No April Fools: Starting April 1st, Cannabis Operators Face CEQA Compliance Requirements For State Licenses

• Published date: 14 April 2022
• Subject Matter: Environment, Compliance, Cannabis & Hemp, Environmental Law
• Law Firm: Sheppard Mullin Richter & Hampton
• Author: Ms Whitney Hodges

For many in the cannabis industry, April 1, 2022 is seen as a day of reckoning following the July 2021 passage of Assembly Bill 141 and Senate Bill 160 (collectively, the Cannabis Trailer Bill). In an attempt to transition to an annual licensure program, April 1^st marked the beginning of the end for provisional cannabis licensure. It also ushered in significant changes to renewal process for previously granted provisional licenses. These modifications now require applicants to comply with the California Environmental Quality Act (Pub. Res. Code ' 21000 et seq.) (CEQA), a complex statewide policy of environmental protection fraught with potential traps for those unversed in the law, before an operator is eligible to be awarded a cannabis state license. This requirement alone carries the potential to create a much higher barrier to entrance into the cannabis market.

I. California's Statewide Cannabis Regulatory Scheme

California has a dual regulatory scheme for cannabis licensing - meaning licensure or permitting is required at both the state and local level.

At the onset of statewide cannabis legalization, California's Bureau of Cannabis Control, now part of the Department of Cannabis Control (DCC), rolled out a program that would issue cannabis operators a 'temporary license' starting January 1, 2018. Under the state's original licensing scheme, temporary state licenses were only issued to applicants that have a local permit, license, or other authorization. Once issued, temporary licenses were valid for 120 days, though a license could be extended for 90 days and possibly longer. During this period, a company with a temporary license was expected to be working towards submitting its full state license application. Companies that had received a temporary license were only able to do business with other companies that had received temporary or permanent licenses.

Nearing the end of 2018, California established its provisional licensing program as a stopgap measure to give operators more time to transition from the temporary licenses to 'annual' licenses. Originally, the program was only intended to have a 1-year life span. However, in 2019, California lawmakers reauthorized the program, this time with a 2-year window. This extension gave regulators the authority to issue or renew provisional licenses until December 31, 2021.

Under the Cannabis Trailer Bill, March 31, 2022 was the last day to submit applications for provisional licenses with few exceptions.¹...