BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2516


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          Date of Hearing:  May 4, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


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


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill creates a "specialty cottage" license for eligible  
          medical cannabis cultivators. Specifically, this bill: 


          1)Creates a Type 1C, or "specialty cottage" license to be issued  
            by the California Department of Food and Agriculture (CDFA),  
            for cultivation using a combination of natural and  
            supplemental artificial lighting at a maximum threshold to be  








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            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 for indoor  
            cultivation, on one premises.

          2)Clarifies the role of the of the CDFA is not to supersede or  
            limit the authority of the State Water Resources Control Board  
            (SWRCB), regional water quality control boards, or the  
            Department of Fish and Wildlife (DFW) when implementing and  
            enforcing their statutory obligations or to adopting   
            regulations to protect water quality, water supply, and  
            natural resources.
           
          FISCAL EFFECT:


          1)Unknown costs to CDFA to develop regulations, review and issue  
            licenses, and enforce regulations as a result of more  
            cultivators participating in the regulated market. While this  
            bill does not expand the universe of potential licensed  
            cultivators, this new specialty cottage license is intended to  
            attract an unknown number of small cultivators who otherwise  
            may opt out of the regulated market altogether. 



          2)Existing law authorizes CDFA to establish a scale of license  
            fees, based on the size of the business, that would cover the  
            cost of licensing and enforcement activities. However, the  
            potentially broad appeal of this new license category could  
            result in the enforcement and licensing workload not scaling  
            proportionally to license fees, resulting in costs that exceed  
            fee revenue in the initial years of implementation.   
          COMMENTS:


          1)Purpose. This bill is intended to help cottage farmers comply  
            with the provisions of the Medical Marijuana Regulation and  
            Safety Act (Act) by establishing a license that is more  








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            appropriate for their size and output. Supporters argue that  
            this will help encourage these cultivators to participate in  
            the regulatory structure put in place by the Act. 


          2)Background. The Act, which consisted of three separate bills  
            (243 (Wood), Chapter 688, Statutes of 2015; AB 266 (Bonta),  
            Chapter 689, Statutes of 2015; and, SB 643 (McGuire), Chapter  
            719, Statutes of 2015) was enacted to bring licensure and  
            regulation to the medical marijuana industry. The Act 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  
            Board, are responsible for developing environmental standards.  
               

          3)Size of the cottage industry. The precise size of the number  
            of cottage farmers is unknown, but is likely in the range of  
            tens of thousands statewide. This bill does not expand the  
            number of eligible cultivators who may participate in the  
            regulatory structure established by the Act. However, by  
            creating a license that is more in line with the size of  
            cottage farmers, this bill is more likely to bring these small  








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            cultivators into the regulatory framework established by the  
            Act. As a result, an intended impact of this bill is to  
            increase the number of cultivators covered by the Act.  


          Analysis Prepared by:Luke Reidenbach / APPR. / (916)  
          319-2081