Lori Ajax, chief of the Bureau of Medical Cannabis Regulation for California, under the Department of Consumer Affairs, spoke about the bureau’s actions to develop regulations after the passage of Proposition 64, which legalized adult-use cannabis in the state.

Regulations for production and sale of adult-use cannabis are expected by January 2018.

“It’s quite a journey we have all been on since the Medical Cannabis Regulation and Safety Act was passed in 2015,” said Ajax, former chief deputy director of the California Department of Alcoholic Beverage Control. “I didn’t realize what I was getting into. I didn’t realize how much different cannabis is from alcohol. Alcohol is simple to understand. Cannabis is a lot more complicated. I had to start over to learn how best to regulate this industry.”

She was the keynote speaker at North Bay Business Journal’s first North Coast Cannabis Industry Conference, held at the Hyatt Vineyard Creek Hotel & Spa in Santa Rosa on May 9.

Passage in November of Prop. 64, “expanded our role” to include adult-use cannabis, Ajax said.

“We are working with many other state agencies,” she said, especially the Department of Public Health, which regulates manufacturers of cannabis edibles and concentrates, and the Department of Food and Agriculture.

“We had an industry for two decades that hadn’t been regulated at the state level,” Ajax said. “It has been regulated at the city and county level. The state is now trying to catch up” to begin issuing licenses to operators in the cannabis industry.

“The twist is that we have adult-use also,” Ajax said. “We have a looming timeline,” with licenses for adult-use expected by January 2018. “We are determined to make that timeline. It became a statutory mandate.”

Medical-use proposed regulations are available for public viewing and comment, she said.

“These are nowhere near final,” she said. The goal is to find a balance between public safety and environmental protection but “not having regulations that are so onerous on the industry that it’s difficult for people to comply. The goal is to get folks into the regulated market.”

California cannot simply adopt regulations from Colorado, Washington or Oregon, Ajax said.

“We have a lot of public input. We want to hear from you. We are going to be going on the road for regulation hearings,” she said.

The agency created a new California cannabis portal, with links to proposed regulations, at cannabis.ca.gov. The 45-day public comment period started May 5.

Proposed regulations for adult-use cannabis are expected in the fall, following the governor’s budget trailer bill, which attempts to “align the Medical Cannabis Regulation and Safety Act with Proposition 64 to have one model,” she said. “Are they similar? Yes, but there are a lot of key differences,” Ajax said.

“The goal is to get to an efficient model.”

The bill has to be passed by the Legislature to take effect. There are about 60 bills regarding cannabis floating in the legislative process.

“We are waiting to see what happens,” she said, noting “how quickly the cannabis industry is moving and changing. We have to keep up with changes, plan for the unknown.

The goal is to have online applications available about two months before January.

“We are in a sprint to get this up and running so adult-use licenses can begin issuance on Jan. 2,” she said.

“All of it requires mandatory testing of the cannabis,” Ajax said. “That is part of the supply chain,” and requires a sufficient number of testing labs.

Operators approved by local jurisdictions will have transition periods to obtain full state licensing, she said.

“We don’t want complete chaos” with a rush of people seeking licenses in January. “We have to make sure that public safety is not compromised. We are looking at temporary licenses for people already operating until we can do all the necessary investigation.”

Fees for the licenses have not been established.

With medical cannabis, licenses will be needed by distributors, transporters, dispensaries and testing labs. The adult-use cannabis industry will allow business including cultivation, manufacturing, distribution and retailing.

“It’s going to be one license but allow a lot of privileges,” she said. Penalty guidelines have not been proposed yet.

The bureau cannot issue state licenses unless an operator is approved by local jurisdictions. Under a dual-licensing scheme, local ordinances take priority, and can be more restrictive than state regulations.

“You have local control. Our relationship with the locals is huge,” Ajax said. “It takes everybody to get this done with an aggressive timeline. We want to do it right for California. It’s moving fast.

“With all the money farmers put out to become legal,” said cultivator Lawrence Callahan in a question, “what is the state or county going to do to protect me and fellow farmers from a continuing strong black market?”

“For this to work,” Ajax said, with regulations and taxes, “a strong enforcement strategy is what we’re working on,” with state and local authorities. “That’s one of the biggest things I worry about,” she said. “If I tell you to come into the light and be regulated, we have to do something about the black market.”

Regarding the lack of banking in the cannabis industry, she said, “It is a cash business. That’s not a good thing. As a regulator, you don’t want people dealing in cash. Where does the money go?”