April 18, 2017

Many clients ask if they can skip local permitting or licensing for their cannabis business, following the passage of Proposition 64, the Adult Use of Marijuana Act, and more recently, Governor Jerry Brown’s trailer bill language. The answer remains no, clients cannot skip local regulation and licensing – not now, or in the future.

Local Licensing Required under MCRSA

When the California Legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA) back in 2015, the MCRSA left in place local control for commercial medical cannabis businesses: it explicitly required medical cannabis businesses to have a local permit, license, or other authorization for their medical cannabis business before businesses could ever submit a state application in the future.

Local Licensing under Proposition 64, the Adult Use of Marijuana Act

Though the MCRSA was explicit about local licensing being a requirement for a state application, Proposition 64, the Adult Use of Marijuana Act (AUMA) was silent whether a local permit was required to submit a state application. But, Proposition 64 was explicit that local governments retain the ability to ban, or not allow, commercial adult-use cannabis businesses. Clients have often asked if they can leapfrog the local government, submit a state application for an adult-use cannabis business, and then seek to locate it somewhere or skip local permitting. While the state has not explicitly answered this question yet, logic dictates that the answer is no, given the language in the MCRSA and California’s preference for letting local governments control land use decisions. Most likely when the state begins accepting applications for both medical and adult-use cannabis, they will require an applicant to have a completed or in-process application with a local government. The state will also likely require applicants to identify a specific location that complies with the regulations of the local jurisdiction where the business seeks to operate.

Lastly, even if California were to accept and process an application at the state level without an affiliated, permitted or likely-to-be permitted local location, businesses would be foolish to go down such a path. Such businesses would run the risk of never finding a permitted local location at which they could operate. In that scenario, all money and effort for state licensing would be wasted, the businesses would fall behind competing ones that had local locations and permits, along with state licensing, and investors would not deem such businesses good risks, compared to locally licensed facilities.

Local Licensing under the Brown Trailer Budget Bill

Over the past two weeks since Governor Jerry Brown released a proposal to reconcile differences between the AUMA and the MCRSA in a trailer bill, clients have again wondered if they can leapfrog local regulation. The confusion is understandable: Brown’s language mentions that people can seek a state permit after performing an environmental impact report (EIR) if they seek to locate in a local jurisdiction allows cannabis uses but is not issuing permits or licenses. Media coverage that has misstated or oversimplified this section of the trailer bill has heightened confusion.

To be clear, the Brown language is a proposal; it is not a final law, rule, or regulation. The California Legislature will be considering all of Brown’s proposal and will likely incorporate parts, but not all, of the proposal in a bill to reconcile conflicts between the MCRSA and the AUMA. Beyond that, the Brown language about EIRs does not allow applicants to skip considering local approval or regulation, or open the door for businesses to open wherever they want, including hostile municipalities. To understand why, one must breakdown the Brown language carefully. To begin, this unusual path to state licensure only applies to those businesses that seek to locate in a jurisdiction that has decided to allow cannabis businesses, but for some strange reason does not issue licenses or permits. The author is not aware of any jurisdiction that has taken the trouble to pass laws allowing cannabis businesses, but then perversely does not issue licenses, permits, or other authorizations. But, if such a scenario ever arose, a business falling under that scenario would be the only one that could seek a state permit after performing an EIR, under Brown’s proposal.

This is a highly unlikely scenario. Virtually all jurisdictions in California ban cannabis uses of land, either explicitly or by not allowing them under the principles of permissive zoning, or they allow or are considering allowing cannabis uses in their local jurisdictions through local zoning, permitting, and licensing. If a local government is issuing licenses or permits for cannabis uses, applicants must comply with that process to operate in that local jurisdiction.

In sum, no law, regulation, or language currently exists or is proposed for California that allows businesses to skip local approval or allowance, be it for medical or adult-use cannabis.

Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.

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