Oakland cannabis regulationsTuesday night, in a continuation of more than ten months of contentious debate and revisions, the Oakland City Council revisited and reargued the terms of its yet-to-be-implemented Equity Permit program for cannabis businesses. The program aims to address inequity in the local cannabis industry by prioritizing permit issuance to those with roots in certain identified Oakland neighborhoods that have been historically impacted by disproportionate drug law enforcement, and to members of the Oakland community that have been arrested and convicted of cannabis crimes in Oakland in the last 20 years. The law moves qualifying Equity Applicants to the front of the cannabis permitting line, and it also creates access to approximately $3.4 million in earmarked interest-free business loans and other assistance.

The law was first introduced in May 2016, but in response to community concern about how it might affect the local economy, the City Council commissioned an extensive race and equity analysis of medical cannabis regulations and scheduled another vote for early 2017. Among the most jarring of the City Council’s findings was that over the past 20 years, African Americans, particularly those living within certain Oakland police beats, have been dramatically and consistently overrepresented in cannabis-related arrests, reaching as high as 90% of all cannabis arrests in the late nineties.

Two weeks ago, the Oakland City Council approved a last-minute amendment to the program mandating that any general (non-Equity) applicant must have lived in Oakland for at least three years to get a cannabis business permit. Because Equity Applicants must already demonstrate residency and a past connection with Oakland, this amendment would have effectively placed a residency restriction on all new or existing cannabis businesses. After a motion passed 6-2 Tuesday night removing the residency requirement for general applicants, the current version (which still requires another Council vote to become law) provides that, when issuing permits for any kind of cannabis business, the City must give half (i.e. maintain a 1-to-1 ratio) of all permits issued in its initial issuance phase to “Equity Applicants,” defined as Oakland residents with an annual income at or less than 80% of the City average and who either lived in certain defined Oakland police beats for 10 of the last 20 years, or who have been convicted of a cannabis crime committed in Oakland within the last 20 years. Tuesday night’s motion also requires dispensary staff be at least 50% Oakland residents with at least half of those residents from areas identified as having high unemployment or low household incomes.

Though Oakland’s Equity Permit program has garnered praise for its stated policies and goals, it also has generated controversy—as illustrated by the lively hearing Tuesday night—particularly due to its now-withdrawn general residency requirement. Some questioned its efficacy in achieving the City’s goals, while others argued that it would benefit the City by requiring that Oakland cannabis business permits go only to those living in Oakland. The proposed residency requirement would have jeopardized any existing cannabis businesses that could not meet the residency requirement, regardless of how many jobs or how much tax revenue those entities were contributing to the local economy.

Though it is unclear what the ordinance will look like in its final form, and though the residency requirements were relaxed by Tuesday night’s revision, a residency requirement remains for Equity Applicants and dispensary staff. Because the City of Oakland intends to issue only eight cannabis dispensary licenses per year (excluding delivery-only operations), an aggrieved party may challenge the ordinance for favoring longtime residents of certain Oakland neighborhoods at the expense of newer Oakland residents and those living in other neighborhoods, or even for favoring Oaklanders over out-of-towners. Some who spoke at Tuesday night’s meeting explained how, despite having lived all of their lives in Oakland, but not in one of the identified neighborhoods or having lived in a historically disadvantaged neighborhood but not for long enough or having been forced to move out of Oakland after many years because of gentrification, they would not qualify as Equity Applicants. It is these sorts of presumably unintended consequences of the residency requirements that could lead to the program getting bogged down in legal challenges.

The Equity Permit Program’s express preference for Oakland residents over out-of-towners, as an element of its greater approach to addressing longstanding systemic racial disparity in cannabis enforcement, raises some important legal issues. We have previously touched on the constitutionality of residency requirements and the potential difficulties presented by California’s own residency requirement in Proposition 64, such as access to funding from out-of-state investors—a challenge that has been somewhat ameliorated by Oakland withdrawing its requirement that majority ownership and control of cannabis permittees must be strictly City residents.

The Privileges and Immunities Clause of the U.S. Constitution and the Dormant Commerce Clause generally prevent states from discriminating against residents of other states. When a state or local government enacts legislation that facially discriminates against nonresidents, reviewing courts will ask whether the government has a “substantial reason” for the difference in treatment, and whether the law is “closely related” to that rationale. But because cannabis is federally illegal, constitutional claims would likely be a stretch.

As California rolls out its new regulations under the Adult Use of Marijuana Act (AUMA), it will be important to watch how those laws address a state licensee’s right to do business within the state, and how local regulations interact with state law. Though the Medical Cannabis Regulation and Safety Act (MCRSA) requires local government approval before a state license can issue, the AUMA does not, but the AUMA does allow localities to enact their own regulations so long as they do not conflict with state law. It remains uncertain how the AUMA will apply to a state-licensed cannabis entity seeking to conduct business in Oakland if that entity is unable to obtain a business license from Oakland because of its residency requirements. We will be tracking the rollout of California’s new regulations and how the interplay between the state and localities like Oakland will affect cannabis businesses and the state’s soon-to-be massive regulated cannabis economy.

Editor’s Note: Daniel recently joined our firm as an attorney in our San Francisco office, where he will be focusing on mostly California cannabis real estate and dispute resolution issues.

Marin 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 Nevada County, and before that, the City of Lynwood, 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.

I’d bet most Californians would be surprised that Marin County, known for its affluence and laid back lifestyle, does not have a single licensed medical marijuana dispensary collective (though there are some delivery services). It’s been twenty years since the enactment of the Compassionate Use Act – which 73% of Marin residents approved – and Marin is still figuring out how to convert the will of its voters into practice. This resistance by Marin County elected officials to move forward on cannabis is even harder to grasp after the more recent results of the Adult Use of Marijuana Act (AUMA) vote where nearly 70% of Marin residents voted for marijuana legalization. Prior to the AUMA, the California State legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA). The MCRSA covers the comprehensive licensing and regulatory framework for medical cannabis while also granting local jurisdictions the authority to enact their own licensing requirements. Under the MCRSA, a license applicant must demonstrate local approval to secure state licensure. And under the AUMA — though licensees do not need local approval to receive a California state cannabis license, they must be in compliance with all local laws to be able to open the doors of their cannabis business. In turn, the MCRSA and the AUMA are motivating jurisdictions to act, and with the intent of its voters so clear, Marin is slowly taking steps towards local marijuana business licensing.

Medical marijuana is still banned in Marin County’s cities but some, like San Rafael and Larkspur, are gradually adopting local marijuana regulations. The Marin County Board of Supervisors – which has jurisdiction over the unincorporated areas of Marin County – has taken the lead in licensing medical marijuana entities, but not recreational marijuana businesses yet. Under its current medical marijuana ordinance, the Board has authority to issue up to four medical cannabis licenses in Marin County’s unincorporated areas. Over the past couple of months, the County held three public hearings for ten applicants vying for those four licenses.

I attended those hearings and it was clear to me that many of the applicants had not done their homework and therefore had essentially disqualified themselves from getting one of the four medical cannabis licenses. Many disqualified themselves by submitting incomplete or misleading forms. Worse yet, some disqualified themselves by having questionable business partners, which in turn incited the community’s ire — which is not something you want to do in Marin County!

These hearings also call to mind something our cannabis business lawyers are always telling our clients: be careful what you share on social media because your posts can come back to haunt you. At one of the hearings I attended, one license application faced a barrage of attacks because the applicant had partnered with someone whose social media posts glorified essentially the worst stereotypes of marijuana. This individual had Facebook and Instagram accounts glorifying guns, drugs and money, perfectly feeding into the sort of cannabis fears pot prohibitionists love to peddle. Printouts of this person’s social media posts were passed out to everyone at the hearing, both attendees like me and representatives of the Marin County Board.

As California cities and counties continue to put local regulations in place for medical and recreational marijuana operators, marijuana business applicants must start now in developing the first (and second) impressions they will be conveying on their communities, especially if you are looking to open a cannabis business in an county like Marin that is really just getting started with legal cannabis businesses.

What I saw at these Marin County hearings reinforced how critical it is for potential cannabis licensees to do their due diligence regarding the pressure points of the community in which the cannabis business will be located. For example, are you seeking to enter a community where you are likely to run into aggressive NIMBYs or one with such restrictive cannabis business regulations that it is nearly impossible to operate? See High Dive: How To Fail In The Marijuana Industry. With California’s “new” legalization comes new opportunities to find the best possible and permissible location for your new or renewed cannabis business and new opportunities to engage and educate the relevant community to alleviate concerns and misbeliefs.

Editor’s Note: Habib recently joined our firm as an attorney in our San Francisco office, where he will be focusing on mostly California cannabis regulatory and dispute resolution issues.

Los Angeles Cannabis LawsCity of Los Angeles Voters Approve Measure M. The City of Los Angeles is making moves to change its current marijuana policies, which have so far made it impossible to start and operate a new cannabis business in the City. Yesterday, voters in the City were asked to decide between two ballot measures to repeal and replace Proposition D with one of two new cannabis ordinances that both regulate and permit marijuana businesses. Both ballot measures also opened up the opportunity for the City to permit activities besides retail sales by dispensaries, including cultivation, manufacturing, transportation, testing, as well as distribution. As of last night, Measure M was officially passed by voters, making the City of Los Angeles the largest municipal cannabis market to regulate cannabis businesses. The City Council hopes to have comprehensive regulation set up by September 30, 2017, and the existing 135 dispensaries operating in compliance under Prop D will be be first in line to receive city approval under the new regime. These 135 dispensaries just became even more valuable, and the “buying and selling” of those dispensaries will no doubt continue apace. For more on that, see How to “Sell” Your California Medical Marijuana Collective.

Los Angeles County May Lift Its Cannabis Ban Today. Today the Los Angeles County Board of Supervisors will hold a regular meeting to consider a plan for closing all unlicensed medical marijuana dispensaries within unincorporated areas of the County. The details of the proposed plan have not yet been ironed out, but the Board will be reviewing a yet to be submitted report from the Sheriff, District Attorney and County Counsel. If this plan is passed, the Los Angeles County Sheriff will be tasked with shutting down about 70 medical marijuana dispensaries currently operating in the County without a license. Since passage of Proposition 64, the Los Angeles County Sheriff’s Department’s Narcotics Bureau been cracking down on illegal marijuana dispensaries popping up throughout the County.

Los Angeles County currently has a ban on almost all marijuana activities. Since 2011, the County has banned marijuana dispensaries, and in 2016, the County extended the ban to include cultivation, manufacturing, testing, and distribution activities. For more on Los Angeles County’s cannabis laws and enforcement measures, check out The California Cannabis Countdown: Los Angeles County.

On February 7, 2017, the County Board voted ahead of time to extend its current ban on medical marijuana activities as well as implement a new ban on all recreational marijuana activities. During this meeting, the Board also requested the plan to close all unlicensed dispensaries that is being considered today and requested $25 million to fund the shut-down plan.

However, during this same meeting, the Board also voted unanimously to consider allowing marijuana businesses within the County, stating they “support moving from a ban to permitting and regulating the use.” The apparent softening of marijuana policies followed by the proposed plan to shut down all unlicensed businesses has left marijuana advocates in the County confused and concerned. They recommend that instead of punishing the unlicensed businesses, the County provide clear regulations and create a pathway for current operators to obtain a license and establish legitimacy.

Based on comments made by the Board, it is unlikely Los Angeles County will keep its ban in place, though they raised concerns about the state’s ability to meet the January 1, 2018 deadline to issue recreational licenses, the concentration of dispensaries in low-income communities, and increased access to marijuana by young people.

The shift in policies in both Los Angeles County and the City of Los Angeles is a welcome change in an area where there is a great demand from cannabis patients and consumers but a long history of unfriendly cannabis laws and enforcement. Though the County may ultimately shut down its current unlicensed businesses, it does at least look as though it will at the same time begin paving the way towards a regulated and legitimate local market.

What are your thoughts?

California marijuana
Bears are tough animals, and California will fight hard for its cannabis laws.

Last Thursday, White House Press Secretary Sean Spicer stated during a press conference that we should expect to see greater federal enforcement against recreational marijuana use and in the following days the cannabis industry had a lot to say in response. Representatives from several states, including Washington, have spoken out against potential federal enforcement, saying they will fight any attempts by the federal government to interfere with their legalized marijuana systems. We want to assure you that California is ready to fight back as well. (Though not everyone in California is on the same side; we’re looking at you San Bernardino City Council.)

The day after Secretary Spicer’s statements, California elected officials announced that they were preparing for a potential showdown in the courts and Congress to defend recreational cannabis under Proposition 64, which the state’s voters passed in November. California Attorney General Xavier Becerra said:

I took an oath to enforce the laws that California has passed. If there is action from the federal government on this subject, I will respond in an appropriate way to protect the interests of California.”

California Lieutenant Governor Gavin Newsom called Spicer’s remarks “grossly uninformed” and sent a letter to President Trump where he wrote:

The government must not strip the legal and publicly-supported industry of its business, and hand it back to drug cartels and criminals. Dealers don’t card kids. I urge you and your administration to work in partnership with California and the other eight states that have legalized recreational marijuana for adult use in a way that will let us enforce our state laws that protect the public and our children, while targeting the bad actors. We have a shared goal of reducing crime, and the best way we can achieve that is through a tightly regulated market.”

If the federal government chooses to move forward with marijuana enforcement, we provided an idea of what that might look like based on the options the feds can pursue. Though the federal government won’t be able to force states to shut down their marijuana programs or to enforce federal law under the Constitution, they could try to coerce local law enforcement into assisting them.

However, California already has measures in place to undercut the federal government’s ability to coerce local law enforcement through proposed Assembly Bill 1578, which would prohibit state and local agencies from assisting federal agencies against California’s legal medical and recreational marijuana businesses without a court order.

Spicer’s comments did not include specifics on how the federal government would proceed, plus he does not have the authority to make these types of decisions, so we have our doubts on whether the feds will make good on his threats. in any event. And since the Trump Administration has held out medical cannabis as good and recreational/adult use cannabis as bad, what would happen were California (or any other state) to call all cannabis “medical” and to give any cannabis “patient” who fills out a free online “medical” form access to cannabis so long as they check something like “occasional pain” or “sometimes sad” or “sometimes agitated” as qualifying symptoms for medical cannabis use?

The California Bureau Medical Cannabis Regulation has expressed its intent to continue “full speed ahead” on drafting state regulations for medical and state cannabis licenses until they see a formal plan from the federal government. For now, it’s business as usual for California’s cannabis companies and license hopefuls, but if the federal government does try to interfere know that the state is behind you.

California cannabis lawyerLast week, California lawmakers introduced a new bill to increase protections for California cannabis businesses from federal persecution. The timing couldn’t be better as a new president and incoming federal administration have many in the cannabis industry concerned about the future of legal marijuana in the United States.

California Assembly Bill 1578 would prohibit California state and local agencies from taking certain actions and assisting federal agencies in enforcing federal law against marijuana businesses for medical or recreational cannabis activities authorized under California law.

The prohibited activities would include:

  1. Using agency money, facilities, property, equipment, or personnel to assist a federal agency to investigate, detain, detect, report, or arrest a person for commercial or noncommercial marijuana or medical cannabis activity authorized by law in the State of California.
  2. Responding to a request made by a federal agency for personal information about an individual who is authorized to possess, cultivate, transport, manufacture, sell, or possess for sale marijuana or marijuana products or medical cannabis or medical cannabis products, if that request is made for the purpose of investigating or enforcing federal marijuana law.
  3. Providing information about a person who has applied for or received a license to engage in commercial marijuana or commercial medical cannabis activity pursuant to MCRSA or AUMA.
  4. Transferring an individual to federal law enforcement authorities for purposes of marijuana enforcement or detain an individual at the request of federal law enforcement for conduct legal under state law.

State and local agencies would only be allowed to take these actions if they receive a court order signed by a judge. Thus, AB 1578 would protect California cannabis businesses that are operating legally in the state from being handed over to federal law enforcement unless a judicial exception is made.

The bill is similar to other legislation proposed by California lawmakers and signed into law by California Governor Jerry Brown in September of last year. In Assembly Bill 2679, California lawmakers provided guidance for cannabis manufacturers currently operating in the state to increase their protection against misguided raids by local law enforcement. Then, under Senate Bill 443, California lawmakers revised the state’s asset forfeiture laws to reduce the risk of unfair property seizure by state and local law enforcement. SB 443 prohibits state and local law enforcement from transferring property seized under state law to a federal agency and also requires state agencies obtain a criminal conviction to receive a share of federally seized property or to recover their expenses.

If approved and signed into law, AB 1578 would be a good step to ensuring California cannabis businesses and consumers that the state of California is behind them and that it will not allow the federal government to interfere with their licensed and compliant cannabis businesses, at least not by providing the help of any state or local agencies.

How to sell a California cannabis businessSince passage of the Medical Cannabis Regulation and Safety Act (“MCRSA“) and Proposition 64, one of the top questions our California marijuana lawyers have been getting from existing medical marijuana operators is “how can I sell my medical marijuana collective?” Of course, many collectives are not hard-pressed to find willing buyers. In the City of Los Angeles, for example, where only 135 Proposition D-compliant dispensary collectives are allowed to exist (which will also receive priority status from the City under the MCRSA and Prop. 64 in the event Measure M passes on March 7th), buyers are lining up to try to buy LA dispensaries that can get them into that market. There is also plenty of buyer interest in other California collectives that can demonstrate continuous operation and good standing with their local jurisdictions to qualify for “priority status” under both the MCRSA and Prop. 64.

But here’s the big issue: neither the MCRSA nor Prop. 64 repealed Proposition 215 and Senate Bill 420, which together make up California’s current and very vague medical marijuana laws. What this means is that all medical marijuana collectives must still operate as non-profit entities unless and until the application period opens for licenses under the MCRSA or Prop. 64. And just to further complicate matters, “collective” is an industry term of art; it is not a specific type of California legal entity and you are not going to find it in the California Corporations Code. One of the main reasons for California’s “collective model” is that the California Attorney General’s office issued a memo in 2008 with its interpretation of the medical marijuana laws that concluded those laws forbid the sale of medical marijuana for profit and, therefore, only “non-profit operation” would be allowed in the event qualified patients were to “collectively or cooperatively” cultivate and distribute medical cannabis to other qualified patients.

As a result of that 2008 memo, most qualified patients form nonprofit entities to handle their “commercial” medical marijuana activity. They typically form nonprofit mutual benefit corporations (“NPMBCs”) that they refer to as “collectives.” In turn, it isn’t possible to “buy” a collective. Why? Because there’s no equity or stock to purchase. Of course, there are other solutions to this non-profit conundrum, but they must be carefully considered and well thought out by both a prospective purchaser and the collective.

In NPMBCs, the articles of incorporation and the bylaws govern the collective’s every move and decision–but the bylaws really govern the day-to-day activity and decision-making authority of the members. For example, NPMBC bylaws will have provisions that dictate, among a slew of other things, admission of new qualified patient members and what they must do to maintain their membership in the collective. In addition, well-drafted bylaws also typically will address the voting rights of the members and directors. Under the California Corporations Code, a prospective purchaser cannot buy the stock of a NPMBC (because none is authorized or issued). The California Corporations Code does however permit membership transfers if the collective’s bylaws allow them, and these transfers are fairly unrestricted unless the bylaws specifically create restrictions around them.

Section 7320 of the Corporations Code governing NPMBC membership transfers states the following regarding the transfer of membership rights:

Subject to [member voting restrictions in the bylaws]:

(a) Unless the articles or bylaws otherwise provide:

(1) No member may transfer a membership or any right arising therefrom; and

(2) Subject to the provisions of subdivision (b), all rights as a member of the corporation cease upon the member’s death or dissolution.

(b) The articles or bylaws may provide for, or may authorize the board to provide for, the transfer of memberships, or of memberships within any class or classes, with or without restriction or limitation, including transfer upon the death, dissolution, merger, or reorganization of a member.

(c) Where transfer rights have been provided, no restriction of them shall be binding with respect to memberships issued prior to the adoption of the restriction, unless the holders of such memberships voted in favor of the restriction.

The ideal situation is usually one where the bylaws create two classes of membership: usually directors who manage the NPMBC and qualified patient members who access the NPMBC for medical marijuana, with the directors being the only ones who vote on management decisions affecting the NPMBC. The bylaws usually also allow for director membership transfers (presumably with a fee), without requiring a vote of every single qualified patient who has ever become a member of the NPMBC. In turn, directors can sell their memberships to prospective buyers who can then take over and operate the NPMBC until MCRSA and Prop. 64 licensing.

Unfortunately, nearly all of the NPMCB bylaws our California cannabis lawyers have seen on the deals on which they have worked are a mess, largely because most of the lawyers in California that do cannabis law are criminal lawyers not corporate transactional lawyers. Much of the time, the NPMCB bylaws do not contain a provision allowing for membership transfers or they require every single member of the collective vote on such a transfer because they lack multiple membership classes or voting exceptions. In these situations, it is sometimes possible to set up a system where the departing directors provide notice to every single qualified patient member that new directors could take over the board of directors and those new directors might vote to pay the departing directors a fee for services to be rendered to the NPMBC after-the-fact. For example, the new directors could vote to hire the departing directors in a consultant capacity and pay them a fee for that work. Though neither ideal nor efficient, this is one of various workarounds that can be done to transition the management of an NPMBC with bad bylaws.

The bottom line is that non-profit collectives cannot be “purchased,” and it takes good bylaws (or convoluted workarounds) to be able to transition from one group of directors to another. So, if you are looking to “sell” or “buy” a California cannabis business, be sure that the relevant bylaws allow for such a change and that your transition documents are in-line with what the bylaws actually allow. If such care isn’t taken, the buyer can be left with nothing but an empty wallet and the collective may find itself in direct violation of California’s Corporations Code and an expensive and painful lawsuit as well.

Marijuana Real EstateTomorrow, I will co-present a national continuing legal education (“CLE”) seminar for the American Law Institute, titled “Cannabis and Commercial Real Estate.” I will present this 90-minute seminar and webcast with Daniel Dersham, a talented real estate attorney with the San Francisco law firm Wiley & Bentaleb LLP. The seminar is designed for lawyers around the country who wish to assist clients in buying, selling and leasing real estate in the cannabis industry. It is also a great opportunity for non-lawyers to gain insight on how cannabis properties are rented, bought and sold, and to understand how attorneys approach these unique transactions.

Over the past few years, our Oregon, Washington and California offices have advised on hundreds of real estate transactions related to state-legal cannabis. In the Oregon office alone, we are continuously working on these deals, which may range from the negotiation of a 1,500 square foot lease for a dispensary, to the purchase of a 150+ acre property for large-scale agriculture across multiple licenses. Each deal is a snowflake, and each brings unique opportunities and challenges.

Because we are always doing real estate deals, we tend to write about them often. For a recent sampling of work related to this field, including topics that will be covered at tomorrow’s CLE, please see the following recent Canna Law Blog articles:

Like many aspects of the cannabis industry, the central issue that makes real property transactions challenging, unique, and even sort of fun (at least for us cannabis business lawyers), is federal illegality. That issue ripples through pretty much every cannabis real estate deal in myriad ways, and a skilled practitioner with knowledge of the following is required: (1) the dynamic interplay of state and federal law; (2) the intricacies of state and local regulatory programs for cannabis– including zoning and land use laws; and (3) industry standards on achievable deal points for a lease or sale transaction.

Over the next year or two, existing state marijuana markets will continue to mature and new markets will come online. We expect to see a continued emphasis on real estate deals during this period. Buyers, sellers, landlords, tenants and service providers who understand the way this game is played will have a considerable advantage. And for many in the cannabis industry, negotiating a real estate transaction will be the largest decision of all.

I hope that you can join us.

California cannabis marijuanaLast Friday, the California Bureau of Medical Cannabis Regulation (BMCR) announced in a press release that it has begun seeking applicants to participate in a Cannabis Advisory Committee. The role of the Committee will be to help the Bureau and other state agencies – the Department of Food and Agriculture (DFA) and the Department of Public Health (DPH) – develop cannabis “regulations that protect public health and safety while ensuring a regulated market that helps reduce the illicit market for cannabis.”

The Committee is required under Proposition 64 and is one of several steps needed if California is to keep its promise to begin issuing cannabis business licenses by Prop 64’s January 1, 2018 deadline. The agencies still have their work cut out for them, including the challenge of reconciling the conflicting provisions under the Medical Cannabis Regulation and Safety Act (MCRSA) and Proposition 64.

The Bureau and other state agencies have been holding pre-regulatory meetings throughout California over the past year to gather information from cannabis stakeholders, which it is now using to draft initial state regulations for the various cannabis license types. According to the Bureau’s communications director, Alex Traverso, the Cannabis Advisory Committee will meet several times during the next year to review drafts of regulations and share their opinions to ensure that California rule makers are on the “right path.”

They are specifically seeking input from representatives of the cannabis industry, labor organizations, local or state law enforcement, state or local agencies, and from communities disproportionately affected by past federal and state drug policy, as well as cannabis cultivators, environmental experts, patient advocates, physicians, public health experts, social justice advocates, individuals with expertise in regulating intoxicating substances for adult use, and individuals with expertise in the medicinal properties of marijuana.

The application to join the Cannabis Advisory Committee includes requests for any relevant work history in the cannabis industry, and past or present affiliation with a cannabis company, relevant qualifications to serve on the Committee, an explanation of why you wish to serve on the committee, and any potential conflicts of interests. Applicants will also need to provide four references and submit a resume and letters of recommendation. In addition, selected committee members may be required to complete a Fair Political Practices Commission (FPPC) Form 700, Statement of Economic Interest disclosing their personal assets and income.

Committee members will be appointed by the Director of the Department of Consumer Affairs (DCA), Awet Kidane. The DCA is not looking to fill a specific amount of committee seats, but instead the committee’s size will be determined by the number of qualified applicants. Also, the positions on the Cannabis Advisory Committee are voluntary, which means you will not be paid for serving on the Committee, but members are entitled to receive reimbursement of their travel expenses to approved meetings, which will be held in the state’s capitol in Sacramento.

If you’re interested in applying, the bureau says it will keep the application process open for at least a month. For those currently involved in or hoping to join the California cannabis industry, this is an important opportunity to help shape the laws that will impact your/our future. The best way to affect marijuana law and policy is to get involved, whether it’s at the local, state, or federal level.

California marijuana license
California marijuana licenses: start now, but stay flexible

California lawmakers have been tasked with the difficult challenge of reconciling the Medical Cannabis Regulation and Safety Act (MCRSA), which legalized commercial medical marijuana activities, with Proposition 64, which legalized recreational marijuana use for all adults and is set to begin licensing commercial recreational businesses by January 1, 2018. We’ve previously blogged about this challenge and the state’s efforts to meet the 2018 deadline here, here and here.

The many conflicts between the MCRSA and Prop 64 include different timelines, license categories, rules on ownership, residency requirements, and tracking systems. Another key difference is that the MCRSA places limits on vertical integration, generally allowing cannabis licensees to hold state licenses in up to two separate categories and only in certain combinations. The MCRSA also does not allow licensed cannabis cultivators and manufacturers to hold a marijuana distribution license. Licensed cannabis cultivators and manufacturers in the State of California instead must work with an independent distributor to transport cannabis products to labs for testing and quality assurance before they enter the consumer market.

The California cannabis industry is divided on both vertical integration and distribution issues, and the side you take most likely depends on your views on allowing big business to operate under the new regulated cannabis regime. Growers and dispensaries in California are also divided on the issues. California dispensaries generally believe that the use of independent distributors is unnecessary and will ultimately increase costs for the consumers, small mom-and-pop operations worry that without limits on vertical integration they will be squeezed out by bigger, well-funded investments groups.

In contrast, Prop 64 places no limits on vertical integration, except that all testing labs must be independent and large Type 5 grows will not be able act as their own distributors (but these licenses won’t even kick in until 2023). For those hoping to create a vertically integrated cannabis business in California in 2018, Prop 64 offers a nice alternative to avoid the MCRSA’s limits and independent distribution requirements altogether.

However, this option could be gone by the time state licenses are issued. As California legislators work to develop regulations for both the MCRSA and Prop 64 that can operate simultaneously and in congruence, special interests are sending their lobbyists to the Capitol to try and influence the upcoming laws. Labor unions, investors, and entrepreneurs are all seeking to shape the laws that will most favor their members and bottom lines for when the California cannabis gold rush starts in earnest.

The coalition of Teamsters, local government, police chiefs, a Sacramento distribution company called RVR, and the California Growers Association (CGA) that helped draft the MCRSA bills wants to see the same limits on vertical integration and independent distribution requirements extended to recreational businesses under Prop 64. On the other side, cannabis manufacturers, the United Food and Commercial Workers (UFCW), and the California Cannabis Industry Association (CCIA) want to see a more free-market approach under the current Prop 64 model. They argue this is the model California voters supported when they passed Prop 64 last November.

To make changes to Prop 64, California legislators will need to pass any amendments by a two thirds vote. We advise cannabis license hopefuls to start NOW to prepare for California cannabis licensing, but remain ever mindful that much can change between now and January 1.

The Emerald TriangleCalifornia Cannabis: Trinity County is a legendary marijuana cultivation region in California. Since passage of the Medical Cannabis Regulation and Safety Act (MCRSA), the three counties that make up the Triangle, Mendocino, Humboldt, and Trinity, have all been examining local marijuana regulations for cultivation. With Proposition 64, it’s becoming ever more important for local governments to set rules for their local marijuana markets through local licensing and permitting, and the Emerald Triangle has begun doing exactly that.

To date, Humboldt has adopted regulations and their application window for cultivation permits has come and gone. Mendocino is still weighing permitting and zoning ordinances in deciding how to regulate cultivation within its borders. Most recently, Trinity County decided to extend its deadline for commercial cultivation registration to February 28th.

So, if you haven’t had the chance to apply for a Trinity cultivation registration permit, you still have a bit of time to do so. And here’s what you need to know to secure one of those coveted permits from the Trinity County Planning Department:

  1. Trinity is only allowing for cultivation under the MCRSA and Proposition 64 at this time. And under cultivation, Trinity will only permit Type 1, 1B, 1C or Type 2 or 2B cultivators, which represent relatively small-sized grows.
  2. Applicants have to show that they’re registered with the North Coast Regional Water Quality Control Board and that they’re in good standing with the Board’s order (#2015-0023) regarding waste discharge and water quality.
  3. Applicants have to apply for and secure a Board of Equalization (BOE) seller’s permit.
  4. You cannot have any “serious felony convictions” or a Schedule I, II, or III felony (excluding non-serious felony convictions for marijuana-related crimes).
  5. Applicants have to demonstrate at least one year of residency in Trinity County prior to the application date.
  6. Applicants have to submit an accurate site plan of the entire parcel.
  7. Applicants that are business entities have to provide a breakdown showing the ownership of the entity.
  8. Proof of a deed to the cultivation land or a lease authorizing cultivation on the proposed land is required.
  9. Applicants have to provide to the County one of the following documents:
    1. Documents of incorporation
    2. Documents of taxes paid to BOE
    3. Proof of contracts with dispensaries
    4. Receipt of a BOE Seller’s number
    5. Employer Identification Number
  10. Only one application countywide may be submitted on behalf of one person, entity, or per legal parcel.
  11. Grow site registration is limited to 500 applicants. Thus far, County records show only 12 registrations have issued.
  12. There are also various setback and zoning requirements where marijuana cultivation is not allowed, including the following:
    1. Within 1,000 feet of any youth-oriented facility, a school, any church, or residential treatment facility and within 500 feet of an authorized school bus stop.
    2. In any location where marijuana is visible from the public right of way.
    3. A legal parcel without a permitted/legal housing structure, or without an active building permit.
    4. Within the Trinity County jurisdiction of the Whiskeytown-Shasta-Trinity National Recreation area and within the lease lots within the Ruth Lake Community Services District.
    5. Within the Timber Production Zones with an exception for applicants who can show enrollment under/compliance with the Regional Water Board’s order #2015-0023.
    6. Within the R1, R2, and R3 zones.
    7. Within 350 feet of a “residential structure” on any adjoining parcels.
    8. Within 30 feet from any property line.

Applicants also must satisfy a variety of performance to keep their registrations, including noise level standards, surface water restrictions, water diversion restrictions, erosion restrictions, fencing, security and storage requirements, lighting restrictions, and applicable California Fire and Fish and Wildlife standards.

As for fees, for 2016 Type 1 and 2 grows, you’re looking at a $2,500 fee “plus $1,000 towards the general plan update.” For registration after 2016 (assuming the County still allows it), Type 1 and 1B cannabis grows will have to pay $4,000 plus $1,000 towards the general plan update, Type 1C grows will have to pay $2,000 plus $250 towards the general plan update, and Type 2 and 2B grows will pay $5,000 plus $1,000 towards the general plan update.

Trinity’s commercial cultivation program permit application is relatively straightforward. Applicants must first schedule an appointment with the Department of Planning and then submit their application (with all required documentation and attachments) at that appointment. The actual permit will only issue after your cannabis cultivation application is approved and and after an initial onsite inspection ensures your application actually reflects what you’ve built out and set up for your marijuana grow site.

With February 28 fast approaching anyone interested in securing a Trinity County cultivation license should definitely get moving right away to gather up the documentation necessary to submit a top-tier and timely application to the County.