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Marijuana testing, rural licenses and more in bill at Arizona Capitol – The Arizona Republic

Arizona lawmakers are considering wide-ranging changes to marijuana regulations that would force the state to test products sold at dispensaries, issue new rural dispensary licenses and make a host of other changes to cannabis oversight.

Two lawmakers cited a recent investigation by The Arizona Republic about contaminated marijuana as the impetus for several of the changes.

But the bill, deemed a “Christmas tree” for all the eclectic elements hung on its branches, faces opposition from the deep-pocketed dispensaries already operating in the state.

Bill supporters say those big dispensaries want to eliminate competition.

House Bill 2050 includes changes such as allowing recreational-only marijuana shops to sell medical marijuana. The marijuana itself is the same, but taxed at a lower rate for medical patients.

Doing this would solve major zoning issues that threaten to derail the social-equity program voters approved in 2020, which gave 26 new licenses to people who were harmed by old laws that prohibited cannabis.

Some cities outright ban new shops while Phoenix only allows zoning for shops that offer medical and recreational sales, which means the recreational only social-equity shops are shut out. Tucson has a similar issue, and the cities’ slow pace on amending their zoning could mean the shops won’t open in the timeframe required.

Alicia Deals was lucky enough to win one of those social-equity licenses in a state lottery this year, and she is hopeful the bill will pass so she can open her business in the 18-month deadline imposed by the state.

She and her family maxed out a business credit card to launch the venture, which they called Life Changers Investments in honor of her father. He is in the 11th year of an 18-year sentence for a marijuana conviction, she said.

“I’m one of the small people trying to fight for what I was promised,” she said. “There are other people with special interests trying to harm people such as myself. We just deserve a fair chance. This program was designed to right a wrong. But now it’s going the wrong direction.”

The bill passed the Senate on Tuesday but awaits a vote in the House. Deals is hopeful it will pass in the Legislature’s waning days because next year may be too late to solve the zoning issues that are threatening license winners like her.

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State would have to test marijuana

Before the bill passed the Senate, Sen. David Gowan, R-Sierra Vista and Sen. Rebecca Rios, D-South Phoenix, amended the measure to address safety concerns with marijuana. 

Gowan’s amendment would require the Arizona Department of Health Services to contract with a lab to randomly test marijuana sold at shops to confirm it is free of contaminants like pesticides.

The state already requires dispensaries to test marijuana before selling it, but a recent investigation by The Republic found highly contaminated products were sold to medical patients. Furthermore, DHS was unable to identify contaminated products because the agency doesn’t test marijuana on dispensary shelves to verify its safety. Gowan’s amendment would address that gap in state testing rules.

“Concerning stories started coming out about cannabis contaminated with pesticide sold to patients,” Gowan said when introducing the amendment. “Given these reports it needs strengthening, and that’s why we are here.”

His amendment included other elements, such as requiring DHS to appropriate $5 million a year for five years for marijuana clinical trials.

Rios also referenced The Republic’s investigation when she introduced an amendment requiring dispensaries to follow stricter requirements for submitting samples of marijuana for testing. Additionally, her changes waive the medical card fee for veterans and require all marijuana products to have a QR code on the label that will direct consumers to the lab results for that product.

“Much like what Sen. Gowan said, the impetus for this amendment for me was the series of articles in The Arizona Republic that revealed dangerously high levels of pesticide in marijuana products from a reportedly premier provider that many medical marijuana patients were receiving their medical marijuana from,” Rios said.

The Arizona Dispensaries Association trade group opposed the bill when the initial language was adopted in March. The group dislikes the bill even more with the additional amendments approved Tuesday.

And Trulieve, a Florida company that recently bought Harvest, the largest chain of dispensaries in Arizona and a member of the association, also opposes the bill.

“Arizona’s cannabis regulatory program is lauded by others around the country for its balanced approach between regulation and business,” CEO Kim Rivers said in a statement to The Republic, citing concerns with the process rather than any particular element of the bill.

“Trulieve feels strongly that any meaningful cannabis legislation takes time, stakeholder input, and an assessment of what is and is not working in the marketplace. Last minute amendments for such critical aspects of the cannabis ecosystem are susceptible for mistakes and oversights.”

Demitri Downing of the Marijuana Industry Trade Association said he is frustrated the big dispensaries are lobbying to kill the bill and said they are “playing games.” He said they only oppose it because allowing social-equity shops to sell medical marijuana would harm the big dispensaries that can sell recreational and medical.

“They are trying to keep these social-equity licenses at a competitive disadvantage,” Downing said. “What they are doing is trying to control competition.”

So many disparate issues are included in the bill because few of the elements had sufficient support to win approval on their own. And because medical and recreational marijuana both were approved by voters, a three-quarters vote is required to make changes. The bill cobbled several items together to bolster support, he said.

“It’s a Christmas tree. It’s sausage making,” Downing said. “Everything got thrown into this bill.”

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Rural license change sparks opposition

The bill also has a clause that would require DHS to issue new marijuana shop licenses in rural areas, which some bill opponents have called a giveaway because it appears one individual could get multiple licenses, which are worth millions of dollars.

The bill would require DHS to process any applications from companies that applied for dispensaries since Jan. 1, 2017. That portion of the bill appears to favor a man named Mason Cave, who for years tried to get the state to issue him licenses for marijuana shops in rural areas.

Cave said he is a CPA by training who has run marijuana cultivation and processing businesses in Arizona and Nevada.

DHS has issued dispensary licenses in a series of lotteries since voters approved medical marijuana in 2010. Those DHS lotteries follow rules for how companies apply to enter the lotteries and win licenses. 

Cave and others have complained that some rural communities that previously had dispensaries have seen those shops move to bigger cities where they do more business, forcing patients in rural areas to drive hours to buy marijuana.

Cave’s companies submitted applications in 2019 and 2020 for dispensaries in rural counties outside the DHS lotteries, and when the state wouldn’t issue him licenses, he sued. The Maricopa County Superior Court recently ruled in favor of DHS, which argued it didn’t have to issue licenses to Cave’s companies.

Cave filed a notice he would appeal.

But in the meantime, the bill passed by the Senate would order DHS to issue licenses to companies like Cave’s that applied for licenses in rural counties.

Ryan Hermansky, CEO and founder of Noble Herb in Flagstaff and president of the state dispensary association, said that is why the group opposes the bill.

“It’s actually unclear how many licenses would be introduced by this process. Why they thought this would strengthen the bill I’m not sure,” Hermansky said. “The bill got convoluted and became a giveaway of licenses to Mason Cave.”

Cave said the legislation is needed to get DHS to license shops in rural areas and that others could get new licenses from the bill.

“I own property or lease property at my own expense and have been trying to get this done for years,” Cave said.

He said he applied to the lottery last year when DHS issued new rural licenses, but he did not win, and that the shops DHS licensed then are only able to sell recreational marijuana, leaving rural medical-marijuana patients at a disadvantage. Both the 13 new rural licenses issued last year and the 26 social equity licenses issued this year allow for recreational sales only.

That means that even with new rural shops, medical patients in rural areas can’t purchase products at the lower tax rate like medical patients in urban areas.

“You are saying a veteran (living in a rural area) has to pay 16% more in taxes because the state hasn’t done what it is supposed to do and fill these rural licenses,” Cave said.

“What I’m hearing is they (the big dispensaries fighting the bill) want this to go to a lottery,” he said. “After all the years of fighting suddenly they want a lottery. It’s because the lottery can be bought. I’m a smaller guy. Putting in five applications, that’s expensive. They put in tens if not hundreds of applications and effectively buy the lottery. Is that fair?”

Rios said she was initially concerned with the bill disproportionately favoring Cave but that the language was changed so that other companies could also benefit from the additional licenses.

The bill language says that DHS shall consider applications for new rural dispensaries from companies that applied for rural licenses in places without medical marijuana shops since Jan. 1, 2017.

“You have communities that are completely lacking any sort of dispensary,” Rios said. “You may have to drive a couple hours to get to Tucson or Phoenix.”

Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.

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