Big Sky Revolution

With new regulations and oversight, Montana’s cannabis industry is playing catch-up with the rest of the country

Montana was among the first dozen states to legalize medical marijuana, but, like many of its predecessors, its program was almost entirely lacking in regulatory oversight.

Patients could grow six cannabis plants for themselves and have one ounce in their possession. Medical marijuana providers could grow up to six plants per patient for a $50 annual licensing fee and little else; there was no tracking, no tracing, no inspections, no testing, no marijuana-specific taxes.

By 2010 — six years after voters approved legalization by a ballot initiative — Montana had roughly 4,000 permitted caregivers and 20,000 patients, and administrative expenses were leading to a $500,000 shortfall every year. In 2011, Montana nearly became the first state to reverse a legalization measure; the governor vetoed a bill that would have repealed the medical marijuana law. In 2016, voters approved new legislation that solidified the industry’s standing and expanded the program, while rejecting a ballot measure that would have required the state to follow federal law.

“We had programs up since 2004 without even an inspection until 2017,” says Kate Cholewa, the government relations liaison for the Montana Cannabis Industry Association (MTCIA). “When you have no inspections, no tracking, no oversight, no one knows. I am sure there were a lot of people operating legitimately and there were a lot who weren’t.”

Finally, after more than a decade of loose rules and uncertainty, Montana is heading down the rough-and-tumble path of bringing the industry into daylight, giving serious cannabis business operators the legitimacy they deserve.

Justin Turcotte, the owner of Ember in Columbia Falls (above and below), says under the current legislation his business is fine “but anyone with less than 50 patients is struggling.”

New Program, New Problems

After years of toiling on the backroads, Montana is looking to get its program on the highway that is the modern cannabis industry, but it’s having problems at the onramp. Everything seems to be behind schedule.

The state has been working to realize the promises of Senate Bill 333 since November 2017, but implementing seed-to-sale tracking, testing standards and a new licensing policy in a 14-year-old market hasn’t been an easy task for Montana’s Department of Public Health and Human Services. Essentially, the bill modernizes Montana’s medical cannabis program with new regulations for canopy sizes, licenses, inspections, Metrc traceability software, waste management protocols, packaging standards and a slew of new systems, while keeping some old regulations such as mandated vertical integration and tethering patients to dispensaries.

As of November 2018, Montana had 430 approved providers and 29,080 enrolled patients.

Some operators have been exhausted by the “hurry-up-and-wait” protocols; others are picking the legislation apart piece by piece in an effort to perfect the law in their eyes.

One major obstacle for both patients and businesses is connecting to Metrc.

Ten weeks after submitting his application, Ember owner Justin Turcotte received an email from the state saying his application failed because his business was already in the Metrc system. He would need to restart the application process.

All businesses providing cannabis for more than 10 patients were supposed to be in Metrc’s seed-to-sale tracking system by Sept. 3, 2018. So far, Turcotte has only managed to add the cultivation side of his business.

Due to changing regulations, Montana Advanced Caregivers has shut down three times, but owner Richard Abromeit remains hopeful that he will not have to shutter his doors again.

“It’s stressful because not only is the process used for businesses, but it’s also used for the patients to get their medical cards,” Turcotte says. “They are supposed to have medical cards processed within 30 days. That isn’t happening, but there’s no penalties or accountability for them (the state) to have to do so.”

Instead of handling applications internally, the state Department of Public Health and Human Services (DPHHS) contracted the work to Complia, a cannabis-specific licensing and registration platform that has also taken contracts to handle similar processes in Oklahoma and Maryland. On the DPHHS website, applicants are advised not to call within 30 to 35 days of submitting an application as “it only slows things down.” (At the time of publication, the department had not responded to multiple requests for comment.)

“They created a licensing model different than what was in the legislation,” Cholewa says. “But referencing the legislative process was something that they did not think was of consequence.”

Turcotte says the processing of patient applications has also changed from 30 days to eight weeks.

“People get mad at us for the time it takes to process their cards,” Turcotte says. “We’ve lost a few (patients) since some of them have gone back to the black market.”

But while providers and the MTCIA say the DPHHS is behind schedule, the Department of Revenue has been right on time collecting its 2% tax on all sales and the updated annual licensing fees for providers which range from $100 for a caretaker to $5,000 for providers with 50 or more patients.

The Right Direction

Even with all the problems, many cannabis operators believe the latest revision to the state’s medical marijuana program is, at the very least, a step in the right direction.

Under the old regulations — or lack thereof — there was almost no point in being transparent: No one regulating the program seemed to be paying much attention.

When Charlton Campbell, the former owner of Montana Buds, pleaded guilty to federal drug trafficking charges in March 2017, the crimes he committed may have been symptomatic of the broken state system. Because Campbell had prior felony convictions, he should have been barred from receiving a medical marijuana providers license after the Legislature in 2011 banned anyone with a felony from participating in the program (the state’s original medical marijuana legislation prohibited anyone with a drug-related felony from participating).

Yet, the state continued to renew Campbell’s license until federal prosecutors charged him with drug trafficking.

“It was a breeding ground for that kind of activity,” Richard Abromeit says of the state’s past programs.

For the past year, providers like Abromeit, the owner of Montana Advanced Caregivers in Billings, have been adjusting to the state’s newest set of regulations, which many hope will improve the program for patients.

“This new law, SB333, allows these businesses to exist and not have something hanging over their heads,” Abromeit says. “There’s a tax base coming into the state. Even if it just feeds the program, it is acceptance, it is regulation and that makes it go forward.”

“We’re all on a learning curve right now,” says Ricky Burns II, founder of the Bozeman-based edibles company, Cannalectables. “There’s a lot of detail work to be done, but I think the majority of the people are just happy that we can operate and that good things are coming for us.”

Montana Advanced Caregivers is being alotted more than 30,000 square feet of canopy space, but the company can supply its patient base with just 2,000 square feet.

Working out the Kinks

Now that the bar has been raised for license holders, providers like Abromeit hope to see the state remove the bad actors he’s been competing with for more than a decade. One of the biggest problems for compliant operators in the past has been a lack of inspections or state record to separate them from the bad operators.

“You can’t have rules and not have the backbone of the department to make the companies follow through,” Abromeit says.

Turcotte would like to see a law enforcement arm established to start dismantling the state’s black market, so DPHHS can focus its efforts on licensing and revisions to the current legislation.

He says it’s also problematic that the state has not defined penalties for medical providers other than a few specific violations that would cause a license to be revoked.

Another concern among the above-board licensees is the potential for overproduction. State regulations allow providers to use up to 30 feet of canopy for every patient tethered to the organization.

Abromeit says Montana Advanced Caregivers qualifies for more than 30,000 square feet of canopy, but his business is capable of supplying its patients with just 2,000 square feet.

“We created legislation that would help manage production, so we don’t end up in an overproduction situation. Our state did exactly the opposite,” Cholewa says. “If we’re not going to manage production rationally, then you’ve got to cap licenses.”

Cholewa hopes the 2019 legislative session will help stabilize the state’s medical cannabis program, but she knows passing two major pieces of legislation back to back is difficult to achieve.

Not all business owners see eye to eye with the MTCIA, but some of the organization’s concerns that are shared by providers include better enforcement of policies, reducing the allotment on provider canopy and untethering patients from providers so they freely explore the market.

“I am waiting for the next legislative session to see what happens,” Turcotte says. “Hopefully someone is going to bring some common sense to these rules.”

“We still have licensing tied to patients, so we can’t let the patients function as a market should because production is tied to them being tied to a provider,” Cholewa says. “In order to let the patients go where they want you have to untangle licensed production from how many patients you’ve got.”

Abromeit agrees that there are still issues that need to be addressed, but sees little use in being angry over them. He says he is thankful for the work the Legislature and regulators have already done and prefers to wait to lobby for the changes when the time comes.

“I just want this to move forward,” Abromeit says. “I am so tired of all the negativity that comes toward all the good that we actually do. By sending bulls–t to the state and having problems with the programs, all that does is give the patients problems in the end.”

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