Pubdate: Thu, 20 Oct 2016
Source: National Post (Canada)
Copyright: 2016 Canwest Publishing Inc.
Contact: http://drugsense.org/url/wEtbT4yU
Website: http://www.nationalpost.com/
Details: http://www.mapinc.org/media/286
Series: O Cannabis: Part Five of Six
Series: http://news.nationalpost.com/features/o-cannabis
Author: Nick Eagland
Pages: A4-A5

GROWING OPPORTUNITIES

In the shadows of these snow-capped B.C. mountains, small growers are 
running a billion-dollar industry

Hidden in the shadows of snow-capped mountains, scattered along the
grassy banks of glassy rivers, a billion dollar black market quietly
keeps Canadians stoned.

Since the early 1970s, southeast B.C.'s Kootenay Rockies region has
been a key player in the nation's cannabis industry.

Some 150,000 people live here, many of them farmers who have set aside
patches of land and corners of chicken coops to cultivate small crops
of lush indicts and sativas - the infamous B.C. Bud. Police and
industry insiders believe each year, thousands of them contribute to
this aromatic cash crop worth an estimated $2 billion to $7 billion
province-wide.

"Phil," a medium-to-large-scale cannabis producer, invited Postmedia
News to visit his facility in the Kootenays on the condition his
identity and location would be carefully protected.

On a sunny morning in June, a short cruise down a potholed driveway
brought this reporter and a videographer into Phil's mysterious world
- - a hulking production facility nestled in the woods, hidden from the
eyes of law enforcement and thieves.

Phil stands outside in a black T-shirt, a warm smile on his slender
face. His dog slinks into the facility while we unload gear from the
rental car.

Phil is kind, but cautious. He gently reminds us about the agreement
to protect his identity, made for the sake of his wife and children,
his employees, his crop and his industry colleagues. Despite his
concerns of "prosecution and persecution," Phil wanted to speak about
widespread fears that legalization will destroy his industry. He
brings us inside. The facility has rooms for mothering and trimming,
propagation, growing and budding.

In the trimming room, Phil's dog lazes in the shade. Across the room,
dozens of potted cannabis plants grow shoulder high. Motorized lights
slide back and forth. Fans hum.

In 2011, Phil began to acquire Designated Person Production Licences
under Canada's now defunct Marihuana Medical Access Regulations
(MMAR), which continue to allow him to grow 294 cannabis plants. From
these, he is permitted to legally supply 60 grams of dried cannabis
each day to a trio of patients he met through a trade
organization.

Sometimes, producers like Phil grow more than their patients buy. They
are required to destroy the excess, but don't. It winds up in
dispensaries across the country.

The federal government maintains the only legal commercial sources are
the 35 Licensed Producers (LPs) licensed by Health Canada, which
operate with licences issued by Health Canada under the Access to
Cannabis for Medical Purposes Regulations (ACMPR). Illegally-supplied
dispensaries and compassion clubs are not authorized to sell cannabis
for any reason.

Phil sells some of his crop to a trio of dispensaries. He wouldn't
divulge details, but said many producers do this because growing for
sick patients on tight budgets can end up costing producers faced with
the cost of building facilities, buying supplies and paying wages.

They fear such cosy arrangements will fall apart if LPs seek to have
their black-market competitors shuttered.

Sgt. Mike Wicentowich of the RCMP's provincial general investigation
section has been involved with enforcement at hundreds of cannabis
facilities in the Kootenays since 2000.

"If you're growing it illegally, we still treat it like a crime -
that's the directive," he said. "But the legal ones, it's actually
refreshing. We've taken a lot of work off our plates as police so we
can focus on other things, and we're focusing on the harder drugs,
which I do believe are way more destructive."

With cannabis, he said, police are primarily concerned about organized
criminals, the proximity to schools and residential neighbourhoods and
the violence that can occur when valuable crops are stolen.

Kootenay police are aware of the flow of cannabis from mostly
mom-and-pop producers to dispensaries. As long as a dispensary is a
"well-run place that is respectable, that is open to the police, that
allows inspection, that doesn't sell to kids, that monitors and
regulates," officers won't be in a rush to shut it down, he said.

"The fact that we have these things is going to pull it out of the
darkness, bring it into the light, make people feel safe and probably
reduce any kinds of violent crimes or robberies associated with
marijuana trafficking."

Det. Const. Nathaniel Holt of the Nelson Police Department said most
complaints about cannabis producers come from neighbours irked by the
smell.

Holt's first call is to Health Canada to confirm the producer has a
licence. If the producer has that paperwork, police aren't authorized
to stop them. The vast majority cause no problems, Holt said.

"Really, a lot of these people don't want to be known. They're running
a legitimate business that there is inherent risk involved in and they
don't want to attract attention to themselves."

Phil said in his five years as a grower, he's never rubbed elbows with
organized criminals. He believes they have turned to more lucrative
drugs, such as fentanyl and amphetamines.

"Most gangs aren't actually interested in growing marijuana because it
is very costly, it takes a long time to produce, it is risky."

In Phil's facility, a trio of trimmers - two women in their 40s and a
man in his 20s - sit around a long table piled with clear Tupperware
bins labelled with the names of his proprietary strains. They wear
blue nitrile gloves and use scissors - lubricated with organic olive
oil - to snip leaves from pungent buds the size of hot dog buns.

Employees are cherished for their discretion. If a thief were to get
wind of a producer's grow cycle, it would put the crop at great risk.
Trust is key.

Phil has three regular employees, with at least a dozen on call for
trimming days. They earn $20 to $30 an hour, based on experience.

He believes more than half of Kootenays residents are connected to the
cannabis industry, while most others are tied to service, logging,
mining and manufacturing.

They're part of a tightly knit community that helps members through
hard times caused by insects, heat or humidity. Many depend on the
cannabis industry to fund other business ventures and top up meagre
wages.

"A lot of them are very quiet about it," Phil said. "They don't want
to make a lot of noise about it, but it's what puts winter tires on
their car, pays their property tax, helps them through the winter and
fills their freezers with food."

Nelson-Creston MLA Michelle Mungall doesn't deny the role cannabis
plays in her riding.

"The type of industry that's grown under the black market is very much
a craft industry, so if we lose that craft industry, the big question
for us is, ' What will be the outcome on our local economy?' Everyone
predicts that it will be negative."

Mungall draws similarities between the cannabis and brewing
industries, with room and demand for large-scale brewers such as
Molson, but space for smaller local brewers and micro-brewers.

"All of these (brewers) have a particular market and are doing quite
well. They generate revenue for government, they generate jobs, they
contribute to a local economy and there should be no reason why
marijuana is treated any differently."

We step outside Phil's facility and go back in through another door
that brings us into a small storage room.

Here, he's posted his three MMAR licences, the patients' identities
blacked out by electrical tape.

He slips on an LED headlamp and opens a second door, taking us into a
pitch-black space where a row of plants is in a dark cycle to trigger
budding. We stumble to yet another door, which Phil swings open to
blinding white light.

We step into a white-panelled room the size of a two-car garage.
Inside, a complex network of hoses and pipes feeds nutrients and water
to dozens of plants - some two metres tall - basking in the warm glow
of lights with parabolic reflectors.

Typically, he has six or seven strains growing, but today there are
13, four of which are high-CBD, one predominately sativa, more hybrids
and a couple of indicas - Nuken and Blue Cheese. He tenderly sniffs a
bud the size of a Twinkie.

"It's important for small-scale growers to be a part of the system
because we offer much more diversity than bigger companies and
corporations," Phil said. "We're always changing with the needs of the
public and what the patients need."

In Nelson, Alison VanNest, Chander Nath and Lita Moth run the Kootenay
Compassion Collective. Inside are cosy rooms with massage tables and a
place where patients can relax on couches.

Nath explained all their products are sourced locally, like a 100-Mile
Diet of cannabis. They work with small growers to bring in strains
requested by patients and fine-tune their stock to address particular
ailments and needs.

"The level of integrity of growing is higher, people are personally
involved and there's a personal connection," Moth said of the small
growers they work with.

The trio was in consensus that there's fear about how the federal
system will play out for the producers who supply them. Moth said the
industry plays a vital role in the generation of revenue in the
community and the provision of well-paying jobs with flexible hours.

"You'll see a lot of moms involved in the propagation and harvesting
of cannabis," Moth said. "These dollars that are generated go right
back into the economy."

Chris Campbell, owner of the Nelson Potorium, counts herself among
those who may suffer.

"The cannabis industry is a big part of our economy here, whether it's
acknowledged or not," she said. "It would definitely affect the area
if that was taken away."

Cannabis and extracts sourced from Kootenays growers and tested by
Wagon Wheel Labs are displayed prominently inside a glass display case
in her dispensary on the city's downtown strip. These products were
meant to be destroyed by MMAR producers, but were "donated" to her
store, she said.

"My experience is, certainly in this area, that the smaller producers
have a more artisanal feel to their craft. They're concerned about the
quality, especially if it's medicine for themselves."

But not all are singing the praises of small-scale black market
growers.

The Cannabis Canada Association represents 900 workers and about 60
per cent of the companies regulated by the ACMPR, including major LPs
such as Aurora Cannabis Inc., TweedMarijuana Inc. and Mettrum Health
Corp.

Executive director Colette Rivet called the LP system a "gold
standard," recognized globally, but said the existence of the black
market puts LPs at a disadvantage.

She said LPs must keep their costs below those in the black market to
ensure patients can access affordable cannabis. Operators and
investors sink millions of dollars and years of work into establishing
facilities capable of producing cannabis that meets stringent federal
health standards. They're required to report to Health Canada on how
much they grow, sell and destroy.

With black-market cannabis, there's no guarantee of quality and
safety, she said. "For instance, if you grow cannabis out in the field
or a grow-op, there could be enormous amounts of pesticide, fungus,
mould. Because they don't test, you don't know what you're ingesting."

Ian Dawkins, executive director of Cannabis Growers of Canada, which
advocates for the inclusion of small and medium-sized firms in the
country's legal marketplace, said he's had a positive conversation on
the issue with B.C. Premier Christy Clark, but has heard nothing from
federal officials.

"I'm suspecting they hope that the problem will magically go away,"
Dawkins said.

He believes enforcement against operations like Phil's would damage
B.C.'s economy.

An economist's report commissioned by the CGC took U.S. census data
that tallied 16,000 people licensed to work in the cannabis industry
in Colorado. Comparing the state's population to that of B.C., the
report estimated 13,700 people could be working in the province's
cannabis industry.

"These are real people with real full-time employment in the cannabis
economy, paying for their families," Dawkins said. "These are
basically seasonal agricultural jobs out here in the rural British
Columbian communities. If that suddenly goes away, it's not going to
be replaced by anything. The licensed producers aren't going to come
to Nelson and hire 1,000 cannabis trimmers (and) dispensary staff. So
if all these people are unemployed, what's the plan?"

Outside Phil's facility, we shoot a video interview in the company of
fat mosquitos. Phil tells us he wants Prime Minister Justin Trudeau to
consider how a system based on LPs and mail-order cannabis may not be
what all Canadians want.

"I don't know that legalization will actually bring anything good for
small-scale growers," Phil said.

"I worry that our government is going to do what it has done before
with many other industries, which is allow a monopoly to basically
steal what began as a mom-and-pop industry in British Columbia, with a
very loosely knit community of growers throughout the province -
thousands of growers strong, producing very small amounts on a monthly
or tri-monthly basis, but cumulatively adding up to a large economic
engine."

Around noon, we shake hands and thank him for speaking with us. As our
rental car rumbles down Phil's driveway, his secret is swallowed up by
the forest.

We serpentine through the mountains, pull over by a river and pop the
trunk to grab the video equipment. The pungent, piney aroma of Phil's
crop has clung to the gear and our clothing, and lingers in the humid
summer air.

Back in town, no one seems bothered by the smell.

*

THEWORLD IS WATCHING CANADA

Nation could become hub of cannabis industry innovation.

As the U.S. takes a state-by-state approach to cannabis legalization,
investors south of the border are pining for a chance to see how a
market booms when national legalization arrives.

ArcView Market Research projects that in 2016, the legal market for
cannabis in the U.S. will grow 26 per cent over last year to US$7.1
billion and will surpass US$22 billion by 2020.

Leslie Bocskor, founder and president of Las Vegas-based investment
fund Electrum Partners, believes Canada is set to become a hub for the
global cannabis industry, a place for research and development as well
as a testing ground where U.S. firms can establish brands, knowledge
and best practices before bringing them back home.

"You'll probably see a lot of innovation in Canada," Bocskor said.
"(Canada) will become sort of the global centre with the largest
economy and the best regulatory framework - the only regulatory
framework - on a national basis with that kind of economy. Then that
can become sort of the Silicon Valley of cannabis, to a certain extent."

Bocskor believes U.S. firms will choose to migrate their "best of
breed" product categories, innovation, technology and methodology into
Canada. Business issues solved in Canada can then be used in market
leadership in the U.S.

 From Bocskor's perspective, Canada is already an environment conducive
to doing cannabis business, with a large population and high cannabis
consumption rates, a broad land mass and a good economy.

"It's a clear and easy-to-navigate playing field in a very
business-friendly environment that is going to be sort of changing the
world, with regards to policy on this issue," he said. "I'm sure
there's an enormous section of the U.S. market that's looking to do
business in Canada."

Bocskor believes legalization will present a great opportunity for
Canadian and U.S. firms to collaborate. States with legalization, such
as Colorado, Washington and Oregon, have cultivation processes that
are "really pretty advanced" and large, experienced markets that he
said have led to techniques, knowledge and intellectual property that
will be important to migrate to the Canadian market.

"Canada will have an incredible opportunity in being federally legal
before the United States, to adopt U.S. practices," he said.

New York-based Tuatara Capital led a round of investments in Willie's
Reserve - musician Willie Nelson's independent-grower-supplied
cannabis firm - and Teewinot Life Sciences Corp., a firm developing
cannabinoid-based therapies headquartered in Florida that conducts
research in Manitoba.

Emily Paxhia is the managing director at Poseidon Asset Management, a
San Francisco-based hedge fund focused on cannabis that recently
invested in two licensed producers in Ontario.

"We're in a constant state of research and seeking opportunities to
fill up our pipeline for investing," Paxhia said. "We really like the
strategy of kind of covering North America and not just the United
States, and ultimately we're seeing this as a global investment
opportunity. It just happens to be nice that our neighbour to the
north is really digging in on this so that we can get up there, see
things happening in person, and do the due diligence on the ground."

Paxhia's brother and founding partner at Poseidon, Morgan Paxhia, said
with Canada's legal medical cannabis system already in place, it has a
"really solid foundation" for a regulated, good-quality market with
strong institutional support.

"You're just seeing the benefits of a true functioning market in
Canada first, and hopefully we'll see the U.S. catch up to that," he
said. "From an investor's standpoint, it's interesting to see because
it is a really limited marketplace. From a production standpoint,
there's about 35 (licensed) producers to date in Canada, and in
California there are thousands of producers for (a comparable) market
size. So you can see these businesses scaling much faster and becoming
much more stabilized because they are getting those economies of scale."

Al Foreman, a partner and chief investment officer at Tuatara, said
the firm's focus is on the next wave of expansion states: California,
Arizona and Nevada.

But as the U.S. cannabis market remains fragmented because of
state-by-state legalization, Canada's position as the first national
market "right out of the gate" has Tuatara's attention, Foreman said.

"We're watching the tone and pace of the legalization effort and
believe that Canada is going to be an attractive market for investment
dollars," he said. "We believe that the Canadian efforts on the
medical side have been a good kind of bellwether for a program done
right and so, based on that, we would expect that federal legalization
for adult use would follow a similar path."
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