Lawmakers object to proposed marijuana rules; will meet again on Dec. 13

Industry workers raise concerns about licensing fees, moratoriums

By: - December 9, 2021 5:52 pm

A worker touches plants at a cannabis greenhouse at the growing facility of the Tikun Olam company on March 7, 2011 near the northern city of Safed, Israel. In conjunction with Israel’s Health Ministry, Tikon Olam are currently distributing cannabis for medicinal purposes to over 1800 people in Israel. (Photo by Uriel Sinai/Getty Images)

The Economic Affairs Interim Committee unanimously voted on Thursday to stall the rulemaking process for implementing the state’s new recreational marijuana program, with lawmakers asserting that some of the Department of Revenue’s interpretations of House Bill 701, a law passed this session regulating recreational marijuana, stray too far from its legislative intent.

As the January 1 implementation deadline for the program inches closer, the committee postponed all decisions on the new rules proposal until its next meeting on Monday, Dec. 13. Until then, Sen. Jason Ellsworth, R-Hamilton, and Sen. Shane Morigeau, D-Missoula, will work with DOR to clarify and amend the rules to more closely match legislative intent.

“I would say that trying to pass a comprehensive rules package that is on a key piece of legislation that affects everyone in Montana is a very difficult task. We have to be precise, in our wording, phrasing and it’s very important to get that accurate. We only get one opportunity at this, and we need to make sure that we get it right,” Ellsworth said.

During Thursday’s meeting, lawmakers and members of the public weighed in on equity among tribes in the implementation process, how licensing fees should be handled, warning labels on marijuana packaging and who should benefit from a moratorium on new licenses.

The Hamilton legislator was specifically concerned about the language surrounding Native American tribes’ ability to expand their marijuana grow operations under their automatic combined-use licenses and whether dispensaries or the DOR should be tasked with coming up with training standards for industry employees.

Ellsworth also opposed a rule change that would allow for “cannabis” to be used on warning labels as a substitute for “marijuana.”

“Children don’t understand what cannabis is, but they understand what marijuana is. So if we are going to label something with a warning to make sure children heed that warning, we need to be concise,” he said.

Morigeau said with a program this extensive, the committee needs to ensure they are doing everything they can to implement it effectively.

“We’re pushing out a lot of rules and a lot of processes for an industry that has often been under a lot of scrutiny, so we are just trying to make sure we are doing our best to satisfy everybody’s concerns,” he said.

Along with combined-use licenses, Morigeau said he wants to examine licensing fees and a potential moratorium on new marijuana testing laboratories, two topics heavily discussed during public comment.

To align with legislative intent, both Morigeau and Ellsworth said the DOR’s interpretation of combined-use licenses should have made it clear that the tribes can expand their marijuana cultivation beyond tier one, the lowest tier. The licenses allow Montana’s tribes to cultivate marijuana and open a dispensary on the same property. The DOR may issue eight combined-use licenses, one for each tribe.

“Our intent was that the combined-use licenses were the [entry point] and an opportunity for those tribes to tier up equally and fairly just like everyone else,” Morigeau said.

During public comment, industry professionals debated whether there should be a moratorium on applications to open marijuana laboratory testing facilities, like for dispensaries. The 18-month moratorium is meant to give Montana dispensaries a head start on out-of-state competition, something dispensaries and other industry businesses advocated for to make sure they were not pushed out of the market.

Dispensary owners said more labs in the state are necessary with the expected increased production that comes with recreational legalization to avoid a bottleneck in services.

But Nathan Kosted, who works at a marijuana testing laboratory in Stillwater, said labs can process up to 30 tons of marijuana per month and can handle any supply increases. And he said the labs should be the beneficiary of a moratorium just like other businesses in the industry.

“People are not excluding labs on purpose. They rarely if ever think about us … for the last four years of legal medical sales in Montana, we are always forgotten,” he said.

Morigeau agreed. “I still think they dumped a lot of money into the industry like everyone else, and that they should be included in the moratorium. I think everyone is going to be getting hammered with increased demand,” he said.

Barbie Turner said in the past, she would pay fees for her dispensary license and her manufacturing license at different times in the year, but now she said they are all due on January 13.

“So instead of having, you know, roughly $25,000 due now and $15,000 due later in the year, we are looking at about $40,000 to $50,000 in licensing straight out of the gate,” she said. “This could prove detrimental for many other businesses, especially a smaller business, in this industry.”

Ellsworth said he wasn’t aware of the issue until public comment on Thursday and that he would look into the licensing structure and work with DOR to make sure it’s structured in a way that protects smaller businesses.

“It’s a new issue that I’m being made cognizant of, but in 701, it does allow the department to stagger licenses … so I think potentially, there could be a solution there,” he said.

In mid-November after pushback from legislators and legalization advocates, DOR announced changes in two high-profile rules. One rule allows for the sale of certain CBD products in dispensaries and another removes language that would have restricted employment opportunities for those with any previous criminal conviction in the past three years or any marijuana law violation in any jurisdiction at any time in the past.

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Keith Schubert
Keith Schubert

Keith Schubert was born and raised in Wisconsin and graduated from the University of Minnesota in 2019. He has worked at the St.Paul Pioneer Press, Milwaukee Journal Sentinel and most recently, the Asbury Park Press, covering everything from local craft fairs to crime and courts to municipal government to the Minnesota state legislature. In his free time, he enjoys cheering on Wisconsin sports teams and exploring small businesses. Keith is no longer a reporter with the Daily Montanan.