Pot regulators mount up in Citrus Heights

Cautious optimism permeated the crowded Citrus Heights Community Center last month, as representatives from the state’s newly established Bureau of Medical Cannabis Regulation sought advice on how to get into the medical marijuana business.

More than 200 people attended the second of six pre-regulatory meetings held throughout California on September 20. The impetus for these rotating forums is the Medical Cannabis Regulation and Safety Act, which is charting new legal territory for a substance the federal government still considers illegal. The act is made up of a trio of bills that officially took effect January 1, but its implementation is being rolled out over two years, as its specific requirements are shaped and locally approved collectives and cooperatives are phased out in favor of a model similar to the one that regulates the commercial sale of alcohol and tobacco.

The state Board of Equalization will begin accepting applications for medical cannabis resale licenses on January 1, 2018; though to sell medical cannabis, license holders will also have to obtain local government approval.

(The act has no bearing on Proposition 64’s recreational cannabis model, recently endorsed by the California Nurses Association and Sacramento Mayor-elect Darrell Steinberg.)

The bureau is seeking input in the rule-making process from stakeholders at every level of the medical cannabis industry, as well as patients, law enforcement and the public, said bureau chief Lori Ajax. “Just getting that feedback from them is really helpful to both the bureau and public health [department] in getting it right,” Ajax said.

As part of the act, the state Department of Food and Agriculture will implement an electronic identification system, beginning with a tag attached to each cannabis plant at cultivation sites. This track-and-trace program will be implemented to address safety concerns with pesticides, confirmation of origin of the plant and to oversee every step in between, from harvest to patient.

Though no single entity has yet been awarded a government contract to run a track-and-trace system, SICPA, a security company with prior experience in the tobacco regulation market, began a pilot track-and-trace program in Humboldt County. SICPA currently works with 15 operators in the medical cannabis industry and is seeking to expand. Alexander Spelman, SICPA’s vice president of business development, said the program is crucial for taxing and regulating cannabis products.

“Essentially you are tracking something to identify where it is in the supply chain,” Spelman said. “And you are tracing it, to identify where it has been in the supply chain.”

The statewide forums, which wrapped up October 5, were the first step in the regulation process, after which the rules will officially be drafted, noticed, opened for public comment and modified. Then, subject to approval from the Department of Consumer Affairs, they will be submitted to the state Office of Administrative Law for final approval.

The fact that these meetings are taking place at all is a game-changer for an industry plagued by the inherent difficulties of operating in a legal gray zone, according to Patrick Rohde of Emerald Environments LLC, Cannabis Industry Compliance Solutions, based in Long Beach.

“This has been probably the most positive interaction with the government that our industry has had in a very long time,” Rohde said at the forum. “They’re willing to listen at long last … and we’re able to safely convey our actual business model to them and help them get an idea of how to actually license us, and implement us … so that we can pay our taxes and not go to jail for a plant that, honestly, heals a lot of people.”

A recurring concern last month related to the act’s requirement that licensees not only obtain a state license, but local permission as well, which is notoriously inconsistent from jurisdiction to jurisdiction, even within Sacramento County.

For instance, cultivation of any kind is prohibited in Folsom and Galt. Dispensaries are prohibited in Rancho Cordova, but indoor cultivation is permitted in single-family homes for people who can afford costly fees, with a full prohibition on outdoor cultivation.

Back in February, the city of Sacramento approved the cultivation of commercial medical cannabis inside of buildings up to 22,000 square feet, and private cultivation in structures up to 400 square feet, as long as these buildings weren’t located near parks and schools.

“We’re going to have a disparity of patients that are not going to [get] access to our medicines,” predicted Rich Miller of Sacramento’s Therapeutic Alternative. “We did this at the state level, but it’s also important that the state get involved on the local level so that … we can have the same access across the street for every patient.”

If the state regulations don’t address this patchwork, the black market will only grow, said Lynette Davies of Canna Care in Sacramento.

“Overregulation actually kills a good business,” Davies said. “The Board of Equalization says we have 1,623 dispensaries as of 2014. If you’re going to regulate an entire industry and not help open dispensaries in communities, what are you going to do with the product? Are they fostering an illegal market, a black market? Or are they going to help us open up communities that don’t have dispensaries?”