A refresher course on California’s existing environmental laws and regulations.
With the passage of the Adult Use of Marijuana Act (Proposition 64, or AUMA), along with the 2015 Medical Cannabis Regulation and Safety Act (MCRSA), the cannabis industry in California took a significant step toward transforming itself from a niche (but still sizable) market to a major industrial player whose impact extends far beyond California. In the meantime, state agencies are busy developing regulations to implement both AUMA and MCRSA, addressing areas such as cultivation, manufacturing, distribution, and sales. They’re also establishing specific application requirements and licensing fees for state licenses, instituting a track-and-trace system for medical cannabis, and establishing operational requirements for medical cannabis businesses. In addition, myriad environmental requirements have been added to the already voluminous depth of environmental regulation in California.
With all the focus on the new law and regulations that will implement AUMA and MCRSA, those in the industry—particularly cultivators and manufacturers—must not ignore existing environmental regulations. Those regulations will apply to the cannabis industry to the same extent as they apply to every other business in the state.
Most business are becoming familiar with the various proposed AUMA and MCRSA regulations emanating from the Department of Public Health’s Office of Manufactured Cannabis Safety, the Bureau of Cannabis Control, and the Department of Food and Agriculture. Environmental provisions incorporated into AUMA include a requirement that each licensing agency implement protocols to ensure compliance with state laws and regulations related to “environmental impacts, natural resource protection, water quality, water supply, hazardous materials, and pesticide use.” Further, AUMA requires the Department of Pesticide Regulation, in consultation with the Department of Food and Agriculture, to develop regulations for the use of pesticides in cultivation and maximum tolerances for pesticides.
Beyond that, AUMA requires each license issued by the Department of Food and Agriculture to include conditions requested by the Department of Fish and Wildlife to ensure the effects of water diversion and discharge associated with cultivation do not affect instream flows necessary for fish spawning, migration, and rearing, and that flows are maintained as necessary to protect fish, wildlife, their respective habitats, and water quality.
However, perhaps the most significant AUMA provision relating to environmental regulations, but one that does not garner much attention, is found in Section 26036, which provides that “Nothing in this division shall be interpreted to supersede or limit state agencies from exercising their existing enforcement authority…” Moreover, and as a matter of federal constitutional principle, nothing in AUMA prevents any federal environmental or wildlife agency from enforcing federal laws against in-state manufacturers and cultivators.
Therefore, existing environmental and natural resources regulations under both state and federal laws need to be considered, above and beyond any specific, additional requirements set forth in AUMA. The applicability of each requirement, and compliance strategies, need to be addressed on a case-by-case basis, but several primary categories of regulation should be considered.
Two elements of water resources law apply particularly to outdoor cultivation activities—water use and water quality. The first step in water-use consideration is to determine whether the cultivation operation has any existing water rights. Absent such rights, if the operation is diverting water flow it must file with the Division of Water Rights. The state is developing general terms and conditions for a small-irrigation-use registration program (e.g., less than 20 acre-feet per year, among other conditions).
Regarding water quality, both the California Porter-Cologne Water Quality Control Act and the federal Clean Water Act may apply. Those laws address both discharge of waste water (including storm water runoff) and filling of any wetlands (which may occur, for example, if a cultivation operation seeks to construct an impoundment to store water). Both the North Coast and Central Valley regional water quality control boards have adopted general orders regulating cultivation discharges. Any fill of wetlands requires a permit from the U.S. Army Corps of Engineers. In addition to cultivators, manufacturing facilities could be subject to discharge permits, whether from indirect wastewater discharges to municipal systems or direct storm water runoff.
Both the federal and California Endangered Species Acts apply to endangered, threatened, and special-status plants, wildlife, and fish and their respective habitats. Moreover, streambed alteration permits may be required by the Department of Fish and Wildlife if any activity impacts streambeds. Impacts to species and habitat can occur from construction, field operations, discharges, impoundments, or other activities associated with cultivation operations. Moreover, to the extent any federal permit is necessary for any operation, the federal agency must comply with Endangered Species Act provisions that require the agency to “consult” with federal wildlife agencies if permitted activity “may affect” a protected species or its critical habitat. Lastly, requirements issued by the California Department of Forestry and Fire Protection may also apply. For example, a permit may be required if timberland is to be converted to a non-timber-growing use.
Any discretionary project, such as siting and constructing a manufacturing facility or developing land for cultivation, may be subject to the California Environmental Quality Act (CEQA). Under CEQA, impacts such as environmental, traffic, aesthetics, noise, etc., may be required to be addressed through an Environmental Impact Report before the project is approved. Whether an EIR is required or exemptions apply or the impacts can be mitigated are all complicated issues when considering how best to facilitate project approval. Moreover, cannabis businesses, whether cultivators, dispensaries, or manufacturers, will need to contend with zoning restrictions or otherwise immerse themselves in zoning classification changes.
Pesticides are regulated under California law as well as under federal law through the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). As noted above, the Department of Pesticide Regulation, in consultation with the Department of Food and Agriculture, is required to develop regulations for use of pesticides in cultivation and maximum tolerances for pesticides. Pesticide application will need to be consistent with standards set forth in the California Food and Agriculture Code.
Apart from regulatory requirements concerning pesticides, there is also a practical business “regulator” on use of pesticides. Sampling results indicate a significant portion of raw product may contain detectable levels of certain pesticides. In many of those instances, manufacturers will reject the supply. Therefore, strict control of pesticide use will be paramount to the success of any cultivation operation.
With passage of AUMA and the maturation of the cannabis industry in California, operations will be subject to and burdened with myriad environmental regulations specific to the industry that other businesses in the state already are required to address. Over time, complying with these requirements will be integrated into the day-to-day operations of industry players. In the early stages, however, it is critical that manufacturers, cultivators, and others seriously address regulatory obligations and ensure they achieve compliance every step of the way.
Joshua Bloom is a principal in Meyers Nave’s Environmental and Land Use Practice. With more than twenty-five years of experience, he specializes in all areas of state and federal environmental and natural resources law. He may be contacted at [email protected] or (510) 808-2000.