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An employee shows a jar of marijuana at the Health Lifestyle Marijuana Supply Centre on Commercial Drive in Vancouver, British Columbia.Rafal Gerszak/The Globe and Mail

The City of Vancouver has approved a two-tier licensing system to curb the explosion of illegal medical marijuana dispen- saries, defying warnings from the federal government by becoming the first jurisdiction in Canada to regulate storefront pot sales.

Councillors voted on Wednesday to introduce a new business licensing system for compassion clubs and dispensaries, whose numbers have ballooned to about 100 across the city, up from a handful just several years ago. The vote followed extensive public hearings, in which most speakers generally supported regulation, and stern letters from federal cabinet ministers urging council to abandon its plan.

The provincial Health Minister and the head of the local health authority have voiced their support for the rules, and Victoria's mayor says her staff are already studying Vancouver's new bylaw and will report back to council in September about imposing similar regulations on the 19 dispensaries in that city.

Before they voted, Mayor Gregor Robertson and all six councillors from his governing Vision Vancouver party lambasted the federal Conservative government as being "tone deaf" on the issue of dispensaries and for creating a licensed medical marijuana system they say is difficult for many patients to access.

(For more on Vancouver's dispensaries, read The Globe's in-depth explainer: Vancouver's pot shops: Everything you need to know about marijuana dispensaries)

Councillor Geoff Meggs said Vancouver's regulations send federal Health Minister Rona Ambrose a clear message to "wake up."

"You are completely out of touch with the realities on the ground," Mr. Meggs said of the minister. "The policies that you're advocating are backwards and destructive and they've driven us to take the steps that are necessary here today."

Ms. Ambrose said in an e-mailed statement she was "deeply disappointed" by the vote, which she said would make it easier for kids to obtain and smoke marijuana.

"Regulating marijuana in the same manner [as alcohol] could mean as much as tripling its use by youth," the statement said. "These stores have absolutely no regard for the rule of law and have been caught selling marijuana to kids."

Ms. Ambrose's statement said storefronts selling pot are illegal and she expected "the police to enforce the law," but she didn't say whether her department would take any steps to intervene.

The dispensaries operate outside the federal government's medical marijuana program, which permits about 20 industrial-scale producers to sell the drug, in its dried form, directly to patients through the mail.

Under Vancouver's new system, retail pot shops will be charged a yearly licensing fee of $30,000 and must be at least 300 metres from schools, community centres and other dispensaries or compassion clubs.

The fee will drop to $1,000 for non-profit compassion clubs, which must also offer their members other "non-marijuana health services" such as acupuncture and massages. Compassion clubs will also get priority in situations where the city must break up a group of shops that are clustered too close together.

About two-thirds of the city's existing dispensaries are expected to close or relocate under the new rules. City staff said a maximum of about 94 locations could operate under the spacing guidelines of the new bylaw, which could be enforced using fines and even court injunctions for unco-operative pot shops.

Several of the city's oldest compassion clubs will be forced to move, despite years of advocating for patients and having "become part of the fabric of their community," according to Jamie Shaw, spokeswoman for the B.C. Compassion Club Society.

She said she hoped there were licensing loopholes that would allow her non-profit to avoid moving, which would likely be too costly for her club.

Shortly after Vancouver announced plans to regulate marijuana shops, Ms. Ambrose wrote councillors a letter urging the city and its police force to shut down the dispensaries. Public Safety Minister Steven Blaney echoed that message.

Criminologist Neil Boyd of Simon Fraser University, an expert on illegal drugs, called Ms. Ambrose's response "posturing to the base of the Conservatives" and said the federal government could likely only challenge the bylaw through the courts.

However, he predicted such a challenge would be "costly and counterproductive" as the tide of public opinion in Canada continues to shift in favour of decriminalizing, regulating and taxing marijuana.

"Are we going to go back to outright criminalization? I can't imagine how or why that would happen and I don't think people want that to happen," he said.

Still, he said similar bylaws are unlikely to start cropping up in cities across Canada any time soon, because such an approach only works in communities such as Vancouver, where "it's clear there's tolerance and acceptance" of storefront pot sales.

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