Provisional Licensing in California

Posted by Margolin & Lawrence on September 5, 2018

Originally, Senate Bill (SB) 1459 was written to allow the county agricultural commissioners (CACs) to include cannabis among reports about the condition, acreage, production, and value of the county’s agricultural products as submitted to the Secretary of Food and Agriculture. The bill was first introduced in the California State Senate on February 16th, 2018, by Senator Cannella (coauthored by Senators Galgiani and McGuire, Assembly Members Caballero and Wood). The impetus for suggesting that CACs report cannabis as an agricultural product was based on the National Agricultural Statistics Services assessment that “providing crop statistics is basically a way to stabilize the agricultural marketplace." Such action would ultimately facilitate the integration of cannabis cultivation into the marketplace, and moreover encourage unlicensed growers to legitimize their businesses. After passing the Assembly Appropriations Committee 13-4 on August 8th, SB 1459 then received a majority vote upon a third reading on the Senate floor.

However, perhaps due to lack of funding to CACs, the bill underwent significant changes this month. Last week, the bill was presented to the Assembly Committee on Business and Professions and was exclusively focused on provisional licensing, no longer addressing agricultural regulation. This amendment was permitted under Assembly Rule 77.2, and now focuses on alleviating the strain of local agencies managing the operations of temporary licenses (lasting 4 months). Foremost, the bill seeks to precede annual licensing with a provisional 12 month period, that would effectively allow businesses to operate for a year without the possibility of renewal. Once this provisional license expires, annual licensing will then be available to existing businesses.

Another key element of this proposal is the delayed compliance with the California Environmental Quality Act (CEQA), as well as issues surrounding water and wildlife permits. As it stands, many local cannabis businesses holding temporary approval are still waiting on permission from environmental agencies such as the State Water Board. Unless these agencies process the regulatory permits before the year is out, licensed cannabis businesses will need to stop operations, thereby disrupting a growing market and prohibiting expected tax revenue.

According to the Senate Bill’s analysis, delays in permitting have already caused issues with regards to reducing illegal cultivation activity. The DEA’s Cannabis Eradication and Suppression Unit has removed more than 1,500 grow sites, seizing over $2.5 million in assets as a result. In Humboldt County, for instance, 900 temporary local permits out of the 2,376 submitted applications were approved, with illegal cultivation sites estimated at 12,500 in that county alone. While licensing diminishes the illegal market, it has happened at a slower rate than anticipated. The County of Humboldt writes, “An impossible task lies ahead for our staff to finalize all 900 local permits to enable issuance of annual state licenses without assistance from the State.” Furthermore, several desirable counties, such as Santa Barbara, have suffered delays due to stretched resources following recent fires and other environmental disasters.

Complications surrounding annual licensing have resulted in bills such as SB 1459, which proposes the institution of provisional licensing. This solution would effectively extend the conditional and temporary status of commercial cannabis licenses for one year, though the expectation is that provisional license holders will ultimately apply for annual licensing thereafter. The provisional license holder would still be subject to annual licensing fees, track and trace, and all other statutory obligations. The bill has received overwhelming support from groups and local agencies such as the California Cannabis Industry Association, California Growers Association, Humboldt County, Monterey County, Santa Barbara County, and the Rural County Representatives of California, to name a few. Following the most recent hearing on August 31st, regarding recent clarification amendments, the bill holds a significant majority in support of passage on both senate and assembly floors: 33 to 4, and 73 to 1, respectively.

 

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.