California pot retailers say state rules could force them to destroy millions of dollars' worth of product

California pot retailers say state rules could force them to destroy millions of dollars' worth of product

All marijuana sold in California by state licensed firms will be required starting Sunday to undergo new testing for quality and toxins, but retailers warn they face financial hardship because they will have to destroy tens of millions of dollars’ worth of untested product still on their shelves.The United Cannabis Business Assn. led 128 cannabis businesses and advocacy groups in petitioning Gov. Jerry Brown on Friday to indefinitely extend the period for selling marijuana products that do not meet the new testing standards to avoid forcing some licensed firms out of business.“This really is the destruction of the whole supply chain,” said Jerred Kiloh, president of the United Cannabis Business Assn., which represents 76 pot retailers in Los Angeles and Orange counties.The association surveyed some 50 marijuana firms and estimated retailers statewide may lose $90 million worth of marijuana that they will have to dispose of because it cannot be sold legally after Saturday.

The coalition said in a letter to Brown that an extension is warranted in part because there are not enough state-licensed testing facilities to handle the volume of cannabis required by pot shops to meet consumer demand.

Without an extension, “retailers will be forced to destroy everything in their inventory and repurchase new products,” the group wrote to Brown. “Not only will this financially cripple the majority of retailers, but there will not be enough compliant product on the market to meet the demand.”

Californians approved pot legalization in 2016, and the state began issuing licenses for growing, testing and selling marijuana on Jan. 1 with some limited testing requirements. But many retailers stockpiled large amounts of cannabis harvested before Jan. 1, which was not required to be tested.

The state agreed to delay more costly requirements — including more comprehensive testing, labeling and child-proof packaging — until July 1 to allow new pot businesses to get on their feet financially.

The Brown administration has no plans to delay the new testing requirements, said Alex Traverso, a spokesman for the state Bureau of Cannabis Control.

“We issued our emergency regulations back in November, and at that time, we were pretty clear about the fact that there would be a six-month transition period for retailers to use up their existing supply,” Traverso said. “We felt that was a sufficient amount of time to deplete stock on hand and adapt to California’s new rules.”

Joseph Devlin, chief of cannabis enforcement for the city of Sacramento, estimates pot retailers there may end up disposing of some 4,500 pounds of marijuana worth about $10 million. The hard deadline could tempt some retailers to surreptitiously sell their valuable pot surpluses to the illicit market, even though getting caught could result in losing their state license, some officials worry.

“Looking statewide at this, we’ve at least created conditions for poor decision-making,” Devlin said. “We’re expecting people to essentially throw away a lot of money at a time when they are spending a lot of money on things like compliance and permits.”

State officials are confident the transition will happen without major disruption.

“Do we want to get more labs licensed and up and running? Absolutely we do,” Traverso said. “But we’re hopeful what we have now will be enough to test all products going forward after July 1.”

The requirement for more extensive testing is a key condition of the marijuana legalization, Traverso said.

“We want to do everything we can to ensure consumers get safe cannabis,” he added.

In the meantime, state officials and industry observers say the new testing requirement is creating a short-term benefit for consumers as retailers are holding “fire sales” to sell their surplus pot at deep discounts before Sunday.