California Hashish Cultivators Face Authorized Challenges as Non permanent Licenses Expire – New Hashish Ventures

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California Hashish Cultivators Caught With out Licenses: AB-97 Provides Some Reduction, However fast Cease-Hole Measures Nonetheless Obligatory

Visitor publish by Jeffrey Hamilton and Hillary Mimnaugh of Farella Braun + Martel

Over the previous few months, 1000’s of California cannabis farms that had been working legally with momentary state cultivation licenses have been pressured to carry their operations to a grinding halt. Whereas these farms typically proceed to carry native approvals of their cities and counties, their momentary state cultivation licenses have expired and they’re caught ready because the California Division of Meals and Agriculture (CDFA) struggles to reply to an enormous backlog of purposes for everlasting annual licenses. Farmers with restricted assets, usually by means of no fault of their very own, are confronted with the tough resolution of risking their livelihood or working within the black market.

California legislation requires cannabis farms to acquire state licenses and adjust to native cannabis regulatory ordinances. As this regulatory course of has developed over time, the federal government has supplied three state license choices:

The objective in granting momentary licenses was to permit cultivators to function their farms legally whereas working towards acquiring a everlasting annual license, which has extra stringent necessities. The primary a part of the plan was profitable—California issued 9,464 momentary licenses. Sadly, these momentary licenses are expiring quicker than farms can get hold of provisional or everlasting annual licenses.

On the date of this publication, 97.8% of the momentary licenses have expired. By the tip of July, all momentary licenses will expire. Underneath the present legislation, farms can’t renew or prolong their momentary licenses. Which means after July, the one method to legally function a cannabis farm is to function beneath a everlasting annual license or a provisional license.

CDFA is issuing provisional and everlasting annual licenses at staggeringly gradual tempo. As of July 16, 2019, CDFA had solely issued 2,053 provisional licenses and 230 everlasting annual licensees to the unique 9,464 farms that had momentary licenses. Which means 75.8% of California cannabis cultivators who acquired momentary licenses, and had been working legally, have shuttered or are actually caught as they await provisional or everlasting annual licenses.

The license backlog is partly defined by the complicated license utility course of. The everlasting annual farm license utility is lengthy and complex, requiring potential licensees to undergo background checks, present surety bonds, actual property paperwork, detailed farm administration, waste administration, safety and pesticide protocols and web site plans, in addition to exhibit compliance with the stringent California Environmental High quality Act (CEQA). The provisional license utility just isn’t materially much less burdensome. The provisional license utility has relaxed CEQA compliance necessities, however this solely simplifies one small a part of the licensing utility. Thus, many farms proceed to be annoyed by the opposite complexities within the provisional license utility and CDFA’s gradual response fee. Furthermore, till lately, the one farms eligible for provisional licenses have been farms that had beforehand obtained momentary licenses. As soon as farms efficiently obtained a provisional license, they may solely maintain it for one yr and had no possibility for renewal.

On the time of this writing we’re unaware of state enforcement actions towards farmers who’ve expired momentary licenses, however are in any other case working in compliance with their native cannabis regulatory ordinances whereas they await provisional or everlasting annual state licenses. Nevertheless, state regulators haven’t made any official statements to present consolation to farmers on this place, and the penalties for conducting business cannabis exercise with no license could be extreme. California state licensing authorities can problem citations to unlicensed cannabis cultivators with fines as much as $30,000 per violation. Furthermore working within the black market will increase the farmer’s threat of federal enforcement.

Some excellent news for cannabis cultivators: On July 1, Governor Newsom signed Meeting Invoice 97 into legislation, which can open the door for extra provisional licenses. AB 97 removes the requirement {that a} farm will need to have beforehand held a short lived license in an effort to get hold of a provisional license. Which means a complete new set of cannabis farms that wish to enter the authorized business are actually eligible for provisional licenses. AB 97 additionally permits farms which have obtained provisional licenses to resume their provisional license, giving them extra time and suppleness earlier than they obtain the CEQA compliance required for a everlasting annual license. Lastly, when the CDFA points or renews a provisional license, the CDFA should spell out the excellent objects that stay in an effort to qualify for a everlasting annual license. This could assist demystify the method in acquiring a everlasting annual license. These new guidelines for provisional licenses will keep in impact till January of 2022.

The legislature is unlikely to increase momentary licenses: Though AB 97 affords some reduction to cannabis farms, it doesn’t resolve the fast downside for farms whose momentary licenses have expired. To assist resolve this downside, State Senator Mike McGuire sponsored Senate Invoice 67. Underneath SB 67, so long as a farm obtained a short lived license and utilized for a everlasting annual license earlier than the date of their momentary license expiration, SB 67 would reinstate and prolong a farm’s momentary license till September 15, 2019. Thus, SB 67 proposed to purchase farms a number of additional months of time to function legally whereas CDFA labored to clear its backlog. Sadly, the legislature is unlikely to maneuver ahead with SB 67. The deadline for SB 67 to maneuver out of the Meeting agriculture committee has handed, and thus the invoice has stalled. It seems that the legislators imagine AB 97 largely addresses cannabis farm licensing issues and they are going to be unlikely to pursue SB 67 any additional. Within the meantime, many cannabis farms should proceed to take a seat and wait.


Concerning the authors:

Jeffrey Hamilton is an lawyer in Farella Braun + Martel’s San Francisco workplace, the place he counsels corporations of all sizes, from startups to publicly traded firms, in a broad vary of transactional issues. Hillary Mimnaugh is a summer time affiliate at Farella and in her second yr at Harvard Regulation College.

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The NCV Newswire by New Hashish Ventures goals to curate prime quality content material and details about main cannabis corporations to assist our readers filter out the noise and to remain on prime of crucial cannabis enterprise information. The NCV Newswire is hand-curated by an editor and never automated in anyway. Have a confidential information tip? Get in contact.

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