The Justice Department is asking a federal court to force California marijuana regulators to disclose documents about cannabis businesses’ licenses and shipping manifests for reasons that remain unclear.
A petition with the U.S. District Court for the Southern District of California on Monday says the Drug Enforcement Administration (DEA) subpoenaed documents about marijuana companies and owners from the state’s Bureau of Cannabis Control (BCC) back in January—but regulators declined to comply because the request did “not specify relevancy” and they said it risked violating privacy laws.
What sort of federal investigation is at hand is unclear. In general, the Trump administration has maintained a hands-off approach to state marijuana policies despite the rescinding of an Obama-era memo that generally directed prosecutors to avoid interference in licensed cannabis markets, and the president has asserted that he supports the rights of states to set their own laws regardless of federal prohibition.
The DOJ court filing listed three specific types of records DEA is seeking through the subpoena: “unredacted cannabis license(s), unredacted cannabis license application(s), and unredacted shipping manifest(s).” The department said it “seeks the documents for only six entities, which include three corporations and each corporation’s presumed owner; and it seeks the documents for a limited period of roughly two years, stated as ‘January 1, 2018 to Present.'”
The targeted cannabis businesses and owners are not named in documents that have been publicly released in the new case. Marijuana Moment reached out to DOJ and BCC for comment, but representatives were not immediately available.
Two months after DOJ’s initial request, the agency “spoke with BCC attorneys and attempted to assure them of the Subpoena’s validity and the necessity for compliance, but the BCC’s position did not change,” the filing states. “The United States sent a letter to the California Attorney General (and BCC Counsel) in May and provided an opportunity to respond prior to filing this action. The BCC stated that its position had not changed, and it has not complied with the Subpoena to date.”
The federal filing says that the federal government is “not aware of any court that has invalidated DEA’s use of administrative subpoenas to obtain material relevant to an investigation.”
It also rejects the state’s arguments about privacy concerns with sharing the requested materials.
“The United States is aware of no authority holding that a state entity may rely on state law-based privacy interests to refuse to respond to a federal subpoena, issued pursuant to federal law,” the filing states. “And the BCC has not presented any federal law that permits non-compliance with this federal subpoena.”
“In refusing to comply with the Subpoena, the BCC asserted that California state laws prevent disclosure of the requested documents. These state laws, however, either permit disclosure or do not apply. Yet even if a state law does purport to prevent production, the Supremacy Clause would preempt such law. None of the cited state laws prevent producing the documents to the DEA. But it also would not matter. That is because when state law does contradict federal law that requires production, federal law, not state law, controls.”
DOJ said DEA “meets the procedural requirements” for its subpoena request, which the government argues “is relevant and material to a DEA investigation, and is specific and narrow in accordance with the Fourth Amendment reasonableness requirement.”
“Not one reason permits the BCC to refuse to comply with the Subpoena. And even if a state law does purport to prevent compliance, the Supremacy Clause would preempt such law,” the filing states.
DOJ requested the court that it must compel the California agency to act within seven days.
BCC “has not complied with the Subpoena and informed the United States multiple times that it will not produce the requested documents,” the feds wrote. “The United States has made all efforts to obtain compliance short of litigation, but the BCC refuses to comply with the Subpoena.”
In the initial subpoena, a redacted version of which was released as an exhibit attached to the court petition, DEA had asked that California’s regulatory agency “not disclose the existence of this request or investigation for an indefinite time period. Any such disclosure could impede the criminal investigation being conducted and interfere with the enforcement of the Controlled Substances Act.”
BCC responded at the time in a letter that is also being publicly released that it “objects to the subpoena and will not produce the requested documents as the subpoena does not specify the relevancy of the subpoena and requests information that is confidential, protected from disclosure, and part of pending licensing application investigations.”
The department argued that DOJ’s request “fails to meet the appropriate standard of establishing that the records are in fact relevant to this particular investigation” and “seeks information that is confidential and not subject to disclosure.”
“In addition to the personal information provided to the Bureau, an applicant or licensee must provide procedures for the business and a diagram of the businesses premises,” it argued. “These operating procedures contain information concerning trade secrets or other proprietary information protected from disclosure. Additionally, both the procedures and diagram of the premises contain information that could impact the security of the business.”
This legal action comes weeks after a DOJ whistleblower accused Attorney General William Barr of directing investigations into 10 cannabis firm mergers because of the top prosecutor’s alleged personal animus for the industry.
That said, a top department official said in a letter to Congress that those actions are better understood as helping to ensure consumers have affordable access to products in a competitive cannabis market—a curious position for the federal government to take.
Read the federal court filings seeking California marijuana business information below:
DEA’s Hemp Rule On THC Content Misinterprets Congressional Intent, Senators Say
A pair of senators representing Oregon sent a letter to the Drug Enforcement Administration (DEA) on Thursday to demand changes to the agency’s proposed hemp regulations.
This is the second congressional request DEA has received on the subject this week, with a group of nine House members similarly imploring a revision of a rule concerning hemp extractions on Tuesday.
DEA released an interim final rule (IFR) for the crop in August, and it said the regulations were simply meant to comply with the 2018 Farm Bill that legalized hemp and its derivatives. But stakeholders and advocates have expressed serious concerns about certain proposals, arguing that they could put processors at risk of violating federal law and hamper the industry’s growth.
Sens. Ron Wyden (D-OR) and Jeff Merkley (D-OR) said in the new letter that despite DEA’s claim that its IFR is only about compliance, the proposal “does significantly more.”
“The IFR treats hemp as a Schedule I controlled substance at any point its THC content exceeds 0.3% THC,” they said. “However, when Congress passed the 2018 Farm Bill, we understood that intermediate stages of hemp processing can cause hemp extracts to temporarily exceed 0.3% THC, which is why we defined hemp based on its delta-9 THC level.”
“In effect, the IFR criminalizes the intermediate steps of hemp processing, which is wholly inconsistent with Congress’s clearly stated purpose and the text of the 2018 Farm Bill,” the letter states.
In other words, while Congress intended to legalize hemp extracts, businesses that produce the materials could find themselves inadvertently breaking the law and be subject to enforcement action if THC levels temporarily increase beyond 0.3 percent.
A public comment period on DEA’s proposed rules closed on Tuesday. It saw more than 3,300 submissions, many of which focused on issues with the “work in progress” hemp THC issue.
Another issue identified by more than 1,000 commenters concerns delta-8 THC. The most widely known cannabinoid is delta-9 THC, the main component responsible for creating an intoxicating effect, but delta-8 THC from hemp is also psychoactive and is an object of growing interest within the market.
Because DEA’s proposed regulations state that all “synthetically derived tetrahydrocannabinols remain schedule I controlled substances,” some feel that would directly impact the burgeoning cannabinoid, as its converted from CBD through the use of a catalyst—and that could be interpreted as a synthetic production process.
In any case, it’s not clear whether DEA deliberately crafted either of these rules with the intent of criminalizing certain hemp producers—but stakeholders and advocates aren’t taking any chances.
The U.S. Department of Agriculture (USDA) has faced separate criticism over its own proposed hemp rules, though it has been more proactive in addressing them. Following significant pushback from the industry over certain regulations it views as excessively restrictive, the agency reopened a public comment period, which also closed this month.
USDA is also planning to distribute a national survey to gain insights from thousands of hemp businesses that could inform its approach to regulating the market.
Read the letter from Wyden and Merkley on DEA’s hemp proposal below:
Photo courtesy of Brendan Cleak.
USDA Releases, Then Rescinds, Hemp Loan Notice Following Congressional Action
The U.S. Department of Agriculture (USDA) recently released—and then promptly rescinded—a notice on providing federal loans for hemp processors.
After the crop was federally legalized under the 2018 Farm Bill, USDA announced that regulations were being developed to offer direct and guaranteed loans to the industry. The federal agency unveiled those guidelines in April and then issued a new notice this month notifying applicants about the policy change ahead of the planned expiration of the earlier 2014 hemp pilot program.
The next day, however, it posted an “obsoleting notice” invalidating the prior document.
The new guidance “was developed with the understanding that operators would no longer be authorized to produce hemp under the 2014 Farm Bill Pilot Program,” USDA said. However, because Congress approved a continuing resolution that extends the program until September 30, 2021, the loan policies are not currently applicable.
That pilot program extension came at the behest of numerous stakeholders, advocates and lawmakers who have been pushing USDA to make a series of changes to its proposed hemp regulations. As those rules are being reviewed and finalized, they said it was necessary to keep the 2014 program in place.
The president signed the continuing resolution late last month, so it’s not clear why the notice on loan policy changes was released weeks later, which then necessitated a follow-up recision. But in any case, it’s another example of the fluidity and challenges of rulemaking for the non-intoxicating cannabis crop following its legalization.
It stands to reason that the loan processes outlined in the now-invalid notice will likely be consistent with what’s ultimately released next year, assuming the pilot program does expire then.
The primary rule change concerns licensing requirements for borrowers. After the 2014 regulations are no longer in effect, hemp loan applicants must be licensed under a USDA-approved state or tribal hemp program, or under the agency’s basic regulations if the jurisdiction the business operates in has not submitted its own rules.
Borrowers who are not licensed to grow hemp will be considered in non-monetary default and any losses will not be covered. For direct and guaranteed loans, hemp businesses must have a contract with USDA’s Farm Service Agency laying out termination policies and their ability to repay the loans.
As of this month, USDA has approved a total of 69 state and tribal hemp regulatory proposals—mostly recently for Illinois, Indiana, Michigan, New Mexico, Oklahoma and South Dakota. Illinois and Oklahoma were among a group of states that USDA had asked to revise and resubmit their initial proposals in August.
While the agency released an interim final rule for a domestic hemp production program last year, industry stakeholders and lawmakers have expressed concerns about certain policies it views as excessively restrictive.
USDA closed an extended public comment period on its proposed hemp regulations earlier this month. Its initial round saw more than 4,600 submissions, but it said last month that it was reopening the feedback period in response to intense pushback from stakeholders on its original proposal.
The federal Small Business Administration (SBA) said last month that the new 30-day comment window is too short and asked USDA to push it back, and it also issued a series of recommended changes to the interim final rule on hemp, which it says threaten to “stifle” the industry and benefit big firms over smaller companies.
All told, it appears that USDA is taking seriously the feedback it’s received and may be willing to make certain accommodations on these particular policies. The department’s rule for hemp is set to take effect on October 31, 2021.
In July, two senators representing Oregon sent a letter to Perdue, expressing concern that hemp testing requirements that were temporarily lifted will be reinstated in the agency’s final rule. They made a series of requests for policy changes.
Senate Minority Leader Chuck Schumer (D-NY) wrote to Perdue in August, asking that USDA delay issuing final regulations for the crop until 2022 and allow states to continue operating under the 2014 pilot program in the meantime.
Sen. Cory Gardner (R-CO) also called on USDA to delay the implementation of proposed hemp rules, citing concerns about certain restrictive policies the federal agency has put forward in the interim proposal.
The senators weren’t alone in requesting an extension of the 2014 pilot program that was ultimately enacted legislatively, as state agriculture departments and a major hemp industry group made a similar request to both Congress and USDA in August.
Amid the coronavirus pandemic, hemp industry associations pushed for farmers to be able to access to certain COVID-19 relief loans—a request that Congress granted in the most recent round of coronavirus legislation.
While USDA previously said that hemp farmers are specifically ineligible for its Coronavirus Food Assistance Program, that decision was reversed last month. While the department initially said it would not even reevaluate the crop’s eligibility based on new evidence, it removed that language shortly after Marijuana Moment reported on the exclusion.
Meanwhile, USDA announced last week that it is planning to distribute a national survey to gain insights from thousands of hemp businesses that could inform its approach to regulating the industry.
Photo courtesy of Pixabay.
New York Will Legalize Marijuana ‘Soon’ To Aid Economic Recovery From COVID, Governor Cuomo Says
New York Gov. Andrew Cuomo (D) recently said that legalizing marijuana represents a key way the state can recover economically from the coronavirus pandemic.
During a virtual event last week to promote his new book on the state’s COVID-19 response, the governor was asked when New York will legalize cannabis for adult use.
“Soon, because now we need the money,” he said, according to a recording that was obtained by USA Today Network. “I’ve tried to get it done the last couple years.”
“There are a lot of reasons to get it done, but one of the benefits is it also brings in revenue, and all states—but especially this state—we need revenue and we’re going to be searching the cupboards for revenue,” he said in remarks that will be released in full in a podcast in the coming weeks by Sixth & I, which hosted the event. “And I think that is going to put marijuana over the top.”
Cuomo has included legalization in his last two budget proposals, but negotiations between his office and the legislature fell through both times, with sticking points such as how cannabis tax revenue will be allocated preventing a deal from being reached.
A top adviser of his said earlier this month that the plan is to try again to legalize cannabis in New York in early 2021.
“We’re working on this. We’re going to reintroduce this in our budget in January,” he said. “We think we can get it done by April 1.”
Cuomo was similarly asked about legalization as a means to offset the budget deficit caused by the pandemic in May.
While he said it’s the federal government’s “obligation as part of managing this national pandemic that they provide financial relief to state and local governments,” he added that “I support legalization of marijuana passage. I’ve worked very hard to pass it.”
“I believe we will, but we didn’t get it done this last session because it’s a complicated issue and it has to be done in a comprehensive way,” he said.
Cuomo indicated in April that he thought the legislative session was “effectively over” for the year and raised doubts that lawmakers could pass cannabis reform vote remotely via video conferencing amid social distancing measures.
Assembly Majority Leader Crystal Peoples-Stokes (D) made similar comments when asked about the policy in April, though she seemed to signal that she laid partial blame for the failure to enact reform on the governor prioritizing other issues during the pandemic.
In June, a senator said the legislature should include cannabis legalization in a criminal justice reform package, making the case that the policy change is a necessary step especially amid debates over policing reform. That didn’t come to pass, however.
The New York State Association of Counties said in a report released last month that legalizing marijuana for adult use “will provide the state and counties with resources for public health education and technical assistance” to combat the pandemic.
Meanwhile, the state Senate has approved several modest marijuana reform bills in recent months.
The chamber passed a bill in July that broadens the pool of people eligible to have their low-level marijuana convictions automatically expunged. That was preceded by a Senate vote in favor of legislation to prevent tenants from being evicted solely because of their legal use of medical marijuana.
Thanks to a bill expanding cannabis decriminalization in the state that the governor signed last year, the New York State Unified Court System made an announcement last month outlining steps that people can take to clear their records for prior marijuana convictions.
Locally, a local law enacted in New York City this summer bans pre-employment drug testing for marijuana for most positions. It was finalized in July following regulators’ approval of certain exemptions.
Photo courtesy of WeedPornDaily.