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Election 2015

On Marijuana, Harper's Politics Don't Match His Actions

The Tories say pot must stay illegal. They're also laying groundwork for legalization.

Geoff Dembicki 19 May 2015TheTyee.ca

Geoff Dembicki reports on energy and climate change for The Tyee. Find his previous stories here.

This article was paid for in part by Tyee readers, as part of our 2015 federal election drive. Support Tyee coverage, or learn more about our Tyee Builder program, here.

In politics, there's often a gap between what someone says and what they do. Federal Conservative Health Minister Rona Ambrose had strong words in April for Vancouver council's plan to regulate the more than 80 marijuana dispensaries across the city. Cannabis is "an illegal substance" with "serious health risks," she wrote to Mayor Gregor Robertson. Ambrose warned that Vancouver's proposed pot rules would end up "legitimizing and normalizing the use and sale of marijuana."

By that measure, Ambrose should be writing letters to her own ministry. For under Prime Minister Stephen Harper, Health Canada has done far more to legitimize and normalize the use and sale of marijuana than Vancouver. Since 2000, court rulings have made it legal for Canadians to possess and grow small amounts of cannabis for medicinal purposes. Last year, Health Canada brought in new rules allowing commercial producers to grow medical marijuana in carefully regulated facilities.

That made it possible for firms with names like Tweed Marijuana Inc. and Bedrocan Cannabis Corp. to go public on the Toronto Stock Exchange. Legally speaking, these firms are producing a drug for sick patients. But James West, who tracks the industry closely on the investor news site Midas Letter, says there's more to it. "These guys want to be in a position so that when the recreational marijuana laws change in Canada, they are perfectly positioned" to supply a potentially massive market, he said.

Make no mistake: Health Canada was forced to regulate medical marijuana by court rulings. Yet with a federal election where full-blown pot legalization could become a big issue, it's put the Conservatives in a delicate position. "They're going to distance themselves from [their own program] so they don't anger their base," said Khurram Malik, an analyst with the Toronto-based investment bank Jacob Securities. "But they're going to keep it in their back pocket if ever they have to pull out a trump card."

Birth of an industry

The story of medical marijuana began in 2000, when Canadian courts ruled that people with serious illnesses should have access to a drug capable of alleviating their symptoms. In response, Health Canada enacted the "Marihuana Medical Access Regulations," which let licensed patients grow and possess small amounts of cannabis. Yet many bought pot illegally, and home grow-ops proliferated. "It was very difficult to police," said Hugo Alves, a partner at the business law firm Bennett Jones.

Alves got involved in the medical marijuana industry last year, after Health Canada enacted the medical pot regulations. The new rules required that patients buy their weed from licensed producers, and also laid the groundwork for a commercial industry. Firms like Tweed competed to obtain licenses. They raised hundreds of millions of dollars in investment on the TSX, and retained corporate law firms like Bennett Jones. "The regulation does add an air of legitimacy," Alves said.

Marijuana may now be fully legal in states like Washington and Colorado. But the fact that it's still illegal at the national level makes U.S. investors uneasy. Many are choosing to invest in Canada instead, where large producers have legal authority to operate from the Harper government. "We really like the Canada model, which is really unlike any other in the world," said Christian Goh, co-founder of the Seattle-based Privateer Holdings, one of the largest private equity firms in marijuana.

Bay Street is now the top global source of marijuana financing. True, most producers have yet to turn a profit and Health Canada's rules are being challenged in court. But the allure of future riches is strong. The Canadian medical marijuana market could be worth $1.3 billion by 2024. And many pot producers are hoping to someday cash in big from full legalization. "In other words," West said, "where you can walk into a liquor store... and you're allowed to buy as much as you can carry out the door."

A delicate spot

None of this would have been possible without Health Canada's regulations. Which puts Harper in a delicate spot as the federal election approaches. Both of his political rivals support looser marijuana laws. Liberal leader Justin Trudeau is calling for full legalization, while NDP leader Tom Mulcair supports decriminalization. Harper says he's opposed to such reforms. "Dangerous and addictive drugs tear families apart, promote criminal behaviour and destroy lives," his spokesperson recently stated.

At the same time, the Harper government has created one of the largest commercial markets for marijuana in the world. The investors, the law firms, the licensed growers -- ostensibly their business is medicinal. Will it stay that way? "As soon as you get large commercial entities involved in any commodity, governments find themselves under heavy pressure to increase the availability of the product," Eugene Oscapella, a founding member of the Canadian Foundation for Drug Policy, recently argued.

There's no visible sign this is happening in Canada. For now, the 18 weed producers who've received licenses from Health Canada are trying to figure out how to survive in the medical market. "It's in the government's best interest to make sure this first batch of licensees succeed," Malik said last year. "It's a bit of a political pitfall, a bit of a nightmare if some of these... act up badly enough to get their licenses yanked." The Tories, he went on, "need these [firms] to succeed to legitimize what they're doing."

So what are the Conservatives doing on marijuana? "They're traveling both sides of the fence," Malik said. Minister Ambrose's strong words to Vancouver are a good example. The dispensaries across the city are technically illegal. By attacking them, the Conservatives look tough on drugs. But if pot legalization becomes a big deal this election, Harper can contrast the wild-west dispensary system with his regulated corporate model "to counteract whatever the Liberals might do," Malik argued.

Trudeau doesn't excite

You would think Canada's weed producers are thrilled that Trudeau is campaigning on full legalization for marijuana. But West has interviewed many pot executives, and if they're excited, they don't show it. "We have a corporate policy that we don't comment on politics, leaders or things that they propose," T-Bird Pharma Inc. CEO Robert Gagnon explained last fall. "We'll look at every market that opens up and offers itself to us in the future, but it's not something we sort of take a side on."

Why would they? Right now, companies like T-Bird Pharma have plenty of room to grow in the medical marijuana industry created by Harper's Conservatives. By 2024, Health Canada predicts there will be about 500,000 patients registered to purchase medicinal pot. And Malik predicts that the $1.3-billion industry that represents will become a reality even sooner. "Whether [marijuana] becomes truly decriminalized or not, there's a lot of room for a company to make a lot of money," he's argued.

Still, it's obvious to everyone in the industry that legal recreational marijuana is where the truly big money will be made. In Colorado alone, cannabis sales generated US$700 million last year. But one reason why some Canadian pot producers are guarded in their opinions on Trudeau is that "an aspiring politician will say anything to get in power," West said. "And once a guy gets elected, 90 per cent of the promises he ran on -- suddenly there are reasons why he can't follow through on them."

Supposing Trudeau is elected, though, and that he makes pot legalization his top legislative priority, West suspects it would take most of his first term in office to get new laws passed in Parliament. And if pot is to someday be regulated and sold like alcohol, "that's a multigenerational transformation," he said. Yet it's one already well underway. Harper argues pot must stay illegal, but the groundwork laid by Health Canada for a legal corporate industry may end up being one of his biggest legacies.  [Tyee]

Read more: Health, Politics, Election 2015

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