BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:   April 19, 2016


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                  Rudy Salas, Chair


          AB 2516  
          (Wood) - As Amended April 6, 2016


          NOTE:  This bill is double referred, having been previously  
          heard by the Committee on Agriculture, and passed on a 7-2 vote.


          SUBJECT:  Medical marijuana:  state cultivator license types:   
          specialty cottage type.


          SUMMARY:  Clarifies the role of the of the California Department  
          of Food and Agriculture (CDFA) is not to supersede or limit the  
          authority of specified state agencies when implementing and  
          enforcing their statutory obligations, or adopting regulations  
          to protect water quality, water supply, and natural resources;   
          creates a Type 1C, or "specialty cottage" license, to be issued  
          by the CDFA, for cultivation using a combination of natural and  
          supplemental artificial lighting at a maximum threshold to be  
          determined by the licensing authority; and, authorizes the CDFA  
          to promulgate regulations to govern the new license type.


          EXISTING LAW:


           1) Prohibits the possession, possession with intent to sell,  
             cultivation, sale, transportation, importation, or furnishing  
             of marijuana, except as otherwise provided by law.  (Health  








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             and Safety Code (HSC) §§ 11357, 11358, 11359, and 11360)

           2) Prohibits prosecution of a patient or a patient's primary  
             caregiver, under the Compassionate Use Act (CUA), an  
             initiative measure, for possessing or cultivating marijuana  
             for personal medical purposes of the patient upon the written  
             or oral recommendation or approval of a physician.  (HSC §  
             11362.5)

           3) Establishes the Bureau of Medical Marijuana Regulation  
             (Bureau) within the Department of Consumer Affairs (DCA) to  
             oversee state licensure and regulation of commercial cannabis  
             activities, including cultivation, possession, manufacture,  
             processing, storing, laboratory testing, labeling,  
             transporting, distribution, and sale of medical cannabis or  
             medical cannabis products; requires the Bureau, the  
             California Department of Public Health (CDPH), and the CDFA  
             to administer the Medical Marijuana Regulation and Safety Act  
             (Act) and promulgate regulations for implementation of the  
             Act.  (Business and Professions Code (BPC) § 19300 et seq.)


           4) Vests in the DCA the sole authority to create, issue, renew,  
             discipline, suspend, or revoke licenses for medical marijuana  
             activities, including licenses for dispensaries,  
             distributors, and transporters; prohibits a licensee from  
             holding more than one license except as specified.  (BPC §§  
             19302.1, 19328)


           5) Specifies license classifications as follows:  (BPC Section  
             19328)


             a)   Type 1 = Cultivation; Specialty outdoor; Small.
             b)   Type 1A = Cultivation; Specialty indoor; Small.


             c)   Type 1B = Cultivation; Specialty mixed-light; Small.








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             d)   Type 2 = Cultivation; Outdoor; Small.


             e)   Type 2A = Cultivation; Indoor; Small.


             f)   Type 2B = Cultivation; Mixed-light; Small.


             g)   Type 3 = Cultivation; Outdoor; Medium.


             h)   Type 3A = Cultivation; Indoor; Medium.


             i)   Type 3B = Cultivation; Mixed-light; Medium.


             j)   Type 4 = Cultivation; Nursery.


             aa)  Type 6 = Manufacturer 1.


             bb)  Type 7 = Manufacturer 2.


             cc)  Type 8 = Testing.


             dd)  Type 10 = Dispensary; General.


             ee)  Type 10A = Dispensary; No more than three retail sites.


             ff)  Type 11 = Distribution.








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             gg)  Type 12 = Transporter.


           6) Provides that qualified patients, persons with valid  
             identification cards, and their designated primary caregivers  
             who associate in order to collectively or cooperatively  
             cultivate marijuana, are not subject to criminal liability  
             solely on that basis, until one year after the Bureau begins  
             issuing licenses under the Act.  (HSC § 11362.775)
           7) Allows the Bureau to convene an advisory committee to advise  
             the Bureau and licensing authorities on the development of  
             standards and regulations, including best practices and  
             guidelines to ensure qualified patients have adequate access  
             to medical marijuana and medical marijuana products.  (BPC §  
             19306)


           8) Provides that nothing shall be interpreted to supersede or  
             limit existing local authority for law enforcement activity,  
             enforcement of local zoning requirements or local ordinances,  
             or enforcement of local permit or licensing requirements.   
             (BPC § 19315)


           9) Provides that the permitted actions of a licensee pursuant  
             to both a state license and a license or permit issued by the  
             local jurisdiction following the requirements of the  
             applicable local ordinances, and conducted in accordance with  
             the Act are not unlawful under state law.  (BPC § 19317)

           10)Prohibits a person from engaging in commercial cannabis  
             activity without possessing both a state license and a local  
             permit or other authorization upon the date of implementation  
             of regulations by the licensing authority.  (BPC § 19320)


           11)Requires an applicant for a state license to, among other  








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             things, submit fingerprints to the Department of Justice, and  
             provide documentation, issued by the local jurisdiction,  
             certifying that the applicant is in compliance with all local  
             ordinances and regulations; evidence of the legal right to  
             occupy the proposed location; for applicants with 20 or more  
             employees, provide a statement that the applicant will enter  
             into, or already has entered into, a labor peace agreement; a  
             seller's permit number; and other specified information.   
             (BPC § 19322)


           12)Requires applicants seeking licensure to cultivate,  
             distribute, or manufacture medical cannabis, to include a  
             detailed description of the applicant's operating procedures  
             for all of the following as required by the licensing  
             authority: 1) cultivation; 2) extraction and infusion  
             methods; 3) transportation procedures; 4) inventory  
             procedures; and 5) quality control procedures.  (BPC § 19322)  



           13)Requires the Bureau to deny an application if the applicant  
             or the premises do not qualify for licensure or fail to  
             comply with the Act.  (BPC § 19323)


           14)Requires all licensed cultivators and manufacturers to  
             package all medical cannabis and medical cannabis products in  
             tamper-evident packaging and to use a unique identifier to  
             identify and track the product, and requires the product to  
             be labeled as specified.  (BPC § 19326)


           15)Requires all licensees holding cultivation or manufacturing  
             licensees to send all medical cannabis and medical cannabis  
             products to a distributor for quality assurance and  
             inspection by the distribution licensee and for batch testing  
             by a testing licensee prior to distribution to a dispensary.   
             (BPC § 19326)








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           16)Requires the CDFA to administer the provisions of the Act  
             related to the cultivation of medical cannabis; to create,  
             issue, and suspend or revoke cultivation licenses for  
             violations of the Act; and to promulgate regulations  
             governing the licensing of indoor and outdoor cultivation  
             sites.  (BPC § 19302.1, 19332)


           17)Requires the Bureau to establish a grant program to fund  
             activities by state and local law enforcement to remedy the  
             environmental effects of cannabis cultivation, payable from  
             fines and penalties charged pursuant to the Act after all  
             outstanding loans for the program are repaid.  (BPC § 19351)


           18)Provides for a General Fund or special fund loan, including  
             up to $10 million from the General Fund, to the Bureau to  
             support the initial regulatory activities authorized by Act.   
             (BPC § 19351)


          THIS BILL:


          1)Clarifies the role of the of the CDFA is not to supersede or  
            limit the authority of the State Water Resources Control  
            Board, regional water quality control boards, or the  
            Department of Fish and Wildlife when implementing and  
            enforcing their statutory obligations or to adopting  
            regulations to protect water quality, water supply, and  
            natural resources.
          2)Creates a Type 1C, or "specialty cottage" license, to be  
            issued by the CDFA, for cultivation using a combination of  
            natural and supplemental artificial lighting at a maximum  
            threshold to be determined by the licensing authority, of  
            2,500 square feet or less of total canopy size for outdoor  
            cultivation, or 500 square feet or less of total canopy size  








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            for indoor cultivation, on one premises.


          3)Authorizes the CDFA to promulgate regulations to govern the  
            new license type.


          FISCAL EFFECT:  Unknown. This bill is keyed fiscal by the  
          Legislative Counsel. 


          COMMENTS:


          Purpose.  This bill is sponsored by the  California Growers  
          Association  .  According to the author, "Last year the  
          [L]egislature passed the [Act] in order to address the  
          environmental, public health, and public safety concerns that  
          surfaced in the industry.  In order for these new regulations to  
          be successful we need to ensure businesses have pathways to  
          compliance.  Currently in California there are thousands of  
          small growers that operate on much less than 5,000 [square  
          feet].  [This bill] will round out the licensing structure that  
          was put in place last year so that it will accurately reflect  
          the business activities currently taking place across the  
          state."


          Background.  The Compassionate Use Act of 1996 (CUA).   
          Proposition 215 was approved by California voters to exempt  
          certain patients and their primary caregivers from criminal  
          liability under state law for the possession and cultivation of  
          marijuana.  Proposition 215 was enacted to "ensure that  
          seriously ill Californians have the right to obtain and use  
          marijuana for medical purposes where that medical use is deemed  
          appropriate and has been recommended by a physician who has  
          determined that the person's health would benefit from the use  
          of marijuana," and to "ensure that patients and their primary  
          caregivers who obtain and use marijuana for medical purposes  








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          upon the recommendation of a physician are not subject to  
          criminal prosecution or sanction." 


          The Medical Marijuana Program Act.  SB 420 (Vasconcellos),  
          Chapter 875, Statutes of 2003, established the Medical Marijuana  
          Program Act (MMP).  The MMP, among other things, required the  
          California Department of Public Health (CDPH) to establish and  
          maintain a program for a statewide identification card system.   
          Medical marijuana identification cards are intended to help law  
          enforcement officers identify and verify that cardholders are  
          able to cultivate, possess, and transport certain amounts of  
          marijuana without being subject to arrest under specific  
          conditions.   All counties participate in the identification  
          card program; however, participation by patients and primary  
          caregivers in the identification card program is voluntary.


          In 2008, the Attorney General issued guidelines to: 1) ensure  
          that marijuana grown for medical purposes remains secure and  
          does not find its way to non-patients or illicit markets; 2)  
          help law enforcement agencies perform their duties effectively  
          and in accordance with California law; and, 3) help patients and  
          primary caregivers understand how they may cultivate, transport,  
          possess, and use medical marijuana under California law.


          Since the passage of Proposition 215, a flood of medical  
          marijuana collectives and cooperatives have created a patchwork  
          of local regulations for these industries and with little  
          statewide involvement.


          The Federal Controlled Substances Act.  Despite the CUA and SB  
          420, marijuana is still illegal under federal law.   Adopted in  
          1970, the Controlled Substances Act (CSA) established a federal  
          regulatory system designed to combat recreational drug abuse by  
          making it unlawful to manufacture, distribute, dispense, or  
          possess any controlled substance.  (Title 21 United States Code  








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          Section (USC) 801, et seq.) Under California law, marijuana is  
          listed as a hallucinogenic substance in Schedule I of the  
          California Uniform Controlled Substances Act.   Yet, the CUA  
          prohibits prosecution for obtaining, distributing, or using  
          marijuana for medical purposes.   However, under the federal  
          CSA, it is unlawful for any person to manufacture, distribute,  
          dispense or possess a controlled substance, including marijuana,  
          whether or not it is for a medical purpose.   As a result,  
          patients, caregivers, and dispensary operators, who engage in  
          activities relating to medical marijuana, may still vulnerable  
          to federal arrest and prosecution.  


          Congress has provided that states are free to regulate in the  
          area of controlled substances, including marijuana, provided  
          that state law does not positively conflict with the CSA.   
          (Title 21 USC Section 903.) Proposition 215, nor the MMP,  
          conflicts with the CSA because medical marijuana use has not  
          been "legalized" medical marijuana in the state; instead,  
          California has tried to avoid this conflict by not pursuing the  
          state's powers to punish certain offenses when a physician has  
          recommended marijuana as a treatment for a serious medical  
          condition.


          Center for Medicinal Cannabis Research.  According to the CMCR,  
          "The [CMCR] was created in 2000 to conduct clinical and  
          pre-clinical studies of cannabinoids, including smoked  
          marijuana, to provide evidence one way or the other to answer  
          the question "Does marijuana have therapeutic value?" To  
          accomplish this objective, the CMCR issued calls for  
          applications from researchers at leading California  
          institutions, developed a close working relationship with state  
          and federal agencies to gain regulatory approvals, established  
          panels of nationally-recognized experts to rigorously review the  
          merit of applications, and funded carefully designed studies  
          that have now been published in high impact scientific journals,  
          making significant contributions to the available literature on  
          cannabis and the cannabinoids."








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          The CMCR continues, "As a result of this program of systematic  
          research, we now have reasonable evidence that cannabis is a  
          promising treatment in selected pain syndromes caused by injury  
          or diseases of the nervous system, and possibly for painful  
          muscle spasticity due to multiple sclerosis.  Obviously more  
          research will be necessary to elucidate the mechanisms of action  
          and the full therapeutic potential of cannabinoid compounds.   
          Meanwhile, the knowledge and new findings from the CMCR provide  
          a strong science-based context in which policy makers and the  
          public can discuss the place of these compounds in medical  
          care."


          The Medical Marijuana Regulation and Safety Act.  The Act  
          consisted of three separate bills which were enacted together on  
          Sept 11, 2015, to bring licensure and regulation to the medical  
          marijuana industry nearly 20 years after the passage of  
          Proposition 215 in 1996, which legalized the use of medical  
          marijuana.   The bills created a comprehensive state licensing  
          system for the commercial cultivation, manufacture, retail sale,  
          transport, distribution, delivery, and testing of medical  
          cannabis.   In addition, the bills affirm local control and  
          require licensure by both a local government and the state in  
          order for a licensee to operate. The Act went into effect on  
          January 1, 2016, although licensure requirements will not go  
          into effect until the regulatory entities responsible for  
          implementing the act pass necessary regulations.  


          Among other things, the Act establishes the new Bureau under the  
          DCA, which is responsible for licensing and regulating  
          dispensaries, transporters, and distributors. In addition, the  
          CDPH is responsible for regulating manufacturers, testing  
          laboratories, and the production and labeling of edible medical  
          marijuana products. The CDFA is responsible for regulating  
          cultivation, and other state agencies, such as the Department of  
          Pesticide Regulation and the State Water Resources Control  








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          Board, are responsible for developing environmental standards.    



          Under the Act, applicants seeking licensure to cultivate,  
          distribute, or manufacture medical cannabis are required to  
          include a detailed description of the applicant's operating  
          procedures for cultivation, extraction and infusion methods,  
          transportation process, inventory procedures, and quality  
          control procedures.


          Commercial and Personal Use Cultivation. According to the  
          author, "Many medical cannabis farmers across California grow  
          only a handful of plants on relatively small plots of land.  
          These cottage farmers often rely on medical cannabis cultivation  
          to supplement their income, or simply as one product in a larger  
          agricultural portfolio." The author goes on to say, "The  
          creation of a cottage license that provides a viable pathway to  
          compliance for the small farmers that operate throughout the  
          state will maximize the number of businesses that come into  
          compliance." 


          Current Related Legislation.  AB 26 (Jones-Sawyer) of the  
          current legislative session requires a licensee under the Act to  
          institute and maintain a training program to educate, inform,  
          and train the licensee's agents and employees regarding  
          compliance with the Act, and requires the Bureau to approve and  
          regulate the training programs. STATUS: This bill is pending in  
          the Senate Committee on Business, Professions and Economic  
          Development.


          AB 567 (Gipson) of the current legislative session, would  
          prohibit mobile, vehicular, or technology platforms that enable  
          qualified patients or primary caregivers to arrange for any  
          delivery with a third party; would provide that a dispensary  
          that employs or uses the services of any person under 21 years  








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          of age for the sale or delivery of medical cannabis or medical  
          cannabis products is subject to suspension or revocation of  
          certain state or local licenses; and would require tax penalty  
          amnesty programs, for medical cannabis-related businesses, as  
          provided.  STATUS: This bill is pending in the Senate Committee  
          on Health.


          AB 1548 (Wood) of the current legislative session, would impose  
          a tax in specified amounts on the distribution in this state by  
          a cultivator of marijuana to a licensed distributor, as  
          specified; require the licensed distributor to collect the tax  
          from the cultivator and remit it to the BOE; and require all  
          moneys, less refunds and costs of administration, to be  
          deposited into the Marijuana Production and Environment  
          Mitigation Fund, as specified.  This measure died in the  
          Assembly Committee on Revenue and Taxation.


          AB 1575 (Bonta) of the current legislative session makes a  
          number of changes to the Act including, among others: specifies  
          that it is not a violation of state law for certain licensees to  
          sell medical cannabis under 8 ounces; specifies that no  
          individual or group may cultivate or distribute cannabis other  
          than what is specified in the Act or the Compassionate Use Act;  
          and, exempts any commercial cannabis activity by a holder of a  
          state license who complies with the Act. STATUS: This bill is  
          pending in the Assembly Committee on Banking and Finance.


          AB 2385 (Jones-Sawyer) of the current legislative session  
          prohibits licensing authorities from requiring a local license,  
          permit, or other authorization, and would require the issuance  
          of a state license, if the authorities determine that the  
          applicant meets all of the requirements of the act, as  
          specified, in the City of Los Angeles.  STATUS: This bill will  
          also be heard before the Assembly Committee on Business and  
          Professions during today's hearing.









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          AB 2545 (Bonta) of the current legislative session authorizes  
          the Governor to enter into agreements with federally recognized  
          sovereign Indian tribes, as defined; authorizes these agreements  
          to include provisions regulating activities between licensees  
          operating on and off the land of federally recognized sovereign  
          Indian tribes; authorizes the Governor to delegate to the chief  
          of the Bureau authority to negotiate these agreements.  STATUS:  
          This bill will also be heard before the Assembly Committee on  
          Business and Professions during today's hearing.


          AB 2672 (Bonilla) of the current legislative session renames the  
          Medical Marijuana Regulation and Safety Act (Act) to the Medical  
          Cannabis Regulation and Safety Act; renames the Bureau of  
          Medical Marijuana Regulation (Bureau) to the Bureau of Medical  
          Cannabis Regulation; renames the Medical Marijuana Regulation  
          and Safety Act Fund (Fund) to the Medical Cannabis Regulation  
          and Safety Act Fund; renames the Medical Marijuana Fines and  
          Penalties Account (Account) to the Medical Cannabis Fines and  
          Penalties Account; and, makes other conforming changes  
                                                     throughout the Business and Professions (BPC), Fish and Game  
          (FGC), Government (GOV), Health and Safety (HSC), Revenue and  
          Taxation (RTC), and Water Codes (WAT).  STATUS: This bill will  
          also be heard before the Assembly Committee on Business and  
          Professions during today's hearing.


          AB 2679 (Cooley) of the current legislative session increases  
          the reporting requirements of the Bureau to include the number  
          of appeals of denial of state licenses or other disciplinary  
          actions taken by the licensing authorities, the number of  
          complaints submitted to the Bureau regarding licenses; and,  
          expands scope of the CMCS to include in its studies the effect  
          of marijuana on a person's motor skills.  STATUS: This bill is  
          pending in the Assembly Committee on Appropriations.


          Prior Related Legislation.  AB 266 (Bonta, Cooley, Jones-Sawyer,  








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          Lackey, and Wood), Chapter 689, Statutes of 2015, enacted the  
          Act for the licensure and regulation of medical marijuana and  
          established the Bureau within the DCA, under the supervision and  
          control of the Director of the DCA, and required the Director to  
          administer and enforce the provisions of the Act.  AB 266 also  
          required the CDFA to administer the provisions of the act  
          related to cultivation, and required the CDPH to administer the  
          provisions of the Act related to manufacturing and testing of  
          medical cannabis.  The bill also required the BOE, in  
          consultation with the CDFA, to adopt a system for reporting the  
          movement of commercial cannabis and cannabis products.



          AB 243 (Wood), Chapter 688, Statutes of 2015, required the CDFA,  
          the DPR, the CDPH, the DFW, and the SWRCB to promulgate  
          regulations or standards relating to medical marijuana and its  
          cultivation, as specified, required various state agencies to  
          take specified actions to mitigate the impact that marijuana  
          cultivation has on the environment, and established the Act  
          Fund.   
          SB 643 (McGuire), Chapter 719, Statutes of 2015, set forth  
          standards for a physician and surgeon prescribing medical  
          cannabis, required the Medical Board of California to prioritize  
          its investigative and prosecutorial resources to identify and  
          discipline physicians and surgeons that have repeatedly  
          recommended excessive cannabis to patients for medical purposes  
          or repeatedly recommended cannabis to patients for medical  
          purposes without a good faith examination, as specified,  
          authorized counties to impose a tax upon specified  
          cannabis-related activity, and set forth standards for the  
          licensed cultivation of medical cannabis.


          ARGUMENTS IN SUPPORT: 


          The  California Growers Association (CGA)  writes in support, "CGA  
          has conducted numerous community workshops throughout the state  








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          and found that the smallest growers didn't fit into the [Act]'s  
          license framework due to the simple fact they grew significantly  
          less product than the smallest license category "type 1" at  
          5,000 square feet. By creating a smaller license type that  
          accurately reflects the smallest cultivation operation the state  
          will realize greater regulatory compliance because cottage  
          growers will identify with a license category that accurately  
          fits the scope of their regulated business."


          The  Consortium Manage Group  writes in support, "Creating a new  
          license for small cultivators, with a maximum of 2500 square  
          feet for outdoor cultivation and 500 square feet for indoor  
          cultivation, ensures that small business have a  licensing  
          category and a regulatory structure that is consistent with the  
          size of the cultivation."


           Safe Access for Americans (ASA)  writes in strong support for  
          "licensing and sensible regulations for commercial medical  
          cannabis cultivation and other activity." ASA goes onto say,  
          "The addition of a license for smaller-scale cultivators is an  
          important improvement to the [Act]. The "cottage" cultivators  
          anticipated by [this bill] will play an important role in  
          increasing the quantity and variety of medical cannabis that an  
          estimated 1.4 million legal patients need to treat the symptoms  
          of chronic pain, cancer, arthritis, migraines, and other serious  
          conditions."


          ARGUMENTS IN OPPOSITION:


          None on file.


          POLICY ISSUES FOR CONSIDERATION:










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          This bill may be premature given that the Act and Bureau are  
          relatively new and the structure of each is still being  
          developed. It is unclear if this additional license type is  
          necessary, although the license type will allow small  
          cultivation to comply more easily with the provisions of the Act  
          and may encourage hesitant cities and counties to allow  
          cultivation if in smaller quantities.


          REGISTERED SUPPORT:  


          California Growers Association (sponsor)
          Consortium Manage Group
          Safe Access for Americans


          REGISTERED OPPOSITION:  


          None on file.




          Analysis Prepared by:Gabby Nepomuceno / B. & P. / (916) 319-3301