Washington: Liquor Control Board Limits Marijuana Licenses To One Per Applicant

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Board to limit individual production, will begin issuing producer and processor licenses soon

The Washington State Liquor Control Board (Board) on Wednesday approved staff’s recommendations to limit the number of individual marijuana producer licenses to one (from the previous limit of three) and initially limit production at 70 percent, clearing a path for the agency to begin issuing producer and processor licenses.

“Today’s Board action clears an obstacle and allows the agency to begin issuing marijuana producer and processor license in the coming weeks,” said Board Chair Sharon Foster. “We believe this is the most fair and equitable way to get the market up and running.”

Single Production License Limited to 70 Percent

In its enforcement guidelines issued August 29, 2013, the U.S. Department of Justice required states to ensure a tightly regulated and controlled market to prevent diversion of product to other states, sales to minors and other concerns.

The Board used available consumption data supplied by its consultant, BOTEC Analysis Corporation, to craft production limits in its rules to meet initial consumer demand without over-supplying. The rules are based on BOTEC’s input that the state can capture just "13 to 25 percent of the overall market in the first year of recreational sales."

"Additional production is likely necessary for the state to capture an increasing percentage as the market refines and matures," the Board drily noted. "Agency rules allow for flexibility to meet an evolving controlled market."

Agency rules (WAC 3214-55-075 (8)) state “if the total amount of square feet marijuana production exceeds two million square feet, the Board reserves the right to reduce all licensees' production by the same percentage or reduce licensee production by one or more tiers by the same percentage.”

Extrapolating production data from the initial 1,500 applications, the LCB estimates that the canopy of marijuana licenses would be about 35 million square feet. The issue is, the total production canopy must be reduced from 35 million square feet to 2 million. This is why each licensee will be limited to one license and to "70 percent" of the production for which they've applied.

The Board closed a 30-day application window for marijuana licenses on December 20, 2013. During that period the agency received 2,858 marijuana producer applications.

"The plant canopy of these applications far exceeds a manageable plant canopy set by the Board in its rules," the WSLCB stated in its Wednesday press release. "Of these applications, over 900 are for more than one marijuana producer application."

One License Per Applicant

The I-502 rules had until now allowed for up to three licenses per licensee; many prospective license-holders have already filed for the (then-) maximum number of three licenses. Washington's absurdly low cap on marijuana cultivation (2 million square feet of canopy space, which translates to about 46 acres of weed) means that just 22 growers, each applying for three "Tier 3" licenses of up to 30,000 square feet, could have used up all the state's allotted grow space.

After this absurd situation -- in which just 22 growers could control the entire state's legal supply of marijuana --got some publicity, the Board was practically compelled to respond.

"In an effort to meet a manageable plant canopy for marijuana production, the Board will file an interim policy that limits any qualified entity or principals within any entity to one marijuana producer license," the WSLCB's Wednesday press release reads. "If any entity or principal has more than one marijuana application pending, staff will contact the applicant and offer them the option of withdrawing their additional applications for a refund or having their additional applications held up to one year or until the Board determines more marijuana producer licenses are needed."

“In interviews with our licensing investigators, many license applicants have said that they do not intend to use all three licenses initially or planned to reach the top of their tier,” continued Foster.

Bans and Moratoriums

As if worrying about the total supply of weed in the state -- and the prospect of marijuana-store shelves quickly emptying -- wasn't enough, marijuana users in Washington, including seriously ill medicinal cannabis patients, have to worry about safe access.

Several communities and jurisdictions across Washington have enacted local bans or moratoriums on recreational marijuana businesses. In a formal Attorney General Opinion issued January 16, 2014, Attorney General Bob Ferguson's Office concluded that “I-502 left in place the normal powers of local governments to regulate within their jurisdictions” and that “…nothing in I-502 limits that authority with respect to licensed marijuana businesses.”

"While the law is silent on the issue of local bans, there is also nothing with the law which allows for the Board to deny licenses to qualified applicants," the WSLCB tells us. "If an applicant meets the state’s criteria for licensure, the Board will issue a state license. Like any other type of business, a licensee must be in compliance with local laws and regulations."

It sounds like they plan to go ahead and issue licenses to qualified applicants, regardless of local bans. The line for attorneys to queue up for impending litigation starts here.

"The Board action and interim policy are effective immediately," the WSLCB's press release notes.