California Cannabis Provisional Licensing Update

26 Feb California Cannabis Provisional Licensing Update

Last summer, I wrote about Senate Bill 1459, a piece of California legislation that created a new scheme of provisional licenses for cannabis operators. This provisional licensing scheme was essentially intended to replace the temporary licensing scheme that only ran through January 1, 2019 per state law. SB-1459 was necessary because the three main state cannabis licensing agencies—the Bureau of Cannabis Control (“BCC”), California Department of Public Health (“CDPH”), and California Department of Food and Agriculture (“CDFA”)—and localities which issue permits to cannabis operators, were all backlogged with numerous applications and couldn’t process all of the applications in time for applicants to get operational in 2018. In some cases, applicants could not even obtain temporary licenses before the temporary license regime expired.

SB-1459 was thus supposed to be a lifeline for companies which had scored very short-lived temporary licenses so that they could get operational in 2019 while the state was processing their annual licenses. In this post, I look at what’s happened with the provisional licensing scheme since SB-1459 has passed, how each agency has treated them, and what applicants need to do to get them.

The steps—per SB-1459—to obtain a provisional license are fairly straightforward at first glance: (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 and proof that California Environmental Quality Act (“CEQA”) compliance is underway. Provisionals last for 12 months and can be issued through the end of 2019. Luckily for operators, this doesn’t add a layer of complication to the already complex process of applying for annual licenses and doesn’t really require applicants to do much that they wouldn’t have already needed to do in connection with annual applications.

The only agency which has published more comprehensive information on provisional licenses is the 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 a temporary and paid its fees), CDFA staff will determine whether a provisional is warranted.

As noted above, and as most readers of this blog are probably aware, the temporary license scheme ended in late 2018. The impact of this is that temporary applications will expire in March or April unless an extension was provided. Each of the three agencies is likely to get a large influx of applications between now and when the temporary licenses expire, but we don’t yet know how they will process provisionals. If the BCC and CDPH follow the CDFA’s lead, then it seems like it may be a ministerial act after review of the completed submissions. But even that takes time to do, and businesses that are currently legally operational should probably not wait until their cutoff to apply for annuals, as a provisional application probably would not be processed by that time.

The bottom line for provisional license applicants is that even though they don’t have many filing prerequisites, they are going to be difficult to obtain because applicants must have first applied for annuals. Qualifying applicants—those who hold or have held temporary licenses—should take a hard look at the temporary license expiration dates and consult with their cannabis counsel on finishing up annuals with time for the agencies to review annual applications, and hopefully process and issue provisionals. Stay tuned to the Canna Law Blog for any other developments with provisionals.