Getting Compliant

Locals react to California's new medical marijuana rules


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With a motion of his wrist, Gov. Jerry Brown signed into law this month a broad set of regulations designed to rein in the state's massive, unruly medical marijuana industry.

The regulations have been 20 years in the making, since California voters legalized medical marijuana in 1996 with the Compassionate Use Act, better known as Proposition 215. That act led to a fragmented and complicated set of local rules, uncertainties for regulators and law enforcers, continuing interference from the federal government, and a green rush in our own Emerald Triangle that has fragmented timber lands, damaged watersheds and built an important, albeit shadowy, economic driver for Humboldt County.

According to the Sacramento Bee, California medical marijuana sales total more than $1 billion per year, with more than 1 million physician-approved patients throughout the state. Local estimates of the marijuana trade are notoriously hard to pin down, but a nearly five-year-old study estimates Humboldt County's marijuana trade alone is worth more than $1 billion. There's no question it's grown in the last several years. Estimates of the number of farms within county lines vary from 4,000 to 10,000. Permanent and temporary laborers in the fields and dispensaries certainly number in the tens of thousands. Factor in soil producers, well drilling companies, garden stores, water trucking companies and the myriad other support industries, and it's clear marijuana plays an enormous role in the local economy.

For most of the last 20 years, the California Legislature was too shy to take up the issue of medical marijuana. But a softening of contemporary views on pot, legalization in other states in recent years and growing awareness of the industry's environmental impacts (and, perhaps, tax potential) led to a flurry of activity in the last legislative session.

Thousands of hours of staff time from North Coast Assemblyman Jim Wood's and Sen. Mike McGuire's offices, as well as Bay Area Assemblyman Rob Bonta's office, resulted in a package of three bills that narrowly passed deadlines in August before finally earning Brown's signature on Oct. 11. While each of the lawmakers submitted independent bills by the end of the legislative session, they were largely rewritten by Brown's staff, with language based on the originals.

In signing statements, Brown wrote that regulatory framework was "long-overdue" and would begin to stem the flow of damage to the state's natural resources.

"State agencies will begin working immediately with experts and stakeholders on crafting clear guidelines, so local government, law enforcement, business, patients and health providers can prepare and adapt to the new regulated system," Brown wrote.

"This new structure will make sure patients have access to medical marijuana, while ensuring a robust tracking system. This sends a clear and certain signal to our federal counterparts that California is implementing robust controls not only on paper, but in practice."

Indeed, some of the rush to implement medical marijuana laws can be attributed to expectations that California voters could legalize recreational pot, or adult marijuana use without a doctor's recommendation, as soon as 2016. Medical use regulations could provide a framework for laws if the state further eases restrictions on cannabis through several legalization initiatives that are currently being drafted.

As it stands, many of California's new medical marijuana bills won't go into effect until 2018. But what will regulation mean for the industry, which ranges from rural farmers to urban retailers? And for law enforcement agencies, and communities where marijuana plays a big role in the economic and social fabric?

That remains to be seen. It's a complicated issue, so the Journal asked local stakeholders what they like and don't like about the bills, and how they think regulation will affect Humboldt County. Before we get into that, though, let's look at some of the major points of the act, which regulates many aspects of medical marijuana from seed to sale.

The bills are light on details, assigning existing agencies to take on new roles in the oversight of growing, processing, transporting and selling marijuana. A state licensing system will regulate businesses operating in all aspects of the industry.

Bonta's Assembly Bill 266 creates a new Bureau of Medical Marijuana Regulation within the Department of Consumer Affairs, which will be led by a yet-to-be-named director. That agency — funded initially by a $10 million loan to be paid back through the collection of still-to-be-determined fees and taxes — will make many of the rules that will define how the business of medical marijuana is carried out.

One major difference in the state-mandated business model is the removal of requirements that marijuana dispensaries operate as nonprofits, an obligation that purportedly compelled patient-dispensary cooperatives but, some believe, is widely ignored.

Perhaps most germane to Humboldt County are cultivation regulations, which are spread between Wood's and McGuire's bills. State agencies will be tasked with setting forth environmental and public safety standards, such as allowable pesticides on cannabis crops and food safety preparation techniques for edible marijuana products. The Department of Fish and Wildlife will have authority to create environmental regulations, and the State Water Quality Control Board's recent pilot project to inspect grow sites for water diversion and runoff violations — and levy hefty fines against non-compliant grows — will be expanded to the entire state.

AB 243 creates four types of state cultivation licenses, each with sub-specialties for indoor, outdoor and mixed-light grows. The bottom tier licenses cultivation of up to 5,000 square feet of total canopy size on one site, or up to 50 mature plants on noncontiguous plots. The next tier covers grows with canopies of 5,001 to 10,000 square feet in size, and the largest allowable canopy size is one acre, or 43,560 square feet. There is a fourth license type for cultivators who operate solely as nurseries and don't bring plants to maturity for harvest.

New regulations will also require a "unique identification program" that will note each plant and allow tracking of marijuana from farms through the retail process. The bill even suggests a zip-tie program, clearly resembling Mendocino County's lauded tracking program, which was shut down by the federal government years ago.

The bills allow for personal growing as well, as long as the patient doesn't exceed 100 square feet of cultivation area and doesn't sell or give the marijuana to anyone else.

In a victory for the Emerald Triangle's small scale growers, the bills allow for appellation rights, meaning cannabis can't be marketed using the name of a California county unless it was grown in that county. That, farmers say, will maintain Humboldt County's global reputation for producing high quality marijuana.

Beyond the unique identification program, the bills also allow a fair amount of local control when it comes to developing land use codes allowing cultivation, taxing the growth and sale of marijuana, and outright banning many machinations of the industry. In addition to needing a state license, businesses will have to show they comply with local ordinances. This has left Humboldt County scrambling to put together regulations of its own by March of 2016, a state deadline for local laws to go into effect.

The county's been working on an outdoor cultivation ordinance for about a year, a process that was largely driven by a private political action committee that handed over its draft to the county for consideration in September. County staff has since developed its own draft, and while there is debate about the final language of the law, both drafts are more restrictive of canopy size than the state laws.

The state bills also call for a comprehensive track-and-trace retail program, the details of which will be worked out by the Department of Food and Agriculture and the Medical Marijuana Regulation Bureau. The program is required to include strict labeling, testing, security and transportation policies.

A total of 17 business license types will be available to applicants for medical marijuana businesses, in an effort to separate the various aspects of the trade and prevent vertical integration, in which one company could control medical marijuana from seed to sale. Those licenses pertain to cultivation, manufacturing, testing, retail sales, transportation and distribution, and contain a complicated rubric that disallows businesses from holding more than one or two different types of licenses. For example, cannabis cultivators and manufacturers will no longer be able to sell directly to dispensaries — they will have to move their product to a retailer through a third-party distributor. Distributors will be able to apply for transportation licenses, but no other types of license.

The most notable item removed from the bills as the governor's office refined them this fall was a statewide excise tax on marijuana sales, an omission Wood lamented and vowed he would reintroduce in the next legislative session.

So what does this all mean for the North Coast's marijuana industry? Much remains to be seen, but local stakeholders and members of the industry weighed in on the good, the bad and the missing.

The Advocate

Luke Bruner has been just about the most public face of medical marijuana in Humboldt County for the last year. Representing California Cannabis Voice Humboldt, he's spoken bombastically about the need for local regulations, has lobbied for Sacramento legislation and has been relatively successful in bringing marijuana industry types out of the shadows and into concert with other community stakeholders.

And he has high praise for the recent statewide bill package. "This is gold standard," he said. "This is the best that has been seen in any state so far."

The biggest successes, he said, were taking the water board program statewide and the appellation zoning, which could be critical for Humboldt cultivators to compete with big marijuana operations that could crop up in more farm-friendly parts of the state. "The days of dirty product from trespass grows going on dispensary shelves are over," he said, referencing the current hard-to-stop practice that hurts Humboldt's brand.

He said allowing local authorities to tax medical marijuana was also important, adding that the combined efforts of CCVH, Humboldt County supervisors and other advocates could be thanked for much of the local protection afforded by the bills.

The flipside to local control, Bruner lamented, is that counties and municipalities can choose to ban cultivation (even for personal use) and dispensaries outright, harming patients' ability to get medicine.

The Cop

Sheriff Mike Downey supports much of the bill, though he agreed that "no bill is ever perfect." He called the package "pretty comprehensive" and expressed relief that his agency, which has been operating for decades without clear state guidelines, will have more definitive space to work within. "I'm pretty tickled about that," he said.

Downey expressed concerns about the maximum allowable canopies, suggesting they were too high to ensure that marijuana remained in the proper medical channels.

He said he was fine with the cannabis industry falling under more civil enforcement from state agencies, though he said he's worried about how agencies like the state water board, Fish and Wildlife, and the Department of Food and Agriculture will fund their expanding programs.

Downey has concerns about people driving under the influence of marijuana, and hoped that expanding education programs — both for the public and his officers — will be afforded under the new regulatory bureau. Mostly, he's sitting back to see how this plays out. He's not sure how quickly growers will come into compliance or what changes new regulations may force on the county jail, and said, "It's hard to say what interdiction and eradication is going to look like in the next years."

The Environmentalist

"Too bad our Legislature is not driven by common sense. It is driven by reaction to emotions," said Ettersburg resident Robert "Woods" Sutherland. He's spent decades maintaining a fine balance between marijuana advocate and environmental protector, and said the recently approved package of bills "has things in it that only a policeman who just wants to block marijuana would like."

Among those, he said, are restrictions and increased penalties for doctors found to be writing excessive prescriptions for marijuana, a problem that he said is widely discussed but not really proven. But, he said, most doctors are already "terrified" of writing 215 recommendations, and increased regulations might make physicians even more reluctant to consider recommending marijuana. With fewer healthcare providers willing to prescribe, it could be harder for legitimate patients to get prescriptions, he said.

More important, he said, would be for the legislation to figure out "how can we encourage the right doctors to do the right thing."

Sutherland also thinks the smallest tier of cultivation licensing, allowing canopy areas up to 5,000 square feet, is too large for a lot of the niche growers in the North Coast region, and suggested that there should be another, smaller-scale tier to make it easier for niche producers to come into compliance. The large canopy allowances, he said, are due to Sacramento looking at marijuana as a typical agricultural product. Some people have expressed gratitude for that perspective, but Sutherland said, because of the high price of marijuana, it simply can't be treated like any other agricultural commodity.

And, he worried, licensing the thousands of existing grows in Humboldt County — even if they come into compliance with state and local laws — would amount to the government embracing the widespread environmental damage that's occurring because of years of deregulation. "It's not true that all the environmental issues have been taken care of, by a long shot."

The Provider

"This is exciting. This should've happened a long time ago," said Mariellen Jurkovich, the executive director of Humboldt Patient Resource Center, a city-sanctioned dispensary in Arcata that's often been lauded as the model for responsible medical marijuana retailing in Humboldt County.

Jurkovich said HPRC is in good shape for when the regulations go into effect: The dispensary already tracks its marijuana from seed to sale, has its products tested for potency and contaminants and, because they've been operating in accordance with local law for years, it will be able to keep its cultivation and retail licenses.

While HPRC does grow some of its marijuana on site, what might change is its cooperative dealings with patients who sell products through the dispensary. "We deal with a lot of patient vendors," she said. "We're very interested in them getting to be legal. Because if they're not we won't be able to get product from them."

For dispensaries that don't grow their own marijuana, getting steady supplies for patients could prove problematic.

Cultivators will need to get into compliance and producers of extracts and edibles have to learn how to properly prepare, test and package their wares. People are going to need commercial kitchen facilities, Jurkovich said, and fast. And while Arcata may be ahead of the curve, with its recent approval of a medical marijuana innovation zone that could host grows, labs and kitchens, Jurkovich said other communities are going to have to scramble to get those facilities in place.

The Farmer

Struggles could lie ahead for Mendocino farmer Casey O'Neill, who grows marijuana through his company Happy Day Farms and is the board chair of the California Growers Association (formerly the Emerald Growers Association).

"It's a great foundation," he said of the new regulations. "But foundations can be used to build a happy home or a prison. It really depends on what we do from here."

He's thrilled about the licensing for small agriculture, the potential for appellation designations and the water discharge and diversion regulations going statewide.

But he's worried about small farmers being able to come into compliance, and said survival is going to require that they get organized into cooperatives. He'd also like to see a smaller farm tier for cottage-scale producers. "People are hopeful and fearful," he said.

Of personal concern for O'Neill is the seeming prohibition on issuing licenses to felons convicted of drug or fraud offenses, a clause that could preclude many people previously and currently involved in the marijuana industry from continuing in the field when it goes forward.

O'Neill has a marijuana conviction on his record, and has previously said he studied how to legally and responsibly grow marijuana while serving time. When the new laws go into effect, he's unsure if he will be able to obtain a license. The bill says the licensing authority can choose to conduct a review of an applicant's conviction and grant a license.

"From a personal perspective it's important," he said. "But it's more important from a larger societal perspective, because the history of prohibition has more negatively impacted people of lower income and minority communities."

The Lawyer

"Get lawful and don't think about it. Get lawful now." That's the advice former Humboldt County District Attorney Paul Gallegos is offering to local medical marijuana cultivators, producers and retailers. Gallegos spent 12 post-215 years as the county's top prosecutor before deciding not to run for re-election in 2014. Now he's helping businesses that are scrambling to come into compliance before the state regulations go into effect.

Why the hurry? Tucked into a passage in AB 266 is the following line: "The licensing authority shall prioritize any facility or entity that can demonstrate to the authority's satisfaction that it was in operation and in good standing with the local jurisdiction by January 1, 2016."

What "prioritize" means, exactly, remains to be seen, Gallegos said, but it would be a boon to the local industry to be fast-tracked for state approval. That means businesses must show they have a voting board, keep records, pay taxes and are compliant with local rules and zoning — or are at least moving toward compliance.

Gallegos said regulation is both a "tremendous challenge and opportunity for this community." Crucial to getting the industry into compliance, he said, is statewide encouragement, not penalties. That's taking the form of the apparent availability of running a for-profit medical marijuana industry. But that's not a certainty yet. "There are some people who are trying to challenge that," Gallegos said, and for now he's advising people to continue to operate as a nonprofit.

Gallegos thinks it's possible for Humboldt County's industry to come into compliance. It'll take time, creativity and hard work, he said, but it's possible. "You have to be an active participant in your own rescue," he said.


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