While California voters legalized cannabis for adult use nearly five years ago, the legal market has faced several major hurdles as it continues to mature and evolve.
Two of those hurdles — licensing and enforcement — were top of mind during this week’s meeting of the state’s Cannabis Advisory Committee, whose seventeen members make recommendations to the state’s Bureau of Cannabis Control and its Departments of Food and Agriculture and Public Health, soon to see much of their cannabis regulatory activities consolidated under a newly-formed Department of Cannabis Control.
The Committee held its second meeting of the year on Tuesday, though it was the first in which it considered new recommendations from its subcommittees. Last week, the Subcommittee on License Types and the Subcommittee on Enforcement each met for day-long meetings to discuss three potential action items each, which resulted in three motions to ultimately make recommendations to the full Committee.
One of the more pressing topics under consideration had to do with “CEQA regulations,” or compliance with the California Environmental Quality Act, which requires those seeking cannabis business licenses to get clearance at the both state and local levels.
In presenting the subcommittee’s discussion and decision making on this topic to the full Committee on Tuesday, subcommittee chair Kristin Nevedal, who is also the executive director of the International Cannabis Farmers Association, said that a lot of the conversation around this item during the subcommittee meeting centered on the challenges of transitioning from provisional licenses to annual licenses.
The requirements around CEQA, as currently structured, Nevedal said, has “likely been one of the main slowing factors for processing provisionals into annuals. And it also has posed some significant expense challenges or cost challenges to the applicants themselves.”
In 2018, lawmakers created the provisional license type, which is set to expire by January 2022, in response to the slow pace at which annual licenses were getting awarded. But today, roughly 82% of all licenses in the state remain provisional. Governor Gavin Newsom’s revised budget released earlier this month proposes allowing for the provisional licenses to be issued until the end of June 2022 and removing the so-called “sunset date,” which would allow the licensee to keep the license as long as they are actively working toward obtaining an annual license. The revised budget also includes a Local Jurisdiction Assistance Grant Program that is aimed at helping localities more quickly transition provisional licensees to annuals.
When the revised budget was released, Nicole Elliott, Newsom’s Senior Advisor on Cannabis, said in a statement, “We are committed to maintaining stability across the cannabis supply chain, supporting our local partners, and transitioning provisional licenses into annual licensure more swiftly, without sacrificing California’s environmental commitments.”
Nevedal pointed out on Tuesday that “there are zero laboratory testing facilities that hold annual licenses,” therefore, considering all cannabis products must move through a lab before it gets to consumers, should the provisional license program not be extended, “it could have incredible impact” on the supply chain.
The license subcommittee’s motion that passed last week, which the full Committee passed on Tuesday, was therefore to “recommend that the licensing authority consider uncoupling the project-specific CEQA analysis from annual licenses and instead provide guidance to the local jurisdictions to ensure that applicants meet CEQA compliance during the local permitting process.”
The license subcommittee also considered a motion, which failed during the subcommittee meeting due to a tied vote, to recommend “that the license authority create a new cottage legacy license type that allow cultivators and manufacturers to offer consumer direct sales and also allow cultivators to move their genetics into the marketplace via nursery or licensed retail sales” and that “this license type should be subject to a scale trigger.”
On the third item under consideration, regarding the “number of licenses by type,” the license subcommittee chose not to make any recommendation and instead to close the agenda item. On Tuesday, Nevedal told the full Committee that this was because the subcommittee did not feel prepared to make recommendations about license caps or floors.
The enforcement subcommittee passed two motions last week: one related to disciplinary action against licensees who violate regulations or statutes, and another related to enforcement against unlicensed operators.
The motion in response to the former, which the full Committee passed on Tuesday with no discussion other than public comment, was “to recommend the licensing authority prioritize for disciplinary action violations that directly impact public health or environmental degradation, specifically focused on sales to minors, sales and distribution of contaminated or unsafe products, and egregious environmental damage.”
The motion in response to the latter item, on enforcement against unlicensed operators, which the full Committee also passed swiftly on Tuesday, was to “recommend that the licensing authority focus enforcement efforts in jurisdictions that allow licensed commercial cannabis operators over jurisdictions that do not, so that licensed operators can thrive, and prioritize enforcement efforts against unlicensed businesses that are selling to minors, selling contaminated products, or that cause egregious environmental harm.”
After the motion was read on Tuesday, Committee member Timmen Cermak, a psychiatrist, and the former president of the California Society of Addiction Medicine, congratulated the subcommittee for “returning a balance” to the two goals of legalization in the state.
“One is to create the industry, and in a regulated way, and the second is to protect the public health,” he said, adding, “when we consolidate, it would be useful to have each of those goals more equally represented than what has happened so far.”
Ahead of the vote, Committee chair Jeff Ferro, who is also the director of Cannabis Workers Rising, spoke about the need for the new consolidated regulatory body to use its enforcement capacity in a meaningful way, and how that capacity should not go toward the localities that have chosen to ban cannabis sales, thus allowing unregulated operators to thrive.
“Licensing fees go to cover enforcement against the illegal market, and those fees get strained if we go outside of the market that’s legally operating,” Ferro said. “So if a city wants some assistance, they should probably look at a system in which they allow licensing. And then that would afford them the resources to go after the illegal market that targets individuals maybe not of age and provides products that may not be properly tested to the market, endangering the consumer.”
The enforcement subcommittee chose not to make any recommendations for consideration by the Committee regarding “disciplinary tiers” of violations. This would have involved providing input to the new consolidated agency, the Department of Cannabis Control, regarding any potential changes to how state cannabis regulators measure the severity of various offenses.
“Our reasoning was that we didn’t have a whole lot of background information and there was not, as far as we could tell, a great deal of history with the current policies,” subcommittee chair Matt Clifford told the Committee on Tuesday. “We certainly didn’t have much experience to draw on and, from public comment, did not hear a whole lot of dissatisfaction for how these have been applied to date.”