A Brave New World: Cannabis Industry Out of the Shadows

August, 2016



Illustration: Terry Torgeson. Used with artist permission.Illustration: Terry Torgeson. Used with artist permission.

Legalization on the Horizon?

A ballot initiative to legalize recreational cannabis, Proposition 64, will be sent to voters this November. A previous attempt to legalize marijuana in California, Proposition 19, failed in 2010, with the Emerald Triangle voting overwhelming against legalization. Unlike the state’s current medical cannabis regulation, Proposition 64 does not include size restrictions on cultivations. Concerns have been raised that the failure to include size restrictions will result in the consolidation of cannabis farms, a move away from the so-called “Mom and Pop” operations. Under the law, local governments can impose additional regulations, such as size restrictions, as they see fit.  As of press time, Proposition 64 has not been endorsed or opposed by major environmental groups.

Look for more information on Proposition 64 in the Oct/Nov EcoNews as the election approaches. 

State Law Update: Water Diversions and New Excise Taxes

The state legislature passed a trailer bill, SB 837, to the state budget which further regulates how cannabis farmers can use water. The bill requires the State Water Resources Control Board and Department of Fish and Wildlife to set up a joint task force to assess damages from cannabis operations and gives the taskforce the authority to collect fees from cannabis cultivators to pay for corrections. 

SB 837 also requires that cannabis cultivators obtain a statement of diversion, including the amount of water, from the State Water Resources Control Board. The State Water Resources Board will only issue such statements of diversion if the diversions do not cumulatively impact the instream flows needed for fish spawning, migration and rearing, and the flows needed to maintain natural flow variability—not an easy task. The legislation further authorizes the State Department of Food and Agriculture to designate appellations, a legally defined geographic region, for cannabis grown within the state. SB 837 is supported by CalTrout, the Nature Conservancy, Trout Unlimited, and the California Grower’s Association.

The state legislature is now considering a bill, AB 2243, which would impose state excise taxes on cannabis and cannabis products to fund watershed restoration and law enforcement efforts. While the exact tax amounts are still being worked out in the legislature, the draft bill would direct 30 percent of all tax revenue to the “Watershed Enforcement Team,” a joint task force of the California Department of Fish and Wildlife and the State Water
Resources Control Board. 

Funds generated would be designated as follows: 30 percent would be directed to the Natural Resources Agency for environmental remediation efforts of problem cannabis operations, 30 percent would be devoted to local law enforcement of illegal operations, eight percent to the Open Space Subvention Payment Account of the California Land Conservation Act of 1965, and two percent will fund and create Regional Marijuana Enforcement Officers who shall coordinate enforcement efforts between various law enforcement agencies, including the DEA, Department of Wildlife, and local law enforcement.

Humboldt Cannabis Tax Sent to Ballot

By a 4-1 vote, the Humboldt County Board of Supervisors sent a proposed cannabis tax to the voters this November. The tax is based on the size of operations—$1 per square foot of growing space for outdoor plants, $2 per square foot of mixed-light, and $3 per square foot of indoor plants. This amount is far less than staff proposed. After reviewing telephone polling, county staff recommended a progressive tax with small outdoor operations in the lowest tax bracket while large indoor operations would be in the highest. Voting against the proposed tax, Third District Supervisor Mark Lovelace noted that other communities were charging between $20–$30 per square foot of cultivation. 

HUMMAP Lawsuit Settled

Shortly after Humboldt County adopted its cannabis land use regulations, the Humboldt Mendocino Marijuana Advocacy Project (HuMMAP), which represents small cannabis farmers, filed suit alleging violations of the California Environmental Quality Act (CEQA). HuMMAP ultimately settled with the county based on the county’s commitments to improve the land use ordinance by: ensuring the county would conduct an Environmental Impact Report, which the county will begin work on later this summer; clarifying provisions related to noise restrictions and carbon credits; providing a process to examine prior unpermitted three acre timberland conversions; and clarifying and refining minor flaws in the ordinance.

Mendocino Regulations Shuttered As Result of Lawsuit

Mendocino County passed its own local ordinance attempting to regulate cannabis production. The Mendocino County ordinance allowed for a set number of plants based on the size of the growing parcel, with a maximum of 99 plants on a 10+ acre parcel. The Mendocino County Blacktail Association, a hunting non-profit organization, filed suit against the county, arguing that Mendocino County’s ordinance violated CEQA. Like HuMMAP, Mendocino County ultimately settled, agreeing to stop processing new applications, although it would honor those that it had already processed.

Trinity County Issues Moratorium on three Acre Conversions

One of the most hotly discussed items in discussing cannabis regulations on the north coast is timberland conversions, the transfer of timberland to other uses such as residential or agricultural uses. The conversion of timberlands has major ramifications for wildlife species dependent on forests. Most timberland conversions occur through a CEQA-exempt process, known as the “Less Than Three Acre Conversion Exemption,” under which CalFire has virtually no discretion as to whether or not to approve a conversion application. With a large number of cannabis farmers moving into forested landscapes, CalFire has reported a surge in the number of CEQA-exemption three acre conversions.

On June 7, the Trinity County Board of Supervisors, alarmed by the number of three acre conversions related to cannabis, issued an emergency moratorium on three acre conversions of timberland to agriculture for 45 days. During press, the three acre conversion moratorium is expected to expire. All expectations are that the Board of Supervisors will reissue the moratorium through the summer.

Cannabis Workshop Series and Compliance Handbook

Because most new applicants are farmers and not policy wonks, EPIC, Mad River Alliance, Humboldt Bay Municipal Water District, California Growers Association, and Humboldt Green worked together to create a Cannabis Farmers’ Compliance Handbook, which simplified hundreds of pages of regulations into 22 pages—the essence of what is needed for people to understand and comply with the law. Additionally, we began a series of workshops designed to help farmers comply with the new laws, in order to protect and restore the health of our forests, water, and quality of life here on the North Coast. The workshops had presentations by the North Coast Regional Water Quality Control Board, Department of Fish and Wildlife, and experts on state and county laws there to answer the public’s questions. More than 500 people attended the workshops and more than 3,000 Compliance Handbooks
were distributed.

Few Early Enrollers—More to Come?

Relative to the number of likely grows—somewhere between 3,000 and 10,000 cannabis farming operations—the number of cannabis farmers who have submitted completed applications to the county is low. As of July 8, only 91 have completed applications that have been received by the county. But a wave of new applications is expected. Currently, 527 individuals have completed pre-registration forms, the first step in compliance, but have not completed the lengthy application yet. 

Even with the relatively low number of applications, county Planning and Building Department staff were overwhelmed and overworked; staff needed reinforcements. The Board of Supervisors responded to staff’s concerns by authorizing five additional staff members to deal with the increased workload. The Planning Department further announced the creation of a specialized office, the Cannabis Services Division, whose five staff members will be solely devoted to implementing the new ordinance—answering questions, of which there are many, and processing applications.