First Look: Delaware Lawmakers Introduce Recreational Marijuana Bill
April 5, 2017
Last Thursday, members of Delaware’s House of Representatives introduced the Delaware Marijuana Control Act (HB 110), which seeks to legalize, tax and regulate marijuana in a manner similar to alcohol. Delaware legalized medical marijuana in 2011, but the program has been plagued by delays. There is only one medical marijuana dispensary currently operating in the state – First State Compassion Center in New Castle County. Delaware’s second medical marijuana dispensary is set to open this month in Sussex County.
HB 110 would permit state residents over the age of 21 to purchase up to 1 ounce of marijuana from state licensed stores for personal consumption. The bill prohibits public use and home cultivation of marijuana. HB 110 is a comprehensive bill that seeks to generate revenue for education and other public purposes, and allow law enforcement to focus on more serious crime. Driving under the influence of marijuana would remain illegal, and employers would not be required to accommodate marijuana use in the workplace. The following is a short summary of the bill’s key provisions:
A. LICENSING – TYPES, FEES AND LIMITATIONS
Under HB 110, Delaware’s marijuana industry would be divided among 4 types of licensees: cultivators, product manufacturers, retail stores and testing facilities. All licensees will be required to pay a $10,000 licensee fee, which is valid for 2 years.
Marijuana Cultivators. Cultivators will be licensed to grow, prepare and package medical marijuana for sale to retail marijuana stores and/or product manufacturers. Cultivators will not be allowed to process marijuana into concentrates nor will they be permitted to sell marijuana to customers. HB 110 provides for 75 cultivation licenses to be distributed as follows:
At least 30 licenses – facilities cultivating less than 1,000 SF
At least 15 licenses – facilities cultivating between 1,001 and 2,500 SF
At least 10 licenses – facilities cultivating between 2,501 and 7,500 SF
No more than 10 licenses – facilities cultivating 7,501 or more SF
Product Manufacturers. Marijuana product manufacturers will be licensed to obtain marijuana from authorized cultivators, process the raw marijuana into approved product forms and sell the products to retail stores for sale to consumers. Marijuana may be processed into concentrates, tinctures, ointments, extracts, edibles and liquids. All retail marijuana products must meet sanitary standards, including the Delaware Food Code, Sec. 4458 of Title 16 of the Delaware Administrative Code and the Cottage Food Regulations, Sec. 4458A of Title 16 of the Delaware Administrative Code. HB 110 provides for at least 25 product manufacturing licenses.
Retail Stores. Retail marijuana stores are licensed to sell up to 1 ounce of marijuana, or its equivalent in retail marijuana concentrates upon proof the customer is at least 21 years old. Retail stores are prohibited from selling any other consumable goods, including cigarettes, alcohol or any edible product that does not contain marijuana. HB 110 provides for 40 retail store licenses, which may be expanded after 3 years if additional stores are needed to meet demand.
Marijuana Testing Facilities. All marijuana sold in Delaware will be subject to testing for potency and potential contamination. To avoid conflicts of interest, individuals or companies with interests in medical or recreational marijuana businesses will be prohibited from holding any interest in a marijuana testing facility. HB 110 limits the total number of testing facilities to 5, but this number may be expanded to meet demand.
B. PREFERENCE FOR EXISTING MEDICAL MARIJUANA COMPASSION CENTERS
Notably, HB 110 contains several provisions that indicate a preference for applicants who are currently operating medical marijuana facilities – known as Compassion Centers – in Delaware. Specifically, existing Compassion Centers can obtain licensure for retail stores, cultivation and product manufacturing operations months before other applicants as part of a two-phase application review. Also, the bill specifically provides that a Compassion Center “that does not already hold a retail marijuana store license shall be given priority over other applicants in any competitive application process.” Sec. 4951B(n)(3).
C. TAXES AND APPORTIONMENT OF REVENUE
The bill imposes an excise tax on all sales from a marijuana cultivation facility to retail stores or product manufacturers at the following rates:
$50 per ounce on all marijuana flowers
$15 per ounce on all parts of marijuana other than flowers and immature plants
$25 per immature marijuana plant
Tax revenues will be distributed as follows:
20% to the Department of Education to distribute to public school
10% to Department of Health and Social Services (“DHSS”) for distribution to qualified community-based nonprofits to support economic development and other services
10% to DHSS for evidence-based, voluntary programs for the prevention and treatment of alcohol, tobacco and marijuana abuse
10% to DHSS for a scientifically and medically accurate public education campaign educating youth and adults about the health and safety risks of tobacco, alcohol and marijuana
Any remainder as the General Assembly determines.
D. ANALYSIS
It is uncertain whether the Delaware General Assembly can garner the necessary votes to put HB 110 before Delaware Governor John Carney for signature. If the bill becomes law, Delaware will become the ninth state to legalize recreational marijuana and the first to do so through legislation. Delaware, unlike the other states that have legalized recreational marijuana, does not have a voter initiative processor. Based on an October 2016 survey conducted by the University of Delaware, 61% of Delawareans are in favor of legalizing marijuana.
The Regulated Substances Blog is intended to keep readers current on developments regarding medical cannabis legalization and regulation and is not intended to be legal advice. If you have any questions, please contact the author Peter Murphy at pmurphy@eckertseamans.com. You may also contact Daniel Clearfield at dclearfield@eckertseamans.com, Robert Hoffman at rhoffman@eckertseamans.com, or any other member of our Regulated Substances Group.