Cannabis legalization may spawn profitable industry

Mar. 29—SANTA FE — When it comes to legalizing recreational cannabis for New Mexico adults, one of the issues that lawmakers have grappled with is deciding who should profit from a lucrative new industry being built from the ground up.

During a committee hearing that stretched well past midnight in the final stanza of this year's 60-day legislative session, Sen. Joseph Cervantes voiced concern about the role of the "big guys" in helping draft provisions in a legalization bill that ultimately stalled on the Senate floor.

Specifically, he said the bill, as written, would have made dispensaries essentially a "front" for licensed manufacturers and producers due to a provision that would have required them to sell cannabis product on consignment as a condition of doing business.

"I'm sure the big guys have written this bill — I wasn't born yesterday," Cervantes, a Las Cruces Democrat, said during the late-night Senate Judiciary Committee meeting.

While he did not specify whom he was referring to, several lawmakers who have worked on legalization bills acknowledge current medical cannabis producers would have a big jump start if New Mexico decides to legalize, tax and regulate marijuana sales.

And two prominent producers combined gave more than $170,000 in campaign contributions to lawmakers last year, according to state campaign filings.

With a special session on cannabis legalization called by Gov. Michelle Lujan Grisham set to begin Tuesday, the issue of profit potential could once again bubble to the surface of legislative debate.

Cervantes, who sponsored a 2019 bill that reduced penalties for possessing small amounts of marijuana but is a skeptic of cannabis legalization, said in a recent interview that there could be multimillion-dollar profits to be had under a cannabis legalization bill.

"The state will decide who gets to profit and how much they get to profit," said Cervantes, who compared potential cannabis distribution licenses to liquor licenses that skyrocketed in value before lawmakers overhauled the state's liquor laws this year.

He also said the cannabis consignment provision would be unique in a free-market system, saying, "It's a windfall for the people who know this game and are in the middle of playing it."

Head start

Supporters of legalizing adult-use cannabis claim such a law would create thousands of new jobs statewide and generate hundreds of millions of dollars in sales annually.

But when it comes to setting up the rules that would govern such an industry, there are differences of opinion even among backers.

Rep. Javier Martínez, D-Albuquerque, a sponsor of the cannabis legalization bill that passed the House during this year's 60-day session only to ultimately stall in the Senate, suggested there's nothing wrong with existing medical cannabis producers getting a head start under a legalization law.

"Many of these medical cannabis producers have not only invested money and time, but they've also laid the foundation for New Mexico to become (the latest state to legalize)," Martinez said.

But he also touted a provision in the House bill that would have allowed for "microbusiness" licenses, or more inexpensive licenses for smaller cannabis producers who would face a cannabis plant limit of 200 plants — or possibly fewer.

Such licenses, he said, could allow for land grants, acequia associations and other groups of people to team up to launch small-scale cannabis operations.

"I don't think anyone's going to be able to monopolize (the market) in months," Martinez told the Journal.

In contrast, Sen. Cliff Pirtle, R-Roswell, who introduced a competing cannabis legalization bill during this year's session, has proposed tying the cost of a marijuana production license to the size of a growing operation.

He also said he favors opening the licensing process to all new entrepreneurs as quickly as possible — even if commercial cannabis sales are not authorized to start until sometime next year.

"People who are already licensed medical cannabis producers are going to have a head start, no matter what," Pirtle said.

Politically active producers

With the prospect of cannabis legalization on the horizon, some medical cannabis producers have become increasingly involved in helping fund political campaigns.

The state's largest medical cannabis producer, Ultra Health LLC, reported giving $55,500 to different New Mexico legislative candidates and political committees during last year's election cycle, according to reports filed with Secretary of State Maggie Toulouse Oliver's office.

Contributions from the company were received by 13 current lawmakers, both Republicans and Democrats.

And Ultra Health also reported giving $25,000 in two contributions to Senate Democrats' caucus committee.

A separate medical cannabis producer, Albuquerque-based PurLife, gave even more in campaign contributions — a total of $115,500 to nearly 40 lawmakers, according to filed reports.

Most of those donations were made after the November general election but before the 60-day session started in January.

In all, PurLife made contributions to more than 30 Democratic lawmakers and eight Republicans.

Both companies have also made past donations to Lujan Grisham, both before her 2018 gubernatorial campaign and since.

Governor optimistic

This week's special session will play out after multiple cannabis legalization proposals fell short during the 60-day session that ended March 20.

Top-ranking lawmakers said proposed revisions to the House-approved measure were still being circulated in the session's final hours, but the bill was not brought up for a vote on the Senate floor.

Given that backdrop, Lujan Grisham has said she's optimistic a bill can be approved in a quick special session focused solely on marijuana legalization and the proposed expansion of a state economic development program.

Specifically, the Democratic governor said shortly after legislators adjourned that "it makes no sense to make New Mexicans wait" when the framework for a legalization bill is largely in place.