California licensing snafu could cost cannabis growers thousands in lost revenue, possible shutdowns

California’s marijuana growers are at risk of losing thousands of dollars in revenue as scores of temporary business licenses expire each day before the state can replace them with annual permits.

That leaves many cultivators trapped in a licensing logjam with a difficult choice: Continue operating with expired permits – or shut down.

This is the beginning of the outdoor cultivation season, and many growers went ahead and planted despite knowing their temporary licenses were set to expire – holding out hope that state regulators would speed up the licensing process and issue annual permits posthaste.

That largely hasn’t happened. And lawmakers in Sacramento have yet to pass a legislative fix.

As of April 16, roughly 3,000 temporary cultivation permits had expired and the California Department of Food and Agriculture (CDFA) had issued only 62 annual licenses and 564 provisional permits.

“I do believe the state will get our license approved in time,” said Wendy Kornberg, CEO of Sunnabis, a cultivator in southern Humboldt County with temporary licenses expiring April 17.

“I have to believe that, otherwise we lose everything. I would lose my home. I would lose my land. I would lose my farm. We would have nothing left.”

Senate Bill 67, which would amend a section of the California Business and Professions Code to extend temporary business licenses until the end of 2019, passed in the state Senate earlier this month and moved to the Assembly. But it hasn’t yet been assigned to a policy committee.

The state Legislature is on recess until April 22, and industry analysts don’t expect a committee vote before April 29.

Then the measure will need fiscal committee and floor votes before landing on the governor’s desk.

Industry watchers expect more than 6,000 temporary cultivation licenses will expire by the end of April.

‘No choice but to grow’

Mikal Jakubal owns Plant Humboldt, a cannabis nursery in Humboldt County. His temporary licenses expired March 31, but he’s still operating.

“Those of us who already started seeds have no choice but to grow them out,” he said.

“If we were to shut down, we’d go bankrupt – and we wouldn’t start up again.”

Some business owners who continue to operate with expired licenses don’t want to openly speak out, but not Jakubal.

“Frankly, I think more people need to be outspoken,” he noted.

Jakubal said he believes there’s a lack of understanding in Sacramento about how his business and others like it operate, namely based on seasonal factors.

“The seasons don’t wait,” he added. “The calendar doesn’t stop because the regulators are twiddling their thumbs.”

Jakubal’s operation isn’t financed with millions in outside investments that would keep him capitalized through months of lost income.

He completed his application for an annual permit at the end of 2018 but hasn’t heard anything from state regulators.

Now he’s hoping he’ll get his annual licenses by the time his plants are ready for sale in three to four weeks.

He’s anxious, though, that if the cultivators who would typically buy plants from him can’t get their permits, he’ll “be stuck with a bunch of plants.”

Growers attempt to keep licenses current

Kornberg in Humboldt has tried to prevent her licenses from expiring by filling out applications and paying the fees, as well as communicating as much as possible with the CDFA.

“We’ve already spent money on clones,” she said. “We have to plant our plants. I really don’t know what to do.”

Her farm is a small, family-run operation. Employees are still trying to process cannabis from 2018, a task they’ll have to cease once the company’s permits expire.

“There’s a possibility of losing our crop from last year,” Kornberg said.

She said her business could weather being without a license for a few months, but if the licensing problem were to go on for, say, half a year, “that’s a problem.”

“If I had money buried in the ground somewhere,” Kornberg said, “we could wait until June or July, but that is not our situation.”

‘Just idling’

At Oakland-based CWG Botanicals, cultivator Rebecca Kirk’s temporary license expired March 21. She applied for her annual license in May 2018.

State regulators told her on March 29 that she had deficiencies in her annual license application, including a missing copy of her lease.

According to Kirk, she provided the required copy of her lease in order to receive her initial temporary permit, but the state lost it.

She’s had to cease and desist operations for the time being.

“We’re just idling,” she said. “Losing thousands (of dollars in revenue) per week.”

What advice do marijuana attorneys have?

Los Angeles-based cannabis attorney Pamela Epstein has multiple clients who applied for annual permits last year and have seen their temporary licenses lapse. She pointed to a lack of urgency by CDFA regulators.

“The entire program is prefaced off of having cannabis,” she said. “If you have no cannabis that is cultivated lawfully, then you are responsible for the uptick in the illicit market and the eventual rise in prices.”

Although regulators have told her several times that as long as her clients are maintaining compliance they won’t be targeted by law enforcement, she’s not buying into it.

“If you don’t have an active state license, you’re not allowed to conduct commercial cannabis activity,” Epstein said. “That means planting, harvesting, caring for those plants. It means everything.”

Oakland-based cannabis attorney Kieran Ringgenberg said California’s licensing issue could affect companies’ abilities to create long-term business plans.

“If there’s only a short pause, and as long as there’s no enforcement activity, this will only have a moderate impact,” he added.

“If there starts to be enforcement or this stretches on so long that people can’t move product or pay their bills, then obviously people are going to be out of business.”

Bart Schaneman can be reached at [email protected]

19 comments on “California licensing snafu could cost cannabis growers thousands in lost revenue, possible shutdowns
  1. Pat on

    Anyone see a trend? One that’s going to end quite unfavorably for those trying to do things right? The ca. experiment is about to implode. Why? Greed and inappropriate/undeserved control by people that claim to be regulators.

    Reply
    • Seth Tyrssen on

      Agreed, completely. I’m afraid Ms. Kornberg is living on the hope of desperation; the government isn’t going to suddenly pull its head out of its ass. So long as “legality” only lets in the big-money players and “investors” from the Corporate Kleptocracy that don’t know a joint from a watermelon, it’s going to fail — and for the very reasons you stated. It’s time for full legalization across-the-board, with MINIMAL restrictions, to keep Sacred Herb in the hands of The People.

      Reply
      • Pat on

        The state I think, knows exactly what it’s doing. But without admitting it. So, it looks like it has its head up its ass. They won’t admit it because they will be hit with class action lawsuits left and right, and lose BIG. But, these lawsuits are probably going to move forward anyway because of the preponderance of evidence.

        All of these antics and appearances of incompetence are just a front for how they’re trying to shake-out and frustrate those on the 99% side of the equation. The state didn’t really want to see them succeed out the gate ( even though they let on that they did…AND, taking applicant’s money ).

        When the “law” was purported to be what it was before it was enacted; then it got enacted and became something quite different in practice. And, now you’ve got this in addition to everything else that’s blown up in people’s faces making a concerted and honest effort to play by the rules. This means that the state didn’t really want many of those to succeed in the first place ( But, they led them on that they could ). And with this latest “snafu” the dots are getting connected, for those that still have their rosy lenses on.

        I’ve said it before: The state has allowed itself to be run by the original cartels. So, with this kind of criminally minded backdrop as a platform for the state to operate from, you get this. What did the powerful cartel guys do to their competition before all of this became “legal?” A lot of illegal things. But, for the state of ca. to acquiesce to this mindset is the real mind bender that not enough people are questioning, even at this juncture.

        Reply
  2. Mike Johnson on

    Jakubal is operating illegally and blatantly. He should be shut down. What’s going on here? Preferred non-enforcement of some operations in direct violation of state law?! You signed up for the permits but only when it works out for you? They all need to be shut down if they are operating w/o a valid permit. That is the law that they helped to pass.

    Reply
    • david on

      ” That is the law that they helped to pass.”
      Wrong Mike, the regulatory system required in Prop 64 is not what the BCC has given us. The rules as written are so onerous that even a one person operation needs a compliance officer as well as several attorneys. Ca. Code 26014 required the state to eliminate the black market AKA the consumer market. They failed and have emboldened that market. The state did not take into consideration that when they threw us under the bus, we took the consumers with us. This may shock law enforcement and or people like Mike, but the 50 billion dollar a year war on drugs never worked, how is a permit going to change that. If the system is rigged, we’re not interested. The BCC should be shut down not Jakubal. They have violated every single statutory date requirement in prop 64. This is not even worth a court battle over about 15% of the market. We’ll take the 85% and a fair percentage of the other states business.

      Reply
      • Paul on

        Agree w David. 1000%. Could be worse though, read about the NY blown BILLION$ Amazon deal. NYS “Idiotcracy” at its very best. That revenue will simply go somewhere else…just like the CA cannabis business. CA, NY and a host of other states NOT named Texas can’t get out of their own way.

        Reply
    • M. Woods on

      What is your role in the industry, if any? You don’t seem to understand how the system has been implemented up to this point.

      Reply
      • Mike Johnson on

        Thanks for asking! I moved to Mendocino County in 1977. I have lived in Mendocino and Humbold Counties since then-42 years of experience growing and helping my neighbors and sometimes even brokering and a few times even transporting to points back east. All for the cause…all with major risks.
        I see some old friends and neighbors getting the permits- paying the state thereby donating to the fund which are used to pay Fish and Wildlife to eradicate and abate their neighbors. People who grow small- mom n pops are being attacked because they were unable to get these permits. Everybody is selling into the traditional underground market yet blaming the unpermitted mom n pops. Permit holders are blowing up massive scenes and selling it to out-of-state brokers yet publicly posturing about how “legal” and “right” they are. All the while dragging their feet as hard as they can to avoid track-n-trace. I know the game quite well.
        Now they are losing their licenses through government blundering?! Good.Live by the corporate sell-out scam now die by it. Why should they think it’s their right to break the same law that they have used to blow up large grows while providing funding for shutting down their neighbors? They are breaking the law. I have no sympathy for their whining.

        Reply
    • Pete Stapp on

      The logic doesn’t work. “You signed up for the permits only when it works out for you.” ?? No. You sign up and pay for a permit as a given that the permitting is obligated to work for you. The state is not allowed to take money for permits that are a gamble… The State is then a plutocratic meddler misusing government authority in a republic with democratic institutions. It has a monopoly on state permits and is thus acting on bad faith and not doing its job. It’s not an opportunity to punish the purchasers of the permits and thwart the very expectations the state itself created for the legal process.

      Reply
  3. Rod Gass on

    The article could’ve painted a clearer picture of the mechanics involved with the true nature of the standoff.

    California has produced a huge, huge volume of disenfranchised voters who did not vote for this “legalization”. The philosophical objection seems to be… every cultivator needs to be shut down. When a license expires, you’re closed for “legal” business. The troops should be called in to enforce the “legal” laws.

    The “legal” growers are a creation of the state sanctioned criminal events that is leading to their own demise. When an industry or business begins from corruption, the state figures out how to rebalance the scales. Now the OG Market can push back and demand the house cleaning.

    Live and prosper by state protection, then die by state controls.

    Reply
  4. Old Timer on

    Another consequence of the failure of the BCC and “legalization”.
    Throw it all out and start over.
    Refund all the exorbitant fees.
    Move forward without overregulation and without pay to play.
    Let farmers grow and sell crops. Use the model currently applied to corn, tomatoes, fruits, or nuts. Let the free market determine price and quality.

    Reply
  5. Joshua Milks on

    We are just going to grow our own or continue buying illegally as long as they want to continue hiking up taxes on this. 20% tax is absurd and few are going to follow that law. I only know a couple people that will fork over that money. Everyone else buys illegally and will continue to do so until these idiots allow cannabis to be a free market.

    Reply
  6. mike on

    no collusion, no collision. of course the big money people knew that they didn’t need to collude with the gov regulators to destroy the little guys because gov inefficiency and complete ignorance of this industry will cause all those that came out of the shadows trusting the gov to treat them fairly will just get swallowed by gov bureaucratic regs until bk, and then out of the way for the big boys. the underground will stay there and the billion dollar corps will control the aboveground since apparently there is enough money for all.

    Reply
  7. Jeanette on

    It was my understaning that they did another temporany permit extension until the end of July. Is that not accurate?

    Reply
  8. Steve Walser on

    Hey California,
    Ain’t one party rule grand? You folks are in a stew of your own making. Exactly what incentive do your lawmakers have of solving your problems when you have eliminated any competition the political masters have?

    Reply
  9. Prices are too HIGH on

    These “small, mom and pop” businesses complain about the bigger guys taking them out. But when you go Instagram you can see their employees smoking massive amounts of concentrates and cannabis. Who pays for their 30 gram dabs? Meanwhile, we can’t even afford a single gram at 30-40 dollars in the store. Some of you small businesses even try charging over 70 a gram, that is really NOT fair.

    Go on the instagram app, look up “dabbing” on the hashtags, and you’ll see so many people going overboard. I know they’re not paying 50 a gram…

    Reply
  10. Joseph Funes on

    With a permit, a grower should pay $100.00 per plant and $200.00 per plant,that is over the proposed limit the grower set for the season,…Grower should call county to come verify the amount of plants to harvest and a Bill to how much Grower owes the state ,after sales or lose permits till paid…

    Reply

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