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By the end of the year, Canadians may be able to enjoy a cold beer with no alcohol, but with the buzz and quick feedback of a joint.

But if strict proposed federal rules take effect, you may be able to drink something that is made from barley and brewed in a brewery, but it can’t be called “beer” on the label or in any other context.

It’s a problem that puzzles Terry Donnelly, CEO of Hill Street, a maker of de-alcoholized wine and beer which wants to start making THC beverages.

“If I can’t call it beer, what do I call it? Do I say this is a ‘cannabis-infused liquid of fermented cereal grains’? What else am I going to call it? Tweet This

Donnelly would like to sell wine and beer with no alcohol, but with a small amount of THC added.

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Several other companies, including Hamilton-based craft brewer Collective Arts and Smiths Falls, Ont. licenced producer Canopy Growth, have said they are interested in making THC beverages.

In Hill Street’s plan, the THC would be water-soluble — unlike the fat-soluble THC found in edibles, which can take hours to kick in.

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“Nobody wants to drink a beer and have it take two hours to affect you and have it last for eight hours. That’s a very big commitment to a beer.” Tweet This

The THC that would be used comes as a powder. Since the amount needed is so tiny, the size of half a grain of sugar, “it has zero impact on the aroma and taste, so our Chardonnay tastes like a Chardonnay,” Donnelly says. He claims that the company’s experiments show that it stays evenly distributed in a bottle, even if it’s stored for some time.

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Cannabis beverages, like edibles, weren’t allowed immediately when pot was legalized last year; the federal government has promised to publish rules by this coming October. Draft rules made public in December make it clear that Canada is likely to see a much stricter system than U.S. states like Colorado, where confusingly packaged edibles have caused overdoses.

Under the draft rules, cannabis beverages must not be appealing to children, have “elements that would associate the product with alcoholic beverages or brands of alcohol,” or have more than 10 mg of THC per container. They must have child-resistant, plain packaging — and be made on production lines completely separated from any other food or drink product.

“If there’s one kind of fundamental thing that I think they might move on, I think that’s one,” says Ottawa-based cannabis lawyer Trina Fraser. Tweet This

“I still think there’s hope that the government may change its position a little bit on that issue, and move to a high degree of regulation to ensure that there’s no cross-contamination as opposed to just outright prohibiting it.”

Donnelly sees this as the biggest problem with the rules taking shape.

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“Our facility currently handles allergens that can kill people, without any issues.”

“We’ll have to build a whole new plant, so it will at least double our cost of goods. If it doubles the cost of goods, we have to double the price.”

It creates an uneven playing field in relation to well-funded companies like Canopy Growth, he argues.

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“These regulations pose a massive barrier for us to be able to compete. I don’t think it’s fair.”

Canopy Growth CEO Bruce Linton says the proposed rules are reasonable:

“These are not ingredients that should be in other areas. You wouldn’t expect it if the other areas didn’t exist, and you weren’t pissed off about losing access to using your capital for a higher yield. Quit making the other stuff.”

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Big companies do have some natural advantages, he argues.

“There are economies of scale, I think, in everything. If you think about the market share that goes to the giant guys, it’s very allocated to them. Beverage alcohol is the same thing.”

Fraser agrees the rules are very restrictive, but sees them as a reaction to the U.S. experience.

“Is it overly paternalistic? Probably. But it’s not surprising, when you think back to the first principles of what the government’s objectives are with legalization.” Tweet This

“As with everything surrounding legalization, the government’s approach is that it’s better to start extremely restrictive and loosen the regulations over time than it is to under-regulate and try to backtrack later.”

In the meantime, Donnelly is stuck with the puzzling issue of what to print on the labels, given that the draft rules say that “it would be prohibited to use terms related to alcoholic beverages.” For example: can a THC-infused wine made with Chardonnay grapes use the word “Chardonnay?”

“It says ‘alcohol-related terms.’ I don’t have any idea what that means. Does it include ‘winery’ or brewery’? We run a brewery, we run a winery. We put Chardonnay grapes into our wine. I don’t even know the extent these stipulations go.”

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For Linton, who calls THC-infused beer “hop water with THC,” only beer and wine with alcohol are beer and wine.

“Beer is beer. Wine is wine. When you don’t have alcohol in it, it might be grape juice. I think it’s important not to call things people understand to be something else.”

The proposed rules are far stricter than those applied to alcohol, Donnelly points out.

“Alcohol is a far more deadly product. You’re looking at about 15,000 deaths a year in Canada from alcohol, and none from cannabis.” Tweet This

But Fraser chalks up the inconsistency to the process of getting used to a new product:

“There’s definitely a hypocrisy about how we treat alcohol and cannabis. There’s no question. But alcohol has been legal since Prohibition, for almost a century, and cannabis is brand new to the legal realm.”