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Adult-Use Establishment Applications Are One Month Away in Michigan: Here’s What to Plan For

Cannabis Law Blog

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Adult-Use Establishment Applications Are One Month Away in Michigan: Here’s What to Plan For

For medical marijuana facility licensees and some first-time applicants who are looking to jump into the adult-use marijuana industry in Michigan, the day when the Marijuana Regulatory Agency (MRA) will begin accepting applications—November 1—is approaching quickly. While the application itself has not yet been released online, the MRA has been on tour during September, holding public educational sessions to familiarize potential applicants with the requirements and process. There will be an abbreviated application process to assist current medical licensees into the adult-use market.

First-time applicants will be able to apply for a limited number of adult-use license types, including Class A grower (100 plants), microbusiness, designated consumption establishment, safety compliance lab, and temporary marijuana event licenses. For the first two years that the MRA accepts applications, however, only applicants operating active medical marijuana facilities will be able to be receive licenses in the following adult-use categories: Class B Grower (500 plants), Class C Grower (2,000 plants), Excess Grower (based on the number of Class C medical licenses held), Processor, Retailer, or Secure Transporter.

During the educational sessions and through its latest “Tips for Licensees” bulletin, the MRA highlighted key differences between medical and adult-use licensing, and things to be aware of when moving into the adult-use space. We’ve collected a handful of the most notable ones here.

License Types and Locations

  • An active medical marijuana facility licensee of any type may apply for any type of adult-use marijuana establishment license, not just an equivalent license type. For example, a Class C medical marijuana grower is not restricted to applying only for a Class C adult-use grower license, but could apply for and receive an adult-use secure transporter license (but would be unable to transport medical marijuana). This is true even though some license-type combinations are prohibited when both are medical or both are adult use: medical growers, processors, and provisioning centers cannot hold an interest in a medical secure transporter or lab, and the adult-use rules have similar restrictions on adult-use license combinations. An active medical facility licensee is also not restricted to operating adult-use establishments only where its medical facility is located—a medical licensee can choose to operate an adult-use establishment in any municipality that has not opted out of the adult-use industry.

Separation of Inventory and Displays

  • A licensee that intends to operate a medical marijuana provisioning center and an adult-use marijuana retailer at the same location must keep its medical and adult-use inventories entirely separate, both as physically stored and in the tracking system. Medical and adult-use products must also be displayed for sale so that they are separately identifiable. The medical provisioning center and adult-use retail establishment do not have to be partitioned from each other, though. Only the marijuana must be separated.

Capitalization

  • Medical marijuana facility license applicants are required to demonstrate a minimum level of capitalization to receive a license, with Class C grower licenses at $500,000 each and provisioning center, processor, and Class B grower licenses at $300,000 each. In contrast, adult-use applicants do not have to demonstrate their available capital at all.

Employees Under Age 21

  • The adult-use rules prohibit anyone under the age of 21 from working (or volunteering) at a marijuana establishment, but the medical facility rules do not. If a medical facility licensee applies for an equivalent adult-use license and intends to operate both at the same location, neither can employ a person under 21 unless the medical facility and adult-use establishment are completely partitioned.

Social Equity Plan

  • As noted in our previous post, adult-use licensing applicants will be required to submit a social equity plan as part of each application. A social equity plan must be designed “to promote and encourage participation in the marihuana industry by people from communities that have been disproportionately impacted by marihuana prohibition and enforcement and to positively impact those communities.” Adult Use Emergency Rule 7(13). Through its own Social Equity Program, the MRA has identified what it considers to be the 19 disproportionately impacted communities in Michigan, based on the number of marijuana-related convictions in and poverty level of each community.

Application Process Timing

  • Because the adult-use establishment statute, the Michigan Regulation and Taxation of Marihuana Act (MRTMA), includes a tight 90-day time frame for the MRA to approve or deny a license application, adult-use applicants will also have short deadlines to respond to MRA questions and complete inspections. Applicants will have only five calendar days (which includes weekends and holidays) to respond to any notice of deficiency from the MRA about an application. And, an applicant must be ready for MRA inspection of its establishment within 60 days of submission of its complete “Step 2” establishment license application, or its application will be denied. Therefore, an application should be submitted only when the building is ready—or very nearly ready—for inspection.

Remodeling to Accommodate Adult Use

  • If a medical facility licensee plans to add an equivalent adult-use license to the building where the medical facility is located and is considering remodeling to accommodate additional plants, product, or sales space, it may make more sense to apply for and receive the adult-use license first, before undergoing a redesign, if the current space will work temporarily. Establishments that are immediately ready for inspection will almost certainly be processed more quickly than those that are delayed for additional build-out. Further, the MRA is authorized to permit licensees who hold equivalent medical and adult-use licenses to transfer medical marijuana product to adult-use to ensure an adequate supply at the start of the adult-use industry. A consequence of this is that a licensee could split its medical inventory between medical and adult-use, putting both license types to use, without adding space or remodeling, as long as inventory and displayed product can be separated within the existing space. A redesign could always be planned and approved at a later time. The MRA has not released regulations for transfers between equivalent medical and adult-use licenses yet, but they are anticipated.

Environmental Compliance

  • Growers and processors of marijuana are subject to Michigan’s environmental regulatory statute, the Natural Resources and Environmental Protection Act, 1994 PA 451 (NREPA). The Michigan Department of Environment, Great Lakes, and Energy (EGLE) has issued guidance summarizing the environmental regulations that apply to marijuana cultivation and processing, which are broken down into three categories: air, materials and waste management, and water. Additional permits and inspections are required under these regulations, so licensees should familiarize themselves with EGLE’s guidance.

The MRA plans to release its adult-use application forms and additional instructions in early October to allow applicants time to prepare to submit on November 1. With more changes ahead, stay tuned to Dykema’s Cannabis Blog for future developments impacting the cannabis industry.