Agriculture Committee on June 20th, 2022

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Hurford.

Thank you, Mr. MacGregor.

Colleagues, that brings us to the end of our first panel. I'd like to thank the witnesses on your behalf for sharing their important testimony here today.

Thank you.

Colleagues, we're going to take a two-minute break. We do have a next panel. For those who are participating online, the clerk is going to send a virtual link because for the last 10 minutes we're going to reserve some time for some feedback based on the elements you might want to see in the letter. We're not going to have a drafting stage, but it will be instructive to our analysts.

For those participating online, watch for that link.

We'll see you in two minutes and we'll get started.

[The Chair, Liberal, Kody Blois]

We have three different witnesses scheduled here .

From Blue Sky Hemp Ventures, we have Devin Dubois, who serves as the vice-president, corporate affairs, and counsel.

From Canadian Hemp Trade Alliance, we have Ted Haney, president and chief executive officer. We're going to work with Mr. Haney to see if we can get his microphone issues resolved. We also have Keith Jones, who serves as the board chair.

We did extend an invite to Agropod, but Ian Bourassa has not shown up yet, so perhaps he will join at some point, but we've been unable to get him.

We have five minutes for opening statements. We're going to start with Mr. Dubois.

It's over to you for five minutes, my friend.

[Devin Dubois, Vice-President, Corporate Affairs and Counsel, Blue Sky Hemp Ventures]

Thank you, Mr. Chair. Thank you for hosting us today.

My name is Devin Dubois. I am vice-president and one of the founders of Blue Sky Hemp Ventures. We are, I would say, a primary hemp processor. We make food products from seed, and we also make cannabis products from hemp flour in a licensed cannabis processing facility. We are perhaps the only company that straddles the bridge between industrial hemp processing for food and the cannabis market by making extract.

The important thing that we would like to highlight here today is that Canada's approach to regulating hemp must acknowledge that hemp is different from cannabis and that hemp presents a potentially higher economic value to Canada because of that difference.

Hemp is a broad-acre, rotational oilseed akin to flax, sunflower or canola, with the added benefits of supplying industrial and nutraceutical inputs, all in a sustainable, carbon-negative fashion, making it potentially the highest value broad-acre crop in Canada. It is not the same as cannabis grown for recreational or medicinal value.

The other important element to understand is that the Canadian Prairies are strangely well suited to hemp production, as land values and current production alternatives to hemp, other oilseeds in broad-acre production like canola, flax and sunflower.... Hemp is economically and agronomically competitive with those crops, given the right circumstances.

We have an immediate advantage over other global regions, including the U.S., in terms of experienced production capacity, agronomic knowledge, production economics and immediate processing capacity. However, this advantage will quickly dissolve unless Canada takes action to remove impediments to the growth of hemp cultivation. It's now a federally legalized production crop in the U.S., so we will see mounting pressure from the United States in how they develop processing, infrastructure and production.

The other thing I'll leave in my introduction is the real reasons that we need to think about fostering the growth of industrial hemp production. One of the first ones is that our growers are equipped and capable of simply adding this crop in rotation in place of other oilseeds like canola and flax. This is really just another broad-acre crop in rotation that has some unique attributes that potentially make it much higher value.

Number two, when the industrial hemp stalk is harvested and sequestered for industrial products, it pulls enormous volumes of CO2, in the vein of two to six tonnes per acre of production. This is real carbon sequestration; it's not a fictional or paper accounting of carbon. This is a real carbon sink, potentially, if we can get that stalk into industrial products.

The other thing is that hemp is really the first potentially significant multi-use, broad-acre crop. That is, we can generate food and ingredients from seed, industrial products from stalk, and nutraceutical compounds from flower all from the same acre. This is very possible, and it's really what our business is based on.

Finally, growth in hemp production drives value-added processing, as the high volume and low-value stalk requires primary processing relatively close to production. It doesn't work in any other economic fashion, so where there is a large supply of hemp is where you will find value-added primary processing in all three sectors.

There are some things we'd like to raise today about the impediments to growth in hemp production. Number one, in order to be economically competitive with other crops, hemp must be a multi-purpose crop in the current situation. That is, we need to derive different value chains from both the seed, the stalk and potentially the flower as well. When growers are looking to place crops, they need revenue at a certain level, and that revenue has to be above $500 per acre—probably more like $600 or $700 acre—to displace other crops.

That said, for single-purpose use, especially for single-purpose fibre use, the fibre industry cannot afford to pay that. This has to be a multi-purpose crop, and there's certainly opportunity to do that.

Also, unlike every other oilseed or grain in Canada, hemp by-products—including benign portions like seed—are not permitted for use in the commercial feed market. This is an extreme economic disadvantage for hemp growers and processors. Every other grain and oilseed industry has an outlet in the commercial feed market for by-products and off-spec products. This may be the single biggest factor currently impeding hemp production and hemp processing. Part of that is because hemp foods from seed generally remain in a niche market, so the market demand is growing, but it's taking time, and without an avenue to feed the by-products into the animal market—

[The Chair, Liberal, Kody Blois]

Mr. Dubois, could you just wrap up in 10 or 15 seconds? That would be great. I gave you a little bit of extra time.

Over to you.

[Devin Dubois]

The last thing is just to understand that, although hemp crosses into the cannabis market, that's a very complicated transition and we need our government partners to think about hemp as something different from cannabis so that we get the right regulatory regime to support the industry.

[The Chair, Liberal, Kody Blois]

Thank you very much.

Mr. Haney, I believe we've resolved your microphone issues. Fingers crossed.

We go over to you and Mr. Jones. You guys can decide how you'd like to split your five minutes.

Over to you.

[Keith Jones, Board Chair, Canadian Hemp Trade Alliance]

Thank you very much, Mr. Chair, and thank you to the committee for hearing from us today.

Our organization has been involved as the Canadian national organization for the Canadian hemp industry. The Canadian Hemp Trade Alliance was established in 2003 to advance the industry. We have over 240 members from all 10 provinces and one of the two territories right across the country. We represent over 240 members, spanning the entire value chain, from producers right through to processors and companies that are making hemp products in the food industry.

I'm involved with a hemp farm in Alberta and have been board chair for the last five years at Canadian Hemp Trade Alliance.

Since the passage of the Cannabis Act, Health Canada has, unfortunately, significantly harmed the Canadian hemp industry through inattention, neglect and wholly inappropriate regulatory interpretation. This has directly contributed to the significant loss of hemp acreage in Canada, from 118,000 acres in 2017 to 60,000 acres in 2021, and likely even less this year. Health Canada's regulatory oversight has significantly undermined Canada's position as the global leader in hemp for food.

Today we are asking the committee to engage an emergency study on the current regulatory oversight of hemp under the Cannabis Act and the industrial hemp regulations. The results of that study, we believe, will support our request to move the responsibility for the hemp file from Health Canada, which doesn't understand it, to Agriculture and Agri-Food Canada, which does understand it.

Our industry grew significantly from 1998, when the production and processing of hemp was legalized in Canada, right through to 2017. The Cannabis Act came into force in 2018.

In 2017, our industry generated more than $180 million in sales, exported $97 million in value-added products, supported over 1,000 jobs, provided $9 million in federal and provincial corporate taxes and contributed approximately $370 million to the Canadian economy.

As Mr. Dubois testified, in addition to being an excellent source of plant oils and proteins, hemp is a tremendous contributor to carbon sequestration and low-emission agricultural production. Competitors in the U.S., Europe, Australia, China and other countries are awakening to the potential of hemp and are amending their regulatory regimes to enable this important crop.

The passing of the Cannabis Act and the industrial hemp regulations was intended to consolidate all hemp-related regulation, delineate between hemp and high-THC cannabis, streamline regulatory processes and remove certain restrictions. Unfortunately, this hasn't happened. Our industry has been damaged since Health Canada began regulating it under the new Cannabis Act.

The entire industry is concerned about the regulatory implementation. It's less concerned about the Cannabis Act itself and the industrial hemp regulations themselves, although there are definitely opportunities for improvement. It's more about the interpretation of those regulations and how Health Canada has actually regulated hemp. Despite hemp seed and hemp stalks being exempted from the Cannabis Act under schedule 2, Health Canada has continued to regulate all hemp and provide advice to any people in the industry interested in using hemp, as it is a controlled substance that requires a cannabis type of handling.

CHTA concurs with Mr. Dubois' testimony that it is time for a review of the regulatory environment and an amendment to the regulatory practices, which are damaging the industry.

I will turn it over to Mr. Haney to share some specific examples. CHTA has a great deal of evidence to provide in this regard.

[The Chair, Liberal, Kody Blois]

We have about one minute left for testimony.

[Ted Haney, President and Chief Executive Officer, Canadian Hemp Trade Alliance]

Thank you very much. Hopefully my mike issues have been addressed.

To summarize the high points, there have been a number of areas in which Health Canada's administration has caused damage. The high points really are that the line between industrial hemp and THC has become less clear in many ways and therefore things have not been delineated. In particular, Health Canada has created interpretation barriers that hinder and block value-added processing of hemp in Canada, and as a result of that, investment in food, feed, fibre and fractions processing has been lower and in some cases has moved outside Canada.

Regulated processes guiding hemp breeding and cultivar registration have become more complex and less transparent, which has resulted in less innovation and higher risk. Health Canada's regulatory interpretation regarding non-THC cannabinoids in hemp products is inconsistent with both the Cannabis Act and industrial hemp regulations. This has introduced risk and uncertainty, which in turn has reduced seeded acres and investments in value-added processing.

Health Canada's regulatory management has really—

[The Chair, Liberal, Kody Blois]

Mr. Haney, I apologize, but we're going to have to leave it at that. I know my colleagues are itching to ask questions of our other witnesses as well.

[Ted Haney]

Thank you.

[The Chair, Liberal, Kody Blois]

With that, we're going to get started.

I think Mr. Shields is sitting in. You have six minutes.

Now colleagues, just to be clear, we need to make a little bit of time at the end to provide some instructions to the analyst. My intention is that the first round will be six minutes for each party and then two minutes for the Conservatives, two minutes for the Liberals and then just one minute for the Bloc and NDP. That way we can get two rounds.

Mr. Shields, please go ahead for six minutes.

[Martin Shields, Conservative, Bow River, AB]

Thank you to the witnesses for the information you've presented today. I've been dealing with health ministers on this one for a number of years, and they all agree it should be transferred, but nothing happens. Recently I spoke to the industry minister, justice minister and the environment minister. They all thought it had been transferred. They can't believe it's still in Health Canada.

So we have a challenge in the sense of getting it out of Health. It has to get out of Health Canada.

You referred to the report, Mr. Jones. Would you please submit that report to the committee immediately so we have it as part of our study? You have excellent information in that report. I reviewed it again this morning.

You mentioned the international market, but you also mentioned the decrease. Could you go back and talk about why there's a decrease in acreage? This is a phenomenal crop. The witnesses have explained the tremendous value of it, but could you go back and tell us, from your organization, why this decrease in crop acreage has happened?

[Keith Jones]

Thank you very much, Mr. Shields.

We found that with the uncertainty around the interpretation of the regulation, farmers are finding it too risky to seed hemp and to plant hemp. CHTA has collected numerous examples of how food processors have approached Health Canada with regard to including hemp protein or hemp oil in their food formulations and have been told by Health Canada that in order to do so and to comply with the requirements for CBD, the food processors need to register under the Cannabis Act as licensed processors.

Well, they aren't intending to get into the cannabis business. They're planning to use the exempted parts of the plant—the hemp grain and the hemp stock—for their processes, but Health Canada has advised them they'd need to get licences to be part of the Cannabis Act.

Because of that risk, processors have shut down. Processors are not expanding their businesses. Other food companies are not looking at adding hemp protein, which is a fantastic protein, or hemp oil, which is a sensational functional oil, into their formulations, and as a result, we've seen our acreage drop by half and continue to drop.

[Martin Shields, Conservative, Bow River, AB]

Recently there was a federal grant announced for the Vegreville area to deal with the fibre and to build other products with it. So it seems hypocritical that we have a federal grant coming into a community to develop it, and yet the health restrictions are lessening that.

This is where other countries are going, right? They've figured out that there's fibre here; there are all sorts of plants, yet we're going in the wrong direction.

[Keith Jones]

Yes, that's a tremendous point. There is significant interest in hemp fibre, and because hemp fibre is part of hemp straw, which is exempted from the act, the processors have moved with more confidence on hemp fibre because it's not connected to a food product.

Ted, you had a comment.

[Ted Haney]

Yes.

The dual approach of Health Canada, which was to implement a completely unjustified interpretation of zero tolerance for any non-THC cannabinoid in any hemp process product, really put an end to hemp entering the natural health products and veterinary health products sector completely and has absolutely put additional risk in the highly value-added processes or programs in hemp fibre, as well as hemp foods from seed and stock. Because Health Canada has basically treated the whole plant as cannabis, the ability to use hemp roots to extract bioactives and/or to infuse the product for even topical lotions has been completely voided.

We have a major issue with Health Canada treating hemp as cannabis, which is the opposite of what the intentions of the Cannabis Act and the industrial hemp regulations were in the first place.

[Martin Shields, Conservative, Bow River, AB]

Our closest trading partner is the U.S. Years ago at a PNWER convention, the Americans were there asking questions about the Canadian hemp industry. There was little interest at that time, but since then, the interest in hemp has exploded in the States. We are now falling behind, in the reverse of five years ago. They're our biggest trading partner. How are we going to compete with the U.S. in our hemp industry if this continues?

[Ted Haney]

I think it begins with implementing the Cannabis Act and the industrial hemp regulations as they are written and, more importantly, as Parliament intended them to be implemented. That will be a great start.

There are amendments to both that will be helpful to more fully open our industry while protecting human health and the environment, but just implementing those two documents as intended will be of great assistance.

[Martin Shields, Conservative, Bow River, AB]

Mr. Dubois...?

Or am I out of time?

[The Chair, Liberal, Kody Blois]

You have 15 seconds.

[Devin Dubois]

I would just echo what has been said and have everyone understand that the market is here for the taking. We export much of our food product ingredients—our non-cannabinoid product—to the U.S. We're currently in that exporter market, but that could change if we're not careful.

[The Chair, Liberal, Kody Blois]

Thank you.

Mr. Turnbull, we'll go over to you for six minutes.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you.

It's great to have such knowledgeable witnesses with us today. Thanks to all of you for your testimony. I found it really interesting and informative.

Let me just zero in on a couple of questions that I had.

In the opening remarks, it was mentioned that hemp has such a great economic potential because it's a multi-use crop, and it sounds like that potential is being under-realized at the moment. If this industry grew to its full potential, what would be the economic potential that you would see in the future? Do you have any sense of what size it would be?

Maybe I'll frame that for Mr. Jones and Mr. Haney for now.

[Ted Haney]

Sure.

For our industry, assuming the Cannabis Act and the industrial hemp regulations are appropriately implemented, I believe that we will move from our current 60,000 acres to 229,000 acres, with farm grade sales of $340 million, a billion dollars of industry sales, a half a billion dollars in exports and almost 5,000 jobs, contributing $2 billion to the Canadian economy.

That's the prize for industry, for Canadian agriculture and the Canadian economy, just by implementing the Cannabis Act and industrial hemp regulations as written and as intended by Parliament.