California is a big cannabis market. Tax revenue from sales of cannabis was $1.2 billion last year. This year, it is expected to reach at least $1.3 million. Of course, you cannot sell products if you do not have it and you must raise prices if the product’s unit price is raised. This increase in retail price is likely to be due to a new requirement that has been placed on growers.
California Department of Cannabis Control has its own licensing requirements and procedures. For example, if you want to cultivate you must have a cultivation license; if you want to grow seedlings for use by others you need a nursery license; if you want to dry, cure, and trim cannabis, you need a processors’ license. California’s most important permits are for water. They are issued by the Fish and Game department and one of the California Regional Water Quality Control Boards.
California has made it more difficult and expensive to grow cannabis. To obtain an annual license, California requires that all applications be reviewed under the California Environmental Quality Act. Adopted in 1970 under the auspices of then-Governor Ronald Reagan, CEQA’s concept was straightforward: The government should consider and mitigate the environmental impacts of public projects before approving a public project. The permits needed to construct and maintain a cannabis growing farm/facility would be considered a public project in this instance. Recent legislation has made provisional license applications inadmissible until June 30, 2022. Any person wishing to apply for a provisional licence after that date must show that they are following CEQA guidelines. Anyone wishing to apply for a new license after this date must also show compliance with CEQA before the license will be issued. Provisional license holders already have the ability to produce products, but they will need to go through the CEQA process. Licensees who want to apply for a new license after June 30, 2022 must also pay compliance costs.
While the CEQA process is simple in its purpose, it has become incredibly complicated, time-consuming and costly. It has also become the preferred weapon for environmental groups to attack, stall, and demand changes before all CEQA requirements have been fulfilled. This would allow the government entity to grant the permits or approvals needed for the project. It is not uncommon for the CEQA process, which can include lengthy administrative processes and even litigation, to be extremely complex. It is relatively simple to litigate, partly because the CEQA process has a self-executing clause which allows anyone to ask a judge to order an environmental review. The CEQA process and possible litigation can be costly and/or slow down your ability to grow and make profits.
CEQA requires that any governmental entity involved in granting permits cannot do so without an required environmental-impact review (EIR). The EIR outlines all possible harms to environment and suggests alternatives. Public hearings are also organized for feedback. EIRs can easily exceed 1000 pages for large projects to address all issues. It is serendipitous that California’s CEQA Guidelines, which set the parameters for how environmental review must be conducted, has swelled from a 10-page checklist to a 500-page tome, covering a range of issues which now includes climate change/greenhouse gas emissions. Although it is possible for an EIR to be used for a cannabis-related project, it can still be costly. EIRs are usually prepared by a specialized consultant, and lawyers who work with them.
While there are many topics that an EIR should cover, they must at most address the following:
- Aesthetics/Visual Resources
- Biological Resources
- Cultural Resources
- Geology and Soils
- Hazardous and hazardous materials
- Land Use
- Noise
- Public Services
- Transportation/Circulation
It is not uncommon for the government agency to have additional requirements to be considered when preparing an EIR.
The mitigation aspect of CEQA is another factor that can impact the decision to build/not construct, operate/not run. The EIR must identify the potential significant environmental effects and suggest possible mitigation measures. The CEQA broadly defines mitigation as the following types of measures: You can avoid the entire impact by not taking certain actions or parts of an action. 2. Limiting the impact of the action and its execution is one way to minimize them. Assuming the governmental entity involved will grant permits or take other such action, the mitigation measures selected must be complied with as part of the development/construction process. Depending on the project’s size, mitigation can be very costly.
You should consider the costs of CEQA compliance when you are developing your business plans. Make sure you have the right counsel and consultants if you have to deal directly with CEQA. It is worth considering hiring a public relations agency to help you get approval from the general public.
