ATTACHMENT E: SUMMARY OF LICENSE TYPES, STATE LAW, AND STATE REGULATIONS REGARDING CANNABIS

Transcription

1 ATTACHMENT E: SUMMARY OF LICENSE TYPES, STATE LAW, AND STATE REGULATIONS REGARDING CANNABIS Cannabis Permit Types The following descriptions provide a broad overview of the various State license types and were used as the basis for the activities that were considered to be allowed as part of the Cannabis Land Use Ordinance and Licensing Program. Types 1-5: Cultivation With passage of SB 94, there are 14 medical and non-medical cannabis cultivation license types, of which three are not available prior to January These license types allow indoor, outdoor, and mixed light (e.g., greenhouses) cultivation and vary by size. The table labeled Cultivation License Types (below) lists the State s cultivation license types. Cultivation License Types Type 1 Outdoor Up to 5,000 ft 2 Type 3 Outdoor 10,001 ft 2 to 1 acre Type 1A Indoor 501 to 5,000 ft 2 Type 3A Indoor 10,001 to 22,000 ft 2 Type 1B Mixed light 2,501 to 5,000 ft 2 Type 3B Mixed light 10,001 to 22,000 ft 2 Tier 1 the use of artificial light at a rate of six watts per square foot or less Type 4 Nursery Tier 2 the use of artificial light at a rate above six and below or equal to twenty-five watts per ft 2 Type 1C Cottage up to 2,500 ft 2, 25 plants Type 5 - Cultivation- Outdoor; Large outdoors, or 500ft 2 indoors Over 1 acre Type 2 Outdoor 5,001 to 10,000 ft 2 Type 5A - Cultivation- Indoor; Large Over 22,000 ft2 Type 2A Indoor 5,001 to 10,000 ft 2 Type 5B - Cultivation- Mixed-light; Large Over 22,000 ft2 Type 2B Mixed light 5,001 to 10,000 ft 2 Processor - Cultivation site that conducts only trimming, drying, curing, grading, packaging, or labeling of cannabis and nonmanufactured cannabis products. Multiple permit types can exist on one lot. Type 3 licenses will be limited to one per owner by CalCannabis, a division of the California Department of Food and Agriculture, which will be issuing State cannabis cultivation licenses. Type 5 licenses will be available starting on 1/1/23. Outdoor: Outdoor cultivation occurs in an open-air space with access to only natural light. Cultivated areas can either have unobstructed access to sunlight or can be covered with a lightpermeable structure. Structures used in outdoor cultivation are commonly temporary and cannot involve permanent structural elements (e.g., footings, foundations, plumbing, and electrical wiring). Indoor: Indoor cultivation occurs in an enclosed space with no natural light. Artificial lights, irrigation, dehumidifiers, and HVAC equipment are typically used to control interior climate. Indoor facilities are typically secured and locked to prevent trespassing and theft. Indoor operations may occur within a range of structures, including large farm structures (e.g., barns), garages, commercial buildings, or industrial buildings.

2 Page 2 Mixed-light: Mixed-light cultivation can involve hoop houses, greenhouses, or permanent agricultural structures. Cultivation occurs inside a permanent agricultural structure which can provide mixed light sources, normally on a permanent foundation. Operators of mixed-light structures may supplement natural light with light suppression/shielding and artificial lights, along with HVAC and other climate controls, including CO 2 enrichment systems. Light suppression systems (e.g., utilization of blackout curtains) are a common industry technique for plants that benefit from adjusted daylight hours, including poinsettias and chrysanthemums. Greenhouses and permanent agricultural structures are typically secured and locked to prevent trespassing and theft. Nursery: Nurseries involve the cultivation of plants in their immature stage, for the period of growth between germination and flowering during which the plant has no observable flowers or buds. During this stage, plants conduct photosynthesis and accumulate resources that will be needed for flowering and reproduction. While some nurseries propagate from seed, most create clones by taking cuttings from mother plants. Nurseries may produce seeds from mature plants. Nurseries can also be used to develop and research new strains of the plant. Nursery operations may be entirely indoors or may use a combination of outdoor, indoor, and mixed-light techniques. The state requires nurseries to adhere to cleanliness standards to minimize the establishment and spread of plant pests and diseases. In addition to the cultivation activities, ancillary uses are also likely to occur on site including: Cannabis Processing: A processing license is required from the State to process cannabis. Processing cannabis is similar to processing cut flowers, hops, or lettuce, which involve the preparation of a crop onsite to be transferred from the growing medium to a distribution center. Cannabis plant flowers are trimmed, with the leaf and prepared buds stored separately and then typically dried on-site. Drying rooms are sometimes kept at a cooler temperature, though this is not required. Processing typically results in (1) the cannabis flower, (2) smaller leave trimmings, and (3) the unusable stems and large leaves of the plant. After drying, the product is generally transferred to other operations involving other permit types (e.g., dispensaries, testers, or manufacturers) discussed below. Cannabis Packaging: If the cannabis product is not going to be manipulated further than what is allowed as an ancillary cannabis processing license (described above) then packaging will happen on the cultivation site. If it will be further manipulated at a manufacturing operation then packaging for individual use may occur after cultivation at the manufacturing site and sold as a product with its own wrapping within child-proof resealable containers. Types 6 and 7: Manufacturing With passage of SB 94, there are four manufacturing license types:

3 Page 3 Type P: Only package or repackage medical cannabis products or label or relabel the cannabis product container. Entities that engage in packaging or labeling of their own product as part of the manufacturing process do not need to hold a separate Type P license. Type N: Manufacturers that produce edible products or topical products using infusion processes, or other types of medical cannabis products other than extracts or concentrates, and that do not conduct extractions. Manufacturing Non-volatile: Manufacturing using non-volatile solvents (e.g., CO 2 compressed gas, water, ice, vegetable oils, or animal fat). Manufacturing Volatile: Manufacturing using volatile solvents (e.g., butane, propane, or ethanol). The use of volatile compounds in THC or cannabidiol (CBD, which is the nonpsychoactive component) extraction is generally the less expensive option, and also takes much less time, but it involves the storage of solvents that can combust or explode if mixed with air. Cannabis product manufacturing is defined as production, preparation, propagation, or compounding of manufactured cannabis products directly or indirectly, by extraction methods, independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis, at a fixed location dedicated to packaging or repackaging cannabis. Manufacturing is the extraction or refinement of THC or CBD for use in consumer products such as baked goods, topical ointments, or aromatics for medicinal or recreational use. This process may also involve the transition of raw cannabis into other products, such as oil, rosin, hash, wax, or tinctures, which is then often used in other products, such as vape pens, edibles, salves, and cosmetics. Manufacturing can use intensive processes, such as closed system, super-critical carbon dioxide processes for hash production and heated hydraulic pressing for creating rosin or less intensive methods, such as screen filtering for straining hash, using ice, or soaking cannabis in alcohol to create tinctures. A wide range of chemical and base materials are used depending on the manufacturing process, including ethanol, CO 2, butane, propane, and other natural gases, as well as isopropyl (rubbing) alcohol, hydrogen, liquid nitrogen, and lipids (e.g., coconut oil, olive oil, or butter). These chemicals are used during the manufacturing process and are typically stored onsite. Required manufacturing equipment varies depending on the process and can include machinery engineered specifically for extraction, such as closed loop CO 2 extraction machines, distillation machines, rosin presses, and chromatography machines; or it can consist of simple household appliances, such as crockpots, ovens/stoves, and food processors or blenders. Additionally, manufacturers also use machinery to package products, such as capsule fillers. Following extraction, the products are then manufactured into THC or CBD concentrates, edibles, topical products, and cartridges for vape pens for distribution to consumers. Commercial manufacturing process locations can vary in size and range from a 100-square foot room to a 5,000-square foot warehouse floor.

4 Page 4 Type 8: Testing Quality control testing is conducted to ensure that products are safe for human consumption. Testing involves the distribution of a sample of the cannabis product that is ready to be sold from the cultivator or manufacturer to the testing laboratory. Testing labs will provide a certificate of tested batches of cannabis or cannabis products that the labeled pharmacologically active ingredients are present in the manner described on the packaging, including the presence of THC and CBD. The labs will also test for the presence of contaminants. Testing of cannabis and cannabis related products would occur prior to distribution to retail and microbusiness license holders. Like manufacturing, testing is an indoor, light industrial activity. A licensee who possesses a testing license is not eligible to possess any other cannabis license. The purpose of this license is to have an independent third party inspecting and certifying all cannabis products before distribution to retailers. Type 9: Non-Storefront Retailer & Type 10: Retail Sales Retailer licenses would allow holders to conduct retail sales and deliveries of cannabis or cannabis products to customers. Retail stores contain a variety of products which cater to customer preferences for consumption and use. These items include natural cannabis or flowers, concentrates or oils, hash, edibles, vape cartridges, drinks, tinctures, wax, and seeds, among other items. Retail stores vary widely in size, though generally match the surrounding business establishments, such as within strip malls or plazas. A retailer would be required to have a permitted premise which is a physical location from which commercial cannabis retail operations are conducted. A retailer s premises may be closed to the public and the retailer may conduct sales exclusively by delivery, and a licensed retail or microbusiness license holder may make the deliveries. Delivery license holders must comply with all standards that apply to retail licenses. Delivery service operators utilize a variety of smartphone applications or other web-based options to connect with consumers, and then deliver the products from personal vehicles. The County cannot prohibit licensed retail cannabis delivery services from driving on the roads in the unincorporated area of Santa Barbara County or driving to a licensed business in the County of Santa Barbara. SB 94 provides that the County may allow onsite consumption at licensed retail sales locations as ancillary uses to retail sales operations, and with additional regulations, including access to the area of consumption is limited to those over 21 years old, is not visible from any public place, and sale or consumption of alcohol or tobacco is not allowed. While these commercial retail operations would remain subject to smoking and vaporization regulations, local governments may permit, regulate, or restrict edible, topical, or other non-inhaled means of ingesting cannabis products. Type 11: Distributor Distributor licenses are required for the warehousing, transportation, testing and taxation of cannabis products. Only employees of persons holding a distributor license may transport cannabis and cannabis products. Distributor licensees would be required to receive and distribute

5 Page 5 cannabis and cannabis-based products from and to other licensed entities. For example, a holder of a distributor s license would only be able to pick up and store cannabis from a licensed cultivator and would only be able to take to a testing, manufacturer, or retailer permit holder. Distribution operators will participate in the state s track-and-trace monitoring system as cannabis products are monitored from seed-to-sale to ensure quality, origin, and potency are accurately presented to the customer and that taxes are duly collected. The County cannot prohibit licensed cannabis distributors from driving on the roads in the unincorporated area of Santa Barbara County or driving to a licensed business in the County of Santa Barbara. The holder of a distributor s license will not be allowed to conduct retail delivery. Whereas a general Type 11 license authorizes both the warehousing and distribution of cannabis products, there is a sub-license of the Type 11 license that allows a distributor to only transport cannabis products between licensees. This sub-license of the Type 11 license would be necessary for those participating in the vertical integration model to transport immature plants from the nursery to the canopy area or flowers from processing to the manufacturing premise. Type 12: Microbusiness Microbusiness licenses would allow holders to cultivate cannabis on an area less than 10,000 square feet and to act as a licensed distributor, non-volatile manufacturer, and retailer, provided such licensee can demonstrate compliance with all requirements imposed on licensed cultivators, distributors, non-volatile manufacturers, and retailers to the extent the licensee engages in such activities. Cannabis Event Organizer License and Temporary Event License An event organizer license allows for the organization of a temporary event which can last up to a maximum of four days and are allowed to take place at county fairs and district agricultural associations. Retailers can apply for a temporary license to sell cannabis products at these events. The consumption of cannabis goods is also allowed at cannabis events provided the consumption of alcohol or tobacco shall not be allowed on the cannabis event premises. These events prohibit any person under 21 years of age. Personal, Non-Commercial Uses Any person over the age of 21 may lawfully cultivate up to six cannabis plants within a single residence or upon the ground of the residence at one time. The County is preempted from prohibiting indoor cultivation of up to six cannabis plants for personal use. The County could prohibit outdoor personal cultivation or establish additional regulations regarding cultivation for personal use in any zone, though this would make the County ineligible for potential grant funding from the State s cannabis tax revenue pursuant to Revenue and Taxation Code section

6 Page 6 Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) The text below summarizes some key land use-related regulations set forth in MAUCRSA. All Cannabis activities will have to comply with these regulations to be licensed by the State. Cultivation Size Limitations The current maximum allowable size for a premise is one acre (43,560 square feet) outdoors (Type 3), or 22,000 square feet indoor or mixed-light operations (Type 3A and 3B licenses). Distributors A distributor license has been created to regulate the flow of products. All cultivation and manufacturing licensees are required to send their products to a distributor to transfer samples to the testing license for quality insurance and inspection before passing them to the next stage of manufacturing or retailing. The distributor charges a fee that covers the testing, plus any taxes which the distributor submits to State and local jurisdictions. Vertical Integration and Anti-Competitive Business Practices Vertical integration is permitted, allowing a person to hold licenses in separate licensing categories, so long as licensed premises remain separate and distinct from one another. Testing laboratory licensees are prohibited from obtaining any other license type, and those holding large cultivation licenses, which become available after January 1, 2023, will be prohibited from also holding distributor licenses or microbusiness licenses. The law contains language aimed directly at preventing any unfair business practices that would discourage competition or create monopolies. The state licensing authority is also authorized to deny licenses to any retailer, microbusiness, or nonprofit, if granting a license creates an excessive concentration. Excessive concentration applies when either of the following conditions exist: (1) The ratio of licensees to population within the census tract or census division in which the premises is proposed to be located exceeds the ratio of licensees to population in the county in which the premises is proposed to be located, unless denial of the application would unduly limit the development of the legal market so as to perpetuate the illegal market for cannabis or cannabis products. (2) The ratio of retail licenses or microbusiness licenses to the population within the census tract, census division, or jurisdiction exceeds that allowable by local ordinance. Applicant Qualifications Applicants may provide proof of local approval and evidence of legal right to occupy a proposed location. Applicants shall submit fingerprints for Department of Justice background checks. A licensing authority may deny an application if an applicant has been convicted of an offense substantially related to qualifications, including any felony controlled substance offense, violent or serious felonies, or felonies involving fraud, deceit or embezzlement, or any sanctions by a local licensing authority in the past three years.

7 Page 7 Definition of Volatile Solvent A volatile solvent is defined as a solvent that is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures. (Health & Safety Code section (b)(3).) Advertising Requirements and Restrictions There are extensive, specific advertising restrictions and labeling requirements on licensees. Regulations include requirements for properly labeling cannabis products by including a licensee s identifying information, accurately representing any designations of origin, and prohibitions regarding marketing on interstate highways, near K through 12 schools or youth centers, broadcasting advertisements where less than 71.6 percent of the audiences is reasonably likely to be 21 or older, or using any marketing that is attractive to children. MAUCRSA also requires edible cannabis products to be marked with a universal symbol. Retail Surveillance Retailers need to implement security measures reasonably designed to prevent unauthorized entrance into areas containing cannabis or cannabis products and theft of cannabis or cannabis products from the premises. These security measures shall include, but are not limited to, all of the following: (1) prohibiting individuals from remaining on the licensee s premises if they are not engaging in activity expressly related to the operations of the retailer, (2) establishing limited access areas accessible only to authorized personnel, and (3) provide that, other than limited amounts of cannabis used for display purposes, samples, or immediate sale, all finished cannabis and cannabis products are stored in a secured and locked room, safe, or vault, and in a manner reasonably designed to prevent diversion, theft, and loss. Delivery Retailers must have a fixed physical location that is closed to the public to sell cannabis exclusively through delivery. All deliveries must be documented, and no locality can bar transport of delivered products through its territory. Deliveries may be taxed by local jurisdictions. Identifying a Water Source There are specific water source requirements for cannabis cultivators. For example, cultivators using a small retail water supplier and a water supply source that includes a diversion, and who are seeking licensure before January 1, 2019, had until July 1, 2017, to file a statement of water diversion with the State Water Resources Control Board. Onsite Consumption and Sales Local jurisdictions can allow for onsite cannabis consumption, if (1) the area where cannabis is consumed is restricted to people ages 21 and up, (2) the consumption is not visible to the public or a nonage-restricted area, and (3) alcohol or tobacco consumption is not allowed on the premises.

8 Page 8 If permitted by the local jurisdiction, the State can issue temporary licenses for county fairs or district agricultural events. Sensitive Receptors Cultivation and dispensary facilities must be located at least 600 feet from schools, day cares, and youth centers. Cooperatives Cannabis Cooperative Associations can now be formed and operate similarly to agricultural cooperatives. Members of a cannabis cooperative cannot grow more than four acres of total canopy size of cultivation throughout the state. Packaging Products shall be labeled and placed in opaque, child-resistant, tamper-evident packages. Packaging shall take place at a licensed cultivation or manufacturing site. Packaging is not allowed to take place at retail establishments. Organic, Varietal, Appellations, and other Standards By January 1, 2018, there will be standards in place for cultivators to designate counties of origin, and by January 1, 2021, a process for cultivators to establish appellations of standards, practices, and varietals for cannabis grown in particular geographical regions of California. These standards should function like the appellations, and varietal designations in the wine industry. By January 1, 2021, there will also be a program for designating and certifying cannabis as organic.

9 Page 9 EMERGENCY REGULATIONS BY STATE LICENSING AGENCIES The text below summarizes some of the key land use-related state regulations that complement the requirements of MAUCRSA. All Cannabis activities will have to comply with the State regulations and MAUCRSA, to be licensed by the State. Sensitive Receptors Cultivation, retail sales, and manufacturing activities cannot be located within 600 feet of schools, day care centers, or youth centers. This shall be measured parcel line to parcel line. Excessive Concentration In determining a license for a retail license or microbusiness license, the Bureau of Cannabis Control shall consider if an excessive concentration exists in the area where the licensee will operate. An application for a state license may be denied if the ratio of existing licensees to population within the census tract exceeds the ratio of licensees to population in the County. Retail Businesses hours are limited to 6 a.m. to 10 p.m. Cannabis products cannot be visible from outside the business. Employees must wear an identification badge. Retailers must have security guard(s), security systems, including digital cameras with a resolution of 1280 x 720 pixels, and record 24-hours a day. Cannabis company owners must be background-checked and fingerprinted. Advertising on television, radio, print, and digital must be done where more than 71.6 percent of the audience is 21 or older as determined by reliable up-to-date audience composition data. All cannabis will be sold in resealable, tamper-resistant, childproof packaging. No displays are allowed in bulk containers and jars. Retail cannot give out free samples and cannot sell superpotent edibles. Delivery Delivery is not allowed by aircraft, watercraft, drone, rail, human-powered vehicle, or unmanned vehicle. Deliveries must be to a private address. Deliveries cannot be conducted to a public place and must come from an employee of a licensed business. To decrease the threat of robbery, retail delivery drivers are not allowed to carry more than $3,000 in product at any one time. Cultivation All cultivation licenses types must submit a detailed site and cultivation plan that sets forth (1) the boundaries of the property and the proposed premise(s) where the license(s) will be located, (2) all perimeter dimensions, entrances, and exits to both the property and premises, (3) roads and water crossings on the property, (4) canopy areas (which shall contain mature plants), (5) areas outside of the canopy where only immature plants shall be maintained, (6) designated pesticide and other agricultural chemical storage areas, (7) designated processing areas, packaging areas, composting areas, and storage areas, and (8) the water source for the operation.

10 Page 10 Indoor and mixed-light cultivators must submit a lighting diagram that identifies the proposed (1) location of all lights in the canopy area and (2) maximum wattage, or wattage equivalent, of each light. Operators of mixed-light license types of all tiers and sizes shall ensure that lights used for cultivation are shielded from sunset to sunrise to avoid nighttime glare and all outdoor lighting used for security purposes shall be shielded and downward facing. A person shall be limited to one medium outdoor, or one medium indoor, or one medium mixedlight license (Type 3 licenses). Cultivators will have to comply with extensive water rules, and the renewable energy mandates of the State and local jurisdictions. Indoor cultivators will be subject to odor control rules. Cultivators will need a receipt from a licensed waste management company to compost their cannabis waste; it cannot be sold. Generators rated at 50 horsepower or greater must demonstrate compliance with California Airborne Toxic Control Measures. The applicant must provide a copy of the applicants permit from the local jurisdiction or a copy of the California Environmental Quality Act (CEQA) document completed by the local jurisdiction or prepared by the applicant. Manufacturing Manufacturing licensees must have written procedures for inventory control, quality control, transportation, security, and cannabis waste disposal. Descriptions of these Standard Operating Procedures must be submitted with the annual license application. Cannabis waste cannot be sold, must be placed in a secured area and be disposed according to applicable waste management laws. Good manufacturing practices must be followed to ensure production occurs in a sanitary and hazard-free environment, cannabis products are contaminant free and THC levels are consistent throughout the product and within required limits. Extractions using CO 2 or a volatile solvent must be conducted using a closed-loop system, certified by a Californialicensed engineer. Volatile, hydrocarbon-based solvents must have at least 99% purity. Finally, volatile solvent, CO 2, and ethanol extractions must be certified by the local fire official. Products cannot be infused with nicotine or alcohol or have added caffeine. Edible products cannot be shaped like a human, animal, insect, or fruit. Some potentially-hazardous foods, such as meat and seafood, and other products requiring refrigeration, are prohibited for sale as cannabis products. Juice and dried meat made in accordance with requirements are allowed. Perishable ingredients, such as eggs and milk, may be used as long as the final product meets regulatory standards.

11 Page 11 Edible products are limited to a maximum of 10 milligrams of THC per serving and 100 milligrams of THC per package. Other cannabis products, such as tinctures, capsules and topicals, are limited to a maximum of 1,000 milligrams per package for adult-use and 2,000 milligrams of THC per package for the medicinal-use. Testing Testing labs will sample each 50-pound increment of cultivated cannabis for potency and check for contaminants including heavy metals, mold, and residual solvents like butane in extracts. Any plant with more than 0.1 parts per million of common pesticides will be deemed too contaminated for consumption and will be destroyed. The testing lab will have to send out personnel to a distribution center or cultivation site to personally choose a sample for testing. Track-and-Trace A track-and-trace system will record every cannabis plant and batch, from seedling to sale. Applicants are required to complete a training session for the track-and-trace system within 10 days of receiving notice that their application is complete. The state has also initiated a track and trace system in which all cannabis operators will have to participate starting in 2018 to capture and reconcile activity at any point in the cannabis supply chain, from initial production through retail sale, tracking all movements within the chain of custody. The system will include unique identifiers that will be affixed to plants at production, bulk product, semi-finished and retail level packaging as proof of a legally grown and processed cannabis product. The track and trace system will provide the County with a control and enforcement framework for tracking and tracing of cannabis while enabling consumers to uniquely verify the safety and security of products. Events Events will be limited to state-run county fairgrounds, in which licensed cannabis vendors and smoking will be allowed and events can last up to four days. The holder of a retail license can apply for a temporary license to participate in events. On-site consumption permits are available for retailers who sell at events. Distributor Transport Only License A new sub-license type of the Type 11 distributor license will allow cultivators to move cannabis on a premises from one licensed location to another. G:\GROUP\COMP\Ordinances\Cannabis Ordinance\Hearings\CPC\Adoption\CPC Attachment E - Summary of State Law and Regulations Regarding Cannabis.doc