A: There is currently no firm canopy ceiling for the WSLCB, but Randy Simmons has stated publicly that they have a fungible approximation in mind as of late August 2014 of 8-10 million sq feet. He has said this elsewhere, but he said it in front of an audience for a “Business Intelligence” panel I was on Wednesday August 27 for the Marijuana Business Association Tech seminar.
The 2 million square feet number that came from BOTEC’s summer 2013 recommendations to the state was officially thrown out last February, when the WSLCB reduced the number of production licenses an applicant could hold from 1 from 3; and reduced max canopy per Tier by 30%.
This was a response to the fact that applications greatly exceeded the original cap by tens of millions of square feet. They stated the basis for their decision in this press release:
“Agency rules (WAC 3214-55-075 (8)) state “if the total amount of square feet marijuana production exceeds two million square feet, the Board reserves the right to reduce all licensee’s production by the same percentage or reduce licensee production by one or more tiers by the same percentage.””
Given the slowness of the approval rate and difficulties unrelated to approval since February, the WSLCB is considering restoring the 30% canopy that was taken away last February, according to my sources. This is going to upset a LOT of the 2375 pending applicants, since as of 9/30, 235 applicants have been approved; 22 denied; 9 applicants issued licenses but are listed as “pending;” and 1 applicant is listed as active but pending approval.
How many of them will be upset depends on how many of them are viable. Right now we still don’t have a clear picture, but remember our April 23, 2014 interview with I-5 Real Estate owner Tom Gordon in which he estimated that 5-15% of the applications were viable. We are at a little under 10% approval right now, and the WSLCB now has the opposite concern that they had in February: they need more active canopy. That says to me that while plenty of those 2000+ pending applications still haven’t had their first phone call from the WSLCB, an awful lot of those pending applications either had their phone call and haven’t gotten anywhere or really aren’t in a hurry to get that phone call.
In the meantime, license acquisition is now an absolutely normal thing, and folks whose license are not viable may sell their businesses to people who can make them viable. This is probably not what the WSLCB wanted, and they may want to simply re-open the application process rather than let investor money take over.
If they have truly gone to a 10 to 12MM sq ft canopy they will put most indoor operations out of business. They are also setting the program up to fail the major requirement that the US Justice department set for the program as that many square feet will likely lead to major overproduction problems and thus diversion of unsold product. Major, major mistake to increase canopy too fast while the retail and edible market is so undeveloped.
I agree that indoor operations are not long for this landscape, and that this is one factor. But wholesale prices for legal cannabis start to over lap with informal market prices at about $2500, and we won’t see that till next November at the earliest. Diversion is incredibly unlikely given the system’s tight oversight; and good growers can do fine all the way down to the low 1000’s which we won’t see for several years. Plus the “secondary” extraction market is going to eat up so much canopy space at an accelerating rate. Finally, there are 300 more retail stores to open up, and so much more production necessary to open them up much less keep them open that it seems incredibly far from the failure you describe. By then indoor operations will be gone for many other reasons.
I know people really want this thing to fail, but I’m here to tell you: it’s not going to. The question is going to be whose success will it be, and my hope is that it will be everyone’s instead of a few. For that to happen, more growers needs to succeed sooner.
Honestly I don’t think the WSLCB is going to pause till they get to 15 million approved; and then they’ll head right to 20 before really having to think about it.
Steve W –
I’m interested to know why 10 to 12 million sq ft would put indoor operations out. Can you elaborate?
~Scotty 5~
2 million sq ft is 46 acres.