Editor's note: This is the final part of a three-part series.
The state is still coming up with regulations for medical marijuana, but that hasn’t stopped antsy investors from trying to get their feet in the door.
The Missouri Department of Health and Senior Services started collecting application fees Jan. 5 from people interested in applying for a license for cultivating marijuana, manufacturing marijuana products or operating a dispensary.
Tracey Smith pre-filed a $10,000, non-refundable application fee for a cultivation license. His wife, sons and niece are hoping to set up a marijuana growing facility in Laurie, a village of fewer than 1,000 people near the Lake of the Ozarks.
There’s no real incentive to pre-file the application fee. The department said nobody will be advantaged in the application process. Still, as of Feb. 7, fees had come in from 418 applications, totaling over $3 million to the department.
Smith would play the role of landlord and supportive father, he said. His wife is the majority owner and his niece, Ellie McDaniel, would be the master grower. McDaniel has been overseeing the family’s growing operation in Oklahoma, which they opened after that state’s voters approved medical marijuana.
Smith was fine with filing the application fee early if it helps the department get the medical marijuana program up and running. The state needs to pay for staff, and it’s only fair that applicants pay rather than having taxpayers foot the bill, he said. Still, there’s a decent chance Smith will be out a chunk of change with nothing to show for it.
The family already bought property in Laurie they think will be perfect for an indoor growing facility. It’s not too close to town, because Smith didn’t want anyone bothered by the pungent odor of marijuana. It will also be able to handle the electrical needs of a 24/7, year-round grow house, Smith said.
An indoor growing facility would be a lot more productive than growing marijuana in an open field, Smith said. A controlled environment allows Missourians to grow tropical crops that can be planted and harvested multiple times in a year.
There’s also a regulatory advantage to growing indoors, Smith said. While the constitution limits outdoor operations to 2,800 plants, indoor operations are only limited to 30,000 square feet of "flowering plant canopy space," which Smith interprets as the size of the roof. The way he interprets the constitution, you could grow multiple levels of plants to fit more inside.
Investing in the fee and property could end up being a mint for the family, but if they don’t get a license, they’ll probably have to try to sell the property, Smith said. And he’s not getting back the $10,000 fee.
There isn’t a maximum limit on how many licenses the state can issue, but the Missouri Constitution does set minimums. There has to be at least one cultivation license for every 100,000 people living in Missouri, based on the most recent census. That means about 60 licenses based on the 2010 census, but that will increase after the 2020 census.
Smith expects the department to start out only issuing the minimum number of licenses. There’s no restriction on how quickly the department has to issue 60 licenses. Smith, a doctor who often works with the department, said he expects a slow and methodical process.
As of Feb. 7, there were 128 application fees for cultivation licenses filed with the state. That means that more than half of the people who have officially shown interest will not get a license. And the department won’t even begin taking official applications until August, so it’s likely to be even more competitive.
The constitution also requires a minimum of one manufacturing license for every 70,000 people, which is about 85 licenses based on the 2010 census. It also requires at least 24 dispensary licenses in each of Missouri’s eight congressional districts, a total of 192.
An individual can apply for multiple permits, but Smith said he only filed once. He doesn’t expect the department to give someone more than one license with so many applicants.
"We weren’t trying to get greedy," Smith said.
The department hasn’t offered specifics on the permitting process, and likely won’t for several months. Application forms and instructions will be available no later than June 4, according to the department’s website. It will start taking applications for patient identification cards no later than July 4, and facility applications will open no later than Aug. 3.
For now, the constitution is the best guide for what the department will be looking for in applications. There isn’t a specific rubric for judging applications yet, but the constitution requires the department to consider several criteria, including the applicant’s background, experience and business plan and the potential for positive economic impact in the area.
The state is also working through regulations for industrial hemp, strains of the cannabis plant with less than 0.3 percent THC, the compound that causes the high associated with marijuana.
Anyone who wants to grow or handle hemp needs to get an agricultural hemp seed production permit from the Missouri Department of Agriculture. An application for the permit costs $100, and you need to show evidence of farming experience, the variety of seed you’re going to use, a detailed map of the land, and a production, research and marketing plan.
The agriculture department scores each application before awarding permits, but it won’t develop a rubric until it has funding to staff the hemp program, said department spokesperson Sami Jo Freeman.
Companies must pay a combination of 10 potential fees, depending on the size and type of the operation. The largest fee is $3,000 to process hemp leaves and flowers that contain CBD, but adding acres to an operation could cost more than the processing fee.
Permits are good for three years with an annual renewal fee of $45 per acre for growers and equal to the total application fee for handlers. Farmers can only grow between 10-40 acres of hemp.
If you were running a 10-acre growing operation and didn’t need a handling permit, you would owe the department $1,950 over three years. For a 40-acre growing operation, you’d owe $6,000.
Say you started off with a 10-acre growing operation, and in the first year, you realize you want to go all the way up to 40 acres. After you pay the $250 permit modification fee, plus $45 for every acre you add, and the renewal fees of $45 per acre, the department would end up with $10,900 out of your pocket over three years.
That’s $400 more than you would owe if you started out with a 40-acre operation and also had permits for handling, processing grain and flower, and producing seeds.
The $45 per acre fee and limits on acreage are too restrictive in Chris Beedle’s eyes. He has 6,000-7,000 acres set aside for hemp production in Audrain and Callaway counties.
"You’re gonna kill an industry like that," he said.
If Beedle maxed out his operation at 40 acres and got permits for everything except flower processing, he’d owe the department $7,500 over three years.
One southeast Missouri lawmaker, Rep. Rick Francis, R-Perryville, introduced a bill that would remove the acreage limits. So far, that bill has not passed a committee, one of the first major steps in the legislative process.
Even if the acreage limits are lifted, Beedle’s hopes for a 600-acre operation would be tough to reach under the current fees. For an operation that size, Beedle would pay the department $83,100 to have a permit for three years.
Those rules aren’t final yet, and Beedle said he hopes the department will reconsider both the fees and the acreage restrictions before it starts taking applications in September.
A bill in the Missouri General Assembly would lift some restrictions in the state’s pilot program, but there are no major expansions pending. The federal government hasn’t given Missouri guidance for complying with federal changes to hemp laws, so Freeman couldn’t say if the federal law would change the department’s rules.