Disparate interests of large, small marijuana business hopefuls on display at public rules hearing | Arkansas Blog

Friday, March 31, 2017

Disparate interests of large, small marijuana business hopefuls on display at public rules hearing

Posted By on Fri, Mar 31, 2017 at 10:55 PM

click to enlarge COMMENT: John Mueller with Delta Cultivators argued for large-scale cultivation. - BRIAN CHILSON
  • BRIAN CHILSON
  • COMMENT: John Mueller with Delta Cultivators argued for large-scale cultivation.

Over 200 people packed an auditorium at Little Rock's Bowen School of Law on Friday afternoon to deliver comments on draft rules that will govern the licensing and regulation of Arkansas's new medical marijuana industry.

The joint hearing was held by the Arkansas Medical Marijuana Commission — which will distribute licenses to dispensaries, cultivation facilities and other marijuana-related businesses such as transporters and processors — and the Alcoholic Beverage Control board, which will oversee those businesses' operations. It concluded the 30-day public comment periods on sets of rules previously approved by both bodies; they are still subject to revision and to legislative review, and must be in place in advance of a July 1 deadline for the commission to begin accepting applications.

Most of the several dozen people who spoke at Friday's hearing clearly have ambitions of entering the marijuana business in Arkansas or have an existing interest in the cannabis industry outside of the state. Although the mood was not acrimonious, the substance of the comments — which were limited to three minutes per speaker — illustrated divergent visions for the heavily regulated industry-to-be.

Many urged the medical marijuana commission to adopt a merit-based system of awarding licenses to dispensaries, rather than the lottery system the draft rules would establish. A number of African-American speakers said the commission should give weight to racial and geographic diversity when awarding licenses. Some criticized various rules, established by both the commission and ABC, which would make it more difficult for dispensaries to grow marijuana on-site; others suggested that dispensaries shouldn't be growing at all and that that task was best left to big cultivators. And citizens outlined a vast range of concerns, from taxation to zoning restrictions to pesticide use, only some of which fall under the authority of the commission or ABC.
 
click to enlarge Virgil Young - BRIAN CHILSON
  • BRIAN CHILSON
  • Virgil Young

Virgil Young
, a resident of North Little Rock, spoke for many when he criticized a restriction against cultivation facilities being located within 3,000 feet of a public or private school, church or daycare. "There is not such a facility ... in Pulaski County," Young said. "It creates in urban areas a mission impossible." Dispensaries cannot be located with 1,500 feet of such locations. As several speakers noted later, it may be difficult to find real estate in some Arkansas towns that's located a sufficient distance from a church.

In fact, those distance restrictions were written into the Arkansas Medical Marijuana Amendment itself and could not be altered by the commission. The amendment did not specify, however, how the distance is to be measured: Does school means "a building with classrooms," or "any school property, including land owned by a college or university"? Does "church" mean "sanctuary," or "any church property"? The question has been settled with the legislature's recent passage of a bill by Rep. Michelle Gray (R-Melbourne) which calculates the distance from the entrance of the dispensary or cultivator to the "nearest property boundary" of a school, church or daycare. The highly restrictive definition in HB 2011 further ties the commission's hands.

(Also, as was noted later, local governments can hold "dry" elections to entirely prohibit dispensaries or cultivators in specific cities or counties. This was also written into the AMMA itself.)
click to enlarge THE COMMISSIONERS: Three of the five members of the Medical Marijuana Commission — from left, James Miller, Travis Story and Dr. Ronda Henry-Tillman, the chair. - BRIAN CHILSON
  • BRIAN CHILSON
  • THE COMMISSIONERS: Three of the five members of the Medical Marijuana Commission — from left, James Miller, Travis Story and Dr. Ronda Henry-Tillman, the chair.

A large number of speakers said the commission should reverse course on its plans to assign dispensary licenses through a double-blind lottery. The AMMA authorizes 20 to 40 dispensaries statewide, and the commission will initially award 32 such licenses. Applicants will first have to meet basic criteria, after which there will be a double-blind drawing to determine a random ranking system. In the order assigned by the drawing, the applicants will go before the commission; if the commissioners deny an application, it will move on to the next application. It will continue in this manner until the licenses are all awarded for each area of the state (see below). This differs from the purely merit-based system which it will use to award five initial cultivation licenses. A lottery will not be used to select cultivators.

In fact, there are difficulties with both methods: A lottery may result in less qualified applicants being chosen over more qualified applicants, while a merit system is more subjective and therefore presents more opportunities for favoritism, or the appearance of it.

Dr. Alex Tyler, who represents a newly formed company called "Empathic Therapeutics of Arkansas," said dispensary assignment should be merit-based. "Our group is predominately physicians and pharmacists working together. … We really want to have a clinical setting," he said. Dr. Robert Ballentine, also with Empathic Therapeutics, told the commission about stopping at a dispensary in Denver, Colorado in 2013 as that state transitioned from medical to recreational marijuana. "It didn't look like a clinic; it looked like a head shop. ... You should have had a receptionist out front. You should have had a counselor saying 'Hey, what specific medical problem do you have that you need treatment for? Let me find a strain that works for you.' ... But instead I talked to a guy who looked like my college roommate at Hendrix. ... I think if you do a lottery-based system you’re going to get 32 copies of Armadillo Hands out on Asher."

Several of those who advocated for a merit-based system were experienced in the marijuana industry elsewhere. Sarah Gullickson said she has "been in the industry about 7 years," and that in nine out of 11 states in which she's participated in a licensing process, a merit-based system has been used. "I really feel like it’s very detrimental to have a lottery based system," she said. Others cited a difficult rollout of a double-blind lottery in Arizona.

But others like a lottery system. Loretta Lever of Little Rock said, "I think we should have the lottery, because it gives everyone an equal chance. As opposed to the merit — then, you have a few people who would have the opportunity. If you have the basic criteria met, then a lottery would be the fairest way to make sure this is equal."

click to enlarge Casey Caldwell - BRIAN CHILSON
  • BRIAN CHILSON
  • Casey Caldwell

About two dozen members of the audience wore shirts bearing the slogan "Diversity For All," and many of them appealed to the commission to ensure that the African-American community isn't left out of the new industry.

Among them was Casey Caldwell. "Statistics show that half of the diseases that individuals may qualify for medicinal marijuana are predominately affecting the African-American community," she said. "We know that such diseases as hypertension, sickle cell, neuropathy, and so on are more predominate in blacks. ...It is safe to say that African-American communities would benefit the most. In the past, pharmaceutical drugs have been priced so high that [people] have to make a decision whether or not they should eat or whether they should purchase [medicine]. … I hope that you all control that [price] to the best of your ability."

Loretta Lever said the commission should ensure diversity in ownership of marijuana-related businesses, both in terms of race and geography. "Statistically, African-Americans have had the highest rate of unemployment throughout Arkansas … It is important for the smaller counties — jobs there mean more than jobs in Pulaski County." Lever said the rules also contain an error or oversight: At a January 3 meeting, the commission voted 5-0 to include "the potential for positive impact on the economy and diversity of the area in which they intend to locate" in its merit criteria regarding cultivation facilities. At a later meeting, the commission discussed instead moving diversity to a list of criteria it may consider. But, it never took a vote to make the change, and Lever argued that that means the diversity criterion was never properly moved. Diversity should continue to be a core criteria of merit selection, rather than an optional one, Lever and others argued.

The commission plans to divide Arkansas into eight zones and distribute a number of the 32 dispensary licenses in each, proportional to population. Zone 5, which includes Pulaski and surrounding counties, will get eight, while Zone 7, which encompasses most of southeast Arkansas, would get two. The commission initially planned to distribute the five cultivation licenses based on geography as well but later reversed course.

click to enlarge Melissa Fults (center) and Gary Fults. - BRIAN CHILSON
  • BRIAN CHILSON
  • Melissa Fults (center) and Gary Fults.

The Arkansas Medical Marijuana Amendment envisions a few big cultivators supplying most of the state's marijuana, but it also provides for dispensaries to grow up to 50 mature cannabis plants each. However, the state's regulators have limited dispensaries' growing capacity somewhat by requiring that those dispensaries that do cultivate plants pay steeper fees and abide by stricter regulations (such as those that apply to the cultivation facilities). This upsets those who fear the five cultivators will drive up prices.

Melissa Fults of the Drug Policy Education Group has been at the forefront of the fight for medical cannabis for years. She thanked the commission for its work — " I would not have taken y'alls job for any amount of money" — but said she was "concerned about the $25,000 [licensing] fee for dispensaries that want to grow." Dispensaries will be able to cultivate small quantities of esoteric strains of the plant that may appeal to small populations of patients, she said. "Cultivation centers are [only] going to grow the most popular strains. ... Also, it will add some competition.

Others objected to an ABC rule defining "mature plant." Because the amendment doesn't specify what qualifies as a mature plant, it's not hard to imagine a well-oiled dispensary maintaining a continuous growing cycle that allows it to have a large number of immature plants in various stages of growth. But the draft rules define a "mature" plant as one over 8 inches tall, which is much shorter than the average flowering, harvestable pot plant.

Ted Brennan, a medical marijuana patient who said he moved from Arkansas to Colorado to grow pot, said "mature plant" should be defined as one that is flowering. Brennan said that's the definition used in other states, including Rhode Island, Colorado, California and Oregon. The ABC rule "does not allow you to maximize your time or production," he said. (Brennan also added, to applause, "With the Arkansas legalization movement, my wife and I want to come home.")

But others say cultivation is best left up to the larger growers. John Mueller said he's established operations in Nevada and California — "large facilities" — and is currently "working on a project down in Phillips County, [Arkansas]" with a company called Delta Cultivators.  "The 50 plant rule for the dispensaries — you have insects, you have odor control issues, you have processing and extraction ... which I think basically puts your patients in greater risk. Not to mention the lab testing. Our lab testing in other markets is $400 a test, and when you look at 50 plants you just can’t do the math and still be competitive for your patients," Mueller said.

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