“Big Ag” to Begin MMJ Cultivation in Illinois

Illinois’s Compassionate Use of Medical Cannabis Pilot Program Act establishes a 4-year pilot program allowing the cultivation and dispensing of marijuana for medical purposes. Although the law became effective in January, 2014, much of this year has been spent building the regulatory framework necessary to administer the program. The licensing process for growers, dispensaries and patients has just opened.

Prospective growers may apply for licenses through the Illinois Department of Agriculture during a 14-day period that began on September 8. The application process for one or more of the 22 cultivation licenses is restrictive, detailed and expensive, but according to Dan Linn, Executive Director at Illinois chapter of NORML, “The restrictive nature of the law is the product of more than a decade of debate and represents a compromise  that Illinois lawmakers feel comfortable with.”

 

Cultivation License Application

The application and schedules require a detailed description of planned business operations, staffing, operations, security, cultivation, and product safety and labeling in addition to blueprints, engineering specifications and audited financial statements for the previous year. The granular level of detail required, down to the resumes of employees, seems to presume an existing operation on which the new cultivation site will be very closely modeled. However, according to Linn, the result will strike a balance between established out-of-state marijuana growers and in-state large scale farmers.

Applications will be evaluated on a point system weighted heavily toward the cultivation and security plans.  It is hoped that licenses will be issued and cultivation under way in time for patients to buy medical marijuana by next spring.

 

Financial Requirements

The application fee is $25,000 and the initial permit, if awarded, will cost another $200,000. Applicants must also hold $2 million in escrow or post a surety bond of the same amount and document at least $500,000 in liquid assets. These fees are per cultivation center and applicants may apply for as many as three cultivation sites in addition to any dispensaries. Estimates for the total cost of operating a grow site are hard to come by, but required security alone may run as high as $1.8 million.

One group of investors reportedly plans to submit applications for three cultivation centers and two other dispensaries across the state, with a total investment of at least $10.2 million. Once in operation, cultivators will pay a 7 percent excise tax on sales to dispensaries.  The tax will be used to fund the costs of the program.

 

Reaction

The restrictions have been the subject of considerable comment.  On one hand, supporters see the measures as a way to keep drug cartels out of the medical marijuana business. The financial disclosure requirements, like the sanitizing effect of sunshine, provide considerable comfort on that point. Illinois, far more than many other states, already has abundant experience with large-scale commercial agriculture.

On the other, cost alone seems to preclude the participation of small businesses. The law also shuts out the smallest of the small, prohibiting cultivation by patients for personal use.

It may be that Illinois is following what has now become a familiar pattern of opening the legitimate industry in a very restrictive fashion. If the Colorado experiment is any guide, restrictions may gradually loosen with positive experience. Big, well-capitalized businesses have an early advantage that may make it doubly difficult for small businesses to compete, but the early entrants will have been thoroughly vetted through a process that should give residents of Illinois confidence about the legitimate nature and intentions of legal growers.

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