Multiple Cannabis Cultivation Licenses for Large Indoor, Outdoor, and Mixed-light Growers.
Compliant cannabis cultivation is a challenging proposition for large California growers; that is those growers that wish to remain compliant and currently, or plan to, have a canopy greater than the 22,000 square feet for indoor and mixed-light cultivation, and 1 acre for outdoor cultivation that are currently authorized under a single license. This article discusses the new California Department of Food and Agriculture (CDFA) regulations that apply to those cultivators that have cultivation sites that are greater than the 22,000-square feet or 1-acre limits.
First, it is important to determine whether your cultivation is subject to the 22,000-square-foot limit or the 1-acre limit.
Outdoor cultivation is defined by the CDFA in § 8000(v) of the regulations:
“Outdoor cultivation” means the cultivation of mature cannabis without the use of artificial lighting in the canopy area at any point in time. Artificial lighting is permissible only to maintain immature plants.
Basically, this means that if you use lights at any point during the flowering cycle, your grow is not considered outdoor by the CDFA and you are prohibited from getting an outdoor license.
Can a greenhouse be outdoor?
It is unclear if cannabis grown in a greenhouse can be considered outdoor. A greenhouse might be considered “outdoor cultivation” if:
- No artificial lighting is used during flowering, and
- There is no light deprivation used.
However, the definition of “mixed-light cultivation”, also in CDFA in § 8000 of the regulations, reads:
(s) “Mixed-light cultivation” means the cultivation of mature cannabis in a greenhouse, hoop-house, glasshouse, conservatory, hothouse, or other similar structure using light deprivation and/or one of the artificial lighting models described below:
(1) “Mixed-light Tier 1” the use of artificial light at a rate of six watts per square foot or less;
(2) “Mixed-light Tier 2” the use of artificial light at a rate above six and below or equal to twenty-five watts per square foot.
This definition is ambiguous because it is unclear if any greenhouse, glasshouse, conservatory, or hothouse automatically means it is mixed-light cultivation, or if it is the use of light deprivation or artificial lighting that makes it mixed-light cultivation. My opinion is that it is the use of light deprivation or artificial lighting that makes cultivation “mixed-light cultivation”, therefore a greenhouse can be considered outdoor so long as no artificial light and no light deprivation are used.
The definition of indoor cultivation is also in CDFA § 8000:
(n) “Indoor cultivation” means the cultivation of cannabis within a permanent structure using exclusively artificial light or within any type of structure using artificial light at a rate above twenty-five watts per square foot.
This definition is relatively straightforward, and the determination as to whether you have an indoor or mixed-light cultivation should merely be a calculation of watts of light divided by square feet of canopy.
Multiple licenses are allowed
The CDFA regulations contemplate that a single licensee can have multiple licenses; see, for instance, §§ 8202 and 8607.
Each license must be on separate “premises”
CDFA § 8202(b) states that “Every business entity shall obtain a separate license for each premises where it engages in commercial cannabis cultivation.”
The crucial part of this requirement is the definition of “premises”, found in § 8000(x):
“Premises” means the designated structure or structures and land specified in the application that is owned, leased, or otherwise held under the control of the applicant or licensee where the commercial cannabis activity will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one licensee.
As indicated in the definition of “premises”, each licensee must define the boundaries of the premises. § 8105 states:
A property diagram shall be submitted with each application and shall contain the following:
(a) Boundaries of the property and the proposed premises wherein the license privileges will be exercised with sufficient detail to enable ready determination of the bounds of the premises showing all perimeter dimensions, entrances, and exits to both the property and premises;
(b) If the proposed premises consists of only a portion of a property, the diagram shall be labeled indicating which part of the property is the proposed premises and what the remaining property is used for.
Taken together I believe these sections generally describe what must be done in order to have cultivation on one site under multiple licenses.
The first section we must analyze is the following: “‘Premises’ means the designated structure or structures and land specified in the application”. This section must be considered in relation to § 8105. Together, these mean that in the application a licensee has to define where it will be engaging in all of its cultivation activities and what the other parts of the property will be used for (if the licensee isn’t using the entire property). The second half of the first sentence in the definition of premises really isn’t important for this issue.
The last sentence in the definition imposes two very stringent requirements on licensees. First, the premises must be contiguous. The plain meaning of the contiguous requirement is that that a cultivator cannot have a spatial separation between different parts of the premises where it will be exercising license privileges (i.e., doing anything under its cultivation license.) Second, only one licensee can occupy any premises. This means that if there is more than one licensee on a property, every licensed activity must be physically separated as between the different licensees.
This distinction is important because if a cultivator wants a cultivation canopy that is larger than the maximum size allowed for one license, it cannot practically apply for licenses under separate businesses since processing, packaging, composting, and all other cultivation-related activities would have to be separate. For example, each licensee would need to have a separate area to dry and trim cannabis.
Further, § 8202(d) states:
Licensees are prohibited from transferring any commercially cultivated cannabis or nonmanufactured cannabis products from their licensed premises.
This means that even if a single licensee obtains multiple licenses on a single property, its cultivation license would not allow it to transport the cannabis to another premises where processing, packaging, composting, and all other cultivation-related activities would occur. This regulation would require the licensee to duplicate its cultivation-related activities.
How can one have a large-scale cultivation and not duplicate cultivation-related activities?
Having multiple licenses under one roof seems to be allowed and merely requires the licensee to clearly delineate the boundaries of the licensee’s premises.
The tougher question is how to avoid duplicating cannabis-related processing activities. We have come up with what we believe is an elegant solution to this aspect of the problem.
If you would like to discuss how this solution might apply to your business, have any questions about cannabis licenses, please feel free to email me directly at Mathew.Auric@OjaiLawyer.com or contact us at 805-669-8877.