Elastic Deadlines for California’s Regulated Cannabis Industry
Five months into legal cannabis in the Golden State, the temporary licenses issued by authorities to get things off the ground are starting to expire. But the full permanent licenses are still being held up by several factors — including the failure of local authorities to approve cannabis operations and the delayed implementation of a track-and-trace system to monitor marijuana from seed to sale.
The transition to a fully regulated cannabis industry in California seems to be under an elastic deadline. The first 120-day temporary permits for cannabis businesses granted in January are now set to lapse, but state regulators are preparing to extend them. The permanent annual permits have yet to be issued.
A third of all existing licenses — currently numbering around 6,000 — are due to run out by the start of June, and a tenth in early May. Rather than immediately issue full annual licenses, regulators are extending temporary ones for another 90 days.
“Part of the problem, I think, is that people wait until the last minute,” said Lori Ajax, chief of California’s Bureau of Cannabis Control, speaking to the Orange County Register. “I’m a procrastinator sometimes. I get it, so I’m not upset.”
Only 278 businesses had even applied for full licenses as of April 25, the OCR reported.
That includes just 24 cultivators, 61 manufacturers and 193 dispensaries, distributors or testing labs. If businesses don’t submit applications for a full license before their temporary permits expire or receive a 90-day extension license, they’ll be required to shut down — at least until their full annual authorization is approved.
Meanwhile, some 1,150 temporary applications have been rejected, overwhelmingly due to failure to win approval from local authorities, the OCR reported. But getting that approval is often simply impossible. More than two-thirds of California’s cities (144 out of 482) don’t allow any cannabis businesses at all, according to data compiled by the Southern California News Group. Other municipalities and counties have been slow in issuing local applications. Sonoma and Nevada counties, for example, have extensive backlogs in processing local cultivation permits, according to Hezekiah Allen, director of the California Growers Association.
The Los Angeles Times also notes that the expense and red tape of getting a regular license is a “headache” for many applicants. Fees for the annual permits run as high as $73,000, and also often require costly upgrades to security and product testing.
“It’s all a bit of a hardship right now,” said Nicole Neubert, a San Francisco attorney representing cannabis businesses, in comments to the paper. “All of these costs of becoming regulated are hard for these businesses to incur, especially at a time when the market is so strange.”
Among the programs to be instated with the full permits is a track-and-trace system that will monitor cannabis from seed to sale. (The Mercury News facetiously notes that the strain known as C. Banana has been dubbed by state regulators as #S0411180010-01 for the track-and-trace system.)
“It’s tracking cannabis as if it were uranium,” Mark McMillan, director of systems at Oakland’s flagship Harborside dispensary, told the Mercury News.
Now, implementation of the track-and-trace system is set to begin June 1. Software will monitor each plant’s yield and every move, and measure its weight along the way right down to the point of sale — assuring that legally cultivated cannabis isn’t crossing state lines (which could bring down federal wrath) or being diverted to the illicit market.
In addition to serving as a kind of insurance policy against federal interference in the California cannabis industry, this system will also help state tax collectors determine how much revenue they should be collecting. The track-and-trace program is to be overseen by the Florida-based firm Framwell METRC (Marijuana Enforcement Tracking Reporting Compliance), which already has contracts in Nevada, Colorado and Alaska.
But there’s clearly some trepidation about compliance within the industry. “There is a lot of pressure here,” said Harborside’s McMillan. “Errors can happen by accident, by one person sneezing.”
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