Just a handful of businesses will soon get the opportunity to grow marijuana in Utah, but it won’t come cheap.
It will cost interested growers $2,500 just to apply for a license, while awardees can expect to pay $100,000 for the opportunity to grow the plant beginning this summer. That license would only be good for about 18 months.
The Utah Department of Agriculture and Food, which is overseeing cannabis cultivation under Utah’s new medical marijuana law, plans to award up to 10 licenses by July 15. Applications will open later this week.
The licensing is the main source of revenue for the agriculture department’s medical cannabis program, which is supposed to pay for itself. Some worry that the cost of licensure alone will keep small business out of the industry while making medical cannabis more expensive for patients.
But Andrew Rigby, the department’s director of medical cannabis, said during a public hearing Tuesday that the cost of the licenses are “fair and appropriate given the opportunity at hand.”
“This program is not subsidized by the state and we don’t have the ability to run a deficit,” Rigby said. “So we basically have to estimate and forecast our total gross expenditures for the next year and a half.”
Those costs will change as the program hires staff and buys equipment. Rigby expects the $1 million-plus estimated revenue from the licensing will be enough to get the program through 2020, when the first batch of licenses expire.
In 2021, growers who are in compliance will be able to keep their licenses, Rigby said. By that time, the renewal price could be higher or lower than the current $100,000, depending on the department’s needs.
The initial application fee was lowered to $2,500 from $10,000, the latter of which Rigby said was a “rough” estimation that was “put together way in advance of having any actual, formal data.”
“As we spent time working through the numbers ... we just felt like those numbers needed to be changed,” he said.
Fees and rules for cannabis processing will be made public beginning in June, Rigby said. Cannabis pharmacy licensing will come after that but will be handled through the Utah Department of Health.
Another public meeting regarding general cultivation rules is scheduled at the Agriculture Department on June 5. In the meantime, the department is urging interested growers to complete a required background check as soon as possible.
While there’s opportunity to make money in Utah’s fledgling medical cannabis industry, some worry that the $100,000 price tag for licensing alone will keep smaller, local businesses out.
J.D. Lauritzen, an attorney who is helping businesses navigate the new cannabis and hemp industries, said he appreciates that the state only wants serious applicants. But he raised concerns that the high cost of entry will not only be a barrier for small “mom-and-pop” type operations, but could also affect medical marijuana patients.
“What I worry about is that cost being passed down to the patient and making it being prohibitively expensive and them just going back to the black market,” he said.
Lauritzen said the $100,000 price of a license has given some of his clients sticker shock. For those people, he suggests a less expensive venture into another new industry: industrial hemp. Those licenses only cost $500.
“If you don’t think that you can afford the THC side, give hemp a try. You’re not going to go bankrupt. I think you’d be pleasantly surprised by your ability to get into the industry,” Lauritzen said.
