BILL ANALYSIS Ó AB 2672 Page 1 Date of Hearing: April 19, 2016 ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Rudy Salas, Chair AB 2672 (Bonilla) - As Amended April 5, 2016 SUBJECT: Medical cannabis. SUMMARY: 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). EXISTING LAW: 1)Requires specified entities under the jurisdiction of the Department of Consumer Affairs (DCA) to provide on their Internet web sites specified information pursuant to the California Public Records Act and the Information Practices Act, which must include information on suspensions, revocations and other enforcement actions against licensees pursuant to the Administrative Procedure Act; specifies that AB 2672 Page 2 personal information about a licensee is not to be included on the web site. (BPC Section 27) 2)Specifies the board and bureaus in this state that are under the jurisdiction of the DCA, including the Bureau. (BPC Section 101) 3)Specifies that an applicant to become licensed by a board or bureau, as specified, including the Bureau, under the jurisdiction of the DCA must submit a full set of fingerprints for the purposes of conducting criminal history record checks. (BPC Section 144) 4)Establishes the Fund within the Professions and Vocations Fund. (BPC Sections 205.1 and 19351) 5)Establishes the Act to provide for the 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; defines several terms applicable to the Act; establishes the Bureau within the DCA to be supervised and controlled by the director of the DCA; authorizes the Governor to appoint a chief of the Bureau, to be confirmed by the Senate; specifies that the DCA, Department of Food and Agriculture (CDFA), and the Department of Public Health (CDPH) have the authority to issue, renew, discipline, suspend, or revoke licenses, as specified; authorizes the Bureau to convene an advisory committee to advise the Bureau, the DCA, CDFA and CDFA on the development of standards and regulations; requires the CDFA to make available a certified organic designation and organic certification program; requires the CDFA to establish a track and trace program for reporting the movement of medical marijuana items throughout the distribution chain, as specified, requires each licensing authority to establish a scale of application, licensing, and renewal fees, based on AB 2672 Page 3 the cost of enforcing the Act; appropriates $10 million, as specified, from the Fund to the DCA to implement the Bureau. (BPC Section 19300, et seq.) 6)Declares that the environmental impacts associated with cultivation have increased, and unlawful water diversion for irrigation have a detrimental effect on fish and wildlife and their habitat; provides that cultivation sites may require greater Department of Fish and Wildlife (CDFW) staff time and personnel expenditures; requires the CDFW to establish the watershed enforcement program; requires the CDFW to coordinate with the State Water Resources Control Board (SWRCB) to establish a permanent multiagency task force to address environmental impacts, adopt regulations and a fee schedule. (FGC Section 12029) 7)Subjects any agency, authority, board, bureau, commission, conservancy, council, department, division, or office of state government, except as specified, to sunset review by the Joint Sunset Review Committee, or relevant policy committees. (GOV Section 9147.7) 8)Provides that indoor and outdoor cultivation activities must adhere to state and local laws, as specified; provides that state agencies, as specified, must address environmental impacts and coordinate enforcement efforts. (HSC Section 11362.769) 9)Provides that qualified patients, as specified, who associate within the state in order to collectively or cooperatively cultivate are not solely based on that fact subject to criminal sanctions; provides that this section is repealed upon issuance of licenses under the Act one year after the licensing authorities begin granting licenses. (HSC Section 11362.775) AB 2672 Page 4 10) Requires the CDFA to establish the Medical Cannabis Cultivation Program (MCCP) to be administered by the secretary of the CDFA, except as specified; specifies that a person or entity who intends to cultivate must first obtain a license, permit or other entitlement, as specified; specifies that a person or entity must obtain a license, permit or other entitlement pursuant to local provisions prior to applying for state licensure; specifies that an application for a license to cultivate cannot be submitted if it violates local ordinances; authorizes local jurisdictions to issue or deny a permit to cultivate; provides that a city, county to city and count that issues or denies a conditional licensee to cultivate must notify the CDFA; authorizes the secretary of the CDFA to adopt and enforce regulations or emergency regulations relating to implementing the MCCP; authorizes the secretary of the CDFA to enter into a cooperative agreement with a county agricultural commissioner to carry out provisions; provides that the CDFA, in consultation with eh Bureau, SWRCB, CDFW, and other state agencies as appropriate, consider environmental impacts when developing the MCCP; requires the CDFA to establish a program for the identification of permitted plants at a cultivation site, including identifiers and a fee structure; exempts a qualified patient who cultivates for personal use, as specified. (HSC Section 11362.777) 11) Requires the State Board of Equalization (BOE), in consultation with the CDFA, to adopt a system for reporting the movement of commercial cannabis and cannabis products throughout the distribution chain, employing secure packaging and be capable of providing information to the BOE. (RTC Section 31020) 12) Expands the multiagency task force pilot project into a permanent project the address the environmental impacts of AB 2672 Page 5 cannabis cultivation on public and private lands in California to ensure the reduction of adverse impacts throughout the state. (WAT Section 13726) THIS BILL: 13) Renames the act as the Medical Cannabis Regulation and Safety Act and the bureau as the Bureau of Medical Cannabis Regulation. 14) Renames the fund as the Medical Cannabis Regulation and Safety Act Fund and the account as the Medical Cannabis Fines and Penalties Account. 15) Makes conforming changes to the act and would replace the term "marijuana" with the term "cannabis." FISCAL EFFECT: Unknown. This bill is keyed fiscal by the Legislative Counsel. COMMENTS: Purpose. This bill is sponsored by the author. According to the author, "The term marijuana derives from a folk term for cannabis brought over by Mexican immigrants who sought refuge from the Mexican Revolution. As the recreational use of smoking cannabis and racial prejudice grew, propaganda against cannabis featured false, lurid stories about African-American and Mexican men committing outrageous acts of murder and mayhem. Marijuana effectively became more associated with these false stereotypes and less with a form of medicine. The term cannabis is a more appropriate medical and botanical term as it does not carry the AB 2672 Page 6 stigma that marijuana does." 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 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. AB 2672 Page 7 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 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. AB 2672 Page 8 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." 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 AB 2672 Page 9 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. 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. 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 AB 2672 Page 10 delivery with a third party; would provide that a dispensary that employs or uses the services of any person under 21 years 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. NOTE: 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 AB 2672 Page 11 Professions during today's hearing. AB 2516 (Wood) of the current legislative session provides for the issuance of a Type 1C, or "specialty cottage," state cultivator license, as specified, by the CDFA. STATUS: This bill will also be heard before the Assembly Committee on Business and Professions during today's hearing. 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 AB 2672 Page 12 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, 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 AB 2672 Page 13 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. REGISTERED SUPPORT: None on file. REGISTERED OPPOSITION: None on file. Analysis Prepared by:Gabby Nepomuceno / B. & P. / (916) 319-3301