Cannabis

Mendocino County Supervisor Ted Williams Addresses the State of Cannabis Cultivation Permitting

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TLDR: The “Phase 3” land use approach will provide an essential bridge between our county cannabis cultivation permitting system and the state’s licensing program and create a path forward to a well-regulated cannabis industry with robust environmental oversight and community input. Developing a well-regulated cannabis industry is important to the overall well-being of our County.

After nearly two years of commenting from the sideline about the County’s failed cannabis cultivation program, I joined an ad-hoc committee with Supervisor Haschak on Aug 4, 2020 to work with staff and outside agencies on a pathway for cannabis cultivators to obtain their state annual licenses. I’ll share some of my findings. The inherently complex nature of this topic highlights the merits of representative democracy.

Cannabis cultivation in Mendocino County requires two approvals, a county permit and a state license. Both of these requirements have been met primarily with temporary approvals, namely the county “embossed receipt” and state “provisional” license. These temporary approvals were to allow existing activity to continue while working applications through the regulatory pipeline.

Our local cultivation ordinance offered the illusion of local control. In fact, the local program is a set of overlapping and disjointed requirements. It’s as if the county operated in a parallel universe, failing to track state regulation. Compared to outlaw activity, a regulated market has potential to prevent economic destruction, generate revenue for other county services, reduce crime and mitigate neighborhood conflict. These goals can only be reached if operators are actually able to complete the process. To date, virtually zero state annual licenses have been awarded for outdoor cultivation. It’s impossible to objectively weigh the local results of regulation when at most we’ve manifested regulatory fiction.

Commercial cannabis cultivation is a highly regulated activity, primarily by the California Department of Consumer Affairs, Bureau of Cannabis Control and The Department of Food and Agriculture. At a state level, Cannabis cultivation is not classified as agriculture. Cultivation is a product endeavor and while I disagree with this approach, it’s as directed by the people of California in passage of Proposition 64. The California Environmental Quality Act (CEQA) applies both for the county permit and state license. At a county level, a Mitigated Negative Declaration (MND) was completed and went unchallenged. The goal was to legitimize existing activity and was coupled with a “Phase 1” ordinance, welcoming applicants who could show proof of cultivation prior to 2016. I’ve felt uneasy about this requirement in regard to the spirit of equal protection, but one could argue it made sense for a short period of time to prioritize legitimization of an existing underground economy. Nonetheless, this met the CEQA obligation for the *county permit*.

CEQA for the *state license* is an entirely separate matter. This is between applicants and the state. Annual license application requirements are codified in California Code of Regulations § 8102. There are essentially two paths enumerated under 8102(r). (1) allows documentation of county site specific review to be forwarded to the state to meet the state license CEQA obligation, alleviating the need to perform duplicative review. (2) allows the applicant to submit full CEQA documentation direct to the state. The latter option has been a viable pathway for Mendocino County cultivators since the state regulation was created. Of note, CDFA doesn’t exactly have adequate staff assigned and cannot estimate how long review will take, probably because cultivators from other counties overwhelmingly prefer the (1) path.

On January 5, 2021, my ad-hoc gained full board support on a proposal to allow county permit applicants to hire third party consultants at their own expense to document the existing county-performed site specific review in a format appropriate for submission to CDFA to exercise the 8102(r)(1) path. This path might work for some applicants. The effort cannot include authorship of a new work product, but rather, is limited to showing the existing site specific review that justified issuance of a county permit. It’s at the applicant’s expense, because this was never work contemplated by the county or included in cost recovery at fee hearings. It represents the county’s attempt to lend hand to cultivators in pursuit of state licensing. It was not included in the ~$1500 permit fee paid by cultivators. Applicants should become educated in the process, because there is not a single best path for all cultivators. For cultivators who hold county permits with successful Sensitive Species and Habitat Review and are in compliance with local laws, the lesser effort 8102(r)(1) could be the shortest path to state license. The process may be unforgiving and therefore applicants are encouraged to get it right for the first attempt. I worry about cultivators paying inexperienced consultants and losing their ability to operate in the legal market. I recommend cultivators ask potential consultants for proof of successful site specific CEQA and review the outcomes carefully.

Recognizing that nearly two hundred county permits had been issued without a completed Sensitive Species and Habitat Review while the Cannabis Program was operated under our Ag Department, the board supported an ad-hoc committee recommendation on December 8, 2020 to initiate an Interagency Agreement with California Department of Fish and Wildlife. Soon, CDFW biologists will be available to process Mendocino County SSHR requests, a review necessary under the county ordinance and our environmental document (MND). The outcome is unknown. In order to meet the requirements of the county permit, less than significant impact to sensitive species and habitat must be found by CDFW. Due to the ministerial nature of the county permit, if greater impact is found, conditions cannot be applied to mitigate existing impact. Rather, approval of the permit will fail and once ejected from Phase 1, the ordinance offers no option to re-enroll. Even farms which are doing everything within their power to operate in ecological harmony might find that their cultivation clearing sits on what was once sensitive species habitat. For example, a cultivation site cleared decades back in an area of Covelo with Lupine could be a problem, no matter the farming practices exercised today.

The state “provisional” concept expires on Jan 1, 2022. There is talk about the legislature extending the provisional, but we also anticipate CDFA will soon require Mendocino County applicants to affirm their intended CEQA compliance path and provide regular updates indicating actual progress. In other words, if a legislative extension materializes, it is unlikely to act as a blanket postponement of obligation. At present there are approximately 1,100 in the county system and approximately 800 in the state system. The delta of 300 represents farms which are not actually operating legally under state law.

As with most complex problems, generalizing cannabis cultivators will produce an  inaccurate narrative. Some cannabis cultivators are amazing neighbors and farm in harmony with the land, free of environmental destruction. Others are terrible neighbors and place profit over environmental compliance. The quality of applications also vary. Plot plans need not be computer generated or perfectly to scale, but napkin drawings lacking compass bearings, applicable structures and legend can block the review pipeline. When staff walked me through a random stack of permits, I saw electrical violations, non-permitted ponds, buildings without approved septics, enlarged clearings and all sorts of other violations. Perhaps some have compliance plans, but I suspect many do not. Prohibition forced an industry into the underground economy and many are likely unaware of the extent of their own non-compliance. These problems will likely surface during site specific review for state licensing.

When I joined the county, the cannabis program was in transition from the Agriculture Department to Planning and Building Services. Our CEO took heat from people who believed cannabis belonged in Ag, because it’s about growing crops. As is often the case, there was more to the story. Staff in the Ag department assigned to work on cannabis permits were bailing, in part because they did not wish to work on cannabis applications. Today, we’re adjusting to the resignations of our Planning Director, Cannabis Manager and a highly qualified Senior Planner. Forcing skilled planners to process cannabis applications without authority to reject poor quality submissions is not a recipe for success. It will destroy Planning and Building. Without safeguards, I believe we will see an exodus of skilled staff. We cannot allow the failures of the previously approved Cannabis Program to injure a vital department.

On January 25, on a 4-1 vote with Supervisor Haschak dissenting, we approved a new land use cultivation ordinance (Phase 3) for submission to our Planning Commission. This is a drastic departure from the failed Phase 1 approach. In essence, under this new ordinance, we answer the “where” while leaving the “how” to the state. Eligibility will not be limited to any class of applicants. The approach mirrors land use policies of other counties, including Humboldt, where state licenses have been awarded to hundreds of applicants. I would argue it’s the most stringent Cannabis Cultivation process in county to date, because every single applicant will go before discretionary review (many in front of the Planning Commission). The board gave direction to author standard conditions to limit water hauling, regular generate use and continued proliferation of plastic. Use Permit applicants must demonstrate their project will not create a nuisance or detriment to health, safety, peace, morals, comfort or general welfare. The level of discretionary review will meet the state CEQA obligation, allowing timely issuance of state license. The program is of scale and complexity to fit within the county’s organizational capabilities. Under the new model, the county will act in an appropriate land use regulation role, balancing competing property rights, avoiding intentional anticompetitive effect. Cultivation size will depend on site specific environmental concerns and impacts to neighboring use.

There have been calls for the county to regulate the market for purposes of prioritizing “legacy”, limiting competition from “outsiders” and controlling supply. Land use and zoning decisions do have an economic impact, but categorically, it is inappropriate to use this authority for the purpose of ensuring specific economic benefit. Cannabis prohibition is ending. California voters decided it was time to stop jailing our people over a plant. With the repeal of prohibition, competition is a given. Some businesses will succeed through innovation, marketing, regulatory compliance and solid business practices. It is not for government to decide the winners and losers. My heart is with the small farms. I’d prefer see small, ecologically superior independent farms. Legitimizing all previously outlaw activity will not be possible under the state regulatory framework. For some, relocation will be the only path to continued operation within the legal market. These decisions were made when Proposition 64 was passed. Other Supervisors might not be as vocal and raw, but I suspect there is little difference in perception.

The Cannabis program today generates nearly $6M of annual tax revenue. This is more than the transient occupancy tax (“bed tax”). Cannabis added millions to the general fund at a time we allocated millions from the general fund to bolster the Sheriff’s office. The bulk of our general fund is allocated to public safety. If only 15% of the 1,100 cannabis farms are successful in state licensing, we’ll soon be talking about where to make cuts.

Typically, after I share observations about the cannabis program, I receive suggestions that we should have a simpler program for backyard farms. This is not possible under the legal framework passed by California voters and subsequent legislative action (SB94). I will also hear about the need for greater enforcement. Aside from the obvious implications of losing millions of dollars per year, I can’t see the county indiscriminately engaging in enforcement against the farms which came forward and attempted to enter the legal market. As one of the predominant revenue streams to Mendocino County, overnight abatement of cannabis cultivation would trigger economic devastation for unrelated businesses.

We have a problem. There are no perfect solutions. The “Phase 3” land use approach will soften the impact.

ted

Categories: Cannabis

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