Committee of Supply

Proceedings in Section A

ESTIMATES: MINISTRY OF
ATTORNEY GENERAL

On Vote 15: ministry operations, $524,557,000.

The Chair: [Inaudible recording.] I will turn it back over. I’m sorry, Members. I had to interrupt the member for Richmond-Steveston and the Attorney General.

Maybe I’ll turn it back to the member for Richmond-Steveston, if there’s anything else he had to ask before we go to the Attorney General.

J. Yap: Thank you, Chair.

I’ll assume that my first question was recorded by Hansard. I’ll just repeat it. How has the pandemic affected the 2020-2021 budget plan for LDB?

Hon. D. Eby: The first-quarter results were according to the existing budget plan. That’s the only quarter we have numbers for currently.

I can advise the member that one of the major policy changes during the pandemic was to implement a wholesale price discount for hospitality. The projected impact of that initiative is $26 million to $28 million, which would be a change to the number for the budget plan. So first quarter, according to the plan.

There are a couple of trends that I would like to point out to the member in terms of potential impacts that are coming.

The first quarter. Obviously, hospitality revenue was down, but it was offset by more people buying alcohol from retail to consume at home. I would note for the member that June, July, August and December and January are very big hospitality months for people purchasing liquor — so Christmas, New Year’s, summer long weekends, and so on, being at bars and restaurants.

Obviously, with social distancing and varying public health requirements around gatherings of 50 people and so on, we are expecting to see a decline in hospitality income over that period. It’s not determined yet how big that will be and to what extent retail purchases will offset that.

J. Yap: Thank you to the minister for that and for anticipating my question about impacts.

The $26 million to $28 million figure that the minister referred to, I take it, is the expected annual impact of the move to wholesale pricing for licensees. Can the minister confirm that?

Hon. D. Eby: Yes, that is correct.

J. Yap: So with this announcement of the move towards wholesale pricing for restaurants and bars, how is that process going? Has it been implemented? Is it being phased in, or is it now up and running?

[9:45 a.m.]

Hon. D. Eby: I just want to clarify my previous answer around the pricing on hospitality, in terms of the impact of the change to provide wholesale pricing to hospitality.

I believe I responded to the question, which was whether it was an annual cost. That is the cost from implementation date, which was the 20th of July, through to fiscal year-end, which is March 31. So it’s not an annualized cost. It’s the cost of the change for the period through to March 31.

Then in terms of implementation of wholesale pricing, it launched on Monday, on the 20th. So far, so good. Restaurants and pubs are purchasing at wholesale price at the retail level. There’s been no discernible change to volume or patterns of purchasing from these customers at this stage.

By the end of August, there will be an online system where hospitality customers will be able to access the full catalogue online. Currently there’s a workaround to ensure that we were able to implement it as quickly as possible, and it will be a more polished process by the end of August.

J. Yap: Thank you to the minister for that answer.

With the change to wholesale pricing for hospitality, and with the adjustments to forecasts that the minister referred to in terms of the impact of the pandemic on revenues to the hospitality sector, perhaps offset by retail purchase, what is the anticipated net revenue or profit that government expects from LDB for this fiscal year, 2020-2021?

Hon. D. Eby: Currently, with Q1 meeting targets, the service plan projection for LDB is $1.133 billion. But as I articulated in the earlier answer, there are a number of trends that could play out differently. One is the increase in purchase by people for consumption at home that in Q1 made up for the significant decline in hospitality.

We aren’t sure, and we don’t believe that it is likely that retail purchase will make up for the loss of significant hospitality months over the summer and Christmas if there’s not a vaccine or an effective treatment for COVID-19. And it is all, obviously, highly dependent on the trend of infection numbers for the province and necessary public health closures that might follow.

[9:50 a.m.]

Currently we are still working from the service plan, a number of $1.133 billion. The significant pandemic variation that the member should be aware of from this number is the $26 million to $28 million impact of the wholesale pricing in the fiscal year.

J. Yap: I appreciate that from the minister. Of this amount, $1.133 billion, what is the division between profit from the wholesale division of LDB and the retail division of LDB?

Hon. D. Eby: I’m advised it’ll take just a little bit of time to get that number for the member. If he wants to move on to another question, then I’ll get that information to him as soon as it’s provided to me.

J. Yap: I appreciate that. How many LRS licensed private retail stores are there presently in the province?

Hon. D. Eby: There are 671 active licences in the province for LRS stores.

J. Yap: There was a moratorium on the issuing of new licences. I’m wondering if the minister can tell us if that moratorium is still in place, when it expires and what government’s thinking is, one way or the other, regarding extending this moratorium.

[9:55 a.m.]

Hon. D. Eby: The moratorium expires July 1, 2022. Government’s intention with respect to the moratorium is to maintain it.

There is one recently announced policy change that could shift the number of LRS licences, which is that we provided the ability for wine store licensees in the province to convert their licence to an LRS licence. Wine store licensees are limited to purchasing and selling wine only, as the name might suggest. The ability to convert to LRS means that they could sell a variety of products, including spirits, beer, cider, mead, and so on.

I will note that there are 11 of those stores. If all 11 did convert, then there would be 682, but for most British Columbians, there would not be any change in the occurrence of the number of outlets selling alcohol. Beyond that change, we have no intention of increasing the number of LRS licences.

J. Yap: Thank you to the minister for the response.

My next series of questions is on behalf of my colleague from Surrey–White Rock, who really wanted to ask these questions, but unfortunately, she’s not able to join us this morning. She was hopeful that she could get these in yesterday, late afternoon, but it was not to be with the change in schedule of estimates.

I’ll risk your forbearance, Chair and Minister. I’ll read this into the record. There are three questions, which I will read into the record. I’ll leave it to the minister and ministry staff to respond, at an appropriate time, to these questions. I hope that’s okay, Chair and Minister.

The Chair: Please proceed.

J. Yap: Question 1, on behalf of the member for Surrey–White Rock. With respect to the severe challenges in the pub and bar industry currently with COVID-19, would government consider increasing the number of LRS licences by creating a window for existing bar and pub establishments to apply for these new LRS licences, and would government consider removing the one kilometre restriction from government liquor stores as an impediment to new licences?

This would go a long way to helping these businesses over the hump of COVID-19. Given the current economic environment, it doesn’t make sense for government liquor stores to be protected from private competition.

Question 2. Several constituents have contacted me over concerns with recycling beer cans, liquor bottles and even glass containers with liquor as a result of the pandemic. These concerns include the fact that not many recycling depots are open. The grocery stores won’t recycle pop cans, and the LDB won’t recycle beer cans. Added to that, in our community, there have been long lineups, parking challenges and frustrations among residents. On top of these frustrations, notwithstanding the LDB’s closure of its recycling service, the LDB continues to charge a recycling fee.

The questions to the minister. Again, these are from the member for Surrey–White Rock. Does the LDB have a plan for the recycling of beverage containers? Will there be an amnesty for bringing more than the normal amount of recyclables to stores and LDB, etc., to clear the backlog? Does LDB have a definite date for restarting recycling, and if not, why? If the LDB is not able to commit to a date for resuming recycling, will they stop charging a recycling fee at checkout?

The last question from the member for Surrey–White Rock. Recently government opened the sale of takeout alcohol with food for restaurants. However, that order doesn’t include growlers or bombers, which can be more cost-effective or appropriate for consumers. Would the government amend its alcohol-to-go program to include growlers and bombers, and if not, could they explain the rationale for not doing so?

That ends the questions read into the record on behalf of my colleague the member for Surrey–White Rock.

[10:00 a.m.]

Next I’d like to turn it over to the member for Kelowna-Mission, who has a few questions.

Hon. D. Eby: I take it, from the member giving over to another member for questions, that the member for Surrey–White Rock would like these answers in writing?

J. Yap: Yes.

S. Thomson: Good morning. Thank you to my colleague for Richmond-Steveston for providing me the opportunity to ask a couple of quick questions here in the process of these estimates.

The question that I wanted to ask to the Attorney General is around the change to the wholesale pricing model for restaurants. I’m certainly not arguing against that, and I recognize the importance of that to that sector. But I wanted to confirm with the minister whether he’s aware of and, in considering that policy, understands the significant negative impact that that decision has had on the craft manufacturing sector, both the craft distilleries and craft breweries, that are impacted by that decision.

I’ve met recently with a number of distilleries here in the Okanagan. For one distillery, this change has a direct impact on them of around $78,000 off the bottom line, just for July and August. For another one, it’s over $300,000 for the same time period. Could the minister confirm that in his considerations for implementing this policy, he acknowledges and understands the negative impact of that on the sector?

Hon. D. Eby: The recommendation related to hospitality pricing came to us from a group called the business technical advisory panel. This is a group of industry representatives that includes two members, in particular, related to the member’s question. One is the Craft Distiller Guild, and the other is the B.C. Craft Brewers Guild. It is a relatively small group, fewer than ten participants, and what they do is provide recommendations to government based on an industrywide perspective.

[10:05 a.m.]

One of the benefits of having this entity providing advice to government is that they can have a discussion among themselves about potential impacts of any policy shift and provide recommendations to government that take a global perspective. I can’t speak for either of them in terms of the decision-making about why they supported this particular recommendation.

From my perspective, I can say that it certainly must have been part of the calculus that having restaurants and pubs open and surviving the pandemic is of economic benefit to all producers in the province and that all producers are hurting a bit as a result of the pandemic. To share some of that financial harm around is, industrywide, more beneficial than having one sector, which craft producers are dependent on, taking all of the impact.

I don’t know the extent to which thinking like that influenced the decision, or at all, but I can advise the member that the recommendation to implement hospitality pricing came from, included, the very groups that the member listed as negatively affected by the decision. I’m certainly aware of the impact. Craft distillers and brewers in British Columbia — and wineries as well, when they sell to restaurants — are able to sell at a lower price than retail.

Obviously, when you have a wholesale price for all products going to restaurants and pubs, that removes that advantage. But I can also advise the member that there are many restaurants and pubs that are very loyal to B.C. products, are supportive of B.C. products and will continue to order and promote B.C. products regardless of that. I’m very confident in the ability of B.C. products to compete in this new environment.

S. Thomson: I’m sure the minister understands that this sector has great opportunity, is a job creator, is part of our tourism sector and is one that supports a very, very significant component of the value-added sector in agriculture.

It’s important to put into context — the minister referred to the recommendation from the technical advisory panel, the BTAP report — and recognize that that recommendation was part of a package of recommendations and was meant to be considered as a total package, not a process. Everybody gave up a little bit in that process in terms of making those recommendations. But what has happened here — to take one of the recommendations from that report and move forward with it in terms of the wholesale pricing — has had that very, very significant impact on one of the other sectors.

There were recommendations in the BTAP report that balanced out that decision, as a package of recommendations. The situation here is that picking one recommendation and moving forward with it has that negative impact. That was part of the overall support, from the craft sector, for the package of recommendations. I’ll ask the question to the minister. Given this negative impact, is he prepared to consider some policy steps that would mitigate that impact on the sector?

This is a sector that really stepped up to the plate during the COVID pandemic with the production of hand sanitizer, a major contribution. Is the Attorney General prepared to consider some mitigating policy measures that would offset that very, very negative impact on the sector? Can he provide a timeline of when he is prepared to move forward with the balance of recommendations in the BTAP report, which would be part of that mitigation — moving forward on those?

There’s concern that in this process the minister has had the report for a significant amount of time, and the sector doesn’t see the timeline in terms of moving forward with the complete package of recommendations.

To the minister, can he advise on whether he’s prepared to consider some mitigating policy decisions that would offset that significant negative impact? Can he provide a timeline on when he’s going to move forward with the total package of recommendations that are in the BTAP report?

[10:10 a.m.]

Hon. D. Eby: I can advise the member that this particular recommendation around hospitality pricing was pulled out of the BTAP report as a whole by BTAP and identified as their number one priority in the context of COVID. Obviously, we took that recommendation very seriously and have implemented it in a very short time period, in order to benefit these critical pieces of the ecosystem around hospitality in British Columbia.

I can advise the member that, also in the COVID context, a number of recommendations that came from BTAP were pursued and implemented, separate from the original report. It included the patio expansion, the ability for the distillers to produce hand sanitizer, the delivery of packaged alcohol with food, and deferrals in relation to licences.

All this was a very significant amount of work done in a very short period of time by the folks at our regulator, and I want to just put on the record how much I appreciate the effort of all those people to do that work. There were a lot of late nights and weekends, and there continue to be, as the patio applications come in for processing, to get those turned around, because everyone understands how vital it is that this happen in a hurry.

I do understand the member’s core submission, which is that there is a larger set of priorities of industry within the BTAP report. I do think, and at least I hope…. I tried to be clear that that was our work plan for the mandate of the government. It is a huge amount of work. It is a significant reform of alcohol policy in the province, and we continue that work. COVID has disrupted and introduced additional priorities. It was my goal to stay on target with those original recommendations and really focus on those, but COVID changed those plans.

I want to extend my appreciation to both BTAP and to the regulator for their working together to try to save as many businesses as we can.

S. Thomson: Thanks for the response. I would just close by saying that when the minister answered an earlier question about the $26 million to $28 million cost of this implementation of this policy, that’s the revenue impact to government.

What that doesn’t account for is the cost and the impact on the craft manufacturing sector. The cost of this policy decision is, essentially, being borne by two components: government and the craft manufacturing sector. As I said, the overall package of recommendations in the BTAP created that balance that would have offset it and created that balance around all of the puts and takes that are in those recommendations.

[10:15 a.m.]

Unfortunately, what has happened here is that it has moved forward with one specific part of the recommendations — and the others, as the minister pointed out — but there’s a critical piece that hasn’t moved forward. Those are the balancing recommendations around the manufacturing sector.

This is, I’ll just reiterate again, a sector that has tremendous opportunity for jobs, for growth, for contribution to the value-added agriculture sector. It’s a component of our tourism sector in all of our regions and communities throughout the province. It’s the craft distillers. It’s the craft brewers. It’s the small-scale wineries.

I would just encourage the minister to expedite and move forward with the key recommendations in the report that balance that and look for policies that help mitigate this negative impact on this sector. They are bearing part of the cost of this decision, and I know there are concerns that the overall set of recommendations haven’t moved forward. So I’d encourage the minister to expedite that process and deal with this negative impact and the balance of the recommendations.

With that, I’ll close and turn it back to my colleague from Richmond-Steveston.

Hon. D. Eby: I would like to respond, Mr. Chair, if I could just have one second.

I was hoping that we might have quarter 1 this year over quarter 1 last year numbers from craft distillers, but we don’t have those numbers yet to share with the member. But I’ll just put on the record that once we do, I’ll do my best to get those numbers over to the member so that we can see what the actual result is.

What I’d like to just underline is that the impact of the collapse of the hospitality sector on sales for craft brewers and distillers needs to be the value, essentially, that’s weighted against the financial impact of the wholesale price initiative. If there’s nobody to sell to because the restaurant has gone out of business, is that a greater impact than the hospitality pricing?

I suspect that’s why the BTAP group pulled this recommendation out and said, “This is urgent; please do it right away,” which government did. I don’t know that for sure. The deliberations take place among the group itself. But I can confirm and advise the member again that that was pulled out as the number one priority for us to get out the door.

Certainly, I will take the member’s advice in terms of other recommendations of BTAP. But I can also advise him that due to the work on COVID-related policies, we have been delayed in the implementation of the other BTAP recommendations, and we may be for a while yet, depending on the continuing impacts of COVID.

I’ll also advise the member that if he has suggestions about policies related to craft distilleries that would be trade-compliant, I would be glad to hear about how government could further support this important sector, and the same, certainly, for craft brewing. But I can also tell the member that we are in very close contact with the two main organizations that represent these groups, the Craft Distiller Guild and the Craft Brewers Guild, on a regular basis.

J. Yap: Just to follow up from my colleague from Kelowna-Mission on the matter of recommendations from BTAP, the technical advisory panel provided their recommendations back in June of 2018.

[10:20 a.m.]

I do appreciate the minister mentioned that this was intended to be a workplan over the mandate of the government. We’re now two years in, and yes, we’ve had the unexpected pandemic happen. I wonder if the minister could…. I know there’s tremendous staff that work at LDB and the control board, the LCLB, who are very dedicated, work very hard and, I’m sure, have provided a comprehensive outline around the policy work that needs to be done to complete the work on the BTAP recommendations.

As was mentioned by my colleague from Kelowna, all the participants in BTAP arrived at this consensus group of recommendations, 24 recommendations, based on a give-and-take. Some were going to get what they really wanted but had to give up something so that overall, the stakeholders could agree on a document that they presented to the minister. Some of the recommendations have been addressed, as mentioned, and that’s a good thing. But the whole package needs to be implemented so that the industry as a whole can move forward on a level playing field and fairly.

To the minister, can he provide a timeline of when the BTAP recommendations in total can be expected to be implemented? Recognizing we have the pandemic to deal with…. But I do know that there’s a great public service that provides great support to the minister. I wonder if he can share with us what they’re saying they can do, on behalf of the minister, in implementing all these recommendations from BTAP.

Hon. D. Eby: I can advise the member that there were 24 original recommendations. That expanded to 30 recommendations, and then the 30 recommendations were supplemented by additional COVID-related recommendations.

[10:25 a.m.]

What we have with BTAP is a rolling discussion and a re-evaluation and prioritization based on circumstances — in particular, the pandemic. In that context of an ongoing discussion — on what is likely to become and remain an institution advising government, because it’s been incredibly helpful for everybody — I can advise the member that six recommendations made by BTAP are complete and 15 are in progress. The horizon for implementation of all of those is in the neighbourhood of 24-36 months, and nine require further assessment and discussion.

Now, the member would rightly ask: “Why does it take so long, 24 to 36 months, to implement those 15 that you have in progress?” As one example, a significant number of those recommendations are tied up with a significant reform of our distribution system at the government-owned distribution warehouses in the province — new computer systems, end-to-end monitoring of shipments, and so on. It’s a very significant IT project that is underway and a number of recommendations from the report flow from those reforms that need to happen.

Others are closer, and industry has been advised and been provided commitments by government around implementation so that they can plan accordingly. For example, rural agency stores. I recently appeared virtually for one of their membership meetings and announced that government will be transitioning oversight and governance of those rural agency licences to our regulator out of the LDB. Creating a separate licence class for rural agency stores is something the sector has been asking for, for a long time. So while it is in progress, it is significantly underway and committed to by government.

The numbers provide a bit of the story. The larger context is an ongoing discussion and prioritization with the BTAP group.

J. Yap: Thank you for that, Minister. A good segue to a quick question on the distribution centre.

Can the minister confirm the status of the new distribution centre? Is it up and running? He mentioned that there’s still some technology implementation to happen, but is the transition from the Vancouver warehouse to the Delta warehouse complete? And what is the status of the government property, the former Vancouver warehouse property? What will happen with that real estate?

[10:30 a.m.]

Hon. D. Eby: The member asked a number of questions there, but I’ll start with one that he asked earlier, which is the split between wholesale and retail in terms of revenue for government, projected. Wholesale revenue projected for this fiscal is $1.079 million. Retail revenue — $64 million on the retail side.

The member also asked about the distribution centre. The new distribution centre is running at a 95 percent fulfilment rate. The full transition was completed at the end of May. There have been no major issues. There are obviously occasional hiccups with new facilities, but everything is running as expected. In fact, they’re currently running record volumes through the facility, 11 percent more cases year over year. This year they expect to ship 22-million-plus cases through the new distribution centre.

With respect to the old distribution centre, that warehouse was sold at the end of July last year, and the LDB had to be out by the end of July. It’s owned by a group of First Nations. I believe it’s the MST — the Musqueam, Squamish and Tsleil-Waututh. In any event, it is a group of First Nations and the Aquilini Development corporation that purchased it.

J. Yap: Moving on to cannabis. Last year the minister informed the House that the organizational structure of LDB for distributing cannabis was not yet complete.

Can the minister update us on where that is right now with respect to cannabis distribution?

Hon. D. Eby: The organizational structure is in place. There are no additional employees added, except as demanded by additional volume of stores and sales going forward. So the organizational structure is in place.

J. Yap: How many legal cannabis stores in B.C. are now open? How many of these are LDB, and how many are private?

[10:35 a.m.]

Hon. D. Eby: I’m going to give the member a set of numbers here. Please feel free to ask for clarification.

On the public side, there are 19 public stores that are open as of this week. On the private side, here’s where the numbers might get a little bit complicated. There are 260 licences issued. There are 45 approvals in principle, in addition to those 260. That is, functionally, they’re ready to go, and it’s up to the operators to open and begin ordering.

Then there are 213 private stores that are actually ordering from the LDB, ordering cannabis for sale. It’s a good proxy for the number of private stores that are actually open, but some stores may be ordering but not yet open, so it’s not a perfect number.

J. Yap: I appreciate that from the minister.

By complete coincidence, Chair, there is an op-ed in the Vancouver Sun from Val Litwin, who is the CEO of the B.C. Chamber of Commerce. The topic is very germane to my next series of questions. The headline is: “Cut the Red Tape that Plagues Legal Cannabis Stores.” The minister may have read that in his morning clips.

I’ll just quote, to set the context for my next series of questions, from the CEO, Val Litwin: “B.C.’s legal cannabis stores are ready to put hundreds of unemployed retail employees back to work quickly. They’re also well positioned to generate thousands of dollars in tax revenue if they were allowed to accept online orders and deliver to your door. Unfortunately, burdensome regulations mean cannabis retailers are struggling to find workers and are being forced to compete with illegal dealers.”

He goes on to say…. Again, this is exactly what he says: “Since March, the economic fallout from COVID-19 disproportionately hit the retail sector, leaving thousands out of work.” The Finance Minister confirmed that “almost 400,000 jobs were lost in B.C. in the first two months of the pandemic.”

He goes on to say: “Meanwhile, cannabis retailers have hundreds of jobs to fill. Sounds like a no-brainer. Workers need work, and there are jobs waiting. So what’s the problem? But overly restrictive policies and regulations in the cannabis sector are keeping furloughed employees on government programs, depressing the earnings of B.C.’s regulated cannabis industry, and inadvertently protecting the illicit market.”

He goes on to say: “As of now, the hiring process for a single front-counter job at a cannabis retail store takes up to three months.”

Finally, near the end of his piece he says: “With reasonable regulations and policies that mirror those of liquor distribution, the cannabis sector is poised to provide much-needed jobs for workers, create thriving businesses for legitimate employers across B.C., improve health and safety for consumers, push out the illicit market, and increase tax revenue for government.”

This was in today’s Vancouver Sun. It really sets the context for a few questions here, and the minister may want to respond to that op-ed.

My first question. We’ve heard from cannabis retailers with many frustrations, issues, complaints about the level of service and the quality of product. I wonder if the minister can comment on what’s being done to resolve these issues.

[10:40 a.m.]

Hon. D. Eby: I will respond as best I can to Mr. Litwin’s op-ed, but first, let me respond to the member’s questions.

In terms of delivering product, we’re not aware of any issues currently, except for one. With COVID, Canada Post stopped delivering parcels to the door, so customers need to go to the Canada Post depot because they need to do age verification. The mail carrier will not knock at the door and do that at the door, so that was an inconvenience for customers that was COVID-related.

In terms of the warehouse, the availability of product, there was a major issue last year with cannabis flower. I can advise the member that that is not an issue this year. But this year, the availability issue relates to edibles, concentrates and drinks. This is due to a shortage of, in particular, suppliers. The licensing of suppliers is done on the federal side. In addition, suppliers have also been struggling in this new market, trying to get their product assortment right and their chains of supply in place.

[10:45 a.m.]

A number have downsized significantly or gone bankrupt. This is to be expected in a new industry but has still provided challenges in terms of the province being able to access products that can then be distributed and sold, which is what our job is. There have been challenges on the industry side in understanding what consumers want and in delivering that to us to deliver it to them.

On our side, though, I can advise the member that the LDB is in regular conversation with retail customers. Three weeks ago, there was a survey that went out to retail customers about their experiences and how the LDB can improve. There have been improvements in a number of different areas, including how products are stored and distributed as we move forward.

Mr. Litwin’s, Val’s, comments about three months to approve a counter worker are simply incorrect. There is a public safety check because of the association of organized crime with cannabis sale, delivery and manufacturing in the province. We have made a commitment to British Columbians to keep criminals, as best we can, out of the supply chains and distribution chains of cannabis as we transition to a legal market.

The current wait time for the full background check is three weeks for 80 percent of cannabis workers. So 4,300 workers have had background checks, and we have done significant work to expedite those approval processes. Those licence numbers that I gave the member, in terms of private licences, involved extensive background checks of owners, including financial background checks — very extensive work.

The member is right to note that we have been careful about this. This is a new market coming from an illicit and illegal market. We know that organized crime is involved in cannabis production and distribution in our province, and we do not want them involved in the legal market. So when we have 300 licences to go through, Public Safety and Solicitor General does extensive background checks to make sure that organized crime is not involved.

Finally, just in terms of the suggestion by Val that there’s an opportunity around continually improving our regulations or making them respond to current conditions, I think he’s absolutely right. There is, obviously, opportunity for us to revisit regulations. That was our intention from the beginning — to start very strict and to loosen regulations over time, because of the experience of other jurisdictions and their advice to us. That is, it is very hard to go from loose regulations to tight regulations in this sector. It is much preferable, according to their advice to us, to start with very strict regulations and move to looser regulations.

Recently that has involved things like film on windows, allowing stores to operate with transparent windows. We were trying to meet federal requirements around not having children be able to see product. There’s a federal requirement. Working with cannabis store owners, we found a mutually agreeable solution where they would keep the product out of sight of people from the street and be able to have transparent windows, as one example.

Expediting processes around background checks and the regularity and the number of times those kinds of background checks need to be reviewed. Also, allowing people to reserve and pay for products, and pick them up in store.

Work is continuing on delivery as well. He mentions that as a key opportunity. One of the challenges we face, obviously, is that a lot of illegal stores do deliver, and we need to make sure that consumers understand when they’re ordering that they’re ordering from a store that’s legal and licensed in British Columbia. That’s one of the challenges in delivery, because we do know that consumers want to know if they’re buying from a licensed store or not.

Some of the critique, I think, is fair. But it was a deliberate policy decision to start strict and ease regulations. Some of it, unfair and inaccurate. I can advise the member that the licensed producers of cannabis products in Canada and British Columbia continue to improve. This is a new market. There will be challenges. But things are going quite well, in my opinion. British Columbians want us to balance public safety with the growth of a potential new industry for our province.

That is both the opportunity that is in front of us and the challenge. I know that for the member, coming from Richmond-Steveston, many of his constituents have expressed concern about the legalization of cannabis and the availability of retail stores in his home community. I know he knows, better than many members, the public safety concerns related to cannabis legalization, which is why government needs to take a very careful [audio interrupted].

[10:50 a.m.]

J. Yap: I appreciate the answer from the minister.

The minister referred to the illegal trade. I wonder if he could tell us what is being done to address that continued illegal trade.

Hon. D. Eby: In terms of illegal producers, government’s primary response is the community safety unit. I can advise the member that this unit operates out of the Ministry of Public Safety and Solicitor General, and any detailed questions would be best directed to that minister.

J. Yap: We understand that illegal cannabis growing and sales on First Nations reserves has also been an issue. What is the government’s position on that issue?

Hon. D. Eby: I can advise the member that where the nation is concerned about illegal cannabis growing or sales or distribution taking place on reserve, they can and, in many cases, have reached out to the community safety unit in terms of an enforcement response. Government continues to maintain that anybody selling, growing or distributing cannabis may only do so with appropriate licences from the provincial or federal government as required.

With respect to particular priorities of government around recognizing the government-to-government relationship between nations and the government of British Columbia, we have a section of our act, section 119, that permits government-to-government agreements with First Nations in terms of the sale of cannabis, provincial jurisdiction. So we are involved in discussions, with hopes to establish a bit of a template agreement. We’re quite well-advanced in conversations with one nation. A lot of that work is taking place in the cannabis secretariat, located in Public Safety and Solicitor General.

I can also advise the member that we are working closely with the First Nations Leadership Council, where they have a working group on cannabis, and government is working in partnership with them as well. So there are extensive government-to-government discussions taking place about the sale of cannabis in relation to First Nations in the province.

J. Yap: The minister earlier in his reply had talked about public safety, which of course is a concern for all British Columbians, including my constituents. The key to this is education. Government has talked about enhanced education around cannabis use.

Can the minister tell us what concrete steps the government has taken on education with regard to cannabis?

[10:55 a.m.]

Hon. D. Eby: There are a number of areas of cannabis education that fall within the responsibility of this ministry, and then there are a number of pieces that fall within the responsibility of Public Safety and Ministry of Health. So please don’t take this as a complete answer of everything that government is doing. I would encourage the member to raise questions with the Ministry of Health and PSSG as well.

In terms of the B.C. cannabis stores, there are educational materials in stores, including banners, ads and pamphlets, educating people about the use and risks and how to mitigate risks of using cannabis, also public health–related information. In terms of the online store, there is a section of the online store and banners and other advertisements that relate to public health and responsible use of cannabis. The educational materials, the public health materials, in the online store are not age-gated, which means that they can be accessed by anyone, regardless of age, with the goal of providing that information to all British Columbians. The LDB does do some limited social responsibility advertising on social media as well.

Now, with respect to our regulator, the key mandate of the regulator has been educating British Columbians about legal versus illegal cannabis and risks associated with purchasing illegal cannabis, which include the promotion and support of organized crime and gang violence but also, obviously, potential health risks, encouraging people to make good decisions — if they’re going to purchase cannabis, to purchase legal cannabis.

They have been educating consumers about which stores are legal and which are not. There’s a map of legal stores so that consumers can identify a store near them and choose to purchase there. There are decals that have been provided to licensed retail stores so they can identify themselves as licensed by the province of British Columbia. They also deliver the Selling It Right program that is mandatory for all retail employees in the province, at both public and private stores, to complete.

The Selling It Right training program is up and running right now. All employees have until the end of September to complete this program and be in compliance. It’s the cannabis version of the Serving It Right program that the members will surely be familiar with. That program provides education to cannabis store employees around age confirmation, serving people who are impaired and other kinds of public health–related information to mitigate harms and prevent children, for example, from accessing cannabis.

[11:00 a.m.]

J. Yap: My last question on cannabis is with regard still to public safety. The minister talked about how we are in this period of transition from illegal to legal. Then there’s organized crime, which the minister referred to in respect to keeping them out of the legal market. It is known, from media reports, and just generally accepted that organized crime has been long involved in the cannabis trade in B.C.

Can the minister tell us…? What is the status, to the best of his knowledge, of that involvement? Has it gone up? Has it gone down? Is it about the same? What is police intelligence saying to him?

Hon. D. Eby: I would encourage the member to raise those questions with PSSG. I don’t get intelligence briefings from police related to cannabis, illicit industry activity, in the province.

I can advise the member that in terms of the financial impact on organized crime, the government is forecasting, this year, to have a $350 million revenue from the sale of cannabis. That is money that is not going to organized crime in the province. The member can imagine supplying $350 million to criminals across the province. The impact of that is obviously fairly significant — to take that out of organized crime.

It also generates jobs and provides products that are less likely to cause significant adverse health impacts for British Columbians. Also, that $350 million in product was grown by licensed producers that do not bypass hydro utilities, cause house fires and other public health issues with remediating grow-ops in residential areas.

We’re making some progress, because last year’s sales were $135 million. So it’s more than double that. It is good to see British Columbians transitioning their use of cannabis from the illicit market to the legal market in the context of all the controls we put in place to encourage people to use responsibly if they do choose to use cannabis. Otherwise, I would refer the member to PSSG.

J. Yap: Thanks to the minister for the answer.

Moving on to BCLC, my first question, I think, would be fairly obvious. There has been a major impact of COVID-19 on the government’s 2020-21 budget plan, which originally forecast a target of $1.374 billion in net revenue to government, which obviously is not going to happen this year because of COVID and the impact on the casino industry. Can the minister comment on what he expects the financial impact of COVID will be on BCLC? A follow-up question, so he has it, is: what is the operational staff — that is, of the casinos?

[11:05 a.m.]

Hon. D. Eby: The casinos closed on March 16 and remain closed currently. I understand that B.C. Lottery Corp. service providers have provided a proposal to the PHO around reopening. That is being considered by the PHO, although the PHO has given no indication of a reopening date at this point.

So currently closed, and we do not know when they will reopen. The decision is entirely in the hands of the PHO, and I will take direction from the public health officer when she feels it is safe and that the plan meets requirements around public safety in relation to COVID transmission.

I can advise the member that B.C. Lottery Corp. revenue numbers are very much in flux, but to get a sense of the impact of the closures of the casinos on provincial revenues, the projected revenue from casinos operating normally to the province is about $23 million a week. So each week that casinos are closed, that is roughly the revenue impact on the province.

If I could ask the member if he is done with liquor and cannabis-related questions. If he is, then I will release those staff to their work for the province.

J. Yap: Yes, I have completed the questions with regard to LDB, liquor and cannabis. He may release the staff. With that, I would like to say thank you to the staff for their dedication and their great work in executing the policies that provide for liquor and cannabis in our province. Thanks to them for their great work in supporting the minister and our province.

To the minister, thank you for the response on my question. We understand that some service providers — some of the casinos — have submitted reopening plans incorporating safety in the new world that we live in. We, of course, want to see the casinos upgrade safely for the sake of customers and the staff.

The minister referenced the fact that every week that the casinos are not operating, we’re not collecting a substantial amount — $20 million or so — in revenues to the province, so it’s a substantial hit.

[11:10 a.m.]

I do appreciate that the minister is placing the responsibility for the safety side with the provincial health officer to sign off on it, and that’s understandable.

My question to the minister. As the minister responsible, does he have a sense of when, given what we know of…? I assume he knows about the opening plans. So whether he sees an opportunity for some limited reopening of the casinos, in a safe way, in the short term.

Hon. D. Eby: B.C. Lottery Corp. has been working in partnership with service providers — service providers are the companies that run the casinos for the province — to establish health and safety guidelines so that there are common minimum standards across the province.

Each facility is unique, though, in its layout and so on. There will be unique aspects to the safety plan for each particular facility at any time of reopening, but there are minimum standards being established by B.C. Lottery Corp. in partnership with service providers.

I can advise the member of some of the aspects of the proposed plan that may be of interest to him. One is that for players who attend casinos, there’s a proposal that they must have a player-identifying card in order to use any machine or table in a facility. The goal behind that is to enable and support contact tracing, in the event that someone attends a casino that later is found to be positive for COVID, so that people who were in the area can be contacted immediately and notified. There are considerations like that going into the plan.

With that said, there is a very active expectation that the public health officer and WorkSafeBC will have different recommendations and feedback on the plan for any reopening. As I said before, I think it’s important to put on the record that although there is a significant amount of revenue in operations as normal for casinos in the province, the province and government will only be reopening casinos if the public health officer is comfortable with and supportive of the plans that have been put forward for mitigating risk for British Columbians.

People need to have confidence about the safety of a facility before they attend, and the numbers for revenue from casinos reflect operations as normal and are unlikely to reflect revenue to the province from operations in a COVID situation. I also want to recognize and express that government is very much thinking about the thousands of British Columbians who work in industries either directly associated with or in proximity to gaming facilities or dependent on gaming facilities.

[11:15 a.m.]

We’re, obviously, concerned about those families who are dependent on those jobs, but again, we are taking our direction from the public health officer and WorkSafeBC to ensure that those employees, when they return to their jobs, are safe and that anyone who attends a B.C. facility is safe as well. We’ve seen some examples out of Las Vegas, for example, that we don’t wish.

J. Yap: I’m glad the minister recognized the impact on jobs as well. We’ve heard from some casino operators that they have laid off about 95 percent of their workforce since they were shut down in March. So very challenging for many families of employees of casinos around the province.

To the minister, what is the financial impact of the pandemic on funding for community gaming grants?

Hon. D. Eby: Gaming grants are within the responsibility of the Ministry of Municipal Affairs and Housing, but given that those estimates are complete, to the best of my knowledge, we’ll try to get the member an answer for that during the tenancy of these estimates.

J. Yap: I appreciate that, Minister.

The number one goal of BCLC’s service plan is that no one is harmed from gambling offered by BCLC. With the lack of availability of British Columbia casinos and the availability of Internet and smartphone-accessible gambling opportunities, or apps, can the minister tell us…? Are people gambling more online? What sort of risk does this mobile gambling pose?

[11:20 a.m.]

Hon. D. Eby: The member is right. We have seen a shift to online gaming, given the closure of the casinos. As a result, and in recognition of that, increased supports have been provided through the online platform.

The GameSense advisers — these are the people who are in every gaming facility now in the province, or they were — have now shifted to a call centre model where they are available by chat and by phone through the BCLC online gaming platform, Play Now, and are also otherwise available to members of the public. Given that you can’t go into a facility to access that service, it’s available both online and by phone.

PlayNow.com also has a couple of safeguards in place that land-based casinos do not. For example, you can lock yourself out of your account for a predetermined amount of time or engage in voluntary self-exclusion, which prevents you from logging in at all. Then also, it has gambling session information for the person so that they know how much money they have spent in any particular session, and they can track that.

In addition, I can advise the member that the gaming policy and enforcement branch is working on additional online outreach, in terms of education about resources available due to problem gambling. The reason for doing this outside of the Play Now platform on social media is that there has also been an increase observed in the grey market. I prefer to call it the black market because it’s my position and belief that this is illegal gambling.

In any event, in what is commonly described as the grey market — online gambling providers that provide services to people with Internet connections in British Columbia — we’ve seen an increase in that activity. There are no GameSense advisers, and there are no account-based controls in the same way. So we want to make sure that the GameSense advisers that we offer are available to British Columbians who are gambling on those platforms and that they are taking advantage of services offered by the gaming policy and enforcement branch, even if they are gambling on illegal gambling sites.

J. Yap: Speaking of the gaming policy and enforcement branch, their budget was $19.437 million for 2019-20, which is the same amount that is allocated for this year’s budget, 2020-21, despite inflation being approximately 2 percent. In effect, the budget has been reduced year over year.

Can the Attorney General explain why the budget has been effectively cut? If so, what services were cut?

[11:25 a.m.]

Hon. D. Eby: I can advise the member that the GPEB budget has, in fact, increased with contingencies. There are 12 additional GPEB inspector positions that were funded through contingency and were present in casinos at peak hours until the casinos closed. This was following the Peter German recommendation that the regulator be present in casinos at peak hours. So programs have not been cut. Programs continue to be supported and expanded.

Of course, all of government is encouraged and required to be fiscally responsible. So GPEB finds efficiencies, certainly, in their expenditure wherever they can, in relation to travel or other non-fixed costs. But the presence of GPEB inspectors had actually increased in the B.C. casinos — while they were open, again.

I’m going to go back to the member’s question with respect to gaming grants. On June 22, the Ministry of Municipal Affairs and Housing announced that, regardless of the impacts of the pandemic on gaming revenue, gaming grants would be maintained at the same level as the previous year. For fiscal ’20-21, it would be $140 million.

J. Yap: We understand that the German report recommendations on anti–money laundering steps have been fully accepted by government and that government is in the process of implementing all those recommendations. What is the timeline for completion of all the recommendations of the German report?

[11:30 a.m.]

Hon. D. Eby: I can advise the member that 37 of the 48 recommendations have been addressed. Nine will be addressed through legislation by the end of 2021. One will be complete, we anticipate, in September. This is a recommendation related to the joint integrated gambling enforcement team. Then there is one, which is ongoing, in relation to money service businesses within the Ministry of Finance.

J. Yap: With successful implementation of the German anti-money laundering processes, as the minister says, over the next year, what does the minister expect will be the impact of these changes on gaming revenue over the next year and beyond, recognizing that this is an unusual year with COVID? But back to the planning for normal operations, with the service plan that had been laid out, what would be the impact of those changes?

Hon. D. Eby: We were kidding a little bit that we’re expecting a 100 percent increase in revenue as soon as the casinos open. It is a very difficult time to project revenue impacts, obviously, as a result of the pandemic closures.

Pre-pandemic, the impact of the German recommendations…. The recommendations related to the acceptance of bulk cash at casinos and other related recommendations were priced in last year and continue to be integrated into the fiscal plan on a go-forward basis. The impact was not expected to be greater this year than last.

J. Yap: The Cullen commission on money laundering was initially scheduled to deliver its interim report by November of this year and final report by May of 2021. With the pandemic, is this still on schedule?

[11:35 a.m.]

Hon. D. Eby: The commission anticipates that their interim letter to us will be on time but that their final report could be delayed. A number of participants have been delayed in participating as a result of COVID. That has resulted in a delay of the anticipated fall resumption of hearings with the commission.

In terms of the impact on the final report, it’s too soon to say what, if any, impact there will be in terms of their ability to deliver that final report on schedule.

J. Yap: The budget was, I believe, $10 million — in this year’s budget — for the public inquiry. The question to the minister is: does the Attorney General expect the public inquiry to come in on budget? This, of course, is an issue that the public is interested in.

Hon. D. Eby: We’re advised by the commission that they are on budget and currently still anticipate finishing on budget.

J. Yap: My last question is in regards to the rebuilding of BCLC’s headquarters in Kamloops. Can the minister explain how that process evolved, how the decision to cancel was arrived at and the reason for that change in decision?

[11:40 a.m.]

Hon. D. Eby: With respect to the headquarters at Kamloops, BCLC prepared a business case that was evaluated by Partnerships B.C., which then provided recommendations back to the B.C. Lottery Corp. and to government in terms of the use of the existing facility and the budget impacts of a new headquarters versus using the current facility and doing upgrades as needed. The decision was made by government, in partnership with the B.C. Lottery Corp., to upgrade the existing facility rather than build a new building, given the information we were provided by Partnerships B.C.

The building itself is undergoing $1.6 million in upgrades to ensure that the workforce is appropriately housed, that the folks who do the good work at the B.C. Lottery Corp. have a nice place to work and have appropriate space allocation and a modern workspace. I can also advise the member that there are ongoing discussions with the city of Kamloops around the property as a whole, given this relatively new approach, although we announced that last year.

In particular, some of the B.C. Lottery Corp. property is being used as a staging area for the Victoria Street upgrades that are underway in Kamloops right now. BCLC has made that available to Kamloops. Obviously, while it’s being used as a staging area, no work can be done on that site. But the hope is that there can be some partnership with Kamloops in terms of how that property is used and beautified to improve the general experience of people in the Kamloops BCLC property.

I can advise the member as well — because I know it’s an issue of continuing interest of many members, in terms of the executive complement of the B.C. Lottery Corp., and government’s commitment to keeping BCLC headquarters in Kamloops — that the two most recent executive hires for vacancies in the executive at the B.C. Lottery Corp., the corporate social responsibility officer and the chief people officer, both are in the process of, or have recently arrived in Kamloops as permanent residents of Kamloops. So the executive, in the vast majority, are full-time residents of Kamloops.

J. Yap: Thanks to the minister for that answer. With that, I want to say a big thank-you to the minister and all the staff that supported the estimates with regard to BCLC, all the hard-working and dedicated people that help government and this minister operate BCLC.

With that, I will hand back the debate to my colleague from Vancouver-Langara.

M. Lee: That completes our first portion of AG estimates. We’re going to switch over now to ICBC and my critic for our team for ICBC, the member for Richmond-Queensborough.

J. Johal: My first question to the Attorney General, if you can give us a sense of how COVID-19 has impacted ICBC revenue.

Hon. D. Eby: Just before I turn to staff on that question, I want to clarify that we’re not going back to B.C. Lottery Corporation. So the gaming policy and enforcement branch and BCLC folks can sign off.

The Chair: Member for Vancouver-Langara, is that correct?

M. Lee: Yes, that’s correct.

[11:45 a.m.]

Hon. D. Eby: On May 14, 2020, ICBC released a report about the impacts of COVID on revenue. Among other things, it detailed a decline in annualized premium of $283 million and a reduction in expenses associated with claims projected at $158 million. I can advise the member that updated numbers will be provided in a report to be released in September. It will follow the same format as the May report. But I don’t have more current numbers than that.

I can tell the member, though, that traffic has been increasing, as have collisions, but not yet to historic levels, so they’re still under projected collisions. That’s good news for finances for ICBC, but also premium revenue is still not at historic levels or projected levels either.

J. Johal: Alluding to…. I think the minister is commenting about the information that was released in May.

In that press release from ICBC, it said: “ICBC opened 46 percent fewer accident claims, including claims for both damage to vehicles and for injuries, compared to the same time last year, with an average weekly reduction of 7,200 claims. This drop in the number of claims amounts to approximately $158 million in savings for ICBC.”

Does the minister expect similar savings of that we saw from the March to May period, or does he expect those savings to significantly decline?

Hon. D. Eby: The best I can do is provide the member with broad trends. The broad trends are….

The point-in-time number from the May report of $158 million in projected savings was at the sort of lowest point of traffic related to public health orders of the pandemic, where there was close to a 50 percent reduction over historical trends and projected trends. The trend since that point has been of increasing traffic and increasing collisions, but we are still below historic and projected collisions. So the number of $158 million will be increasing, but at a slower rate in terms of the numbers that are expected to be released in September.

[11:50 a.m.]

J. Johal: That period that we’re talking about here, March 16 to May 2. In that seven-week period, there were about 7,200 claims over the seven weeks. That’s 50,400 fewer claims. That’s a savings of $158 million, which means the average cost per claim is $3,135.

In 2017, the average injury paid claim was $41,800, and the average basic property damage claim was $4,000.

Can the Attorney General help me understand what cost per claim or what kind of calculation they’re using to project the $158 million? Basing it just on the 2017 numbers, one would assume the savings would be higher.

Hon. D. Eby: I can provide the member with a bit of background about how that number was reached. ICBC’s actuaries looked at historical accident claims in a year-over-year period and the severity of those relative claims, divided into material damage claims and injury claims. They looked at what they have seen in previous years, compared it to what was coming into the claim centre and arrived at the value of $158 million.

[11:55 a.m.]

Now, obviously, it’s an imprecise science, because we’ve put a number of road safety measures in place, and we hope to reduce collisions and so on. But in any event, it is a very accurate number, in terms of actuarially what was expected versus what actually materialized in the claim centre.

There is an explanation for the variation on the average claim value, though, that goes some distance to addressing the member’s concern, I think. In the service plan, the average collision claim value does not include glass claims. Those glass claims are reported separately. Because there are so many of them, and they are at a much lower value, they have a distorting effect on the numbers. The average cost, in 2019, of a claim was $4,300, and in 2017, it was $3,900. So the impact of glass claims can be seen.

The Chair: For both the member and minister, noting the hour, we’ll do a quick question, hopefully — and, if possible, a quicker answer.

J. Johal: That’s the challenge. I think these questions are rarely quick, and it takes a while to answer. We’ll do our best, both of us.

In that same press release, ICBC had stated: “More than 150,000 customers changed their insurance policies by cancelling their policy, 103,700, or lowering their rate class, 57,561, resulting in a projected $283 million decline in written insurance premiums compared to what would normally be received for that period.”

How does ICBC calculate the $283 million loss based on the 103,000 cancellations and the 57,000 who were insured but lowering their rate class?

Hon. D. Eby: It’s a relatively straightforward answer to the member’s question. It’s very simply the premium that ICBC has returned to people, prorated over the year. If you have paid for 12 months of insurance and you cancel your insurance in month 3, then it’s nine months of premium returned — which is added, then, to that $283 million number.

The difference here from the collision number is that this is an annualized number, so this number could — and it’s likely to — change as people come back on, or as their behaviours change related to the loosening of public health restrictions and as they’re returning to work. But the months of premium that are lost is indeterminate at this point. So in terms of what the final number will look like, it’s not that easy to project. It depends on what happens with COVID in the province.

With that, hon. Chair, I note the hour and move we adjourn for lunch.

The Chair: The minister has moved that we report progress on the estimates of the Ministry of Attorney General.

Motion approved.

The Chair: Thank you, Members. We will see you after the lunch hour. Have a good time. Bye for now.

The committee adjourned at 11:59 a.m.