Daniel Chitiz and Alastair McNish: Is Large Scale Marijuana Farming on the Horizon?

September 1, 2016

Expanded Marijuana Farming Still Only One of Many Possibilities under Future Regulation

 

The legalization andregulation of marijuana for recreational use has been in the news since the 2015 federal election.  Since that time, there have been very few clues about what future regulation might look like.  Under the existing Marihuana for Medical Purposes Regulations(“MMPR”), only producers licensed by the federal Minister of Health are permitted to legally grow marijuana, for sale to individuals who have a medical prescription to use it.  For farmers waiting to expandinto a new andpotentially profitable market, the only fair advice to offer at this stage would be: keep waiting.  Marijuana farming may one day resemble existing, heavily-regulated but viable agriculture sectors like tobacco andhemp farming, but that day is not near, andmay not arrive at all.

 

In late April, Canada’s health minister announced that the government would introduce legislation to legalize andregulate recreational marijuana in the spring of 2017.  This announcement followed a federal court ruling in February (Allard et al. v. Canada) that the MMPR was unconstitutional, a decision which the federal government chose not to appeal.   To comply with the Allard ruling, Health Canada has just introduced the Access to Cannabis for Medical Purposes Regulations (ACMPR) to replace the MMPR, to permit limited home grown marijuana production for personal use, with the new regulations coming into effect on August 24, 2016.  The government has not yet signaled how it would regulate commercial-scale marijuana production when the recreational marijuana regulations are introduced.

 

From 2001 to 2013, medical marijuana production was regulated by the Medical Marihuana Access Regulations(MMAR).  There were few rules about where or how marijuana could be grown.  If grown outdoors, the MMAR simply required that the crop could not be adjacent to a school, playground, day care facility or other public place frequented by people under the age of 18.  However, the MMAR did not contemplate large-scale production.  A production licence only permitted a licence holder to grow enough marijuana for two individuals with “Authorization to Possess” permits, andonly four production licenses could be issued for the same site.

 

In contrast, the MMPR, which came into force in April 2014, sets very strict rules for production: all cultivation must take place indoors in a secure, restricted access facility (this does allow for greenhouse production).  Producers must comply with stringent security requirements, such as maintaining security cameras around the perimeter of the facility and areas within the site where cannabis is present, intrusion detection systems, and record-keeping systems to identify every person entering or exiting the facility.  Given the rigorous application process and the high cost of setting up compliant production facilities, it is not surprising that, across Canada, there are only 34 “Licenced Producers” (LPs) currently permitted to grow marijuana legally.  Presumably, those LPs would prefer regulations that keep the barriers to entry into this segment high.  As for those on the outside, including farmers looking for alternative profitable crops, the more lightly regulated the better.

 

The Allard case offers some insight into the government’s primary concerns about marijuana production: safety in cultivation (mould and fire risk applying specifically to indoor production), diversion onto the black market, community impacts, and the ability to control the quality and consistency of the product.   While it is difficult to speculate about the specifics of new marijuana production regulations, some aspects of the MMPR and existing regulations for the cultivation of cannabis sativa for industrial hemp likely offer some guidance.

 

Under the Industrial Hemp Regulations, the federal government permits the production of certain strains of cannabis, provided the plants contain less than 0.3% THC (the active compound in marijuana).  Hemp farmers must apply for a production licence to the federal Ministry of Health, setting out the number of hectares to be cultivated and providing GPS coordinates of exactly where the crop will be planted, among other things.  Further, hemp growers must have samples tested at a laboratory to ensure that the crop contains less than the maximum THC concentration allowed.

 

If recreational marijuana production is to be expanded at all, it is a near certainty that the regulations will be at least as rigorous as the licensing and testing regime for industrial hemp.  Depending on how much emphasis the federal government places on reducing the risk of diversion, the more rigorous security requirements under the MMPR may also be applied – which could rule out outdoor cultivation entirely.  At this stage, farmers eager to break into this sector have no choice but to wait for the green haze of uncertainty to clear, and keep their expectations low.

 

* A version of this article was featured in the Tuesday. August 20, 2016 edition of Ontario Farmer. 

Alastair McNish, Daniel Chitiz, Expertise, Litigation, Litigation News