Cannabis businesses in California can’t be within 600 feet of schools. Shops have to close by 10 p.m., and they need 24-hour video surveillance.

Those regulations are in the new rule book for California’s cannabis industry, which state regulators released Thursday.

“I feel a big sigh of relief. It’s a big milestone for us to release these regulations,” said Lori Ajax, chief of the state’s Bureau of Cannabis Control. “But there’s still a lot of work to be done. No rest for the weary.”

The rulebook gives aspiring and established marijuana businesses their first look at 276 pages of regulations they must abide by come Jan. 1, when the state will start issuing licenses for the multibillion-dollar industry and allowing recreational pot sales to start for the first time.

Conflicting laws

The rushed timeline is the result of a series of conflicting laws passed over the last two years.

In fall 2015, Gov. Jerry Brown signed a trio of bills that mandated the first set of comprehensive regulations on medical marijuana in California by the start of 2018.

Then in fall 2016, voters passed Proposition 64, legalizing recreational marijuana. That measure also called for recreational cannabis businesses to get state licenses starting Jan. 1, 2018.

Wellness advisor Melody Cordova helps a customer decide between cannabis strains at Bud and Bloom dispensary in Santa Ana. (Nick Agro/Cannifornian file)

Since they were already at work on rules to rein in California’s massive medical marijuana industry, state regulators — the Department of Food and Agriculture for cultivators, the Department of Public Health for manufacturers and the Department of Consumer Affair’s Bureau of Cannabis Control for retailers, distributors and testers — published 211 pages of draft rules for that sector in April. The agencies then held a series of public hearings throughout the state, collecting thousands of comments from stakeholders.

The plan was to incorporate that feedback into final medical marijuana regulations, which were expected to arrive this fall. And the three agencies would also use the comments to shape recreational cannabis regulations, which would be issued under an “emergency rulemaking process,” since there wasn’t time to hold more public hearings before the Jan. 1 deadline.

But in June, legislators tacked Senate Bill 94 onto the state budget. That trailer bill — known as the the Medicinal and Adult-Use Cannabis Regulation and Safety Act — called for merging the medical and recreational laws into one unified system. And where there were discrepancies between the two, the bill largely sided with proposed rules for the recreational sector, including how cannabis would be distributed and what types of licenses would be available.

That meant the three state agencies had to go back to the drawing board. In September, they officially withdrew draft medical regulations and started crafting a new set of rules for both industry sectors under the streamlined emergency process.

New regulations

The three sets of rules released Thursday by each agency include expected rules for strict testing and tracking all products from seed to sale. They also added dozens of pages of rules regarding fees, enforcement and new license types. And they kept controversial limits from the proposed rules on how much THC, the compound that makes consumers high, can be in edibles. Here are some specific regulations laid out for businesses:

  • Edible products must be produced in serving sizes that have no more than 10 milligrams of THC and no more than 100 milligrams of THC for the total package.
  • Shops will only be allowed to give free cannabis products to medical patients or their caregivers.
  • Scaled fees are spelled out, with costs for annual licenses ranging from $800 for businesses transporting cannabis up to $120,000 for a business doing multiple activities and making more than $4.5 million a year.
  • Businesses will be able to apply for a special license to host cannabis events, such as festivals at fairgrounds.
  • There’s a six-month grace period for some rules. Through July 1, licensed businesses will still be able to sell products in their inventory that haven’t been tested (with a label saying that) or put in child-resistant packaging. And they’ll be able to work with other licensed businesses without worrying about whether their permits are for medical and recreational activities.
  • Rules for advertising are laid out, including only allowing cannabis ads in outlets where at least 71.6 percent of the audience “is reasonably expected to be 21 years of age or older.”
  • A controversial cap on how many small farms people can own was removed, with some conditions.

While there are many changes from the draft rules out in April, Daniel Yi, spokesman for the Los Angeles-based dispensary chain MedMen, said most established businesses have seen the writing on the wall. They were able to prepare with the help of the draft rules and the process that’s unfolded in other legal marijuana states.

“It’s not like the regulations that were dropped today fell out of the sky,” he said.

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Though there are no formal public hearings on the regulations ahead, Ajax said they plan to continue taking public comment into 2018 and fine-tuning the rules as needed.

“I think they’re good, but I think there are improvements that can be made,” she said. “I think we’re going to get a better idea once we start issuing licenses and see how implementation is going.”

What’s next?

The state will get help going forward from its new 22-member Cannabis Advisory Committee, which met for the first time Thursday as the regulations were released in Sacramento.

Members of the public raised concerns during Thursday’s meeting about who was chosen among hundreds of applicants to be on the advisory board. They said they wanted to see more representation from the cannabis community, including farmers and those impacted by the war on drugs.

The next step in regulating the industry will come in December, as the state starts accepting online applications for temporary business permits.

The permits will be good for four months. That gives marijuana business owners time to compile the additional information needed to get permanent licenses, including security plans, insurance bonds and business formation documents. It also gives the state time to review the applicant’s information and conduct background checks without holding up the Jan. 1 launch date.

The agriculture department included a copy of the temporary license application in its rules out Thursday.

Come New Year’s Day, cannabis shop owners will be waiting on an email from the state saying whether their temporary license has been approved. If they get the OK, they will be able to immediately start selling cannabis to any adult 21 and over with an ID.

Interest in running a licensed cannabis business has been high.

Thousands of people lined up for three workshops the state agencies held in October to help business owners better understand the overall process before applications are in circulation.

The agencies plan to also hold workshops in December catering to different sectors of the industry, with more detailed guidance on what’s needed for growers, manufacturers, retailers, distributors and lab testers.

But in order to apply for a temporary or permanent cannabis business license, these aspiring entrepreneurs must first have permission from their local city or, if they’re outside an incorporated city, the county. That’s why local governments throughout California are rushing to pass regulations in advance of Jan. 1, with some now warming to marijuana businesses while most still have full bans in place.

The local permits are causing some concern in the industry, Yi said — particularly in cities such as Los Angeles, which is scrambling to roll out its own rules.

Still, speaking from the massive Marijuana Business Conference & Expo happening now in Las Vegas, he said most industry insiders are anxious to move forward and ready to roll with the punches.

“It’s going to be a little chaotic,” he said. “It’s not going to be clean. But we’re going to get there.”

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