Challenging restrictive municipal cannabis regulation (part one): Is weed agriculture?

On Oct. 17, 2018, Canada gained international attention as it became the first G7 country to legalize recreational cannabis. The introduction of Bill C-45, An Act respecting Cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts (Cannabis Act), was the catalyst for a myriad of substantial legislative changes across Canada. The Cannabis Act, which came into force on Oct. 17, 2018, granted the federal government the authority to oversee prohibitions related to the sale, distribution, purchase, possession, cultivation, propagation and harvesting of cannabis. Each province was required to develop its own unique recreational cannabis regime to facilitate the application of the new federal legislation.

In Ontario, the provincial government enacted three main pieces of legislation – the Cannabis Control Act, 2017^[1], the Cannabis Licence Act, 2018^[2], the Ontario Cannabis Retail Corporation Act, 2017^[3] – and amended others to account for the legalization of recreational cannabis. While the federal and provincial governments established the high-level legislative and regulatory framework, local governments filled in a number of gaps that appeared to exist in the legislation.

This paper series explores the inconsistent nature of municipal cannabis regulation, its interaction with federal regulation, and the legislative limitations that allow cannabis producers to exist within municipal and federal boundaries.

The pseudo-gatekeepers of the cannabis industry: Municipal attempts to restrict cannabis operations

Since the Cannabis Act came into force, municipalities have struggled with how to approach cannabis operations within their jurisdictions. They have grappled with whether to treat cannabis producers as agricultural operations, similar to any other commercial grower, or as something different altogether. Gaps in provincial and federal cannabis legislation have resulted in municipalities seeking to use their existing statutory powers to act as gatekeepers for the cannabis industry.

Zoning powers are, in the opinion of municipalities, one of the most significant statutory tools for regulating cannabis, as on the surface, they provide municipalities with a means of restricting the location, form, and density of cannabis production facilities. Each community holds differing views about the addition of cannabis activities within their local spaces. Therefore, the success of the cannabis industry is dependent on whether individual municipalities approach recreational cannabis with open arms, or with hesitation. As we will see, as the song says, "It Ain't Necessarily So."

1. Cannabis retail stores

In Ontario, municipalities had the ability to prohibit the establishment of cannabis retail stores in their communities. The Cannabis Licence Act, 2018, provided municipalities with the opportunity to opt out of having physical cannabis retail shops within their boundaries by January 22, 2019.^[4] A municipality that decided to opt out could opt back in at any point in the future. However, once a municipality opted in, this decision became final with no option of opting back out.^[5] If a municipality had not made a decision by January 22, 2019, then, by default, they were considered to have opted in, allowing private cannabis retail stores to open in the municipality beginning April 1, 2019.^[6]

Interestingly, the opt-out provision in the Cannabis Licence Act had an all-or-nothing effect. If a municipality allowed cannabis retail stores in their communities, they could not use zoning to control the location of cannabis retail stores specifically. According to the Alcohol and Gaming Commission of Ontario, 66 out of the 444 municipalities in Ontario have opted out of the regime as of April 18, 2022.^[7]

2. Cannabis production facilities

Municipalities were not provided with the same opportunity to prohibit the production of cannabis as they had been with retail stores. However, some municipalities have attempted to regulate cannabis production through the use of zoning by-laws. Some municipalities have added cannabis production facilities as defined uses in zoning by-laws; some have specified the limitations of the use; and others have done nothing at all. With each method, municipalities have asserted different levels of control over where and how facilities are permitted in their jurisdictions. Municipalities that aim to severely restrict cannabis production will often use egregious setbacks, justified through the regulation of noise and smell.

Cookie-cutter approaches to the regulation of cannabis

While municipalities have the authority to tailor their approaches to cannabis production to the individual needs of their communities, it has become common for municipalities to use cookie-cutter approaches, resulting in systems that are inappropriate in the context of their geographic realities. It is common for municipalities, instead of doing unique research, to simply follow the lead of others. The notion is "If they can do this, so can we." This is an approach that often leads to absurdity. For example, rural/agricultural municipalities such as Niagara-on-the-Lake should not be adopting the approach of Toronto, which has no agricultural land.

Prior to the legalization of recreational cannabis, Toronto amended its zoning by-law to define Medical Marihuana Production Facilities (MMPFs) as "premises, authorized by a licence issued by the federal Minister of Health, used for growing, producing, testing, destroying, storing, or distribution of medical cannabis".^[8] The zoning by-law also prescribed where the use was permitted, providing separation distances from sensitive uses.

In Toronto, the MMPFs were only permitted in Employment Industrial zones. The Employment Industrial zones made the most sense for the placement of MMPFs given the geographical makeup of the area and the character of these zones. With the introduction of the Cannabis Act, Toronto passed By-law 1124-2018, which deleted the definition of "Medical Marihuana Production Facility" and replaced it with the term "Marihuana Production Facility" to include recreational cannabis in the description.^[9] Therefore, recreational cannabis production facilities were also zoned Employment Industrial. Notably, Toronto does not have agriculturally zoned lands; it is entirely urban.

While municipal approaches to regulate cannabis operations in their jurisdictions should be unique and fit the specific needs and realities of the given social and geographic areas, many municipalities lack the personnel or financial resources to do individual investigations of the appropriateness of their approaches to the regulation of cannabis. As such, they look to what others have done. Adopting Toronto's approach of restricting cannabis production to Employment Industrial zones does not necessarily make sense for smaller communities that may not have large industrial areas, or that may have an abundance of agricultural lands that would be better suited for cannabis production.

This was the case in Niagara-On-The-Lake v. Tweed Farms Inc.,^[10] a case that will be discussed is more detail in part two of this series. In this case, the municipality attempted to zone cannabis production facilities as industrial zones, despite the fact that these facilities were agricultural uses and the municipality had an abundance of agricultural lands to accommodate them.

Cannabis production: The ugly duckling of agriculture

The regulation of cannabis production began at a time several years prior to legalization of the production and use of recreational cannabis. Some municipalities, from small to large, have not caught up with the changes in federal law since implementing medical marihuana regulations, and have attempted to regulate recreational cannabis under the repealed medical marihuana legislation. In other municipalities, cannabis production continues to be regulated in a manner no different than any other agricultural use. In the town of Grimsby, for example, "Agricultural Use" is defined as^[11]:

the growing of crops, including nursery and horticultural crops; raising of livestock; raising of other animals for food, fur or fibre, including poultry and fish; aquaculture; horse boarding; apiaries; agro-forestry; maple syrup production; and associated on-farm buildings and structures.

Most other municipalities have similar definitions for agriculture or farms. Over time, more municipalities have amended their zoning by-laws to include cannabis production facilities as permitted uses within agriculturally zoned lands.

Approaching cannabis production as agriculture is appropriate because cannabis is no different from tobacco, hops, barley or any other crop that can be processed into alcohol; however, for some, it comes with additional moral considerations. Yet in terms of the impact of such facilities on surrounding uses, there is no doubt that greenhouse-based production has far less impact than does field-based agriculture. There is no impact from animals, or animal-based fertilizer, in terms of odour. From a planning law perspective, it could be argued that there is no "material adverse impact" on surrounding landowners from the presence of a cannabis production facility. While plant odour can be a concern to municipalities, appropriate technological measures cut it down considerably. The same municipalities exhibit no such odour concerns regarding the use of animal waste as a fertilizer, the odour from which can spread for kilometres.

"Material adverse impact" is a term of art in planning law, which speaks to a real negative impact of a use on neighbouring lands, measured by approval authorities in considering their decisions. The best evidence of a lack of material adverse impact can be found in the absence of a requirement promulgated by the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) for minimum distance separation (MDS) for the raising of crops and another land use^[12]. MDS is required only between a livestock barn or manure storage and another more sensitive land use. No MDS is required for any crop-based agriculture. It is worth noting that the only concern of any consequence in relation to cannabis greenhouses is the potential for odour from the plants. Odour is mainly a concern when plants are in flower. In some greenhouses, only a small amount of plants will be in flower at a given time. In these cases, there would be no material adverse impact.

Odour and other nuisance issues arising from cannabis production facilities are hot topics for municipalities. Municipalities struggle with developing regulatory standards for odour due to the complex, lengthy and costly process of determining an odour's strength. In light of these factors, the Federation of Canadian Municipalities has suggested that municipalities take "proactive" measures to deal with possible odour concerns, such as requiring odour level testing, control plans, landscaping or buffers to prevent possible interference of odour with other uses.^[13] However, these measures have the effect of removing the burden of odour mitigation from municipalities and thrusting it upon cannabis producers. Again, these concerns relating to odour are unique to cannabis producers; no other strong-smelling agriculture receives the same type of pushback. In Ontario, the legislation does not support these kinds of measures.

Conclusion

Since the Cannabis Act came into force, municipalities have struggled with how to approach cannabis operations within their jurisdictions. Moral decision-making and the lack of municipal finances and resources have led to the establishment of inconsistent and often inappropriate approaches to the regulation of cannabis at a municipal level.

Cannabis retailers, producers and distributors have been forced to jump through more hoops than other agricultural producers to operate. The fact of the matter is that municipalities restrict cannabis because it is the ugly duckling of agriculture. Therefore, cannabis operators need to be cognizant of the provincial and federal limitations on municipal regulation of cannabis, and be prepared to challenge municipal decision-making that negatively impacts their ability to grow. Lawyers will need to think outside of the box to best advise their clients.

Michael Polowin and Kelly Duquette practise municipal law in Gowling WLG's Ottawa office. Kelly is an associate, and Michael leads the firm's national Municipal Group.