Most of 333 will not go into effect until April 2018
SB333, the bill to generally revise I-182 (the current law regarding medical cannabis in MT), has been signed into law by the Governor. Stay tuned for a detailed breakdown of the implementation dates of I-182 and SB333. Please note that even though the legislative process has concluded, there are still many rules which will come out of DPHHS that are yet to be determined. The ongoing establishment of the cannabis industry in MT will continue throughout much of 2017. However, with 182 and 333, a solid framework has been established, so mostly it will be details from here on out.
There is a sales tax of 4% on cannabis purchases for the first year, and a 2% tax for the following years. They call this a “provider tax” but the reality is that there is already a fee structure for providers and this tax will filter down to patients, particularly to the patients whose providers operate dispensaries. This tax is meant to administrate the program and that is why the tax is less after the first year. Estimates on the cost to set up a program that has yet to be clearly defined, are pretty difficult, so it does make sense they would cover their bases.
Fees on Providers
The fee structure for providers is to be determined by DPHHS, but the the suggested amounts are between $1000 and $5000 per year.
This is significant for two reasons –
1. There is no “cap” to the fee structure as there had been in all previous versions.
2. They are allowing DPHHS to determine the fees based on the needs of administering the program.
Although they have left the window open for an unlimited fee structure, they have clearly stated that these fees are not meant to generate revenue for other programs or the general fund. It seems they heard the message about not taxing medicine and realize that if they attempted to impose a revenue generating, recreational type tax, it would not be well received by the public. Although it would be naive to think that they don’t have ways of quietly funneling some money out if there are excess funds.
Under 333 testing of cannabis for pesticides and other contaminants is required, except for providers who have less than 10 patients. For those providers, they will have a three year exemption from that rule. As for what types of tests will be required, that has been left up to DPHHS to determine. Lab managers must have a BA and some experience rather than the PHD that was required by 182.
Pretty much everyone agreed that testing should be mandated for the sake of patient safety. And although I personally believe that testing should be required no matter how big or small your farm is (do small chicken farmers get a free pass on salmonella testing?) – it does show that the legislators were thinking about the small providers out there and giving them time to adapt to a regulated environment, which is pretty cool. Not so much for patients perhaps, but the small provider in me approves. Also, rather than completely caving in to Trace Analytics and requiring a plethora of testing that would raise prices for providers and ultimately patients, they are leaving it to DPHHS. Although it is worth noting that the less strict requirements for lab managers was a direct request from the lobbyist that works for Trace. This paves the way for a big, central lab and multiple satellite labs coming to a town near all of us. Let’s just hope Trace does not buy their way into DPHHS like they did in Helena (although my guess is that they have already taken the right officials out to dinner and let them tour their big, impressive facilities.)
The residency requirement has been raised from one year to three years. I would like to applaud the committee on this one. Raising the requirements gives local businesses some much needed time to adapt and get ready for out of state competition, at least in theory. This should help prevent an out of state green rush, although I am sure Big Canna has plenty of workarounds.
182 requires a minors parents to be their provider, meaning the parent must grow for them. SB333 allows for a parent to choose a professional provider to grow on the child’ behalf.
Seed to Sale Tracking
Under SB333, SOS tracking is mandated. This means that every plant must be documented and accounted for from the time it is rooted until it is sold. This system, which is common in recreational states, is effective at preventing diversion (selling medical cannabis to the black market, oftentimes out of state). This system will be the single biggest expense of administering the program, so much so, that it is mentioned as the main reason for the tax. While SOS can be a daunting affair (closed circuit cameras in every grow room, central databases, etc), there is no standard on what it actually entails. All the details are being left to DPHHS to decide. While I believe the good of SOS far outweighs the bad, this is the part of the program which could make or break it. If the regulations are too strict, then small providers get run out and prices soar. I hope that DPHHS forms a simple, workable SOS system that reflects the small population of the state and honors the conservative values of many Montanans. I should note that in committee they added language that puts the cost of implementation on the program and not on individuals. To be honest, I do not exactly know what this means (are they buying computer hardware for every provider?), but it does show, yet again, that they are considering how this may affect small businesses in the state and allowing DPHHS the freedom to find a workable system.
This replaces the one ounce per patient possession limits that have been the law of the land for providers since the beginning of time (2004). Basically, it establishes a canopy size for providers based on the number of patients a provider has. This does away with weight limits and ensures that a provider will not be punished for how much cannabis they grow and harvest. In my mind, this provision is the single most important and necessary part of SB333. It allows a path to compliance, whereas the old law made it impossible for a provider to be compliant 100% of the time.
SB333 establishes a licensing system to allow for the production of concentrates. Concentrates, also called hash, honey, BHO, oil, RSO, etc are preferred by many patients in medical programs because they are easy to use, potent, have little to no smell, and have long lasting effects. Concentrates are also used to make many edible products. Some concentrates, like Rick Simpson Oil (RSO), are used by cancer patients for curative therapy, as they have shown to reduce cancer cells in some instances. In Minnesota, the most restrictive medical program in the nation with only 1,500 patients statewide, the law requires that all plant material be processed into concentrates before being administered to patients. They do not even have the option of purchasing flower.
The requirements for getting a license to produce concentrates is being left to DPHHS. Since many concentrates use flammable solvents for extraction, I anticipate some stiff requirements. This will most likely give rise to commissary labs, where space is leased to providers to do extractions. If you are looking for a way to invest in Cannabis, commissary commercial kitchens and extraction labs are worth a hard look.
I said in my first newsletter that a good law is generally one that finds a compromise. It should be a collaborative effort that addresses the needs of many groups and does not leave any one group feeling alienated and another jumping for joy. By that definition, this bill does that. Although if you follow social media alone, you may think otherwise. To be honest, this idea of regulation kind of scares me, particularly after I decided to open a coffee shop at my second dispensary location. I have seen firsthand what the DPHHS is capable of – I secured the dispensary permit in a matter of days, the coffee shop, even though it had already been one before, took months. It turns out there is a rule and a code for everything. It was expensive, frustrating, and time consuming – but it forced me to slow down and start to realize the responsibility I was taking on to ensure the safety of my customers. Although it would be easy to dismiss “big government” and rant to my friends about how pointless it is, the truth is that, for the most part, it was pretty important stuff. It was in that moment that I realized how utterly easy selling cannabis has been up to this point.
I cannot think of a time that I have been more nervous since the election as I was on the day of my “pre-operational inspection.” But an unexpected thing happened. My inspector was a really nice guy. He let me know that he would be a resource for me and that he would help me to stay compliant and to run a good business. He even acknowledged how difficult the process could be, and praised me for going through it. When that inspection was over, I felt a great sense of pride. I felt like I had earned something. I also felt better prepared to open my little coffee shop and to not completely screw it up.
In the end, the Brooks St store showed me not how over regulated a coffee shop is, but how under regulated cannabis is. And although, ethically speaking, I face far more inner turmoil selling caffeine and sugar than a non addictive herbal remedy to sick people, I can still clearly see the need for some regulation and guidance on selling any product that people consume.
Anecdotes aside, I think it is fair to say that everyone agrees that regulation is necessary. But the real question is does SB333 go to far to fast. After this bill left the House, I started to have some big concerns that it did. In fact, I was very close to withdrawing my support. But a crazy thing happened. The conference committee removed the worst aspects of it. Not just for large providers, but for small providers and even patient growers. They covered their bases to make sure the program would be self funding, and even gave the power to DPHHS to set the fee structure so that it would not become a revenue bill for the state. The surprise champion of this common sense approach was, wait for it……Jeff Essman.
Ok. I need to stop there. As I type I can hardly believe these works are coming off the keyboard. The sponsor of SB423, the root cause of the debacle that has plagued this state the last six years, actually stood up for patients and providers and was instrumental in making SB333 a workable solution. I am not making this shit up, I swear. Turns out Essman running for mayor of Billings was a good thing for the cannabis movement (although it remains to be seen if its a good thing for Billings).
In short, I have to say I cannot imagine a scenario where this would have played out better for us. The legislature has given a path to compliance for providers, a head start to local businesses, a buffer to smaller providers, retained the ability for patients to grow for themselves, protected the interests of patients by requiring testing and inspections, discouraged diversion and abuse (which protects compliant providers from federal government crackdowns), gave sick minors and their families the same rights as all patients, allowed for potentially life saving concentrates against the will of the state supreme court, given the DPHHS the authority to enact rules, and ensured that the medical program only serve itself and not fund other programs.
This bi-partisan bill stands in stark contrast to pretty much everything I have come to know and expect from our state government. The hard work of the MTCIA, Kate Cholewa, DPHHS, Mary Caferro, and all the committee members in the Senate and in the Conference Committee, shows on this bill. We have a solid foundation to work on, and it will be interesting to watch as the hard work begins as DPHHS establishes the details and implements the will of the voters.
Make no mistake, there is still a long way to go. Full implementation of SB333 will not happen until April of 2018, at the earliest. And although there are still plenty of ways to screw this thing up, I am feeling cautiously optimistic. All signs have been that DPHHS is preparing to approach this with intelligence and an open mind. But don’t worry, I plan on keeping my ear to the ground closely and making sure to get all of you accurate information, good, bad or indifferent.
The last six months have seen resounding victories for the cannabis community in MT – at the ballot box, in the courts, and now in the Legislature. I have never been more hopeful and proud to be a provider and a patient in our MMJ program. Although challenges remain, I can say with confidence that we are here to stay. We have earned a place in our community. And that feels really good.