Week in Review: Massachusetts rec logjam, Pennsylvania MMJ grower licensees & Oregon testing woes

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By Omar Sacirbey, Bart Schaneman and John Schroyer

Massachusetts lawmakers propose an overhaul to a voter-approved measure to legalize recreational cannabis, Pennsylvania awards 12 medical marijuana cultivation licenses, and Oregon continues to have MJ testing issues.

Here’s a closer look at some notable developments in the marijuana industry over the past week.

Massachusetts bill wrangling

Massachusetts state senators and their counterparts in the House passed very different adult-use marijuana bills and now need to bridge their differences to forge a common measure that Gov. Charlie Baker must sign by July 1 for it to become law.

If lawmakers fail to send a bill to Baker’s desk, Massachusetts law mandates the adult-use initiative voters passed will take effect.

That would certainly seem to be an outcome of poetic justice after House lawmakers passed a bill late Wednesday that would essentially repeal the voters’ referendum and replace it with their own proposal. The Senate followed up by passing its own bill Thursday, essentially “setting the stage for negotiations” over a final bill, according to the Associated Press.

Rec cannabis advocates said they could live with some changes to the law that passed in November, but the House bill looked almost nothing like the voter-backed measure.

“The House bill is highly problematic. Let’s begin with the fact that it blatantly violates the will of the people,” said Kris Krane, managing partner at 4Front Ventures, a cannabis consulting firm in Boston.

The most onerous provisions in the House Bill:

  • Raising the tax rate from 12% to 28%.
  • Allowing municipal officials to decide whether to ban or limit marijuana businesses. Under the voter-backed measure, towns and cities could ban marijuana businesses only by putting it on the local ballot.
  •  Mandating that marijuana business owners and employees be fingerprinted.

The Senate bill is more in line with the voters’ wishes, advocates said, because it maintains the voter-approved 12% tax rate, for example.

Which bill will prevail?

Senators have the leverage because, unlike the House’s proposal, their legislation more closely parallels the one voters already passed.

If the House pushes for changes the Senate can’t tolerate, the senators can easily walk away because they can live with the original measure, which would become law without a legislative compromise. House members don’t want the voter-approved measure to become law, so they’ll try to get as much as they can without pushing the senators away from the negotiating table, according to MJ advocates.

Out-of-state licensees

Pennsylvania’s decision to not include strict residency requirements for prospective medical marijuana cultivators led to an influx of applications from states with up-and-running cannabis industries.

So regulators essentially got their wish when at least four of the 12 companies granted cultivation licenses Tuesday could be considered out-of-staters.

“We anticipated that Pennsylvania would do that because they wanted to have people from out of state who have proven that they have done it in other states,” said Judith Cassel, a Harrisburg, Pennsylvania-based, cannabis attorney.

The out-of-state entities will be expected to lead the way with their experience, she added, and give the home-grown Pennsylvania companies and entrepreneurs an opportunity to learn from them.

Cassel also believes a big difference between the winners and losers in the scoring were the Diversity and Community Impact sections of the application.

Interestingly, Pennsylvania’s largest city, Philadelphia, didn’t receive a cultivation permit. When Cassel’s firm tried to help applicants site their operations there, she said, it wasn’t easy to find acceptable locations.

“It was really tough to find real estate within the city limits that would qualify” with stipulations like a 1,000-foot buffer from schools or day-care centers, she said.

Cassel expects the state Department of Health to issue the remaining 13 cultivator/processor permits sooner than later, likely in the first quarter of 2018.

Oregon pesticide problem persists

Pesticide use by marijuana growers and inconsistent lab testing methods continue to plague the marijuana industry.

That point was driven home again this week in Oregon, where The Oregonian newspaper found that pesticide-tainted cannabis was still making its way onto retail shelves despite strict testing standards.

While there are plenty of factors surrounding the issue, the takeaway for cannabis businesses is they still must expect the unexpected and budget for it, said Sam Chapman, co-founder of Portland, Oregon-based New Economy Consulting.

“The pesticide and testing issue has haunted a good percentage of businesses today that can no longer afford to participate as a result of the current state of testing regulations being overly burdensome,” Chapman said.

“There’s a decent portion of the market that saw this going on coming into the industry and have set aside capital for (the unforeseen), and a good portion of (the unanticipated) is within the testing and regulatory side of things. And there are people who didn’t prepare for that.”

While the industry at large continues to grapple with uncertainty and a lack of standards – whether it’s growing, pesticide use or testing – companies must set aside a rainy-day fund so they can pivot quickly to deal with such problems.

“It comes back to experience and operator sophistication and understanding that if you’re in the cannabis industry, your business is politics, and regulations are extremely fluid right now,” Chapman said. “And if you’re not paying attention to those things, you can get caught flat-footed really quickly.

“So anyone who’s coming into the industry thinking they have it all figured out is probably one of the first to learn a lesson the hard way, whether it’s getting your product pulled off a shelf or popping hot for a pesticide test by The Oregonian.”

Omar Sacirbey can be reached at omars@mjbizdaily.com

Bart Schaneman can be reached at barts@mjbizdaily.com

John Schroyer can be reached at johns@mjbizdaily.com