New Mexico regulators on Tuesday released an initial set of rules for the adult-use marijuana market as the state prepares to launch retail sales next year. And applications for producer licenses will start to be accepted within days.
Adults 21 and older are currently able to possess up to two ounces of cannabis and grow up to six mature plants for personal use under a law that was enacted earlier this year, but officials must still develop regulations for the commercial market. They took a key step to that end on Tuesday, and the rules for producers published in the New Mexico Register take effect immediately.
Rules for retailers, testing facilities and other cannabis sectors are still being developed and need to be finalized by January 1, 2022 in advance of the launch of sales by April.
“As a result of our open and collaborative process, these rules reflect the unique needs and perspectives of New Mexico residents, businesses, entrepreneurs and communities,” Regulation and Licensing Department Superintendent Linda Trujillo said in a press release.
Most of the new regulations concern licensing requirements, public safety, patient access and social equity.
For example, the Cannabis Control Division said it will ensure that 50 percent of marijuana producer licensees will meet its social equity standard, supporting communities that have been most impacted by the war on drugs.
It will also “solicit public input to create and implement a social and economic equity plan” and create that plan by October 15. It will “include guidelines to determine how to assess which communities have been disproportionately impacted, how to assess if a person is a member of a community disproportionately impacted, and proposed incentives to promote social and economic equity for applicants, licensees, and cannabis industry employees.”
“We are ready for business,” Trujillo said. “The Cannabis Control Division is committed to supporting licensees to maximize the economic opportunities that adult-use cannabis sales offer our state.”
Regulators said they will begin accepting producer license applications “later this week” ahead of a mandated September 1 deadline through a “streamlined online system.” They will have 90 days to approve or deny a license once a completed application is received.
The rules published in the New Mexico Register on Tuesday cover a lot of territory for producers. It sets out rules for licensing, security requirements, recalling and disposing cannabis products, transporting marijuana and testing for quality assurance.
There’s also a significant focus on ensuring that patients continue to have access to cannabis after the adult-use market opens up.
Marijuana shops must “make reasonable efforts to sell a minimum of twenty-five percent of their monthly cannabis sales to qualified patients, primary caregivers, and reciprocal participants,” according to the rules.
If there’s a cannabis shortage for patients, regulators would have the authority to take certain steps such as requiring retailers to set aside at least 10 percent of their products for the medical marijuana community or reducing the per plant fee for medical cannabis to incentivize such production.
There’s been some concern about whether New Mexico has the capacity to produce enough marijuana to meet the recreational market demand while still serving patients.
But regulators are nonetheless optimistic that they’re moving in the right direction to ensure a smooth rollout of the adult-use market while still protecting the state’s medical cannabis program.
John Blair, deputy superintendent at New Mexico’s Regulation Department, told KOAT that while there may be an initial surge in sales when the market opens up to adult-use consumers, there are provisions in the legalization law that ensure regulators “can control and ensure that every business is growing, selling, manufacturing a certain percentage of cannabis to maintain the strength and integrity of the medical cannabis industry.”
Trujillo said that the division is “on track and making good on our commitment to an efficient, open and transparent process to stand up this exciting new industry.”
“There is more work to do, but an important first step has been completed and we look forward to working with New Mexicans to stand up production facilities in the coming weeks,” she said.
There is no set limit on the number of business licensees that could be granted under the program, or the number of facilities a licensee could open, although regulators could stop issuing new licenses if an advisory committee determines that “market equilibrium is deficient.”
Cannabis purchases will include a 12 percent excise tax on top of the state’s regular eight percent sales tax. Beginning in 2025, the excise rate would climb by one percent each year until it reached 18 percent in 2030. Medical marijuana products, available only to patients and caretakers, would be exempt from the tax.
Local governments cannot ban cannabis businesses entirely, as some other states have allowed. Municipalities can, however, use their local zoning authority to limit the number of retailers or their distance from schools, daycares or other cannabis businesses.
Polling indicates New Mexico voters are ready for the policy change. A survey released in October found a strong majority of residents are in favor of legalization with social equity provisions in place, and about half support the decriminalization of drug possession more broadly.
Gov. Michelle Lujan Grisham (D) gave final approval to the cannabis legalization legislation in April, fulfilling a key goal for her administration. She had to convene a special session to ensure that lawmakers got the job done after they failed to pass legalization during the regular session.
A separate, complementary bill providing for expungements for convictions made legal under the marijuana legalization law was also passed during the special session and signed by the governor. Under it, courts must begin reopening qualifying cases within 30 days after the legislation goes into effect on January 1, 2022.
Regulators launched a website to provide information about legalization before the governor even signed the bill into law.
Lujan Grisham included cannabis legalization as part of her 2021 legislative agenda and has repeatedly talked about the need to legalize as a means to boost the economy, especially amid the coronavirus pandemic. She said during a State of the State address in January that “a crisis like the one we’ve experienced last year can be viewed as a loss or as an invitation to rethink the status quo—to be ambitious and creative and bold.”
Additional pressure to end cannabis prohibition this year came from neighboring Arizona, where sales officially launched in January after voters approved a legalization ballot initiative last year. To New Mexico’s north is Colorado, one of the first states to legalize for adult use.
New Mexico’s House in 2019 approved a legalization bill that included provisions to put marijuana sales mostly in state-run stores, but that measure died in the Senate. Later that year, Lujan Grisham created a working group to study cannabis legalization and issue recommendations.
In May of last year, the governor signaled she was considering actively campaigning against lawmakers who blocked her legalization bill in 2020. She also said that she was open to letting voters decide on the policy change via a ballot referendum if lawmakers didn’t send a legalization bill to her desk.
Photo courtesy of Brian Shamblen.