Marijuana commission split on geographic distribution of cultivation licenses | Arkansas Blog

Tuesday, December 27, 2016

Marijuana commission split on geographic distribution of cultivation licenses

Posted By on Tue, Dec 27, 2016 at 9:33 PM

click to enlarge PACKED: Each of the four meetings the marijuana commission has held this month have filled the room to capacity and then some. (This photo is from the Dec. 20 meeting.) - BRIAN CHILSON
  • BRIAN CHILSON
  • PACKED: Each of the four meetings the marijuana commission has held this month have filled the room to capacity and then some. (This photo is from the Dec. 20 meeting.)

The Arkansas Medical Marijuana Commission today continued creating rules for the licensing of cultivation facilities, one of the two types of businesses envisioned by the medical marijuana amendment approved by voters in November. The five commissioners also have authority over licensing dispensaries and will take up that rule-making process in the coming weeks.

Because the commission must begin accepting applications by June and its licensure rules must be in place by March 9, the newly created panel has met three times in the past two weeks. A week ago, it determined to initially assign five cultivation licenses statewide (the amendment requires four to eight). At its last meeting, on Thurs. Dec. 22, the commissioners decided that such licenses would be given out on a merit-based system rather than a lottery system.

Today, as the commission continued plowing through draft rules prepared by Department of Finance and Administration staff, one issue in particular provoked disagreement among its members: Whether or not to require the five marijuana growing centers to be spread out geographically around the state. Previously, the panel said that one facility apiece be located in each of the Arkansas Department of Health's five geographic regions. However, Commissioner Travis Story would like to rescind that restriction, saying that it could pigeonhole the commission into accepting less worthy applications.

"I’m not a fan of mandating where they are, because then we get into questions of ‘What area are you applying for? Are you applying for multiple areas?'" he said today. Story said he would support making geography one among many items in a scoring rubric the commission will use to determine the merit of an application, but not to set a hard requirement regarding facility location.

Dr. Carlos Roman and Dr. Ronda Henry-Tillman, the chair, argued in favor of requiring the cultivation facilities to spread out. "I think we’re going to have smart enough people and people with money all over the state," Henry-Tillman said. Roman pointed out that since both people and wealth are concentrated in Northwest and Central Arkansas, it's likely that a strictly merit-based system would end up with growing facilities congregated in those regions only. "I still feel like it’s better to give more people around the state opportunities for job creation and economic development," Roman said. "I just think that kind of diversity is economically better for the state." Commissioner James Miller, who was teleconferencing, also favored the requirement.

Dr. Stephen Carroll pointed out that such a requirement opens up other questions, including whether an applicant who fails to obtain the license for one region must then submit an entirely new application (including a hefty fee) to try again for a different region. The commissioners agreed to revisit the issue in future meetings.

click to enlarge TRAVIS STORY - BRIAN CHILSON
  • BRIAN CHILSON
  • TRAVIS STORY
The commission also established an application fee of $15,000 for cultivation facilities, the maximum amount allowed by the amendment. (This is distinct from a license fee, which the committee has yet to establish, but which could be much higher.) Story argued that the application fee should be non-refundable. "We want people who are committed to the process and also have the financial wherewithal to make this happen," he said. Because of the latent risk involved in the marijuana market, Story added later, "there ought to be a high barrier for entry." Roman disagreed. "I’d like to see some of it refundable, if not all of it. ... I think it would be better for your ... average Arkansan trying to start a business."

Mary Robin Casteel, an attorney for the Alcoholic Beverage Commission (which will oversee much of the rule-making and regulation of cultivation facilities and grow centers apart from their licensure), told the commission that ABC typically refunds half of the application fee for permits that are distributed in limited quantities. The commission voted 4-1 to make 50 percent of the $15,000 fee refundable if the application is unsuccessful, with Story the only "no" vote.

Much is yet to be decided about the actual rubric by which the commission will determine the relative merit of applications, including the weight that will be given to each item, but it has a set of draft rules with which it is working. By way of example, here's one of several lists of criteria included in the draft:
i. Ability to operate a business, including but not limited to education, knowledge, and experience with:
1. Regulated industries;
2. Agriculture or horticulture;
3. Commercial manufacturing;
4. Creating and implementing a business plan, including a timeline for opening a business;
5. Creating and implementing a financial plan;
6. Secure inventory tracking and control;
7. The cultivation and production of marijuana;
8. Owning or managing a business that required twenty-four hour security monitoring;
9. Owning and managing a business that has not had its business license revoked; and
10. Any other experience the applicant considers relevant.
Rule-making now occurring at ABC and at the Health Department will partly determine the shape of the commission's rubric. This parallel interagency rule-making process, and the short timeframe mandated by the amendment, add to the commission's complications. Agency staff at ABC are working on providing the commission with sample rubrics from other states that allow medical marijuana. The commission did unanimously approve a motion by Roman to add one item to the rubric, however: Inclusion of a medical professional — meaning an M.D., a pharmacist or a D.O. — on the board of directors, as a consultant or otherwise within the business plan of an applicant will add to the application's merit.

Also to be determined are license fees. Story, citing the "incredible economic potential" of cultivators, said he would prefer a high fee. In Connecticut, he said, such facilities are charged $185,000 upon being granted a license. Roman said he felt a fee of that magnitude could "price people out" and benefit the existing, unregulated black market. If medical marijuana prices are driven through the roof, that could hamper demand for the cultivation facilities' product. "If we fee this thing to death ... we can screw this up," he said.

Casteel, the ABC attorney, said the fee charged to a liquor distillery is $1,000 annually. The ABC's steepest licensing fee is for liquor wholesalers, at $10,000 per year. In the end, the commission decided to wait for more information before making a decision.

The Medical Marijuana Commission will next meet at 3 p.m. on Tuesday, Jan. 3 and Tuesday, Jan. 10

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