New State Legislation Merges 2015 Marijuana Legislation Into 2016’s Proposition 64

by Betsy Martyn on July 16, 2017

The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA or the “Act”) contains portions of the Medical Cannabis Regulation and Safety Act (MCRSA) that do not conflict with the Adult Use of Marijuana Act (AUMA) along with a variety of provisions designed to create a single, comprehensive regulatory system for commercial cannabis activity and product sale, testing, distribution, and enforcement.

Effectively, the Act makes the MCRSA superfluous although it does not repeal it. There is additional regulation as to the content and packaging for edibles (cannabis products).

The Act eliminates:

· regulation of mobile dispensaries (permitted as a form of retail sales);

· the City’s ability to prohibit transport on public roads by compliant licensees;

· residency requirements for licenses; and

· regulation of industrial hemp

Administration

The state office in charge of administering and interpreting the Act is the Department of Consumer Affairs, Bureau of Cannabis Control (the “Bureau”). Several other state agencies have roles, including the Food and Agriculture Department, the Public Health Department, the State Fire Marshal and Fish & Wildlife, and each is called a “licensing authority.” Currently, they share a joint (although not-up-to-date) website, the California Cannabis Portal.

Single regulatory system

A. Licenses: The Act codifies state licensing authority with regulations to follow. The Bureau must begin processing licenses starting January 1, 2018. Because it does not appear that final regulations can be in place by then, the Bureau and each licensing authority have the authority to adopt temporary regulations until January 1, 2019. However, they may grant licenses only where there is a local license in place (or no requirement for a local license).

The highlights are:

1. Producing dispensary and transporter licenses will not be available.

2. Types of Licenses: There are 12 types of licenses; eight are for types of cultivation, one is for testing labs (Type 8), one for retailers (Type 10); one for distributors (Type 11) and one for a microbusiness (Type 12). Each license, except for the testing license, must be designated as a medicinal (M) or adult use (A) license, and separate licenses are required. For example, a medicinal commercial cannabis operation requires a Type 10-M license.

3. Microbusiness includes cultivation of an area of less than 10,000 sq. feet along with distribution and sale.

4. “Retailer,” means someone who sells and delivers cannabis or cannabis products to customers. A retailer must identify a specific physical location from which commercial cannabis activities are conducted. A retailer’s premises may be closed to the public. A retailer may conduct sales exclusively by delivery but a retailer cannot distribute without a separate distribution license. A retailer shall notify the licensing authority and the appropriate law enforcement authorities within 24 hours after discovering significant inventory discrepancies; theft, loss or criminal activity in the operation or by an employee or agent of the retailer, or loss or alteration of records, specifically including those for registered qualifying patients and primary caregivers.

5. A state temporary event license will be granted only where a local jurisdiction allows for the state to grant a temporary event license.

6. A person may hold any combination of licenses although a person with a testing license may hold only that license.

7. Separate license are required for each location.

8. No licensee may sell alcohol or tobacco.

9. The state may deny the license because of the operator, the premises, or failure to comply with the Act or its regulations. The state also may deny a license on the grounds of an excessive concentration of commercial cannabis facilities, i.e. over 1 per 15,000 people; licensee acts in restraint of trade or discriminates in sale.

10. Priority in licensing to those operating legally before September 1, 2016; a city must identify those businesses for the state and provide a copy of the local ordinance plus any amendments.

B. Licensing provisions address who is allowed on the premises as well as recordkeeping: “The designated structure or structures and land specified in the application that is owned, leased, or otherwise held under the control of the applicant or licensee where the commercial cannabis activity will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one licensee.” This rule allows for more than one license to be associated with a given address or parcel because parcels may include multiple premises.

C. Delivery and distribution require specific safety standards. For example, the license holder must employ all drivers. Cannabis for delivery or distribution must have security manifest with that unique identifier for each recreational cannabis plan and the retailer or distributor must participate in the track and trace program.

D. Security measures for retailers must include, at a minimum

(1) Prohibiting individuals from remaining on the licensee’s premises if they are not engaging in activity expressly related to the operations of the retailer.

(2) Establishing limited access areas accessible only to authorized personnel.

(3) Other than limited amounts of cannabis used for display purposes, samples, or immediate sale, storing all finished cannabis and cannabis products in a secured and locked room, safe, or vault, and in a manner reasonably designed to prevent diversion, theft, and loss.

Local Control

The Act deals with matters of statewide concern; therefore, including for charter cities, the Act specifies the areas of local control by local jurisdictions (which means cities and counties (B&P Code Sections 26000 et seq.)).

1. Local legislative authority continues to prohibit commercial cannabis activity, which is defined to include both dispensing and cultivation (B&P Code Section 26001(k)).

2. Local legislative authority continues over land use and business licenses: “This division shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate businesses licensed under this division, including, but not limited to, local zoning and land use requirements, business license requirements, and requirements related to reducing exposure to secondhand smoke, or to completely prohibit the establishment or operation of one or more types of businesses licensed under this division within the local jurisdiction.”

3. Therefore, current bans on commercial sales of medical cannabis and cultivation remain legal along with the regulation of personal indoor and outdoor cultivation, although the definitions in those ordinances should be updated to be consistent with those used in the Act.

4. Commercial cannabis activity (defined as both distribution and cultivation) needs to be addressed with an ordinance effective on or before January 1, 2018 as it is unlikely if there will be permanent statewide regulations by that time (and somewhat doubtful that there will be temporary regulations).

5. Any ordinance in place or adopted needs to be provided to the state Bureau of Cannabis Control; there is a system that will be set up for that, but it is not yet in place.

6. Local jurisdictions may, but are not required to:

· Establish rules and regulations more strict then those established by Act or by regulations of the Bureau or licensing authorities: “Any standards, requirements, and regulations regarding health and safety, environmental protection, testing, security, food safety, and worker protections established by the state shall be the minimum standards for all licensees under this division statewide. A local jurisdiction may establish additional standards, requirements, and regulations.

7. The Act allows local enforcement of state law by delegation from the bureau under a written agreement with that local jurisdiction.

8. The Act outlines a process for a local jurisdiction and the Bureau to communicate regarding state and local licenses:

· Notification by the city to the state of denial or revocation of local license (B&P Code Sections 26055 and 26200 (c))

· Creation of a database of local ordinances and amendments regarding commercial cannabis plus written identification of a contact person (otherwise assumed to be the City Clerk)

· Coordination with the state: The state notifies the city of a license application; the city may notify state whether the entity has a local license if one is allowed or the entity may provide a copy of the license

· If the city does not respond, the state will presume compliance and go ahead with the license (assuming other qualifications are met)

· If the city responds late, it still may notify the state of non-compliance and the state may take disciplinary action or decide not to renew; the city can still enforce its local ordinance

9. Location of either commercial sale or cultivation cannot be within 600 feet of K-12, day care, youth center at the time the license is granted unless the city makes that distance larger or smaller.

10. A local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a licensed retailer or microbusiness by those 21 or older when such consumption is not visible from a public place or other non-age restricted area and where that is allowed by the local jurisdiction.

11. The city attorney may enforce civil penalty provisions of state law regarding unlicensed operation of a commercial cannabis facility.

12. Until July 1, 2019, any city ordinance that requires discretionary review of permits for commercial cannabis activity is exempt from CEQA as long as each permit is subject to CEQA review.

13. State Fire Marshal regulations including building standards for fire and panic safety may be enforced by the state or by local jurisdictions.

14. Local non-profit licenses: The state is reviewing whether there should be state non-profit licenses to serve low-income users. While that is determined, if a local jurisdiction wishes to proceed with a non-profit license, it may do so under certain conditions (See B&P Code Section 26070.5).

15. A local jurisdiction may require its own track and trace program, which could include medicinal cannabis, although not required under state law for medicinal cannabis.

Cannabis Cooperatives

A cannabis cooperative association is 3 or more unlicensed people who pool resources with one or more license holders to cultivate no more than 4 acres and distribute the product. This portion of the Act creates a new form of non-profit corporation and specifies similar requirements for articles of incorporation, bylaws, and so forth. The name “cannabis cooperative” cannot be used except in compliance with these provisions (B& P Code Sections 26220 et seq.).

Quality Control, Inspection and Testing

· Distributors will store cannabis batches on their premises during testing; testing lab employees will obtain samples for testing and transport those samples to testing labs, and distributors will conduct a quality assurance review to ensure compliance with labeling and packing requirements, among other things.

· Allows testing by cannabis businesses themselves with state oversight; testing labs must be independent and separately licensed and with no other license.

· Chain of custody and standard operating procedures apply.

· Limited sale of untested products allowed.

Packaging

· Production, packaging and labeling, and regulations will be developed by the state Department of Public Health and will apply to all licensees.

· Packaging must be re-sealable, tamper evident, child resistant and include the unique identifier; cannot be attractive to children with the following warning:

GOVERNMENT WARNING: THIS PACKAGE CONTAINS CANNABIS/CANNABIS PRODUCT, A SCHEDULE 1 CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.

· Packaging also must have source, date of cultivation, type and date of manufacturing or packaging, the list of active ingredients, appellation, nuts or other allergen, identifying and for medical cannabis: FOR MEDICAL USE ONLY.

Edibles

· Cannabis products are regulated by Food and Agriculture Department and Drug Administration but not treated as food.

· Edible cannabis may not be appealing to children or made to be confused with candy.

· Have lower concentrations of active ingredients and is homogenized.

· The state Department of Public Health controls sanitation standards similar to those for food preparation.

· Packaging must provide information as to effect of the cannabis product and be marked with the universal cannabis symbol.

Cultivation

· The Food and Agriculture Department handles all cultivation licenses, including indoor and outdoor, mixed light, cottage and nursery and must adopt regulations.

· Cultivation must comply with all state and local laws, current building and fire regulations, grading, land conversion, water usage & quality, etc. (B&P 26066)

· Any cultivation license application must identify a water source and any proposed diversion of water.

· The Food and Agriculture Department also handles use of pesticide.

· The Food and Agriculture Department must develop an organics program and establish an appellation (to identify the county of cannabis origin).

· The Food and Agriculture Department must develop a track and trace program with a unique identifier for each plant to track its movement.

· Track and trace system information is exempt from Public Records Act disclosure but available to law enforcement.

Environmental Protections

· Administered by the state Department of Fish and Wildlife.

· A cultivation application has to identify water source and waste discharge.

· Promulgation of regulations for lake or streambed discharge and use of pesticides.

· Prohibition on alteration of water flow.

Advertising

· Restrictions on advertising (both web and billboard) require display of the current license number and universal cannabis symbol.

Excise Taxes and Fees

· 15% excise tax on all commercial products which is set by the average market price for a retail sale (changed from gross receipts); the purchaser remains liable for the tax until he/she has a receipt from the retailer which says it was paid.

· Distributors impose the cultivation tax at the time produce enters the commercial market and collected.

· Licensing authorities will charge fees.

· A county may impose a tax on cultivation separately when approved under Proposition 218.

Enforcement

· Vehicle Code Section 23222 has been revised to provide that it is an infraction with a $100 fine to possess an open cannabis or cannabis product container in a motor vehicle while driving (unless the container is in the trunk). The exception is for a qualified patient or person with an ID card, where the container is closed.

· Provisions legalizing medicinal possession and use, as well as personal recreational possession, cultivation and use remain in effect.

· The Act adds the state Impaired Driving Task Force.