Oregon Cannabis lawsThe 2017 Oregon legislative session begins two weeks from tomorrow, on Wednesday, February 1. Already, there are many proposed bills, measures and resolutions posted on the legislature’s website, ranging from marquee bills to tackle the state budget shortfall and its gun registry loopholes, to resolutions naming an official state horse (the Kiger Mustang) and a dog (the Border Collie). For our faithful readers, there is also a generous helping of cannabis bills. We count 28 of them.

Back in October, we wrote that issues surrounding public consumption, like cannabis cafés and special event (temporary) licenses, would be up for discussion. As shown below, that has proven to be true. We have also written time and again (and again and again) about the need to merge Oregon’s medical and recreational marijuana programs. That appears to be up for serious consideration as well. Finally, we have written about the state’s burgeoning industrial hemp program, which is also addressed.

Below is a compilation of the 28 introduced cannabis bills, sourced from the Oregon legislature’s website. Each bill is linked to its summary page, and you can click through to the text of any proposal of interest. When reading a bill, it’s important to understand that any text in bold letters would be new, while language in [italics and brackets] would be removed from existing law. It’s also important to note that each proposed bill has a specific enactment date: some are “emergency” laws, effective on passage, while others would take effect at a future date. Finally, some of these bills would sunset after a certain period; others are proffered as evergreen.

As in the 2016 short session, many of the bills listed below will fall by the wayside as the senate and house convene and begin to knock heads. Others will be revised, consolidated or otherwise modified, but it is altogether certain that we will see some changes in Oregon cannabis law this session. Altogether, the index below seems to support the sentiment that Oregon is committed to getting it right with cannabis.

Draft Senate Bills

SB 56. Authorizes Oregon Liquor Control Commission to require cannabis-related licensees, certificate holders and applicants for licenses and certificates to submit information related to persons who hold financial interest in business operating or to be operated under license or certificate.

SB 108. Modifies certain definitions for purposes of regulating cannabis. Imposes tax on retail sale of marijuana seeds. Conforms terms throughout statutes governing regulation of cannabis.

SB 130. Waives fees for obtaining a medical marijuana card for veterans who have total disability rating of at least 50 percent as result of injury or illness incurred or aggravated during active military service, and who received discharge or release under other than dishonorable conditions.

SB 300. Establishes Oregon Cannabis Commission to fulfill duties, functions and powers relating to medical use of marijuana. Directs Oregon Health Authority to transfer duties, functions and powers relating to Oregon Medical Marijuana Act to commission. Makes commission operative January 1, 2018.

SB 302. Removes provisions related to marijuana offenses from Uniform Controlled Substances Act. Moves crimes, penalties, defenses to crimes and procedural provisions in Uniform Controlled Substances Act that apply to marijuana offenses to Control and Regulation of Marijuana Act. Adjusts penalties for certain crimes. Makes corresponding changes to statutes referencing controlled substances to clarify applicability to cannabis and cannabis-derived products.

SB 303. Amends, clarifies and creates consistency in statutes setting forth prohibitions and procedures related to minors possessing, purchasing, attempting to purchase or acquiring alcoholic beverages or marijuana items.

SB 304. For purposes of laws regulating cannabis-related businesses, standardizes language with respect to issuing, renewing, suspending, revoking or refusing to issue or renew licenses.

SB 305. Clarifies law requiring notice to Oregon Liquor Control Commission when person licensed by commission to engage in cannabis business is convicted of violation of state law or local ordinance of which possession, delivery or manufacture of marijuana item is element.

SB 306. Repeals provisions regulating marijuana grow sites, marijuana processing sites and medical marijuana dispensaries on June 30, 2018. Updates and creates provisions providing for licensing of marijuana grow sites, marijuana processing sites and medical marijuana dispensaries by Oregon Liquor Control Commission.

SB 307. Provides for regulation by Oregon Liquor Control Commission of consumption and sale of marijuana items at temporary events, including licensure of premises on which temporary events are held. Provides for regulation by commission of consumption of marijuana items at cannabis lounges, including licensure of premises where cannabis lounges are located. Prohibits licensing temporary events or cannabis lounges in cities or counties that have not adopted ordinances allowing for the consumption of marijuana items at temporary events or cannabis lounges. Excepts from prohibitions on public use, including restrictions set forth in Oregon Indoor Clean Air Act, consumption of marijuana items in designated areas of premises for which temporary event or cannabis lounge license has been issued. Applies current law regulating licensed marijuana producers, processors, wholesalers and retailers to new types of licensees. Makes certain exceptions.

SB 308. Establishes Task Force on Social Consumption of Cannabis.

SB 319. Authorizes local governments to allow medical marijuana dispensaries and marijuana retailers licensed by Oregon Liquor Control Commission to be located within certain distance [500 feet] of schools.

SB 342. Clarifies total number of mature marijuana plants and immature marijuana plants and total amount of usable marijuana, medical cannabinoid products, cannabinoid concentrates and cannabinoid extracts that patients and caregivers registered under Oregon Medical Marijuana Act may possess.

SB 570. Creates crime of intentionally administering marijuana item to body of person who is under 18 years of age. Punishes by maximum of 20 years’ imprisonment, $375,000 fine, or both. Creates crime of knowingly administering marijuana item to body of person who is under 18 years of age. Punishes by maximum of 1 year’s imprisonment, $6,250 fine, or both.

Draft House Bills

HB 2151. Allows property tax exemption for food processing machinery and equipment newly acquired by persons engaged in business of producing cannabinoid edibles, alcoholic beverages and alcoholic liquors.

HB 2197. Directs Oregon Liquor Control Commission to enter into agreement with nongovernmental entity that conducts or funds research on cannabis and cannabis-derived products. Specifies terms of agreement. Requires public dissemination of data, information, analysis and findings procured pursuant to research.

HB 2198. Changes name of Oregon Liquor Control Commission to Oregon Liquor and Cannabis Commission. Changes composition of Oregon Liquor and Cannabis Commission by adding commissioners from cannabis retail industry. Specifies that Oregon Health Authority may not register marijuana grow sites, marijuana processing sites and medical marijuana dispensaries. Creates within authority, for purposes of administering Oregon Medical Marijuana Act, Medical Use of Cannabis Board. Becomes operative June 30, 2018. Repeals provisions regulating marijuana grow sites, marijuana processing sites and medical marijuana dispensaries on June 30, 2018. Updates and creates provisions providing for licensing of marijuana grow sites, marijuana processing sites and medical marijuana dispensaries by Oregon Liquor Control Commission. Makes other technical changes to laws regulating cannabis. Creates alternate registry system administered by State Department of Agriculture for growers that produce marijuana for registry identification cardholders. Directs Oregon Liquor and Cannabis Commission to coordinate with department for purpose of regulating marijuana producers.

HB 2199. Eliminates provision indicating that cannabis-related business licenses may be for term other than one year. Qualifies provision providing that cannabis-related business license expires upon death of licensee.

HB 2200. Changes name of Oregon Liquor Control Commission to Oregon Liquor and Cannabis Commission. Changes composition of Oregon Liquor and Cannabis Commission by adding commissioners from cannabis retail industry. Directs commission to coordinate with State Department of Agriculture for purpose of regulating marijuana producers. Makes other technical changes to laws regulating cannabis. Specifies that Oregon Health Authority may not register marijuana grow sites, marijuana processing sites and medical marijuana dispensaries. Repeals provisions regulating marijuana grow sites, marijuana processing sites and medical marijuana dispensaries on June 30, 2018. Updates and creates provisions providing for licensing of marijuana grow sites, marijuana processing sites and medical marijuana dispensaries by Oregon Liquor and Cannabis Commission.

HB 2201. Corrects and conforms definitions for “cannabinoid concentrate” and “cannabinoid extract” in laws regulating cannabis.

HB 2202. Modifies statute under which lien may be imposed against building or premises used to illegally produce, process, sell or use marijuana items.

HB 2203. Changes distribution of moneys collected by Department of Revenue as tax imposed on retail sale of marijuana items.

HB 2204. Changes statutory limitation on local government’s authority to impose local tax or fee on retail sale of marijuana items. Specifies that if electors of city or county approve ordinance imposing tax or fee, governing body of city or county may amend ordinance, without referring amendment to electors, to adjust rate of tax or fee.

HB 2205. Directs State Department of Agriculture to solicit proposals from third party vendors to create for producers of cannabis efficiency standards for energy and water consumption and certification protocols for meeting those standards.

HB 2371. Specifies that, for purposes of statutes regulating seeds, agricultural hemp seed is flower seed. Directs Director of College of Agriculture and dean of College of Agricultural Sciences of Oregon State University to establish program for labeling and certification of agricultural hemp seed.

HB 2372. Establishes Oregon Industrial Hemp Commission.

HB 2556. Restricts sale and delivery of marijuana paraphernalia. Creates violation for unlawful sale or delivery of marijuana paraphernalia. Punishes by maximum of $2,000 fine.

If you made it this far, well done. We will continue to offer updates as events unfold this February and March. In the meantime, please let us know if you have comments on any of the specific bills listed above, or on the Oregon legislature’s approach to cannabis this session.

 

 

Arkansas CannabisArkansas voters’ decision to approve state-legal medical marijuana evidences a shift in attitudes towards medical cannabis that transcends stereotypical red-state/blue-state division on progressive cannabis reform. Arkansas will soon join Florida and Louisiana as traditionally “southern” states to embrace some form of medical marijuana legalization.

The Arkansas Medical Marijuana Commission is developing rules and regulations that will shape the trajectory of medical cannabis in the state. Though medical marijuana is now enshrined in the Arkansas state constitution, the Commission’s implementation of the law will largely determine the character and viability of the system.

Investors and entrepreneurs looking to capitalize on Arkansas medical marijuana should consider several questions raised by the legalization amendment itself and by the actions the Medical Marijuana Commission has taken since the November vote. The Commission has yet to promulgate final rules, and it will not do so for at least a few more months. But the rules trickling in already shed some light on several challenges and opportunities facing early movers in Arkansas’ medical marijuana industry.

Do I have to be an Arkansas resident to enter the industry? Not necessarily. Issue 6 as passed requires an individual applying for a dispensary or cultivation license to have been a resident of Arkansas for the past seven consecutive years and a rule adopted by the Commission requires applicants establish residency through two forms of identification. However, Issue 6 requires only that 60% of the individuals owning an interest in a medical marijuana dispensary or cultivation operation meet the residency requirements. This means that even though the individual named as the applicant on the form must be a long-time, continuous resident of Arkansas, that individual can recruit non-resident investors if Arkansas residents make up 60% of the syndicate. Interestingly, Issue 6 states that 60% of owners must be Arkansas residents – not that 60% of the cannabis company must be owned by Arkansas residents. Accordingly, a group of six Arkansas residents could own a medical marijuana facility with as many as four non-residents even if the four non-residents own a disproportionate share of the ownership interest.

Residency rules are more and less restrictive for other medical marijuana stakeholders. For example, “visiting qualified patients” (defined as visitors and those who have lived in Arkansas for less than 30 days) may receive medical marijuana from Arkansas dispensaries if they present a valid medical marijuana registry identification card from another state. On the other hand, members of the Arkansas Medical Marijuana Commission must be residents for ten years.

Are there capital requirements to obtain an Arkansas cannabis license? Capital requirements are a big obstacle to entering the Arkansas medical marijuana market. The Commission recently approved a licensure and renewal fee of $100,000 for dispensaries and cultivation operations. This is in addition to the several thousand dollar –- and only partially refundable -– application fee. The fees are steep, especially considering the uncertainty surrounding the mostly unknowable and uncertain market and regulatory environment of the fledgling Arkansas medical marijuana industry. The Commission also required proof of assets or a surety bond of $1,000,000 and proof of $500,000 in liquid assets to obtain a license. We see these high financial barriers as likely to limit the growth of Arkansas’ cannabis industry, while at the same time leading to experienced and well-funded non-residents taking a large stake in it by providing necessary start-up capital. Our cannabis business lawyers are already getting a slew of calls and emails from cannabis industry veterans from outside Arkansas looking to get in and from Arkansas residents looking for experienced outside help and funding.

What else should I know before getting into an Arkansas cannabis business? In addition to the usual concerns about federal illegality of marijuana and obstacles to operating a marijuana business like lack of banking, investors in Arkansas should beware that the Arkansas Medical Marijuana Commission has yet to complete its work creating rules and much could change. Ultimately, the Commission’s final rules will not be finalized for a few months and all manner of restrictive local land use codes, ordinances, and other laws could result. Nonetheless, the potential for a vibrant medical marijuana industry in Arkansas is undeniable and investors and entrepreneurs should pay close attention. After all, Arkansas is famous for its diamonds in the rough.

Cannabis lawyerThe confirmation hearing for Alabama Sen. Jeff Sessions, Trump’s nominee to serve as the U.S. Attorney General, begins this morning at 9:30 a.m. ET. You can view the live feed here. Sessions is opposed by civil rights groups and championed by law enforcement, which, together, signal poorly for marijuana. On the specific issue of federal marijuana prohibition, we wrote on his nomination day that the Senator has been hostile to marijuana for a long time.

If each member of the Senate Judiciary Committee votes with his or her party, Sessions will pass by a vote of 11 to 9. That seems likely, as there have been no reported signs that any Republicans will defect, either in the committee or on the Senate floor. Still, Democrats have the opportunity to ask some tough questions on a variety of topics. It is our sincere hope that somebody takes the opportunity to drill down from civil rights to marijuana legalization, and specifically, to enforcement of the Federal Controlled Substances Act (CSA).

As it stands, a hostile, Sessions-led Department of Justice (DOJ) could attempt to kneecap marijuana policy reform nationwide. Its options would include everything from suing states to block implementation of marijuana programs, to leveraging the CSA’s asset forfeiture provisions against pot businesses and related parties. These actions would likely be massively unpopular, but they would be well within the power of a hostile administration – even one that ostensibly supports limited government and states’ rights.

Fortunately, there is a bipartisan majority in each chamber of Congress that appears interested in seeing states, and not federal law enforcement, lead on the issue of cannabis legalization. If Congress continues to prohibit the DOJ from chasing state medical marijuana actors, it may be hard for Sessions to keep the jails as full as he would like. There is also a possibility that as much as Sessions dislikes pot, he may have other priorities, at least to start.

As of today, there is probably more uncertainty than at any point in the past few years with respect to enforcement of federal prohibition. Anyone interested in federal marijuana policy would be well served to tune into today’s hearings, and to closely monitor the hearings of other Trump nominees like Georgia Rep. Tom Price, who has been nominated to serve as Secretary for Health and Human Services (and also has a very poor record on pot). Mr. Price is set for hearing next week.

Stay tuned.

Cannabis bankingThere has been a ton of speculation about what President-elect Donald Trump and his nominee for U.S. Attorney General, Jeff Sessions, will do about state-legal marijuana in the next four years. Some industry and political experts think a renewed War on Drugs is coming, while others believe neither Trump nor Sessions will undertake the politically unpopular task of undoing state-by-state cannabis legalization and some version of the status quo under the Cole Memo will prevail. What is likely to happen with access to banking for cannabis businesses under this new administration?  Next to 280e, the inability to secure and maintain a bank account is probably the biggest business problem for marijuana entrepreneurs.

Marijuana businesses and ancillary service providers (those businesses that provide services to the industry but that are not cultivating, manufacturing, or distributing marijuana) often cannot get bank accounts or bank financing because marijuana is federally illegal. Regulations issued by the Financial Crimes Enforcement Network (FinCEN) dealing with money laundering are what make it so tough for cannabis businesses to secure banking. The Bank Secrecy Act FinCEN enforces requires banks investigate their customers and neither negligently or knowingly do business with bad actors. State-legal marijuana businesses and even many ancillary businesses are viewed as bad actors for banks and so they generally avoid those businesses and the potential fines that can come with them.

Nonetheless, in 2014, FinCEN finally issued some guidance that allows financial institutions to at least provide bank accounts to marijuana businesses — no mention was made in this guidance about access to banking for ancillary service providers. Under these FinCEN marijuana guidelines, banks are expected to:

  • Verify with state authorities that a marijuana business is duly licensed and registered.
  • Review state license applications and related documentation the marijuana business used to obtain its state license to operate its marijuana-related business.
  • Request from the state licensing and enforcement authorities available information about the business and related parties.
  • Develop an understanding of the normal and expected activity for the business, including the types of products to be sold and the types of customers to be served.
  • Monitor publicly available sources for adverse information about the cannabis business and related parties.
  • Periodically refresh information obtained as part of customer due diligence using methods and timetables commensurate with the risk.
  • File Suspicious Activity Reports (SARs) with FinCEN for all of their marijuana business customers. Banks use SARs to notify regulators that someone may be using their services for an illegal purpose. There will be no direct consequences arising from these SAR filings, but this means the federal government knows exactly who you are as a marijuana business, and with whom you are banking.
  • File SARs if they believe one of their cannabis business customers has violated a state law or has failed to act in accordance with the Cole Memo.

With these guidelines FinCEN essentially dragooned banks into acting as on-the-ground investigators to snitch on marijuana businesses that are not being as compliant or careful as the federal government believes they should be. These guidelines do not change federal banking laws and they are pretty onerous, but they were a positive step towards alleviating the marijuana banking epidemic.

With eight states, including California, electing to legalize/”medicalize” marijuana this past November, I questioned in a recent blog post what FinCEN/the Department of Treasury will do with the 2014 FinCEN guidelines, especially with Trump soon to be our President. In December, Senator Elizabeth Warren (and several other senators) sent a letter to FinCEN requesting it issue increased guidance to banks, given we now have 29 states with some form of legal marijuana and no federal resolution of the banking issue. Specifically, Senator Warren and the other senators wrote that more guidance is necessary to address how ancillary services providers can secure financial services as the 2014 FinCEN guidelines are silent on this issue. The senators’ letter specifically stated that:

The 2014 FinCEN guidance did not distinguish between state-sanctioned marijuana businesses and the [ancillary] businesses that service the marijuana industry, leaving it up to individual financial institutions to determine how to classify and treat [ancillary] businesses. Limitations on access to financial services have become increasingly problematic for legal businesses and will only present a larger problem as more states legalize marijuana . . . since FinCEN’s 2014 guidance was released, less than 3% of the nation’s 11,954 federally regulated banks and credit unions have chosen to serve the cannabis industry.

The senators’ letter also accurately noted that an inability of cannabis businesses to bank promotes tax fraud and creates a public safety issue due to the large amounts of cash marijuana businesses must handle.

If Congress will not adjust the banking laws to accommodate state-legal marijuana businesses, pressuring banking regulators to change their enforcement policies is the logical next step and we need to see more congressional representatives and senators from marijuana-friendly states standing up for marijuana banking. If we expect the state-by-state democratic experiments with cannabis to succeed, we need to equip marijuana and ancillary businesses with the tools for success, including access to banking.

Cannabis litigation lawyerThough we are hoping 2017 will bring you nothing but prosperity when it comes to your cannabis business. But if you are headed to court in 2017 or even if you are just just sensing a company dispute stirring, the following five tips will help you avoid or mitigate the negative impact of a business dispute.

  1. Make your business relationships crystal clear from the start. The days of handshake deals regarding ownership in a cannabis business are over. You should do no deals of any real size without first getting everything in writing. Operating agreements, bylaws, and shareholder agreements exist to ensure that your company structure and the relationship between its owners is abundantly clear. When starting a company together, you and your fellow owners should have at least some understanding on how your company will be operated and on how such things like equity versus debt, voting rights, sweat equity, preferred returns, owner employment will be navigated. Most of the ownership disputes our cannabis litigation lawyers have handled have been because of badly done initial company contracts and filings.
  2. Perform due diligence on your partners. If you want to increase your odds of avoiding a dispute with your cannabis business partners, the most important thing you can do is to choose your partners wisely. What never ceases to surprise us is how often we are told by a party locked in a life or death ownership dispute regarding a cannabis business is that they barely knew their business partner before they started the business with them. If you are going to start a cannabis business (or any business for that matter), the first thing you should do is find out as much as you can about your putative partner’s financial and business history. You should do this before you sign away your soul and money to joining with this person on a business project. It’s neither rude nor unexpected to ask your potential partners for documentation showing their financial and criminal history–the state licensing regulators will ask for this information anyway. It is even more important to conduct thorough due diligence if you are buying into an existing cannabis business. At minimum, this due diligence should include investigating and analyzing the assets and liabilities of the company and its current owners. Your due diligence should also include confirming the appropriate standing of the company with state and local government regulators, and determining that the company and its principals understand how to comply with state and local laws as well as the Cole Memo. This is routine in every other industry and it must become routine in the cannabis industry as well.
  3. Get your own attorney from the start to protect yourself. More often than not, the company has an attorney looking out for the company’s interests. But it is important to realize that the company attorney is not your personal lawyer and that lawyer will almost certainly be conflicted out of any dispute between you and your business partners and/or investors. For this reason (and many others) you need your own lawyer providing you with your own counsel and protection regarding your role in the company and your ownership rights. This lawyer should also make sure that the written agreements work for you and not against you. This lawyer will also be an asset for you personally if any dispute arises. For more on how to avoid a dispute relating to your cannabis business, check out Five Tips on How to Avoid Cannabis Litigation and How to Avoid Costly Marijuana Business Disputes. For more on how to choose the right lawyer for your cannabis business check out How To Choose Your Cannabis Business Lawyer.
  4. Know your dispute resolution options. Well drafted corporate documents and contracts should cover most possible breakdowns in the business or the relationship and set out the options for handling internal strife. If there is a fight or a tie on a vote, what happens? How are problems resolved and when? Who makes what decisions and how? What about liquidating the business? What about selling an ownership interest and for how much? Can you sell just your membership interest or shares without going through a vote of the members? Can you keep running the business free of your partners if there’s a fight? What about dissolving the company and winding down? What happens if there is a contract breach? All of these things can and usually should be covered in your corporate governing documents or in any other contract you sign, and by doing so, you greatly minimize your likelihood of destructive problems down the road. Your company documents and contracts should also make clear exactly how disputes are going to be handled. Are you going to want your dispute made public in a court, or kept quiet in an arbitration or mediation? It is a lot easier to reach agreement on such things when you are starting your business or your relationship than when you are already in the midst of a hard fought dispute with costly lawyers.
  5. Make sure your lawyer knows what he or she is doing. When hiring a lawyer to help protect you when getting into a cannabis business, you should be sure to hire a law firm with lawyers who know both business law and cannabis law. And when confronted with a dispute involving your cannabis business, you need to be sure to hire a law firm with lawyers experienced in civil litigation (criminal litigation experience does not count here) and cannabis law, if possible. For more on choosing your cannabis lawyer, check out How To Choose Your Cannabis Business Lawyer.

Be careful out there, and have a happy 2017.

home grown cannabisAs cannabis reform continues to spread across the United States, we are seeing a marketplace increasingly driven by business interests. This is the eighth installment in our series looking at how the changing landscape of cannabis policy affects a key group of often-overlooked stakeholders: medical marijuana patients who choose to cultivate their own supply of cannabis. Go here for the home grown laws in Washington and Oregon, here for the laws in California and Alaska, here for the home grown laws in Michigan and Illinois, and here for the laws in New York, Rhode Island, and Vermont, here for the laws in Hawaii, New Mexico and Nevada, here for Colorado and Montana, and here for the laws in Arizona, DC, and Massachusetts. Though there are undeniably many benefits to the expansion and professionalization of the commercial cannabis industry, it is also important to account for these small-scale medical marijuana producers that started it all.

2016 saw many states approve recreational or medical cannabis reforms. Though progress has been limited at the federal level, the tide of public opinion and state policy is increasingly clear. As part of our series on home cultivation of marijuana, what follows is a round-up of November changes to home cannabis cultivation in multiple states.

The new recreational marijuana states:

California. The first state to legalize medical marijuana has now embraced recreational cannabis with the passage of Proposition 64 in November 2016. The old law exempted qualified patients from prosecution if they cultivated no more than 100 square feet of marijuana for their own personal, medical use. Primary caregivers were permitted to grow up to 500 square feet.

The new law requires that amounts of marijuana possessed by people 21 years or older in excess of 28.5 grams be kept within or on the grounds of a private residence. The law allows no more than six living marijuana plants to be “planted, cultivated, harvested, dried or processed” within a single residence at one time. The state law also protects localities’ ability to pass laws regulating home cultivation within their jurisdictions.

Nevada. Nevada also voted to legalize recreational cannabis this November by passing its Question 2, though it had previously permitted medical marijuana. Nevada’s new law permits possession of up to one ounce of marijuana. It also allows home cultivation for individuals who live more than 25 miles from a registered marijuana dispensary. These individuals may grow up to six mature cannabis plants at a time.

Massachusetts. Massachusetts voted to approve legal recreational marijuana by passing Question 4 this year. The state allows persons 21 years of age and older to possess up to 10 ounces of marijuana at their home and grow up to 6 marijuana plants, up to 12 per household.

Maine. Like most of the other states to legalize recreational marijuana in 2016, Maine’s new law, Question 1, allows adults over 21 to cultivate up to 6 mature cannabis plants and possess as many as 12 immature plants. Outdoor grows are more heavily regulated.

 

The new medical marijuana states:

Florida. Unfortunately for green thumb patients and master growers alike, Florida’s Amendment 2 does not currently permit home cultivation of marijuana as part of its new medical marijuana program.

Arkansas. Arkansas’ Issue 6 also does not permit home cultivation of medical marijuana. Look here for more of our thoughts on Arkansas medical marijuana.

North Dakota. North Dakota’s Measure 5 allows qualified patients who live at least 40 miles from the nearest registered dispensary to grow their own.

Montana. Voters in Montana approved I-182 in November to permit medical marijuana in the state. Qualified patient home growers are allowed a total of 4 mature plants and as many as 12 seedlings. Patients are allowed to possess one ounce of usable marijuana.

Even as the tides of federal cannabis policy become increasingly uncertain, these states evidence that the times are indeed changing, and this holds true for growing your own as well.

 

California cannabis lawsA new California bill, Assembly Bill 64, is currently being considered by California legislators. AB 64 would amend the marijuana advertising rules under Proposition 64 (aka the Adult Use of Marijuana Act, or AUMA) to create stricter regulations for advertising on highway billboards. Though Prop 64 already bans marijuana ads on any billboards on California interstate highways or state highways that cross the border of any other state, AB 64 would extend that prohibition to exclude advertising on billboards on any highways within the state.

The sponsors of AB 64 state that the stricter regulations are meant to further enforce prohibitions against advertising cannabis to minors under the age of 21, who would be able to see ads on highway billboards even if the ads are targeted specifically at legal adult consumers and medical marijuana patients. In addition, the bill’s sponsors are concerned that cannabis businesses that have not yet received a state license to sell medical or recreational cannabis are already advertising on highway billboards across California.

AB 64 would prohibit not only licensed businesses, but any entities operating in California from placing marijuana ads on interstate and state highways. The bill would also extend all other restrictions under Prop 64 on marijuana advertising and marketing from licensees to all entities operating within the state; thus closing a loophole that currently exempts unlicensed cannabis businesses from new state advertising laws. What’s more, the bill would extend the prohibition on billboard ads to the marketing of medical cannabis and medical cannabis products.

Though the new advertising restrictions are already receiving pushback from the cannabis community, AB 64 is not all bad news for California cannabis businesses and license hopefuls. If passed, the bill will also provide clarification on major issues concerning many California cannabis businesses, specifically whether for profit businesses and delivery-only businesses will be allowed under new statewide regulation.

Under AB 64, the Medical Cannabis Regulation and Safety Act (MCRSA) would be amended to explicitly allow medical cannabis collectives and cooperatives to operate for profit. In order to operate for profit, these businesses will be required to obtain a valid California seller’s permit from the State Board of Equalization and a valid local license, permit, or other authorization from the city or county where the business operates.

AB 64 would also amend California law to specify that Type 10 dispensaries and Type 10A producing dispensaries under the MCRSA, as well as retailers (and by association microbusinesses) under the AUMA, may be either:

  1. a “storefront dispensary” for locations that have direct physical access for the public, or
  2. a “nonstorefront dispensary” for locations that do not have direct physical access for the pubic.

For the amendments under AB 64 to pass, two thirds of California legislators will need to vote in favor of the bill. This is California’s first attempt to consolidate the provisions of the MCRSA and the AUMA, which contain several conflicting provisions due to differing approaches on key issues under the two state initiatives. However, this will most likely not be the last attempt as the state prepares to license both medical and recreational cannabis businesses beginning as early as January 1, 2018. We will be closely following any changes to California cannabis laws throughout 2017 and those interested in securing a state license should be following along.

Oregon Cannabis lawsThis week marks the end of the early start program for medical marijuana dispensaries licensed by the Oregon Health Authority (OHA). As of Sunday, January 1, OHA licensed dispensaries will only be allowed to sell marijuana to adults who hold a valid medical marijuana card. These dispensaries will no longer be allowed to sell marijuana at retail to non-medical cardholders, as most had been doing since October 1, 2015. Going forward, only Oregon Liquor Control Commission (OLCC) licensed dispensaries can sell pot at retail to non-medical cardholders. And that is where the money is.

For the past few months, our Oregon cannabis lawyers have prodded, poked and cajoled many of our clients to submit their OLCC paperwork to ensure a timely and successful transition into the adult use market. In our experience, OLCC has prioritized retail applicants, and for anyone without local hang-ups the transition has been fairly smooth. Still, the OLCC reports that just 104 of 494 retail applicants have been licensed to date. (The numbers for processors are even worse, with just 23 of 208 applicants approved.)

If you are an OLCC licensed retailer, you will be sitting pretty on January 1, assuming you can find product to sell while everyone else scrambles toward licensure. The situation is less than ideal for consumers, who will no longer have access to many outlets, and also less than ideal for the State of Oregon, which could see a hiccup in sales tax revenues. We have written that the rollout of state level cannabis programs is an uneven course, and hard deadlines tend to showcase that observation.

Note that although the January 1 deadline may seem to decouple Oregon’s medical and adult use marijuana programs, the reality is more nuanced. OLCC licensed entities are allowed to opt in to medical marijuana activity, and almost all of them do – whether through production, processing or retailing. In the retail context, this means that OLCC licensees will be allowed to sell marijuana to medical marijuana cardholders along with anyone else (but tax-free), subject to tracking and reporting requirements. A year from now, we expect very few OHA dispensaries will be standing.

The Oregon early sales program was a good idea, and we believe it achieved its goal of diminishing black market sales. It is our hope that the testing bottleneck and a lack of licensed OLCC operators will not reverse that trend. In any case, starting January 1, Oregon dispensaries without an OLCC license will face a $500 fine, per violation, for selling to retail customers. All of this should make for an interesting start to 2017.

 

In our California Cannabis Countdown, Tiffany Wu (of our San Francisco office) regularly analyzes the various local city and county ordinances governing California’s ever-changing cannabis industry (see here, for example). Local cannabis laws have always been important in California, but they’ve become even more important now that the Medical Cannabis Regulation California Cannabisand Safety Act (“MCRSA“) requires local government approval before you can get a state medical cannabis license. And though you don’t need that local approval before getting a state license under Proposition 64, you will have to be in compliance with local law before you can open and operate your adult use cannabis business in California.

Some California cities and counties have gone back and forth for months over what their local marijuana market should look like, with some even banning marijuana businesses altogether. Mendocino County, part of the famous Emerald Triangle, is no different, though it is getting closer to some form of comprehensive regulation even if it only addresses medical cannabis cultivation for now.

Mendocino County codifies its current medical cannabis regulations under Section 9.31 of its county code, which it amended in May of this year with an urgency ordinance. The County basically has two standards for current growers: growers cultivating no more than 25 plants per parcel, and growers cultivating more than 25 plants per parcel because they are authorized to do so by the County and/or the Sheriff as a result of having registered with the County by June 3 of this year.

Section 9.31 may end up being moot though since the County is looking to pass two new ordinances: one having to do with regulations and permitting for cannabis cultivation sites and the other having to do with zoning for the same. Copies of both proposed ordinances can be found here. Let’s start with the Medical Cannabis Cultivation Ordinance (“MCCO”).

Under the MCCO, should it pass, to be considered by the Agricultural Commissioners Office for a cultivation site MCCO permit, you will need to prove to the County that you had an existing, Proposition 215 and Section 9.31-compliant medical cannabis cultivation site prior to January 1, 2016. To prove the existence of such a site , the County will require the following:

  1. Photographs of any cannabis cultivation activities that existed on a legal parcel prior to January 1, 2016, including: ground level views of the cannabis cultivation activities and aerial views from Google Earth, Bing Maps, Terraserver, or other comparable services showing the entire legal parcel and the cultivation area in more detail. The date these images were captured must be noted.
  2. Photographs of any cannabis cultivation activities that currently exist on a legal parcel, including: ground level views of the cultivation activities from at least three different vantage points, and aerial views from Google Earth, Bing Maps, Terraserver, or other comparable services showing the entire legal parcel and the cannabis cultivation area in more detail. The date these images were captured must be noted.
  3. At least one additional document demonstrating proof of cannabis cultivation prior to January 1, 2016. A list of examples of the type of documentation that will meet this requirement are found in Appendix B to the application. Any reliable documentary evidence similar to that found in Appendix B which is deemed satisfactory to the Agricultural Commissioner, which establishes that medical cannabis was planted and grown on a parcel to be permitted prior to January 1, 2016, will likewise be accepted.

You can also re-locate your existing cannabis cultivation site if you can prove the above, but you will then be treated as a “new” grow, which really just means increased property setback restrictions. In addition to proof of a prior grow (and a bevy of other regulations relating to fencing, security, grow lighting, and track and trace requirements), MCCO permit applicants will be limited to two cultivation permits, one per legal parcel. There are ten different types of cannabis cultivation permits that vary by size and growing medium, including a nursery permit.

For all MCCO permit applicants, the following will be required by Mendocino County as part of the MCCO permit application:

  1. The name, business and residential address, and phone number(s) of the applicant.
  2. If the applicant is not the record title owner of the legal parcel, written consent from the actual owner allowing cultivation of medical cannabis on their property by the applicant with original signature of the record title owner.
  3. Written evidence that each person applying for the permit and any other person who will be engaged in the management of the collective is at least twenty-one (21) years of age.
  4. A site plan showing the entire legal parcel, including easements, streams, springs, ponds and other surface water features, and the location and area for cannabis cultivation on the legal parcel, with dimensions of the area for cultivation and setbacks from property lines. The site plan shall also include all areas of ground disturbance or surface water disturbance associated with cultivation activities, including: access roads, water diversions, culverts, ponds, dams, graded flats, and other related features. The site plan must include dimensions showing that the distance from any school, youth oriented facility, church, public park, or residential treatment facility to the nearest point of the cultivation area is at least 1,000 feet.
  5. A cultivation and operations plan which includes elements that meet or exceed the minimum legal standards for the following: water storage, conservation and use; drainage, runoff and erosion control; watershed and habitat protection; and proper storage of fertilizers, pesticides and other regulated products to be used on the legal parcel. Any fuel, fertilizer, pesticides, or other substance toxic to wildlife, children, or pets, must be stored in a secured and locked structure or device. The plan must also provide a description of cannabis cultivation activities including, permit type, cultivation area, soil/media importation and management, the approximate date(s) of all cannabis cultivation activities that have been conducted on the legal parcel prior to the effective date of this ordinance, and a schedule of activities during each month of the growing and harvesting season.
  6. A copy of the statement of water diversion, or other permit, license or registration filed with California Water Resources Control Board, Division of Water Rights, if applicable.
  7. An irrigation plan and projected water usage for the proposed cultivation activities, as well as a description of its legal water source.
  8. A copy of a Notice of Intent and Monitoring Self-Certification and any other documents filed with the North Coast Regional Water Quality Control Board (NCRWQCB), demonstrating enrollment in and compliance with (or proof of exemption from) Tier 1, 2 or 3, North Coast Regional Water Quality Control Board Order No. 2015-0023, or any substantially equivalent rule that may be subsequently adopted by the County of Mendocino or other responsible agency.
  9. If any on-site or off-site component of the cultivation facility, including access roads, water supply, grading or terracing impacts the bed or bank of any stream or other water source, you must show proof that you have notified the California department of Fish and Wildlife pursuant to Section 1602 of the Fish and Game Code and provide a copy of the streambed alteration permit obtained from the Department of Fish and Wildlife.
  10. If the source of water is a well, a copy of the County well permit, if available.
  11. A unique identifying number from a State of California Driver’s License or Identification Card for each person applying for the permit and any other person who will be engaged in the management of the cultivation operation.
  12. Evidence that the applicant or any individual engaged in the management of, or employed by, the cultivator has not been convicted of a violent felony as defined in Penal Code section 667.5 (c) within the State of California, or a crime that would have constituted a violent felony as defined in Penal Code section 667.5 (c) if committed in the State of California and is not currently on parole or felony probation. A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere.
  13. A statement describing the proposed security measures for the facility sufficient to ensure the safety of members and employees and protect the premises from theft.
  14. If the applicant is organized as a non-profit collective, the applicant shall set forth the name of the corporation exactly as shown in its Articles of Incorporation, and the names and residence addresses of each of the officers and/or directors. If the applicant is organized as a partnership, the application shall set forth the name and residence address of each of the partners, including the general partner and any limited partners. Copies of the Articles of Incorporation or Partnership Agreement shall be attached to the application.
  15. The applicant shall provide proof of either a physician recommendation that the amount of cannabis to be cultivated is consistent with the applicant’s medical needs, the needs of the patients for whom the applicant is a caregiver, or a written agreement or agreements, that the applicant is authorized by one or more medical marijuana dispensing collectives or processors to produce medical marijuana for the use of the members of said collective(s) or processor(s).
  16. The Agricultural Commissioner is authorized to require in the permit application any other information reasonably related to the application including, but not limited to, any information necessary to discover the truth of the matters set forth in the application.
  17. Apply for and obtain a Board of Equalization Seller’s Permit and collect and remit sales tax to the Board of Equalization if applicant intends to sell directly to qualified patients or primary caregivers.
  18. Written consent for an onsite pre-permit inspection of the legal parcel by County officials at a prearranged date and time in consultation with the applicant prior to the approval of a permit to cultivate medical cannabis, and at least once annually thereafter.
  19. If applicable, clearance from CalFire related to compliance with the requirements of Public Resources Code Section 4290 and any implementing regulations.
  20. For activities that involve construction and other work in Waters of the United States, that are not otherwise exempt or excluded, include a copy of a federal Clean Water Act (CWA) Section 404 permit obtained from the Army Corps of Engineers and a CWA Section 401 water quality certification from the NCRWQCB.
  21. For projects that disturb one (1) or more acres of soil or projects that disturb less than one acre but that are part of a larger common plan of development that in total disturbs one or more acres, are required to obtain coverage under the State Water Resources Control Board General Permit for Discharges of Storm Water Associated with Construction Activity Construction General Permit Order 2009- 0009-DWQ. Construction activity subject to this permit includes clearing, grading and disturbances to the ground such as stockpiling, or excavation, but does not include regular maintenance activities performed to restore the original line, grade, or capacity of the facility.

If the Agricultural Commissioners Office approves you for an MCCO permit, you’ll then be kicked over to the Department of Building and Planning Services for zoning compliance. Under the County’s proposed zoning ordinance, cannabis cultivation of varying parcel and canopy sizes will be allowed in the following zones: RR 2, RR 5, RR 10, AG, UR, RL, FL, TPZ, I1, I2, and PI. And all permissible zoning will require either a zoning clearance, an administrative permit, or a minor use permit. Further, depending on the MCCO permit type, there are minimum lot size restrictions ranging from 5 to 10 acres. And also depending on whether you’re an existing cannabis grow or a “new” grow (based on whether you’re moving your existing grow), there are various property setback requirements you will have to follow to achieve compliant zoning.

Right now, the County is still deciding on whether to adopt these proposed ordinances, and they’re talking public comment on them until January 4, 2017. I list all of the above though just to emphasize how difficult and time consuming and expensive it will be to operate a cannabis cultivation business in Mendocino County. But the bad news is that we expect many other California counties to initiate similar requirements.

Stay tuned to see if Mendocino County will embrace the heavy regulations set forth above or go back to the drawing board on cultivation.

Nevada County CannabisCalifornia has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we plan to cover who is banning, who is waiting, and who is embracing California’s change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the City of Lynwood, and before that, the City of Coachella, Los Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Welcome to the California Cannabis Countdown.

Nevada County has long been a popular spot for cannabis cultivation due to its location and climate, but many longtime growers in the area were displaced in 2012 when the County passed restrictive cannabis regulations. In early 2016, the County banned all outdoor cannabis cultivation but it has since repealed the ban and adopted less restrictive, though still very limited regulations for indoor and outdoor cultivation that have not been well-received by local growers.

Location. Nevada County is located in the Sierra Nevada region of Northern California, bordering the state of Nevada. It was once home to the California Gold Rush of 1849 and it lays claim to many firsts and historic moments, including the first long-distance telephone, the only railroad in the West that was never robbed, and the historic Holbrooke Hotel. The County itself has stated that its “unique geographic and climatic conditions, which include dense forested areas receiving substantial precipitation, along with the sparse population in many areas of the County, provide conditions that are favorable to marijuana cultivation. Marijuana growers can achieve a high per-plant yield because of the County’s favorable growing conditions.”

History with Cannabis. On May 8, 2012, the Nevada County Board of Supervisors passed Ordinance No. 2349, which created regulations for medical cannabis cultivation.

On November 4, 2014, voters in Nevada County rejected Measure S, an initiative from the Nevada County branch of Americans for Safe Access designed to overturn the County’s ordinance and replace it with less restrictive provisions.

On January 12, 2016, the Board adopted emergency Ordinance No. 2405, banning all outdoor cultivation and limiting indoor cultivation to 12 plants per property. At the same time, the Board passed Resolution No. 16-038 to submit Measure W to the voters of the County.

On February 9, 2016, the Board passed Resolution No. 16-082, which clarified that if Measure W was not approved by a majority of Nevada County voters, the Board intended to repeal the ban on outdoor cultivation and adopt other regulations at the next available meeting after the election.

On June 7, 2016, voters in Nevada County rejected Measure W, an initiative proposed by the Board of Supervisors to ban all outdoor cultivation, commercial cultivation, and all other commercial cannabis activities. As a result, the emergency ordinance from January 12th remained in place.

On July 26, 2016, to follow through on the Board’s intention to repeal the ban on outdoor cultivation, the Board approved urgency Ordinance No. 2416 to allow limited outdoor cultivation in the County.

Current Cannabis Laws. Under Ordinance No. 2416, cultivation is permitted in residential and agricultural zones in Nevada County in very limited amounts.

In residential zones:

  • Indoor and outdoor cultivation is prohibited in all R-1, R-2, and R-3 zones
  • In areas designated as residential and estate and zoned R-A:
    • On parcels of 5 acres or less, indoor and outdoor cultivation is prohibited
    • On parcels greater than 5 acres and up to 10 acres, a maximum of 12 plants may be cultivated indoors only; outdoor cultivation is prohibited
    • On parcels greater than 10 acres and up to 20 acres, a maximum of 16 plants may be cultivated indoors, outdoors, or a combination of both; a maximum of 12 plants may be cultivated indoors; outdoor cultivation must be on one contiguous staked grow area not exceeding 800 square feet
    • On parcels greater than 20 acres, a maximum of 25 plants may be cultivated indoors, outdoors, or a combination of both; a maximum of 12 plants may be cultivated indoors; outdoor cultivation must be on one contiguous staked grow area not exceeding 1,000 square feet

In agricultural zones (e.g., AG, AE, FR, TPZ, and areas designated as rural and zoned R-A):

  • On parcels 2 acres or less, indoor and outdoor cultivation is prohibited
  • On parcels greater than 2 acres and up to 5 acres, a maximum of 6 plants may be cultivated outdoors only; cultivation must be on one contiguous staked grow area not exceeding 300 square feet
  • On parcels greater than 5 acres and up to 10 acres, a maximum of 12 plants may be cultivated indoors, outdoors, or a combination of both; outdoor cannabis cultivation must be on one contiguous staked grow area not exceeding 600 square feet
  • On parcels greater than 10 acres and up to 20 acres, a maximum of 16 plants may be cultivated indoors, outdoors, or a combination of both; a maximum of 12 cannabis plants may be cultivated indoors; outdoor cultivation must be on one contiguous staked grow area not exceeding 800 square feet
  • On parcels greater than 20 acres, a maximum of 25 marijuana plants may be cultivated indoors, outdoors, or a combination of both; a maximum of 12 plants may be cultivated indoors; outdoor cultivation must be on one contiguous staked grow area not exceeding 1,000 square feet

In addition, all indoor and outdoor marijuana cultivation must comply with the following setbacks, as measured in a straight line from the nearest border of the grow area to the property line of any adjacent, separately owned parcel:

  • On parcels greater than 2 acres and up to 5 acres: 100 feet
  • On parcels greater than 5 acres and up to 10 acres: 150 feet
  • On parcels greater than 10 acres and up to 20 acres: 200 feet
  • On parcels greater than 20 acres: 300 feet

Proposed Cannabis Laws.

The regulations under Ordinance No. 2416 were passed amidst criticisms and protests from Nevada County residents, but the Board has said the ordinance is meant to be temporary in order to buy time to draft permanent regulations.

On November 8, 2016, the same day as the passage of Proposition 64 in California, the Nevada County Board of Supervisors formed a subcommittee to develop a permanent cultivation ordinance. The County is currently seeking stakeholder and community input on the ordinance and is also seeking proposals for consulting and facilitation services for their Marijuana Regulation Community Advisory Group.

Prop. 64 permits adults in California over age 21 to cultivate up to six plants for personal recreational use. While cities and counties can still ban outdoor cultivation, Prop. 64 does not allow cities and counties to ban indoor personal cultivation though they are allowed to regulate it. In response, the Nevada County Board of Supervisors introduced an amendment to Ordinance No. 2416 on December 13, 2016, to allow indoor personal cultivation of up to six plants per private residence. The Board will consider adopting the amendment at its meeting on January 10, 2017.