CA’s Stringent New Pot Regs

by Jim Shields, November 29, 2017

Last week we discussed the new rules adopted by the State Water Resources Control Board (“State Water Board), establishing strict environmental standards for cannabis cultivation in order to protect water flows and water quality in California’s rivers and streams.

The Water Board and other state agencies are planning on restricting or capping the number of cultivation licenses that can be issued, most likely based on an “environmental impact calculation” of how many grow sites and/or plants are allowable per watershed. According to a Water Board staffer, the plans include limiting the “number of plant identifiers and licenses issued by the various entities, and so those folks that come forward earlier are going to be in a better position than folks that may stand on the sidelines and wait for a while.”

That’s a great idea that local officials should take note of, immediately. It’s a much-needed regulation and would address the issue of the out-of-control expansion of pot production, especially here in Mendocino County. It also would address the major issue concerning the economic survivability of the small cottage grower who has seen the selling price of marijuana plummet because the market (black, gray or legal) is flooded with surplus pot primarily due to the failure of local governments enforcing natural resource provisions in their own ordinances

For example, Mendocino County has an ordinance that prohibits removing a single tree if the purpose is for growing marijuana. There is little evidence the County is enforcing that strict rule, especially in the view of CALFIRE who this past summer admonished the BOS for its failure to do so.

It’s the same case with water-related issues. The county doesn’t have a clue if cultivators are in compliance with water codes and regulations regarding water sources, diversions, pond building, road construction, etc.

The Water Board’s regulatory approach should be emulated by all local governments involved in the cannabis legalization process because what they’ve done so far, sure isn’t working.

This week, California’s other three state cannabis licensing authorities announced that they have rolled out proposed emergency licensing regulations for commercial medicinal and adult-use cannabis.

The Department of Consumer Affairs’ Bureau of Cannabis Control, Department of Public Health’s Manufactured Cannabis Safety Branch, and Department of Food and Agriculture’s CalCannabis Cultivation Licensing Division each developed the new regulations to reflect the law as found in California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).

The licensing authorities expect the just released emergency regulations to be effective sometime later in December. However, the implementation date for the issuance of the state commercial cannabis licenses remains the same: January 1, 2018. Keep in mind that the state will only be able to license those businesses that are in compliance will all local laws.

On another front, the Business, Consumer Services and Housing Agency will hold a workshop with state-chartered banks and credit unions in December to discuss regulatory and compliance issues, as well as look at the sticky issue of potential approaches to banking cannabis-related businesses. This is a potential important development due to the federal  restrictions on banks handling funds generated by marijuana activity.

The state Department of Food and Agriculture issued its emergency regs this week and here’s a summary of what becomes effective next month.

Mirroring State Water Board rules regarding water issues, CDFA will require cultivators to file plans indicating which part of the property is the proposed premises and what the remaining property is used for, including all roads and water crossings on the property. If the grower is proposing to use a diversion from a “waterbody, groundwater well, or rain catchment system as a water source for cultivation,” they have to include the following locations on the “property diagram with locations also provided as coordinates in either latitude and longitude: (1) Sources of water used, including the location of waterbody diversion(s), pump location(s), and distribution system; and (2) Location, type, and capacity of each storage unit to be used for cultivation.”

This provision is the first step in nailing down numerous regs dealing with very tough water rules that will be tightly enforced by the State Water Board and its co-enforcer partner, the Department of Fish and Wildlife.

Here’s the basics of CDFA’s regulatory framework:

License Application Fees. CDFA will charge a one-time fee to review an annual cultivation license application. Application fees are scaled based on the average annual production of the license type and range from $135 to $8,655.

Annual License Fees. The license fee schedule has been updated based on an economic analysis of CDFA costs. License fees are scaled based on the average annual production of the license type and range from $1,205 to $77,905.

Temporary Licenses. Applicants must present a local permit, license, or authorization to be considered for a temporary license, which will allow cultivation before an annual license is issued.

Processor License. An additional license type not included in the original statute has been added for processors, permitting them to trim, dry, cure, grade, and package cannabis. Processors may not grow cannabis under their license.

Track-and-Trace System/Requirements. Covers the requirements for licensees and/or designated track-and-trace account managers, including training, registration, plant tagging, and inventory tracking. The track-and-trace system will record the movement of cannabis and cannabis products through the state’s supply chain—from cultivation to sale.

Applicant Track-and-Trace Training Requirement. Requires applicants to complete a training session for the track-and-trace system within 10 days of receiving notice that their complete application has been received and approved by CDFA.

Cannabis Waste Management. Requires licensees to comply with current state waste-management laws and include requirements for on-site composting, using a waste hauler, or self-hauling.

Renewable Energy Requirements. Renewable energy requirements allow a phase-in period. Beginning in 2022, licensees will need to provide details regarding energy use and sources. Beginning in 2023, licensees must meet the average electricity greenhouse-gas-emissions intensity required of their local utility provider.

Generator Requirements. Specifies allowable generator types and use restrictions. For example, generators rated at 50 horsepower or greater must demonstrate compliance with California Airborne Toxic Control Measures. Generators rated below 50 horsepower will have to meet compliance measures by 2023.

Inspections, Investigations, and Audits. All inspections, investigations, and audits of the licensed premises shall be conducted during standard business hours or at a time mutually agreed to by the Department and the licensee. For the purposes of this section, standard business hours are 8:00am–5:00pm  Prior notice of inspection, investigation, or audit is not required.

Record Retention/Sales Invoice or Receipt Requirements. Governs the maintenance of records and sales invoices for licensees.

Licensing Actions. Enforcement actions may be taken for any violation(s) of license conditions or requirements. The Department may take any one of, or a combination of, the following actions for all of the licensee’s cultivation licenses:

Revocation;

Suspension for a specified period of time;

Issuance of a probationary license with terms and conditions; and

Order an administrative hold of cannabis and nonmanufactured cannabis products.

Administrative Fines. Violation Classes: minor (fine range: $100 to $500); moderate (fine range: $501 to $1,000); serious (fine range: $1,001 to $5,000). Repeat violations may result in an escalation of the violation class.

Administrative Hold Procedure. Details procedures for establishing administrative holds on cannabis and nonmanufactured cannabis products.

Annual License Fees. An annual license fee shall be paid to the department prior to issuance of a license or renewal license. The fee schedule is as follows:

  1. “Specialty Cottage Outdoor” is an outdoor cultivation site with up to 25 mature plants. $1,205
  2. “Specialty Cottage Indoor” is an indoor cultivation site with 500 square feet or less of total canopy. $1,830
  3. “Specialty Cottage Mixed-Light Tier 1 and 2” is a mixed-light cultivation site with 2,500 square feet or less of total canopy. Tier 1: $3,035; Tier 2: $5,200
  4. “Specialty Outdoor” is an outdoor cultivation site with less than or equal to 5,000 square feet of total canopy, or up to 50 mature plants on noncontiguous plots. $2,410
  5. “Specialty Indoor” is an indoor cultivation site between 501 and 5,000 square feet of total canopy. $19,540
  6. “Specialty Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 2,501 and 5,000 square feet of total canopy. Tier 1: $5,900; Tier 2: $10,120
  7. “Small Outdoor” is an outdoor cultivation site between 5,001 and 10,000 square feet of total canopy. $4,820
  8. “Small Indoor” is an indoor cultivation site between 5,001 and 10,000 square feet of total canopy. $35,410
  9. “Small Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 5,001 and 10,000 square feet of total canopy. Tier 1: $11,800; Tier 2: $20,235
  10. “Medium Outdoor” is an outdoor cultivation site between 10,001 square feet and one acre of total canopy. $13,990
  11. “Medium Indoor” is an indoor cultivation site between 10,001 and 22,000 square feet of total canopy. $77,905
  12. “Medium Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 10,001 and 22,000 square feet of total canopy. Tier 1: $25,970; Tier 2: $44,517
  13. “Nursery” is a cultivation site that conducts the cultivation of cannabis solely as a nursery. $4,685
  14. “Processor” is a cultivation site that conducts only trimming, drying, curing, grading, packaging, or labeling of cannabis and nonmanufactured cannabis products. $9,370

As I’ve been warning folks for sometime, if they think the county’s rules are onerous, wait until they see what the state does. Well, now they’re seeing it. State regulators understand that the key to a successful regulatory framework is a system of cohesive and coherent regulations and the means and will to enforce them. These are plans, approaches, and strategies that local governments with cannabis ordinances should replicate.

(Jim Shields is the Mendocino County Observer’s editor and publisher, and is also the long-time district manager of the Laytonville County Water District. Listen to his radio program “This and That” every Saturday at 12 noon on KPFN 105.1 FM, also streamed live: http://www.kpfn.org)

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