Solicitor General Mike Farnworth and Vancouver Coun. Kerry Jang speak to reporters at UBCM conference, following session on regulating recreational marijuana.





Will Vancouver nightclub owners be able to develop marijuana smoking lounges, once recreational cannabis use is legalized next year?

Will cornfields and greenhouses that now grow tomatoes give way to marijuana crops on Agricultural Reserve Land (ALR) in Delta?

Should pot be sold through private pot shops, or only through government run liquor stores?

Should strata councils be allowed to forbid owners from smoking pot in their own condos?

These are some of the questions the new NDP government and municipal governments need to answer by July 2018, which is when bills C-45 and 46, federal legislation legalizing recreational marijuana use, go into effect.

In attempt to get public consensus on those and other questions before enacting new provincial laws, the new NDP government is asking for public input.

A new consultation campaign was announced Monday September 25 at a Union of BC Municipalities (UBCM) annual conference session on legalized cannabis.

“Collaboration is key to getting it right here in British Columbia,” Mike Farnworth, B.C.’s solicitor general and minister of public safety, told UBCM delegates during a morning session on legalized cannabis.

What may work for Vancouver when it comes to regulating a nascent cannabis industry might not work for other municipalities, he said.

Indeed, whereas Vancouver’s biggest issue right now is trying to regulate a profusion of illegal pot shops, in Delta – a farming community with a substantial amount of land in the ALR – one of the biggest concerns is that farmland currently used for growing food will end up being used for growing pot.

“”I really don’t want to be the pot capital of Canada,” said Delta Mayor Lois Jackson.

She said 35 companies have already made inquiries with the city about growing marijuana on ALR land in Delta. That’s not surprising, given that ALR land is taxed at a much lower rate than industrial land.

“I think we’re going to have to address the question: ‘Are we going to allow, or should we allow, all of our agricultural lands to be used for growing of marijuana – and our greenhouses – or are going to grow our own vegetables?” Jackson said.

Sukhbir Manhas, a lawyer with Young Anderson, said the provincial government has addressed that question with respect to medical marijuana: Municipalities cannot prevent medical marijuana growers from setting up on ALR land. Whether that ruling will apply to marijuana grown for recreational use is unclear.

“Certainly, if we want to have some teeth vis-à-vis ALR land, we’re going to have to see that regulation amended,” Manhas said.

While the legalization of marijuana for recreational purposes is a federal law – one that takes effect in July 2018 – all three levels of government in Canada will have a role to play in regulating a new industry that Deloitte last year estimated to be worth $22 billion.

Whereas the federal government is responsible for regulating marijuana production, provincial governments will be responsible for distribution and retail, and municipal governments are responsible for zoning and business bylaws.

So far, the new NDP government has not decided whether marijuana will be sold through private specialized pot shops, or government regulated liquor stores, which are just two of many options.

Asked if he thought Vancouver might see nightclubs creating marijuana smoking lounges, or specialty smoking clubs opening, Vancouver City Coun. Kerry Jang said: “I do envision that being a possibility. It sort of reminds me of craft beer. It wasn’t long ago when it was a government monopoly on beer, and craft beer is legal. Now we see a huge market for craft beer.

“We see responsible usage, we see breweries, we see brew pubs that didn’t exist before. Why not with marijuana?”

While the opportunities for new marijuana-related businesses are significant, it can create serious headaches for the governments responsible for regulating the new industry.

The legalization of medical marijuana created an illegal industry almost overnight in Vancouver, where more than 100 medical marijuana shops popped up – in violation of federal laws, which restricts the distribution of medical marijuana to the post office.

Using its zoning and business bylaws authority, the City of Vancouver has tried to regulate these illegal shops. The more compliant businesses – about a dozen – have been licensed and adhere to city regulations.

But about 57 have flouted the regulations and the city has tried to take them to court for violating its zoning and business bylaws – something the courts seem in no hurry to deal with.

Jang said the city has filed injunctions against 57 medical marijuana dispensaries.

“Some have been filed for about a year,” he said. “Some, by the time they get heard, it will be two years. We can’t tell the courts what to do.”

Municipal governments have expressed the concern that, although they will share the burden for things like any additional policing costs, they have had little input on the new federal law.

They also want to ensure that they receive some of the new taxation revenue that would come from a new regulated industry.

It’s on that score – taxation – where the NDP has been out in front of the Liberals. While the previous Liberal government dithered over questions about distribution and taxation, Farnworth and Carole James, now finance minister, travelled to Washington and Oregon last year to see how legalization worked there.

Farnworth said it was clear from those visits that governments that set tax levels too high on marijuana find that it does nothing to squelch the existing black market.

In fact, Farnworth expects there will be some fairly significant upfront costs to the provincial government in the infancy stages of a legal recreational marijuana industry.

“This is not about bringing on a whole revenue stream for the province,” Farnworth said. “If that’s how provinces approach it, they are making a big mistake.

“Yes, revenue will flow and you may get significant amounts of revenue. But the reality is that there are significant up-front costs that you have to put in place before you flip the switch.”

Farnworth also thinks it would be a mistake for provinces to set widely varying tax regimes.

“I would like to see, right across this country… a uniform tax rate so that you don’t have one province competing against another.”

nbennett@biv.com