Challenging restrictive municipal cannabis regulation (part two): Whose jurisdiction is it anyway?

Provincial protections from inappropriate municipal control of cannabis production

In Ontario, municipal control of cannabis or any other agricultural production is restricted under the Farming and Food Production Protection Act, 1998 ("FFPPA"). Based on the language of the FFPPA, it is our view that municipalities have no authority over the control of agricultural products, including cannabis.

Where a municipality attempts to restrict the establishment of a cannabis production facility through site-specific zoning by-law amendments prohibiting such facilities as a permitted use, section 6(1) of the FFPPA provides that "No municipal by-law applies to restrict a normal farm practice carried on as part of an agricultural operation."^[1] A normal farm practice is defined as a practice "conducted in a manner consistent with proper and acceptable customs and standards as established and followed by similar agricultural operations under similar circumstances, or makes use of innovative technology in a manner consistent with proper advanced farm management practices."^[2] An agricultural operation includes an "agricultural, aquacultural, horticultural or silvicultural operation that is carried on in the expectation of gain or reward."^[3] Based on this, cannabis production is classified as an agricultural use, which is exempt from any by-law restriction imposed on it. Therefore, where farming of cannabis is not a permitted use under a zoning by-law, section 6(1) of the FFPPA may prevent municipal by-laws, including zoning by-laws, from restricting such uses.

Section 6(1) of the FFPPA was recently considered by the Ontario Superior Court of Justice in Leamington v. DeGoey, 2021 ONSC 694. A home owner in Leamington installed plastic covered hoop greenhouses on his farm, which was zoned "agricultural hobby farm," and began cultivating cannabis for others in those greenhouses.^[4] His operation was permitted by the issuance of site-specific licences from Health Canada. The Municipality of Leamington argued that the home owner was growing and processing cannabis contrary to several municipal by-laws. Leamington brought an application against the home owner, seeking relief, which included an injunction restraining him from using his property for the growing or processing of cannabis; an order to comply with its cannabis regulation By-law 35-18; and an order for the home owner to remove and dispose of all of his cannabis. By-law 35-18 governs two types of cannabis facilities, and sets out rules for how such facilities are required to operate. Leamington took the position that the home owner's operations were a Part II cannabis facility under By-law 35-18, and as such the home owner's operations were subject to nine requirements.

The home owner had applied to the Normal Farm Practices Protection Board ("NFPPB"), objecting to a number of provisions of Leamington's By-law. The home owner also challenged Leamington's application, taking the position that the use of his property as a cannabis facility was a "normal farm practice" under s. 6(1) of the FFPPA and that Leamington lacked jurisdiction to interfere. The home owner sought an order staying the application pending the NFPPB's determination of his application for an order that Leamington's By-law did not apply to him. The NFPPB declined to hear the home owner's application until the issue of jurisdiction had been determined by the Ontario Superior Court of Justice.^[5]

The Court dismissed the home owner's motion, finding that the NFPPB's jurisdiction was too narrow to address the relief sought in his NFPPB application. The Court found that the NFPPB had jurisdiction to consider elements of zoning by-laws that dealt with normal farm practices and disturbances ("disturbances" meaning odour, dust, flies, light, smoke, noise and vibration pursuant to s. 1(1) of the FFPPA), but not by-laws that dealt with land uses related to farming operations allowed in certain zones. Specifically, the Court found that the home owner's objections in his application to the NFPPB could not be characterized as relating to disturbances within section 1(1) of the FFPPA , which meant that they were outside the board's jurisdiction.^[6] Counsel for the home owner argued that the board had jurisdiction to declare that any and all provisions of a zoning by-law did not apply to an applicant, including, without limitation, land-use issues such as which uses were allowed in what zones. The Court disagreed, finding that this conflated "land uses" with "farm practices."^[7] It could not accept the home owner's argument, providing that it would "deprive the municipality of control over various different agricultural land uses within the agricultural community, and accordingly, would deprive the municipalities of the ability to allocate scarce resources."^[8]

Ultimately, the Court found that the provisions as to the potential disturbance or nuisance resulting from cannabis cultivation were not at the centre of the home owner's application to the Board, but rather the zoning provisions on his land which prevented his cultivation of cannabis. The Court found that the board's jurisdiction was much narrower than the relief sought in Leamington's application. Further, the home owner's operation came after the municipal by-laws, which it was found to have contravened. The Court concluded that an appropriate remedy for the home owner would have been to make an application under the FFPPA prior to commencement of his operations or to conform to applicable by-laws.^[9]

It is our opinion that these cases – Leamington v. DeGoey in particular – were wrongly decided. Specifically, we believe the Court in Leamington v. DeGoey relied on a misinterpretation of the Hill & Hill Farms Ltd. v. Bluewater (Municipality), 2006 CarswellOnt 5537 decision of the Ontario Court of Appeal. As mentioned, s. 6(1) of the FFPPA clearly states that "no municipal by-law applies to restrict a normal farm practice carried on as part of an agricultural operation."^[10] As the Ministry has made it clear that agriculture is inclusive of cannabis cultivation, s. 6(1) of the FFPPA applies. The Ontario Court of Appeal in Hill & Hill found that a "municipal by-law" is inclusive of a zoning by-law, and that the NFPPB has jurisdiction to determine whether a zoning by-law restricted a normal farm practice.^[11]

Further, the Tribunal and Court relied upon the decision of Oakville (Town) v. Read, 2011 ONCA 22, which we disagree with for a number of reasons. First, it was a goal-oriented decision. It is important to bear in mind the context of Oakville, which focused on a reduction of taxes, not what could be done on the land. Second, we find the Court's interpretation of s. 6(1) of the FFPPA to be restrictive beyond the words and clear intentions of the legislature.^[12]

It appears that the Divisional Court and the Court of Appeal in Oakville blindly followed the decision of Hill & Hill. There is no explicit language in the FFPPA to suggest that "farming" and "farm practice" are two fundamentally different concepts.

45. The fact that the normal farming practice must be a practice that is carried out on land for which farming is permitted is further confirmed by s. 6(16) of the Act, which sets out the three types of decisions that the Board can issue. Section 6(16)(c) says that the Board can determine that a farm practice will be a normal farm practice "if the farmer makes specific modifications in the practice within the time set out in the decision." If the subject lands in question are not zoned for agricultural purposes, there is nothing a farmer can do to bring his farm practice in compliance with the definition of "normal farm practice" in the Act. This is because s. 6(1) deals only with restricted practices, not with land uses.

46. Therefore, when s. 6(1) is read in conjunction with the preamble and other provisions of the Act, it is readily apparent that the Board only has jurisdiction to consider the applicability of by-law to normal farming practices that are carried out on agricultural lands. The Act does not permit circumvention of legitimate municipal planning regarding the land use designations of various lands.^[13]

The bolded statements in paragraphs in 45- 46 are highly contradictory. The Court has found that the FFPPA does not apply to land uses, however also states that the jurisdiction of the NFPPB is limited to normal farming practices that are "carried out on agricultural lands"… which equates to a land use.

The preamble of the FFPPA seeks to protect the development and improvement of agricultural lands in agricultural areas. It would therefore be contrary to the goals of the FFPPA to exclude all issues of land uses or zoning in its application. The FFPPA defines "Agricultural Operation" and "Normal Farm Practice," and the zoning of land is not an element of differentiation provided in the statute between these two concepts.^[14] These concepts are interrelated and relative to one another. For example, s. 1(2) provides an interpretation of "Agricultural Operation" that includes examples of types of farming, which are also clearly farming practices.^[15] Farming practices make up and are examples of farming, as is made clear in s. 2(1), which states that "A farmer is not liable in nuisance to any person for a disturbance resulting from an agricultural operation carried on as a normal farm practice."^[16] The FFPPA only differentiates between farming that meets certain standards and farming that doesn't; it does not differentiate between the land use/zoning and the farming activities.

As we have seen in these cases, the courts and tribunals have continued to misinterpret the intention of the FFPPA, and specifically the application of s. 6(1). There has been a tendency to defer to municipalities, most often incorrectly, and to improperly narrow the intended scope of the FFPPA. In 2022 as opposed to 2011, a variety of farming practices are carried out on non-agricultural lands. Toronto is a great example of this, as there are no Agricultural zoned lands, but there are agricultural uses permitted on Industrial zoned lands. There is a movement across the world to convert office buildings into farming. The interpretation of s. 6(1) and 6(16) in the above cases is simply incorrect, and would not make sense in light of modern day agricultural practices.

We have reviewed correspondence from the Ontario Ministry of Agriculture, Food and Rural Affairs ("OMAFRA"), and are satisfied that the Ministry agrees with our conclusion that growing cannabis is an agricultural exercise, and therefore protected by the FFPPA . Properly argued, this would lead to a result where no municipality has any authority to create restrictions for cannabis production or warehousing/distribution.

Section 42(1) of the Cannabis Licence Act, titled "Restrictions on By-law Making Authority" is another provincial statute that bars municipalities that have allowed cannabis retail stores within their boundaries from passing by-laws under the Planning Act, R.S.O. 1990, c. P.13 ("Planning Act") that distinguish between uses of land, buildings or structures that involve the sale of cannabis, and uses which do not.^[17] Section 42(2) deals with Planning Act by-laws. Municipalities are unable to restrict the establishment of cannabis retail stores within a given zone without also restricting all other retail stores at the same time. Therefore, a municipality would need to rezone an entire area from commercial use to residential, or another zoning designation, to prohibit the establishment of cannabis retail stores in a given area. Municipalities are also restricted from passing by-laws that create municipal business licensing regimes, specifically by-laws that control the sale of cannabis, holders of a licence or authorization issued under the Cannabis Act or cannabis retail stores.^[18]

Do municipalities really have jurisdiction to regulate cannabis production?

Section 9 of the SOR/2018-144 ("Cannabis Regulations") sets out that any licence issued by the Minister is specifically tied to the address of the site. Licences authorize specific activities at the site, and may even include details regarding which authorized activities may be conducted at each building at the site. Licences also contain any conditions the Minister considers appropriate. Section 39(1) of the Cannabis Regulations sets out that the holder of a licence is authorized by the federal government to carry out the prescribed activities, including the cultivation, propagation and harvesting of various forms of cannabis, on an approved site. Therefore, the constitutional authority for the regulation of the production of cannabis is wholly within the jurisdiction of the federal government, including the approval of sites for cannabis cultivation and production.

The doctrine of Federal Paramountcy dictates that where there is a conflict between valid provincial and federal laws, the federal law will prevail and the provincial law will be inoperative to the extent of the conflict. Even where dual compliance is possible, if the provincial law frustrates a federal purpose, this is considered a conflict. The municipal jurisdiction to regulate land use and zoning is a statutory power arising from Acts of a provincial legislature. In particular, municipalities are empowered to deal with land use and zoning matters under the Municipal Act, 2001, S.O. 2001, c. 25 ("Municipal Act"), and the Planning Act. The Municipal Act provides at section 14(1) that "A by-law is without effect to the extent of any conflict with, (a) a provincial or federal Act or a regulation made under such an Act; or (b) an instrument of a legislative nature, including an order, licence or approval, made or issued under a provincial or federal Act or regulation."

The Municipal Act further provides at section 14(2) that: "without restricting the generality of subsection (1), there is a conflict between a by-law of a municipality and an Act, regulation or instrument described in that subsection if the by-law frustrates the purpose of the Act, regulation or instrument."  As such, a municipality's authority to regulate land use is in conflict with the purpose of the Cannabis Act, and the federal purpose, statute and regulation must prevail. The power to legislate on cannabis is, in some respects, shared between the federal government and the provinces. Provincial legislatures have some authority to determine how cannabis is distributed and sold within their jurisdictions pursuant to their power over "Property and Civil Rights in the Province" under section 92(13) of the Constitution Act, 1867, including: how cannabis can be sold, where stores may be located, how stores must be operated, and who is allowed to sell cannabis.

Ontario has allowed municipalities to prohibit cannabis retail stores from being located in the municipality, pursuant to section 41(1) of the Cannabis Licence Act. However, the federal government has occupied the field with respect to the regulation of cannabis production, and it has not provided a similar option for municipalities to opt-out of allowing the cultivation of cannabis within their territory. As a result, while municipalities may choose not to allow the retail of cannabis within their lands, they do not have the power to prohibit or regulate the legal cultivation or production of cannabis.

Parliament may validly regulate products for a public health purpose through the "Criminal law" head of power under section 91(27) of the Constitution Act. Pursuant to the Cannabis Regulations made under the Cannabis Act, the federal government regulates the issuance of site-specific licences for cultivation, processing, analytical testing, sale and research of cannabis and cannabis drugs. The Cannabis Regulations also deal with security required for, and emissions from, licenced facilities. Before submitting an application to the Minister for any type of licence, the applicant must provide a written notice to the municipality in which the site referred to in its application is located. Notably, the Cannabis Regulations do not solicit input from the municipality as to the location of the site. Municipalities are notified, but there is no mechanism for municipal participation in the licensing process.

This argument was made in the decision of Niagara-on-the-Lake^[19]. Here, Tweed Farms Inc. intended to contest the constitutional validity of Interim Control By-law No. 5169, adopted by Niagara-on-the-Lake ("NOTL") pursuant to section 38 of the Planning Act^[20]. In 2018, the Town adopted Interim Control By-law No. 5089-18 (the "Original By-law") for the purpose of restricting the use of all lands in the municipality for any cannabis-related land uses pending the completion of a study. The Original By-law was set to expire after a period of one year, on August 27, 2019.

On July 15, 2019, the Town passed Interim Control By-law No. 5169-19 ("Extension By-law"), which had the effect of maintaining the restrictions set out in the Original By-law for an additional year. Tweed Farms Inc. appealed the Extension By-law under section 38(4.1) of the Planning Act, including on the basis that the Extension By-law sought to regulate cannabis, which was outside the jurisdiction of a municipality. On March 26, 2020, the Tribunal issued a procedural decision setting an issues list for the hearing of the appeal, including the issue of whether NOTL had authority to review and regulate cannabis-related land uses through an interim control by-law.

The Town enacted interim control by-laws to freeze the expansion or introduction of any cannabis related land uses, despite the federal approval of such uses including the location of sites. Furthermore, the Town's resolution in enacting the Extension By-law directed staff to prepare a zoning by-law that was so restrictive that it frustrated the purpose of the Cannabis Act and Cannabis Regulations. For example, council directed that planning staff bring forward a by-law to require a setback of 250 m from all property lines for indoor cultivation, and to prohibit outdoor cultivation, unless it was the only available option, in which case there must be a minimum setback of 400m from all property lines.

This direction was in conflict with the Cannabis Act and Cannabis Regulations, which allowed the holder of a licence to cultivate, propagate or harvest cannabis on an approved site, both indoors and outdoors. The implementation of a 250 m setback from all property lines to an indoor cultivation would have the practical impact of prohibiting cannabis production within the municipality. The proposed setback required at least 61 acres just to accommodate the 250m setback from all properties lines. The proposed setback was so large that the area of existing lots was too small to support the cultivation or production of cannabis. The proposed setbacks would have been similarly prohibitive for outdoor cultivation, requiring approximately 158 acres to accommodate the 400m setback from all property lines. While this constitutional issue was not determined by the Local Planning Appeal Tribunal, or the Divisional Court in NOTL, it calls into question a municipality's authority to regulate cannabis production.

Conclusion

It is our view that the federal government has occupied the field in terms of cannabis production, and that on a constitutional basis, municipal zoning by-laws purporting to regulate the production of cannabis would be outside the scope of municipal powers. While municipalities may choose not to allow the retail of cannabis within their lands, they do not have the power to prohibit or regulate the legal cultivation or production of cannabis. 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 be creative and 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.

Works Cited

LEGISLATION

Cannabis Licence Act, 2018, S.O. 2018, c. 12, Sched. 2.

Cannabis Act (S.C. 2018, c. 16).

Farming and Food Production Protection Act, 1998, S.O. 1998, c. 1

Planning Act, R.S.O. 1990, c. P.13, s. 38.

JURISPRUDENCE

Hill & Hill Farms Ltd. v. Bluewater (Municipality), 2006 CarswellOnt 5537, [ONCA].

Leamington v. DeGoey, 2021 ONSC 694

NIAGARA-ON-THE-LAKE v. TWEED FARMS INC., 2020 ONSC 3664.

Oakville (Town) v. Read, 2011 ONCA 22.

Tweed Farms Inc. & 2470689 Ontario Inc. v. Niagara-on-the-Lake (Town), 2020 CarswellOnt 4530 (LPAT)