July 12, 2021

Top NM cannabis regulator on rule changes: Substantive changes require a new hearing

There are less than two months left before the New Mexico Regulation and Licensing Department is required by law to start accepting recreational-use cannabis business applications. But before the department can do that, it needs to finalize rules that outline its own standards and requirements for cannabis businesses. 

The department held a public rulemaking hearing last month where dozens of people raised concerns of large cannabis growers potentially exploiting local water rights and excess water use, particularly in areas dependent on acequias. Many of the hundreds who spoke at the hearing also asked logistical questions, all of which the hearing officer said would be answered by the department outside the hearing. 

Last week RLD announced it would conduct another public hearing for an updated set of proposed rules. In a phone interview last week, RLD Superintendent Linda Trujillo told NM Political Report that the new set of rules include changes based on previous public comments as well as new proposals. 

Limits on production limits, for example, were added to the new proposals, but the department also added a proposal for provisional licenses after many people raised concerns about a requirement that physical space is secured before applying for a cannabis business license. 

The following is a conversation between NM Political Report and Trujillo, which has been edited slightly for clarity and brevity.

NM Political Report: Can you explain to readers why RLD is doing another round or rules, separate from the last batch?

Linda Trujillo: It’s a pretty straightforward answer. When you put rules out for the public to make comments on, if the comments diverge from the rules that were published, to an extent that it’s legally determined to be not a logical outgrowth, and that means that there’s really been substantive changes that the public should have a right to go back out and comment on, then you have to do this process. We had hoped that wasn’t going to be the case, but as the comments came in, and as we got closer to the hearing, it appeared that there was probably some substantive changes. We got more reference material, and ultimately the changes that needed to be made, we determined, from a legal standpoint, were substantive enough that they weren’t logical outgrowth. So we need to go back out for a hearing.

Production limits have been a big topic over the past several years. Now it seems that the proposed rules could result in at least some producers having up to 10,000 mature plants at a time. Can you explain how RLD came up with that number?

In the public comments, we had to submit a research document that we worked with the Department of Health to get commissioned to look at that. We had that as a reference material and we have reference materials from other states that have made those same decisions that we reviewed.  Ultimately, we did not include those other states’ reference materials, because it was kind of included in the research projects that we looked at. We got a document from Ultra Health with some research in there, and we looked at all of those. And that’s how we came up with the numbers that we came up with. Now, it’s important to note that research is not able to be compared apples to apples, because it’s about numbers, and it’s about assumptions, and it’s about how you look at those numbers. So ultimately, the numbers that we came to were an analysis that took all of the research that we reviewed, and made the most sense. When you look at the one that we got from the researchers who we got information from, and you look at the one from Ultra Health, they really were not that far apart. 

The proposal is to have different levels for production limits, right?

Yes, it is. And I think the important piece to note in that, is that we really had two reasons for wanting to do levels and one of them is really to help us as a department to actually have some guidelines for how much water it will take. This leveling allows us to come up with some general, “If you’re between this amount of plants and this amount of plants, this is how much you need.” And we can multiply that by how many seasons you grow. And so it really makes our work manageable instead of a plant-by-plant determination.

During the last rulemaking hearing, there were some public comments expressing concern over the proposed requirement that businesses have a physical space before applying for a license. What is the reasoning behind that requirement?

The reason for that is that we’re required by the statute to make sure that businesses are following state and local laws and ordinances. So in order to determine that they’re in the proper zone, that they are, in fact, prepared to pay their required taxes, getting a business license would give us all of that information. You’ve got to have your tax identification numbers before you get a local business license, you’ve got to be in the right zone before it’s awarded to you. So having that will show us that you’re adhering to those state and local requirements. But we did recognize, and we recognized this really early on, that we’re kind of setting up this chicken before the egg. And to say that you have to have that when the local folks are looking at whether or not you’re properly licensed with us puts people into a process that there really was no way to get off the merry-go-round and get a resolution. You might have noticed that in part two, that we’ve established the provisional license process, whereby if an applicant needs to have some sort of assurance from the state, that they’re going to get their license in order to finalize the purchase of land and then to get their business or finalize the lease of a of a building before they can get their business license. If they need some sort of an assurance that they’ve met all the requirements for licensure, except for these other things that are pending approval, then we’ll give them this approved provisional license letter that will list all of the things that they’ve accomplished. And that if they turn in these other things that are still pending, that they will be given a completed license and then able to do their business. So it was a way for us to still get those requirements but not stop the entrepreneur from moving forward on their business requirements.

I would imagine this was also the impetus for you sending a letter out to the Municipal League and the Association of Counties to get the ball rolling.

That is correct. That is absolutely correct. In our first round of rules we put [language] in there about being a certain distance from childcare and schools. It wasn’t until after that was already published and we couldn’t take it out, that we realized that authority didn’t rest with us. That is an authority that rests solely with the local jurisdiction. We felt like we have a responsibility to make sure that local governments are aware of what their responsibilities are. And because we had potentially kind of muddied the water, and made it a little more confusing, we felt compelled. So I sent that letter out. We’ll continue to meet with those decision makers in order to help answer their questions and make sure that they take care of and understand what their local authorities are.

There were also a lot of questions from the public during the last rulemaking hearing. How is RLD working to answer those questions?

We are working on an FAQ. I don’t know how quickly it’s going to come out. We had talked about trying to put out FAQs as we get them compiled, and then add information to it as we answer more. There were over 360-some public comments and a good number of those had questions. So we’re trying to put them into categories and groups so that we can try to answer them without having to answer each question individually. So those Q&A’s will be posted on the website. The report from the hearing is going to be rather small, because we’ve opted to go back out for public comment and don’t need a thorough analysis in the hearing report, because the recommendation is to go back out, because there’s so many changes. But we are intending to have an FAQ section on the website that continues to grow to answer those questions.

What is the likelihood that RLD would change any of these proposals based on public comment?

The new rules that were published on [July 7] are a combination of the public comments that we got, to the extent that we could make changes. So we do believe that public comment is reflected in the changed rules. They were changed because of public comment and input. Now, there are some things that we can’t change. There was a lot of public comment about requiring someone to be a New Mexico resident. The statute is really clear that we have the responsibility to encourage New Mexico residency. But because it says that we must encourage New Mexico residency, we cannot require it. The legislature did not give us authority to require that someone be a New Mexico resident. We’re looking into ways of encouraging New Mexico residency. As we really kind of drill down into what the social equity plan is going to look like, that’s going to be part of that.

Do you expect any more hearings before September 1?

I hope we don’t have to have another hearing on these particular rules. Whether or not we have another hearing, our hope is that the rules that we put out incorporated the changes to the extent that we could by law, and we felt was still maintaining public health and safety. It would be my hope that we don’t have to take these rules back out for a public hearing again. But we still have a multitude of other things that we have to do public hearings on and whether or not we’ll be in a position to have that ready to do something before September 1, I can’t tell you that. We are working on a scope of work for a research agency to help us start the process of testing laboratories. So depending upon how quickly that can get into place, we can get started. We’ll be looking at new rules for testing labs, we’ll be looking at new rules for manufacturers, new rules for couriers, for retail facilities, for servers, for educational folks. We’ll be looking at all of those, but hopefully, because we also have a contractor who’s going to help us with strategic planning and that strategic planning is going to be with the Cannabis Regulation Advisory Committee, will have a better defined social equity plan in place. And that may, in fact, have to go back out for rules. There could be some other rules that we’re moving forward on in a public hearing, but it would be my hope that these rules are close enough that any changes that we make now would be considered a logical outgrowth of what’s already been put out  for comment. 

How is the search for a Cannabis Control Division director and Cannabis Regulatory Advisory Committee members going?

The Cannabis Regulatory Advisory Committee members, we’re very close. I know we’ve told you that before, but we actually have to have them meet so that they can review the rules. Whether it’s before the hearing or whether it’s after the hearing, once we’ve taken public comment and compiled it, they are going to have to look at these rules, and make some recommendations prior to them being filed and published. We absolutely have to have them in place here very shortly. We have taken some time to reach out to other interested parties that we hadn’t spoken with in the past. That includes Indian Affairs, and taking some recommendations from the tribes, pueblos and nations. We have tried to make sure that we have as many interested parties having some input in it, which is why it’s taken us a little bit longer.

And as far as the cannabis control, division director?

We’re looking at people who have applied. We’ve sent out some emails to some of our email lists of people that we know, I have been talking with national folks and we’ve been looking at other regions. We’re really looking for somebody who has some experience in cannabis. And because it’s a new industry, or at least a growing industry, it’s not maybe as easy as it would be to find leadership for other operations. But we’re still in the process. We’re looking for people who have some cannabis experience to help us do this. In the meantime, I’m doing some work, [Deputy Superintendent] John [Blair] is doing some work, and it’s still all hands on deck. We do have 13 new positions from the Department of Health that are now RLD employees. So, now we’re up to 14 positions, with [Cannabis Control Division Deputy Director of Policy] Robbie Sachs and the employees from the Department of Health. So we’re making some progress.

Is there anything else that you want readers to know?

Social equity was a real priority for us, and it didn’t obviously come across that we felt that that was something that we were going to get to. I think the public, rightfully so, wanted to see some documentation that we actually were doing it. And so that was the inclusion of that social and economic equity [language]. I will just point out that one of the states that I saw that was the furthest advance on that, in regard to documentation that I could actually pull up and look at and read through, was New York. They’ve got a really cool, just a couple of pages of framework that really outline some guidance for us. That was part of what we used, to do that. 

The Regulation and Licensing Department will hold a public hearing, both virtually and in person, on Aug. 6. You can find more information about the proposed rules and supporting materials here.