Cannabiz Law Blog

On Sept. 12, 2017, the Michigan Medical Marihuana Licensing Board held a meeting at which its members discussed the current state of proposed rules for the Medical Marihuana Facility Licensing Act (MMFLA) and took public comment.

The meeting lasted several hours and the board discussed and took comment on a variety of subjects related to the facilitation of the MMFLA. We shall focus on three issues: (1) the likely promulgation of “emergency” rules: (2) in what manner regulatory authorities may treat facilities currently existing under the Michigan Medical Marihuana Act (MMMA) for the purposes of licenses under the MMFLA; and (3) proposed fee structures.

Emergency Rules

The MMFLA requires that rules be in place by Dec. 15, 2017. The Administrative Procedures Act (APA) governs the promulgation of rules by state agencies. Ordinarily, rules are drafted, public notice is provided, the relevant department develops a regulatory impact statement, a public comment period ensues, a synopsis of comments received is prepared and the rules are then promulgated with or without changes in response to public comments received. This process takes time to complete.

Anyone who has been following the development of rules under the MMFLA could have anticipated that the Department of Licensing and Regulatory Affairs (LARA) would fail to meet the Dec. 15 deadline. Therefore, LARA informed the board that it would need to issue emergency rules.

Under the APA, a department may issue emergency rules under specific circumstances. The board will need to make a finding that “preservation of the public health, safety, or welfare requires promulgation of an emergency rule without following the notice and participation procedures . . . “ Further, the governor needs to concur with  that conclusion. If approved, the emergency rule remains in effect for no longer than six months (or a shorter time if stated in the emergency rule) but can be extended only once for an additional six months.

If the board and governor agree that an emergency rule is justified, then the longest these emergency rules will be in effect is one year. That means that LARA and the board will still need to develop permanent rules during the time the emergency rules are in affect. Also, the emergency rules will not be based on public notice and comment, but only what LARA and the board think are appropriate, opening the door for confusion and possibly significant opposition due to the lack of public input.

Existing Facilities

On Aug. 21, 2017, the board conducted a meeting in Lansing. At that meeting, board member and retired State of Michigan Trooper, Donald Bailey, moved that any medical cannabis dispensary that wanted to apply for a license under the MMFLA must stop operations by Sept. 15, 2017. As we noted, Mr. Bailey’s proposal stood on very shaky legal grounds, and his motion was tabled.

The board revisited Mr. Bailey’s motion at its Sept. 12 meeting. An alternative proposal was made that the dispensaries could remain open until Dec. 15, 2017 so that patients relying on dispensaries could find alternative, legal sources of medical cannabis and allow the dispensaries to wind down their operations in an orderly fashion. Mr. Bailey continued to insist that Sept. 15 remain the cutoff date, suggesting that if he was reviewing an application of a facility that remained in operation after that date, he would look unfavorably on that application.

The justifications cited for closing dispensaries sooner rather than later were essentially the following: (1) these dispensaries have always operated outside the law and (2) there was evidence that they provided product to the “black market” and out-of-state users. The Assistant Attorney General made it clear to the board that it could not promulgate policies based on its own procedural vote. It would need to establish rules following the APA.

Fees

Those applying for licenses can expect nonrefundable license fees of $4,000 to $8,000 at the state level. Remember that local communities will likely also require application fees. In addition to application fees, there will be annual regulatory assessments to offset costs of governmental cannabis-related services and the required $500,000 licensing substance abuse program and other agencies’ costs related to the MMFLA. The statute caps grower “Class A” license (up to 500 plants) annual regulatory assessments to $10,000. Other licenses could be from $10,000 to $57,000. There will also be fees to conduct the required background checks.

Conclusion

What we can expect to happen is the following:

• Emergency regulations will be promulgated.

• The board will expect that currently operating dispensaries will cease operations on or before Dec. 15 or risk being barred from acquiring licenses.

• Applications and fees will start being accepted on Dec. 15, 2017.

• The applications will be submitted to the board for approval or denial, per the emergency rules.

• Approvals will be issued by the end of March or early April.

• Given that it takes time for a crop to be ready and processed, actual availability of medical cannabis under the MMFLA will not occur for several months after that.

• Current medical cannabis card holders will need to scramble to find alternative sources in the time between the closure of dispensaries and the availability of medical cannabis under the MMFLA.

It is important to note, however, that the MMMA is still good law and the MMFLA did not specifically preempt it. Therefore, caregivers may be available to provide medical cannabis to patients, although the amount of available cannabis may not meet demand.

Many of the comments during the Sept. 12 meeting focused on what existing patients should do, and it is possible that the current anticipated process may change as a result of those public comments. The next meeting of the board is at 1:30 p.m. on Oct. 17 at the Kellogg Hotel and Conference Center in East Lansing where this issue may be revisited.