May 14, 2019

Multiple Licensing Tiers and Fees Proposed Yet Implementation Date Still Uncertain


The Maine Department of Administrative and Financial Services (DAFS) recently released the first draft of proposed rules to govern the state’s adult-use cannabis industry, which was legalized via ballot initiative in the 2016 elections. While there will almost certainly be changes made to the regulations as they exist currently, below we review some items pertinent to the state’s nascent wholesale market.

The draft rules lay out four tiers of cultivation licenses. Tier 1 licenses allow the farming of up to 30 mature plants or 500 square feet of canopy. Tier 2 licensees will be able to grow up to 2,000 square feet of canopy space. Tier 3 operations will be permitted to cultivate up to 7,000 square feet of canopy area. Tier 4 growers may work up to 20,000 square feet of canopy, or nearly a half-acre. A license for nursery cultivation facilities is also being proposed for operations that can sell clones and seeds to other licensed growers or consumers.

Importantly, “canopy” is defined in Maine’s draft rules as areas that contain mature, flowering plants only. Under the current version of the regulations, licensed cultivators would be able to have unlimited amounts of immature plants and “seedlings,” or clones.

Cultivation in greenhouses and outdoors, in addition to indoor growing, will be allowed in Maine’s adult-use market, though of course security, fencing, and lighting requirements are outlined for each cultivation approach.

License fees vary according to tier, in addition to an operator’s cultivation method. Tier 1 outdoor growers will pay fees of $9 per mature plant or $250, while those in this tier growing indoors or using a mix of artificial and natural light will pay $17 per mature plant or $500 annually. Annual license fees for a Tier 2 permit have been set initially at $1,500 for an outdoor cultivator and $3,000 for other grow methods. Tier 3 licensees will pay $5,000 annually if farming outdoors or $10,000 per year otherwise. Tier 4 cultivators will see annual license fees of $15,000 for outdoor growing or $30,000 for indoor or mixed operations. Annual fees for a nursery license have been set at $350.

The regulations do not include a state-level cap on the number of cultivation licenses that might be issued. However, all businesses seeking to enter Maine’s adult-use market will have to secure local approval before being able to gain a state license, which will likely restrict the proliferation of such operations somewhat.

The proposed regulations also provide guidelines pertinent to Maine’s registered caregivers or existing medical dispensary operations that intend to enter the state’s adult-use market. In general, plant cultivation and resulting product must be kept separate. The parallel, impermeable markets laid out in the draft rules echo the situation in Colorado. Further, cultivation of medical and adult-use plants in Maine must be “visually and physically” separated, unlike in Colorado where plants tagged for the medical and adult-use markets may be grown side-by-side

For existing operations, co-location of medical and adult-use cultivation facilities is allowed. However, the current rules state that prospective licensees must illustrate areas distinct to medical and adult-use plants and production in facility and security plans required in the license application.

Additionally, “If a[n adult-use] cultivation facility with a marijuana store license (…) or standalone marijuana store is located adjacent to a registered caregiver or medical marijuana dispensary, it must have distinctly separate entrances from a public right of way.” Such requirements could pose difficulties for existing medical cannabis businesses that might have hoped to simply add additional point-of-sale stations for adult-use consumers in a currently-operating medical storefront, as is allowed in some other states.

Relatedly, adult-use operations that intend to integrate vertically to varying degrees may co-locate cultivation, product manufacturing, and retail. However, conditions apply, such as a prohibition on having “inherently hazardous” materials in a product manufacturing operation that is co-located with a storefront.

While the issuance of the first draft of adult-use regulations is a significant step toward a functioning commercial market in Maine, when production and sales will begin remains somewhat uncertain. A report from the Portland Press Herald, prior to the release of the draft rules, stated that final regulations must be approved by state lawmakers prior to the end of the legislative session in June if sales are to have a chance of commencing by the end of this year.

Notably, the draft rules currently do not include proposed regulations for testing labs. Additionally, guidelines that would permit existing medical cannabis dispensaries or caregiver operations to begin selling to adult-use consumers, or transfer existing inventory into the new market, are not included in the regulations as they are constituted currently.