California's Three State Licensing Authorities Propose Updated Emergency Regulations

Last week, the Bureau of Cannabis Control (BCC), the Department of Food and Agriculture (CFDA), and the Department of Public Health (CDPH) proposed updated emergency regulations for California cannabis businesses that would extend the emergency regulations' effect another 180 days. The notice and comment period for the regulations is scheduled to begin on May 25 when they are filed with the Office of Administrative Law (OAL). The deadline for the regulations to be approved by the OAL and filed with the Secretary of State (when they would take effect) is 10 days after that.

The biggest change in the regulations is that an applicant may now file just one application (and pay only one application fee) to license a premise, under which the applicant can conduct medicinal (M), adult-use (A), or both commercial activities. Applicants can also now conduct business with other licensees irrespective of the their "M" or "A" designation.

Existing licensees under the BCC can request to add an "M" or "A" designation to their license by notifying the Bureau, but cannot operate under the requested designation until approved. BCC § 5023. It is not clear under the CDFA or CDPH regulations what the procedure is for cultivators and manufacturers to add a designation, but presumably the process would be similar.

Below are additional changes or clarifications made in each department’s new emergency regulations:

The BCC regulations change and clarify the following:

  • Financial interest. Applicants for an annual license are already required to disclose the identifying information about all individuals with a financial interest. The new regulations clarify a financial interest includes any agreement to receive a portion of the profits of a business, unless the interest is held as part of a mutual fund or similar instrument. § 5004.
  • Premises diagrams. The locations for specifically listed activities must be identified on premises diagrams submitted as part of annual license applications. Those activities include storage, batch sampling, shipment loading or unloading, packaging and labeling, customer sales, loading for deliveries, extraction, cultivation, or processing, if applicable. § 5006(c). There are also more specific requirements for diagramming premises on property where there are multiple licensed premises, or where the property also includes a residence. Id. at (h) & (j).
  • Shared security. Where multiple licensees are located in the same building and share a video surveillance system, security personnel, or alarm systems, each applicant must explain how these will be shared and the regulations clarify that all the licensees are responsible for ensuring compliance as all can be disciplined for any violations. §§ 5044, 5045, 5047.
  • Transport between licensees on the same property. If multiple cannabis licensees are located in the same building or property and it is not operationally feasible to transport cannabis good by vehicle, the licensees can transport the goods by foot, hand truck, forklift, or other similar means. § 5311
  • Business modifications requiring notice to BCC. A licensee is not required to notify the BCC of every change to its standard operating procedures, only those major changes outlined under the regulations. § 5023 
  • Fee Schedule. The new regulations have an updated fee schedule for annual licenses. § 5014
  • No advertising with images of minors. The new regulations expressly prohibit advertising and marketing with depictions or images of minors under 18. § 5040(2)
  • No drive-throughs. Among other things, the regulations now explicitly prohibit retail drive-throughs and delivery services to cars. § 5025
  • No businesses within residences. The regulations prohibit premises within private residences, or that would require passing through a private residence. § 5026
  • Premises adjacent to other licensees. Premises adjacent to manufacturing or cultivation must be separated by walls and doors. §5500
  • Operating procedures.  The operating procedures submitted with annual applications have more specific requirements regarding waste and delivery procedures. For example, applicants for delivery services are now required to describe how they will verify the age and identity of a customer and avoid making any deliveries on public land. § 5002 (b)(c)(29)(E) & (F).
  • Delivery service value limit. The value limit for cannabis goods that can be carried by a delivery service is now $10,000 rather than $3,000. § 5418.
  • Bonds. The commercial bond required for licensure must be on the Commercial Cannabis License Bond form under Title 11, California Code of Regulations, Article 56, at section 1118.1. § 5008.

THE CDFA regulations regarding cultivation licenses change and clarify the following:

  • Light deprivation. The definition of light deprivation has been added, which clarifies that light-dep grows are "mixed-light cultivation" requiring mixed-light licensure, not outdoor cultivation, even if they do not use artificial light. Light deprivation is defined as “the elimination of natural light in order to induce flowering, using black out tarps or any other opaque covering.” §8000(q).  
  • Temporary cultivation applications. Temporary cultivation applications now require (1) a proposed cultivation plan (2) identification of applicable water sources (3) evidence of enrollment in water-quality-protection programs with the applicable Regional of State Water Board, or a written verification enrollment is not necessary. The proposed cultivation plan requirements are those outlined in § 8106 of the regulations and are the same requirements as those for annual license application cultivation plans.
  • Bonds. Bonds must be in a form prescribed by the department pursuant to Title 11 of the California Code of Regulations section 26.20. § 8102 (n).

The CDPH regulations change and clarify the following:

  • Labeling medical only products. The new regulations require cannabis manufacturers to label cannabis products that are over 1,000 mg for “FOR MEDICAL USE ONLY” prior to sending the product to a distributor. § 40306. Manufacturing activity now also includes placing a “FOR MEDICAL USE ONLY” sticker on products sold to medicinal-use customer. § 40100 (kk)
  • Shared-use or S-licensing. The recently added regulations for shared-use facilities are included in the regulations. § 40190. See our blogpost on S-licenses here.
  • Tinctures. The regulations provide an exception to the prohibition on cannabis products containing more than .5% alcohol by volume for tinctures. Under the rules, a product that is more than .5% alcohol by volume and would not be an alcoholic beverage under BPC § 23004 can not be sold in packaging larger than two fluid ounces and must include a dropper or measuring device. § 40308.
  • Labor peace agreement. An annual license applicant with 20 or more employees is no longer required to submit a notarized statement that it will enter into and abide by the terms of the labor peace agreement. The applicant can now simply attest that it has entered into or will enter into a labor peace agreement, abide by those terms, and send a copy of the agreement to the Department.
  • Financial interest holders. Annual license applicants are required to submit minor additional information about financial interest holders, including the name and number of the government issued ID for a person, or the name and federal taxpayer ID number of an entity. §40129. Owners can now submit either a social security number or an individual taxpayer identification number. § 40129
  • Closed-loop system certification. Annual license applicants conducting chemical extractions with CO2 or a volatile solvent must submit a copy of the signed closed-loop system certification required under Section 40225 with their license application. §40131(l)
  • Bonds. Bonds must be issued by a corporate surety licensed to transact surety business in the State of California. § 40129
Hannah Strassburger