Lawmakers and regulators in California struggling to maintain a grip on the state’s massive cultivation industry. With thousands of temporary cultivation licenses expired or set to expire soon, officials are concerned that many temporary permit holders will slip back into the so-called “black market” overnight. In a bid to stall that possibility, the California Senate voted Thursday to pass a bill that would extend nearly 7,000 temporary growing licenses through mid-September.
Senate Bill Aims to Keep “Good Actors” Out of Underground Industry
Since legalizing cannabis for adult use in 2016 and implementing its retail industry in 2018, California has faced challenges transitioning unlicensed growers into the legal, regulated space. A major reason for that has been a licensing bottleneck. State agencies have been unable to keep up with the influx of permit applications from cultivators looking to join the state’s legal market.
As a stop-gap solution, regulators implemented a set of emergency rules to govern the industry throughout its transition. Part of those rules allows cultivators to apply for temporary cultivation licenses. These temporary permits allow growers to continue to raise and sell cannabis while they put together their license application and wait on an official decision.
The problem, however, is that California stopped issuing any new temporary licenses at the end of last year. And in 2019, growers’ temp permits started expiring. All are slated to expire by July 1, but thousands have already. In March, according to California Department of Food and Agriculture data, 1,000 temporary licenses expired. By the end of April, another 4,000 will expire.
Under California law, an expired license means growers can’t cultivate any new cannabis. They also can’t sell any products to other licensed operators. But farmers aren’t going to just squander their crop. As a result, growers end up selling their produce back into the unlicensed market. And since California wants to keep a slice of the industry to itself through taxes, there’s a major incentive to prevent “black market” diversion.
Industry and Local Gov. Demand Fix to Licensing Backlog
The widespread problem of expiring temporary permits for growers has prompted the industry and local governments to demand a solution. Many municipalities are already trying to take matters into their own hands. Despite “cease and desist” letters from state regulators, country and local officials are telling growers to keep operating. So long as a cultivator has submitted an application for a state license and follows local regulations, county officials generally aren’t shutting them down.
Essentially, there are two ways out of the logjam. One, California regulators can work to accelerate application processing and clear the backlog. Two, the state can implement some kind of legislative fix.
At the moment, California lawmakers are working on the second option with SB 67. Passed with a 32-4 vote in the Senate and supported by over 200 organizations and county supervisors, SB 67 would extend all of California’s provisional grow licenses through mid-September. Ostensibly, the deadline extension would give state regulators more time to process applications.
Without it, “a crisis will take hold,” said Sen. Mike McGuire (D-Healdsburg), a key sponsor of the bill. The next stop for SB 67, which has broad bi-partisan support, is a vote on the floor of the Assembly.