Chapter 3796:2-1 Licensing; Certificates of Operation

3796:2-1-01 Number of cultivator provisional licenses.

(A) Until September 8, 2018, the director of the department of commerce or the director's designee may issue up to twelve level I and twelve level II cultivator provisional licenses, in consideration of the ranking of the applicants in accordance with the criteria listed in section 3796.09 of the Revised Code and this chapter.

(B) Beginning September 9, 2018, and in accordance with section 3796.05 of the Revised Code, the director or the director's designee may issue additional cultivator provisional licenses, if the population of this state and the number of patients seeking to use medical marijuana support additional licenses, at the discretion of the director.

(C) In the event additional cultivator provisional licenses are deemed necessary, the department will follow the application procedures outlined in rule 3796:2-1-02 of the Administrative Code and this chapter.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03 , R.C. 3796.05, R.C. 3796.09

3796:2-1-02 Cultivator provisional license application.

(A) The department shall provide advance notice to the public indicating the commencement date and time period for accepting applications. The director shall have the right to amend the notice prior to the deadline for submitting an application. The director shall publish such amended notice in the same manner as the original notice. The director shall also have the right to cancel a notice of open application prior to the award of a cultivator provisional license.

(B) The provisional license application shall be submitted in accordance with Chapter 3796. of the Revised Code and this chapter. The application will include instructions for completion and submission. An applicant for a level I cultivator provisional license shall be prohibited from applying for a level II cultivator provisional license, and an applicant for a level II cultivator provisional license shall be prohibited from applying for a level I cultivator provisional license. An applicant for a level I or level II cultivator provisional license shall submit, in accordance with the application instructions, the following:

(1) A non-refundable application fee as set forth in rule 3796:5-1-01 of the Administrative Code;

(2) A business plan, which, at a minimum, shall include:

(a) The legal name of the applicant;

(b) The type of business organization of the applicant, such as an individual, corporation, partnership, limited liability company, association or cooperative, joint venture, or any other business organization;

(c) Confirmation that the applicant is registered with the secretary of state as the type of business submitted pursuant to paragraph (B)(2)(b) of this rule, a certificate of good standing issued by the secretary of state, and a copy of the applicable business documents governing the operations and administration of the business;

(d) The proposed physical address of the applicant's facility;

(e) An organizational chart of the company, including name, address, and date of birth of each principal officer, board member and any other individual associated with the cultivator, provided that all those individuals shall be at least twenty-one years of age;

(f) All persons subject to the criminal records checks shall submit both an Ohio bureau of criminal identification and investigation criminal records check and a federal bureau of criminal investigation criminal records check pursuant to division (B) of section 3796.12 of the Revised Code;

(g) Any instance in which a business that any person associated with the applicant had managed or served on the board of the business and was convicted, fined, censured, or had a registration or license suspended or revoked in any administrative or judicial proceeding;

(h) Evidence that the applicant owns the property on which the proposed cultivator will be located, has executed a lease for the property that does not contain any use restrictions that would otherwise prevent the cultivator from operating pursuant to Chapter 3796. of the Revised Code and in accordance with the rules promulgated pursuant to Chapter 3796. of the Revised Code, or has secured the ability to purchase or lease the property that does not contain any use restrictions that would otherwise prevent the cultivator from operating pursuant to Chapter 3796. of the Revised Code and in accordance with the rules promulgated pursuant to Chapter 3796. of the Revised Code;

(i) A location area map of the area surrounding the proposed cultivator that establishes the facility is at least five hundred feet from the boundaries of a parcel of real estate having situated on it a prohibited facility, as measured under rule 3796:5-5-01 of the Administrative Code;

(j) For any instance in which an applicant or any person associated with the applicant is currently or was previously licensed or authorized in another state or jurisdiction to cultivate, produce, test, dispense, or otherwise deal in the distribution of marijuana in any form, the following:

(i) A copy of each such licensing or authorizing document verifying licensure in that state or jurisdiction;

(ii) A statement granting permission to contact the regulatory agency that granted the license, accompanied by the contact information, to confirm the information contained in the application; and

(iii) If the license, authorization or application was ever warned, fined, denied, suspended, revoked or otherwise sanctioned, a copy of documentation so indicating, or a statement that the applicant was so licensed and was never sanctioned; and

(k) Documentation that the applicant is in compliance with applicable building, fire, safety, and zoning statutes, local ordinances, and rules and regulations adopted by the locality in which the applicant's proposed property is located, which are in effect at the time of the application, including but not limited to building department approval demonstrating compliance with rules adopted by the board of building standards pursuant to Chapters 3781. and 3791. of the Revised Code and any applicable zoning considerations.

(3) An operations plan that establishes policies and procedures that the applicant will implement for the secure, safe, sustainable, and proper cultivation of medical marijuana, which, at a minimum, shall include:

(a) Agricultural cultivation techniques;

(b) Experience with the cultivation of medical marijuana or agricultural or horticultural products, operation of an agriculturally related business, or operation of a horticultural business;

(c) A list of medical marijuana varieties proposed to be grown with estimated cannabinoid profiles, if known, including varieties with high cannabidiol content;

(d) Facility specifications, including the cultivation environment, layout of the marijuana cultivation area (i.e. grow tables, tiered or stacked orientation, etc.) evidencing that the applicant will comply with the requirements of Chapter 3796. of the Revised Code and will operate in accordance with the rules promulgated pursuant to Chapter 3796. of the Revised Code;

(e) The implementation of standards and guidelines for cultivating, propagating, vegetating, flowering, and harvesting medical marijuana, including safety protocols and equipment; and

(f) Facility staffing and employment matters, including employee training and employee compliance with Chapter 3796. of the Revised Code and in accordance with the rules promulgated pursuant to Chapter 3796. of the Revised Code.

(4) A quality assurance plan that establishes policies and procedures for a safe, consistent supply of medical marijuana, which, at a minimum, shall include:

(a) Intended use of pesticides, fertilizers, and other agricultural products or production control factors in the cultivation of medical marijuana;

(b) Best practices for the packaging and labeling of medical marijuana;

(c) Implementation and compliance with the inventory tracking system;

(d) An inventory control plan;

(e) Standards for the disposal of medical marijuana waste and other wastes; and

(f) Recall policies and procedures in the event of contamination, expiration or other circumstances that render the medical marijuana unsafe or unfit for consumption, including, at a minimum, identification of the products involved, notification to the dispensary or others to whom the product was sold or otherwise distributed, and how the products will be disposed of if returned to or retrieved by the applicant;

(5) A security plan that establishes policies and procedures to prevent theft, loss or diversion from a cultivator and protect facility personnel, which, at a minimum, shall include:

(a) Record keeping policies and procedures that will ensure the facility complies with rule 3796:2-2-08 of the Administrative Code;

(b) A security plan in accordance with rule 3796:2-2-05 of the Administrative Code;

(c) Transportation policies in accordance with rule 3796:5-3-01 of the Administrative Code; and

(d) A plot plan of the cultivation facility drawn to a reasonable scale that designates the different areas of operation, including the marijuana cultivation area, with the mandatory access restrictions.

(i) If the building is in existence at the time of the application, the applicant shall submit plans and specifications drawn to scale for the interior of the building.

(ii) If the building is not in existence at the time of application, the applicant shall submit a plot plan and a detailed drawing to scale of the interior and the architect's drawing of the building to be constructed.

(6) A financial plan, which, at a minimum, shall include:

(a) The identity and ownership interest of every person, association, partnership, other entity, or corporation having a financial interest, direct or indirect, in the cultivator with respect to which licensure is sought;

(b) A cost breakdown of the applicant's anticipated costs in building the facility and implementing the policies and procedures submitted as part of the application and the source of funding for the associated costs;

(c) Documentation acceptable to the department that the individual or entity filing the application has at least five hundred thousand dollars in liquid assets for a level I cultivator provisional license and fifty thousand dollars in liquid assets for a level II cultivator provisional license, which are unencumbered and can be converted within thirty days after a request to liquidate such assets;

(i) Documentation acceptable to the department shall include, as evidence of compliance, a signed statement from an Ohio licensed certified public accountant attesting to proof of the required amount of liquid assets under the control of an owner or the entity applying, if such a statement is available at the time of application.

(ii) The documentation must be dated within thirty calendar days before the date that the application was submitted.

(d) Information verifying that the applicant will be able to conform to the financial responsibility requirements under rule 3796:2-1-05 of the Administrative Code; and

(e) A record of tax payments in the form of tax summary pages for individuals and businesses at the state and federal level and in all jurisdictions in which an applicant has operated as a business and for every person with a financial interest of one per cent or greater in the applicant for the three years before the filing of the application, unless the department determines that documentation should be submitted for all individuals and entities.

(7) Any other information requested in the application instructions that the department deems necessary to evaluate and determine the applicant's suitability to operate as a cultivator.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03 , R.C. 3796.09

3796:2-1-03 Cultivator application review.

(A) The department, an independent contractor selected by the department, or a combination of the two shall review the submitted applications as described in this chapter and the application instructions. In order to receive consideration under paragraph (B) of this rule, an applicant shall:

(1) Demonstrate sufficient liquid capital pursuant to rule 3796:2-1-02 of the Administrative Code and an ability to meet the financial responsibility requirements under rule 3796:2-1-05 of the Administrative Code;

(2) Certify in writing at the time of application that an owner or prospective owner, officer or prospective officer, board member or prospective board member, administrator or prospective administrator, employee or prospective employee, agent, or other person has not been:

(a) Convicted of a disqualifying offense, as defined in rule 3796:1-1-01 of the Administrative Code; or

(b) Issued a certificate to recommend or applied for certification under section 4731.30 of the Revised Code;

(3) Verify that the proposed facility is not located within five hundred feet of a prohibited facility, which shall be measured in accordance with rule 3796:5-5-01 of the Administrative Code;

(4) Certify that the local jurisdiction where the facility is proposed has not passed a moratorium or taken other action that would prohibit the applicant from operating as a medical marijuana cultivator;

(5) Certify that an owner or prospective owner, officer or prospective officer, board member or prospective board member, administrator or prospective administrator, employee or prospective employee, agent, or other person who may significantly influence or control the activities of the cultivator does not have an ownership or investment interest, or compensation agreement with, or share any corporate officers or employees with any of the following:

(a) A laboratory licensed under Chapter 3796. of the Revised Code; or

(b) An applicant for a license to conduct laboratory testing under Chapter 3796. of the Revised Code;

(6) Provide documentation sufficient to establish that the applicant is in compliance with the applicable tax laws of this state and any jurisdiction where the applicant operates and conducts business; and

(7) Submit an application with the applicable fee under rule 3796:5-1-01 of the Administrative Code that does not contain information that misleads the department, misrepresents a material fact, or is received after the established application submission period established under paragraph (A) of rule 3796:2-1-02 of the Administrative Code.

(B) The applicants shall be ranked using an impartial and numerical process taking into account the criteria identified in rule 3796:2-1-02 of the Administrative Code, as developed by the department, an independent contractor selected by the department, or a combination of the two. The applicants will be ranked based on the following criteria, at a minimum:

(1) A business plan, which, at a minimum, shall include:

(a) A proposed business model demonstrating a likelihood of success, a sufficient business ability, and experience on the part of the applicant;

(b) An organizational chart of the company, including name, address, and date of birth of each principal officer and board member of the cultivator, provided that all those individuals shall be at least twenty-one years of age;

(c) Experience, which includes information on business licenses held by any person affiliated with the applicant, regardless if said license is active, revoked, suspended, or expired. If expired, applicant shall provide the grounds behind the expiration. The information provided on business licenses shall include the type of license, the licensing agency, the date the license was obtained, and a summary of any negative actions taken against each license;

(d) Evidence that the applicant owns the property on which the proposed cultivator will be located, has executed a lease for the property that does not contain any use restrictions that would otherwise prevent the cultivator from operating pursuant to Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code, or has secured the ability to purchase or lease the property that does not contain any use restrictions that would otherwise prevent the cultivator from operating pursuant to Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code; and

(e) Documentation that the applicant is in compliance with any local ordinances, rules, or regulations adopted by the locality in which the applicant's property is located, which are in effect at the time of the application. Such documentation may include, but is not limited to, local building department approval demonstrating compliance with rules adopted by the board of building standards pursuant to Chapters 3781. and 3791. of the Revised Code to construct the proposed facility, local approval to operate as a medical marijuana cultivation facility, and evidence that the applicant's proposed location is in compliance with local ordinances, rules, or regulations adopted by the locality in which the applicant's property is located, which are in effect at the time of application.

(2) An operations plan, which shall include, but not be limited to, the following:

(a) Documentation of cultivation methods and standards that will provide a steady, uninterrupted supply of medical marijuana;

(b) Experience with the cultivation of medical marijuana, or agricultural or horticultural products, operation of an agriculturally related business, or operation of a horticultural business;

(c) A list of medical marijuana varieties proposed to be grown with estimated cannabinoid profiles, if known, including varieties with high cannabidiol content;

(d) Facility specifications, including the cultivation environment, layout of the marijuana cultivation area (i.e. grow tables, tiered or stacked orientation, et cetera.), evidencing that the applicant will comply with the requirements of Chapter 3796. of the Revised Code and will operate in accordance with the rules promulgated pursuant to Chapter 3796. of the Revised Code; and

(e) Staffing and training guidelines.

(3) A quality assurance plan, which shall include, but not be limited to, the following:

(a) Intended use of pesticides, fertilizers, and other agricultural products or production control factors in the cultivation of medical marijuana;

(b) Best practices for the packaging and labeling of medical marijuana;

(c) Implementation and compliance with the inventory tracking system;

(d) An inventory control plan;

(e) Standards for the destruction of medical marijuana and disposal of waste; and

(f) Recall policies and procedures in the event of contamination, expiration, or other circumstances that render the medical marijuana unsafe or unfit for consumption, including at a minimum, identification of the products involved, notification to the dispensary or others to whom the product was sold or otherwise distributed, and how the products will be disposed of if returned to or retrieved by the applicant;

(4) A security plan, which shall include, but not be limited to, the following:

(a) Policies and procedures to ensure a secure, safe facility to prevent theft, loss, or diversion and protect facility personnel;

(b) Physical equipment used to monitor the facility and meet the security requirements under Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code;

(c) Emergency notification procedures with the department, law enforcement, and emergency response professionals;

(d) A plot plan of the cultivation facility drawn to a reasonable scale that designates the different areas of operation, including the marijuana cultivation area, with the mandatory access restrictions; and

(e) Transportation policies and procedures, which includes the transportation of medical marijuana from a cultivator to a processor or dispensary and from a cultivator to a testing laboratory in the state of Ohio, in accordance rule 3796:5-3-01 of the Administrative Code.

(5) A financial plan, which, at a minimum, shall include the following:

(a) The identity and ownership interest of every person, association, partnership, other entity, or corporation having a financial interest, direct or indirect, in the cultivator with respect to which licensure is sought;

(b) A cost breakdown of the applicant's anticipated costs in building the facility and implementing the policies and procedures submitted as part of the application and the source of funding for the associated costs;

(c) Documentation acceptable to the department that the individual or entity filing the application has secured at least five hundred thousand dollars in liquid assets for a level I cultivator provisional license and fifty thousand dollars in liquid assets for a level II cultivator provisional license, which are unencumbered and can be converted within thirty days after a request to liquidate such assets;

(i) Documentation acceptable to the department shall include, as evidence of compliance, a signed statement from an Ohio licensed certified public accountant attesting to proof of the required amount of liquid assets under the control of an owner or the entity applying, if such a statement is available at the time of application.

(ii) The documentation must be dated within thirty calendar days before the date the application was submitted.

(d) Information verifying that the applicant will be able to conform to the financial responsibility requirements under rule 3796:2-1-05 of the Administrative Code; and

(e) A record of tax payments in the form of tax summary pages for individuals and businesses at the state and federal level and in all jurisdictions in which an applicant has operated as a business, and for every person with a financial interest of one per cent or greater in the applicant for the three years before the filing of the application, unless the department determines that documentation should be submitted for all individuals and entities.

(6) Any other information that the department deems necessary to evaluate and determine the applicant's suitability to operate as a cultivator.

(C) In addition to the criteria established in paragraph (B) of this rule, the department may also consider the following when awarding a provisional license:

(1) Principal place of business;

(a) The applicant must provide documentation establishing that its principal place of business is headquartered in Ohio. The applicant may also provide names, addresses, and verification of any persons associated with the applicant that have established residency in Ohio.

(b) The applicant may also provide a plan for generating Ohio-based jobs and economic development.

(2) Environmental plan;

(a) The applicant must demonstrate an environmental plan of action to minimize the carbon footprint, energy usage, environmental impact, and resource needs for the production of medical marijuana.

(b) The applicant may also describe any plans for the construction or use of a greenhouse cultivation facility, energy efficient lighting, use of alternative energy, the treatment of waste water and runoff, and scrubbing or treatment of exchanged air.

(3) Employment practices, which the applicant must demonstrate a plan of action to inform, hire, and educate minorities, women, veterans, disabled persons, and Ohio residents;

(4) Verification of economically disadvantaged groups; and

(a) The applicant must demonstrate the following:

(i) It is owned and controlled by a United States citizen who is a resident of this state and is a member of one of the economically disadvantaged groups set forth in division (C) of section 3796.09 of the Revised Code. As used in that section, "owned and controlled" means that at least fifty-one per cent of the business, including corporate stock if a corporation, is owned by persons who belong to one or more of the groups set forth in this rule, and that those owners have control over the management and day-to-day operations of the business and an interest in the capital, assets, and profits and losses of the business proportionate to their percentage of ownership; or

(ii) It is owned and controlled as a woman-owned business by a United States citizen who is a resident of this state. For purposes of this paragraph, "owned and controlled" has the same ownership and control requirements as listed in paragraph (C)(4)(a)(i) of this rule.

(5) Research plan, which the applicant must provide the department with a detailed proposal to conduct or facilitate a scientific study or studies related to the medicinal use of marijuana.

(D) The department may request additional information as part of the application review process from an applicant that otherwise meets all of the requirements under paragraph (A) of this rule. The applicant shall have thirty calendar days from the date the applicant receives the department's request to provide the information. If the applicant fails to provide the requested information within thirty calendar days, it will result in an abandoned application. An abandoned application shall not receive further consideration.

(E) An applicant forfeits all fees associated with an abandoned application. The department shall not be required to act on an abandoned application and the application may be destroyed by the department. An abandoned application will not prevent an applicant from applying for a provisional license in the future if the department issues additional provisional licenses pursuant to paragraph (B) of rule 3796:2-1-01 of the Administrative Code.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03

3796:2-1-04 Cultivator provisional license award.

(A) A provisional license shall be issued to the level I and level II qualified applicants receiving at least the minimum required score in each category and the highest total score overall as compared to the other applicants.

(B) In the event that two or more qualified applicants for a cultivator provisional license received the same total score, and awarding a provisional license to all tied applicants would violate paragraph (A) of rule 3796:2-1-01 of the Administrative Code, the department shall select the applicant that received the highest score in the operations plan category. In the event that the same applicants received the same score in the operations plan category, the department shall select the applicant that received the highest score in the security plan category. If a tie score still remains, the tied applicants will be interviewed by an unbiased panel selected by the department.

(C) If no qualified applicants are found during the process described in rule 3796:2-1-03 of the Administrative Code, a provisional licensee fails to fulfill the conditions in the application, or a certificate of operation is revoked, the department may, at the discretion of the director, announce another period to submit applications in accordance with rule 3796:2-1-02 of the Administrative Code. If the department announces another application period, a qualified applicant that submitted an application during the previous application period, but was not issued a provisional license, may re-submit an application and the application fee under rule 3796:5-1-01 of the Administrative Code shall be waived.

(D) No person shall hold or be granted more than one cultivator provisional license or cultivator certificate of operation at any time. No person shall hold a financial interest in or be an owner, partner, officer, director, shareholder, member, or other person who may significantly influence or control the activities of more than one cultivator. No corporation, partnership, limited liability partnership, limited liability company, or other entity or subsidiary thereof shall hold a financial interest in or be an owner, principal officer, partner, shareholder, member, or other person who may significantly influence or control the activities of more than one cultivator.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03 , R.C. 3796.09

3796:2-1-05 Cultivator financial responsibility.

(A) A provisional licensee shall provide evidence of financial responsibility before a certificate of operation can be issued, which may be payable to the department for any of the following reasons:

(1) A cultivator fails to adhere to the security plan approved by the department or otherwise operates the facility in a manner that allows for or results in theft, loss, or diversion of medical marijuana;

(2) A cultivator engages in activities prohibited under rule 3796:2-2-07 of the Administrative Code; or

(3) A cultivator has its certification of operation fined, suspended or revoked resulting from activities prohibited under rule 3796:5-6-02 of the Administrative Code.

(B) Evidence of financial responsibility shall be provided by the following:

(1) Providing and maintaining at its own expense any insurance coverage and terms of insurance required and approved by the department, including, but not limited to, products liability and general liability, prior to the issuance of a certificate of operation, if such products are in existence at the time of issuance or the time of renewal for the certificate of operation; and

(2) Establishing and maintaining an escrow account in a chartered financial institution in Ohio in the amount of seven hundred fifty thousand dollars for level I cultivators and seventy-five thousand dollars for level II cultivators, with escrow terms, approved by the department, that it shall be payable to the department in the event of circumstances outlined in paragraph (A) of this rule. A financial institution may not return money in an escrow or surety account to the cultivator that established the account or representative of the cultivator unless the cultivator or representative presents a statement issued by the department indicating that the account may be released; or

(3) Providing a surety bond naming the cultivator as principal of the bond, upon terms approved by the department, in the amount of seven hundred fifty thousand dollars for level I cultivators and seventy-five thousand dollars for level II cultivators payable to the department in the event of circumstances outlined in paragraph (A) of this rule. Bond terms include the following:

(a) The business name and registration number on the bond must correspond exactly with the business name and registration number in the department's records.

(b) A copy of the bond must be received by the department before a certificate of operation is issued.

(c) The bond shall not be canceled by a surety on less than thirty days' notice in writing to the department. If a bond is canceled and the cultivator fails to file a new bond with the department in the required amount on or before the effective date of cancellation, the cultivator's license shall be revoked. The total and aggregate liability of the surety on the bond is limited to the amount specified on the bond.

(4) The department shall permit a cultivator to reduce the escrow or surety bond by two hundred fifty thousand dollars for level I cultivators and twenty-five thousand dollars for level II cultivators upon the successful achievement of each of the following milestones, resulting in a potential elimination of the escrow account or surety bond:

(a) A determination by the department that the cultivator remained fully operational without substantial interruption and was able to provide and maintain an uninterrupted supply of medical marijuana, in accordance with rule 3796:2-1-07 of the Administrative Code, and demonstrates an ability to comply with the requirements of Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code, as determined by the department, for a period of one year;

(b) A determination by the department that the cultivator remained fully operational without substantial interruption and was able to provide and maintain an uninterrupted supply of medical marijuana, in accordance with rule 3796:2-1-07 of the Administrative Code, and demonstrates an ability to comply with the requirements of Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code, as determined by the department, for two consecutive years; and

(c) A determination by the department that the cultivator remained fully operational without substantial interruption and was able to provide and maintain an uninterrupted supply of medical marijuana, in accordance with rule 3796:2-1-07 of the Administrative Code, and demonstrates an ability to comply with the requirements of Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code, as determined by the department, for three consecutive years.

(5) A cultivator will not be held in default should the failure to comply be the direct result of an event or effect that cannot be reasonably anticipated or controlled, such as an act of God or nature and not the result of a lack of good faith effort.

(C) The required insurance policy and surety bond shall be written by an insurance company formed, licensed or eligible, and authorized or approved to write such insurance in the state of Ohio under Title XXXIX of the Revised Code.

(D) The department may waive any of the requirements of this rule on a temporary or permanent basis, if it is determined by the department that the financial responsibility instruments listed in this rule are not in existence in the insurance market.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03 , R.C. 3796.09

3796:2-1-06 Cultivator certificate of operation.

(A) A provisional licensee is prohibited from operating as a licensed cultivator and performing any cultivation or production activities until a certificate of operation is issued by the department. The information and plan submitted by a provisional licensee shall become mandatory conditions that must be met before a certificate of operation can be awarded.

(B) A provisional licensee shall have nine months from the date they are notified of selection for a provisional license to obtain a certificate of operation. A certificate of operation shall be issued once all applicable inspections are passed, a certificate of occupancy issued by the building department having jurisdiction for such use is obtained, and the provisional licensee demonstrates that it conforms to the specifications of the application, as well as the requirements imposed by law and rules. If a certificate of operation is issued, the provisional license becomes null and void.

(C) The department shall not award a certificate of operation to a provisional licensee if the provisional licensee has not met all of the specifications in the application and passed all applicable inspections under rule 3796:2-3-01 of the Administrative Code within nine months of written or electronic notification of the applicant's selection for a provisional license. If the provisional licensee fails to remedy the deficiencies in accordance with rule 3796:2-3-01 of the Administrative Code or otherwise satisfy the nine month time period established under paragraph (B) of this rule, the director, at his or her discretion, may extend the time period for the cultivator to obtain a certificate of operation or take action pursuant to rule 3796:5-6-01 of the Administrative Code.

(D) In addition to entities authorized to purchase medical marijuana pursuant to Chapter 3796. of the Revised Code from a cultivator possessing a certificate of operation, medical marijuana may be sold to a laboratory licensed under Chapter 4729-13 of the Administrative Code, to possess dangerous drugs and controlled substances for scientific and clinical purposes.

(E) The certificate of operation, along with a copy of the current certificate of occupancy for the facility and any other certificate, business license, or other authorization required to conduct production activities, shall be posted in a conspicuous place within the facility and made available to the department and all fire code and building officials upon request.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03 , R.C. 3796.09

3796:2-1-07 Uninterrupted supply of medical marijuana.

(A) A cultivator shall ensure that a consistent supply of medical marijuana is available to be sold to licensed processors and dispensaries. Evidence of a consistent supply may be shown by:

(1) Not more than one hundred twenty days elapsing between harvests of at least fifteen pounds of medical marijuana; or

(2) Maintaining an inventory of at least twenty pounds of medical marijuana for level I cultivators and ten pounds of medical marijuana for level II cultivators that is ready for immediate sale.

(B) If the director believes a cultivator has failed to meet the requirements of paragraph (A) of this rule, the director may issue a notice of insufficient business activity to a licensed cultivator. The notice shall include the factual basis for the director's belief, including any appropriate supporting documentation.

(C) Upon a notice issued pursuant to paragraph (B) of this rule, a licensed cultivator may respond with any evidence sufficient to prove that the cultivator has met, and continues to meet, the standards established by paragraph (A) of this rule.

(D) If a cultivator fails to respond to a notice issued, or the director determines the evidence provided is insufficient to establish one of the conditions in paragraph (A) of this rule, the director shall move to revoke the cultivator's certificate of operation pursuant to rule 3796:5-6-01 of the Administrative Code.

(E) At any time prior to the issuance of a notice of insufficient business activity, a cultivator may petition the director to toll computation of the timeframes provided in paragraph (A) of this rule. Such a petition shall provide:

(1) An explanation of the facts and circumstances that will not allow the cultivator to ensure a consistent supply of medical marijuana as required in paragraph (A) of this rule; and

(2) A plan for how and when the cultivator will be able to meet the requirements of paragraph (A) of this rule, with specific attention to how such a plan will allow the cultivator to show the standards established in paragraph (A) of this rule.

(F) Upon receipt of a petition under paragraph (E) of this rule, the director may stay the requirement of paragraph (A) of this rule for a cultivator. A director's order staying the requirement of paragraph (A) of this rule shall state the date upon which the stay if lifted using information provided by the cultivator in accordance with paragraph (E)(2) of this rule.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03

3796:2-1-08 Cultivator transfer of ownership or location.

(A) A provisional license issued pursuant to this chapter is nontransferable.

(B) A certificate of operation shall be issued for the specific cultivator and location identified on the application, and is valid only for the owner, premises and name designated on the certificate of operation and the location for which it is issued. A certificate of operation may only be transferred or assigned if the department determines that the proposed ownership or location change complies with the rules promulgated in accordance with Chapter 3796. of the Revised Code, Chapter 3796. of the Revised Code, and the following:

(1) Upon any request for a change in ownership, the cultivator shall:

(a) Notify the department in writing of the proposed ownership change;

(b) Facilitate the submission of both an Ohio bureau of criminal identification and investigation criminal records check and a federal bureau of criminal investigation criminal records check pursuant to division (B) of section 3796.12 of the Revised Code;

(c) Demonstrate to the department that the person acquiring the interest meets the requirements under rules 3796:2-1-02 and 3796:2-1-03 of the Administrative Code, and the cultivator will remain in compliance with its application for a cultivator provisional license, the rules promulgated in accordance with Chapter 3796. of the Revised Code, and Chapter 3796. of the Revised Code under the proposed ownership structure; and

(d) Require the cultivator to re-submit an application in accordance with rule 3796:2-1-02 of the Administrative Code if the transfer of ownership would result in a new controlling shareholder or shareholders outside of the current ownership structure approved by the department. For purposes of calculating a controlling interest, the department will consider all transfers of ownership that occur in a given calendar year and calculate such transfers in the aggregate.

(2) Upon a request for a change in location, a cultivator shall:

(a) Notify the department in writing of the proposed location change;

(b) Submit plans and specifications for the new facility in accordance with rule 3796:2-1-02 of the Administrative Code; and

(c) Demonstrate to the department that the new location meets the applicable requirements of rule 3796:2-1-02 of the Administrative Code and that the cultivator will remain in compliance with the rules promulgated in accordance with Chapter 3796. of the Revised Code, and Chapter 3796. of the Revised Code, at the new location.

(C) A cultivator requesting a change in ownership or location shall submit the applicable fee under rule 3796:5-1-01 of the Administrative Code. A proposed change in ownership or request for a change in location shall not be effective until approved in writing by the department.

(D) A cultivator receiving approval from the department for a change in location shall have ninety days from the date of approval, unless an extension is granted at the discretion of the department, to transfer inventory and begin operations at the new location, subject to the following restrictions:

(1) The transition period shall not begin until the new location is ready to begin production and has passed an inspection by the department under rule 3796:2-3-01 of the Administrative Code;

(2) No product may be transferred to or cultivated at the new location prior to the beginning date of the approved transition period;

(3) Any medical marijuana remaining at the original location past the ninety-day transition period shall be destroyed in accordance with rule 3796:2-2-03 of the Administrative Code; and

(4) The cultivator shall notify the department in writing or by electronic transmission once the transfer of inventory is complete and production has begun at the new location.

(E) Upon inspection and verification by the department that the new location is in compliance with Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code, the department shall issue a license modification reflecting the new location. The modified license shall have the same expiration date as the previously issued license.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03 , R.C. 3796.09

3796:2-1-09 Cultivator marijuana cultivation area expansion.

(A) Beginning September 9, 2018, the director or the director's designee, at his or her discretion, may approve a marijuana cultivation area expansion of an existing cultivator's facility, such that the approval of a proposed initial expansion shall not result in a total marijuana cultivation area that exceeds fifty thousand square feet for level I cultivators and six thousand square feet for level II cultivators, based on cultivator compliance with licensure requirements and other factors related to the program. The director, at his or her discretion, may approve a subsequent expansion of an existing facility's marijuana cultivation area of up to twenty-five thousand square feet for level I cultivators and three thousand square feet for level II cultivators, based on cultivator compliance with licensure requirements, if the population of the state, number of patients seeking to use medical marijuana, and data from the inventory tracking system regarding patient recommendations and patient usage of medical marijuana support such expansion. In the event the director or the director's designee approves both expansions of a facility's marijuana cultivation area, the marijuana cultivation area shall not exceed seventy-five thousand square feet for level I cultivators and nine thousand square feet for level II cultivators.

(B) A cultivator seeking to expand its marijuana cultivation area shall submit an expansion plan, which, at a minimum, shall include the following:

(1) Include plans and specifications for the expansion or alteration in accordance with rule 3796:2-1-02 of the Administrative Code that demonstrate compliance with the requirements of the rules adopted by the board of building standards pursuant to Chapters 3781. and 3791. of the Revised Code and the rules adopted by the state fire marshal pursuant to sections 3737.82 and 3737.86 of the Revised Code;

(2) Propose a timeline for completion of the proposed expansion, which, if approved, will become a mandatory condition;

(3) Demonstrate a history of compliance with Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code, which includes a history of enforcement actions and sanctions issued by the department or law enforcement against the cultivator;

(4) Provide supporting documentation that the cultivator has consistently met the cultivation requirements under rule 3796:2-1-07 of the Administrative Code; and

(5) Demonstrate to the department that the proposed expansion meets the applicable requirements of rule 3796:2-1-02 of the Administrative Code and that the cultivator will remain in compliance with Chapter 3796. of the Revised Code and the rules promulgated in accordance with Chapter 3796. of the Revised Code, if the expansion is permitted.

(C) Upon the department's receipt of a request for expansion, the department shall have a reasonable time to review and approve or deny a request for expansion. If approved, the cultivator will be bound to the terms in the request for expansion and must pass an inspection pursuant to rule 3796:2-3-01 of the Administrative Code prior to cultivating medical marijuana in the expanded marijuana cultivation area. A cultivator's failure to comply with the approved request for expansion may result in the revocation of the department's approval or additional sanctions under rule 3796:5-6-01 of the Administrative Code. A cultivator shall not submit a request for expansion more than once during any twelve-month period.

(D) If the director or the director's designee determines that additional cultivation capacity is necessary to meet the demand for medical marijuana based on the population of this state, number of patients seeking to use medical marijuana, and data from the inventory tracking system regarding patient recommendations and patient usage of medical marijuana, the director may request expansion plans from existing cultivators in accordance with paragraphs (B) and (C) of this rule.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03

3796:2-1-10 Cultivator certificate of operation renewal.

(A) Every cultivator certificate of operation issued by the department under this chapter shall expire annually on the date it was issued. A renewal application for a cultivator, accompanied by the proper renewal fee established under rule 3796:5-1-01 of the Administrative Code, shall be filed with the department at least thirty days prior to the expiration date of the certificate of operation.

(B) The department shall grant a renewal application if the application is filed in a timely manner, the cultivator submits the corresponding renewal fee, the department confirms that nothing warrants the denial of the renewal under rule 3796:5-6-01 of the Administrative Code, and the cultivator passes a full inspection, unless a full inspection was passed within three months before the renewal date.

(C) If a renewal application is not filed prior to the expiration date of the certificate of operation, the certificate of operation shall be suspended for a maximum of thirty days, at which point it will be deemed expired if the cultivator has not successfully renewed the certificate of operation under paragraph (B) of this rule. Upon expiration of the certificate of operation, the cultivator shall not engage in any cultivation activities in furtherance of the business of growing medical marijuana. The department shall not renew the certificate of operation and the facility shall permanently cease its operations.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03 , R.C. 3796.09

3796:2-1-11 Winding down.

(A) If a cultivator decides to voluntarily surrender or not renew its certificate of operation and permanently discontinue business operations, the cultivator shall provide written notice to the department at least ninety days prior to the effective date of the closure. If the closure is the result of an eviction notice, the cultivator shall immediately notify the department of the eviction notice and the effective date of the notice. This notice shall be provided prior to the cultivator taking any steps to wind down and discontinue business operations.

(B) A cultivator that notifies the department of its intent to voluntarily surrender or not renew its certificate of operation under paragraph (A) of this rule shall submit, within sixty days of the effective date, a written plan of closure for approval by the department. This plan shall include, at a minimum, the following:

(1) The sale of medical marijuana inventory at market rate;

(2) The destruction of medical marijuana on hand at the facility on the effective date of the closure;

(3) The sale or removal of equipment and products ancillary to the cultivation of medical marijuana;

(4) The retention of all records required to be maintained in accordance with the applicable records retention schedules;

(5) The steps that will be taken to maintain compliance with Chapter 3796. of the Revised Code, the rules promulgated in accordance with Chapter 3796. of the Revised Code, and any other conditions required by the director until the approved closure date; and

(6) The closure and intended use of the premises in which the cultivator was located.

(C) The director shall approve or deny a cultivator's plan of closure within thirty days of receipt. The director may request additional information if approval or denial of the plan cannot be determined based on the information provided.

Effective: 5/6/2017
Five Year Review (FYR) Dates: 05/06/2022
Promulgated Under: 119.03
Statutory Authority: R.C. 3796.03
Rule Amplifies: R.C. 3796.03