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Vermont Proposes Licensing Structures, Moves Closer to Adult-Use Cannabis Sales 

October 30, 2021 by Bryce Rader Leave a Comment

Vermont cannabis

Vermont is preparing for cannabis cultivation and retail. Photo by: greenserenityca.

In 2018, Vermont legalized adult-use cannabis. However, Vermonters are still waiting for the ability to legally buy it. 

When the Green Mountain State made recreational pot legal, it officially allowed residents to grow up to six plants and possess 1 ounce of flower and/or 5 grams of concentrate. But there is still yet to be legal access for adult-use cannabis in a retail setting.

Now, three years later, state officials just unveiled their proposed regulations for the adult-use market. On October 15th, 2021, the Vermont Cannabis Control Board (CCB) released a report that covers proposed licensing, tier structure, social equity applicant criteria, and market analysis for the state, reports Heady Vermont. The CCB is responsible for regulating the statewide market. 

The proposals bring the state one step closer to issuing licenses for adult-use operators. They also include provisions for social equity applicants, cultivation, and those currently holding medical licenses.  

Vermont Cultivation 

Vermont estimates that around 400,000–500,000 square feet of flowering canopy are needed to supply the state, which has a population of 623,989. 

Around 20% of cultivation will take place outdoors with one harvest a year, according to Heady Vermont. A surplus of outdoor supply in the Fall is expected, which can be stored as inventory until the next outdoor harvest.

vermont cannabis
Growing 20% outdoors provides a more stable market compared to growing 50% outdoors. Screengrab from the report.

Outdoor cultivation is encouraged for sustainability purposes. But on its own, it would not be enough to maintain a stable market. While the climate in Vermont only allows for one outdoor harvest a year, indoor farms can harvest year-round.

Small cannabis farms (1,000 sq. ft.) are being supported with a one-license limit, keeping large businesses away. Vermont Growers Association would like to see caps on cannabis produced by big cultivators and hopes the cannabis market will be similar to Vermont’s craft beer, cheese, and maple syrup, reports VTDigger. This would protect small-scale farmers when cannabis is federally legal and it can be transported across state boundaries.

vermont cannabis
There will be an additional mixed tier allowing smaller production of up to 1,000 sq ft. indoors and up to 50 plants outdoors. Screengrab from the report.

In 2021, the average size area for cannabis growing nationally was 33,900 square feet. Vermont’s planned farm sizes are below the average. However, they will be slightly bigger than cannabis farms in Maine, according to 365 Cannabis. 

Each license from the report has two proposed costs. Proposal A is more expensive compared to competing states; but it will cover the costs of the state efficiently, according to the CCB. Proposal B generates enough revenue for the government while providing a lower barrier of entry to the market. More specifically, the cost for indoor cultivation licenses under proposal A is over twice the amount as proposal B.

vermont cannabis
According to Leafly, Vermont’s license fees would be considered low to medium regardless of the proposal type | Screengrab of Indoor License fees from the report.

Retail

The CCB proposed two tiers of retail licenses: a storefront license and a nursery license. Storefront licensees would sell cannabis products, and may also sell seeds and clones. 

Regulators would limit nurseries to selling seeds and clones, and these operations may operate as a stand-alone business or could be held by another business.

While retail locations may sell a variety of cannabis products; the CCB passed a rule prohibiting cannabis retail stores within 500 feet of a school, according to Heady Vermont.

According to the CCB, retail sales would be subject to a 20% state tax (14% excise tax plus Vermont’s 6% sales tax). Moreso, officials did not propose local taxes.

More Licenses 

Additionally, there are two manufacturing tiers as well. Tier 1 allows all permitted methods of extraction, including solvent-based extraction. According to Papa & Barkley, solvent-based extractions use things like butane, propane, carbon dioxide (CO2), ethanol, and more to extract terpenes and cannabinoids from cannabis. 

Whereas, tier 2 functions as a lower cost option that allows for infusion and extraction. However officials will prohibit tier 2 businesses from using solvents like butane and propane which can cause explosions. 

Both of these types of manufacturers would sell exclusively to retailers.

Licenses will also exist for wholesale, laboratory testing (for commercial and at home), as well as an integrated license. Integrated licenses combine all parts of the supply chain into one license, according to Vangst. 

Marijuana Venture says that New Jersey and New York voted against vertical integration for their adult-use market to encourage competition within the market. 

Overall, Mjbizdaily says that the state will issue licenses to small growers and testing labs in May 2022; to large cultivators in June 2022; to processors and wholesalers in August 2022; and they will issue licenses to retail stores in October 2022. Applicants can only apply for one license in each category. However they can put together their own vertical operation from stand alone licenses.

Social Equity 

In May 2021, Vermont lawmakers passed S.25, which the governor then signed in June. The bill establishes the Cannabis Business Development Fund. The fund provides loans and grants to people of color and those affected by cannabis criminalization who want to get into the industry, according to VTDigger. However, the  CCB will decide further details regarding social equity applicants. 

In the CCB’s report, officials discussed the importance of a program for social equity applicants as well as a separate program for diversity, equity, and inclusion. These programs aim to help Black, Indigenous and people of color; those from areas of low social income; anyone arrested (convicted or incarcerated) for a cannabis offense; or family members impacted by someones’ cannabis offense. 

Officials will waive application and license fees for these social equity applicants their first year of operation. However, in the second year, they will pay 25% of the license fee; the third year will be 50%; the fourth year will be 75%; and in the fifth year, it will be full cost.

The CCB plans to further discuss other fee reductions and programs. Some of the discussions include establishing a Cannabis Social Equity Board, automatic expungement for cannabis crimes, special licensing for social equity applicants, and reinvestments into disproportionately impacted areas.

Nearby in New York, there are plans to designate 50% of cannabis licenses for social equity applicants. This has many referring to it as the “gold standard” for social equity, reports Mjbizdaily. 

Additionally, New York regulators will give 40% of tax funds back to communities hit hardest by the War on Drugs. They will also have a social equity program that includes low-and-zero interest loans, reduced or waived fees, and assistance in preparing applications.

Furthermore, the social equity program in Massachusetts reduces fees by 50% annually and offers plenty of programs for people looking to enter the cannabis industry, according to the state’s Cannabis Control Board. The program also offers free courses to prepare social equity participants for entry-level positions, managerial positions, and to help support their own cannabis business.

Still, There are Concerns

Vermont is planning to open recreational sales starting in October 2022, according to MJBizDaily. However, medical cannabis licensees have first access to the recreational market in May 2022, when officials begin issuing licenses for small operators. 

There is concern regarding medical licensees gaining first access. This is because the five vertically-integrated medical licenses in Vermont are all owned by out-of-state corporations, according to VTDigger.

Vermont Gov. Phil Scott also worries that the existing medical market’s early access would lead to an inequitable market, according to MJBizDaily. “Of primary concern is the licensing construct which will disproportionately benefit Vermont’s existing medical dispensaries by giving them sole access to integrated licenses and an unfair head start on market access. This creates an inequitable playing held both for our smaller minority and women-owned business applicants, and other small Vermont growers and entrepreneurs,” he said.  

He also calls for a highway safety plan to prevent drugged driving and additional funding for education and drug prevention efforts for children.

The Vermont Growers Association has expressed concerns with the CCB, which consists of a three member board. The association is particularly concerned that board members may be susceptible to political influence. 

Additionally, the Vermont Cannabis Equity Coalition has voiced concerns that the timeline the CCB has given is too quick to regulate properly in an equitable manner, according to VTDigger. In their opinion, more time would lead to more thorough research and public input.Heady Vermont says that the CCB has submitted its report to the House Committee on Ways and Means, the Senate Committee on Finance, and the House and Senate Committees on Government Operations. In the meantime, the CCB must wait for approval from lawmakers. In the weeks to come, the CCB will further discuss regulations and social equity for Vermont Cannabis.  

Filed Under: Cannabis, Cultivation, Manufacturing Tagged With: adult-use cannabis, Gov. Phil Scott, indoor cultivation, outdoor cultivation, social equity, Vermont, Vermont cannabis, Vermont Cannabis Equity Coalition, Vermont cultivation, Vermont Growers Association, Vermont retail licenses

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