Arizona announces draft rules for adult, recreational marijuana sales

Arizona health officials have begun writing the rules for marijuana retailers the state will oversee following the passage of Proposition 207, which legalized adult, recreational use.

Sales of the drug could begin in the spring.

The election results were made official Nov. 30, meaning it's now legal for adults to possess as much as an ounce of marijuana and grow six plants at home, or 12 if there is more than one adult in the home.

But setting up the licensing and oversight of retail shops that sell the drug will take a few months.

Public can weigh in

The Department of Health Services on Thursday announced draft rules, much of which remain to be written, along with a survey asking the public what they like and what they see as deficient in the draft. The survey will be open until Dec. 17.

The regulation of recreational marijuana sales looks to follow the framework of the medical-marijuana program, which voters approved in 2010 and is regulated by the health department.

Health department spokesman Steve Elliott said Friday that the state anticipates meeting the statutory deadlines within the measure, despite the COVID-19 pandemic that is taking much of the department's attention. 

"While a large part of the operations of other ADHS divisions are devoted to the pandemic, ADHS, as currently staffed and structured, has the necessary personnel and resources to research, write, modify and improve rules for all programs within the agency’s purview," Elliott said. "At this time, we don’t anticipate needing additional staff to implement Proposition 207."

Applications to sell begin in January

Most of the licenses to sell recreational marijuana will go to the approximately 120 existing medical-marijuana shops in Arizona, but there will be about 12 new recreational-sales only licenses available in rural counties that have one or no medical retailers.

The voter-approved measure says the state shall begin accepting applications from medical-marijuana dispensaries that want to operate as recreational facilities from Jan. 19 to March 9, 2021.

No more than 60 days after receiving applications, the department shall issue licenses to those applicants that are in good standing with the department. With that timeline, recreational sales could begin around March 20.

"My confidence level has been high they will meet the deadlines," said Steve White, CEO of Tempe-based Harvest Health and Recreation Inc., which has 15 dispensaries in the state, more than any other company, and licenses for three more. "They have been given very aggressive timelines before and met them."

He said Arizona has been straightforward in its oversight of marijuana businesses, unlike other jurisdictions that have delayed implementing retails sales.

"We've seen across the country regulators delay at every stage along the way," he said. "That hasn't happened a lot here in Arizona with the exception of when politicians required them to stop."

In 2011, former Gov. Jan Brewer tried to stop the implementation of the medical-marijuana program with a lawsuit that was eventually thrown out, but which delayed licensing of dispensaries.

Notwithstanding any similar challenges, the Department of Health Services appears on schedule.

Dispensary industry combing through proposed rules

White said that based on the draft rules, health department officials appear to be following the letter and intent of the proposition.

"In order for them to meet these aggressive timelines they can’t make radical changes to the program," White said.

Samuel Richard, executive director of the Arizona Dispensaries Association, said his group will go through the rules line by line and offer feedback by next week.

"We were expecting ... a quick and dirty draft rules around this time such that the department can start to receive some feedback from folks that have been working nearly a decade in the market," Richard said.

Those applying for a license to run an adult-use recreational retail operation or a marijuana testing facility will pay a $25,000 fee to make that application, according to the draft rules, and it will cost $500 to apply for a license to work at a marijuana retailer.

The Department of Health Services also announced that Branch Chief Thomas Salow from the licensing division and Robert Lane, chief of the office of counsel and rules, will be the public contacts for the rulemaking.

'Social equity' licenses still must be addressed

The proposition also calls for 26 additional "social equity" licenses to be distributed to people who have been disenfranchised by historical marijuana prohibitions, but those licenses are not even addressed in the draft rules yet.

The proposition only calls for the issuance of those social-equity licenses no later than six months after the rules for them are drafted.

"As with other rule-writing activity, ADHS will engage with stakeholders and entities that will be affected by Proposition 207, take public comment, and develop final rules for “social equity” licenses through a public process," Elliott said. "This is how rules will be developed for that form of licenses."

Other portions of the forthcoming rules, such as those for testing facilities, are noted in the draft as yet to be written.

"My understanding is they wanted to get this first, initial set out there, then the department will turn its focus to some of the other pieces," Richard said.

He said the rules governing the operation of medical dispensaries and new recreational dispensaries likely will be the same for the retailers that are licensed under the social-equity rules.

But what is different is who will be allowed to apply and how the social-equity licenses are allocated, such as whether they are determined by a lottery or a merit-based system, and so on.

He said the social-equity licenses are important to his organization.

"It was a key tenet of the initiative and frankly one of the bigger reasons we won so overwhelmingly," he said.