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Michigan Senate Passes Medical Marihuana Regulatory and Infused Products Bills

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Michigan Senate Passes Medical Marihuana Regulatory and Infused Products Bills

Today, the Michigan Senate approved a substitute to HB 4209 of 2015, which creates the Medical Marihuana Facilities Licensing Act, by a vote of 25-12. The bill is similar to the version that was overwhelmingly passed by House lawmakers in October, but does contain a number of substantive changes. HB 4209 now returns to the House for a concurrence vote, and should be headed to Governor Snyder’s desk shortly.

As we discussed previously, this legislation has been a long time in the making. Now, after numerous iterations and nearly five years of work, the legislation should finally become law.

Legislative Summary

Board

Recognizing that marihuana is an evolving industry and that administrative rulemaking is far more responsive and efficient than enacting legislation, HB 4209 creates the Medical Marihuana Licensing Board (the “Board”) within the Department of Licensing and Regulatory Affairs (“LARA”), and gives it broad authority to regulate the activity and operation of medical marihuana facilities within the State.

The Board will be comprised of five members appointed by the Governor, with one member coming from a list of three nominees provided by the House Speaker and one from a list of three nominees suggested by the Senate Majority Leader. Members may not have a direct or indirect financial interest in a marihuana facility or applicant, must be of good moral character, and may not have been convicted of any felony or a misdemeanor involving a controlled substance, dishonesty, theft, or fraud. Additionally, no more than three of the members may come from the same political party.

Each Board member will serve for a term of four years. For initial appointments, however, one member will serve a term of two years, and two members will serve three-year terms in order to stagger future turnover. The Board, in conjunction with LARA, may also hire staff as needed, including a full-time executive director.

Duties

The primary duties of the Board are implementing and administering the Medical Marihuana Facilities Licensing Act, making licensing determinations, overseeing the activities of licensed medical marihuana facilities, and working with LARA to promulgate administrative rules relating to the operation, health, and safety of marihuana facilities. It should be noted that the bill specifically provides that LARA, in consultation with the Board, cannot promulgate a rule capping the number of marihuana facilities in the State.

Licenses

The bill will become effective 90 days after it is enacted into law. Three-hundred and sixty days later, individuals and businesses will be able to begin applying to the Board for licenses as growers, processors, provisioning centers, secure transporters, and safety compliance facilities.

When applying for any license, applicants must provide the Board with general identifying information, including information on every person who has an ownership interest in the applicant, as well as criminal, licensing, and financial background information

As part of the application, the applicant must also notify the municipality in which it would operate that it is seeking a license. Local control is a key feature of the legislation, and marihuana facilities may not operate unless the municipality in which they wish to locate has adopted an ordinance specifically authorizing the type of facility. Thus, municipalities may limit both the number and type of marihuana facilities allowed within their borders. Those cities, villages, and townships may also pass their own regulations relating to marihuana facilities, including zoning ordinances, but may not contradict state regulation. Once it receives notice from an applicant, a municipality has 90 days to submit the following information to the Board: (1) the ordinance authorizing the marihuana facility; (2) a copy of any applicable zoning regulations; and (3) a description of any marihuana-related ordinance violations committed by the applicant. Municipalities may also require an annual licensing fee of up to $5,000.

Certain individuals are ineligible for a license under the legislation, including individuals convicted of or released from incarceration for a felony within the past 10 years, individuals convicted of a controlled substance-related felony within the past 10 years, and individuals convicted of a misdemeanor relating to a controlled substance violation, theft, dishonesty or fraud within the past five years. Additionally, until June 30, 2018, individual applicants must have been a resident of the State for the immediately preceding two years in order to be eligible for a license. Also, before a license can be granted or renewed, an applicant or licensee must demonstrate that they can cover at least $100,000 worth of liability for bodily injury to lawful users resulting from the manufacture, distribution, transportation, or sale of adulterated marihuana or marihuana-infused products.

In reviewing applications, the Board must conduct a thorough background investigation on all applicants. The Board may consider factors such as an applicant’s integrity, character, and reputation; financial ability and business experience; total amount of capitalization; and criminal, licensing, financial, and legal background. Once issued, licenses are valid for one year and renewable annually, and may not be sold, transferred, or purchased without the approval of the Board.

The bill creates five new types of licenses:

Grower

A grower is defined as an entity that cultivates, dries, trims, or cures and packages marihuana. The bill creates three separate classes of grower licenses, each authorizing the facility to cultivate a defined number of plants: 

  • Class A: Up to 500 Plants
  • Class B: Up to 1,000 Plants
  • Class C: Up to 1,500 Plants

The bill now defines the term “plant” to include “any living organism that produces its own food through photosynthesis and has observable root formation or is in growth material.” This is similar to the definition of the term that the Court of Appeals recently applied to the MMMA in People v Ventura, but adds the phrase “or is in growth material,” likely meaning that “clones” will be considered plants.

Growers may only sell marihuana seeds or marihuana plants to other growers, and other forms of marihuana may only be sold to a processor or provisioning center. Growers and their investors may not have an interest in a secure transporter or safety compliance facility. Until December 31, 2021, each grower must employ an individual who has at least two years’ experience as a registered primary caregiver. However, no grower or employee of a grower may be a licensed caregiver at the time that he or she is licensed as, or employed by, a grower. Moreover, a grower may only operate in an area that is either not zoned or zoned for agricultural or industrial use.

Processor

A processor is an entity that extracts resin from marihuana or creates and packages marihuana-infused products. A processor license authorizes an entity to purchase marihuana from a grower and to sell processed marihuana or marihuana-infused products to provisioning centers. Processors and their investors may not have any interest in a secure transporter or safety compliance facility. Until December 31, 2021, each processor must employ someone who has at least two years’ experience as a registered primary caregiver. However, no processor or employee of a processor may be a licensed caregiver at the time he or she is licensed as or employed by a processor.

Secure Transporter

A secure transporter license authorizes the licensee to store and transport marihuana and money associated with the purchase and sale of marihuana between facilities. All marihuana that is transported between facilities must be shipped by a secure transporter. The secure transporter cannot transport marihuana for a sale to a patient or a primary caregiver. In order to be eligible for a secure transporter license, an applicant and its investors cannot have an interest in any other medical marihuana facility, and may not be a registered patient or caregiver.

Secure transporters must comply with all of the following requirements:

  • All drivers must have chauffeur’s licenses issued by the StateNo employee can have been convicted of or released from incarceration for a felony within the past five years, or have been convicted of a controlled substance-related misdemeanor within the same time period
  • Each vehicle used by the secure transporter must be operated by a two-person crew, with at least one individual remaining with the vehicle at all times when transporting marihuana
  • For every trip involving the transport of marihuana, a route plan and manifest must be entered into the statewide monitoring system, and a copy must be kept inside the vehicle at all times and made available to law enforcement upon request
  • All marihuana must be kept in one or more sealed containers that are not accessible during transit
  • All vehicles used to transport marihuana must not have any markings that would indicate that the vehicle is carrying marihuana
Provisioning Center

A provisioning center is an entity that sells or provides marihuana to patients and caregivers. A provisioning center may receive marihuana only from a grower or processor, and may only transfer marihuana to a qualifying patient, registered primary caregiver, or safety compliance facility. Applicants and provisioning center investors may not have an interest in either a secure transporter or safety compliance facility.

Provisioning centers must comply with all of the following:

  • Make sales to patients only after the marihuana has been tested and labeledEnter all transactions, inventory, and other required information into the statewide monitoring system
  • Check that all patients sold to are listed as valid cardholders in the statewide monitoring system and will not exceed any daily purchasing limits set through rulemaking
  • Not sell alcohol or tobacco, or allow the consumption thereof on the premises
  • Not allow a physician to conduct medical examinations on the premises for the purpose helping individuals to obtain a registry identification card
Safety Compliance Facility

A safety compliance facility is a laboratory that tests marihuana for contaminants, as well as for THC and other cannabinoids. For testing purposes, a safety compliance facility may receive marihuana from any marihuana facility or up to 2.5 ounces from a primary caregiver. However, a safety compliance facility may only return marihuana to a marihuana facility, not to a primary caregiver. Within one year of receiving a license, a safety compliance facility must be accredited by an entity approved by the Board, or have previously provided drug testing services to the State or the State’s court system and be a vendor in good standing in regard to providing such services. Additionally, safety compliance facility license applicants and investors may not have interests in any other medical marihuana facility. Safety compliance facilities must also have at least one employee with an advanced medical or laboratory science degree.

Safety compliance facilities must comply with all of the following:

  • Perform tests to certify that marihuana is reasonably free from chemical residues
  • Use validated test methods to determine THC and other cannabinoid levels
  • Perform tests to determine whether marihuana complies with microbial and mycotoxin content standards established by LARA
  • Perform other tests as prescribed by rulemaking
  • Hold a second laboratory space that is inaccessible to the general public

Statewide Monitoring System

HB 4827, which is tie-barred to HB 4209, creates the Marihuana Tracking Act and was also passed by the Senate today by a vote of 27-10. That act requires LARA to establish, maintain, and utilize (either directly or through contract) a “seed-to-sale” tracking system that will track all marihuana that is grown, processed, transferred, stored, or disposed of under the Medical Marihuana Facilities Licensing Act (marihuana grown by caregivers will not be within the seed-to-sale system.) HB 4209 requires all licensees to use a third-party inventory control and tracking system that will allow them to interface with the statewide monitoring system in order to enter and access information.

Taxes, Fees, and Funds

The bill establishes a 3 percent tax on the gross retail receipts of all provisioning centers. This revenue will be deposited into the Medical Marihuana Excise Fund and distributed as follows:

  • 25 percent to municipalities in which facilities are located, allocated in proportion to the number of facilities within the municipality
  • 30 percent to counties in which facilities are located, allocated in proportion to the number of facilities within the county
  • 5 percent to counties in which facilities are located, allocated in proportion to the number of facilities within the county, and earmarked specifically for the county sheriff
  • 30 percent to the State. Until September 30, 2018, this money will be deposited in the General Fund, and thereafter, the money will be deposited into the State’s First Responder Presumed Coverage Fund, which is used to provide funding for firefighters who develop certain types of cancer.
  • 5 percent to the Michigan Commission on Law Enforcement Standards
  • 5 percent to the Michigan State Police

The bill also creates a regulatory assessment to be imposed upon all licensees except safety compliance facilities. The assessment will be calculated annually to cover the costs of medical marihuana-related services provided by various State departments, to provide funds for substance abuse-related programs, to cover expenses related to field sobriety tests, and to provide for the administrative costs of the Michigan Commission on Law Enforcement Standards. Each applicable facility will then pay a proportionate amount of the assessment, which will go into the newly-created Marihuana Regulatory Fund.

HB 4210 provides a one-time appropriation of $8.5M from the State’s existing Michigan Medical Marihuana Fund (to be renamed the Marihuana Registry Fund) in order to fund the initial implementation of the Medical Marihuana Facilities Licensing Act, as well as subsequent administrative and enforcement expenses. The money in this fund is from licensing fees paid by patients and caregivers, and, according to LARA, the fund has a current balance of approximately $30 million, with roughly $9 million per year coming into the fund.

Protections

The bill provides immunity in a number of areas in which licensees, patients, and caregivers will find themselves involved. Licensees acting within the scope of their license and applicable rules, as well as their agents, are not subject to criminal penalties under state laws or local ordinances regulating marihuana, state or local criminal or civil prosecution for marihuana-related offenses, search or inspection except as authorized by the Medical Marihuana Facilities Licensing Act, seizure of marihuana or property based upon a marihuana-related offense, or any sanction by a business or professional licensing board based upon a marihuana-related offense. Moreover, property owners are protected from the same actions for owning, leasing, or permitting the operation of a marihuana facility on their real property, as long as they are not aware that a licensee is violating the Medical Marihuana Facilities Licensing Act. Additionally, patients and caregivers are not subject to criminal prosecution or sanction for purchasing marihuana from a provisioning center if the amount is within the limits established by the MMMA.

The bill also specifies that provisions of certain acts regulating commercial entities, including the Business Corporation Act, the Nonprofit Corporation Act, the Uniform Partnership Act, and the Michigan Limited Liability Company Act, do not apply to marihuana facilities when such provisions conflict with the Medical Marihuana Facilities Licensing Act.

Other Legislation

HB 4209 was tie-barred to a number of other pieces of legislation, including HB 4827, discussed above. Most importantly, however, the Senate also passed a substitute for HB 4210 by a vote of 28-9, amending the MMMA to allow for the possession, manufacture, and use of marihuana-infused products, such as foodstuffs, oils, lotions, etc., thereby addressing the Michigan Court of Appeals’ 2013 decision in People v Carruthers. Under the bill, a patient or his or her caregiver will be able to possess up to 2.5 ounces of combined usable marihuana and “usable marihuana equivalent,” which is the amount of usable marihuana in a marihuana-infused product. HB 4210 sets the following as equivalent to one ounce of usable marihuana:

  • 16 ounces of marihuana-infused product in a solid form
  • 7 grams of marihuana-infused product in a gaseous form
  • 36 fluid ounces of marihuana-infused product in a liquid form

The bill also establishes a rebuttable presumption that any weight listed on the packaging of a marihuana-infused product is accurate. Thus, under the bill, a patient will be able to possess, for example, 16 ounces of marihuana-infused brownies or marihuana-infused water and an additional 1.5 ounces of usable marihuana.

HB 4210 provides protections for patients and caregivers who manufacture or possess marihuana-infused products consistent with the language in the bill. Moreover, HB 4210 protects patients and caregivers from arrest, prosecution, or penalty for purchasing marihuana from a provisioning center, selling marihuana seeds or seedlings to a licensed grower, or transporting marihuana to and from a safety compliance facility for testing.

The bill also prohibits a patient or caregiver from transporting a marihuana-infused product in a motor vehicle, unless one of the following circumstances is met:

  • A patient is transporting a marihuana-infused product in a package that is sealed and labeled with the weight of the product, name of the manufacturer and person from whom the product was received, and date of manufacture and receipt. The marihuana-infused product must also be transported in the trunk of the vehicle or, if the vehicle does not have a trunk, is not accessible from the interior of the vehicle.
  • A caregiver is transporting a marihuana-infused product in a case that is accompanied by an accurate manifest that states the weight of the product, name and address of the manufacturer, date of manufacture, destination name and address, date and time of departure, estimated date and time of arrival, and, if applicable, name and address of the person from whom the product was received and the date of receipt. The marihuana-infused product must also be transported in the trunk of the vehicle or, if the vehicle does not have a trunk, is not accessible from the interior of the vehicle.
  • A caregiver is transporting a marihuana-infused product for his or her child, spouse, or parent, and the marihuana-infused product is in a package that is sealed and labeled with the weight of the product, name of the manufacturer and person from whom the product was received, name of the qualifying patient, and date of manufacture and receipt. The marihuana-infused product must also be transported in the trunk of the vehicle or, if the vehicle does not have a trunk, is not accessible from the interior of the vehicle.

An individual who violates any of these transportation requirements is responsible for a civil fine of no more than $250.

The bill also prohibits a medical marihuana patient from operating a snowmobile or ORV while under the influence of marihuana, just as the MMMA already prohibits a patient from operating a motor vehicle, aircraft, or motorboat under the influence of marihuana. Moreover, HB 4210 also prohibits the use of butane to extract marihuana resin in a public place, motor vehicle, or a residential structure or its curtilage. A person who does either will not be able to assert a Section 8 affirmative defense against any criminal charges arising from operating a vehicle under the influence of marihuana or unlawfully conducting butane hash oil extraction.

Notably, HB 4210 represents just the third bill to receive the necessary supermajority vote and successfully amend the MMMA since its enactment in 2008. (In addition to HB 4210, the Senate passed Senate Bill 141, which simply revises a sentencing guideline reference.)

Conclusion

The bills now head back to the House of Representatives for concurrence, where they have previously passed by overwhelming margins. Once the House concurs, the bills will head to Governor Snyder, and when he signs the bills into law (as he is expected to do), it will start a very hectic timeline. Within three months of the effective date of the Act, the Governor must appoint members of the Marihuana Advisory Panel, a group of government officials and representatives of the cannabis industry, local law enforcement, and municipalities who will make recommendations to the Board regarding the promulgation of rules. That panel must first meet within one month of being appointed.

Additionally, rules must be promulgated as soon as possible, as applicants can begin applying for licenses 12 months after the bill is signed. To this end, language was included in an enacting section of HB 4209 to allow LARA to begin promulgating emergency rules. Moreover, SB 1014 also was passed by a vote of 26-11, and will allow rules relating to the Medical Marihuana Facilities Licensing Act to sidestep the rulemaking process until January 1, 2017. This will allow for rules to be promulgated more promptly, but will also mean that typical rulemaking procedures, including the solicitation of public input, may not be used. Furthermore, the appointment of the Board must occur quickly, and local units of government must decide whether to permit any type or number of marihuana facilities within their jurisdiction and to timely pass any corresponding ordinances.

Developments in the coming months will have a drastic impact on the medical marihuana landscape in Michigan. For more information on these developments, as well as all other cannabis law-related issues, check back in with the Cannabis Law Blog.