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Sunday, 01 October 2017 17:00

Municipalities prepare for — or opt out of — state’s medical marijuana business boom

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Municipalities prepare for — or opt out of — state’s medical marijuana business boom Courtesy Photo

With more than 200,000 medical marijuana patients in Michigan, a thriving industry of growers, processors, transporters and retailers to support them is poised to explode statewide — if communities allow it.

In recent weeks, state regulators have been meeting to craft initial rules under the Medical Marihuana Facilities Licensing Act of 2016, which provides the type of regulatory framework that’s been lacking since voters approved medical marijuana in 2008. Notably, it allows local units of government to opt in to the law, giving them broad discretion about how many and which type of facilities to allow.

According to the law firm Howard & Howard Attorneys PLLC in Royal Oak, at least 10 cities, townships or villages have adopted ordinances that will allow a certain number of facilities to grow, process, test or sell medical marijuana. These include the cities of Lansing and Marshall, as well as Crockery Township in Ottawa County. At least another 24 are officially planning or are likely to opt in, including Kalamazoo, according to the law firm.

Meanwhile, cities like Norton Shores in Muskegon County have officially opted out of allowing facilities.

Alex Leonowicz, who heads Howard & Howard’s cannabis industry practice group, said communities’ approach to regulating these facilities “runs the gamut” for limiting the number that can operate and for how closely local officials want to oversee applicants

“It’s fascinating to see how some municipalities are instituting these ordinances,” Leonowicz told MiBiz.

Lansing’s ordinance, for example, is 37 pages and goes in-depth about issues like ownership plans and proof of insurance, he said. Hazel Park, by contrast, has a nine-page ordinance that allows up to three of each type of facility, although it still goes into detail about how facilities must be run.

“You’re seeing municipalities taking an extra step or vetting the applications themselves (before the state does), which I think is fascinating because it’s not required under the law, but it makes sense,” Leonowicz said. “I think (the application process) is going to be more intense at the municipal level than people think.”

Howard & Howard launched the cannabis industry practice group about four months ago to help businesses through the application process. The state Department of Licensing and Regulatory Affairs (LARA) will begin accepting applications for the five types of facilities — growing, processing, transporting, provisioning center and safety compliance — on Dec. 15.

Meanwhile, the department’s Bureau of Medical Marihuana Regulation is helping craft rules that will delve further into the details of what’s required of businesses. The first set of rules is expected to be completed in November, while the first licenses may be issued by late March 2018.

“They’re going to fill in the gaps and give us a better idea of what the state is going to require for applicants to receive a license,” Leonowicz said.

However, this interim period has caused some confusion and backlash — particularly among patients — as the state has said existing dispensaries risk not being able apply for a license if they continue operating before Dec. 15.

The state has advised patients to grow their own plants or acquire cannabis from their registered caregivers as allowed under the law.

RULES COMING

LARA spokesperson David Harns said a set of emergency rules will be issued before the Dec. 15 application date. For applications to be accepted, the local municipality for the business must have approved an opt-in ordinance. If an ordinance is not in place, the state law prohibits any facilities from operating, Harns said.

The Medical Marihuana Licensing Board has held meetings across the state in recent weeks to take input on the proposed rules. The Bureau of Medical Marihuana Regulation consults with the licensing board on what will be in the emergency rules and the final rules.

Ultimately, the rules will address the “safety, security and integrity of marijuana facilities,” Harns said. As such, they will outline levels of insurance, qualifications, restrictions, procedures and penalties.

The state will also be responsible for inspecting facilities, Harns added.

One of the first rules to emerge was LARA’s announcement in September that it would allow for the co-location of growers, processors and provisioning centers “in order to balance protections for consumers and the general public with the need for businesses to operate efficiently.”

James Barr, managing partner at Wring Biopharma LLC, is among the prospective applicants waiting for Dec. 15. Wring is looking to open a commercial growing operation at an industrial park in the city of Newaygo, which would also process the medical marijuana on-site under a separate license. (See story on page 12.)

On a 4-3 vote in July, Newaygo officials approved moving forward with plans to regulate Wring’s growing and processing facility. Barr said his company was helped through the process and in finding a site by the Newaygo County Economic Development Office (NCEDO) and its partners at The Right Place Inc., a Grand Rapids-based economic development group that contracts its services to the county.

A spokesperson at The Right Place declined to comment for this story.

The local economic development office is “progressive when it comes to diversifying the local economy,” Barr said. “They’re pushing for and supporting this project.”

According to a report in Near North Now, a local online news site covering the greater Newaygo County area, Scott Faulkner, the chairman of the economic development office, backed up Barr’s claim when officials passed the ordinance, although he asserted it was a “hot potato” issue that has generated controversy.

“Much of the outrage comes from a stereotype of Cheech and Chong peddling joints out of the back of their van. This is not what that is,” Faulkner told Near North Now. “This is the manufacture of a legal product that people have legal access to and at this point there is no discussion of a dispensary in our city.”

At this point, Barr said he is awaiting further details on the state’s rules, such as liquidity requirements, although he doesn’t expect any major blows to the business model his company has developed thus far.

“The fact that Michigan has other states to analyze, I expect them to have a smooth roll out of the program,” Barr said.

THE ‘DARK HORSE’

With offices in states like Illinois, Nevada and California that also have medical marijuana laws, Howard & Howard has “worked in this space for a number of years,” Leonowicz said.

The most popular license for potential applicants appears to be the growing facilities, he said. Under the law, companies can seek three classes of growers licenses, which are based on up to 500, 1,000 or 1,500 plants.

While the regulation of provisioning centers, or dispensaries, has garnered much of the attention until now — particularly because of the tax revenue that will be generated from their sales — a network of large-scale grow operations, facilities that process the flowers, testing labs and secure transportation companies also will need to apply for licenses statewide.

Together with the potential market for legal recreational use, Leonowicz noted Michigan has around 218,000 patient cardholders in the state. That’s second only to California and more than Colorado and Illinois combined, according to figures from the Marijuana Policy Project.

The potential businesses in Michigan are “then entering into arguably one of the largest adult-use markets in the U.S.,” Leonowicz said. “I look at Michigan like the dark horse: For some reason people are not paying attention or it’s being overlooked, but the state is going to be a heavyweight on medical cannabis.”

As communities weigh their options for regulating facilities, Leonowicz said they should also consider the number of jobs that are coming with the industry, as well as the ancillary work in areas like insurance, heating and ventilation, legal and accounting.

“Because of the high number of cardholders in the state, because of local regulations that don’t have to limit the number of licenses, it’s going to be a very, very large industry,” he said.

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