TALLAHASSEE — With the state's pot industry poised to explode, Florida health officials have agreed to issue another medical marijuana license – the state's seventh – to a Central Florida nursery that lost out to a competitor by a fraction of a percentage point last fall.

The Department of Health inked the agreement with McCrory's Sunny Hill Nursery last week – after nearly a year of protracted and expensive litigation over the license – before Administrative Law Judge Elizabeth McArthur could issue a ruling and as health officials tried to work out a deal over another license in a separate challenge.

In the Dec. 12 settlement, posted Monday on the Division of Administrative Hearings website, state health officials acknowledged that the Lake Wales-based McCrory's should have received a Central Florida license awarded in November to Knox Nursery.

Of the seven applicants in the Central region, a three-member panel charged with evaluating the applications gave McCrory's an aggregate score of 5.5417, just a fraction below Knox, whose score of 5.5458 earned the Lake Mary-based grower a license.

McCrory's contended that one of the reviewers, who identified the nursery as "superior to all other applicants" in one component, erroneously gave the nursery a score of "6" instead of a "7." If the rank had been assigned correctly, McCrory's "would correctly receive the high score and been the highest scoring applicant in the Central region," the nursery's lawyers wrote in May.

The administrative challenges are rooted in a 2014 law that initially called for one license to be awarded in each region of the state for nurseries to grow, process and distribute medical marijuana. That law allowed limited types of non-euphoric cannabis for some patients and was expanded early this year to allow full-strength pot for people who are terminally ill.

The agency's attempts to resolve the administrative challenges by granting new licenses come as lawmakers prepare to grapple with a vastly expanded medical marijuana market in the state, the result of a constitutional amendment approved by voters last month.

Backers of Amendment 2 have maintained that the limited number of licenses allowed in Florida would not provide the access to marijuana treatment anticipated by authors of the proposal or by voters who overwhelmingly signed off on the measure.

State economists estimate that 500,000 patients could be eligible for the treatment, but industry observers predict that number could be even greater because the amendment gives doctors leeway to order pot for illnesses not specifically identified in the amendment.

One of the state's marijuana vendors last week told a Senate panel that the state will have a more-than-adequate pot supply when the amendment is fully implemented later next year, adding that her company alone could provide marijuana treatment for 650,000 patients.

Under the agreement filed Monday, health officials signed off on a license for McCrory's, and the grower promised to drop administrative and court challenges. Both sides agreed to pick up the tab for their own legal fees and costs.

Known as "GrowHealthy," McCrory's last year joined forces with three other nurseries and purchased a 180,000-square-foot facility in the hopes of getting a license.

"I believe the state reviewed their case, and I believe that we had a high level of confidence that the judge would rule in our favor, and I believe that the state, after going through this process, agreed with us,” GrowHealthy CEO Don Clifford told The News Service of Florida in a telephone interview Tuesday.

The Department of Health is "focusing on our role in implementing the amendment as outlined in the measure approved by voters," agency spokeswoman Sarah Revell said in an email.

"The department remains committed to ensuring a regulatory structure that best serves the people of Florida. The department will continue to work with all licensed dispensing organizations to deliver product to patients as quickly and safely as possible," she said.

The law passed early this year allows the agency to grant three additional licenses after more than 250,000 patients have signed up for the marijuana treatment, Revell noted.

The number of licenses available to businesses interested in growing, processing or selling pot products is expected to be one of the most contentious issues lawmakers face as they contemplate implementation of the constitutional amendment during the legislative session that begins in March.

Four of the state's six medical marijuana license-holders are now producing pot treatments. According to Clifford, patients receiving full-strength marijuana – currently limited to terminally ill patients – are restricted to purchasing five days' worth of treatment due to a supply shortage.

"They (Department of Health officials) have looked at this. They've looked at Amendment 2. They want to add some capacity and move forward. We applaud that effort," Clifford said.

A week before they told McArthur the state had struck a deal with McCrory's, lawyers for the health department asked Administrative Law Judge John Van Laningham to relinquish control of a separate challenge by two applicants that lost out on a Southwest Florida license to Alpha Foliage.

On Dec. 6, lawyers representing the two challengers – Plants of Ruskin and Tornello Landscape, also known as "3 Boys Farm" – and the state told Van Laningham they had reached a settlement and asked him to close the case. The following day, Van Laningham granted the request.

But nearly two weeks later, no settlement had been filed. According to Revell, the challengers "are working on potential terms of the settlement to present to the department" as late as Wednesday.

Van Laningham had virtually guaranteed that he intended to recommend that health officials grant an additional marijuana license after deciding that Alpha did not meet the legal criteria for a license it received from the state. He also scalded the health agency for the manner in which the applications were scored, saying health officials ignored their own rules with the evaluation process.

Van Laningham's ruling would not have had any immediate impact on Alpha, whose dispensing operations are known as "Surterra Therapeutics," just as a ruling in favor of GrowHealthy does not affect Knox. But a ruling against the department could have opened the door for more challenges, insiders predicted.

Under the law passed early this year, nurseries awarded licenses last fall can keep their licenses. The law requires health officials to grant additional licenses to applicants who successfully file challenges against the state.

Since the 2014 law was passed, the state has spent nearly $1.2 million on legal fees and costs as it has faced challenges to rules regulating the industry and to the selection of licensees. The bulk of the money has gone to the Tallahassee-based firm Vezina, Lawrence and Piscitelli.

"It is unconscionable that several citizens of the state of Florida had to go through the expense of a lawsuit to simply prove what many of us knew from the beginning of the award process – that the department had made errors of fact in their interpretation of the law and the rule that they had adopted,” said Louis Rotundo, a lobbyist and consultant affiliated with the cannabis industry.