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Closed-Door Negotiations With Minnesota Governor Could Make Tribal Nations Major Players In State’s Marijuana Market



“I never expected that all of the cannabis that they would grow would stay on reservation lands, that they would only be sold on reservation lands.”

By Peter Callaghan, MinnPost

Ongoing negotiations between Gov. Tim Walz (D) and a group of Minnesota tribal nations could make the tribes major players in the state’s recreational cannabis industry, both on and off reservation land, including in urban areas.

Walz was directed by last year’s House File 100 to negotiate “in good faith” with any tribes interested in entering the cannabis business, both medical and recreational. While the law acknowledges that sovereign tribes can act on their own land without agreement with the state—and three tribes have either opened or announced plans to open cannabis dispensaries on reservation—the law stated that a compact could “proactively address jurisdictional issues related to the regulation of the cannabis industry.”

Walz administration officials say talks are progressing and include discussions of off-reservation cannabis businesses owned by tribes, as well as business interactions between tribal entities and state-licensed businesses. The negotiations involve 10 tribes, though not all are expected to get into cannabis cultivation and sales, said the officials who agreed to speak to MinnPost on condition that their names not be used because negotiations are ongoing. The one tribe not taking part is the Upper Sioux Community.

Messages left for officials representing several of the other tribes involved in the negotiations were not returned in time to be included.

The state is represented by staff from the Office of the Attorney General, the Office of Cannabis Management (OCM), the governor’s office and outside legal counsel Mark Levitan, hired to help with the negotiations. The state has not engaged in negotiations for new compacts with tribes for decades and wanted outside legal expertise on cannabis law and tribal relations, which Levitan has, the officials said.

“These are friendly parties with the goal of getting to yes and making sure the state’s needs and the tribes’ needs are both met by what the statute allows,” one administration official said Monday. An agreement is not expected before the end of the legislative session in two weeks, with the administration officials saying they are aiming toward being ready in time for the launch of the new market.

“I don’t think we’re behind. I think we’re being deliberate,” the administration official said.

The extent of tribal cannabis operations in the fledgling cannabis industry is the subject of speculation among lawmakers and lobbyists crafting revisions to last year’s sweeping House File 100 that made Minnesota the 23rd state to legalize cannabis for recreational purposes. That is, how would details of any compact change how lawmakers and state regulators scale and stage the market?

“I’m a little surprised at how slow it’s going,” said Rep. Zack Stephenson, the Coon Rapids DFLer who has been the lead House member on the issue. And his counterpart in the Senate, Burnsville DFL Sen. Lindsey Port, said she hopes negotiations will be completed soon.

Both said they expect tribes—at least the handful that want to get into the legal cannabis business—to be significant players in the new industry. So far, that has meant cultivating cannabis and selling it from on-reservation dispensaries. But both lawmakers said they expect that could expand to include wholesale sales to non-tribal dispensaries, purchase of products by tribal entities as well as creating retail dispensaries on land that is outside what is considered tribally regulated land, which usually means reservations and trust land approved for tribal use by the federal government.

Stephenson said he always expected tribes would be “big actors” in the state cannabis marketplace, including off-reservation wholesale and retail sales.

“I never expected that all of the cannabis that they would grow would stay on reservation lands, that they would only be sold on reservation lands,” Stephenson said.

As to having tribes be able to wholesale cannabis to state-licensed dispensaries, Port added: “I hope so, but I can’t speak to the details being worked out between the governor and the sovereign nations.” She said that while she supports off-reservation retailing by tribes, the details of that are needed soon.

“As far as retail locations off of tribal lands…those will be taken into consideration of the numbers of licenses that will be granted,” Port said. “If a number of licenses are granted through compacting, in that case I would assume that OCM will remove that number from the amount that they will grant in total.”

Port said she considers the 11 tribal nations to be what are known in the new law as “social equity” participants, a term that covers people and neighborhoods that suffered from unequal enforcement of cannabis prohibition over the decades. The law gives social equity applicants—including those historically or currently involved in the illicit cannabis market—some preference for entering the new market.

“My hope is that those compact conversations will be able to wrap up as soon as possible because the tribes, as sovereign nations, have  a unique opportunity in the state of Minnesota,” Port said. “Ensuring that we get that compacting done promptly is, in my mind, critical to ensuring that they also have the ‘early mover advantage’ that we have discussed throughout the process of social equity applicants having.”

How big a player might tribes be? Stephenson said just three or four tribes have expressed interest.

“They’ve gotta bring resources to the table. They’ve gotta do all sorts of other stuff to work,” Stephenson said. “If you look at what Red Lake and White Earth [tribal nations] have done so far in terms of their cultivation, it is not gigantic. Neither of them are as big as either of the two medical companies, for example.”

The administrative officials said that OCM staff are involved in the talks and are aware of what impact the compact results would have on the rest of the market.

“OCM is deeply involved in all of these discussions since they would be the regulatory agency here,” one of the Walz administration officials said. “They’re tracking everything we talk about and how we are thinking about this as we progress.” The administration believes there will be enough demand for cannabis products that tribal involvement will not take away from non-tribal players.

“The tribes are well aware of competition and they want to be a good partner,” another administration official said. “We think there will be enough availability for everyone who wants to be engaged in the market.”

On its webpage, OCM describes how the state cannabis law treats tribal nations as “among the strongest in the nation to honor and recognize tribal sovereignty and the authority of Tribal Nations to make decisions about cannabis sales on tribal land.” Under “Tribal Partnerships,” it references the compacting requirement in the law.

Tribes with smaller reservations might not be interested in cultivating or perhaps would favor indoor grow operations and not outdoor farms. Others might prefer to purchase cannabis from other growers. There were proposals made earlier in session regarding tribal roles in the market. Rep. Jessica Hanson (DFL-Burnsville) introduced HF 4195 to set up a pilot project to allow the state’s two medical cannabis providers to sell to tribal governments and tribal cannabis businesses. Hanson said the measure did not get enough support.

Another proposal, circulated but not introduced, would have let social equity cultivators begin growing sooner than others and be allowed to sell to tribes.

Port and Stephenson are already meeting to work out differences between bills passed by the House and Senate. Both, however, agree on the basics of the law—that the state Office of Cannabis Management must provide a way for cultivation of cannabis to begin in the second half of this year and that changes in how licenses are distributed should be made. The latter means that what OCM calls a “vetted lottery” likely will replace a points-driven system based on preparations taken by applicants and whether they qualify as social equity applicants.

Walz said last week that he is aware of moves to get plants in the ground sooner than current law envisions. HF 100 requires that all rules be final before any licenses can be issued by OCM, something it forecasts to be March of 2025.

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“We certainly hear people on this,” the governor said last week. “I think there’s some potential there and as of yesterday it sounded pretty optimistic. Maybe we can move something. But as I’ve said, anytime we can start cultivating will be early cultivation since we’ve never had it. I understand the sense of urgency but the arbitrary decision of when it had to be, we’re trying the best we can but we’re not going to cut corners.”

As with other compacts, such as the tribal gambling agreements negotiated in 1989 under the federal Indian Gaming Regulatory Act, the governor has the authority to reach agreement without legislative scrutiny. House File 100 included direction for the governor to conduct compact talks if any tribes request them.

“The legislature finds that these agreements will facilitate and promote a cooperative and mutually beneficial relationship between the state and the Tribes regarding the legalization of cannabis,” the law states. “Such cooperative agreements will enhance public health and safety, ensure a lawful and well-regulated cannabis market, encourage economic development, and provide fiscal benefits to both Indian Tribes and the state.”

The law states that the governor cannot require any revenue sharing or right to tax tribally licensed cannabis sales, cannot require state licensing or oversight and cannot require tribes to permit state laws to be enforced on tribally regulated land. It also, at some length, assured that business interactions between tribal entities and state-regulated businesses—as well as interactions between non-tribal customers and tribal businesses—would be legal.

Walz acknowledged in February that some tribes had requested compact negotiations, including sales on tribal trust land—off reservation property.

“So that still is a gray area,” Walz said. Because of its geographic isolation, the Red Lake tribe has asked about being able to sell off reservation. “So they’re gonna press the limit as far as they can. And they’re the one who brought that up,” he said. “‘We have Red Lake citizens in Minneapolis. Why can’t we set up there?’ So they have raised the issue.”

But the administration officials said the use of tribal trust lands is not a significant part of the talks because those lands are limited in usefulness. Instead, the negotiations have surrounded tribal operations on non-tribal land.

This story was first published by MinnPost.

Minnesota House Passes Bill Changing Marijuana Social Equity And Licensing Rules

Photo courtesy of Chris Wallis // Side Pocket Images.

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