Medical Marijuana Rulemaking Proposal FY 13 (Rough Draft) Objectives: Strike existing text of 1 CCR 212-1 for the purpose

se of complete reorganization and rewrite. Where completed, text in red type references an existing rule and its place in new framework. Existing rule text will be revised and improved where necessary during the text-drafting phase. New framework will have different numbering system to avoid confusions with previous rules. Preamble as used in this document means the rule will begin with a summary of the statutory (law) language that is applicable and foundational to the rule. The statutory preamble will not have an outline number in order to distinguish the statutory provisions from the numbered rule provisions. The preamble will serve to provide the foundation and basis for the rule, as the law should drive regulatory policy as well as provide continuity for the administration of article 43.3 of title 12. This proposal does not include rule or statutory text, but serves as a general proposed landscape of the new rule structure. This is the first rough draft, some areas are still in need of completion.

NEW RULES FRAMEWORK: Chapter A: General Definitions Preamble: statutory definitions Definitions of terms used in rule, or in statute if there is no statutory definition Chapter B: Licensing and Registration B.1 Business Licensing New Application General Provisions Preamble: Statutory sections 12-43.3-103, 303, 304, 305, 308, 310, 401, 501 Rule 16.101 Application General Provisions Rules to address general applications requirements, local authority approval as condition for licensure, new license restrictions, procedures for businesses in banned communities, certifying required cultivation percentage, license types/classification, license fees, pre-licensing inspection, etc. Transfer of ownership application General Provisions Preamble: 12-43.3-309, 310, 901 Rule 9.105 Transfer of Ownership and Changes in Licensed Entities

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Rule to address reporting requirements, exercising privilege of license not held prohibited, general applications requirements, local authority approval as condition for licensure, certifying required cultivation percentage, license types/classification, license fees, pre-licensing inspection, etc. Local Licensing and Instructions for Local Licensing Authorities Preamble: Statutory sections 12-43.3-301, 302, 303, 308, 310 (Reserved Rule) Rules to address minimum licensing requirements; minimum restrictions; new license restrictions (distance, previously denied locations, etc), ability to control number of outlets; restriction on size of premises; communicating with state: new license approval, renewal, report of violations, result of local hearing, approval of concurrent review. Ownership Requirements and Financial Interest Preamble: 12-43.3-307, 310, 402. 403 Rule 1.120 Duty to Report Offenses, Rule 1.100 Engaging in Business, Rule 16.100 Residency Requirements, Rule 9.100 Unlawful Financial Interest Rule to address residency, criminal history and reporting requirements, license required, control of license, vertical integration/common ownership requirements, exceptions, disclosure and reporting requirements, etc. Sales Tax and License Bonding Preamble: 12-43.3-304, 401, 404; 39-26-726 Rule 17.100 Reporting and Transmittal of Monthly sales tax Bond: Rule to address applicability, renewal, reporting requirements, procedures for DOR release of bond Sales Tax: Applicability, proof of sales tax license as condition of licensure, duty to report delinquent status only License Denial-State Preamble: 12-43-306 Rule will reference administrative procedures for Hearings Renewal and Reinstatement State and Local Preamble: 12-43.3-310, 311, 312 Rule Reserved Rule to address renewal deadlines, expired licenses, reinstated license qualification, inactive licenses Changes To An Existing License Preamble: 12-43.3-103, 310 Rules 9.105 Transfer of Ownership and Changes in Licensed Entities, Rule 16.105 Change in Class of License, Rule 16.110 Change of Location, Rule 16.115 Changing, Altering, Modifying Premises, Rule 16.120 Change of Trade Name

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Rule to address ownership changes within the entity holding the license (nontransfers), apps to change location, apps to modify premises, when approved modifications are required, changing trade name with no ownership change, etc. B.2 Occupational Licensing Managers, employees, officers Preamble: 12-43.3-401(1)(d), 307, 310, 901 Rule 8.100 Occupational Licenses Required, Rule 16.100 Residency Requirements , Rule 1.120 Duty to Report Rule to address application procedures , classes of occupational license, persons prohibited as licensees, age requirements, Renewal and Reinstatement of Licenses, License Denial, license privileges shall lapse upon employment termination (clarify 12-43.3-310(3) last sentence requiring surrender), business owner reporting responsibilities 12-43.3-310(3), (4), (12) B.3 Vendor Registration Vendors Requiring Registration Application Procedures Renewal B.4 Laboratory Registration Laboratories Requiring Registration Application Procedures Registered Premises Designated Renewal Disqualification Chapter C: Licensed Premises C.1 General Requirements Preamble: 12-43.3-105, 310, 901 Rule 6.100 Advertising Practices, Rule 10.100 Limited Access Area, Rule 10.105 Display of License, Rule to address possession of premises, manager of premises, display of licenses, signage and advertising, limited access area C.2 Security Alarm Systems and Lock Standards Rule 10.200 Security Alarm Systems, Rule 10.300 Lock Standards Rule to address required alarming of licensed premises and reporting security breach. Simplify the regulatory approach, MMED no longer to act as administrator of these functions. C.3 Video Monitoring Required Rule 10.300 Specifications for Video Surveillance..

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Rule to address operational video surveillance and recording required, areas for camera coverage, record keeping. No equipment specifications. Replace with more general, reasonable requirements requiring consistent and reliable video monitoring of specified areas of the licensed premises, with the corresponding obligation of providing video records to the division or local authority upon request and without unreasonable delay

Chapter D: Medical Marijuana Cultivation for an associated Medical Marijuana Center General Requirements (Re-working Rule 1.205 throughout, and clarifying) Definitions specific to the rule: cannabis plant: seed, seedling, cutting, grafting, immature plant-statutory definition, vegetation or sporophytic state, flowering or gametophytic state; stem, leaf, sweet leaf, trichomes, cannabinoid, Flower/Bud;Hashish/Hash, Kief, Bubble Hash, Hash Oil/Resin, concentrate, waste, etc. Jointly-held licensed premises - Combining commonly owned OPC licenses in a single licensed area; specifying the specific qualifications: common ownership and control, record keeping, security, inventory tracking. Establishing authorized plant count (as verified by authorized patient count in the commonly owned MMC ), to exclude immature plants as defined by statute, but to clarify the time when young vegetating plants must be included. Guidelines for transfer of veg plants between commonly owned OPCs. Cultivation, harvesting, and packaging methods (flower) Authorized extraction methods for MMJ (Hash/hash oil) that is not MMJ-infused product, defining specific extraction processes (manual, water, solvent) Disposal of MMJ methods for rendering MMJ unusable and proper disposal (Rework Rule 12.200) Other Cannibas intended as usable MMJ ( seeds, leaf) and method of packaging and authorized sale. Inventory tracking within the OPC - and preparation for transport Inventory tracking reporting requirements and plant count verification Prohibited processes, additives, chemicals, fertilizers Prohibited acts: Sale of any plant from OPC prohibited. Transfer of flowering plant from original point of cultivation prohibited.

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Chapter E: Manufacture of Medical Marijuana-Infused Products General Requirement (Re-working Rule 12.100 and 14.100 throughout, and clarifying) Definitions specific to the rule (Infused product, edible, tincture, ointment) Related OPC same standard provisions as OPC-to-MMC cultivation (preceding rule). Include restrictions re: 500 plant count limit, plant usage (Rule 1.105) Specific Manufacturing Provisions Sales provisions: MMC contractual requirements, providing product samples to MMC (neither 6-2-103 or 6-2-105 prohibit the distribution of free product, except when there is intent to engage in in deceptive trade practices). Sanitary Requirements and product freshness (Rule 12.100) Product analysis and labeling (Rule 14.100) Prohibited processes, additives, chemicals (Rule 14.100) Disposal of MMJ methods for rendering MMJ unusable and proper disposal (Rework Rule 12.200) Inventory tracking within the MIP and preparation for sale and transport to MMC Prohibited acts: sale of smokeable MMJ or any product that does not fit the definition of an infused product, plants cultivated by the related OPC.

Chapter F: Retail and Wholesale Sale of Medical Marijuana Medical Marijuana Center Definitions MMC General Provisions (Rule 13.100 Acceptable Identification) Acceptable patient documentation for sale (any change related to renewal documentation requires statutory change) Rework Rule 1.200 Registration of a Primary Center, pursuant to 12-43.3901(4)(e), unlawful [for center/OPC] to possess more than 6plants/2oz. per patient that has registered the center as its primary center; with exceptions for recommended expanded plant count. Rework Rule 1.205 Inventory Wholesale sales Requirements and Restrictions (Rule 1.210 30% Rule) MMC to MIP transactions and contracts (Rule 1.110) Inventory Tracking

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Prohibited acts on licensed premises: MMCs are not caregivers, as defined in 1243.3-104. Individual caregiver activities authorized by Amendment 20 and other areas of law may not be conducted on MMC licensed premises, or in conjunction with MMC regulated activities 12-43.3-104(8) Chapter G: Transportation and Storage of MMJ Transportation Strike sections of Rule 11.200 that require MMEDs approval of transportation manifests. Inventory tracking and reporting requirements will sufficiently reflect movement of MMJ between OPCs and MMCs, or between other licensed premises for regulatory purposes. Establish general procedural requirements for licensees who transport MMJ, such having a copy of applicable sales/transfer paperwork, applicable licenses, etc. Warehouse Storage Permit (Rule 11.200). Clarify that storage premises must be under exclusive possession and control of MMC or MIP licensees. Inventory tracking and reporting requirements shall be maintained by licensee, and licensee shall not authorize the storage of inventory belonging to other licensees. Storage cooperatives are not authorized in law. Chapter H: Business Records 12-43.3-701 Retention Show fully the transactions of the business Demonstrate compliance with inventory tracking, etc

Chapter I: Product Labeling, Testing, and Analysis (Rule 14.100) Chapter J: Medical Marijuana Waste Disposal (Rule 12.200) Chapter K: Enforcement and Product Forfeiture Licensee cooperation with Inspections and Investigations Administrative authority Product Seizure or Surrender (Rule Reserved: Instructions for Law Enforcement) Chapter L: Administrative Citation, License Suspension and Revocation (Rule 1.300, 1.305, 5.100, 19.100) Disposition of Marijuana (required by 12-43.3-602) Chapter M: Administrative Hearing Procedure (Rule 19.100)

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Chapter N: MMED and State Licensing Authority Administration (Rule 1.115, 1.310, 2.100)

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