Highlights of Cannabis Emergency Regulations

On November 16, California state regulators released 276-pages of long-awaited draft rules that govern the state’s emerging legal marijuana industry. The draft emergency regulations will, upon adoption, allow the state to begin issuing temporary licenses for growers, distributors, and sellers on January 1, 2018, when recreational sales become legal. The rulebook provides a regulatory road map for what is projected to be a $7 billion economy, the nation’s largest.

The three sets of rules were released by the Department of Food and Agriculture (for cultivators), the Department of Public Health (for manufacturers) and the Department of Consumer Affairs’ Bureau of Cannabis Control (for retailers, distributors and testers). The agencies plan to hold workshops in December for different sectors of the industry to provide more detailed guidance on what is needed for growers, manufacturers, retailers, distributors and lab testers. The state will get help going forward from its new 22-member Cannabis Advisory Committee, which met for the first time when the regulations were released in Sacramento.

Below are highlights of the new regulations.

Approval and Commercial Licenses

• Sec. 5001(c)(12) for temporary licenses, applicants must produce a copy of a valid license, permit, or other authorization issued by a local jurisdiction, that enables the applicant to conduct commercial cannabis activity at the location requested for the temporary license. For purposes of this section, “other authorization” includes, at a minimum, a written statement or reference that clearly indicates the local jurisdiction intended to grant permission for the commercial cannabis activity or to the person to conduct commercial cannabis activity at the premises. Upon receipt of the application, the Bureau will contact the applicable local jurisdiction to confirm the validity of the authorization. If the local jurisdiction does not respond within 10 calendar days, the Bureau will consider the authorization valid. The same is true for annual renewals/licenses (section 5002(c)(28))
• Sec. 5009(b) the Bureau will not approve an application for a state license if approval of the license would violate the provisions of any local ordinance or regulation adopted in accordance with Business and Professions Code section 26200 that is issued by the county or, if within a city, the city, within which the licensed premises is to be located.
• Sec. 5010 addresses applicant CEQA compliance to obtain a license: (1) A copy of the applicant’s license, permit, or other authorization from the local jurisdiction if the local jurisdiction has adopted an ordinance, rule, or regulation pursuant to Business and Professions Code section 26055(h) that requires discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity. (2) A copy of the Notice of Determination or Notice of Exemption and a copy of the CEQA document, or reference to where it can be located electronically, if the applicant does not wish to provide a copy of the license, permit, or other authorization provided by the local jurisdiction or if the local jurisdiction has not adopted an ordinance, rule, or regulation pursuant to Business and Professions Code section 26055(h) that requires discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity. (c) If an applicant does not have the evidence specified in subsection (b) of this section, or if the local jurisdiction did not prepare a CEQA document, the applicant will be responsible for the preparation of an environmental document in compliance with CEQA that can be approved or certified by the Bureau, unless the Bureau specifies otherwise.
• Sec. 5016, related to priority licensing, puts certification requirements on the local jurisdiction that the priority applicant was operating in accordance with the Compassionate Use Act of 1996. The applicant has to obtain such certification from the local jurisdiction to satisfy this priority licensing requirement. The Bureau doesn’t request the same from the local jurisdiction.
• Sec. 5018 establishes that amongst the grounds for denial of a State license is denial of an applicant’s local jurisdiction license.
• Sec. 5019 provides that when granting, denying, or renewing licenses the Bureau must consider (1) “excessive concentration” in the census tract in which the applicant premises is proposed, or (2) whether the application exceeds the allowable number permitted by the local jurisdiction’s permitting ordinance. Arguably this is a second check to the 10 day local agency response to proposed application rule.
• Sec. 5035(c) provides that the licensee is required to give notice to the Bureau when the local permit, license, or approval is revoked. We expect that most local jurisdictions will self-report the same to the Bureau, since substantive and procedural due process would most likely apply to local jurisdictions’ suspension and revocation of permits or approvals.  

Location

• Sec. 5026(a) provides the minimum distance requirements. A premises cannot be located within a 600-foot radius of a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center that is in existence at the time the license is issued. A local jurisdiction should consider defining what is a youth center. Youth center’s come in many shapes and sizes with various types of operations and operators. Section 5026(b) provides that notwithstanding subsection (a), if a local jurisdiction has issued a license or permit to conduct commercial cannabis activity at a premises that is located within a 600-foot radius of a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center, the Bureau may approve the premises for licensure if the following conditions are met: (1) The applicant submits a copy of a valid license or permit from the local jurisdiction with the application for licensure; and (2) The local jurisdiction notifies the Bureau that the applicant is in compliance with all applicable local ordinances and regulations pursuant to Business and Professions Code section 26055(g)(2)(C).

Theft, Loss or Criminal Activity

• Sec. 5036, the licensee is required to notify the Bureau and local law enforcement within 24 hours of any theft, loss, or criminal activity at the premises.

Retailers

• Sec. 5403, retailers may only sell or deliver between 6:00am and 10:00pm PST.
• Sec. 5407, sale of non-cannabis items is permitted if the local jurisdiction permits such sales.  Alcohol and tobacco sales are prohibited.
• Sec. 5806, for clients with adults only establishments considering cross-over into cannabis, section 5806 establishes strict attire and conduct restrictions.
• Sec. 5807 may be of interest to clients in that live entertainment is permitted on a licensed premises, as long as it’s not adults only entertainment.