More Changes to Maine’s Marijuana Program Are on the Table on February 10

Earlier this week, the Veterans and Legal Affairs Committee in Maine’s legislature considered a series of bills related to Maine’s marijuana program. I discussed one of those in this blog post.

Now, there are three more bills up for a public hearing on February 10:

• An Act to Impose Further Restrictions on Where Marijuana May Be Smoked
• An Act to Improve Compliance with Department of Administrative and Financial Services, Office of Marijuana Policy Registration and Licensure Requirements
• An Act to Amend the Marijuana Legalization Act and Make Other Implementing Changes 

The latter two are both children of the Office of Marijuana Policy. Those who were present at the hearing earlier this week will recall that OMP asked the committee to hold off on any significant changes to Maine’s adult use program. Perhaps consistent with this position, nothing proposed in either OMP bill is really big or structural. But…

Of note, the committee will be considering a new category of licensee: a "marijuana establishment support entity," which seems to be a way for OMP to regulate "sample collectors" who will be working with testing facilities and, perhaps, others who touch the product but don’t fit neatly into a current category of licensee.

OMP is also proposing an exemption to Maine’s Freedom of Access Act for certain discrete categories of information, including trade secrets related to marijuana cultivation, etc., and standard operating procedures for marijuana establishments.

Big picture: we can expect the State to continue tweaking our marijuana programs for years to come. I won’t be surprised by some key changes this session, with more and bigger changes to come down the road.

Lots of Different Rules Governing Maine’s Marijuana Programs Are Going to Become Official Soon – But When?

We are waiting on final and effective versions of several different sets of rules governing Maine’s marijuana programs. I’ll start with the Rules for the Certification of Marijuana Testing Facilities, since the public hearing for these rules was just yesterday. The hearing was sparsely attended and public comments were not particularly noteworthy. Readers probably know that the Emergency Rules for the Certification of Marijuana Testing Facilities already took effect in September. This is allowed during rulemaking under Maine’s administrative procedures act in certain situations, and so rulemaking continues anyway. Final written comments are due October 10. At that point, we can expect about a month until final testing rules are released since the Office of Marijuana Policy (OMP) will need to work with the Office of the Attorney General to sort through and incorporate any comments.

We are, of course, also still waiting with baited breath for the final adult use rules to be released. These will incorporate, at a minimum, the changes required by the legislature last June. The legislature required some fairly broad changes to the residency requirements in these draft rules, and we are waiting to see how OMP reacts and what the final rules look like accordingly. These adult use rules, the OMP has stated, will be released within the next 60 days.

Don’t forget that the rules governing Maine’s medical marijuana program are outdated. The current rules were enacted before the legislature significantly revised the program in 2018. So expect OMP to also tackle a rewrite of these rules sometime, perhaps this winter.

Maine Takes Another Step Toward Becoming a Marijuana Tourism Destination—But Are We Moving Fast Enough?

Maine’s cannabis tourism program might be hitting its stride. The Office of Marijuana Policy has reached “instant reciprocity” arrangements with 23 states which allow medical cannabis patients from those states to also use their patient cards in Maine. Here’s the announcement from the OMP. Consistent with state law, the visiting qualifying patient can purchase up to 2.5 oz of medical marijuana and marijuana products every 15 days while visiting Maine. 

Adult use tourism will obviously be of a different cloth, since the hope is that it will attract consumers who can’t legally purchase marijuana products in their home state. There is some evidence that Massachusetts’ rec program is attracting New Yorkers, and the hope is that Maine’s program will bring folks from New Hampshire and New York, etc. Of course, in an industry where there’s a massive "first mover" advantage, it’s not clear that Maine will really open the floodgates to adult use marijuana in time to reap many of the benefits that earlier states are seeing.

The Maine Office of Marijuana Policy Re-formats/Changes (?) Residency Requirements in Response to Rulemaking Comments

The OMP released provisional adult use marijuana rules late yesterday. These rules are majorly substantive, so they are now headed to the legislature. It seems likely that the Veterans and Legal Affairs Committee will hold its public hearing on these rules as early as Monday next week.

While there’s a lot to unpack in this newest iteration of the OMP rules, I’ll focus briefly on the residency requirements today. The provisional rules eliminated two notable subsections from Section 2.3.1(B) that were present in earlier iterations. These are the two subsections which OMP eliminated:

(b)(i) No person or entity shall attempt to subvert this paragraph by way of multi-layered corporate structures or other methods for creating a corporate veil, nor through other equity conveyance tools, including without limitation, purchase options and purchase warrants. The Department may deny an application at its discretion for violation of this provision.

(b)(ii) No person or entity shall create a party of control to a marijuana establishment License consisting of less than a majority of residents.

Before you read too much into the deletion of these paragraphs, the OMP justified removing these paragraphs in its response to specific comments:

“The Department has removed the language of sub-parts (B)(i) and (ii) with the understanding that the powers contained therein were inherent in the powers granted by the Legislature to the Department in statute. These provisions were determined to be duplicative by the Office of Marijuana Policy. Action taken by OMP to remove these provisions should not be construed as a limit on the power of the Department to pierce any corporate veil intended to obfuscate the residency requirements intended by the Legislature in Title 28-B. The Department has clarified in rule that the applicant shall bear the burden of proving majority ownership by residents.”

Lastly, the OMP also added additional language to the residency requirements in Section 2.3.1(B)(b), so now that subsection reads (with the new portion underlined):

“A majority of the shares, membership interests, partnership interests or other equity ownership interests as applicable to the business entity must be held or owned by natural persons who are residents or business entities whose owners are all natural persons who are residents of the State of Maine. The applicant shall demonstrate to the Department that a majority of the shares, membership interests, partnership interests and other equity ownership interests are held by residents of the State of Maine.”

Next, the legislature will have the opportunity to make changes to these provisional rules, and will certainly be considering how these residency provisions jive with the Department’s claim to “inherent powers” derived from Title 28-B.

If You Believe the Proposed Rules, Regulators Want to Know EVERYTHING About YouOr: A Few Words on Disclosure Requirements

For those who are still scouring the proposed adult use rules, take a look at  the sheer volume of information required to be disclosed to the Department of Administrative and Financial Services (DAFS) by anyone seeking a license, and the Department’s claim to unlimited power to keep digging and digging and digging until “satisfied.”

Section 2.4 seems to be designed to require the disclosure of every contract and relationship and, the Department may argue, could even require you to disclose not only your contractors, but your contractors’ contractors. Remember the broad definition of “party of control” (discussed here), and add to that similarly broad definitions of “true party of interest” and “other interested parties.” An applicant must not only disclose all three categories of “parties” (which could be read to encompass everyone remotely involved with or interested in the business), but must provide “all requested information concerning financial and management associations and interests of other persons, parties of control, other interested parties or true parties of interest in the marijuana establishment” (Rule 2.4.2(B)(2)). 

These regulations take us at least two layers deep, but if the Department wants to keep digging even further, it can. Rule 2.5.1 allows the Department to “require additional information to verify that business structures, loans, franchise agreements, and other legal arrangements or anything else regarding true parties of interest, parties of control or other interested parties are not being used to circumvent ownership requirements.”

If these exacting disclosure requirements, combined with broad powers of investigation, remain in the final rules, this will cause headaches on both sides of the process. Applicants will need to be comfortable providing all sorts of sensitive information to regulators, but will also need to be sure their investors, contractors, etc., are comfortable also providing this information to regulators. This is probably something that businesses will want to address, if possible, at the time they enter into their business arrangements to make sure these issues don’t arise in the thick of the application process.

I expect that regulators, too, will find these regulations a bit too much when put into practice. They will need to sift through vast troves of contractual arrangements and other partnerships, many of which will require a particular expertise to decipher. Applicants who want to air on the side of compliance will be almost required to dump their entire filing cabinet on the Office of Marijuana Policy (OMP) just by virtue of the vague nature of the regulations. We’ll see if this language stays in the final rules, and we’ll see if it is relaxed over time through the practice of the Department.

The Public Hearing on Proposed Adult Use Cannabis Rules Is Over, But the Public Comment Period Continues

The public hearing on the proposed adult use cannabis rules took place this morning at the Holiday Inn in Portland. The room was packed with a pretty diverse group of industry folks – banks, towns, and marijuana establishments large and small were all well-represented today. Comments were limited to three minutes per person, and the hearing took barely more than two hours total. Some of the reoccurring issues throughout the morning included: 

• Concerns that testing labs will be a serious bottleneck and drag on the adult use industry
• A number of smaller operators are worried that the rules are too comprehensive and "onerous" and will drive the industry underground
• Concerns that the rules will limit out-of-state investment and make it difficult to work with experts and consultants from other states
• Questions about confidentiality provisions in the rules and the degree that applicant info will be publicly available

The panel of regulators from Department of Administrative and Financial Services (DAFS) and the Office of Marijuana Policy (OMP) seemed to be diligently taking notes this morning, and we’ll have to wait and see how amenable they are to changing the rules as a result of this process. It’s a safe bet that written comments (due June 2) will be more impactful than today’s three-minute spiels, but how impactful, we don’t know. The OMP says that they plan to provisionally adopt final rules and send those rules to the legislature for approval in June. If approved by the legislature, then the rules would likely be scheduled to take effect 90 days later.

Adult-use Rulemaking Is Underway in Maine – This Is Your Chance to Comment

After releasing pre-draft proposed rules for unofficial comment to gauge the initial reaction of the public, Maine's Office of Marijuana Policy (OMP) has now released the official no-longer-in-draft-form proposed rules for real comment. In other words, rulemaking has begun. With a public hearing scheduled for May 23 in Portland, and all public comment due by 5:00 pm on Sunday, June 2, perhaps we can expect rulemaking to be complete and these major substantive rules to be back in front of the Maine Legislature for approval sometime in June, during this session?

The OMP has conveniently posted all of the unofficial comments received in response to the draft rules, and their responses, online here. This provides some interesting insights, and some very predictable ones, into what the different stakeholders care about, and how the State plans to deal with these concerns. Also, kudos to the OMP for using Google Docs – very practical and mainstream for government!