A BRIGHT GREEN SPOT IN THE ECONOMY

With Courts Striking Down the Government's Monopoly on Supplying
Medical Marijuana, Private Growers Are Clamouring to Capitalize on
Pot's Commercial Potential

DUNCAN - Eric Nash can barely contain his excitement waiting to hear
from Health Canada whether he can start growing marijuana for 250 patients.

That would be just the start. There are tens of thousands more who
are ailing across the country clamouring for his organic B.C. bud.

"There is a great opportunity here for the government to collect
significant tax revenue currently being lost to the street market,"
Nash, one of the best-known legal cannabis producers, enthused.

"With the current global financial crisis, this court ruling is
certainly a bright light in dark economic times. We're just waiting
for clarification. I figure our production would increase
significantly from several pounds to 150 pounds or more immediately."

Now that the Federal Court of Appeal has struck down the government's
monopoly on supplying medical marijuana, Nash believes commercial
agricultural production of pot is around the corner and the sky's the limit.

His local company, Island Harvest, has cleared the industrial
security regulatory hurdles so the company meets the standards set by
Ottawa to grow the much-demonized plant.

"Our vision is to have a sustainable commercial agriculture
operation," he said. "There's no reason we can't achieve that. Look
at the number of compassion clubs, look at the number of people using
marijuana to relieve a headache or pre-menstrual cramps!"

More and more research is supporting previous anecdotal evidence that
cannabis may have a wide range of therapeutic uses from the treatment
of Alzheimer's, depression, glaucoma, epilepsy and cancer to
HIV/AIDS, hepatitis and ADD/ADHD. Its most ardent promoters say
cannabis may be an addition to the modern pharmacopeia that rivals
Aspirin in the breadth of its applications.

It doesn't take a genius to realize the potential profits are staggering.

Until now, the government's poorly administered medical program has
artificially depressed that market by making it difficult for
patients to qualify, supplied what many consider poor-quality
marijuana and imposed an arbitrary restriction on qualified licensed
growers to supplying only two patients.

Doctors, too, have exacerbated the situation with their reluctance to
prescribe marijuana, claiming they have no guide on dosage or the
usual pharmaceutical medical studies to rely on. That is changing, slowly.

Nash explained there have been three relatively recent, serious
analyses of the medical marijuana market, which give an idea of its
scope and potential.

The Canadian Medical Association Journal did a survey in 2000 and
estimated the number of self-medicating marijuana patients to be 1.9
per cent of the population; a Price Waterhouse report prepared for
Health Canada two years later concluded it was more like four per
cent of the population, and a report in 2004 by a member of the
federal government's advisory committee on pot suggested the reality
was closer to seven per cent.

(Health Canada, after eight years, has issued roughly 2,500 exemption
permits to needy patients.)

Regardless, Nash said, based on the four-per-cent model, that puts
sales at more than $400 million annually.

More optimistic projections say the medical market, including
ancillary products such as vaporizers and paraphernalia, could be as
high as $20 billion.

Add it up: The government sells maybe $1 million a year worth of the
pot produced in a Manitoba mine, and compassion clubs across the
country sell about $10 million worth of cannabis products.

By far the vast majority of patients who need marijuana as a medicine
continue to buy their drugs from the black market. It's a crazy
situation: imagine if diabetics had to go to a corner dealer to score insulin.

That's one of the fundamental reasons behind the court ruling Oct.
27: the medical marijuana program set up by Ottawa at the turn of the
millennium isn't working.

The government adopted the Medical Marijuana Access Regulations
(MMAR) and accompanying bureaucracy in 2001. It has modified it since
then in the face of judicial warnings that it was constitutionally
inadequate, but it still can't pass muster.

The courts find that offensive.

This new judgment heralds a tectonic shift in the country's
medical-marijuana regulatory regime and perhaps even the drug laws.
It may even invalidate the cannabis prohibition.

Two B.C. Supreme Court justices sitting on separate cases (one about
simple possession, the other production and trafficking) are
currently seized with that question.

If they agree that because a section of medical program is
unconstitutional the criminal law cannot be enforced, it would also
mark the triumph of a Trojan horse strategy by cannabis activists to
achieve legalization by expanding medical access.

Just as liquor was once obtained via prescription, cannabis could be
regulated in a similar fashion, obviating the need for a criminal prohibition.

No matter how you look at it, the federal court decision promises an
economic boon immediately for the hundreds of legal cannabis
producers and increased opportunity for many others.

Nash said it was good news for both the consumer and producer.

The former government communications worker and his partner, Wendy
Little, have been growing since 2002 and proselytizing longer than
that. Their book Sell Marijuana Legally is a huge hit; they created
an online users' group for patients and growers, and they teach courses.

But medical growers across the country have been restricted, a policy
that results in a huge gift of revenue to organized crime.

B.C. Bud's Staggering Numbers

Stephen Easton, an economist at Simon Fraser University and with the
Fraser Institute, has done the most respected work on the size of the
domestic pot industry.

He sat down earlier this year in Denny's with one of B.C.'s biggest
dealers and went over his numbers.

"He figured it out differently than I did, using lights and
ballasts," Easton said. "But he worked out the numbers with me and it
all worked out. He told me it was very close. He was quite surprised.
I was very happy about that. We had a really good talk. He was really
helpful for me."

Since Easton's original estimates, the domestic marijuana market has
undergone some changes, but nothing cataclysmic.

"The fluctuations in the dollar are the main economic factor," he
said. "It has gone up and down and that pushes these guys."

For most of the last few years, the most significant factor has been
the various improvements in border security triggered by the 9/11
terrorist strikes.

In the 1990s and even throughout the early part of this decade, tons
and tons of Canadian marijuana flooded into the U.S. market carried
by anyone with moxy and a decent plan.

People were backpacking across with as much weed as they could carry
in the Interior, or kayaking across with a stash of bud worth as much
as emeralds.

Between 1990 and 2000, the Canadian pot market doubled in size
fuelled primarily by the increased hydroponic production of B.C. bud.
Nationally, we apparently spent $1.8 billion toking up -- just shy of
the $2.3 billion we burned on tobacco.

By 2006, when he did his calculations, Easton said the numbers
indicated a provincial wholesale market of $2.2 billion. You could
increase that to $7.7 billion retail if consumers paid top dollar for
their bud.

That dwarfed any other B.C. agricultural product.

The result on the street was easy to see: a proliferation of gangs
duly documented by the RCMP, as every crook plucked what Easton
called "the low-hanging fruit."

The tightening of the border has had several effects.

Not just everyone can take it across now, with underground sensors,
heightened air traffic scrutiny and the deployment of the military.
Smuggling now is more the purview of the very organized and the very desperate.

At the same time, U.S. authorities have charted the rise of their own
domestic production as American states relaxed enforcement and
sentencing -- the opposite of the 1980s and 1990s when their stiff
attitude drove marijuana growers north.

In California alone, Berkeley, Santa Barbara, Santa Cruz, Santa
Monica and San Francisco all have officially told police to make
marijuana offences their lowest priority.

Evolving Production

Pot production in California rivals Canada's total output.

Similar initiatives have been adopted in other states and cities such
as Seattle, Denver and even Missoula, Mont.

With the north-south route to market more problematic, more B.C. bud
has moved east to feed eastern appetites or find a less monitored
area of the border before turning south. The Mounties have responded
by increasing surveillance along the Trans-Canada on the Prairies,
resulting in large seizures.

By far the biggest factor in the marijuana market in recent years,
however, has been the revolution in production -- the ease,
predictability and most importantly the portability that has come
with advances in indoor cultivation that mean great weed can be grown anywhere.

The RCMP have been reporting huge busts in Eastern Canada as
production has sprouted in the Maritimes and Ontario, reducing their
appetite for West Coast pot.

In Ontario, whose provincial production is said to have surpassed
B.C.'s, authorities have uncovered two separate operations each
capable of producing $100 million worth of cannabis a year.

B.C. bud ruled in the 1990s when the underground marijuana trade was
responsible for keeping afloat many small communities buffeted by
resource-market gales.

Our pot even had cachet even up until four or five years ago but
these days, be you in Charlottetown or Joe Batt's Arm, Nfld., you can
easily obtain good seeds and fail-safe equipment and within a few
months be producing marijuana to rival B.C.'s best.

Nevertheless, Easton explained, when you are looking at a commodity
and domestic production, it's all about the money.

The rise of the dollar in recent years worked against growers and
exporters, but its recent fall provides an upward fillip.

"I imagine with all the market turmoil the domestic marijuana
industry will pick up a bit," Easton said. "it's just had a
15-to-20-per-cent bump in two months."

Some estimates in the 1990s suggested as much as 50 cents of every
dollar generated in some Kootenay towns could be traced directly to pot.

With the international financial tempest wreaking havoc again with
commodity prices, B.C. bud may yet help ride out the storm but
probably not to the same extent.

"We'll just have to watch housing prices in Nelson," Easton laughed.

Mexico Considering Legalization

Sitting in Kitsilano eating breakfast before meeting the city's
police board, former Drug Enforcement Administration agent Celerino
Castillo III nodded his head furiously.

"Yes, yes, it's all about the money," he said. "The money, it's all
so corrupt."

Castillo spent 12 years in the USDA infiltrating Manhattan drug
rings, destroying jungle cocaine labs and training anti-narcotics
agents. The climax of his career was pulling the curtain back on
drug-smuggling by the Nicaraguan Contras with links to Lt.-Col.
Oliver North and the CIA.

From the Amazon to the slums of Mexico City to the ghettos of
America, Castillo has had a front-row seat on the western
hemisphere's drug world and come to the conclusion it's time to
abandon our current approach.

Mexico is again considering legalization because of the violence and
social upheaval caused by illicit drug trafficking, and Canada should
be headed down the same path, he says. So should South America and,
of course, the U.S.

The money is too corrosive.

"The corruption is everywhere -- every month we arrest a law
enforcement official, every month," he insisted, "whether it's a
border patrol agent or a customs agent or a DEA agent or an FBI
agent. We arrest a law enforcement officer once a month, It's huge.
The amount of money is just so big. 'I have a mortgage to pay, I have
to send my kids to college.' That's always the excuse."

He shakes his head.

He explained that in his state, drug couriers once arrived with
suitcases of cash to deposit in local banks: "Now they buy the banks.
Especially now with this upheaval. Who else has the ready cash?"

He laughed.

"But that's actually how they're money-laundering today -- they buy a
bank," Castillo added. "There's no way we can keep up."

In retirement, Castillo has become a featured speaker for Law
Enforcement Against Prohibition, an association of former police,
corrections and judicial officers who want to change drug policy.

"There's more production, more product and more of everything than
there ever was. The war on drugs doesn't work," he said.

"All I'm hoping for is people to start to listen and educate
themselves about what's going on in the world," he said. "I know
first-hand. I've seen it from an agent's point of view.

"It's affecting and destroying a lot of families. For 40 years we've
been trying this John Wayne approach and it's not working. The bottom
line: There are a lot more drugs today than we had 40 years ago."

'These Are the Dealing Tables'

Dana Larsen ushers me into his new marijuana dispensary in the 800
block of East Hastings Street.

The former NDP candidate, who stepped down during the federal
election when his recreational drug use was publicized, has renovated
the run-down storefront and is promoting a new compassion club.

Like Nash, he thinks the medical pot market is about to expand
exponentially and legally.

"There's no smoking in here," he said as he showed me around the
spartan office. "But there's a vapour lounge two doors down in the
Seed Bank where you can light up after you leave."

There is a modest reception area and a large back room. It's clean
but unfinished.

"These are the dealing tables," he said, pointing to a handful of
folding tables separated by office screens to provide a measure of privacy.

He laughed.

"I guess I should call them dispensing tables."

Larsen, who used to be the leader of the B.C. Marijuana Party and
Prince of Pot Marc Emery's lieutenant, thinks the time has come to
move into the medical field.

"I think there's enough of a market in town to support another
dispensary," Larsen said.

"There are more than enough patients who need reliable, quality
cannabis products than the current two clubs in the city provide."

His menu of cannabis products included six strains of dried
marijuana, four kinds of hash, two pot products in capsules and
double-strength bon-bons -- cannabis-infused organic chocolates.

The pot ranged in price from $7.50 a gram for Pine Cross up to $8 a
gram for Sweet Tooth; pressed Kif (soft hash made with a sieve) went
for $8 a gram; and very potent Bubblehash, which was extracted using
water and ice rather than a sieve, went for $25 a gram.

In Oakland, Calif., the private dispensaries that support the state's
medical marijuana program are said to be generating revenues in
excess of $70 million a year.

Medical Marijuana Could Help the Sick

Michelle Rainey is one of roughly 2,500 Canadians with a licence to
possess and use marijuana. She's also a celebrity in the medical
marijuana world and on YouTube.

Rainey has Crohn's disease and finds her home-grown pot an effective
replacement for her previous expensive regimen of pharmaceutical drugs.

She believes the country's health-care system could save a fortune if
there was a working medical marijuana program, and those who could
benefit from cannabis could easily shift away from other medications.

The roughly 110,000 Canadians suffering from Crohn's disease and the
90,000 living with ulcerative colitis, for example, are estimated to
spend $162 million a year for prescription drugs.

Many of those people are already benefiting from marijuana, Rainey
said, but many, many more could be.

Consider too that many battling cancer and HIV/AIDS find edible
cannabis products work to stimulate the appetite, but they've got to
buy them on the street.

"We have a huge problem with physicians being apprehensive about
signing for patients even though the proof is there," Rainey said.

"Our seniors, for instance, are spending their pensions on big pharma
only to end up with more aches and pains when all they may need is a
puff or a brownie!"

Rainey has facilitated more than 70 exemptions for local patients, 30
suffering from Crohn's: "I receive dozens of e-mails from people
suffering every day from all over the world who have discovered
cannabis alleviates pain and nausea. The government should not be
preventing people from getting access to an effective medicine."

The courts agree.

In its decision, the Federal Court of Appeal did more than simply
hand Ottawa a legal loss. It said the government had been knowingly
dragging its heels since at least 2003.

As a result, lawyer Kirk Tousaw told B.C. Supreme Court that this
decision renders the criminal law invalid based on that history of
jurisprudence, which ties enforceability of the criminal law to the
existence of a constitutionally adequate medical access scheme.

He said the judgments in Ontario courts and now the federal court
mean the state of the law is unclear and therefore criminal sanctions
cannot be imposed.

In this latest case -- called Sfetkopoulos et al v. Attorney General
of Canada -- some 27 patients with exemptions to possess marijuana
for medicinal use applied to Health Canada for authorization to
designate Carasel Harvest Supply Corporation as their marijuana producer.

Health Canada refused, saying that violated the regulations that
restricted growers to supplying only two patients at a time.

But the Federal Court Trial Division agreed with the patients and
declared section 41 (b.1) of the MMAR was contrary to s. 7 of the
Charter because it threatened their liberty and security of the
person by preventing them from choosing their marijuana producer.

The judge accepted that sick people should have access to marijuana
for the treatment of serious medical conditions and they should not
be forced to risk imprisonment to buy their medication on the black market.

He interpreted the constitutional guarantee of security of person
rights to include access to medication without undue state interference.

Ottawa appealed and lost.

Court Rebukes Government

The appeal court agreed with the trial judge -- the medical marijuana
scheme was constitutionally deficient -- and rebuked the government.

The three judges said the Crown had brought forward a case dismissed
by the Ontario Court of Appeal in 2003, that nothing had changed and
the marijuana access regulations remained flawed.

In the unanimous 2003 decision, the justices similarly complained
about Ottawa's failure to deal properly with this issue.

In their terse three-page decision a fortnight ago, the justices
refused to suspend the impact of their ruling to give the government
time to amend the regulations.

Health Canada spokesman Phillipe Laroche said the department was
still studying the ruling and had not decided on its response.

Now, Tousaw has argued that those charged or convicted while the
medical marijuana access scheme was deemed unconstitutional should
have their convictions overturned or their charges stayed. That's
thousands of Canadians.

In particular, Tousaw says Ryan Poelzer should have his conviction overturned.

Poelzer was charged May 18, 2007 and there is no disagreement about
the facts. He was smoking a joint on a B.C. Ferry as it pulled into
Langdale and that offended an off-duty cop who called the RCMP. As he
stepped off the ferry, Poelzer was arrested and in his backpack
police found 78.3 grams of marijuana, 8.6 grams of hash, and assorted
paraphernalia and pro-drug literature.

In spite of Tousaw's argument that the cannabis prohibition was
invalid, or alternatively that the status of the prohibition is so
confused that prosecution constituted an abuse of process, the
provincial court judge in the case decided B.C. jurisprudence had
declared the medical marijuana scheme valid and therefore the
criminal law was fine and Poelzer in clear violation of it.

But Tousaw says the B.C. precedents are wrong and fly in the face of
this latest ruling.

The Crown disagrees.

Federal lawyer Peter Eccles said the MMAR requirements are reasonable
given the legitimate societal interest in controlling the
distribution of a "potentially harmful drug."

"They ensure only those with a bona fide medical need for marijuana,
verified by appropriate medical declaration, obtain legal access,"
Eccles said. "Mr. Poelzer is not such an individual."

Perhaps.

Two B.C. justices will render their opinions soon on whether there
actually is a criminal marijuana law in force at the moment or
whether de facto legalization has occurred because the medical access
scheme is unconstitutional.

Market issues 'need to be addressed'

The question is how will Ottawa respond to the federal court decision.

Since the impugned marijuana access scheme is a product of regulation
rather than statute, the government can quickly promulgate new rules.

"They could make cosmetic regulatory changes," Nash acknowledged,
"which would force another court challenge. But I think the judges
are pretty fed up with them doing that."

And for good reason -- sick people should not have to deal with the
black market.

Nash said it's time to get medical marijuana out of the courts,
properly regulated and controlled.

"It comes down to consumer choice," Nash said. "We have people across
Canada who want our organic product. Patients want different price
ranges, they want different strains, they want different hybrids.
There are market issues here that need to be addressed. When you go
to a pharmacy do you want to be told you can only have Bayer?

"This is about patients' rights and a legitimate need."