Growers gain licenses for medical pot

Arkansas officially licensed its first medical marijuana growers on Tuesday after a contentious application process and monthslong court battle.

A spokesman for the state Department of Finance and Administration announced the issuance of the five cultivation permits in an email Tuesday, several hours after an Arkansas Supreme Court ruling lifting an injunction on the Medical Marijuana Commission was finalized.

An unsuccessful applicant’s lawsuit upended the process in March, and a cascade of scoring irregularities, inconsistencies and allegations of wrongdoing followed the suit. Most of those issues remain unresolved, and medical marijuana industry attorneys on Tuesday said more legal challenges are coming.

“This is going to be tied up in court for years,” said David Couch, the Little Rock attorney who drafted the constitutional amendment on legalizing medical cannabis that voters approved in 2016. Couch is also a member of Boll Weevil Farms of the Delta, which applied unsuccessfully for a cultivation license.

The five companies awarded growing permits are:

■ Natural State Medicinals Cultivation of Jefferson County.

■ Bold Team of Woodruff County.

■ Natural State Wellness Enterprises of Jackson County. ■ Osage Creek Cultivation of Carroll County.

■ Delta Medical Cannabis Co. of Jackson County.

It remains uncertain when the first dispensary will open in Arkansas, but at least one cultivation company said it will be able to provide medical cannabis next summer.

“BOLD is excited to move forward and implement the will of the people to serve patients in the State of Arkansas,” Bold Team said in a statement. “This will allow BOLD to provide medical cannabis to qualifying patients in the summer of 2019 and for many years to come.”

Former Attorney General Dustin McDaniel, a stakeholder and attorney for Natural State Wellness Enterprises, thanked the commission, saying his group was eager to get started.

“The voters have made clear that they want medication made available to patients expeditiously,” he said. “We’ll get to work immediately and waste no time.”

Don Parker, a stakeholder and attorney for Delta Medical Cannabis Co., echoed McDaniel.

“With the formal issuance of our license, Delta Medical will immediately proceed with continuing its medical marijuana cultivation efforts,” Parker said in a statement. “We look forward to serving the citizens of Arkansas who are in need of its use and have been required to endure a lengthy delay in its availability.”

Officials of the other two companies couldn’t be reached for comment.

Amendment 98 to the Arkansas Constitution made Arkansas one of 30 states to legalize medical marijuana. The amendment created the commission for the purpose of awarding permits to grow and sell the drug, which must be grown in Arkansas.

The commissioners elected to review and merit-score all 95 cultivation applications themselves instead of hiring an independent consulting firm or using a lottery system, as was recommended by others. Unsuccessful applicants have attacked the scoring process in protest letters and lawsuits, and media outlets have also uncovered a variety of issues in the applications.

Scott Hardin, a Finance Department spokesman, said complaints against the five growing companies will be investigated by the Alcoholic Beverage Control Division’s enforcement section, and Alcoholic Beverage Control Board may “revoke a license if warranted.”

The commission initially planned to award licenses during a formal meeting, but Hardin said in an email that the rules require the licenses to be issued after the successful applicants each pay their $100,000 licensing fee and post a $500,000 performance bond. All five groups met those requirements in March.

The commission planned to employ the same scoring process for dispensary applications, but last week it voted to explore hiring an independent consultant to grade the dispensary proposals. Commissioner Stephen Carroll, who proposed the change, said before making his motion that he thought the public was “losing trust” in the commission.

The commission plans to meet Thursday to discuss the next steps for licensing dispensaries. The meeting agenda also includes the discussion of an emergency rule change “concerning the extension of cultivation and dispensary applications, the awarding of additional or replacement licenses, and the [commission’s] option to rely on the existing applications and scores to fulfill those licenses for a specified period of time.”

The commission’s current rules state that unsuccessful applicants are disqualified after the licenses have been formally issued, and the rules don’t contemplate a scenario in which a company’s license is revoked.

From a legal perspective, the next question is whether any unsuccessful cultivation applicants can successfully challenge the commission’s licensing decisions in court. The state Supreme Court dismissed the previous lawsuit on procedural grounds, but attorneys aren’t sure whether the high court’s bar can ever be met.

To meet the Supreme Court’s threshold requires a quasi-judicial proceeding by the commission, but the commission’s rules don’t provide an avenue for such a process, according to several medical marijuana industry attorneys.

The licensing process has been highly competitive because of the amount of money successful licensees stand to make. Many companies also believe that holding a medical marijuana license will give them an advantage over other companies in several years when they expect cannabis to be legalized for recreational use.

Alex Gray, an attorney for the Arkansas Medical Marijuana Association, said Tuesday that he expects more lawsuits to be filed against the commission, but he wasn’t surprised it awarded growing permits because commissioners last week said they wanted to move the process forward.

Changing the scoring process, Gray said, would’ve done the opposite.

“Formulating some new procedure for scoring cultivation applications would result in lawsuits by the five successful applicants, and it would result in additional delays while the commission determines what that new process is,” he said.

The Arkansas Department of Health has approved 5,546 patients with one of 18 qualifying conditions for medical marijuana registry ID cards. Those patients will be eligible to purchase medical cannabis from 32 dispensaries once they open.