Voting 52 to 29 in favor, the Canadian Senate approved a majority of the House of Commons’ revisions to Bill C-45, the nation’s cannabis legalization measure, making it the first major economy in the world to end the prohibition of marijuana.
Making good on their pledge from the 2015 general election, Prime Minister Justin Trudeau and the Liberal party behind him, after a hard-fought legislative battle, legalized recreational use of marijuana across all of Canada.
The next step for the Cannabis Act, which many see as a formality, is for the bill to receive royal assent, after which the Proclamation Date —the exact day on which the measure becomes law, will be set. As noted by the Liberal government earlier this year, the final stretch of the process is expected to take eight to ten weeks after royal assent, putting the official launch date sometime in September. Royal assent is expected to take place within a matter of days.
The Battle Over Amendments
Only 13 of the Senate’s 45 amendments to the legislation were rejected by Canada’s House of Commons, including one giving provinces the right to ban home cultivation of cannabis. Liberals claim that allowing home grows is an essential part of shutting out the black market. However, both Quebec and Manitoba have already moved to prohibit home grows, actions which are now likely to face legal challenges.
The House of Commons also rejected an amendment prohibiting branded merchandise, and another requiring the country to create a registry of marijuana company shareholders. Conservatives in the Senate were vocal about their disappointment over the rejected amendments.
“Of course I am disappointed, and also a little bit angry that they didn’t take more time and of course did not accept the amendment. We believe that it was a reasonable and flexible solution to the problem,” Independent Senator André Pratte told CBC News regarding the home cultivation amendment being rejected.
“[The Liberals] have to decide at one point; what kind of Senate do they really want,” Pratte continued. “Do they want a really independent, modern Senate? If so, well, they have to take our amendments into consideration seriously.”
Canadians React To The News
Canadian Prime Minister, Justin Trudeau tweeted, “It’s been too easy for our kids to get marijuana – and for criminals to reap the profits. Today, we change that. Our plan to legalize & regulate marijuana just passed the Senate.”
A clear split emerged late Tuesday between Liberals who approved the bill and Conservatives who stood in steadfast opposition to it. Tony Dean, who sponsored the bill in the Senate, told CBC News, “I’m feeling just great. The end of 90 years of prohibition. Transformative social policy, I think. A brave move on the part of the government.”
According to a report in Leafly, Allan Rewak, executive director of the industry association Cannabis Council of Canada has said, “Cannabis Canada is thrilled that the Senate has approved C-45 and we can now, as a sector, move forward building a world-class industry that brings incredible economic opportunity to our citizens while keeping recreational cannabis away from kids and profits away from organized crime.”
In an interview with Leafly, Conservative Senate leader, Larry Smith, criticized what he called the government’s “rush to legalize marijuana.”
“There has been political posturing since Day One. Conservatives on the Committee on Legal and Constitutional Affairs are determined to reduce the scope of the bill or delay it,” Smith was quoted as saying. Liberal Senator Tony Dean claimed that partisan politics were responsible for most of the opposition. Meanwhile, Senator Linda Frum tweeted that it was a “Sad day for Canada’s kids.”
What’s The Plan?
Under the new law, the production of cannabis will be overseen by the federal government. However, provinces and cities will be responsible for regulating retail sales. Some provinces have opted for a privately run market, while others are setting up government-run retail outlets.
According to Cannabis Now, Ontario and Quebec are planning government monopolies on retail sales, while Alberta and Saskatchewan provinces are planning on a private industry model. British Columbia plans on allowing for both government-run and private retailers, with the government-run dispensaries being operated by Canada’s Liquor Distribution Branch. And in Manitoba, the government’s liquor and gambling department will license private retailers but act as their supplier.
In Ontario, Canada’s most populous province, plans call for an initial launch of 40 government-run stores. That number is expected to increase to 150 by 2020. Quebec, the second largest province, will start with 20 stores and has not announced any expansion plans. Many experts claim that these numbers fall well below projections of the number of retail outlets required to meet consumer demand. By comparison, the U.S. state of Colorado has more than 1,000 retail outlets.
An April 2018 report from Health Canada predicts that demand for the drug will reach one million kilograms (2.2 million pounds) by the end of 2018. However, Canada’s largest licensed producers are on track to produce 1.65 million kilograms annually — a number well above that of Health Canada’s projected domestic demand.
What The Experts Are Saying
Motley Fool contributor Sean Williams, however, predicts that supply will, indeed, outpace demand. “If we were to add in the mid-tier players like Supreme Cannabis Company, Sunniva, Cronos Group, CannTrust, Cannabis Wheaton Income Corp., and the dozens of additional growers who’ve been issued a cultivation license, it’s not out of the question that production capacity by the end of 2020 could hit 2.3 million to 2.4 million kilograms on an annualized run rate,” noted Williams. “Even if domestic demand in Canada ebbs higher in 2019 and 2020, production looks to outpace demand by as much as 1.3 million kilograms, by my best estimate.”
Williams continued, “Even with domestic growers expanding their production capacity as quickly as their balance sheets will allow, it’d be a stretch to expect supply to meet demand. Such a scenario suggests that pot stocks will see rapidly rising sales and likely rising margins. Higher margins would be a function of steady or rising cannabis prices on a per-gram basis, as well as economies of scale working in favor of pot stocks and driving down growing costs as their operations expand.”
Williams also points out that “these estimates could rise significantly,” citing MedReleaf as an example.
“MedReleaf agreed to be acquired by Aurora Cannabis earlier this [year], has 95 acres of land adjacent to its Exeter facility in Ontario. With its retrofitted Exeter facility spanning 1 million square feet and capable of 105,000 kilograms a year in production, building out this 95-acre plot could wind up yielding 150,000 kilograms, or more in annual yield should demand merit expansion.”