For the first time in six years and less than a week before the New Mexico Department of Health (NMDH) transferred authority to the newly created Cannabis Control Division, officials quietly opened the window a crack for producers to apply for a cannabis “legacy” producer license. Except for one applicant, nobody else seemed to know about it. The New Mexico Health Department’s last-minute cannabis license is raising eyebrows.
According to the Santa Fe New Mexican, the state health department, without any public notification or announcement, began accepting applications for marijuana cultivation licenses for one week in late June before all industry oversight was transferred to the new Cannabis Control Division on June 29. The Cannabis Regulation Act went into effect on June 29, and retail sales are to begin no later than April 1, 2022.
The one company that applied paid a $10,000 fee to NMDH just one day before the transfer of power and, in return, it received the state’s very lucrative medical cannabis “legacy” producer license.
“It goes against a fair, level playing field for people who want to be in this industry,” said Willie Ford, managing director of Reynold Greenleaf & Associates, a consulting firm for cannabis businesses, who also serves as board chairman of R. Greenleaf Organics, a cannabis cultivation and dispensary operation in New Mexico. “It just stinks of favoritism. In my opinion, this was a dirty affair. This was obviously somebody making it happen for somebody else.”
According to public records, Albuquerque-based GH LLC submitted a 713-page application for a nonprofit medical cannabis producer license June 25. On June 27, a Sunday, Dominick Zurlo, director of the state’s Medical Cannabis Program, and Billy Jimenez, general counsel and deputy secretary of the Department of Health, personally inspected the company’s facilities. The department issued a license the following day.
This sent the New Mexico cannabis industry into an uproar that during the final week of their authority of overseeing medical marijuana companies, NMDH quietly reopened applications for business licenses, awarded one permit, and then closed the window again.
Allegations of favoritism and calls for an investigation by others in the cannabis industry have ensued. The new Cannabis Control Division of the state Regulation and Licensing Department assumed regulatory authority on June 29 over the medical marijuana program and a developing industry for legal production and sales of recreational marijuana.
Under a “publications” tab on its website, the Department of Health posted a notice several days earlier titled “Medical Cannabis Licensed Non-Profit Producer Application Instructions.” The June 23 posting, however, did not explicitly state the department was accepting new applications, and the agency didn’t advertise the application window or otherwise make the public aware of the opportunity. An online application form gave a June 28 deadline. The state had not allowed producers to apply for licenses in the previous six years.
GH LLC “submitted an application like everyone else,” said company founder Vance Dugger, who is also CEO or founder of three road service and towing companies.
Health Department spokeswoman Baylee Rawson told the New Mexican in an email that the agency “often posts announcements through the website” to inform license holders and patients about program updates. Companies entering the recreational marijuana business with a so-called “legacy” license have huge advantages.
Rodriguez, of Ultra Health, said the cannabis industry is “up in arms” over the license issued to GH LLC. He said the matter needs to be investigated by authorities and the GH license should be suspended until the investigation is complete. “If there really was a desire to open [the application process] up, how many people would have applied prior to June 28?” he asked
“You get the mack daddy of licenses,” he said. “You’re the vertically integrated license that allows you to do everything — produce, manufacture — you can do all those things. The new approach under the [Cannabis Regulation Act] makes you subject to having this silo effect. You have to get a license for manufacturing. You have to get a license for retail. You have to get a license for production.”
In April the state became one of the latest to legalize recreational marijuana, and the upcoming new market has many in the industry eager to get a foothold. As an indicator of how much interest there is in New Mexico marijuana permits, the Cannabis Control Division received nearly 900 applications in August for cultivation licenses.
Program Director Dr. Dominick Zurlo of New Mexico’s Medical Cannabis Program has defended the highly criticized process the state followed to issue the production license and said the department didn’t do anything out of the norm.
“We used the same process that we’ve been using for the last two years with other [types of] applications, which has been posting it onto our website,” he said. Zurlo alleged the department sought applications for producer licenses to ensure there would be enough product for medical cannabis and said the state had been working to increase the number of licenses for months.
State Sen. Jacob Candelaria, D-Albuquerque, an attorney who represents New Mexico Top Organics-Ultra Health, said Zurlo and the Department of Health have “fought tooth and nail in District Court” against any order to increase the state’s supply of medical cannabis. “Let me just be very, very clear,” Candelaria said. “It is the height of cynicism, hypocrisy and doublespeak for Dr. Zurlo to say one thing to the District Court when it benefits the Department of Health and say an entirely different thing today to cover up what seems to be a pretty glaring abuse of power.”