Florida sets stage for more marijuana licenses

State health regulators on Monday set in motion a process to issue up to 22 more medical marijuana licenses, in a highly anticipated move that could double the size of Florida’s medical cannabis industry.

The state Department of Health also published an emergency rule that would make it far more expensive for marijuana operators to renew their licenses every two years, increasing the cost from roughly $60,000 to more than $1 million.

The jump in the renewal fees came after Gov. Ron DeSantis this year said medical marijuana companies weren’t paying enough to operate in the state, where licenses have sold for more than $50 million.

Under an emergency rule setting up the process to apply for new licenses, health officials would accept applications in “batching cycles.” The plan said the windows for the batching cycles will be established in a separate rule but did not say how many licenses would be up for grabs in each cycle.

The rule also set the application fee for new licenses at $146,000, more than double the $60,830 fee established during the state’s initial round of licensing more than five years ago.

The release of the rules on Monday created an immediate buzz among industry attorneys, lobbyists and investors.

Health officials were “clever” to include the batching-cycle provision in the application rule, Sally Kent Peebles, a Jacksonville-based partner at the national cannabis-law firm Vicente Sederberg LLP, told The News Service of Florida.

“It was quite brilliant to include the language regarding the batching cycle, and I would think the reason they did that is to avoid all this costly litigation that we’ve seen in the past,” Peebles said.

Losing applicants would have the opportunity to apply for licenses during another batching cycle, which could affect their ability to file legal challenges, according to Peebles.

“An unsuccessful group would be less inclined and has the wind taken out of the argument’s sails when the Department of Health can say … ‘You have the chance to reapply,'” Peebles said.

With more than 22 million residents and an aging population, Florida is viewed as one of the hottest medical marijuana markets in the country. Florida, which has 22 licensed operators, had more than $1 billion in medical marijuana sales in the first six months of 2022, according to Headset, a cannabis data analytics company.

“We appreciate the department moving forward on this important next step and look forward to filing an application once the window opens,” Daniel Russell, an attorney with the Dean Mead firm who represents applicants, told The News Service of Florida.

A 2017 law, which created a framework for the state’s medical marijuana industry, required the Department of Health to grant new licenses as the number of authorized patients increases. With more than 775,000 patients, the state should have issued at least another 22 licenses to keep up with the population of patients.

But the DeSantis administration has left the application process in limbo since the governor took office in 2019.

DeSantis’ office has blamed the delay on litigation over the 2017 law, but a Florida Supreme Court decision upholding the statute was finalized last year.

“While the application deadline will be established via a separate rule, today’s publication of the application rule and form begins a long-awaited process to award the 22 additional licenses currently authorized by statute,” Jim McKee, an attorney who represents license holders and applicants, told the News Service.

While the move toward granting more licenses drew praise, industry insiders also predicted that the dramatically higher renewal fee would likely draw pushback from at least some current operators.

The new renewal fee is based on a formula that includes the amount of money it costs the state to regulate the industry. The renewal fee in 2022 would be $1.33 million, Department of Health spokesman James Williams III said in a phone interview.

The governor flagged the license-fee issue in August, telling reporters the state “should charge these people more.”

“I mean, these are very valuable licenses,” the governor said. “I would charge them an arm and a leg. I mean, everybody wants these licenses.”

The cannabis industry has blossomed since voters approved a 2016 constitutional amendment broadly authorizing medical marijuana.

The department Monday also laid out a process for part of the 2017 law requiring health officials to give a special preference for up to two licenses to applicants that “own one or more facilities that are, or were, used for the canning, concentrating, or otherwise processing of citrus fruit or citrus molasses and will use or convert the facility or facilities for the processing of marijuana.”

The citrus preference has been the target of numerous administrative and legal challenges by Louis Del Favero, Inc., a Tampa-based orchid grower that purchased property to meet the preference requirements. After other attempts fizzled, Louis Del Favero in November filed a lawsuit accusing the Department of Health of violating the state Constitution by delaying the issuance of additional licenses.

Seann Frazier, a Tallahassee attorney representing Louis Del Favero, called the release of the new rules “a step in the right direction.”

“We’re very encouraged. We look forward to the actual process opening up so we can apply,” he told the News Service.

The 2017 law also required health officials to grant a license to a Black farmer who participated in decades-old litigation, known as the “Pigford” lawsuits, over the federal government’s racial discrimination in lending practices.

The health department recently announced its intent to award the Black farmer license to a Suwannee County grower, but the agency’s decision is being challenged by losing applicants and the license has not been finalized.

Monday’s rules were released about a month after the Department of Health hired Christopher Kimball to serve as the state’s new pot czar. Kimball left the Navy in May after serving as “agency counsel/general counsel” for the Judge Advocate General’s Corps since 2008, according to his LinkedIn profile. He served briefly at the state Agency for Health Care Administration before taking the helm of the Office of Medical Marijuana Use.