Pursuant to Business & Professions Code Section 26013, California’s cannabis licensing authorities; the Department of Food and Agriculture’s CalCannabis Cultivation Licensing program, the Department of Consumer Affairs’ Bureau of Cannabis Control, and the Department of Public Health’s Manufactured Cannabis Safety Branch were empowered to make “reasonable rules and regulations” in order to “implement, administer and enforce” the Medical Marijuana Regulation and Safety Act.
And so the three licensing authorities did just that. In early 2017, they began the emergency rulemaking process. After holding stakeholder meetings across the State and accepting public comments, a first set of drafts was published in the Spring. They were soon retracted however, following the passage of the Medical and Adult Use of Cannabis Regulation and Safety Act (“MAUCRSA”), which merged the medical cannabis and recreational/adult use cannabis laws. In November of 2017, the revised emergency regulations were released to the public; the MCSB Emergency Regulations, the BCC Emergency Regulations and the CalCannabis’ Emergency Regulations of Cannabis Cultivation, regulating every aspect of cannabis business in California.
The key word for all the new State Cannabis License applicants in Business & Profession Code Section 26013(a) is “reasonable.” As stated above, the rules and regulations promulgated by the State must be reasonable. And given the complex, unique and original nature of this new industry, that is no small burden for the government drafters to achieve. But what exactly does “reasonable” mean?
Section 26013(c) proffers a definition what “reasonable” means in the context of the State’s cannabis laws. That section reads:
“Regulations issued under this division shall be necessary to achieve the purposes of this division, based on best available evidence, and shall mandate only commercially feasible procedures, technology, or other requirements, and shall not unreasonably restrain or inhibit the development of alternative procedures or technology to achieve the same substantive requirements, nor shall such regulations make compliance so onerous that the operation under a cannabis license is not worthy of being carried out in practice by a reasonably prudent businessperson.” [Emphasis added.]
The set of emergency regulations total 264 pages of regulatory provisions governing all forms of cannabusiness in California. At 264 pages, the regulatory requirements placed on commercial cannabis operations are voluminous and will present a tremendous challenge for any business aspiring to run a fully compliant and lawful operation. And with so many intricate and complicated regulatory requirements, it will be extremely costly and difficult to operate in full compliance. So, the question lingers. Are the draft regulations reasonable? Are they commercially feasible or are they so onerous that operation of a cannabis business would deter a reasonably prudent businessperson from entering the industry?
The grumblings of the industry have begun. Many would-be entrepreneurs have already passed on entry into the cannabis business world due to the perceived difficulty and exorbitant cost to comply with the new regulations. And still, the regulations must balance the State’s duty to the public interest to create a safe and responsible industry involving a potentially dangerous controlled substance against their duty to enact reasonable regulations which do not render cannabis operations commercially unfeasible.
But, as emergency regulations under the pertinent provision of the Government Code in the Administrative Procedure Act, they will expire after 180 days (and a potential two 90 day extension periods), during which time, as part of the regular rulemaking process, including another round of public comments, permanent regulations will be filed with the Office of Administrative Law for enactment estimated to occur in the Spring of 2018. The same requirement of reasonableness will apply.
The State has expressed a sincere desire to avoid over regulation of the cannabis industry and have been careful to follow the rule making process by conducting research, stakeholder meetings and considering public comment. But it will not be until the dust settles and the industry is in full swing, will the answer to the question of their reasonableness become apparent. And if the final regulations are so onerous as to have a chilling effect on California cannabis business, recourse will only be found through a challenge to the regulations for violation by the State of Section 26013(c).