More than 400 provisional licenses in California have expired this year and nearly 300 more could expire by the end of December, according to state cannabis regulators.
Meanwhile, the California Department of Cannabis Control (DCC) has started to convert provisional cultivation licenses to annual in Mendocino County under a new countywide Environmental Impact Report.
More than 2,000 licensees are under a deadline to convert their provisional-active licenses to annual licenses by the end of 2025.
Provisional licenses allow businesses to operate while “actively and diligently” working toward completing annual licensing requirements. To convert to an annual license, a business must comply with a variety of state and local regulations, including the California Environmental Quality Act (CEQA), which usually requires a costly, detailed EIR. Cultivators, particularly in Mendocino County, have had the most challenges meeting these requirements.
The provisional license program was initially scheduled to sunset in 2021. However, that “would have resulted in a significant portion of cannabis businesses losing their access to licensure while forgoing their place in the legacy, regulated marketplace,” said a DCC spokesperson in an email to CRB Monitor News.
The state legislature, under AB 141, allowed the DCC to continue issuing provisional licenses until June 30, 2022, and renew provisionals until Jan. 1, 2025. If a provisional license expires next year, current provisional holders must transition to an annual license before they will be eligible to renew, the DCC said Nov. 25 in a deadline reminder.
The only exception is for social equity retail provisional licenses. They have until 2031 to convert. There were 251 of those licenses as of Oct. 28, including retail, non-storefront retail and microbusinesses with retail activities, DCC said.
There were a total 2,130 provisional-active licenses in the CRB Monitor licensing database as of Nov. 25, a drop of 125 since Nov. 7. Most of the drop was in cultivators, which went from 1,103 to 996.
A business may hold more than one license type.
Costs too high to continue
Industry insiders said the costs of compliance, on top of high taxes and other costs of running a cannabis business in California, will likely lead to the exodus of hundreds of provisional licensees. That seems to be holding true.
The DCC said 430 provisional licenses expired this year, as of Oct. 28, and another 293 provisional licenses expire on or before Dec. 31.
“DCC cannot predict the number of provisional licensees that will not successfully transition to annual licensure, but our staff is working with provisional licensees to assist them in transitioning,” said a DCC spokesperson in an email. “And if a licensee does not transition to annual licensure, it will not preclude them from filing an annual licensure application in the future.”
Mendocino County starting to convert
Mendocino cultivators had it particularly hard because county laws did not require legacy cultivators to get a site-specific EIR that CEQA required. Lengthy delays at the county level to process applications and approve EIRs led the DCC to take over the CEQA process last year. It approved a county-wide EIR on Oct. 17 that was intended to streamline conversions.
At the end of October, there were approximately 460 provisional cultivators that needed to convert by next year, according to Sara McBurney, senior program manager at the Mendocino County Cannabis Department.
McBurney said she received word on Nov. 18 that the DCC had converted 84 cultivators to annual licenses. The county now has 114 annual licenses, she said.
“Mendocino County’s heritage as a cornerstone of California’s cannabis industry is invaluable and we deeply appreciate the commitment of these cultivators to operate in the legal market,” said DCC Director Nicole Elliott in a statement. “This transition demonstrates that our cannabis market can be inclusive, equitable, and reflective of the state’s rich history.”
DCC said 1,230 licenses transitioned from provisional to annual this year, as of Oct. 28. With the Mendocino County approvals in November, the total number of conversions statewide would be more than 1,300.
