California May Try to Fill the Gaps on Provisional Licensing

California’s cannabis licensing process has been a mess for applicants since pretty much day one. Annual license applications have disappeared into a black hole for months, the window for obtaining temporary licenses was very small and many have expired, and many local jurisdictions decided to make up their own phased permitting processes that in many cases ensured that many operators could never be eligible for temporary licenses (e.g., Phase 3 applicants in Los Angeles).

For any applicant who was lucky enough to obtain a state temporary license in 2018, efforts are underway at the state level to relieve some of applicants’ fears surrounding the fact that most of those temporary applications are set to expire in the next few months and that there is no clear understanding of the provisional licensing process. A new California senate bill (SB-67) would reinstate expired temporary licenses and would fill the gaps in the provisional licensing scheme through mid-2020. This would allow operators who received temporary licenses in 2018 to actually become operational rather than sit and wait on annual licenses to be issued.

For some background, I wrote recently the provisional licensing scheme that was intended to act as a band-aid in light of the fact that temporary licenses were going away by the end of 2018 and the fact that annual applications took extreme amounts of time to review. To recap: if an operator who once held a temporary license filed an annual application, submitted evidence of CEQA compliance, and paid the fee, the state agency could issue a year-long provisional license. But the provisional licensing regime is not free from problems.

The first issue with provisional licenses is that they are only allowed to be issued through the end of 2019. This effectively placed about a similar one-year time frame as with temporary licenses. The second problem with provisionals is that there has been virtually no guidance from the state agencies on how to obtain them. The regulations don’t mention provisionals, and only the California Department of Food and Agriculture (or “CDFA”) published guidance on how to get them. That guidance makes it appear like they are issued at the CDFA’s total discretion after an applicant makes the required annual filings. This is problematic because there is no clear time frame or review process. In other words, an operator could file a complete annual application, and the CDFA could sit on it for months before issuing a provisional.

SB-67 might just fix some of these problems. SB-67’s key provision is that when an applicant files its annual license application, its temporary licenses shall remain valid—even if those licenses had previously expired. These extended temporary licenses would only stay effective until an annual license is issued or denied, a provisional license is issued, an application is disqualified or abandoned, or the end of 2019, whichever is earliest.

This is a lot to unpack, but essentially what it means is that if applicants file annuals before the date of  temporary license expiration, those applicants will still have temporary approval until a provisional license is issued. This will help dispel any lack of clarity surrounding the provisional licensing process but will still not change the fact that annuals will need to be submitted as soon as possible.

Another notable part about SB-67 is that if passed, it would first extend the time to issue provisionals through July 1, 2020. This will give the agencies more time in actually issuing provisional licenses past 2019. But problematically, there will be a six-month window where licensees who don’t have provisionals will lose their extended temporary licenses. There may just be another bill on the table later this year to address this very same issue.

SB-67 ultimately will only benefit those few operators and may signal that the state agencies are still so overwhelmed with applications that they won’t be able to process them on time. We’ll be sure to keep our readers up to speed on any updates on SB-67 or the provisional licensing laws.