New Mexico Ups Cannabis Production Limits As Adult-Use Sales Loom

Less than three months before legal sales of recreational cannabis begin in New Mexico, state regulators have increased production limits placed on adult-use cannabis cultivators. Under emergency regulations that went into effect last week, most licensed cannabis producers will be permitted to grow twice as many plants as previously allowed.

Kristen Thomson, director of New Mexico’s Cannabis Control Division, said that the rule change is designed to help spur the launch of the state’s newly regulated adult-use cannabis industry, which is slated to begin sales of recreational marijuana by April 1.

“We have been listening to producers, consumers and patients who are as committed as the Cannabis Control Division is to supporting a thriving cannabis industry in New Mexico,” Thomson said on Monday in a statement quoted by NM Political Report. “Doubling the plant count for licensed producers makes sense to ensure that everyone can maximize the benefits of a thriving cannabis industry.”

Under the emergency rules, which will remain in effect until July, cannabis cultivators with a Level 4 license will be permitted to grow between 12,001 and 16,000 cannabis plants, while Level 3 license holders will be allowed 6,001 to 12,000 plants. Level 2 growers will be permitted to cultivate 2,001 to 6,000 plants, and Level 1 growers will be able to maintain 401 to 2,000 marijuana plants. Thomson explained the rule change in documents filed with the state’s Commission of Public Records.

“The Division has considered demand estimates provided by applicants and licensees in the cannabis industry,” Thomson wrote. “Projected market demand shows that the demand for regulated cannabis will increase year-to-year as more cannabis consumers move from the illicit market to the regulated market. The supply of medical cannabis will become increasingly threatened without an adequate supply of plants.”

Plant limits for micro-producers, however, will not be increased by the emergency rules. Operations of such small growers will still be limited to 200 plants, a cap set by state law that regulators are not authorized to override. The director said the department would seek a legislative fix that would allow micro-producers a similar increase in production limits.

“Equity and fairness are foundational principles of New Mexico’s vision for the state’s cannabis industry,” Thomson said. “We will work with legislators and the governor to ensure those values are upheld and that micro-producers see increased plant count limits as soon as possible.”

Caps Put in Place to Prevent Overproduction in New Mexico

The plant limits on cultivators were included in New Mexico’s cannabis regulations to prevent overproduction. Regulators feared a glut of cannabis that would cause prices to drop dramatically, a scenario that might challenge small operators trying to gain a foothold in the nascent industry.

But last summer, Linda Trujillo, superintendent of the New Mexico Regulation and Licensing Department, which oversees the Cannabis Control Division, warned that supplies of recreational marijuana would be tight once adult-use sales begin in the state.

“It’s highly likely we will run out of cannabis in the first week, if not the first two weeks,” she said at a meeting of the legislature’s Economic Development and Policy Committee on July 26. Trujillo told lawmakers that her prediction is based on the experience of other states as they launched adult-use cannabis sales.

Limits on cannabis production were first put in place under New Mexico’s medical marijuana program. Ultra Health, one of the state’s largest producers of medicinal cannabis, has sued the state over the caps, arguing that they are too low to serve New Mexico’s patient population. On Monday, the company said that the production limits on adult-use cannabis are also insufficient.

“Unfortunately, this increase may be too little, too late,” a spokeswoman for Ultra Health wrote in a statement to local media. “Sales to adults will commence in 74 days, and it takes twice as long, five months, for cannabis to be fully prepared from seed to sale. We are running on a deficit to support 130,000 patients today, so to think this new rule would somehow alter the biological processes required to grow cannabis is naive, at best.”

Ben Lewinger, the executive director of the New Mexico Cannabis Chamber of Commerce, applauded state regulators for considering potential shortages that would negatively impact those relying on steady supplies of medical cannabis.

“Protecting patients and patient supply is absolutely critical and has been a first-order priority through recent legislative and rulemaking processes, and we’re grateful that the Cannabis Control Division is working to ensure that medical cannabis patients aren’t neglected as the state shifts to legalized cannabis for adults,” he said.

But Lewinger questioned the rule change, saying that doubling the cap on plants only weeks before legal sales begin “undermines the work of legislators and advocates” who advocated for production limits to allow equitable access to participation in the new recreational cannabis economy. 

“Building the infrastructure to double plant count could take months to years for most operators, and plants put in the ground today won’t be ready in April,” Lewinger said. “Increasing the plant count now will only help the very biggest and well-resourced producers—it won’t help medical cannabis patients and it won’t help new businesses trying to break into the industry.”

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New Mexico Releases Final Adult-Use Cannabis Rules

The New Mexico Cannabis Control Division (CCD) announced on December 28 that it has finalized the rules for cannabis manufacturers, retailers and couriers. The final rules were published in Issue 24 of the New Mexico Register. Hundreds of applications for licenses are currently under review. 

The rules are effective immediately, with last-minute revisions following several rounds of public comment from small business owners, CEOs and other businesspeople. 

“Every day brings us closer to the first adult-use cannabis sales in New Mexico,” Cannabis Control Division Director Kristen Thomson said in a press release. “Thanks to the Cannabis Control Division’s open and transparent rule-making process over the past six months, businesses and consumers can be confident that all necessary support and protection is in place to ensure a thriving cannabis industry in our state.” 

Under the state Cannabis Regulation Act, adult sales in New Mexico are scheduled to begin by April 1, 2022. The rules that took effect Tuesday include manufacturing rules that replace emergency manufacturing rules implemented last fall, with intentions to protect workers and improve workplace safety.

The rules outline the licensing of retail stores, with new restrictions. The courier rules set guidelines for safe delivery and proper distribution of cannabis products by licensed couriers. 

According to a news release, the CCD has been accepting manufacturing and retail license applications through its online licensing system and has received more than 300 submitted applications total across all industry sectors. 

“Our dedicated team of professionals is working hard through the holidays and… every day to work with applicants to get licenses issued and businesses up and running,” Thomson said. “Standing up a thriving new industry is no small feat, and I know that our team, our system and New Mexico’s prospective licensees are up to the challenge. New Mexico will be ready for adult-use sales in 2022.”

Manufacturing Rules

Manufacturers are also prohibited from adding nicotine or caffeine to cannabis products under the final rules, but naturally-occuring caffeine is tolerated. Manufacturing licenses are divided into four classes:

  • Class I: packaging and re-packaging of already-made products
  • Class II: manufacturing of edibles or topical products from already-extracted products; can also conduct Class I activities
  • Class III: manufacturing of extracts (extracting) using mechanical methods and nonvolatile solvents; can also conduct Class I and Class II activities
  • Class IV: manufacturing of extracts (extracting) using volatile solvents or supercritical CO2; can also conduct Class I, Class II, and Class III activities

Retail Rules

Once retail sales begin on April 1, 2022, customers ages 21 and over, and people 18 and over who possess a valid qualified patient, primary caregiver or reciprocal participant registry identification card, will be allowed inside.

Retailers can take cannabis out of the packaging to display for customers, but the displayed product cannot be sold or consumed, and it must be destroyed. Retailers are also prohibited from providing free samples. Many other restrictions apply.

Courier Rules (Delivery)

The maximum retail value of products that a courier can carry is $10,000, and couriers are not allowed to carry packages for delivery for more than 24 hours. Delivery recipients will have their identity Delivery recipients must either over 21 or older, or be 18 or older as a qualified medical cannabis patient or primary caregiver, and must be pre-verified electronically before a courier delivers cannabis.

The full list of final rules can be found on the New Mexico Commission of Public Records.

The New Mexico Regulation and Licensing Department had issued a license to the first company, Mother’s Meds, to operate as a cannabis cultivator on November 1.

Deadlines were tight, but the state’s leadership pulled together. The final rules are in place four months ahead of the plan for adult-use cannabis sales. Under the Cannabis Regulation Act, which was passed earlier this year, cannabis industry rules need to be in place by January 1, 2022, and adult-use cannabis sales will start by April 1, 2022. 

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New Mexico Cannabis Raid Spotlights Native American Jurisdictional Dilemma

A federal raid on a household cannabis plot on tribal land in northern New Mexico’s Sangre de Cristo Mountains is sparking controversy over who has how much enforcement authority on Native American reservations. As more states embrace legal adult-use cannabis, a lack of clarity persists on the question of how much power the state, federal and tribal governments have on these lands.

On Sept. 9, agents from the US Bureau of Indian Affairs (BIA) confiscated nine plants from a garden at the Picuris Pueblo home of Charles Farden, 54, a life-long reservation resident who is not actually Native American. Farden is enrolled in the New Mexico medical marijuana program, to treat post-traumatic stress and anxiety.

Farden told the Associated Press he was shocked to be put in handcuffs as federal agents uprooted his plants, which were then thick with buds—about a year’s personal supply, by his estimate. 

“I was just open with the officer, straightforward. When he asked what I was growing, I said, ‘My vegetables, my medical cannabis,’” Farden told the AP. “And he was like, ‘That can be a problem.’”

Federal Law Comes First?

New Mexico’s legislature approved a medical marijuana program in 2007, while Picuris Pueblo instated its own parallel program for tribal members in 2015. 

As Picuris Gov. Craig Quanchello told Albuquerque’s The Paper: “We’re exercising our sovereignty. We went through our community and said, OK, this is what’s going on. This is what we want to do. How does the community feel about cannabis from the medical side? …We wanted to provide an alternate medicine for our community people, and we wanted options… We wanted to have an affordable medicine.”

And this is going to become a more pressing question as the Land of Enchantment gets a legal adult-use market. This April, New Mexico’s Gov. Michelle Lujan Grisham signed a general cannabis legalization bill, which took effect in June—permitting up to six plants per individual or 12 per household for personal use, with no weight limit. Commercial sales are set to begin next April. At least two of New Mexico’s 23 federally recognized tribes are seeking an agreement with the state allowing them to operate cannabis businesses—Picuris and Acoma Pueblo.

But the feds, of course, do not recognize any state legalization law. And it is the feds that share law enforcement responsibilities with the governments of federally recognized tribes. This is especially an issue for Picuris, a small pueblo that does not maintain its own police force, relying on BIA officers to enforce tribal laws. The specter of BIA raids could put the kibosh on plans for retail outlets on the pueblos.

In a recent letter to Gov. Quanchello obtained by the Associated Press, a BIA special agent in charge said the agency won’t instruct its officers to relax enforcement on the reservations—and that cannabis cultivation remains a federal crime, notwithstanding any changes to state or tribal law. 

“Prior notification of law enforcement operations is generally not appropriate,” the letter stated. “The BIA Office of Justice Services is obligated to enforce federal law and does not instruct its officers to disregard violations of federal law in Indian Country.”

Officials with the BIA and Interior Department, which oversees the agency, did not respond to the AP’s request for comment on the matter. Farden has not been hit with any criminal charges. 

Prelude at Picuris

The September bust at Picuris also had a prelude about four years earlier. On Nov. 30, 2017, agents from the BIA’s Division of Drug Enforcement arrived at the pueblo to uproot and confiscate a medical marijuana “test plot” of 36 plants that had been established on land under the control of the tribal government. 

News gets out slowly in this rugged and remote part of the state, even today, and it wasn’t until the following November that the raid was written up by the Albuquerque Journal. “They took the plants and threatened to prosecute us,” Gov. Quanchello told the newspaper.

A year later, there had still been no arrests or prosecutions. But the test plot was not replanted. 

Gov. Quanchello emphasized that the pueblo had been totally open with state and federal authorities about what they were doing.  “We even told them if they ever want to raid us, here’s where you need to go,” he told the Journal.

Contacted by the Journal for comment about the raid, the US Attorney’s Office in Albuquerque sent this terse reply via email: “The matter about which you inquire was investigative in nature and, as a matter of policy, Justice Department agencies, including the US Attorney’s Office, do not comment on investigative matters.” 

Negotiating a Solution

This September’s second raid at Picuris has dampened hopes that the situation would improve under the new administration of Joe Biden. 

In its account of the new raid, the Associated Press quoted Portland-based criminal defense attorney Leland Berger, who last year advised the Oglala Sioux Tribe of South Dakota after it instated a cannabis program. Berger implicitly noted the 2014 Wilkinson Memo, which instructed federal prosecutors not to interfere with cannabis sales or cultivation on tribal lands. “It’s remarkable for me to hear that the BIA is enforcing the federal Controlled Substances Act on tribal land where the tribe has enacted an ordinance that protects the activity,” he said. 

As the AP noted, other Native American nations around the country have successfully reached accommodations with state and federal authorities—if informally in the case of the latter. 

In Washington, the Suquamish Tribe in 2015 reached a “compact” with the state to open a retail cannabis outlet just across Puget Sound from Seattle on their Port Madison Reservation.

In Nevada, several reservations now operate dispensaries, bringing their own tribal laws into conformity with the state medical marijuana program and adult-use regulations.

In South Dakota, the Oglala Sioux last year became the only tribe to establish a cannabis market without parallel state regulations, approving both medical and adult use in a March referendum at the Pine Ridge Reservation. That November, a statewide referendum legalized adult-use cannabis in South Dakota, although the state supreme court this November barred it from taking effect.

Sometimes the federal presence on tribal lands is welcomed by reservation governments. President Biden this November ordered several federal agencies to coordinate a new effort to combat human trafficking and crime in Indian Country, where rates of violence are more than twice the national average. But the boundaries between tribal and federal power have long been contested. As Berger told AP: “The tribes are sovereign nations, and they have treaties with the United States, and in some cases there is concurrent jurisdiction… It’s sort of this hybrid.”

‘We Are Being Discriminated Against’

Cannabis Now reached Gov. Craig Quanchello by phone at Picuris Pueblo. He fills in some details on the two raids at the reservation.

Of the medical marijuana test plot that was destroyed in November 2017, he stresses the tribal government’s effort to be transparent. “We met with the US Attorney’s office, and the [Taos] county and state officials, to let them know what we were doing. Our program mirrored the state’s, but we added PTSD and opioid abuse as treatable conditions.” 

Nonetheless, in the 2017 raid, “They brought in dogs and surveillance airplanes—basically shutting down our world. At that point we were hesitant to go forward.”

With new administrations in both Washington and Santa Fe, the tribe was just beginning to get over this hesitancy this year. House Bill 2, the legalization measure signed by Gov. Lujan Grisham on April 12, includes a provision for “intergovernmental agreements with Indian nations, tribes and pueblos.”

Then came this November’s raid on Charles Farden, a non-Native who is married to a tribal member and is enrolled in the state medical marijuana program. “The pueblo recognizes the state card,” Quanchello says.

Quenchello sees cannabis as an obvious option for the mountain-locked pueblo, where the already meager economy has been hit hard by the COVID-19 pandemic.  

“We’re farmers by nature,” he says. “We’ve always grown our traditional crops—corn, hay, alfalfa. We don’t have much population, but we have land. We see this as a means of economic development.”

And he portrays the willingness to work with the state government as a matter of good faith. “We don’t have to,” he asserts. “We are sovereign. But we want to do it, in a spirit of teamwork.”

Yet he’s open about his frustration at two federal raids, even as other reservations around the U.S. have been given some breathing room.

“Why is the BIA picking on us, the smallest pueblo in New Mexico, with no gaming and not on a traffic route? The money is not going to go into anyone’s pocket, it’s going back to the community—to provide healthcare for our kids, our elders. We don’t get enough federal funds to operate, and the funds are dwindling every year. We’re being discriminated against here.”

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New Mexico Issues First Adult-Use Cannabis Cultivation License

Efforts to implement the legalization of adult-use cannabis in New Mexico made new progress this month as regulators issued the first license to cultivate recreational marijuana in the state. Tony Martinez, the CEO of Mother’s Meds, announced in a statement last week that the New Mexico Regulation and Licensing Department had issued a license to the company to operate as a cannabis cultivator on November 1.

The company will join 34 other cannabis producers previously licensed by the Department of Health to cultivate medical marijuana, many of which will also grow adult-use cannabis. On Wednesday, a spokesperson for the state’s Cannabis Control Division (CCD), which is overseen by the department, confirmed that the license had been awarded pending a background check of the applicants.

“Mother’s Meds has been issued a cannabis producer’s license and that license will go into effect as soon as all background check requirements are met,” division spokesperson Heather Brewer said in a statement quoted by the New Mexico Political Report. “The Cannabis Control Division is excited to start issuing licenses and looks forward to public announcements and celebrations of new businesses as the Division works to stand up a thriving adult-use cannabis industry in New Mexico.”

Martinez credited the “hard work, due diligence and adaptability” of the company’s staff and San Juan County’s “business friendly attitude” for the first cultivation license being issued to Mother’s Meds, which is doing business as Lava Leaf Organics. He added that the company “will continue to comply with all CCD rules and regulations” as it gets cannabis production up and running.

Rather than hiring a substantial number of employees, Martinez said the company will operate by contracting with cannabis industry professionals. 

“My least favorite part of business is placing a value on another person’s efforts and talents; this model allows people more control over their destiny and to work with us, not for us,” Martinez wrote in a statement. “I believe this will allow our community to attract and retain more talented professionals than our competitors.”

More Than 1,500 More Cultivation License Applications Still Pending in New Mexico

Since the CCD begin accepting applications for adult-use cannabis producers in August, more than 1,500 potential applicants have initiated the detailed and time-consuming process. More than 1,000 applications were started for licenses to operate microbusinesses, which are limited to growing no more than 200 cannabis plants at a time.

“We’re off to a great start,” John Blair, the deputy superintendent for the New Mexico Regulation and Licensing Department, told local media earlier this month. “I don’t know that we could have anticipated what the demand was going to be other than knowing there really seems to be a great excitement across the state.”

State regulators continue to accept applications, and Blair noted that regulators have not established a cap on the number of licenses issued, a practice common in many jurisdictions with legal marijuana production.

“We don’t have any limit on the number of people that we’ll license for any of the cannabis businesses,” he said. “If a million New Mexicans want to get a license, we would license a million people.”

Completing the application, however, is not a simple process. Johnathan LeDuc, an applicant hoping to produce medical and recreational marijuana in Los Alamos, said that the CCD required him to submit a social and economic equality plan, a government identification card, a current business license, a fire inspection report, zoning approval, proof of business premises ownership, a diagram of the location, a water and energy use plan and a demonstration of water rights.

“It’s quite a daunting process. The application is very, very thorough, and there’s a lot of steps and requirements,” he said. “I have basically only been able to submit my application provisionally.”

No Guarantee of Success

While there is no limit to the number of licenses that can be issued to cultivate adult-use cannabis in New Mexico, receiving one does not guarantee a successful business. A.J. Sullins, a New Mexico resident who owns cannabis companies in several other jurisdictions and is now applying to produce marijuana in his home state, said that market forces and production costs are likely to lead to many business failures.

“There’s going to be quite a few people who have received licensure and their costs are outweighing their revenue because they didn’t plan for a low-cost production,” he said. “And they’re going to start to get consolidated or washed out within a three-year period. I saw the same thing happen in Arizona.”

Sullins added that even businesses with millions of dollars in investment can have difficulty competing with large multistate cannabis operators.

“There’s about one or two large players out there who are absolutely dominating the market,” he said. “I hate to use the word, but almost ‘monopolizing’ the market. So competition is definitely steep at the top.”

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New Mexico Considers Changes to Limit Recreational Cannabis Tourism

Regulators in New Mexico held a public hearing this week to discuss rules for the state’s forthcoming recreational cannabis market. 

The state’s Regulation and Licensing Department, as well as its Cannabis Control Division, fielded questions and comments from the public during last Thursday’s hearing over the rules that will govern cannabis retailers and manufacturers.

According to the local website NM Political Report, the comments at the hearing “varied from proposed regulations for packaging requirements, general business practices to cannabis deliveries to both businesses and residences.”

The meeting was highlighted by the appearance of Katy Duhigg, a Democratic state Senator who also serves as a cannabis attorney in Albuquerque. Duhigg “brought up a series of issues she said she would like to see changed and offered specific suggestions,” according to the website. It was reported that she “took issue with a proposed requirement that cannabis manufactures prove they have access to water rights because manufacturing doesn’t necessarily use water the same way cultivation does.”

“Requiring all manufacturers to prove water rights for their application, I think, is unreasonably burdensome, because it’s just not going to be a factor for a number of them,” Duhigg said, as quoted by NM Political Report

Lawmakers in New Mexico passed a bill legalizing recreational pot use for adults during a special legislative session in the spring. The legislation was signed into law in April by Democratic Governor Michelle Lujan Grisham. This means big things for New Mexico, as for the first time ever, they will finally have a legal cannabis industry. 

Legislators had failed to pass a legalization bill during the regular 60-day session, prompting Grisham to call a special session to get the proposal over the finish line.

“The unique circumstances of the session, with public health safeguards in place, in my view, prevented the measures on my call from crossing the finish line,” Grisham said at the time. “While I applaud the Legislature and staff for their incredible perseverance and productivity during the 60-day in the face of these challenges, we must and we will forge ahead and finish the job on these initiatives together for the good of the people and future of our great state.”

Grisham’s office specifically cited the legalization bill as a reason for the special session.

“With general, across-the-aisle agreement on the importance of the legalization initiative, the governor intends to see through final passage of this potentially significant economic driver, which is estimated to create over 11,000 jobs and ensure New Mexico is not left behind as more and more states adopt adult-use cannabis legalization,” the governor’s office said at the time.

The extra time proved effective, as New Mexico legislators soon passed the Cannabis Regulation Act, which legalized recreational cannabis use for adults aged 21 and older. 

The new law officially went into effect on June 29, allowing such adults to have up to two ounces of pot outside their home (and even more inside their home).

Under the Cannabis Regulation Act, regulated marijuana sales must begin by April 1, 2022.

At the public hearing last Thursday, participants like Duhigg addressed some of the stipulations in the bill, including one requiring cannabis producers to “show that they have legal access to water after many members of the public raised concerns about New Mexico’s scarce water supply,” according to NM Political Report.

The website said that Duhigg with a “provision that would limit cannabis retail businesses from giving away free products to anyone but medical cannabis patients,” as well as one that “would limit cannabis deliveries to residential addresses.”

The latter, she said, will “reduce cannabis tourism in New Mexico.”

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New Mexico Explores Public Financing for Craft Cannabis Growers

New Mexico marijuana microbusinesses could have new options to launch their operations under a plan that would provide public financing for craft cannabis growers in the state’s newly approved recreational marijuana industry. Under a plan suggested by the New Mexico Finance Authority earlier this month, authorities would establish a $5 million line of credit and offer loans of up to $250,000 to newly licensed craft cannabis growers in the state.

In April of this year, New Mexico lawmakers passed the Cannabis Regulation Act (CRA) to legalize marijuana for use by adults and establish a regulated cannabis economy. The law, which went into effect in June, allows adults 21 and older to posses up to two ounces of cannabis and up to 16 grams of marijuana concentrates. Home cultivation of up to six mature cannabis plants is also permitted. The legislation also created the state Cannabis Control Division, which is required to begin issuing licenses to qualified commercial cannabis companies by January 1, 2022, with regulated retail sales scheduled to begin on April 1 of next year.

The CRA also established a microbusiness license class for small craft cannabis growers cultivating up to 200 plants in a single location. Additionally, the legislation requires the state to establish programs that support business opportunities for members of communities disproportionately harmed by the War on Drugs, as well as provide help for farmers and residents of rural and economically disadvantaged communities. So far, state regulators have received at least 22 applications for licenses to form cannabis microbusinesses, according to public records.

Legislative Committee Considers Plan

Under the plan unveiled at a meeting of the New Mexico Finance Authority Legislative Oversight Committee on October 14, loans for cannabis microbusinesses would be underwritten by the state’s Economic Development Revolving Loan Fund, which supports economic development in remote areas of New Mexico. Funds for the program would be drawn from idle loan reserves including money allocated for critical services during the coronavirus pandemic that has not been spent.

Only newly licensed microbusinesses would be eligible for the loans under the proposal. Established medical marijuana businesses in the state would not be eligible. New Mexico Finance Authority CEO Marquita Russel, who has drafted preliminary rules for the proposed loan program, told lawmakers on the committee that traditional business loans are widely unavailable to small companies in the legal cannabis industry.

“They have very few options. If you are a startup cannabis microbusiness, you can’t go to a bank, you can’t go to the Small Business Administration,” Russell said. “There is not a space for a small business to get a loan of this sort.”

Russel acknowledged that there will be challenges to administer the loan program for newly licensed cultivators, noting that many of those eligible for support will be making a transition from the illicit marijuana economy.

“We anticipate that most of them will not have current financial statements,” she said.

To mitigate the risk of making loans to unproven New Mexico marijuana microbusinesses, applications for the program would require guarantees of repayment with collateral including land or equipment. Those who qualify for the loans would be required to pay them back within five years.

“We will be fully secured. These are our dollars, they need to be repaid,” Russel said. “These aren’t (loans) for people who just kind of decided this might be fun.”

State Regulation and Licensing Department Linda Trujillo superintendent, who oversees the Cannabis Control Division, told the committee that providing support to craft cannabis growers is essential to creating an equitable regulated marijuana economy in new Mexico.

“If we don’t find a way to help these microbusinesses to enter into the market, then ultimately they will be shut out,” Trujillo said during the committee hearing.

Lawmakers Hesitant About Loan Program

Members of the finance authority oversight committee expressed reservations about the loan program for New Mexico marijuana microbusinesses, noting concerns about how applications would be vetted and approved. Lawmakers also wondered if the loans would go to those who need them the most.

“There are still so many questions in here, where questions can’t be answered,” said Republican state Sen. Stuart Ingle. “We may need to slow things down.”

Democratic Sen. Joe Cervantes pointed out that the cover sheet for the loan proposal presented at the hearing included text indicating the committee approved the plan even though a vote had not yet been taken. He characterized the manner in which the proposal was advanced as “bypassing the legislative process.”

“This feels like this is a take-it-or-leave-it situation,” Cervantes said. “It sounds like we have to approve this now.”

The committee did not take that step however, voting 6 to 5 against the loan program plan. Democratic Rep. Liz Thomson, the committee chair, suggested that Russell and Trujillo address the committee’s concerns and return in November so that lawmakers could reconsider the proposal.

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New Mexico Cannabis License Raises Eyebrows

A lucrative cannabis producer license that was issued by the New Mexico Department of Health with little notice only days before the agency lost its regulatory authority is raising eyebrows. Some of the state’s marijuana industry insiders are calling for an investigation into the affair amid allegations of favoritism.

The license awarded to Albuquerque-based GH LLC came less than a week before the health department ceded authority over the state’s Medical Cannabis Program (MCP) to the state’s new Cannabis Control Division, which was created following the legalization of adult-use cannabis by New Mexico lawmakers in April. The license, the first awarded by the health department in six years, was issued following a short, unannounced application period in June.

“This new licensee process has certainly ignited a fair amount of distrust, raised eyebrows and questions,” Duke Rodriguez, president and CEO of New Mexico Top Organics-Ultra Health, the state’s largest medical cannabis business, told the Santa Fe New Mexican last week.

“There are a number of good folks who have invested time, effort and resources while not knowing there might have been an express lane,” he said.

License Awarded After Unannounced Application Period in New Mexico

On June 23, only days before the Cannabis Control Division of the state Regulation and Licensing Department took over marijuana regulation, the health department posted a notice on its website titled “Medical Cannabis Licensed Non-Profit Producer Application Instructions.” No official notice that applications were being accepted was issued, however, although an online application listed a June 28 deadline.

According to documents obtained under a public records request, on June 25, only two days after the application instructions were posted, GH LLC submitted a 731-page application for a nonprofit medical cannabis producer license. On Sunday, June 27, Dominick Zurlo, director of the MCP, and Billy Jimenez, general counsel and deputy secretary of the Department of Health, visited the GH LLC facility in Alburqueque to perform an inspection. One day later the “legacy” producer license was issued by the department for a fee of $10,000.

“In my opinion, this was a dirty affair,” said Willie Ford, managing director of Reynold Greenleaf & Associates, a consulting firm for cannabis businesses. “This was obviously somebody making it happen for somebody else.”

Health Department Responds to Questions

Department of Health spokeswoman Baylee Rawson said that the department “often posts announcements through the website,” adding that the site is visited frequently by medical cannabis license holders and patients.

“It is also one of the primary methods used to present information and updates about the program including meeting announcements, patient statistics, educational materials and other reports and documents,” Rawson wrote in an email.

Rawson also wrote that for several months, the Department of Health had been working “on opening licenses for additional licensees to help ensure patients had additional options for obtaining their medication.” When asked about the Sunday inspection during the narrow application window, Rawson said that, “It is not unusual for MCP staff to work on weekends due to the high workload and demand for services.”

Emails obtained through the public records request show that after the transfer of responsibility for the Medical Cannabis Program, decisions regarding the GH LLC application were made by top officials at the Cannabis Control Division. In August, acting deputy director of business operations for the division Nicole Bazzano asked health and safety specialist Joshua Wilson for an update on the status of the application.

“It’s my impression that they are just waiting on the inspection from you in order to start producing/manufacturing, is that correct?” she wrote. “What can we do to get them taken care of and up and running properly and legally?”

The following day, Wilson replied that he “had to go back and do a bit of research on this one” and that he “largely” had no information on the approval of the license.

“The processing, inspection and approval were done at a level above MCP License and Compliance staff,” he wrote. “After looking at the approval letter, it does appear that they were issued some form of conditional approval allowing for the completion of infrastructure and requiring re-inspection before being allowed to cultivate, manufacture, or distribute.”

The ‘Mack Daddy of Licenses’

Rodriguez of Ultra Health characterized the license awarded to GH LLC as the “mack daddy of licenses.”

“You’re the vertically integrated license that allows you to do everything—produce, manufacturing—you can do all those things,” he said. “The new approach under the [Cannabis Regulation Act] makes you subject to having this silo effect. You have to get a license for manufacturing. You have to get a license for retail. You have to get a license for production.”

Medical marijuana advocate Larry Love, the host and producer of Santa Fe-based Medical Marijuana Radio, said that he knows “plenty of people” who would have applied for the medical marijuana producer license had the application period been publicized by the health department in advance.

“It just doesn’t seem fair to the public, knowing that someone was able to get a license ahead of everybody else,” said Love.

But in a brief interview last week, GH LLC founder Vance Dugger apparently shrugged off the controversy over the license, saying “We submitted an application like everyone else.”

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New Mexico Approves Cannabis Rules and Prepares for Legalization

New Mexico officials have announced the arrival of cannabis producer rules, and they plan to allow interested producers to begin their applications for licenses sometime this week.

The New Mexico Regulation and Licensing Department announced on Facebook on August 24 that rules regarding cannabis producers have been finalized and are effective today, and that the agency will begin to accept applications sometime this week. 

“Producer Rules Effective Today! The rules that take effect today cover the licensing of cannabis producers—the people and businesses that grow and harvest cannabis,” the post read. “The rules include plant count limits, which are required by the Cannabis Regulation Act, as well as licensing fees. The Cannabis Control Division will start accepting license applications through its streamlined online system later this week. The CCD has 90 days to approve or deny an application once a completed application is received.”

This is the first round of rules released to the public. Eventually, more will follow with details about retailers and testing facilities, among other important topics. These rules will need to be finalized by January 2022.

“We are ready for business,” said New Mexico Regulation and Licensing Department Superintendent Linda Trujillo about the announcement. “The Cannabis Control Division is committed to supporting licensees to maximize the economic opportunities that adult-use cannabis sales offer our state.”

The rules were published on the New Mexico Commission of Public Records website in four different sections: General Provisions, Licensing and Operational Requirements for Cannabis Establishments, Cannabis Plant Limits and Process to Address Shortage of Cannabis Supply in the Medical Cannabis Program and Fees.

One point of concern has been rules regarding allowances for large-scale cannabis cultivators. Following two public hearings, the final rule text states that cultivators may grow between 6,000 and 8,000 mature plants (or up to 10,000 if they have special approval from the state). There are varying levels of farm sizes ranging from Level 1 (201-1,000 plants), Level 2 (1,001-3,000 plants), Level 3 (3,001-6,000 plants) and the final tier, which includes the information above. Originally, the Cannabis Control Division set plant caps at 4,500 per producer.

The rules also address the growing concern of shortage of medical cannabis. “Upon the division allowing commercial cannabis retail sales, cannabis retail establishments shall make reasonable efforts to sell a minimum of 25 percent of their monthly cannabis sales to qualified patients, primary caregivers and reciprocal participants, or to other licensed cannabis retail establishments that meet or exceed the 25 percent sales to qualified patients, primary caregivers and reciprocal participants until December 31, 2022,” the rules state. The rules also detail a plan for addressing further shortages if they persist through December 2022.

Finally, a section dedicated to social equity efforts states that a plan will be created no later than October 15, 2021, and will include numerous guidelines regarding disproportionately affected communities, individual assessments and any incentives for social equity applicants.

New Mexico is the 17th state to legalize recreational cannabis, which was made official when Governor Michelle Lujan Grisham signed legislation in April 2021. The law, which took effect on June 29, legalizes possession of up to two ounces of cannabis and allows residents to cultivate up to six mature plants for personal use. Recreational cannabis sales are expected to launch by April 2022, although it is possible that they could start sooner than April if the rules are well received and not challenged in court.

In addition to the rule announcement, a recent court ruling established that the Department of Health and the Regulation and Licensing Department cannot enforce purchase limits for medical cannabis or take away rights of medical cannabis patients that they receive under state law, effectively increasing the amount of medical cannabis that can be purchased by patients.

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