Arkansas Business: Room to Grow: State Adds New Cannabis Growers

Read the full story at Arkansas Business.

Ever since Arkansas legalized a medical marijuana industry four years ago, Storm Nolan of Fort Smith has waited in line, not always patiently, for a chance to get in.

Now, spurred by his late mother’s opioid addiction, he’s on the verge of getting his wish in the form of a multimillion-dollar cannabis cultivation center south of the Fort Smith airport.

Nolan, a partner in family-owned CSK Hotels of Fort Smith, is sole owner of River Valley Relief Cultivation LLC, one of three companies that recently gained state licenses to join the five original grow operations.

Nolan’s mother, Toni Whitt, an accomplished lawyer who graduated from the University of Arkansas at 19, died in 2013 at age 57 after struggling with opioids. “That was one of our primary motivations, because we’ve heard countless stories about patients who are either getting completely off of opiates or scaling down their opiate by managing their pain with cannabis instead,” Nolan told Arkansas Business.

“That’s also a reason it’s so sad that Arkansas’ pricing remains so high. People would rather manage their pain with cannabis, but they can’t afford it.”

Total sales at the state’s 29 operational dispensary sales recently topped $600,000 a day, and with twice as many Arkansans obtaining medical cards than expected — 80,314 as of Sept. 11 — the state Medical Marijuana Commission decided recently to issue three new grow licenses. Joining Nolan in the market will be Carpenter Farms Medical Group LLC of Grady, led by Abraham Carpenter Jr., and New Day Cultivation of Hot Springs, owned by Carla McCord with junior partners Nick Landers, Sherman Tate and Charles Singleton.

$300,000 a Day Wholesale

“About half of that $600,000 is divvied up between the current five cultivators,” Nolan said by telephone, noting that wholesale prices are generally about half of what Arkansas patients pay retail, prices that remain among the nation’s highest at nearly $400 an ounce.

“A pound of cannabis flower goes for between $2,800 and $3,200 wholesale, and the state’s latest numbers have the average retail price at $6,300 per pound, so that’s right in line with the 50% rule of thumb,” Nolan said.

Arkansans legalized medical cannabis in a November 2016 vote, and Nolan’s bids for both a cultivation and dispensary license fell just short in the application period that followed, finishing a close runner-up for the five initial growing slots and 32 dispensary opportunities.

Now Nolan, Carpenter and McCord are poised to build their grow operations and start bringing products to market in eight months or so, hoping to ease prices through competition.

That is, if they aren’t sidelined by a lawsuit from the original five growers: Bold Team LLC of Cotton Plant, Osage Creek Cultivation LLC of Berryville, Delta Medical Cannabis Co. of Newport, Natural State Wellness Enterprises LLC of Newport, and Natural State Medicinals Cultivation LLC of White Hall.

The gist of the lawsuit, which names state agencies and the three new cultivation licensees as defendants, is that the state didn’t follow its own guidelines in granting the additional licenses, particularly by failing to establish that new growers were needed to supply the burgeoning Arkansas market. The complaint was filed in Carroll County Circuit Court on July 15, shortly after the Arkansas Medical Marijuana Commission ruled that it would grant the new cultivation licenses. The plaintiffs are represented by Kenneth P. “Casey” Castleberry of the Murphy Thompson Arnold Skinner & Castleberry firm of Batesville.

‘Major Supply Issue’

“There’s a major supply issue in the state,” Nolan said. “We’ve seen a lot of social media messages from dispensaries telling people that they’re out of stock; they can’t get cannabis flower from the cultivators. Instead of placing orders, they basically get an allotment based on previous volume. So even if they want 20 pounds of flower, they may only get 4 pounds delivered in a given week.”

To back up his point, Nolan provided copies of Facebook messages from the Purspirit Cannabis Co. and the Releaf Center, dispensaries in Fayetteville and Bentonville, respectively, revealing that they had sold out of cannabis buds on Sept. 7 and 8. “It is a statewide problem,” Nolan said, “and right now, the cultivators just can’t can’t keep up.”

Castleberry, the lawyer representing the five original cultivators, said the commission couldn’t have determined whether the supply was sufficient to the dispensary market because only three of the five licensed growers were delivering product at the time the commission granted the new licenses. Four are now supplying product, and the fifth is preparing its first delivery this week, state spokesman Scott Hardin said.

Castleberry said that regardless of the disputed need for more cultivators, the state was obligated to follow its licensing rules strictly. “First of all, they didn’t conduct the analysis required [to establish a need for more cultivators]. And even if they had, there was really no way to know whether the five cultivators would have been able to supply the dispensaries because two of the cultivators were not actually supplying [dispensaries],” Castleberry said.

The new cultivators, answering the complaint, argue that circuit courts lack jurisdiction to review adjudications by state agencies. However, Castleberry said, “there’s a longstanding general rule that circuit courts have the authority to enjoin administrative agencies from committing unlawful acts, and we’re claiming that by acting in violation of its own rules, the Medical Marijuana Commission … was doing so.”

The five plaintiffs were content to let Castleberry speak for them, and New Day Cultivation, citing the pending litigation, declined to comment. Abraham Carpenter Jr. of Carpenter Farms did not respond to interview requests.

Both Nolan and Hardin said lawsuits over cannabis licences, which can be worth tens of millions of dollars or more, were inevitable. “The litigation started back as the process was launched, and it has not stopped,” said Hardin, who works for the Arkansas Department of Finance & Administration.

“There have been multiple lawsuits throughout, really. Over the last couple of years, I don’t know if we’ve had a day without any ongoing litigation.”

Planning Underway

One aspect of Castleberry’s filing is specific to Nolan’s cultivation license. “Storm Nolan dissolved the River Valley entity back in 2019, so that entity ceased to exist and did not exist at the time the commission issued that license,” Castleberry said. “In my estimation, that’s going to be an issue the court will look at pretty seriously.”

“That’s a nonissue to us,” Nolan said in response. “Our entity is and was in good standing as of the day they issued the license.”

Hardin, the state spokesman, said all three of the newly licensed cultivators, as well as four new dispensary licensees, are all working toward opening as soon as possible. “It’s going to take probably another one or two months for the dispensaries and longer for the cultivators. But they’re all making progress.”

Nolan plans to start growing marijuana soon in 25,000 SF of a 100,000-SF warehouse his family already owned about half a mile from CSK Hotels’ headquarters at 4320 Industrial Drive. He has engaged a Tulsa design team with vast experience in marijuana manufacturing, Mitch McClain of Davies Architects and engineer Allen Merk of Green Acorn for mechanical and electrical engineering, as well as plumbing.

“The people of Arkansas voted to adopt up to eight [cultivation] licenses, and everybody I’ve spoken with counted on those licenses coming out eventually,” Nolan said. “It seems disingenuous for them to say we don’t need those sources, considering our current patient count, at 80,000, is well above where we thought we’d be. The market size has been a pleasant surprise to everybody.”

As of Sept. 9, Arkansas had total sales of 22,530 pounds of medical marijuana worth $143 million. The first sales were in May 2019, and they shot up as more dispensaries opened. The state tracks sales at individual dispensaries, Hardin said, but it does not rank sales by individual cultivators.

Nolan hopes to get preliminary plans to the city of Fort Smith within a few weeks. After local construction approval, he expects three to four months of building, then inspections by state Alcoholic Beverage Control Division, which enforces medical marijuana regulations.

“ABC approval will allow us to put our seeds in the ground, and the cannabis plant takes, you know, from four to five months to go from seeds to salable product,” Nolan said. “So, something like seven to eight months from now.”

If only the courts will cooperate.

40/29 News: Fort Smith Medical Marijuana cultivation site moving

Read the full story at 40/29 News.

FORT SMITH, Ark. —

The Arkansas Medical Marijuana commission gave River Valley Relief Cultivation approval on Tuesday to move their operations 5.6 miles across town. 

“We think it’s a better location,” explained Storm Nolan, the owner of River Valley Relief Cultivation. “It’s going to allow us to get up and going quickly because it’s a nice, well-built existing warehouse that is ready for us to start putting up walls and equipment.”Advertisement

However not everyone supported the change. Quenton May, an attorney based in Little Rock, spoke out at the commission meeting because ABC is investigating a claim filed against River Valley Productions LLC. Members of the Medical Marijuana Commission were told not to let that impact their decision.

“Ruling on a change of location for this applicant at this point is improper,” said May. “It’s premature, the application submitted by river valley production was not compliant when it was submitted.”

May said the original location of the cultivation site on South E Street was within 3000 feet of a school. Storm Nolan countered, saying it was a juvenile detention center and he had letters from the state board of education, Fort Smith Public Schools and Sebastian County Sheriff’s Office all stating the property was not a school. 

“None of this is surprising,” said Scott Hardin, a spokesperson for the Medical Marijuana Commission. “You have cultivation licenses that are valued at tens of millions of dollars if not more. To say it’s a competitive process is an extreme understatement.” 

With the commission’s approval, Nolan hopes to have the new cultivation site approved to grow medical marijuana by the start of 2021. “Everyday that we’re not under construction is a stressful day, and so that’s our number one goal is to get up and running so we can serve our Arkansas patients.”

5 News: High demand for medical marijuana causes shortage in Arkansas

Read the full story at 5 News.

Patients are struggling to find medical marijuana in Arkansas during the coronavirus pandemic.

FORT SMITH, Ark. — There are several questions in both Northwest Arkansas and the River Valley regarding medical marijuana dispensaries and the struggle to meet the needs of Arkansans.

Patient Carla Thompson says if medical marijuana doesn’t become more available in Arkansas she may have to go to Oklahoma.

“Like right now I’m almost out so tomorrow I will probably have to go online and search around and try to find somewhere that has something,” Thompson said.

Thompson and many other patients say finding access to the medicine they need is almost impossible. She says her local dispensary, Fort Cannabis Company, struggles to keep its shelves full of any strain.

“Mostly from just anything we ran completely out of flower for two weeks now,” said Fort Cannabis Manager Alisha.

Alisha said the amount they order from their cultivators often doesn’t show up in full.

“We need this many pounds and they will send us half that sometimes,” Alisha said.

And when they get a shipment, it’s gone fast.

“With them being the only one in Sebastian County when they do get a supply in the line is wrapped around the building,” Thompson said.

Acanza and Releaf Center in Northwest Arkansas both face the same problem.

Arkansas Medical Marijuana Commissioner Travis Story says there are plenty of flowers out there.

“It seems that there is supply in the product available in the system and so that’s kind of the responsibility of the individual dispensaries,” Story said.

Story says as of July, three cultivators were fully functional and two were still harvesting and preparing to ship production. The commission has approved licenses for three additional cultivation facilities. 

While the reason for shortages remains up in the air, the issue is clear, patients can’t get their medication.

It’s a problem Thompson says she’s tired of driving up to 100 miles to Conway or Little Rock. She says if something doesn’t change, she might have to take her business across the Oklahoma border with a temporary license.

“Where I live that’s just about 5 or 10 miles away, I’m close to Pocola and the Roland border so that’s what I’m thinking about doing,” Thompson said. “People are spending money in Oklahoma, why not have the money here in Arkansas where we need it instead of taking the money out of state somewhere else.”

KNWA: ‘They are doing this for one reason: greed.’ River Valley marijuana cultivator responds to lawsuit filed on behalf of competitors

Read the full post at KNWA.

FORT SMITH, Ark. (KNWA/KFTA) — A Fort Smith-based medical marijuana cultivator responded to claims made in a lawsuit filed on behalf of his competitors, stating, “They want to limit competition and maintain artificially high medical cannabis pricing.”

Storm Nolan is the owner of River Valley Relief, one of three cultivators granted licenses by the Medical Marijuana Commission during the pandemic. The five existing cultivators filed a lawsuit against River Valley Relief, accusing it of being located too close to a school, as defined by a 2017 memo, and operating under a dissolved LLC. The lawsuit seeks to revoke the company’s license.

“They are doing this for one reason: greed,” Nolan said. “They want to limit competition and maintain artificially high medical cannabis pricing which is currently unaffordable to many Arkansas patients.”

Scott Hardin, a spokesperson for the Arkansas Dept. of Finance, said the LLC issue could prove to be the most difficult hurdle for River Valley Relief. Nolan pointed to the company’s status with the Secretary of State’s office and said the issue is overblown.

“The license was issued to me as the applicant and our company, River Valley Production, LLC,” Nolan said. “Our DBA is River Valley Relief Cultivation, and our status with the SoS is in ‘Good Standing.’”

The lawsuit noted that River Valley Relief Cultivation is located close to the Sebastian County Juvenile Detention Center, and a 2017 Medical Marijuana Commission memo stated that juvenile centers are considered schools because local school districts teach curriculum in the facilities. Nolan sent an email from the Arkansas Dept. of Education that said the department, “does not consider the Sebastian County JDC to be a ‘school’ or a ‘school district’ for purposes of Title 6 of the Arkansas Code.”

Nolan said the company submitted a transfer request to move to another location, which would eliminate this problem if approved.

“We are asking the MMC to let us relocate within Fort Smith, so this is a moot point in addition to the allegation in the lawsuit having no merit,” Nolan said.

Nolan said he expected the lawsuit to be filed after seeing similar occurrences in other states.

“We were not surprised by the lawsuit, as this tactic has been used in other states with limited licenses, because the incumbents want to limit competition,” Nolan said. “We are proceeding ahead, working to complete our facility and bring medical cannabis to Arkansas patients as quickly as can be done.”

KNWA: New medical marijuana cultivators granted licenses amid pandemic, controversy surrounds approval

Read the full story at KNWA.

FORT SMITH, Ark. (KNWA/KFTA) — Three medical marijuana cultivators were granted licenses as state sales have risen dramatically during the pandemic, said a Dept. of Finance spokesperson. The additions have drawn controversy, including a lawsuit filed against a cultivator in the River Valley.

“These licenses are worth 10s of millions of dollars, if not more, so they’re obviously very important to companies,” said Scott Hardin, Dept. of Finance spokesperson. “The challenges aren’t a surprise. I think it’ll be interesting to see where all of this goes.”

Representatives of the five current cultivators filed a lawsuit against a Fort Smith cultivator, accusing it of being a dissolved LLC and also being too close to a school, as defined by a Medical Marijuana Commission memo. River Valley Relief Cultivation LLC was dissolved, according to the Secretary of State’s website.

The facility is located near a juvenile detention center, which the lawsuit claims is a violation of the commission’s stated rules. 

“Juvenile detention facilities cooperate with local school districts to provide school instruction that the individuals incarcerated would ordinally [sic] receive if not incarcerated,” a 2017 Medical Marijuana Commission memo stated. “Because schooling is provided in the facility by the local school district and recognized by the Arkansas Department of Education as a non-traditional school, real property operated as a juvenile detention facility will qualify as a school.”

The lawsuit seeks to have the cultivator’s license revoked.

“Osage Creek Cultivation, LLC, Delta Medical Cannabis Company, LLC, Bold Team, LLC, Natural State Medicinals Cultivation, LLC and Natural State Wellness Enterprises, LLC hereby respectfully request that the ABC immediately proceed with the revocation of the license issued to River Valley Production I on July 17, 2020,” the lawsuit stated.

Hardin said the LLC issue may prove to be a serious problem for the cultivator.

“Can the owner transfer ownership to the new name of the company?” Hardin said. “That could be an issue, but that’s something that’s under investigation, and we’ll have to see.”

The too-near-to-school issue could be remedied soon, Hardin said, referencing the owner’s initiative to move the site.

“The owner of that company has issued a transfer of location request the commission will hear next week,” Hardin said. “The company would stay in Fort Smith, but if its awarded, it wouldn’t be close to the school, the juvenile facility.”

If the commission doesn’t approve the request, an investigation into whether the detention center counts as a school would ensue, Hardin said, which could lead to a halt in operations.

“It would be really surprising if that happens,” Hardin said, citing the fact that the majority of transfer requests are approved.

These new cultivators were approved amid a spike in medical marijuana sales throughout the state, Hardin said. Four additional dispensaries were also approved.

“We now have eight cultivators in the state, and that’s the maximum,” Hardin said. “We won’t see any more unless there’s a statewide ballot initiative, and I don’t see that happening.”

Arkansas Dem-Gaz: Arkansas pot producers sue to cancel new licenses

Addition of 3 competitors against rules, filing claims

Read the full story at the Arkansas Democrat-Gazette.

Arkansas’ medical-marijuana growers are teaming up in a lawsuit to try to invalidate licenses recently issued to companies in Fort Smith, Grady and Hot Springs, claiming that regulators exceeded their authority by licensing more growers than needed, thereby reducing the value of their operations.

The 33-page lawsuit, filed Wednesday in Carroll County Circuit Court, calls on Circuit Judge Scott Jackson to cancel the licenses issued to Carpenter Farms Medical Group of Grady, New Day Cultivation of Hot Springs and River Valley Relief Cultivation of Fort Smith before the three can start growing cannabis.

Those three companies, the second set to be licensed since Arkansas legalized medical marijuana in 2016, were granted their licenses over the past month but only because the defendants — the Arkansas Medical Marijuana Commission and the Alcoholic Beverage Control Division of the state Department of Finance and Administration — broke the rules governing marijuana farming licenses, according to the lawsuit, which names the companies as co-defendants with the regulating agencies.

“The [Medical Marijuana Commission] has greatly diluted the plaintiffs’ market share in the medical marijuana industry and disrupted sales of plaintiffs’ medical marijuana to their dispensary customers,” the lawsuit states. “The illegal actions of the [commission] will result in a loss of plaintiffs’ long-term dispensary customs and a reduction in sales of medical marijuana, both of which will have an adverse economic impact on plaintiffs, for which there is no legal means of redress.”

The plaintiffs, represented by attorney Casey Castleberry of the Murphy, Thompson, Arnold, Skinner & Castleberry firm of Batesville and lawyers Eric Gribble and Annie Depper of Little Rock’s Fuqua Campbell firm, are the first growers to be licensed in July 2018.

They are Bold Team of Cotton Plant; Delta Medical Cannabis Co. of Newport; Natural State Medicinals Cultivation of White Hall; Natural State Wellness Enterprises of Newport; and Osage Creek Cultivation of Berryville.

The plaintiffs say they have “indisputable” evidence that regulators failed to follow the rules when granting the new licenses and can present “concrete” proof about how bringing in new growers will damage their businesses.

According to the lawsuit, state rules only allow new cultivators if the five original growers are not producing enough cannabis to supply dispensaries, which serve the 66,594 medical-marijuana card holders who spend an average of $520,000 per day on the drug.

The voter-approved constitutional amendment legalizing medical marijuana allows only eight growers and 40 dispensaries. The commission recently awarded additional dispensary permits, raising the number of sellers to 37.

Scott Hardin, a spokesman for the Department of Finance and Administration, said Friday that Arkansans have spent $109 million on more than 17,445 pounds of medical marijuana since the first dispensary opened in May 2019.

Sales have increased during the coronavirus pandemic as more people have stayed home. Over the past two weeks, Arkansans have spent an average of $583,000 a day on medical marijuana, Hardin said.

Authorities don’t have any reason to believe that marijuana is in short supply, according to the suit.

Data from regulators show that the three farms now growing marijuana — Bold Team, Natural State Medicinals and Osage Creek — are currently supplying more than the dispensaries can sell. Delta Medical and Natural State Wellness are expected to harvest and sell their first crops next month, which will put more of the drug in the supply chain, the suit states.

The lawsuit also points to a survey of dispensaries — 22 of which also grow some of their own product — that showed no supply problems with the current growers, while commissioners have noted that Arkansas appears to have between one and three months surplus on hand.

But at meetings on June 16 and June 30, commissioners approved issuing the remaining cultivation licenses without ever considering the cannabis supply, according to the lawsuit.

Commissioners have had some legislative encouragement to increase the number of licensed producers. Reps. Vivian Flowers, D-Pine Bluff, and Jay Richardson, D-Fort Smith, endorsed adding more growers at a commission hearing last month, although a vote by a Senate committee failed to pass a proposal to ask the commission to award the remaining licenses.

The reasons that commissioners have given for licensing the three new producers are not legal justifications to expand the pool of growers from five to the maximum of eight, the suit states. Those reasons included resolving a lawsuit by Carpenter Farms, an attempt to lower the costs to patients, and increase patient access, the suit states.

Further, by conducting those votes the way they did, without any warning to the public or the established growers about what they were going to do, commissioners violated the plaintiffs’ constitutional due-process rights, given how much money the growers have invested in their operations based on representations by regulators, the suit states.

According to the lawsuit, the five growers say each was practically guaranteed 20% of the medical-marijuana market as the state only could add growers if they failed to produce an adequate supply.

With that understanding of the regulations, the growers say in the suit that they’ve invested significant expense — “millions of dollars” — in their operations, mostly from their personal assets because the nature of the marijuana industry limits opportunities for loans.

But in two weeks — the 14 days between commission meetings — state regulators “drastically reduced the market share of each of the plaintiffs by licensing three additional cultivation facilities. This reduced the market share of plaintiffs from 20 percent to 12.5 percent, a 37.5 percent reduction of their original market share,” the suit states.

Arkansas Times: Lawsuit challenges additional marijuana cultivation permits

Read the full story at Arkansas Times.

The five existing medical marijuana cultivators in Arkansas have sued to stop the award of permits to three more cultivators.

The lawsuit claims the three new permits awarded last month violated rules that said additional permits should be issued only on a determination that existing cultivation permits aren’t sufficient to supply dispensaries. It also says that, after waiting more than 24 months to award new permits, rules required a new application process rather than choosing from original applicants.

The Medical Marijuana Commission was allowed to award up to eight cultivation permits. It awarded five initially. Then it added three more, in part under pressure from Carpenter Farms, which had sued to challenge how initial applicants were scored. The commission approved a permit under a settlement of that lawsuit. But two weeks later, the Commission also approved two more permits. The plaintiffs contend proper notice wasn’t given of this business.

The suit in circuit court is by Osage Creek Cultivation, Delta Medical Cannabis, Bold Team, Natural State Medicinals Cultivation and Natural State Wellness Enterprises.

Defendants are the state Finance and Administration Department, the Alcoholic Beverage Control Division, the Medical Marijuana Commission, and the three new cultivation permit holders — Carpenter Farms Medical Group, River Valley Relief Cultivation and New Day Cultivation.

Here are the lawsuit and exhibits.

Lawyers are Casey Castleberry, Eric Gribble and Annie Depper.

The state will claim sovereign immunity. The lawsuit claims that failure to follows rules is an illegal action (ultra vires is the legal term) that is an exception to the rule that the state may not be sued in its courts.

The lawsuit asks for an injunction against the issuance of the permits or if they have been issued that they be voided.

KNWA: Final marijuana cultivation licenses issued

Read the full story at KNWA.

FORT SMITH, Ark. (KNWA/KFTA) — A Fort Smith business gets one of the last remaining licenses to grow marijuana.

The Arkansas Medical Marijuana Commission voted to issue the final two cultivation licenses.

One went to River Valley relief.

The other went to a group in Hot Springs.

There are now eight licensed growers in the state.

That is the maximum allowed.

Storm Nolan with River Valley Relief said they hope to start with about 40 employees and could grow to over 100.

“We’re going to be able to pull from Fort Smith workers in a very convenient location to where the many people we employ will actually, this will benefit Fort Smith greatly,” Nolan said.

The commission also licensed four new dispensaries including one in Fayetteville.