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Texas Regulation Changes & New Bills Introduced

Henry Levinski - Friday, January 13, 2017


Dear friends,

 

We wanted to update everyone on the latest set of regulations sent out from the DPS, as well as inform you of the bills already being presented to the Texas legislature. The department will accept applications for dispensing organizations (An organization licensed to perform the regulated functions of cultivation, processing, and dispensing of low-THC cannabis) licenses from February 23, 2017 through March 23, 2017.  As reflected in the proposed amendments to the administrative rules to be considered for final adoption by the Public Safety Commission on February 22, 2017, a non-refundable application fee will be payable at the time of application.

The department will review the applications and by April 30, 2017 will notify those applicants that are conditionally approved (applications are not yet available).  When the applicants are ready for the onsite inspection of their facilities, the department will conduct inspections and confirm the facilities’ compliance with the program requirements, and accept payment in full of the license fee. Upon successful completion of all inspections and satisfaction of all requirements, the department will issue the license.

Latest set of Regulations From the DPS:

  • The DPS has added a “Production Limit” to the regulations.  As it is currently, every September 1st the Department of State Health Services will issue a report indicating the number of intractable epilepsy patients in Texas and the most current recommended dosage to treat an individual for 1 year.  The DPS will then determine the maximum amount of product necessary to treat 1/3 of the population and the number of plants needed to produce this amount.  Each licensee shall not annually produce more than the amount of product described, divided by the number of licensees.  However, there is a provision that if it can be shown that additional plants/product needs to be produced to meet demands, the DPS can raise the limits.
  • On March 1st, 2018, the Department of State Health Services shall release updated population and dosage amounts required that will determine the maximum amount of product allowed until September 1st, 2018.
  • The department agrees that shareholders in a publicly traded company who are not otherwise involved in the affairs of the business should not be required to register. The proposal is being amended accordingly.
  • The proposed rule limits research to that which is necessary for development and production of low-THC cannabis products.  The restriction against broader research is intended to limit the potential for violations of federal law. This will not change.
  • Specifically, the department estimates commercial liability insurance coverage, for dispensing agents, will likely cost $4,000 to $5,000 per year. 
  • Its requirement that dispensers have a fire alarm and fire extinguishing system will impose costs, depending on the size and complexity of dispenser's structures. The department estimates a basic fire alarm system with smoke and heat detectors, and alarms with both visual and audio alerts, will cost $1 to $2 per square foot. More complex systems in large buildings may cost $3 to $6 per square foot. A sprinkler or other extinguishing system may cost $3 to $12 per square foot, not including installation. Monitoring fees may cost $50 to $60 per month. 
  • Section 12.7 requirement of a ventilation system with the capability to detect and signal problematic exhaust levels for the extraction room, are estimated to cost approximately $5,000 for those dispensers using C02 systems and $15,000 for butane based systems.  The requirement of an emergency power backup system will vary considerably with the size of the facility, but the department would estimate a backup generator to cost $3,000 to $15,000.
  • Representative samples of all processed products must be tested for the levels of tetrahydrocannabinol, cannabidiol, residual solvents, pesticides, fungicides, fertilizers, mold, and heavy metals.
  • All facilities must be inspected and approved for their use by a local fire code official, or by the state fire marshal or local designee of the state fire marshal, and must meet any required fire, safety, and building code requirements.
  • Licensees must provide certification by a Texas licensed professional engineer that the extraction system to be used to produce low-THC cannabis products was commercially manufactured, safe for its intended use, and built to codes of recognized and generally accepted good engineering practices.

Application for License

  • Proof of ownership and current status in the manner required by the department, including but not limited to a current Certificate of Existence or Certificate of Authority from the Texas Office of the Secretary of State and a Certificate of Good Standing from the Texas Comptroller of Public Accounts.
  • Application fee of $7,356 is required when application is submitted, the licensing fee of $488,520 is required once you are approved for licensure. The renewal fee every 2 years is now $318,511.  In addition, there is a fee of $530 per registrant (managers and employees). These are reduced from the previous $1.3M application fee as the DPS has agreed to not require a DPS State Trooper at each location, instead a special investigator will be hired to visit each location several times per week.
  • Proof of commercial general liability insurance coverage against claims of liability for damage to property of third parties and for personal injuries to third parties, including bodily injury, property damage, and product liability, with limits of:
    •  $1,000,000 each occurrence
    •  $2,000,000 General Aggregate limit
    •  $1,000,000 Product Liability
  • The technical and technological ability to cultivate, process, and/or dispense low-THC cannabis, evidenced by experience in the areas of:
    • Cultivation
    • Analytical and organic chemistry
    • Analytical laboratory methods
    • Micro-biology
    • Patient education and interaction
  • The ability to secure the premises, resources, and employees [personnel] necessary to operate as a dispensing organization, evidenced by:
    • Descriptions of all properties applicant proposes to utilize to cultivate, process, and dispense low-THC cannabis, including ownership information for the properties
    • Descriptions of the methods proposed for the cultivation, processing, and dispensing of low THC cannabis
  • Description of the applicant's proposed testing laboratory, and description of the proposed [cannabis] testing protocols and methods.
  • Department approved acknowledgments executed by the applicant's directors, managers and employees indicating familiarity with the federal laws governing marijuana and its interstate transportation; in other words, verifying you know that transporting seeds across state lines is illegal. (This was added in place of the DPS regulation requiring growers to divulge the source of their seeds, which could in fact put them in jeopardy of violating the interstate transportation of cannabis laws).
  • The financial ability to maintain operations for two (2) years from the date of application, evidenced by:
    • Applicant's business organization, and corporate structure if applicable
    • List of all owners of any non-corporate applicant, or all shareholders of a corporate applicant
    • All individuals and entities with control over the applicant
    • Projected two (2) year budget
    • Description of available assets sufficient to support the dispensing organization activities.

As of January 13th there are 17 bills introduced thus far pertaining to cannabis and we have until March to get others introduced. So far we have:

  • 12 various decriminalization bills being presented to the House and Senate
    • 4 Bills proposing a constitutional amendment to authorize and regulate the possession, cultivation, and sale of cannabis trying to put on the ballot for the public to vote on in the November 6, 2018 election
    • Senator Menendez SB269 which is an amendment to the current SB339.  SB269 would remove the THC/CBD limits; vastly increase the number of ailments (including chronic pain); replace the “subscription” language with that of  “recommend”; create independent testing facilities; limit the application fee to $5,000; and allow patients to grow at least 6 plants for their own use.

We are hopeful that all of you will be available to attend our seminar January 21st at the Doubletree Hotel in Austin and is a one day seminar from 10am to 7pm. We will be discussing all the above information as well as anything new we receive from the DPS prior to that date. In addition, we will be discussing funding that we have available to qualified individuals and/or organizations. If you are able to join us, please register as soon as possible so we can be sure to make all the necessary arrangements. Thank you and we look forward to seeing you soon.

All my best,

Henry Levinski

Director of Operations

Medcan Foundation

817/528-2475 MB

hlevinski@medcanfoundation.com



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