Marijuana firm challenges Utah’s medical pot growing picks

In this Tuesday, July 2, 2019 photo, Darren Johnson, a hemp processor, holds raw hemp that will be used to make CBD oil at his processing facility, Wasatch Extraction, in Salt Lake City. Johnson is one of 81 applicants vying for a medical marijuana growers license in Utah. (AP Photo/Morgan Smith)

SALT LAKE CITY (AP) — Utah’s decision to award a smaller number of medical marijuana grower licenses than the amount allowed by law is being challenged by a rejected applicant claiming the state granted a license to unqualified cultivators and could create a cannabis shortage that forces patients to buy on the black market.

FILE – In this June 5, 2019, file photo, a person holds a program during public hearing on medical cannabis at the Utah Department of Agriculture and Food, in Salt Lake City, Utah. Utah’s decision to award a smaller number of medical marijuana grower licenses has sparked protests from rejected applicants who claim the state is granting licenses to unqualified cultivators and will create a cannabis shortage. (AP Photo/Rick Bowmer, File)

The administrative appeal could further delay the rollout of medical marijuana for the state because licenses cannot be finalized until protests are resolved, under state law.

The state’s Department of Agriculture selected eight companies to grow medical marijuana for its program set to open next year. Although the new law allows Utah to award up to 10 licenses at the start of the program, state officials say they chose to only hand out eight to avoid an oversupply of cannabis.

There were 81 applicants for the licenses.

In an appeals letter dated July 21, Colorado-based marijuana company North Star Holdings LLC said some license winners have no experience with cannabis or farming.

North Star Holdings LLC was not awarded a license and is the only company that has submitted an appeal, said Christopher Hughes, director of Utah’s Division of Purchasing, the agency which helps oversee the licensing process. But if more appeals are filed, they could take weeks to address, he added.

The department has awarded a very valuable cultivation license to an industry beginner that has less experience, knowledge, and ability than the garden-variety home grower in Colorado,” Welby Evangelista, the company’s president, wrote in the appeal letter. “I asked how they’re going to learn cultivation, one of the owners said that ‘everything is on YouTube’ and they will ‘figure it out.’ ”

Evangelista refused to name the company he was referring to except that it is owned by entrepreneurs in northern Utah.

A second company that sought a license but was denied, Tintic United Bioscience LLC, plans to appeal what it considered an unfair licensing process, CEO Michael “Caddy” Cadwell said.

He said some companies were awarded licenses despite not having a growing facility or cultivating supplies.

Tom Paskett, the executive director of the Utah Cannabis Association, called the administrative challenge unsurprising.

“These folks invested a lot of time, money, sweat and tears into their application,” he said. “If I were in their shoes, I would do the same thing.”

Some applicants are concerned eight growers will not be enough to meet patient demand in Utah. An undersupply of marijuana could inflate prices and create a black market, Evangelista said.

Winners include medical marijuana cultivators with businesses in other states and greenhouse growers in Utah. Half of the license recipients already have businesses in Utah, while the rest are headquartered in other states like Nevada, Arizona and Ohio.

Growers are not expected to start planting immediately. Licensees will need to pass background checks and finalize their contracts with the state.

State agriculture officials said they were confident in their picks and would consider issuing more licenses in the future.

Evangelista said he expects more applicants to challenge the licensing result.

“It’s not a fight we asked for,” he said. “But we want to make sure Utah patients have access to quality medicine cultivated by experienced growers.”

Applicants have until Friday to appeal the state’s licensing decision.

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