(POSTMEDIA)

Going to Pot

How Alberta prepared for the era of legal cannabis

By Jen Gerson

The windows of the former flower shop are still papered over, but soon customers will mill about in a very different kind of store. The floors will be polished concrete, and the dated white-and-block ceiling panels and grim fluorescent lighting will be replaced by pipes and tidy wiring that will give the store a sleek industrial vibe. In the centre of the white-walled room, tables will feature the prize product, along with iPads that will educate consumers about specific flavours, attributes and charms.

This is the future of weed. And it’s a far cry from the head shops, fly-by-night dispensaries or friend-of-a-friend Ziploc baggie markets of yore.

“We went to the US to look at dispensaries, why some were doing really well and why others were not so great,” says Raj Jogia, one of four partners behind Kush Collective, which expects to open a retail marijuana outlet on 17th Avenue SW in Calgary now that the federal government’s legalization bill has finally passed and all provinces can bring their own policies and procedures into compliance.

On Jogia’s US fact-finding tour, “There were holes-in-the-wall and multi-million-dollar spaces that looked like Apple stores,” he says. “But the main reason some succeeded was customer experience. The store has to look nice and feel comfortable, but the most important thing for ensuring customer loyalty is experience and education.”

Jogia, sporting a crisp blue-and-white tailored shirt, is in the oil and gas industry. Co-owner Shaun Baid, in a black Kush-branded T-shirt and hat, was laid off from his job as an accountant shortly before the legalization process began; the other partners behind Kush Collective are a lawyer and a professional in the organic food business. All of them are Calgary-bred long-time friends who are passionate about pot—and keen to introduce themselves, their store and their product to the community.

The pair go on to point out literature on specific strain effects; chemicals called terpenes which shift pot’s flavour profile and are believed to account for minute aspects of a user’s experience. It’s a little like wine tasting, with a touch of the professional, pared-down Millennial aesthetic.

Jogia, Baid and their partners, along with dozens of other business owners big and small, have navigated a rushed and ad hoc process in which all levels of government frantically worked to implement a regime for the sale and consumption of legal marijuana—a process that has been untried since the repeal of Canada’s prohibition laws a century ago. It’s a process that left consumers and business owners alike on tenterhooks, unsure of the fine details of what will be legal, where and when. Given the timelines involved, concerns about the speed at which this social shift is taking place are not unfounded, and no one can rule out the possibility of unintended consequences.

“Whether or not you think this is the best idea, there was, ultimately, in a certain way, a referendum on this issue,” says Kathleen Ganley, Alberta’s Minister of Justice and Solicitor General. “That was the (2015) federal election, and that government was elected on a very clear promise to legalize cannabis.”

The legalization of cannabis was up to Ottawa—but the nuts and bolts were left to provinces and cities to figure out. Every level of government across the country scrambled experts and task forces to create new pot regulations, bylaws and sourcing and distribution methods. Myriad questions had to be answered, from the age of legal purchasing, to how the product should be sold, to where it could be consumed. Well before the federal government had a final draft of the legislation it intended to pass, the provincial government and municipalities in Alberta conducted surveys to get a sense of how Albertans wanted lawful weed to work.

One of the most pressing issues was the question of whether to adopt a private or public retail model. Minister Ganley says Albertans were clear in their feedback, which was conducted through two rounds of public opinion polling in 2016: they overwhelmingly wanted a private retail model similar to how alcohol is sold here—in stark contrast to Ontario (initially) and the maritime provinces, which decided to sell pot only through government-run stores.

“A public system gives the province much more control, but is costly to establish and leaves financial risk with Albertans,” Ganley says. By comparison, “a private system puts faith in private retailers to follow the rules established by the province, but poses less financial risk and is more efficient to set up.”

The benefits and drawbacks of public vs. private liquor retail are hotly debated in Canada. One of the touted advantages of Alberta’s private liquor system is that it provides more convenience. That, however, is also considered one of the model’s drawbacks, as it allows easier access by youth. It’s long been alleged, for example, that it’s easier for minors to buy booze from private stores. A 2011–2012 government sting operation in BC, the first province to enact a hybrid public–private liquor retail model, seemed to confirm this theory. But corroborating evidence is scant.

All levels of government frantically worked on a process untried since the repeal of prohibition.

It’s unclear how this dichotomy will play out with regard to cannabis. Months before legalization, the Alberta Gaming and Liquor Commission (AGLC) had received more than 530 retail cannabis licence applications province-wide. At the same point in the process, 40 stores had announced they would dispense marijuana in Ontario, with an expectation that the province would see 150 stores by 2020—though Ontario has 3.5 times Alberta’s population. (That province has since announced it will change to a private retail model, with an unknown effect on the overall number of stores that will be approved.)

There was significant debate on this issue, which is why the Alberta government went back to the public twice on the question. “Our survey results ultimately leaned towards private retail, with 58 per cent of Albertans supporting this system,” Ganley said.

As with alcohol, the AGLC will source and obtain product in bulk that private retail outlets will buy and resell. The AGLC will also oversee retail licensing.

But while the province has taken a liberal approach to physical retail shops, only the government will be legally allowed to sell marijuana online. Ganley says survey results highlighted the fact that Albertans were concerned about how consumers could prove age at point of purchase and at delivery; a public online portal, she suggests, gives the government more control. “Already, even before legalization, retailers are selling illicit cannabis in the online space,” she says. “A government-managed system sends a strong message to consumers that there will be one, legal online source for recreational cannabis.”

The other question the government struggled with was the matter of the age restriction. The best science about the effects of marijuana to date suggests it can harm young people, whose brains are still developing, especially under the age of 25. In the end, Alberta opted for a minimum age of 18 to consume cannabis—a year younger than every other province except Quebec (also 18) went with, but the same age at which Albertans can legally drink alcohol.

“If you make the legal age higher, that does a better job protecting public health,” Ganley says. “But it brings the illegal market into the legal market—which does a worse job of protecting youth, who are still going to the black market.”

Pot smoking will be banned in private cars as well as at Alberta’s hospitals, schools and daycares. Smoking will also be prohibited within close distance of playgrounds, zoos, outdoor theatres or any place where children are likely to be present. But cannabis can be consumed in the province’s parks.

Ganley explains: “Say you have a campground in a provincial park. Now you’re saying people need to drive outside that area to a highway and stand outside their car [to smoke a joint] and go back again.” A restrictive parks policy would have presented more problems, she adds, including fears of impaired driving. “All sorts of different issues could have arisen if we tried to prohibit [consumption] in anything that could possibly be described as a park,” she says.

Provincial legislation, however, leaves this matter open to municipal governments to regulate within their own boundaries. And as Alberta conducted public opinion polling on minute matters of marijuana regulation, so did municipal governments.

“We were a bit surprised the province was treating cannabis like tobacco, for the most part, from a public consumption standpoint,” says Matt Zabloski, lead for the City of Calgary’s cannabis legalization project. “I couldn’t find any major municipality that had allowed for public consumption. Even in the States, they were treating cannabis as restrictively as Alberta treats alcohol, if not more so.”

The City of Calgary decided to take a much more restrictive approach, virtually banning all public cannabis consumption, including in its parks. (Smoking in Fish Creek Park will also contravene Calgary’s municipal bylaws, even though the park is provincial.) This, combined with the AGLC’s having no plan at present to license smoking lounges, has raised the ire of some pot advocates who point out that for many citizens, including those who rent their homes, this legal product could be virtually impossible to legally consume.

Many of these issues may be addressed by edible marijuana, which can be consumed more discreetly. However, edibles aren’t metabolized by the human body in the same way as cannabis that’s smoked; it takes longer for the “high” to hit, and thus it’s easier for users to consume too much. Edibles also raise concerns about food safety, dosing and proper labelling and packaging to ensure candy-like weed products aren’t accidentally consumed by children.

The province’s cannabis secretariat said it does have a plan to develop a policy framework for edibles, but it is awaiting direction from the federal government, which is not expected to legalize that section of the marijuana market until sometime in 2019.

Cities and towns are also responsible for where consumers can buy legal weed. after commissioning polls and studies, zabloski’s team took a series of proposals to council that would govern how marijuana retail outlets apply for business licences. Stores in Calgary will be permitted in the same types of commercial zones where liquor stores can be built, provided they are at least 150 metres from schools. Zabloski says the city considered a more restrictive setback, but that would have significantly reduced the number of viable spaces. By late April, Calgary had received 226 cannabis store applications.

Edmonton senior planner Colton Kirsop says his city ran into similar questions and tradeoffs. “If we’re too restrictive about where cannabis stores can locate, one of the unintended outcomes could be that we drive them to poorly accessible areas of the city—and we’ve seen that in US cities,” he says. Seattle, for example, “banned cannabis stores from downtown and entertainment districts, which left owners little choice but to set up in out-of-the-way industrial areas. These are easier to take advantage of in terms of vandalism and theft. Nobody’s there on weekends or after hours. They’re really quiet.”

Edmonton therefore decided to welcome retail locations to bustling commercial streets such as Whyte Avenue.

The process for applying for business licences varies by city and town; once a location in an appropriate land-use area is chosen, the outlet can apply for a permit and a business licence. Or it can apply to have an area rezoned—which often requires a hearing in front of council. Only after a business has obtained a lease on a storefront can it then apply for an AGLC permit. Current head shops will have to go through the process too, just as if they were new retail businesses. “This is definitely not one of those slam dunk things,” Zabloski says. “This is no walk in the park by any stretch of the imagination, trying to score one of these businesses.”

A higher legal age might do a better job protecting public health, but more people would use the black market.

Michelle Hynes-Dawson, spokesperson for the AGLC, says businesses must pay a $3,000 fee upfront to apply for a licence. “During the application, we do our due diligence. We do a background check for links to organized crime. There’s a questionnaire. We have to ensure there is no history of trafficking,” she says. “Just because someone pays the fee doesn’t mean they are guaranteed the licence.”

Indeed, even the stores themselves will be required to have special features and equipment, including a secure, locked storage area to keep cannabis and accessories. Stores must be equipped with alarms and video surveillance, have a separate entrance and have no access to any other businesses. The AGLC seems particularly concerned that no pot store be too close to a liquor outlet, as the government wants to discourage consumers from too readily compounding their intoxication.

Similarly to cigarettes, marijuana products will have to be sold in plain packaging with no undue salesmanship about effects. Stores will not be able to use words or images that connote any kind of health benefit. And, according to AGLC guidelines, branding must not attempt to appeal to minors, show the use of pot, display intoxication or “advertise a price or price advantage.”

The agency will also restrict cannabis retail monopolies; no individual or entity will be allowed to own more than 15 per cent of the overall retail cannabis licences in Alberta. The province will also set the wholesale price. These restrictions must strike a fine balance—they cannot be so restrictive that the black market continues to flourish.

As the legalization date drew near, the AGLC put out requests for providers to supply stock. Most of the early interest came from federally licensed medical marijuana suppliers. Given there are only so many licensed medical marijuana suppliers in the country, one of the big fears of legalization advocates is that there simply won’t be enough product to meet early demand once pot is officially legal.

Hynes-Dawson says the AGLC has heard such concerns. “Every province is in the same boat,” she says. “There are only so many producers right now. But we were really pleased by the response we got. We got a mix from right across the country.”

While marijuana advocates have long touted the benefits of taxing and regulating the drug, Alberta is not expecting a legalization windfall. In the 2018–19 budget, the province announced that it expects to lose money on pot—largely thanks to the enormous amounts of time, effort and cash that have already been funnelled into creating a legal regime.

The province can earn revenues from wholesale weed distribution, from online sales and from direct taxation—although a quarter of the taxation proceeds must be sent to the federal government. And, again, the taxation room is fairly limited; if legal marijuana proves too expensive, the black market, which isn’t hemmed by restrictions on advertising, price discounts or edibles, will continue to flourish. In the 2018–19 budget, the province expected to rake in only $26-million in taxes on marijuana in the first year of legalization, only about a third of what it has spent to set up the policies, staff and procedures required to make the stuff legal. Alberta will also receive a share of the taxes collected by the federal government. Ottawa expects to take in about $100-million in the first year of legal cannabis.

Alberta’s budget, however, has so far not indicated any revenue-sharing for municipalities, which are expected to bear a major enforcement and regulatory burden. Police and enforcement agencies are also expected to bear significant costs in things such as behavioural training and cheek swab testing to examine for impairment while driving [see sidebar].

“For the first little while, we’re not going to be taking in a surplus of revenue,” Ganley says. “There will be more costs than revenue to go around.”

Given the partisan machinations in the Senate, it was uncertain well into spring 2018 when legal pot could actually be purchased. The Senate voted on the bill on June 7, proposing 46 amendments. The government accepted most of these, and the bill received Royal Assent shortly afterward. The provinces requested several months to finalize regulations, acquire product and stock shelves. On June 20 the government announced October 17 as the day that cannabis officially gets the green light.

All of this uncertainty hasn’t just affected lawmakers. The partners at Kush Collective had to find an amenable landlord and commit to leasing a storefront months before they knew the final municipal rules for retail stores. They had to lease a building to acquire a pot licence—and they lost money on rent every month the drug wasn’t legalized. A sudden change of heart on city council—a small increase in the setback requirements, say—could have quashed their hopes, and their investment.

Further, business and governments both struggled to come up with complementary processes and regulations before legalization—before any of them had a final sense of what various other levels of government were going to pass.

And a retail licence is no guarantee of easy money. Nobody knows just how large the legal market for recreational marijuana will be, and because Alberta’s market is private, retail competition will be fierce. That level of uncertainty privileges retail players with a greater appetite for risk—and more cash in hand to weather it. That likely means more large chains, particularly from the US. Already, major liquor distributors and wealthy investors have announced their intentions to get into marijuana in Alberta.

Meanwhile some new dispensaries, Baid claims, started selling marijuana ahead of legalization. “They make us all look bad,” he says.

Kush Collective says it wants to reduce stigma around pot; the owners envision open-door days for the community to come in and ask questions. But it’s the small operators who play by the rules who stand to lose the most by delay, inaction and uncertainty.

“We’re just four local Calgary guys with a passion for marijuana,” Baid says.

Calgary freelancer Jen Gerson contributes to Maclean’s, The Walrus and CBC, and co-hosts the podcast Oppo.

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