AB 266 Passes In California

The following article is from the Emerald Growers Association homepage at: emeraldgrowers.org
AB 266: Support with concerns
RE: Assembly Bill 266 (Bonta/Jones-Sawyer/Cooley/Lackey) – SUPPORT

The Emerald Growers Association, advocating and organizing on behalf of more than 150 member farmers and 600 affiliated supporters and small business partners in dozens of counties throughout California, supports AB 266. This bill is set to be heard in the Senate Committee on Governance and Finance as well as the Senate Committee on Health.

Our association is focused on ensuring a rapid transition to a well regulated cannabis industry. Our mission is to identify, promote, and protect the interests of our community and members by advocating for public policies that foster a healthy, sustainable and legal cannabis industry. The lack of regulation for commercial medical cannabis has led to an environmental crisis, a public safety crisis, and a small business crisis. We are firmly committed to supporting regulations that offer balanced solutions to these crises.

While we are supportive of the bill at this time, I must highlight a serious concern with recent changes to the legislation. As amended June 30, we are concerned that AB 266 incentivizes continued criminality by failing to provide adequate opportunities and protections for existing small farms and businesses.

We commend the authors’ leadership on this issue. It is high time to bring some sanity to our state’s medical cannabis industry. Cannabis policy promises to be a challenge for several years to come. AB 266 has the potential to be a landmark on the journey toward a well regulated future. We are fully committed to continue working with the author and other stakeholders to improve this important legislation. We urge you to support AB 266.

As amended, AB 266 fails to provide adequate opportunities and protections for small businesses

Protecting small farms and businesses is a core component of our work. Protecting small businesses will provide several important benefits. By keeping existing CA farms and businesses working, we can minimize economic incentives to divert products to illicit markets. Access to a regulated market is a fundamental incentive to existing farms and businesses to comply with existing regulations.

Protecting small businesses will preserve our states global leadership in this industry by ensuring a future for the craft of cannabis cultivation and manufacturing. These protections will also create localized opportunity for value added and manufacturing jobs in communities through the state.

Small businesses focus on quality over quantity and are able to create more jobs because of this added value. This is especially true on farms that grow cannabis.

Specific licenses for small and medium dispensaries and manufacturer have been eliminated. Removing these license classes reduces the regulatory authorities’ ability to provide adequate protections for small businesses. We strongly encourage that these tiers be restored. Alternatively, intent language could direct the regulatory authority to “develop a system of tiered business licensing to ensure small business receive adequate protections.” We feel strongly that creating these license types is a critical step to protect small businesses.

We are specifically concerned with the most recent AB 266 amendments that have loosened restrictions on vertical integration. As proposed, the only restriction applies to dispensaries with more than three locations. As only a handful of dispensaries currently have more than three locations, this means that nearly all of the existing dispensaries would be able to vertically integrate cultivation into their operations. The impacts of this could be catastrophic to the existing small cannabis farms throughout the state and would create and economic incentive for existing farms to divert products to illicit markets.

Generally we support a model that is consistent with the three-tier distribution model in the alcohol industry. This model will foster an environment that allows for the growth of smaller cultivators and manufacturers. This model will ensure that patients have access to diverse qualities and varieties of medical cannabis and medical cannabis products. We are encouraged by the inclusion of definitions for “distribution” and “distributor.”

Farm to table delivery models should be explored as a special market privilege available to “specialty cultivators.” Farm to table models can provide both lower prices to consumer and higher returns to small producers. Vertical integration should be a limited market privilege afforded only to small businesses, similar to a brew-pub or farmers market model or limited to specialty product lines owned by large retailers.

Additionally, this three-tiered model is practical and proven method for collecting and paying excise tax and creates a secure, viable system of cannabis transportation throughout the state.

Language could be added that limited licensees holding license type 10 to only holding only one other license type 1 or 2. This would limit the total volume that could be produced by a vertically integrated company.

Provisions could be added that limited the production levels of vertically integrated retailers to 10% of gross sales by volume. This would ensure that all producers have access to the regulated market.

Provisions that require licensees to send products to a licensed processor for testing prior to sale in section 19325 (e) could be clarified to ensure vertically integrated companies are required to contract with distributors for these “processing” services. This could be achieved by the creation of a distributor/processor license type. This would allow businesses to vertically integrate while ensuring equity for small farms and businesses. Processors could be responsible for QAQC, testing, labeling, and processing taxes.

Additional concerns
We would like to note the addition of Section 19333. This section states that “An employee engaged in commercial cannabis cultivation activity shall be subject to Wage Order 4-2001 of the Industrial Welfare Commission.” We have only been able to complete an initial review of “Wage Order 4-2001 of the Industrial Welfare Commission” and we are not able to comment on this addition at this time. We would welcome an explanation and discussion of why this language was added.

We remain concerned about labor language. The cannabis industry does not need, warrant, nor want precedent-setting language that may result in mandated labor relationships, especially at such a low threshold as 20 employees. Such a mandate would severely, perhaps even fatally, impact the numerous small canna-business that serve communities throughout California today. Finally, we will not support labor peace agreements that operate as a gag order for the employer. We are working with labor to better understand the intent and impact of proposed language and are hopeful we will be able to find a workable compromise.

Many of our members have expressed concern over the addition of new language that expands the scope of felony convictions that are grounds to deny an applicant a license to operate in the medical cannabis industry. We do not think it is appropriate to make such substantive changes to delicate language this late in the legislative process.

We appreciate the authors’ attention to our core principle that prior marijuana convictions not be used as grounds to exclude an applicant from the regulated commercial medical cannabis industry.

We were willing to support the compromise language in the June 2 amendments of AB 266. However, we are unable to support changes made to Section 19321 (d) (14). Text was added on page 38, specifically lines 6, 7, and 8. We encourage the following language be struck from the legislation:

“the possession for sale, sale, manufacture, transportation, or cultivation of a controlled substance, including a narcotic drug classified in Schedule II, III, IV, or V, but excluding marijuana, for drug”

Highlight: This legislation is very close to achieving the gold standard provisions for regulating the licensing and regulation of commercial medical cannabis cultivation.

Despite our increasing concerns with AB 266, we still feel this bill represents the most thoughtful and solution-oriented legislation we have seen in several years of working on this subject. The authors have listened very carefully to many perspectives and worked hard to ensure that our most basic principles have been protected. As our community works to emerge from the shadows of nearly two decades of regulatory uncertainty, this basic recognition is tremendously important. We are excited at the momentum this bill—if passed into law—could bring to our state as we work to regulate medical cannabis.

AB 266 establishes tiered business licensing for cultivation

Recent amendments have significantly improved the cultivation licensing framework.

California’s medical cannabis industry has been built by the hard work and sacrifice of tens of thousands of business owners. Many of these are small farms, creating good jobs in impoverished rural communities. It is critical to communities throughout the state that the transition to a regulated future minimize disruption to existing businesses. The bill calls on the regulatory authorities to establish a tiered licensing scheme for cultivation to accommodate the different levels and types of activity to be licensed. This will create opportunities for small, medium, and large business to participate in the regulated industry and ensure the most expeditious transition to regulation with minimal disruption to regional economies.

The bill should restore tiered business licensing for other business types.

AB 266 begins to regulate cultivation as agriculture

The cannabis industry in California is large and complex with varying businesses of different sizes and types. AB 266 is the first cannabis regulatory bill that takes a multi-agency approach. There is no other major industry in CA that is regulated entirely by one agency and past attempts to fit the entire industry into the oversight of a single industry have failed. The multi-agency approach ensures that agencies are only responsible for regulating things they are capable of regulating. AB 266 offers a uniquely viable path forward for solving the problems associated with the lack of regulation for medical cannabis because it calls on several state agencies to regulate different sectors of this major industry. Specifically, the bill creates the Governor’s Office of Medical Cannabis Regulation to oversee all aspects of cannabis regulation and requires the Board of Equalization to oversee regulation of distributors, transporters and dispensaries of cannabis.

The bill establishes the Division of Medical Cannabis Cultivation within the Department of Food and Agriculture. Recognition as farmers is a fundamental priority of our membership. A licensing program administered the CDFA will attract significantly more participation that a program administered by another agency. This will ensure the smoothest transition to regulation possible.