Over the past six months, Damian Kettlewell’s small Vancouver-based medical marijuana company, BlissCo, has spent more than $100,000 buying, installing and retrofitting an old HSBC cash-transfer-station vault — complete with a 7,500-lb. door — in order to satisfy Health Canada’s strict security requirements for growing cannabis.
On Thursday night, he found out he didn’t need it.
“We’re one of dozens of applicants in a similar situation,” said Kettlewell, after learning that Health Canada was scrapping the expensive security requirement after determining that the old rules, “do not align with the existing evidence of risks to public health and safety.”
The move comes after nearly 1,000 Health Canada inspections over four years found no evidence that marijuana was being diverted from licensed producers into the black market.
Along with ending the vault requirement, Health Canada also decided to eliminate a rule requiring 24-hour video surveillance inside all growing and harvesting rooms.
The changes are being applauded across the industry for significantly lowering the cost of entry for would-be producers. But they do illustrate the risk of a rapidly changing sector.
People “need to skate where the puck is going,” said Dan Sutton, CEO of Tantalus Labs, a Maple Ridge, B.C-based licensed producer. “If you’re building a cannabis cultivation facility for what the (Access to Cannabis for Medical Purposes Regulations) looked like two years ago, you are not going to be able to effectively adapt to a changing regulatory environment that is inevitably going to iterate over time.”
Tantalus built its vault with refrigeration capacity, said Sutton, so it will still be useful for storing products. “The bank door is perhaps the one caveat to all of this. We do have a $15,000 bank vault door that is now a lot less relevant than it was yesterday.”
Sheldon Croome, president and CEO of Atlas Growers Ltd., an LP-applicant near Edmonton with a new $100,000 vault, said that having a vault on site remains a good idea, even if it’s not a requirement.
“We’d be purchasing a vault regardless, just because there’s insurance implications,” said Croome, adding that Health Canada’s change to the video surveillance rules could prove even more important over the long term.
“A huge cost of security for most of these LPs, including ourselves, is the servers (needed to store video footage). You have to store so much data — it’s like petabyte storage — it’s expensive,” he said. Atlas is looking at savings of $100,000 a year simply by not recording the inside of grow rooms 24 hours a day, he said.
Since the changes were announced Thursday, Deepak Anand, vice-president of government relations for consulting company Cannabis Compliance Inc., has been bombarded by calls from clients trying to make sense of the changes. Because Health Canada requires that companies submit detailed blueprints of their facilities, even early-stage LP applicants could end up having to redraw their plans, Anand says.
“Health Canada is by no means saying that this is going to eliminate security, but there are so many ways to go about the program without making these huge capital outlays,” he says.
There is “a degree of frustration” among those who had recently invested in vaults only to find they no longer need them, he says. But, he added, the changes are positive, showing that Health Canada is making data-informed decisions and is serious about encouraging small producers.
Kettlewell, for his part, says the timing is “a little bit unfortunate.” But having a vault is a good idea in any case, he says, and Health Canada’s moves point to significant progress in the industry.
“For the government to say there’s been no diversion whatsoever — after 1,000 inspections — to the black market, that’s a very positive sign and Canadians should feel comfort and confidence that the industry is moving in the right direction.”
