor and the address. They take a random range of thematics. As a taxpayer and a person participating in a sector I want to see arrive, I don’t actually shudder when I see them. I actually think this is part of a good process.
Senator Manning: In your plans for Newfoundland and Labrador, you mentioned the fact of maybe 150 jobs. What is the process that your company goes through to hire these people, the training that’s provided, the background checks and so on?
Mr. Linton: The reason it works in places like Smiths Falls and I have been to visioning sessions in First Nations communities where you spend a Friday night in context visioning is that there is a lot of hand-on-hand training. If you are going to work with the plants, we don’t need you to be an expert. In fact, that is a liability because you probably have a lot of expertise from the wrong place. So we do hand-on-hand training. We have standard operating procedures which people need to follow. Even for customer care, the people who answer the phones have a two-week training program. We have been running a customer care or call centre for three-and-a-half years, and we’ve had two people quit. We have about 125 people working in it.
When a province announces a higher average base minimum salary, it has never affected us because we pay over it, and the standard operating procedures give people robust training.
Senator Manning: In your education programs, especially geared towards our youth, from your company’s perspective, what is your involvement with that? I don’t necessarily mean just dollar figures as much as hands-on.
Mr. Linton: We try not to be hands-on in youth education. We think it is better left to experts and fund it.
Where we are hands-on is I believe we now have had more than 40,000 interactions with physicians, and we’ve had the first, I believe in Canada, certified continuing medical education program. When you take that knowledge base of information to a place like New Brunswick, which is inverting it for the types of questions, answers and scenarios that a clerk would need to be appropriately trained at a retail location. We are turning that into an online paste training program which retail clerks can actually walk through. You can determine how they did based on their answers and duration of time participating in the education. Those are the sorts of things where you see medical turning into retail education.
Senator Manning: Thank you.
Senator Bernard: My apologies. I missed your presentations. I was speaking in the chamber, so that trumped your visit with us, but I have listened intently to my colleagues’ questions and your answers.
I want to pick up on a point that Senator McCallum made around First Nations. There are a couple of things I want to ask. First, we know that currently, the criminalization of cannabis overly criminalizes First Nations and African Canadians and poor people. What, if any, efforts are big industry doing to bring those potential people who up to this point have been consumers of what I will call the illicit market? So they have been consumers of the illicit market. How are they brought into the legal market, not just as consumers but as producers and employees? I have not seen any of that. Are any of you aware of any initiatives? Do any of your organizations have any initiatives that address that significant social issue?
Dr. Lake: First, we have to follow the law. Each province will design the entrance for people into the retail side of the marketplace. If you look at Manitoba, for instance, they made First Nations participation mandatory for retail opportunities. In my home province of British Columbia, they are very cognizant of First Nations issues and looking for ways of people that have been in the illicit market before. As any of you who have been to Vancouver know, there is a huge illegal market going on at the moment. So all of those people typically would not be allowed entrance into the licit market. But British Columbia has stated an objective of taking people that have not had violent behaviour and have not had a level of criminality that we would not want in a licit market to allow them into the new regulated market, much like California has done. I think that is the right thing to do.
We had the Assembly of First Nations delegation come to Hydropothecary, and we are very interested in working with First Nations in terms of economic opportunities around this very new industry. We think it is an opportunity for Indigenous communities to participate, and we look forward to assisting them with that.
Senator Bernard: Are there any similar initiatives for people of African descent?
Mr. Linton: In our shop, if you apply for a job and don’t tell us you have had a rub with the law, with cannabis, that is more of a problem than if you do tell us. If you look at our org chart and some of the people behind me, they have been very actively involved with the illicit market, whether it was setting up what was once a compassion club type of program and some of the people who carried out the protests and ended up with criminal charges. We don’t put a gate up based on that. We put up a gate if you are not transparent and truthful and tell us where you came from.
We don’t have any current programs that target any identifiable minority. We have been active on First Nations in that one of our goals has been to establish a presence and production facility in that context. The challenge hasn’t been interest in the First Nations. It is really the land rights and the ability to get capital. Because there is quite a lot of interest in a plant rooted in the earth as medicine, I found it a much more receptive community than the average.
Mr. Rewak: I will provide some further commentary. As I stated earlier, we still live in a society where some people are treated differently than others. That is something we are all collectively working on. We as an industry have begun having internal dialogue around how we can increase diversity and inclusion in our sector, not just related to race but also related to gender, class and other elements to build an industry that looks like Canada. That is what we are trying for. We are not there yet. We will get there.
I think the discussion point we are having collectively would be that for individuals who have nonviolent possession of cannabis, which disproportionately affects some communities, there should be some governmental response to allow for those individuals to become more active participants in our sector. We are growing rapidly, and we need an inclusive and diverse industry and we would like to build it.
Senator Bernard: Is there a recommendation you would make on that in the context of this bill?
Mr. Rewak: I do not have a formal mandate from my board to make a recommendation on amnesty, but I will say, speaking with members of the cannabis community that, yes, absolutely. I just got corrected by someone who is a member, so yes.
Mr. Linton: In our investor group, I found my first investor who is putting up the first $1 million toward a fund inside our company that will work on how we take the people with simple possession and reduce that as a lifetime incident issue. We are looking for other people who want to fund that and run that, but we found our first million.
Senator Bernard: Thank you.
The Chair: With that, let me thank our panellists, all four of you, for all of your input and answering our questions. We are getting towards the end of our deliberations and hearings, and we will be reporting to the Senate next week. The bill will then be dealt with by the Senate for third reading.
Panel two goes for one hour. I welcome our panellists from the Canadian Hemp Trade Alliance, Russ Crawford, President, and Jason Green, Director; from the Cannabis Trade Alliance of Canada, Rosy Mondin; and from Hiku Brands, Will Stewart, Vice-President, Corporate Communications and Public Affairs. I would ask that each of you give opening presentations up to seven minutes, please.
Russ Crawford, President, Canadian Hemp Trade Alliance: Thank you, Mr. Chairman, for the invitation to attend this session today.
We’ll start by introducing ourselves to you so you know who we are. My name is Russ Crawford. I’m a director of a company called Naturally Splendid Enterprises. This is a hemp food company based in Pitt Meadows, British Columbia.
Jason Green, Director, Canadian Hemp Trade Alliance: My name is Jason Green. I’m an industrial hemp farmer in Saskatchewan. I’m also a director with the Canadian Hemp Trade Alliance. Just recently this year, I’ve joined forces with Canopy Growth Corporation to be the head of their agricultural division for industrial hemp.
Mr. Crawford: Our goal today is to give you a little bit of a fresh look on the material in terms of hemp and the non-psychotropic portion of the cannabis plant that has been an industry growing in Canada for the past 20 years.
The Canadian Hemp Trade Alliance is a not-for-profit national organization. We represent about 400 members, from producers to processors and retailers, plant breeders, researchers and the like. We’ve engaged them extensively during the course of the legalization process and the discussion around the legalization of marijuana and the impact on the hemp industry.
We’re here today to tell you that we support Bill C-45 and its most recent versions in the proposed regulations. It responds very well to the requests that we’ve made on behalf of our members for a number of changes to the industrial hemp regulations, which to our understanding will be included as a subset to the official regulations of the Cannabis Act. Rather than having hemp scattered throughout the whole document, there will likely be a section dedicated directly to industrial hemp, which is important to us.
Our message today is to address some of those things that are important in order for our industry to fully flourish. I think you would have received a pre-document that described a little bit about our industry, so I won’t go into that in detail, but certainly we are prepared to answer questions on that and the size of industry.
Importantly, we see the opportunity to remove regulations pertaining to criminal record checks and security clearances, locked storage of seed, testing for THC reductions and those kinds of things as a positive influence on the industrial hemp farming business.
Also, allowing whole plant use is an extremely important step in terms of capturing the full value of the plant. We are a food and fibre industry. There are other opportunities within the plant that we want to pursue, and our farmers want to capture the full value of that benefit as growers. The crop is ideally suited for the Canadian environment and our rotation of current crop production.
We are also pleased that we are informed that hemp and all of its derivatives will likely be removed from the list of controlled substances. This has certainly been a negative moniker for us to try to develop food products that attract mothers and seniors and everyone in between to use hemp when it is still defined as a controlled substance, so that is a significant improvement.
We still have our challenges in terms of creating clarity between hemp and marijuana. We talk about education and awareness. That is extremely important to our organization. We have a lot of work to do in that area. We don’t want to see a repeat of what happened in 1937 when hemp was thrown under the bus with marijuana under the Marijuana Tax Act. We are much more well-informed at this point in time, and we think we are educated to the point where we see the differences and are able to capture the value and provide the protections that we need without interfering with or reducing the potential opportunity in the industrial hemp sector. We still have some work to do on that.
There are areas that are to be determined later in the bill, including outdoor cultivation of marijuana and the impact of that on the hemp industry. There are some concerns there from our industry and how that might turn out, and certainly the marijuana industry has similar concerns. Those are discussions that will happen at a later date.
We would also look forward to the opportunity to discover the full potential of the plant in terms of cannabinoids, the opportunities and health benefits and how we can capture those and do the research that’s necessary in order to develop the products in a safe manner. This is where we tend to overlap with the marijuana industry a little bit. There is not a black and white. There is not a line that separates the two organizations. That’s why you are seeing marijuana companies acquire hemp companies. The cannabinoids are present in both varieties of the plant.
There is an opportunity to do some development there. Our goal is to build the industry. We are currently about a $180 million industry. We project that by the year 2023, with all of the proposed changes to the legislation, we can easily achieve a $1 billion industry, which will work toward the government’s agenda in $75 billion in agricultural exports.
Hemp can be a big part of our agricultural future, and we look forward to the opportunity to pass this bill and move forward and help our industry grow and achieve the objectives that we feel are its potential. Thank you.
The Chair: Thank you very much.
Rosy Mondin, Executive Director, Cannabis Trade Alliance of Canada: Thank you very much for having me today. It is truly my honour to be here. I’m a lawyer, as background, and a criminology undergrad, a bit of a policy wonk, so I’m grateful to be here and be able to help inform on this bill.
I have been an advocate for a legalization pretty much my entire adult life. My views were formed as a criminology student. Knowing people who were in the industry, it just didn’t make sense that people were being criminalized for the use of this product, whether they wanted to consume, possess or cultivate.
We established CTAC, actually, in 2015, prior to the election, to speak on behalf of those parties who were currently cultivating under the medical marijuana access regulations that wanted to convert to the commercialized framework under legalization.
What we had in Canada was 40,000 people who actually put up their hand and said, “Yes, I would like to be able to legally cultivate medical cannabis under this regulated regime.” So 40,000 Canadians, starting in 2001, actually said they wanted to do this, so the first group in the world to ever cultivate under licence.
When we talk about this illicit market, they are part of this under-regulated market. I call it under-regulated because they do operate under licence. We have to remember this. They do it for personal production reasons. There has been diversion out of that marketplace, but unfortunately we believe it has been due to Health Canada not having the staffing or the ability to provide proper oversight to that program.
They are not scary people. These are truly middle class Canadians, people who are looking to supplement their incomes, people who are cultivating because they find working with the plant quite therapeutic. They are not organized crime. I can talk about that in a bit. But for their involvement in the cannabis industry, they are otherwise law-abiding citizens of Canada.
We set out to advocate for inclusive regulations to allow a pathway for these farmers to cross over to become part of a legalized framework, not only for themselves but also for their products that are being developed in the industry.
It’s important to understand that this industry has a lot of talent. Again, they are not criminals but for the fact they were operating outside of a specific legal framework. These are people with PhDs, researchers, technicians, farmers, geneticists, chemists of all stripes, of all socio-economic and political backgrounds that do participate in this industry, be it as a consumer, cultivator or processor.
The majority of these people do want to be licensed and want an opportunity to participate. They want to be able to provide a safe and tested product and for it to be accessed by those of the age of majority.
We have had some great achievements. We are not membership based. We collaborate with other groups to bring together viable policy recommendations.
We had three policy papers that were submitted to Parliament. We have put in numerous submissions and had consultations with all levels of government. We were invited to testify at the task force and mentioned three times in the task force report, so that was a nice achievement. We’ve presented to the Pacific caucus. I’m from British Columbia, where that robust, mature industry exists. The sky hasn’t fallen in B.C., and I can get to that.
We were also invited to help organize a task force between many of the British Columbia growers and processors to meet with Health Canada representatives and the secretariat of British Columbia to get their feedback as to how the regulations would affect them.
In addition to my role as Executive Director of the Cannabis Trade Alliance of Canada, I am also the CEO of Quadron Cannatech Corporation. We design, manufacture and supply high-precision automated extraction and processing equipment. We also work with participants to set up processing facilities, so end-to-end turnkey facilities to extract the cannabis oil and create the value-added product at the end. We also design and supply the delivery devices. Right now it’s vape pens. So I know a little bit about extraction, and I’m happy to answer questions in that respect.
Finally, to top it off, I’m also an adviser to CAMCD, which is the Canadian Association of Medical Cannabis Dispensaries.
One thing that had come to my attention was that there is a group out of the U.S. called Smart Approaches to Marijuana. They are quite highly partisan and, really, the only group in North America that espouses anti-reform policy positions when it comes to legalization. A lot of their positions are quite contrary to the evidence and the emerging knowledge that is around cannabis use. They are not neutral, and despite what they say, they are not university based.
When it came to my attention that this paper was being circulated, I thought it was important. Again, because I do collaboration with the industry and try to be a go-between with the industry and government to present proper policy recommendations, we wanted to ensure that the senators had well-balanced evidence before them. I organized a cross-sectoral group of Canada’s prominent researchers, legal advocates, industry experts, academics and public health officials, and in less than three weeks we drafted a reply, which I believe you have in front of you now, which is informed by evidence to ensure that Canada’s legal framework will enable a safe and legal marketplace.
Some of the witnesses before you in the past have alluded to this report. There are six main topic areas. I don’t want to go into too much detail as it will cut into my time here, but we touch on youth use, which shows that legalization has little impact to overall youth rates; the impairment, which — Bill C-46, which isn’t before you, but because it was discussed in the SAM report, we did address it, that shows that DUIs are down in Colorado and Washington. You have heard that THC presence is not an indicator of impairment as it can stay in the body for a long time. This is an issue that especially concerns medical patients.
Hospitalization and ER visits. Prior to 2013 ,there were no visits, likely because there was no reporting because it was illegal, so people have fear of arrest. Accidental ingestion is negligible in the context of poisoning with respect to other household products that we can find. Social justice, crime rates, opioid use are all addressed in the paper.
There is not a lot of organized crime. There is data pulled by the CDPC that shows 5 per cent of the files pulled were actually organized crime. They are regular Canadians that do this. If you delay products or legalization, we have people who are going to be going to the unregulated market that does not protect youth. Youth will continue to access the products. Enabling a framework that allows for IDing, that stops people from accessing right there, so maintaining the status quo does not eliminate.
Extracts and concentrates, the market is moving to that. Please feel free to ask me about that. I have some figures for you.
Potency, there is more than just THC. The plant is very robust. A lot of the compounds work together. When you get into extracts, the formulating of the product and bringing all the compounds together benefits medicinally and also social use, depending on the intoxicating effect that you want. Vape pens can have higher potency than the ingestibles.
Home growing should be allowed. I have an infographic that touches on that. Again, we know if you ingest it, it’s not toxic.
I think it’s important to think about this: Cannabis has been illegal for less time than it has been legal. April 23, 1923, is when it was actually made illegal. We don’t really know how it got slipped in. But think about this. This was before the invention of the Geiger counter. It happened before the invention of television, the pop-up toaster, aerosol sprays and the discovery of the penicillin. There have been so many developments since then in our culture, we have to take this into consideration.
That is all I’m going to say right now, and I’m happy to answer questions.
The Chair: Thank you very much. You certainly invite a lot of questions based on your document here.
Will Stewart, Vice-President, Corporate Communications & Public Affairs, Hiku Brands: Thank you, senators, for having me here today. Thank you for extending the invitation for me to speak on Bill C-45.
By way of background, I’m vice-president of Hiku Brands. Hiku Brands is a proudly Canadian company that is publicly traded on the Canadian Stock Exchange, and we have a series of carefully curated cannabis brands which seek to support an educated community of cannabis consumers and the cannabis curious.
Toyko Smoke is our storefront brand, which is currently operating in five locations. We are the only licensed producer that has existing retail in operation today. Of course, those stores do not sell cannabis because that would be illegal. Those are coffee shops and serve as a jumping-off point for our community and education initiatives. Tokyo Smoke won the coveted Brand of Year at the Canadian Cannabis Awards last year despite not being able to touch the product at that point in time.
We are actively participating in a number of provinces where private sector retail will be allowed. We were awarded one of only four master licences for the province of Manitoba, which will allow us to open 9 to 16 stores there. We are in processes in Saskatchewan, Alberta, British Columbia, as well as Newfoundland and Labrador. We expect to have 20 to 30 cannabis dispensing stores in Canada by the end of this calendar year.
Hiku has a fully ACMPR licensed grow in the Okanagan Valley called DOJA. It’s focused on health and wellness and the outdoor lifestyle that the Okanagan Valley is famous for. We recently also announced a merger with WeedMD, which is another fully licensed ACMPR facility in southwestern Ontario. Together, and after we are finished our fully funded expansion plans in 2019, we will be capable of producing 56,000 kilograms of cannabis out of those four facilities.
Hiku is also proud to have as one of our brands the leading female-centric cannabis education and product company in Van der Pop, as well as the Quebec cannabis brand called Maitri as part of our company.
Recently, we announced a strategic investment into Oceanic, which is located in Newfoundland. It will be about a 15,000 square foot facility to start, which will also allow us to open retail footprint in the province of Newfoundland and Labrador as well.
Together, all of these brands represent Canada’s first fully vertically integrated cannabis company that is currently operating in multiple retail environments this day.
I have been fortunate to work at Hiku to build the company and execute on our plans for the adult recreational market.
I wanted to focus my remarks today on a few key topic areas and then take your questions should you have any.
First, it’s important to articulate that we believe that the cannabis act is a good piece of legislation. Far too often in this line of work, I know you hear lots of complaints. Sometimes it’s nice to say nice things about the legislation as well. We believe the bill strikes the right initial balance between protection of the Canadian population that we would expect policy-makers to take as this country seeks to end prohibition, along with private-sector involvement in creating a robust, sustainable sector here.
At its core, the bill will see a licenced production model regulated by the federal government, with the freedom for provinces to do as they see fit on the retail front, as well as municipalities to tweak those plans should they see fit as well in their own jurisdiction.
We support all of those initiatives. We also support the initiative in the bill that allows for home grow. We don’t see that as something that should be prohibited.
Second, I want to speak briefly about one aspect of the Senate’s work that keeps many people in this industry up late at night. Simply put, the timing is a serious consideration for the industry, as well as the private sector capital that is at risk. I don’t raise this as criticism of the Senate’s work. Quite the contrary: I raise this as an encouragement to your work to be completed by June 7 or at least report back for the vote on June 7.
I know that many have raised issues on timing. You have probably heard that many times before. Potential delays of the bill, intentional delays but also unintentional delays, including summer recesses, broader consultations, police forces, et cetera, all cause problems for this industry and could reduce Canada’s first-mover advantage in this sector.
This is a sector in its infancy. Without a doubt, there are many uncertainties, a lot of them around this table as well. Pushing forward with legalization will, however, have two immediate effects to benefit Canada as a whole regardless if you are a cannabis consumer or not.
First, legalization sends a message that Canada at the federal level is open for business. Canadian companies have already started to expand internationally — you heard that on the last panel — and Hiku Brands has also started on that with an investment in a legal cannabis producer in Jamaica.
Perhaps most important now is the development of Canadian intellectual property from research and development to grow systems to business acumen. Canada can be a leader, and we should not cede that ground to other countries as they move forward with different types of medical and recreational regimes. We can and should have a first-mover advantage with this legislation.
The second key reason to move forward with legalization is to begin to reduce the black market ownership of this sector. Will they be eliminated overnight? Of course not. I don’t know anyone who suggests that they will be. But moving on this sooner rather than later will start that process. To reduce organized crime, reduce youth exposure and encourage a legal regime are all very good reasons to push forward now. As Senator Munson said in the National Post, if we keep delaying it, we will simply keep the illegal market open longer.
Finally, I want to talk about a few areas where we think changes should be considered. First, we feel strongly that to begin to make a true dent in the black market of cannabis, Canada and the government should move to legalize forms of cannabis that are widely accepted by Canadian consumers today: namely, that a regulatory regime for edibles and concentrates be approved upon legalization with the rest of the products. I would encourage you to direct lots of questions about extracts and vape pens to Rosy. She is a true pioneer in this space and a wealth of knowledge for this committee.
Canada is home to many quality producers of extracts and concentrates, and legal regimes around the world, even where not federally legal, have managed to establish regulatory frameworks that Canada can certainly learn from in the immediate days as a starting point. If a reduction of the black market is core to this legislation, then vape pens and edibles need to be part of that from the outset.
Second, plain packaging, as currently proposed by the Health Canada draft regulations, puts this sector at risk of not being able to establish a fully functioning legal market that can work toward a mature industry that can educate and inform customers to help them make the choices that are right for them.
Insisting on plain packaging and not including edibles and extracts does put the legal industry in a difficult place to battle with the black market. We need at least some of the tools the black market has if we are to stem that tide.
Thank you for your attention today. I look forward to your questions. I have spent the last 20 years of my career in and around politics in Canada, including some overlap with Senator Dean in Ontario politics. It’s an honour to have addressed you today, and I look forward to your questions and comments.
The Chair: Before I turn it over to my colleagues, I have a couple of questions. I want to understand the difference between the Cannabis Trade Alliance of Canada and the Cannabis Canada Council, which was in the previous panel. I think you said you represent the industry as well, but you don’t have membership.
Ms. Mondin: We work with participants that are primarily MMAR growers. Cannabis Canada Council are the industry representatives for licenced producers under the ACMPR.
The Chair: And you don’t have membership?
Ms. Mondin: As membership, we have supporters that basically cover our disbursements. I do everything pro bono for CTAC. We felt it was important to have a voice to speak to those who want to be included. The others speak on behalf of the LPs.
The Chair: That’s fine.
We had some discussion in the last panel about outdoor growth, and the industry indicated they don’t want outdoor growth for commercial purposes. Does that affect your industry at all?
Mr. Green: Yes, it’s pretty important now that there is an issue in Washington with the marijuana varieties being outdoor. The problem with marijuana is it cross-pollinates with industrial hemp and vice-versa. The two will cross contaminate. Our concern with industrial hemp is we have worked hard to stabilize these varieties that guarantee that they remain below the 0.3 per cent THC threshold. We are concerned that if we have cross contamination, it will affect our genetics for us to stabilize and keep those below that threshold.
We do hope that when and if outdoor production of marijuana is allowed, that there is some type of protection in place like distance measures or something so that we don’t have cross contamination of the two varieties that would affect both of those industries.
The Chair: But Bill C-45 doesn’t affect your outdoor growth?
Mr. Green: No, it does not, right now.
The Chair: Okay.
Senator Petitclerc: Thank you all for your presentations and for being here to help us.
My first question will be for Mr. Crawford. You did mention it a little bit and I want to you to let us know: when it comes to the impact of Bill C-45, it’s a very general question on the possible opportunities that this bill introduces for your specific area and maybe some challenges. You did mention some challenges just in terms of perception. Just kind of expand on that a little more, opportunities and —
Mr. Crawford: There are probably a couple of areas. One is just the validation of the product itself in that it’s not a controlled substance. People will have the opportunity and there will be an opportunity for education to help people understand the nutritional benefits of industrial hemp. This is less of a problem in the fibre sector because we are not consuming it, but on the food side, there is misconception, and this is an opportunity for us to get out from under this cloud of controlled substance. I think that’s extremely important.
But I think the bigger component of the bill is the whole plant use. This is a plant like no other plant I’ve seen. I have been in agriculture for 45 years in Canada. I was around when canola was developed from rapeseed, and the pulse industry, and all the industries have evolved through research and product development. I have never seen anything like this. This is a plant that offers food, fibre, feed and natural health products. We get value from the seed in terms of oil and protein, and we can build just about anything from the fibre. It’s a remarkable product.
The area that we have not researched well at all, because it has been illegal, is the whole plant: the leaves and flowers. This is where the cannabinoids reside, the THC and CBD. But in hemp, the THC levels are very low. We are able to produce a plant that is safe to eat for consumers, and nutritious. I give this to my 93-year-old mother and she does well. She likes it, it tastes good and it keeps her vital. We don’t know enough about that part of the plant, and now, under the freedom of the whole plant use, this is where the significant growth will come.
All of this is to the benefit of Canadian farmers who currently get very good returns for hemp as a product. It’s challenging to grow, and I won’t speak to that, but it also provides tremendous opportunity. In more than one fashion, canola is known for its oil and wheat for protein, but hemp has many different applications. It has been idle for over 60 years because it has been illegal to grow. While all these other crops matured and varieties developed and there has been a lot of research in product development, we have not had that opportunity. We are in a catch-up mode and it will take a while. But there are a lot of people out there who see this who are smart and will take it as quickly as it can possibly go.
The challenge is the cost of doing that. As an industry, we are quite small. We have a small number of members. We have a very small budget, so we don’t have the funding for that research and product development and education. Those are the three key areas that we will continue to pursue.
Then it’s simply a matter of creating that knowledge and opening doors. Hemp needs a tipping point. We need to reach a pivotal acreage where larger companies will start to use our products for fibre and food as ingredients. Right now, we are niche. We’re in farmers’ markets and in small products on the shelves. Manitoba Harvest and their fresh hemp foods brand is doing very well. I can’t tell you how many people say, “I have a bag of hemp hearts in my cupboard.” So we know that people like it and use it, but there are so many other opportunities. The ingredient area is one of them, so we need to develop more ingredients based on products derived from hemp. Again, more research.
So those are the challenges — to find the money, to find the collaborators and people in the industry who will take a risk and put their investment into the hemp industry and develop those products and work with farmers to help expand it.
Senator Petitclerc: Thank you very much.
Senator Seidman: Thank you all very much for your presentations.
My question is for Ms. Mondin. Your organization has stated that an effective tracking system is imperative to the efficacy of Canada’s recreational marijuana regime. I would like to know, from your perspective and experience, how will the tracking system impact the spectrum of marijuana growers differently, and how can the system prevent diversion to the illicit market? Do you have any information about the operational status of the Government of Canada’s proposed cannabis tracking system?
Ms. Mondin: We do recommend cannabis tracking. It’s 2018, and the technology is there. So you can actually verifiably audit the seed to sale all the way through the supply chain.
We have lobbied and advocated against warehousing. We have seen British Columbia moving that route. The reason why is that, first of all, it’s a perishable product. In its dried form, it doesn’t have a long shelf life. Definitely, the oils do, but then you start getting into the ingestible products. Again, the shelf life changes.
What we also see with warehousing is that you are also duplicating the costs of the security requirements that are needed. The licenced producers right now, the commercial growers, have to have quite secure facilities, meet very secure licensing requirements. It just seems very duplicative to have to take what’s already modelled by the LPs to move product to another facility that now has to have its own security facilities. What about the security of the people in and out because, of course, under the LP model, people have to be vetted if you are a secure person in charge or the responsible person in charge.
I just see that a lot of taxpayer dollars going to building and maintaining these facilities just seems redundant. That’s why we recommend seed-to-sale tracking. They’ve had success with that in other jurisdictions, in the U.S. — Washington, Colorado, Oregon. Seed to sale is done with other products as well, agricultural products, in watching that supply chain. I think it would be very effective for cannabis, and we do see that movement happening in other jurisdictions. It seems to make sense. The technology is there. The companies are there, and there are some great made-in-Canada companies that are doing this as well, providing the technology. So we should be supporting these ancillary businesses that are supporting this industry.
We have to remember that we have only 104 or now 106 licensed producers across Canada. To me, that is not really an industry, especially when they are just starting to be able to get banking. Lawyers and accountants are starting to get into this industry. If you think about any other industry that has ancillaries that feed into it, that’s just developing. Supply-chain management is part of it, as is transportation. I think the government would be very good at transporting the product, where they don’t necessarily have to warehouse it. It could also be open to the private sector as well, but that’s something that they could utilize in addition to seed to sale.
Senator Seidman: Do you have any information about the operational status of the government’s proposed cannabis tracking system?
Ms. Mondin: No, I don’t offhand, but I could find out if you’d like me to get an answer for you.
Senator Seidman: Sure. It would be great if you could send that to the committee.
Ms. Mondin: Absolutely.
Senator Seidman: Could I ask you also about another matter that your organization has spoken broadly to in the past? We had testimony here from witnesses in Alaska and Colorado who spoke about the challenges in accurately labelling the THC content of cannabis products. I know that your organization has spoken to this issue broadly in the past, noting that labs all use different testing standards, which you say poses a real challenge to businesses and to product safety. Could you just elaborate on this a bit, and are you aware of any plans by the federal government to standardize or streamline testing going forward?
Ms. Mondin: Definitely. We know that, going forward, for example, the pesticide testing is going to increase substantially. They are looking at testing 119 different pesticides. You have to remember, too, that a lot of these pesticides that are being used are food grade. The problem is that, once they are put onto this product, which ends up being heated and primarily smoked right now because it is primarily dried flower that has been going out, the properties of that pesticide change and can turn into trace amounts of cyanide. This is one of the big issues. They are going to be having requirements to test.
You’re right on the standardization. Right now, for the cultivation of cannabis, there isn’t even a monograph or a pharmacopia made in Canada for standardizing the cultivation, let alone standardizing the extraction process. Again, to have proper SOPs to have that quality control, you need to know what’s going on all the way through. What’s going to happen is you’re going to see industry coming together and creating those standards. It probably should come from industry; they’re the ones working on this product. In the U.S., there’s a group called FOCUS that has created standards on various aspects of the industry. Definitely, this is something that will develop, but it is something that can be developed as we are proceeding with legalization because, again, to try to do this under an illegal framework is really difficult — to create those standards, get your hands on it and work with the product.
Yes, there is room for that, and it’s going to develop, absolutely, and is needed.
[Translation]
Senator Mégie: You said earlier that it was time for hemp growers to become legal. I see from the history that it really started in 1998, but, before that, who was growing hemp in Canada? Before 1998?
[English]
Mr. Crawford: The short answer is no one. It was not legal to grow in Canada prior to 1998, other than up to 1937. For roughly 60 years, it was not legal to grow at all. It grew wild as a ditch weed, which was the term for hemp, but there was no legal production.
[Translation]
Senator Mégie: Was it grown elsewhere, in other countries, which gave industry the idea of doing it?
[English]
Mr. Crawford: The Narcotic Control Act of 1961 basically prohibited hemp from being produced anywhere in the world. Any signatory to that document agreed not to produce hemp, so it was widely not grown, I guess, is the best way to describe that.
Farmers are an inventive lot. They see opportunity, and they go after it. They recognized that this was a plant that had opportunity. It was a small group of farmers in southern Manitoba who got the ball rolling on this, in Canada, at least, back in the early nineties and lobbied government and basically helped to author the Industrial Hemp Regulations that were made legal in 1997.
Canada is actually a leader in the pursuit of the development of hemp as a commercial agricultural crop. Once again, I consider us leading the way in terms of legalization of cannabis in its entirety.
[Translation]
Senator Mégie: Okay. Thank you.
[English]
Senator Dean: This question is for Ms. Mondin. First, thank you for the very helpful commentary on the U.S.-based SAM report. We have heard it widely cited in the Senate Chamber and in this room. It does seem like a gift to opponents of cannabis reform.
One of the more — I’m going to call it — “extreme” allegations made by SAM is that there is an association between cannabis and the opioid crisis. We heard a U.S. witness in this room last week suggest that the legalization of cannabis could provoke an opioid crisis. We already have one, of course. Alternatively, we have heard that opioid overdoses and deaths have tended to decrease where cannabis is legalized, and we’ve heard that cannabis can be an aid to withdrawal from opioids, otherwise sometimes described as a reverse gateway drug — completely the opposite from the suggestion that we keep hearing that cannabis is a gateway drug. Could you comment on that?
Ms. Mondin: Again, I am not a specialist in this area, of course, so I refer to those who are to help form this reply. On their data, when they looked at everything, cannabis is not a gateway drug to opioids. As you mentioned, it does do the reverse. In Vancouver, in fact, they have had a pop-up cannabis shop in areas where there is an issue with opioid and fentanyl. Law enforcement has been supportive of that. They would rather put their time, effort and energy into the opioid crisis rather than going after people with cannabis possession.
There is no evidence to suggest that state cannabis laws have contributed to the rise in opioid use. This was found by our researchers. Also, there are no related harms across the U.S. as a result of the increase in cannabis use, contrasting that there is a rapidly growing body of evidence to suggest that cannabis liberalization may be helping to reduce opioid-related overdoses through promoting increased substitution of cannabis for opioids.
Senator Dean: Thank you. I note in the paper that you said that SAM isn’t a neutral entity nor university-based. It has a long history of taking policy positions contrary to empirical evidence and emerging knowledge from U.S. jurisdictions that have legalized cannabis. It is known for being heavily partisan and prone to misleading the public and legislators. Do you have any further comment on that?
Ms. Mondin: I spoke to colleagues down in the U.S., and they were telling me that SAM does not hold much weight anymore because a lot of their claims have been disputed, refuted and found to be completely wrong and false. They cherry-pick information. They rely on old data. They are not too much of a force anymore. They are the only group that espouses these strong anti-legalization views.
They do show up at times to different events. There was something in Chicago where they mentioned they would be there, but they haven’t been progressing. They still maintain a lot of the cannabis mythology — “reefer madness” fears — around it. That is what they propagate. They are not relied upon. From my understanding from colleagues I speak to in legalized and other medicalized states, SAM does not hold much weight.
That is why it was concerning to me when I heard they were coming up to Canada to try to affect our policy. We need a Canadian, tailor-made legislative framework for this country. We have a robust cannabis industry. We have many people who operate in this industry, and we want to have them transition.
The U.S. is a very different situation than Canada. State by state, it is very different. They don’t have a national policy. When they even look at data where they say that use is increasing or these ills are happening, you have to look at socio-economic factors, racial factors and the fact that surrounding states are not legal. That contributes to some of the movement of cannabis and some of the ills that are happening because people come from one state to the other to access it, take it back home, move it, traffic it and whatever else. Here in Canada, the fact we are doing it nationally makes it a very different framework and landscape.
Senator Dean: That’s very helpful. Thank you.
Senator Poirier: Thank you all for being here.
My question is for Mr. Stewart. I want to quote a passage from a news release your company published last January:
Hiku is focused on handcrafted cannabis production, immersive retail experiences, and building a portfolio of iconic, engaging cannabis lifestyle brands.
You also mentioned a while ago, and I saw on your website, that you talked about the product Van der Pop. It describes itself as “one of North America’s most recognized female-focused cannabis brands” with online content on your website. I also saw that it said it was designed to resemble a sleek women’s magazine. I found articles that suggested that breastfeeding while using cannabis is safe and another about how cannabis can boost your beauty routine. Another suggested that cannabis can cure a hangover.
Mr. Stewart, how does your focus of an engaging cannabis lifestyle brand fall within the purview of what is permitted in Bill C-45, specifically for the lifestyle advertising? Also, are you concerned that this adult-oriented content on the Internet could be seen by young persons?
Mr. Stewart: Thank you very much for your question. First, the press release and those passages are written and publicized outside of a legal, recreational cannabis regime, which we are here to discuss. Once we get to a point where legalization has taken place and regulations are passed, we will live by both the spirit and letter of all of those laws and policies created by the government. I think that goes without saying.
Van der Pop is a female-centric cannabis brand started by a 40-year-old mother of two who was a cannabis consumer. She felt that nothing in the cannabis industry spoke to her as a consumer. She sought an educational platform to educate other women in situations similar to hers on how to consume cannabis in a responsible way while still being a good parent. It comes out of the U.S., and there is a lot of concern in the U.S. about admitting illegal activities when it comes to child custody cases and the like. What Van der Pop seeks to produce is a safe space for women to learn a bit more about cannabis and how it can be included in their life.
Sitting here as a 40-something-year-old White male, I am not the expert on the content of the female side of the space. That would be disingenuous to me as to whether it is effective, but by every social media metric, it is a responsible way to communicate about cannabis.
To your question about whether children could see this, I suppose children could see anything from pornography to violence to extreme cases of cannabis, alcohol and cigarette consumption on the Internet. If you were to look at our website and our properties, you would see that it is not marketed to children whatsoever. It is marketed toward women in a responsible and educational platform.
Senator Poirier: Do you think it is appropriate for a licenced cannabis producer to publish content that makes unproven health claims about cannabis? Either of you can answer.
Mr. Stewart: I will be quick, because I notice the clock as well. We should put an emphasis around your question on health claims. There is a difference between health claims and effects of cannabis on the human body, as well as effects you can expect from consumption.
I don’t think any company would be supportive of making unfounded health claims. That is simply not the Canadian way. However, there is a vast body of evidence supported by numerous consumers, as well as other institutions, on the effects of different types of cannabis on the body. Whether that is as simple as what you can expect from a sativa or indica, what you can expect in terms of time of onset between edibles versus combustibles, there is a lot of information out there to talk about what to expect in terms of effects without making health claims.
One of the failures of Bill C-45 is that it will not allow us to discuss effects with potential consumers. When you couple that with plain packaging, we really have a situation where were are handcuffing our legal regime to not be able to discuss effects and not be able to show differences between brands and products. That hurts us to compete with the black market. Some discussion about effects should be allowed, stopping short of unproven health claims.
Ms. Mondin: I wanted to quickly mentioned that on the branding side of it, if we look at — and I hate making the comparisons to alcohol — but we are looking at people who will be accessing this product through regulated retail outlets. First of all, we will be stopping youth from going in. So on the concern about the branding, labelling and package, parental guardianship will be important, just like prescription drugs with them telling you where to keep it, store it and throw it away. The same should be done with cannabis.
But we enter this with such fear because of the unknowns around this product. Coming from B.C., it has been around for decades, and a lot of this fear has dissipated.
As a woman, too, when you go into the store to purchase something, you tend to gravitate toward a brand. You do so because you know that when you open, say, that bottle of wine, it will give you a consistent product each time, so you venture to that brand. How that product came to be, whether that grower cultivates his own product or knows how to get excellent product to create that brand, it doesn’t matter to the consumer. They just want consistency; they open it and know it is good.
We can have that with cannabis. We can still have branding that is not attractive to children but is still something you recognize. I like J. Lohr, and I know I can buy it and it will give me the wine that I expect each and every time. I know the brand and the consistency. The same can be said with cannabis. I do not know if having overly restrictive branding serves the purpose to stop that use, because people will be going to these retail outlets to consume. They need to know what they are getting, the compounds of that product and how it might affect them when they take it.
Again, it is more than just THC. There are terpene profiles, other cannabinoids. Growing will change. It will not stay indoors in the bunker style as it has been in the past. It has been done that way because it has been illegal. There has been a rush to cultivate a plant to the highest THC content possible, but I think as we move forward we will start looking at robust genetics, starting at the nursery level where they are now cultivating plants with a multitude of cannabinoids.
If you think about the perfume industry, you start with botanicals and you start by pulling all the different compounds, blend them together and formulate. You can reformulate for medicinal purposes or for the intoxicating effects that you want. That will be driven by that brand and what they are able to create and develop under that brand.
The Chair: Okay. Good taste in wine.
Senator Manning: Thank you to our witnesses.
Mr. Stewart, in your presentation you talked about the possibility of maybe 30 stores across Canada in short order. Could you elaborate for us on the discussions with the provinces on the set-up of the stores? Are they different in each province? Are there different regulations? In the news in my own province of Newfoundland and Labrador, today in the House of Assembly questions were raised about the proximity of stores to youth and so on. I wonder what the process is across the country. Can you give us some idea of your experience there?
Mr. Stewart: Absolutely. Thank you very much for the question.
I will start with Newfoundland and Labrador. We have chosen to make an investment in a production facility there. I think we are in an old fish processing plant, so regenerating that facility. That will allow us to have a couple of stores in Newfoundland and Labrador. We expect to have five retail storefronts in Newfoundland and Labrador at some point, as well as farm gate sales at our production facility.
Moving to Manitoba, which I would say is probably the most advanced of any of the provinces at this point, there were a number of applicants, some have said up to 200 applicants for private sector retail licences. For master licences in Manitoba, we were one of only four companies that won one of those master licences with our Tokyo Smoke storefronts. We expect to create 9 to 16 stores there. I have a positive relationship with the regulators and I will return to Winnipeg next week to further our discussion, to share our design stores, et cetera.
With Saskatchewan, the lottery is ongoing. We have submitted there as well.
In Alberta, we have applied for storefronts in the city of Calgary and are awaiting Edmonton to open up their process, which will be lottery based.
In British Columbia, they have started with their legislation as well. However, they have a prohibition on licensed producers having storefronts in British Columbia. It is up in the air as to whether or not we will operate our Tokyo Smoke storefronts in British Columbia, but we are working proactively with the regulators there.
In Ontario, we have submitted a number of SKUs of both product from a series of our brands as well as branded paraphernalia for consideration by the Ontario Cannabis Store to be retailed in their storefronts.
We will continue to operate our existing five or six coffee shops across the country as brand ambassador stores where we are able to do so without selling cannabis.
Senator Manning: Thank you.
Ms. Mondin, being from Newfoundland and Labrador, I get accused of talking fast, but your presentation was even faster, so pardon me if I make a mistake on something that you said.
We have received an incredible amount of information here over the past several months, as you can understand, from people on both sides of this issue. A great concern is the youth use. In your reply, you quote the numbers regarding that. From the point of view of overall youth use, I am wondering about the stats behind what you were telling us versus what has been told to us by others. We have heard from several people about the concern on the age limit. We are talking in the legislation of the age of 18, and there have been suggestions to raising that to 21 or 25 with respect to brain development and so on. I want to give you an opportunity to elaborate on what your knowledge of that is, because as a senator from Newfoundland and Labrador, that is one of my biggest concerns.
Ms. Mondin: If we look at the mandate for legalization, there are three main mandates. We have the public health mandate to supply a safe and tested product, to keep it out of the hand of youth and to put a dent into the black market.
By virtue of legalization, we will have a safe and tested product and make it harder for youth to access this product. Youth are always going to experiment. They are going to find an older brother, sister, cousin who will purchase product for them or they will find ways to get it. They do already with alcohol. I am not encouraging any use. The point is if they do get their hands on it, which they likely will, we’ll make it harder for them by the fact they have to get ID’d. That is a deterrent in itself. But if they do get their hands on it, at least we know they are getting it through a proper supply and it is properly tested and is a safe product.
We also know from hearing from Dr. Mark Ware that the point where the developing mind is most vulnerable is around the age of 13 or 14. It diminishes significantly thereafter. At 21, you are an adult. You can drive at 16, and you can ruin yourself financially by taking out loans, for example, that have significant impacts on people. When we hear from experts who say specifically that 18 or 19 is a good place, it is in line with alcohol and other products, and it is in line with what they are allowed to do at that age like taking out loans, getting financing, getting married, having children, accessing product. There are so many things.
I think back to when I was a youth. Especially being in university for so long, everything is around drinking. You want to go out and enjoy yourself and you have a drink. If there were options to me as a young person, even at age 18 or 19, where I could access a cannabis drink that is not alcohol-based, I would have probably preferred that than drinking. I think it will change a lot of people’s lives in university. You don’t make stupid decisions when you are on cannabis the way you might with alcohol.
The evidence we have, that our researchers found, is that it does have little to no impact on overall youth use. They will experiment, but by virtue of carding and providing ID, that will significantly reduce their access upfront.
The Chair: We are running out of time. I have time for some quick responses, and then we will close the meeting.
Mr. Stewart: I think an age of 18 or 19 in line with alcohol ages is the right approach for this bill. I understand there is medical evidence that suggests something else. I am not a doctor. However, having spent a lot of time in public affairs and politics in my life, I was often forced with making that choice. As public policy-makers, you should seek to make a choice that reflects reality and just doesn’t come down on one side of one medical report or another medical report. Aligning it with alcohol, voting, armed service is the right place for it to be.
Mr. Green: I would like to make a comment to the question that was asked earlier about industrial hemp, and if we are restricted on outdoor cultivation. We currently are not, and under Bill C-45 we won’t be, but we are restricted on whole plant utilization, to gather all of the leaf and whole plant materials. We would ask there is some type of mechanism that would allow us to get those materials into the ACMPR. We are restricted for the whole plant use. I wanted to emphasize that.
Ms. Mondin: Just as a quick addition to my comment, looking at the paper here, approximately 2 per cent of the youth population who use cannabis do so in ways that may be described as problematic. That is 2 per cent. That is what is found by our researchers. Again, we have to be very careful to not make policy to just affect the outliers. We have to look at everyone else, of course, and not just at that 2 per cent issue in a vacuum.
The Chair: With that, I thank all four of you. You have been quite helpful to us. I appreciate your being here.
Committee members, we will adjourn now, but we are back at 10:30 tomorrow morning.
(The committee adjourned.)