Lori Ajax has a big job. Originally appointed in February 2016 by California Governor Jerry Brown to oversee what was then the Bureau of Medical Cannabis Regulation, her mission became much larger in November 2016, when Golden State voters passed Proposition 64, legalizing recreational cannabis as well. Now charged with regulating both medical and adult-use marijuana distribution and retail, the renamed Bureau of Cannabis Control has been working rapidly over the past year to get all the rules and procedures in place before the mandated start date for licensed cannabis sales of January 1, 2018.
From persuading the state’s long-time medical canna-businesses (legal but unregulated in California since 1996) to enter a more complex and demanding official market, to ensuring there’s sufficient licenses to keep enough medical cannabis flowing to patients and recreational cannabis to draw consumers from the black market, to finally evaluating the industry’s impact on the environment, there are many moving parts to the process of creating what will be the nation’s largest market for legal cannabis.
California’s legislators unified the state’s recreational and medical regulations under Senate Bill 94 a.k.a. the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) this past July, making the Bureau’s work somewhat easier, and while they’re responsible for licensing retailers, distributors, and testing laboratories, California’s Departments of Public Health and Food and Agriculture will be licensing product manufacturers and cannabis cultivators respectively. However as the head of the state’s lead agency for cannabis regulation, Chief Ajax has been coordinating all these elements in time for the program’s January launch, as well as ensuring that the interests of stakeholders in the cannabis community are represented by proposed regulations. In advance of her upcoming appearance at the California Cannabis Business Conference next week, MERRY JANE spoke with Ms. Ajax to get a true insider’s perspective on the immense project of bringing regulated cannabis to a previously Wilder West.
This interview has been edited for length and clarity.
MERRY JANE: Since recreational cannabis in California is supposed to go on sale on January 1, 2018, where do the regulations stand currently, and is there any more fine tuning to be done before the projected start date?
Lori Ajax: We put out our draft regulations back in late April, and then we held public hearings, so we’ve gone through all those public comments. We have been doing some fine tuning; we’re using a lot of what was in the draft medical [regulations], but we’re also looking at what was in public comments and making changes to those sections. We also have to address some new issues with the passage of SB 94, but we’re working on getting them developed and completed. One thing to keep in mind: it will probably take until mid-to-late November for the regulations to finalize because we do have to finalize our CEQA (California Environmental Quality Act) initial study that we are currently in process of conducting. It’s been released for public comment, and that has to be completed before we can finalize the regulations.
What is the initial study evaluating specifically?
The environmental impacts of the license types that we’re responsible for. California Department of Food and Agriculture (DFA) is also doing a full environmental impact report on the effects that [cannabis] cultivation will have on the environment. We’ll also being holding public meetings this month and taking public comment on the [initial] study until October 6th, so we may need to make some [regulatory] changes.
Are there other actions your office has to take between now and January to ensure legal sales go smoothly?
We’re also developing our online licensing system, so we have that available before January 1, 2018 — a lot of resources going to that right now. We’re assisting DFA with getting the track and trace program online. Also, hiring and moving to a location to fit all of our staff members, plus making sure we have our procedures in place by January 1st and [that] there’s plenty of information available to the public so they know how to apply for a license.
How many people will your office need to scale up to in order to administer the program?
We’re around 25 now, and we’re approved to hire for the Bureau around 82 additional positions. We don’t need them all for day one. First step is making sure we have enough people in our call centers that can answer questions, and licensing folks that can review and investigate applications. Second phase is having enforcement staff available. We’ll continue hiring through this year and early next year to try and get all those people onboard early on. We need bodies and we need to train them, so the sooner the better.
Given that this is the first time a recreational cannabis program has been implemented in a state this large, what do you think are the biggest challenges for regulated cannabis in California moving forward?
One challenge we talk about in California is that we’ve had a medical cannabis market for decades, so it’s now introducing regulations at the state level that perhaps people haven’t been used to having to comply with. It’s making sure that we get as many people as possible to come into the regulated market, and particularly those that are complying with their local jurisdiction. We want to get them into the regulated market and make that as smooth a transition as we can.
Obviously the geographics of California — moving product around and what not — are more challenging because it’s such a big state. So we’re making sure we issue the license types all across the supply chain and then across the state to make sure the product stays moving.
We’ve also had a lot of changes in legislation: it’s nice to have SB 94 which aligns the [medical and recreational] regulations, so having that consistency helps, but things have been changing quite a bit, so that’s always a challenge.
Since you foresee this potential problem of bringing a surplus of canna-businesses into the regulated market, what is your office doing to mitigate that?
First, we’ve spent a lot of time talking with industry, learning how they do business currently and how they’re operating. We’re also working with the local [governments]. You’ve got a lot of cities already out there with pretty comprehensive cannabis programs and licensing folks, so we’re asking them what works and what doesn’t.
Then, making sure as we develop regulations ― which can be very onerous on a business that’s not used to complying — that we’ve made it so people understand what we’re asking for, that they’re able to comply, and simple enough that they can apply on their own without needing someone to decipher our regulations. We want to make sure everyone has access to apply for a license and be able to comply with our regulations.
I think we may find that some of our regulations don’t quite work, or that we missed something, and it’s important to be quick to respond to those things, especially during the first few months. We want to constantly improve on what we’re doing; the last thing we want is people saying “Ugh, this is too much to do.” We’ve got to break it down for people and that comes with education over the next few months, which is our responsibility: explaining to locals what our requirements and timeline are; explaining to prospective applicants and those already operating in compliance with locals what they can expect and what we’re requiring. There has to be a lot of public education on our part, along with [the California Departments of] Public Health and Food and Agriculture, which also have shares in the licensing [process].
There’s concerns among businesses and consumers about possible difficulties, like the tax rate, or the introduction of a recreational market disrupting the supply of cannabis for medical patients. If such issues become apparent, does your office have a plan for how to respond?
The tax portion is not something that’s under our control, but as for making sure we have enough licensees on day one, that’s something that’s constantly on our mind. Especially for those who are currently operating in the medical market and have an approval from their city or county, we want to make sure they have an avenue to continue operations. We have statutory authority from SB 94 to issue temporary licenses, valid for four months, and we’ll ask for specific information but it will be fairly easy overall.
Statutorily they have to have a license, permit, or other authorization from their local jurisdiction, then we can issue a temporary license. During that temporary period, they’ll need to submit a full application, so that provides a runway for us to fully vet their application, make sure they’re qualified, [that] the premise is appropriate for the activity they’re conducting, and then we can hopefully issue a permanent license within that four-month period. The statute gives us some flexibility: if they’ve applied for full license but we can’t get to their application during that period, they can also ask for an extension for 90 days.
We’re hoping that gets us through, but it’s always hard to flip a switch and say “Okay, now everyone’s going to be in compliance.” This gives us the chance to do our due diligence in responsible licensing, but also gives us the flexibility of offering a temporary permit so those in local compliance can continue doing business.
Was there anything you heard through public comments that influenced the regulations as they stand now?
Specifically when we were in L.A., people really wanted the ability to have a non-storefront retail dispensary; we heard that quite a bit. SB 94 ended up addressing that and allowing non-storefront delivery, and there were other comments addressed with the passage of that bill. We had a lot of comments on lab regulations. We received comments asking for expanded retail hours; expanded delivery hours. We’ve reviewed those comments thoroughly and now we get to make those improvements and I think you’ll see a set of better regulations as a result. It’s nice to have the opportunity for improvement.
As you’ve been in this position of crafting cannabis regulations even before Proposition 64 passed, you’ve been able to observe other states’ experiments with legalization. Are there any lessons learned from those states that you’ve applied to California’s regulatory model?
We’re constantly talking to [those states], but we all have different statutes so it’s not as simple as taking their regulation and plopping it in ours. We’ve had a lot of discussions with Colorado about edibles, and they had some great ideas about having a bit stricter regulation on that, but even more so, making sure we’re educating people about how to properly use edibles. We talk with Oregon and Washington, too, about things like security. We’re closely aligned with Oregon’s medical regulations, and they’re still making changes. In some cases we’ll take something if it makes sense, but with others our statutes might be too different to model what they’ve done. It’s been good for California to be able to have some of that insight, and we still rely on it even now. We’re all still learning, even Colorado. Everyone’s making improvements, and we benefit from that.
Prior to this you worked in California’s Office of Alcoholic Beverage Control. Did your experience in alcohol regulation influence your approach to cannabis?
For me, it’s been a tremendous asset for this job. Even though it is different statutes, alcohol is still highly regulated. I have the benefit of being able to know what really worked well with alcohol regulation. Plus, I did a lot of work and outreach with alcohol stakeholders, which has been very helpful to continue here, too. I think it’s important for the Bureau and other licensing authorities to be continually seeking input from the cannabis industry and local jurisdictions, because we’re all partners in this. We need everyone continuing to provide feedback, and fortunately everyone has responded to that. We’ve had a really positive experience with the locals and with the industry; they’ve been a tremendous help to us. You have to be willing to listen.
Are there any current “unknowns,” or parts of the program that we have to wait on to see how they turn out?
If there are any “unknowns,” we’re seeking to make them known before January 1, 2018 [laughs]. For example: all cannabis has to be tested — that’s an important part of the supply chain — and we have to ensure there’s enough testing labs. We’re already looking to see how many testing labs are going to apply. There probably is something we don’t know yet, but we’re trying to be ‘eyes wide open’ going into this.
There’s also been much anxiety in the cannabis community over the past year about mixed signals from the Trump administration on its plans for recreational and medical cannabis policy. Does your office have a plan in place to protect the will of voters and the legal cannabis industry if federal agencies decide to start investigating and prosecuting legal canna-businesses?
I just know that the Bureau was created to put the state regulatory structure originally for medicinal, and now for adult use, so that’s what we’re focused on and looking to do. We’re looking at the federal guidelines still in place with the Cole Memo, and ensuring our state program is abiding by those federal guidelines. We have a comprehensive regulatory structure in place.
So do you think the best protection is perhaps just robust regulation which demonstrates that California is doing its job?
That’s it right there.
You’ll be speaking to California's canna-business community next week. What message do you seek to bring to them about regulation in California?
I think it’s important that my remarks speak to what they can expect through the end of this year and early next year. To the best of my ability I’ll be transparent about where we are in the process, what are some things they can start doing now to make sure they’re in line to get a temporary permit, and dispel some of people’s misconceptions about the regulations. We hear a lot of things that come back to us from the industry, and we want to clear up those concerns.
What do you think the biggest myth is regarding California’s cannabis regulations?
I think people are worried whether or not they’ll be able to continue operating on January 1st, how’s the state going to process temporary licenses, when they’ll be available, and what the requirements will be. A lot of the questions you asked early on are the questions [the industry] has: Will there be enough testing laboratories? Will there be enough distributors to transport the product? Those are valid questions. Our regulations aren’t finalized but we want to give clarity where we can. People want answers and I don’t blame them.