RE: Response to The Standing Committee on Health s Consultation on Bill C-45

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1 Jason Kujath Northland Place, 3rd Floor Street SW Calgary, AB T2P 4Z2 jay@51st.ca D Standing Committee on Health Sixth Floor, 131 Queen Street House of Commons Ottawa, ON, K1A 0A6 cc: Clerk of the Committee To Whom It May Concern RE: Response to The Standing Committee on Health s Consultation on Bill C-45 I. INTRODUCTION As you are aware, on April 13, 2017, the federal government put before Parliament the Cannabis Act ( Bill C- 45 ) 1 to legalize cannabis for adult recreational sale and use across Canada. It is widely expected that Bill C-45 will receive royal assent and be enacted on July 1, The current medical cannabis regime is governed by the Access to Cannabis for Medical Purposes Regulations (the ACMPR ) and has become the gold-standard of the regulation of medical cannabis legislation. Thank you for providing the opportunity to provide our input regarding Bill C-45. We have requested an invite to appear as a witness before the Standing Committee on Health. It would be an honour to expand on the commentary and research discussed throughout this submission. II. RECOMMENDATIONS Respectfully, we submit that when drafting the Cannabis Act, based on the best practices of other jurisdictions where recreational cannabis is legal for adult-use, Parliament (and Health Canada) should consider the following recommendations to accomplish the federal government s public health objectives: 3 Regulatory Framework Parliament used specific language throughout in the Cannabis Act 4 with a view to regulate cannabis advertising in a similar manner as the regulated promotion of tobacco. The language used throughout the Cannabis Act mirrors the text of the Tobacco Act and should be interpreted consistently with that jurisprudence. 5 (See Canada v. JTI-Macdonald Corp, [2007] 2 SCR 610) 1 An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts, Bill C-45, dated April 13, 2017 (first reading) ( Bill C-45 or the Cannabis Act ). 2 See Liberals to announce marijuana will be legal by July 1, 2018, David Cochrane (CBC News, 26th March 2017). Retrieved from 3 The federal government s primary objectives of the Cannabis Act are to prevent young persons from accessing cannabis, to protect public health and public safety by establishing strict product safety and product quality requirements and to deter criminal activity by imposing serious criminal penalties for those operating outside the legal framework. 4 The only approach to statutory interpretation is that the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. 5 The prohibitive provisions on advertising were clearly drafted with an eye to the Supreme Court of Canada s decision in Canada (Attorney General) v. JTI-Macdonald Corp. [2007] 2 SCR 610 whereby it was held that the prohibition of any brand element that evoked a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring should be interpreted in a way that leaves room for true information and brand preference advertising.

2 The design of the regulatory framework should consider the diversity of each province s selected distribution channel and focus on mandating the monitoring/collecting of a broad cross section of cannabis sales and health related data/information across inter-provincial boundaries. The design of the regulatory framework should recognize the broad administrative burden placed on licensed producers ( LPs ) by the ACMPR to track cannabis products from seed-to-sale. Parliament should ensure that provincial distribution and retail models recognize that the LPs have been designed to track cannabis products from seed-to-sale. The ACMPR should remain in place to govern the licensing and production of commercial-scale cannabis production facilities for both the medical and recreational markets. 6 To maintain a secure chain of custody and eliminate the criminal element from the current supply chain, the same or similar security clearance requirements as those contained within subdivision H of the ACMPR should be maintained. Other barriers to entry, however, should be lessened, such as security requirements mandated by Subdivision C of the ACMPR. Parliament must provide Health Canada with a mandate to accelerate the licensing process, allow for a range of cannabis products, and capitalize on its first mover advantage to create jobs (e.g. - In Colorado, over 16,000+ full-time jobs have been created). Parliament must drastically increase the production capacity for the recreational and medical markets to ensure all Canadians will have access to safe, high-quality and legal cannabis. Best Practices from Other Jurisdictions Most of the US states that have legalized cannabis are using US alcohol policies as a model for regulating retail cannabis, which prioritizes business interests over public health. The history of major multinational corporations using aggressive marketing strategies to increase and sustain tobacco and alcohol use illustrates the risks of corporate domination of a legalized cannabis market. Taxation & Collection: The design of the tax regime applied to cannabis should ensure that there is sufficient tax revenue collected to provide adequate enforcement, effective education and a prevention program to protect youth from the harmful effects of cannabis e.g., Colorado has earmarked the first $40 million collected for the financing and construction of new schools. 7 The tax rate applied to cannabis should not be hinder industry participants and tax revenue should be earmarked for public benefit - i.e. health policy/mental health initiatives or funding of schools etc. 8 Public Health. Canada should invest proactively in a collaborative public health approach that prioritizes investment in a continuum of evidence-informed prevention and treatment services to prevent and respond to problematic use of opioids. The strict regulation of legalized cannabis through testing product, tracking sales and targeting the reduction in its use by youth. Like alcohol, the effectiveness of age restrictions will depend on compliance of those who sell cannabis. 9 Retail operators must be educated on the detrimental health effects of cannabis. 6 The Report on the Legalization of Cannabis by Federal Task Force (the Task Force Report ) recommended that the ACMPR remain in place to govern the licensing of production facilities. 7 See Blake et al, infra, note 11 at Note that total sales and excise taxes since from July 2014 through April 2016: $481.7 million. See Washington State Department of Social and Health Services, Lessons Learned from Marijuana Legalization in Washington State, dated July 2, 2017 ( Social and Health Services Report ). 9 A 2012 study interviewed 106 Dutch managers of facilities where alcohol is sold and found that the primary reason for complying with age restrictions was intrinsic support, meaning the seller supports the age restriction due to concerns about physical and mental health of minors, alcohol abuse and nuisance. See Gosselt, J, Van Hoof, J, De Jong, M. (2012). Why should I comply? Sellers accounts for

3 Provincial education initiatives should provide support for health and physical education curriculums, embedding key evidence-based messages about risky use, especially for youth. Parliament must prohibit the co-location of sales of cannabis, alcohol and tobacco products. Data collection efforts of the enforcement and administrative agencies overseeing legal cannabis in Canada (Health Canada, CFIA, etc.) must be founded in the goal to understand and minimize the possible negative public health impacts of recreational and medical cannabis products. Alcohol and tobacco use patterns are important to consider in monitoring cannabis -related public health data. Changing patterns of cannabis use may lead to substitution for other substance use (e.g., using cannabis rather than binge-drinking alcohol), or combining with other substances to increase their use (e.g., smoking cannabis with tobacco). Energy Conservation. Federally mandated standards should be implemented to conserve resources through the efficient use or best use of electricity, water, and waste management. Parliament should legislate that federal incentives programs be extended to the cannabis industry to incentivize efficient operations. III. PARLIAMENT MUST INCLUDE THE LONG-TERM SUCCESS OF THE CANADIAN CANNABIS INDUSTRY IN ITS POLICY CONSIDERATIONS Cannabis is a widely used substance in Canada and legalization is likely to result in a supply shortfall, just as it has in Colorado, Washington State, and Nevada. 10 Thus, Canada should support the industry s rapid growth to ensure that the federal government s public health focused objectives are accomplished. The primary distinction in the legislative process in the States where cannabis is legal and the legislative process in Canada is that, in the US, the product being legalized remained illegal at the federal level. 11 Health Canada has Failed to Acknowledge the Supply Shortages of the Medical Market. In Canada v Allard, 12 the Supreme Court recognized the strain limitations of LPs. Consumer feedback has since been clear that the capacity constraints continue to inadequately serve the medical market due to the numerous cannabis strains required. To satisfy Parliament s objectives, the Cannabis Act and the ACMPR must provide a solution to speed up the licensing process to increase supply. The Canadian Market is Estimated at $9 billion. The legalization of cannabis provides Canada with an unparalleled opportunity to create jobs, substantially expand its tax base, and be a first mover in a global industry estimated in size at $109 billion. In Canada, cannabis is estimated to be a $9 billion industry that is emerging out of the shadows into the sunlight of commercial agriculture. 13 The industry is ripe to adapt commercial agricultural practices and recognize efficiencies previously limited by its criminalization. The Canadian Cannabis Industry Could Immediately Create up to 100,000 New Full-Time Jobs 14 with wages significantly above the agricultural industry average. 15 Estimates indicate that Canada could create noncompliance with legal age limits for alcohol sales. Substance Abuse Treatment, Prevention, and Policy. Vol 7, Issue 5. Retrieved from: % of Canadians self-report using cannabis within the last 12 months and 33.7% report lifetime use. 65% of Canadians support legalization of cannabis with support being the highest in British Columbia and lowest in Quebec. Upon legalization, it is expected that an additional 17% of Canadians (~2.3 million people) will consume cannabis. 10 This statistic indicates that there will be an immediate 1,271% increase in the number of Canadian users by the end of See Blake and Finlaw, Marijuana Legalization in Colorado: Learned Lessons (Harvard Law & Policy Review:2014) ( Blake et al ) at 365. Retrieved from FC 236 ( Allard ) at paras. 15 and See Deloitte LLP, Recreational Marijuana Insights and opportunities, ( Deloitte Report ) Retrieved from 14 See The Cannabis Market in Canada and British Columbia, author unknown, 2016 ( Cannabis Market in Canada ). Retrieved from 15 This estimate is derived through the number of individuals that have been licensed to work in the cannabis industry by the State of Colorado. This number has then been pro-rated relative to Canada s population of 36.3 million. See Cannabis Market in Canada,

4 over 100,000 new jobs with wages paid that may exceed $1 billion. 16 In Colorado alone, the cannabis industry is estimated to employ approximately 16,000 individuals. 17 Cannabis legalization presents Canada with the opportunity to strategically and opportunely apply its agricultural excellence through research and commercialization of cannabis to solidify its first-mover advantage. The failure to capitalize on this opportunity would come as Canada is looking to create jobs, 18 diversify the Canadian economy and, most importantly, promote public health objectives. IV. OTHER JURISDICTIONS EXPERIENCES There are public health implications associated with cannabis use. 19 Considering these potential harms, Parliament must put health considerations at the forefront and adopt a public health approach to mitigate the harms associated with cannabis use. Industry participants should contribute through the additional tax base to a spectrum of public health initiatives and strategies that will minimize these harms. The Colorado, Washington and Oregon markets have developed regulations built on the best practices of the previous jurisdiction to legalize and regulate. By considering the best practices of each jurisdiction, Canada will create a legislative framework that will be effective in accomplishing the federal government s public health objectives as well as provide a financial public benefit to fund public initiatives. COLORADO. 20 The greatest success of Colorado s legalization process is the efficient and fair tax regime placed on the sale of cannabis through the application of a sales and excise tax. Sales & Excise Tax Revenues. Colorado s tax regime was designed to guarantee the financial resources for a robust regulatory and enforcement regime, for an effective education and prevention program to protect youth from the harmful effects of cannabis, and for the health and public safety costs associated with the retail cannabis industry. A broad overview of the Colorado cannabis tax regime is as follows: a 15% State excise tax on the sale price of retail cannabis when the product is first sold or transferred by a retail cannabis cultivation facility, with public school construction receiving the first $40,000,000 of any tax revenues collected annually; a 10% percent State sales tax on retail cannabis products, in addition to the existing 2.9% general State sales tax, to increase funding for the regulation and enforcement of the retail industry and to fund related health, education, prevention, & public safety costs; 15% of the revenue collected from the 10% State sales tax is directed to cities and counties where retail cannabis sales occur; and, the State legislature may increase or decrease the excise and sales taxes on retail cannabis so long as the rate of either tax does not exceed fifteen percent See Cannabis Market in Canada, supra, note 14. See also Tantalus Labs, Into the Light, Note that the $1 billion estimate is the pro rata estimate of the $232.5 million estimate found in the following two papers. 17 See Cannabis Market in Canada, supra, note 14. The Colorado market is estimated to be a similar size to Alberta s market due to the similarly sized populations and demographics of the markets. Colorado has a population of million (2016). Alberta has a population of million (2014). Each 10,000 square feet of production is expected to initially produce 40 to 60 jobs wit, all of which are in an industry that will raise pay above average wages to its employees. See also Tantalus Labs, Into the Light, 2017 at pg Each facility is expected to initially produce 40 to 60 jobs with expansion plans that would raise this number closer to 150 newly created jobs in a subsector of an industry that will raise pay above average wages to its employees. 19 See Ontario Public Health Association Position Paper, The Public Health Implications of the Legalization of Recreational Cannabis, Retrieved from Legalization-of-Recreational-Cannabis.pdf.aspx?ext=.pdf 20 As of January 1, 2014, adult residents of Colorado can possess, use, purchase, and transport up to one ounce or less of cannabis, and possess and grow up to six cannabis plants in their home On January 1, 2014, the laws regulating recreational sale of adult-use cannabis came into force. 21 See Blake et al, supra, note 11 at 373.

5 WASHINGTON STATE. The Washington State regime has failed to wipe out the black-market due to its high tax, 22 strict advertising restrictions, and three-tiered system. It also has failed to regulate edibles from being attractively marketed to children with a proliferation of products available. Lessons learned from legalization in Washington State highlight the need for regulation of products as well as research regarding driving under the influence of cannabis. In Washington State, it is illegal to drive with 5 ng/ml of THC or more in your blood if you are 21 or older. This threshold has not been properly researched but we recommend that a similar threshold be put in place while the commercialization of a proper test is developed. OREGON. The focus of Oregon s efforts was on developing environmental-related best practices where it put many resources towards developing standards to minimize energy and water use throughout the cannabis industry. The legislature encouraged efficient use of water and electricity by encouraging the State to back the following initiatives: Education and technical assistance to help producers utilize best practices and access existing incentive programs - e.g., the state has placed an increased emphasis on water conservation; Development of a voluntary certification; and Research concerning environmental best practices and other issues related to cannabis including health effects, safety issues, and the properties of specific varieties to help the industry move forward in a safe and productive manner. 23 V. 51ST PARALLEL LIFE SCIENCES LTD. Thank you for the opportunity to provide input to the Standing Committee on Health s public consultation. 51 st Parallel is a late-stage pre-production applicant to become a licensed producer in Canada under the ACMPR. My background is as a tax lawyer having practiced at the Calgary office of Dentons, a large global law firm. I have published policy-based research in the Canadian Tax Journal and numerous other publications. We have requested an invite to appear as a witness before the Standing Committee on Health. It would be an honour to expand on the above evidence-based research. If you have any questions, please do not hesitate to contact me at the information provided above. Sincerely, 51ST PARALLEL LIFE SCIENCES LTD. Jason Kujath, BCom, JD, LLM (Tax) President, Director 22 See Social and Health Services Report, supra, note See Dressler & Remley, Cannabis: Good Ag Practices, (Oregon Farm Bureau Federation:2016). Retrieved from