The More You Know: California Cannabis Provisional Licensing Update

If you’re in the cannabis licensing game in California, you know that it’s taking months and months to secure annual licensing from all three agencies overseeing the implementation of the Medicinal and Adult-Use Cannabis Regulation and Safety Act. To date, temporary licensing has propped up the industry. However, those temp licenses can no longer be issued or renewed, effective December 31, 2018. If you recall, it was a race to secure local authorization by December 31 of last year because, without it, you couldn’t get a state temporary license, which meant that your cannabis company would be waiting around for months (maybe even a year) to get annual licensing. And where you can’t open your doors without both local authorization and some form of a state license, state temporary licenses are lifeblood for operators.

Nonetheless, many temp licenses will expire at the end of this month. To bridge the gap between temporary and annual licenses, the legislature came up with the concept of provisional cannabis licenses via SB 1459. To obtain a provisional license: (1) an applicant must hold or previously have held a temporary license for the same commercial cannabis activity for which it seeks a provisional, and (2) the applicant must submit a completed annual license application with proof that California Environmental Quality Act (“CEQA”) compliance is underway. Provisionals last for 12 months and can be issued through the end of 2019.

California cannabis licensing has been quite a ride.

Until last week, the only agency that detailed the provisional licensing process was the California Department of Food and Agriculture (CDFA), which regulates cultivators. The CDFA does not have a separate application for provisional licenses. Per its instructions, once an applicant submits an annual license application (and assuming it held or has a temporary and paid its annual application fees), CDFA staff will determine whether a provisional is warranted. Thankfully, in a series of emails last week, the Bureau of Cannabis Control (BCC) and the California Department of Public Health (CDPH) finally revealed to stakeholders how provisional licenses will work for them. On March 29, both the BCC and CDPH emailed their list serves with the following message:

The Bureau of Cannabis Control, California Department of Public Health, and California Department of Food and Agriculture are taking steps to prevent gaps in licensure when active temporary commercial cannabis licenses expire. Each licensing authority is tracking expiration dates of temporary licenses and intends to issue a provisional license to qualified temporary license holders before their current temporary license expires. To qualify for a provisional license, an applicant must:

Hold or have held a temporary license for the same premises and the same commercial cannabis activity for which the provisional license will be issued; and

Have submitted a completed license application to the licensing authority, which must include a document or statement indicating that California Environmental Quality Act (CEQA) compliance is underway.

If you are contacted by your state licensing authority for additional information, please respond promptly so that processing of a provisional license is not delayed. Please note that a completed application for purposes of obtaining a provisional license is not the same as a sufficient application to obtain an annual license. Licensees issued a provisional license are expected to be diligently working toward completing all annual license requirements in order to maintain a provisional license.

Similar to CDFA, neither the BCC nor the CDPH has an application process for a provisional license. If you qualify, that license will issue automatically.

Without a doubt the heaviest lift here will be filing for that annual license application. This is where you’ll disclose all owners, financial interest holders, and all criminal background information, and you’ll also submit all of your standard operating procedures. Note that the agencies are looking to give folks a break where a “completed application” for purposes of getting a provisional isn’t the same what’s required to actually get the annual, but you still have to provide all of the required information off the bat to ensure that the application is “complete”.

And let’s not forget about SB 67. SB-67’s key provision is that when an applicant files its annual license application, its temporary licenses will remain valid even if those licenses had previously expired. What this 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. These extended temporary licenses would only stay effective until an annual license is issued or denied, a provisional license is issued, or an application is disqualified or abandoned. Notably, in its last draft, SB 67 will now only apply to CDFA licensees if it passes and it will only remain effective through September 15, 2019.

Licensing in California continues to be a roller coaster, but there is one bottom line: get your annual license applications in as soon as you can to avoid significant licensing delays and the risk of not getting a provisional license.