CLOQUET — Business owners and advocates are pushing back on a proposed zoning ordinance limiting where cannabis dispensaries are allowed to operate.

The Cloquet City Council reviewed a proposed ordinance Tuesday that would largely limit cannabis dispensaries to operating in downtown, the commercial district along state Highway 33 and the north side of town.

“The suggestion that staff and the Planning Commission have come up with is to try to separate the sale of the full-scale cannabis retail business to keep that out of residential neighborhoods and put it into our more densely commercially zoned districts,” City Administrator Tim Peterson said.

The proposed ordinance, which was not voted on by the council, divides cannabis businesses into three categories:

• Cannabis retail business, which sells cannabis and other products;
• Non-retail cannabis business — a facility for cannabis production or distribution; and
• Lower-potency hemp retail business, which includes edibles and beverages.

The ordinance would limit cannabis retail businesses to largely commercial districts and non-retail cannabis businesses to industrial areas.

The proposed ordinance follows the legalization of cannabis in Minnesota in 2023. The Minnesota Office of Cannabis Management, which is responsible for licensing uses related to cannabis, requires businesses to receive a local government’s certification of zoning compliance after being vetted.

Aurora Dispensaries, a Cloquet-based cannabis facility on the north side of town, just had its application reviewed by the Office of Cannabis Management and is now entered into the licensing lottery, co-owner Christina Lau said. However, the proposed ordinance would prohibit the business from operating in its current location.

“It’s a great start, but that’s only half the win,” Lau told the council. “No one wants to just win half the lottery. So with this prime, commercial preferred area, we want to go all the way.”

There was also frustration about business inhibited from operating in Cloquet’s historic West End business district, which has struggled in recent years to attract business owners. The proposed ordinance would not allow retail stores to operate there because of the neighborhood’s proximity to residential housing.

“If you don’t think outside the box, bring something in new to attract more business in five years, it’ll be all residential,” Shaun Naalsun, who owns a building on the West End, told the council. “They’ve tried restaurants. So I just asked if you could amend it or add that to the zone, or whatever you want to call it.”

Councilor Lara Wilkinson said that while she is sympathetic to separating cannabis businesses from residential areas, she believes having cannabis businesses operating in the West End is preferable to empty storefronts.

“If you’re going to have a responsible business owner with a good operational history with your business of this type, as opposed to a rundown, empty building,” Wilkinson said. “I don’t think that’s ideal. I would rather encourage responsible business ownership in commercial areas.”

Councilor Iris Keller said there could be a perceived hypocrisy of only subjecting cannabis businesses to certain zoning laws.

“If somebody were to come to town and they would see a day care in the liquor store right next to each other, and they would say, but you can’t have the cannabis here,” she said.

At the recommendation of the city attorney, City Planner John Kelley said his department removed lower-potency hemp products from the retail definition, which will allow them to be sold by a variety of non-cannabis businesses.

When creating the zoning rules, Kelly said the Cloquet Planning Commission considered distances from schools, day care facilities and select park facilities. When factoring those limitations in, it further constrains where cannabis facilities could operate.

Peterson said the distance from those facilities will be covered by a separate future ordinance that will regulate cannabis similar to a liquor license.