Change in rules may help some pot growers, devastate others

Build it first, then apply.

In a move one industry expert calls a “total game-changer,” federal regulators have flipped the rules about applying for a licence to grow marijuana in a way that will weed out a backlog of unprepared wannabes, but reward serious players like those found in Southwestern Ontario.

Under Health Canada’s previous rules, cannabis licence applicants could submit applications with their plans and get approval before even breaking ground.

Now, those applicants must have fully built sites before they’re eligible for a licence to grow, process or sell cannabis.

“This has scared away the tire-kickers, the dreamers,” said Bill Panagiotakopoulos, the chief executive of Beleave, a cannabis producer building a 23,000-square-metre greenhouse in London.

“Just like any other industry, you’ve got to build and then get licensed, because that shows your commitment.”

Health Canada still is sifting through hundreds of applications from both existing producers looking to expand their sites and new entrants hoping to break into the growing industry.

But more than 70 per cent of licensing applicants who obtained their initial letter of approval during the past three years haven’t submitted the necessary proof of a completed facility, the federal agency said.

“A significant amount of resources are being used to review applications from entities that are not ready to begin operations, contributing to wait times for more mature applications and an inefficient allocation of resources,” Health Canada said.

Trina Fraser, an Ottawa-based cannabis lawyer, called the regulator’s new requirement “a significant jolt” to the industry.

“For some, it’s a welcome change,” she said. “For others, it’s devastating.”

Previously, aspiring pot producers only were required to secure a site to begin the application process. That allowed them to start raising capital from investors – often tens of millions of dollars – to build out their operations.

The head of London-based licensed producer Indiva says his company is waiting for Health Canada’s green light to begin cultivation in three new grow rooms that have been ready for weeks at its Hargrieve Road facility.

“Obviously the pressure on us is to move as fast as we can,” chief executive Niel Marotta said.

“If this change that was announced yesterday actually frees up more resources to deal with the files of the companies that are already in production and hiring people . . . then that’s great.”

Canada is dealing with a country-wide supply shortage since legalizing recreational marijuana on Oct. 17, prompting some in the industry to blame the Health Canada system that takes months for companies to get licensed.

“A slow regulatory process that causes delays . . . prevents supply from coming on,” Marotta said. “That prevents store shelves from being filled.”

Southwestern Ontario has carved out a niche as cannabis hub, with more than a dozen companies growing and processing marijuana for recreational and medicinal purposes.

It’s not known how the new rules will affect existing applicants whose sites aren’t yet complete. Those applications will go through a “high-level review” and a status update letter will be provided to raise any concerns officials have with the application, Health Canada said.

Beleave already has sunk $10 million into its planned greenhouse at 6867 Wellington Rd. S., said Panagiotakopoulos, whose company paid $6.7 million for the former Heritage Gardens greenhouse that sits on a 34-hectare property.

The total cost of the operation, where 240 people eventually will work, will top $28 million, Panagiotakopoulos said, adding he’s confident it will be licensed to begin production in the fall.

“We know we’re going to be successful there,” he said.  “We spent over a year looking for a suitable expansion.”

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