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.

Maine’s Legislature Confronts the Unintended Consequences of Required Marijuana Testing, Before Those Consequences Even Happen

The Maine Legislature’s Joint Standing Committee on Veterans and Legal Affairs will consider a host of marijuana-related bills next Monday, January 27. Check all five of them out here. The one I want to focus on is LD 1545, An Act Regarding the Testing of Adult Use Marijuana and Marijuana Products because this bill tries to address what has been a serious problem in most states launching adult use programs: a shortage of testing labs and resulting bottlenecks in those products.

For starters, LD 1545 seeks to amend language in Title 28-B, governing adult use marijuana in Maine, which currently requires ALL adult use marijuana or marijuana products to be tested by a licensed lab before sale. So what’s the problem with this? There’s serious and well-founded concerns that Maine simply won’t have enough testing labs at least for the launch of the program. This will lead to bottlenecks and significant delays in selling products to consumers. LD 1545 addresses this by permitting any product that has been held by a testing lab for five days without being tested to be sold anyway, with a disclaimer that the product hasn’t been tested.

This seems like a straightforward solution to an anticipated problem, but it seems worth looking briefly at the experience of other states with testing bottlenecks and lab shortages.

California’s lab shortages and bottlenecks circa 2018 were the stuff legends are made of. Now, if anything, California seems to have overcompensated in response and has 27 licensed labs (which isn’t that many, considering the state’s population), none of which report being at full capacity. These labs are facing business problems of their own, with many customers not paying timely or not paying at all. Some suggest that this is a symptom of the broader problem that California’s illicit marijuana market remains dominant and may even be getting stronger.

Closer to home, a shortage of testing labs has been a problem for Massachusetts. As is expected for Maine, Massachusetts started off with only two licensed testing labs. Labs were reporting demand for up to 4,000 tests per day, though, within a year of the adult use program’s launch, the state’s Cannabis Control Commission was reporting that, even with two labs, wait times were down to just a couple of days.

It’s hard to know exactly how Maine’s testing laws will affect the adult use market until that market has really taken off. Certainly, any serious impediments to selling product quickly will encourage return to the black market. I’m sure this will be part of the discussion in the VLA committee on Monday. See you there!

VLA Committee Recommends Changes to Adult Use Rules

The adult use rules necessary to launch Maine’s new market are still winding their way through the legislature, but they’ve been voted out of committee with a number of changes, and should be sent along (in one form or another) to the Governor in the next couple days. The majority report from the Veterans and Legal Affairs Committee contains the changes to the rules and some related changes to statute. This was handed out during amendment review in the committee yesterday.

While you can peruse the majority report for all the details, a couple of things stand out:

1. The committee is amending statute to state that adult use edibles are not “considered to be adulterated” under Maine’s food code. This places adult use edibles in the same ranks as medical marijuana edibles and, though in different statute, foods containing CBD. 
2. You’ll see that in Section 8 of the majority report, the legislature does not actually “redline” the rules created by the Office of Marijuana Policy. Rather, the OMP will receive these specific directives from the legislature, and it will be up to the OMP to put the rules in a final form consistent with these directives. This leaves a few things up in the air about the rules until we see the OMP’s final version. 
3. The legislature is directing the OMP to eliminate the terms “other interested parties,” “party of control” and “true party of interest” from the adult use rules. The rules will “substitute for those deleted terms the statutory terminology in Title 28-B, subchapter 2 regarding the characterization of ownership interests.” This directive should serve to bring the rules in line with the statute in terms of residency requirements for officers and directors, as well as for owners of marijuana establishments. We have in the past written on the residency requirements generally (here, here, and here). 

Stay tuned as we expect this to move quickly through the legislature and on to the Governor.

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.