Newfoundland Is Betting There’s Big Money in Big Weed

I’se the b’y that grows the dope and I’se the b’y that smokes her. Or I could be, soon: Newfoundland and Labrador has just struck a major deal with Ontario-based Canopy Growth to ensure that the province is flush with green when marijuana prohibition ends next year.

The provincial Liberals are betting there’s big money in Big Weed. They may be right. But there are few details of how they struck today’s deal. Nor will it face scrutiny in the House of Assembly until much closer to the July 2018 legalization deadline. In a province with a storied history of scandalous state-sponsored industries, that’s never a good sign.

The government announced the agreement with Canopy to supply up to 8,000 kg of cannabis per year for the next two years, with a one-year optional extension. While nearly all of that will need to be imported to the province when legalization takes effect in 2018, Canopy Growth has also committed to building a 150,000 square foot production facility somewhere on the island, to be in operation for at least 20 years. In the long run, the plan is to produce up to 12,000 kg domestically, and export any surplus.

No location for the facility has been finalized yet, but the expectation is that it will be built on the Northeast Avalon near St. John’s and create 145 jobs. The province and Canopy Growth have also announced a cost-shared research and development program totaling one million dollars.

The provincial government will provide financial assistance to Canopy Growth as it sets up production in the province, to the tune of $40 million. In lieu of a direct cash subsidy, Canopy Growth will be entitled to keep a small portion of every cannabis sale in the province. According to Ashley Fitzpatrick in The Telegram, 10 percent of sales through the Newfoundland Liquor Corporation, five percent of sales online, and three percent of sales through other stores “certified as a seller by the NLC” will go back to Canopy Growth until they have recouped $40 million, at which point full remittance of all cannabis sales will go to the NLC. Meanwhile, as Terry Roberts reports at CBC, Canopy Growth expects the final cost of the production plant to run them between $55 and $60 million.

All sourcing and distribution of marijuana in Newfoundland and Labrador will be carried out through the NLC, which will also operate an online sales platform for the drug. The NLC is also the body that will be licensing front-end marijuana retailers in the province, and Canopy Growth will get up to four branded retails outlets in the province as part of this arrangement.

Although Canopy Growth will be the primary source for cannabis in the province, it will not be the sole supplier, nor is the NLC legally obligated to buy marijuana only from the company. Provincial Industry Minister Chris Mitchelmore stressed that the province is open to sourcing marijuana from other licensed producers, and Canopy Growth says it has plans to work with local growers through educational programs. Currently, however, there is no licensed cannabis producer in the province, and NLC-sanctioned retailers will be required to carry Canopy Growth products.

Questions about the dope deal remain. But I wouldn’t hold my breath for many answers.

The decision to enter into partnership with Canopy appears to have been made without any formal request for proposals from other potential suppliers. It was also announced the day after the House of Assembly closed for the holidays, so the Liberal plan to give Canopy Growth privileged access to the market won’t get any legislative oversight until well into the new year.

There is also Muskrat Falls. (There is always Muskrat Falls.) When the project comes online in 2020, it’s expected to spike provincial power rates—up to an estimated 23.3 cents per kilowatt hour by 2023. The provincial government has previously announced that they intend to mitigate these rates for both individual and industrial consumers. So it’s not clear what impact the Muskrat rates will have on the province’s plans to financially jump-start a new (and very electricity-intensive) marijuana industry on the island. But it may ultimately involve more than the $40,500,000 they’ve capped it at.

How this bag shakes out remains to be seen. But hopefully it’ll go better than the last time Newfoundland tried its hand at hydroponics.

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