California marijuana licensing set to slow with end of provisional program

Image of marijuana plants in California

California’s cannabis program is entering a new chapter.

In a last-minute push that ended in June, hundreds of California marijuana businesses were issued the final significant batch of provisional licenses the state will ever grant.

The end of the provisional license program is expected to raise the barriers to entry into the state’s cannabis market, particularly for newcomers, because annual licenses will be harder to obtain than the provisional permits were.

Provisional licenses essentially provided a path for businesses to continue operations and maintain state compliance while they applied for more permanent annual permits.

The California Department of Cannabis Control (DCC) in June approved 529 provisional licenses covering retailers, distributors, manufacturers, delivery operators and most cultivators.

The tally represents about a quarter of the nearly 2,300 provisional licenses the DCC issued during the entire fiscal year, which ended June 30.

The June approval deadline, among several enacted by the agency since it underwent a major restructuring about a year ago, are part of state efforts to gradually phase out provisional permits altogether.

Looking ahead, state regulators must now transition nearly 8,300 provisional licensees into annual permit holders by January 2026.

According to state data, the June bump accounts for more than 6% of the total active provisional licenses granted since early 2019, when the provision system debuted.

State authorities had until June 30 to issue most of those final permits, with exceptions for social equity licensees and smaller cultivators.

“We have seen a fluctuation in application submissions that often coincide with statutory deadlines, impacting the total number of provisional and annual licenses we have issued,” DCC communications director Maria Luisa Cesar confirmed.

The numbers back that up.

From March through June, the DCC issued 1,574 total licenses, including both provisional and annual permits – an 89% jump from the previous four months.

June also provided a notable increase in annual license approvals – the final stamp for state compliance – with 306, or 21% of the entire fiscal year’s total of 1,465.

Dual licensing dilemmas

Santa Barbara-based Autumn Brands is one of thousands of California cannabis companies that has been operating under provisional permits for years while simultaneously trying to obtain annual licenses.

It took the company nearly four years to secure a county land-use permit and then another year to secure a county business license – requirements before applying to transition its provisional permits into annual licenses, which the company filed to do on June 15.

But Autumn Brands is stuck in the waiting game.

“We have yet to receive any communication from the DCC to finalize that transition,” owner Autumn Shelton said.

Dual local and state licensing requirements have caused plenty of headaches for cannabis operators such as Autumn Brands since California implemented new regulations for its medical and adult-use markets in 2018.

The dual licensing also has slowed licensing approvals in the world’s largest marijuana market.

Still, the DCC encourages most applicants to obtain full local compliance before applying.

“If they are not, then DCC is not able to move forward until the local requirements are met,” Cesar said, adding that social equity applicants have a slightly different timeline.

State lawmakers last year approved a one-time $100 million grant to help 17 cities and counties streamline applications, meet environmental compliance and transition provisional permits into annual licenses.

The DCC has dispersed about 80% of that funding.

The remaining 20% will be allocated “after the local jurisdictions have substantially met the goal and the intended outcomes” set in their annual plans, Cesar said.

The waiting game

After the DCC combined three state departments into one agency, it enacted several rule changes to simplify applications, improve licensing and ease compliance requirements.

Industry insiders applauded those overhauls but signaled that the priority placed on licensing might create other delays.

“As the DCC has ramped up efforts around licensing, we have anecdotally noticed a slowdown in the processing of other important items like business modifications and science amendments (required for cultivation licenses),” said Conrad Gregory, senior director of compliance and corporate affairs at Oakland-based StateHouse Holdings, formerly known as Harborside.

“These slowdowns can have an impact on overall operations, like planned operational changes, but we hope it is short-lived while the DCC focuses on licensing,” Gregory said.

Chula Vista-based vape cartridge maker Helmand Valley Growers Co. is still operating under a provisional license and hopes to have its annual license approved in the next month or so, according to CEO Bryan Buckley.

The company completed paperwork for its annual license about five months ago.

“Overall,” Buckley said, “it seems that things with the DCC have become more streamlined … and things are moving more efficiently than before.”

Chris Casacchia can be reached at ccasacchia@hotmail.com.