Industrial Hemp Licensing and Authorization Summary

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August 2005

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Introduction

This report is produced annually by the Office of Controlled Substances (OCS) to provide stakeholders and other interested parties information on the number of commercial licences and authorizations issued under the Industrial Hemp Regulations (IHR), and research licences issued under the Narcotic Control Regulations (NCR). It also contains an overview of any policy development work and an update on the List of Approved Cultivars.

2005 List of Approved Cultivars

In 2005, two new cultivars were added to the List of Approved Cultivars (LOAC). Alyssa, is a monecious, female predominant, dual purpose variety developed specifically for Manitoba growers. Flowering occurs approximately sixty days after seeding. ESTA-1, is a dioecious grain variety, developed in the Ottawa valley, that flowers approximately fifty days following seeding. Both varieties grow to between 150 cm and 180 cm in height.

In April 2005, Plant Breeders' Rights for the Finola variety were assigned to Hemp Oil Canada Inc. Finola continues to demonstrate high levels of THC in some samples when tested in Health Canada laboratories. This situation is being monitored and duplicate testing of samples in both licensed, private laboratories and Health Canada laboratories is ongoing.

Policy Development

Policy on the exemption of industrial hemp varieties from THC testing during the growing season

On March 31^st 2005, the Director, Office of Controlled Substances approved the policy to exempt varieties of industrial hemp that consistently demonstrated low levels of THC in annual testing. The policy applies to varieties of Cannabis sativa L. that are listed on the LOAC, prepared and published annually by the OCS. Varieties identified on the list as being exempt from testing are exempt from the requirement under subsection 16(1) of the IHR for the current growing season only. Varietal exemption from testing will be reviewed annually by the Interdepartmental Working Group-Cultivars. In 2005, USO 14 and USO 31 have been exempted from annual testing as required under subsection 16(1) of the Industrial Hemp Regulations. These varieties have been evaluated against the Policy on the Exemption of Industrial Hemp Varieties from THC Testing During the Growing Season. A copy of this policy can be found on our website.

Draft Policy for the inclusion of cannabis varieties on the List of Approved Cultivars

The objective of this draft policy is to articulate the criteria under which the Minister will designate or remove varieties of industrial hemp from the LOAC pursuant to section 39 of the IHR. Under this policy, the Interdepartmental Working Group - Cultivars will make recommendations to the Director of the OCS, regarding the varieties that should be considered for inclusion on the LOAC, those that should be removed from the list or placed under observation due to a potential to exhibit elevated THC levels. Comments on this draft policy were being accepted by the section until August 31^st 2005. The approved policy will be posted on the website in the near future.

Industry Initiatives and Developments

This section is to report on initiatives and developments within the industrial hemp industry that have come to our attention. For your reference, we have provided the website addresses after each section.

• A Canadian consortium led by Parkland Bio Fibre Ltd. will receive a contribution of $3 million, subject to final contract negotiations, from Sustainable Development Technology Canada. This funding will complement the significant efforts made by the provincial government of Manitoba and the Dauphin municipal government to bring a hemp fibre processing plant to the Parkland area. The funding will be used to develop and demonstrate a process that will use raw industrial hemp fibre in the production of insulation and other products while reducing agricultural waste streams. The process will use European technology, currently used in small-scale operations, that will be adapted and configured into a larger pilot processing facility in Dauphin. ( www.pihg.net)
• In July 2004, the town of Craik and the Rural Municipality of Craik #222, Saskatchewan provided 80 acres of industrial property to establish a hemp fibre mill in the community. Located directly between the cities of Saskatoon and Regina, and alongside a Provincial highway and rail line, the new facility will provide good access to local and international markets. Construction is expected to begin in 2005. ( http://www.agr.gov.sk.ca)
• In October 2005, there will be a Wood-Plastic and Natural Fiber conference in Baltimore, Maryland. This conference will focus on the expanding market of natural fibre and fibre composites in North America. The use of natural fibre composites made from agrifibres, including flax, hemp, kenaf, jute and sisal is increasing, and is expected to be introduced into North American transportation, building and insulation, and industrial and consumer markets.
  ( http://www.principiaconferences.com/wpc05/schedule.cfm)
• The National Research Council of Canada, in partnership with Hemptown Clothing Inc., has developed a new enzyme technology for processing hemp fibres. Currently, most hemp fabric is a blend of hemp and cotton, resulting in a softer and whiter fabric than hemp alone could provide. This newly developed technology uses a commercially available enzyme that operates at the high temperatures and acidity levels encountered in commercial processing and will remove the pectin found in hemp, resulting in whiter and softer hemp fabric.
  ( http://www.nrc-cnrc.gc.ca/highlights/2004/0407hemp_e.html)
• The Congressional Research Service, The Library of Congress has created a report on hemp as an agricultural commodity in the United States. This report contains both background information on industrial hemp, and the industry, and a synopsis on the current status of the industry. The report also provides a brief overview of the legal dispute between the Hemp Industries Association and the Drug Enforcement Administration. Although the hemp industry has now clarified its legal status, government policy is reflected in the DEA's argument that commercial cultivation in the United States will increase the likelihood of production of illicit crops of higher THC varieties, would significantly complicate surveillance and enforcement activities, and would send the wrong message to the American public concerning the government's position on drugs.
  ( http://www.votehemp.com/PDF/CRS_Hemp_Report.pdf)

Commercial Licensing

Commercial licences are issued for specific activities including the importation, exportation, production, sale and provision of industrial hemp. Tables 1, 2 and 3 provide information on the licences and authorizations issued for commercial activities as of July 31, 2005.The number of applicants is less than the number of licences issued. A single applicant may request licences for multiple activities at multiple locations. A licence is issued to a qualified applicant to perform specified activities at one site. A single licence number is issued for each location, even where multiple activities are approved for that site.

TABLE 1 - Commercial Licence Summary Information

LICENCE SUMMARY	TOTAL	BC	AB	SK	MB	ON	QC	NB	NS
Number of APPLICANTS*	224	4	23	89	75	17	13	3	0
Number of Applicants issued licences	218	39	22	87	74	17	12	3	0
Number of APPLICATIONS** submitted for review	468	14	42	146	203	46	14	3	1
Number of LICENCES ISSUED***	421	13	42	136	186	40	13	3	1
Number of Applications under Review	19	1	0	3	14	0	1	0	0
Number of Applications Withdrawn	1	0	0	1	0	0	0	0	0

Since the dramatic decrease in number of hectares requested, and therefore licensed, for commercial cultivation in 2001, the number of licensed hectares has been steadily increasing, as illustrated in the chart below. Acreage and the number of licences issued for commercial cultivation both significantly increased in 2005. As of July 31, 2005, the acreage licensed for the commercial cultivation increased by 300% from that licensed in 2004. Likewise, the number of cultivation licences issued has increased by greater than 200% over 2004. Fifty per cent of the licensed hectares are located in Manitoba. No applications were received from Newfoundland and Labrador, the Northwest Territories, Nunavut, Prince Edward Island, or the Yukon.

TABLE 2 - Authorization Summary as of July 31, 2005

AUTHORIZATION SUMMARY	TOTAL	BC	AB	SK	MB	ON	QC	NB	NS
AUTHORIZATIONS Requested	8			1	3	4
AUTHORIZATIONS Issued	7			1	3	3
Sampling*	7			1	3	3
Viability Testing	2			1	1
Transportation Only
Possession for Other Purposes	2				1	1
AUTHORIZATIONS Refused
AUTHORIZATIONS Withdrawn
Authorization Applications under review	1					1

TABLE 3 - Commercial Licence Activities as of July 31, 2005

ACTIVITY/SCHEDULE	TOTAL	BC	AB	SK	MB	ON	QC	NB	NS
SCHEDULE 1 (Cultivate) submitted for review	336	0	35	113	151	23	10	3	1
Licences with cultivation activity granted	302	0	27	108	131	23	9	3	1
Hectares requested	10648.4	0	1105.1	3578.8	5596.2	251.2	80.1	19	18
Hectares licensed	9725.2	0	916	3428.8	5018.4	251.2	73.8	19	18
SCHEDULE 2 (Import) submitted for review	4		1	1	1		1
Licences granted	4		1	1	1		1
SCHEDULE 3 (Export) submitted for review	17	1	3	5	5	2	1
Licences granted	17	1	3	5	5	2	1
SCHEDULE 4 (Processing) submitted for review	45	1	7	14	12	7	3	1	1
Licences granted	45	1	7	14	12	7	3	1	1
SCHEDULE 5 (Distribution) submitted for review	221	1	19	93	81	11	13	2	1
Licences granted	213	1	17	90	80	11	12	2	1
SCHEDULE 7 (Breeder) submitted for review	22		1	5	6	10
Licences granted	16		0	0	6	10
SCHEDULE 8 (Viability Testing) submitted for review	3				1	1	1
Licences granted	3				1	1	1
SCHEDULE 10 (Producing a Derivative) submitted for review	27	1	5	10	5	2	3	1
Licences granted	27	1	5	10	5	2	3	1

Acreage Licenced by Cultivar for Commercial Production in 2005 as of July 31, 2005

Current Research Projects with Industrial Hemp

A diverse spectrum of research with industrial hemp continues to occur in Canada each year. The following is a sample of the types of research taking place to expand the uses of industrial hemp, increase the knowledge base with respect to its production, and increase the diversity of cultivars available:

• determination of optimal seeding rates for grain and fibre production;
• collection of data to support optimal fertilizer recommendations;
• improvement of plant genetics to develop hemp as a source of fibre for pulp and paper;
• plant breeding to match fibre production for specific industrial applications such as packing material, insulation, home building products, and ceiling tiles;
• selective breeding of varieties with specific fatty acid and protein profiles;
• selective breeding of plants with larger seeds, lower THC levels, or improved tolerance of the Canadian climate;
• development of enzyme technology for the textile industry; and
• assessment of European hemp varieties, and development on new varieties using crosses of these varieties in the Canadian climate.

The Narcotic Control Regulations and related policies govern the requirements for research licences. Areas of production for applications and licences that relate to greenhouse or laboratory production are not included in these figures.

Research Licence Information	2000	2001	2002	2003	2004	2005
# applicants issued a licence	30	21	11	4	10	10
# licences issued	46	37	24	12	22	30
# cultivation licences issued	39	31	24	9	22	28
# hectares licensed	65.11	39.71	27.83	2.00	5.63	22.66