Panel discusses how regulation of cannabis cultivation in California is working so far and the challenges facing communities on the front lines of the ‘green rush’
In the fall of 2016, voters approved Proposition 64, which legalized the adult use of marijuana, with legal cannabis sales starting in January of 2018. Although medical cannabis has been grown in California for many years, legalization of recreational cannabis may change production patterns. How is the regulation of cannabis cultivation and processing working in California and what are the challenges facing communities who are on the front lines of the ‘green rush’?
The impacts and challenges of cannabis cultivation, both legal and illicit, was the topic of a panel discussion at the California Water Policy Conference, held March 22-23 at UC Davis. Seated on the panel were David Eggerton, General Manager of Calaveras County Water District; Kristin Nevedal, chairperson of the International Cannabis Farmers Association; and Scott Greacen, Conservation Director of the Friends of the Eel River. The panel was moderated by Mark Horne, principal of EW Consulting.
Mr. Horne began by noting that there is a wide range of water consumption and impacts associated with cannabis cultivation which depend on where it’s grown and how it’s grown. Cannabis is not only used by smoking it, but is now processed into an edible form; there is also the issue of dispensaries.
Even though voters passed Proposition 64 in 2016, so far only about 15% of California’s 485 cities have actually licensed dispensaries for adult use and other jurisdictions are moving in that direction, but the availability of cannabis varies across the state, he said.
“This panel is not about the regulation; this is about what’s going on on the ground, what’s going on in cultivation, and what does that mean in terms of water resources,” said Mark Horne. “Are we going to see big impacts? Is it going to be just another change similar to ripping out apples and planting grapes or changing from one crop to another? Is there going to be a shift in production from small, individual cultivators to agricultural to agribusiness taking over the market? There are all kinds of predictions as to where this is going, it’s all an experiment in progress, and I think we should have an interesting and fascinating discussion.”
Question: How is cannabis regulation progressing in California?
Mr. Horne then directed the first question to Scott Graecen, Conservation Director with Friends of the Eel River. “From your perspective, how is the regulation of cannabis cultivation and processing working in California? Give us background on Friends of the Eel River and your relationship to cannabis production.”
Scott Graecen began by saying that from the perspective of Friends of the Eel River, their main concern with respect to water and weed are the watershed impacts and the impacts on fisheries, particularly on steelhead and coho salmon. “We are losing these fish on the North Coast,” he said. “We are particularly losing them in watersheds where ten to fifteen years ago, we had thought to be recovering them. We had hoped that we had stemmed a race to extinction from logging and road building and many other impacts that the 20th century had brought us. We invested tens of millions of dollars of state funds in watershed restoration in many of our watersheds. But the ‘green rush,’ which really started happening after the 1996 passage of Prop 215, gave growers a legal defense to possession charges, and this has really reversed those trends to improved conditions in a lot of our watersheds.”
“In Humboldt County, nobody gets their water from a pipe – some do, but most people get water out of the sky or out of the stream,” Mr. Graecen said. “We spend a lot of time talking about the impacts of water diversions, legal and otherwise, but I’d say honestly, 90% of our real problems in terms of watershed health and watershed impacts have to do with sediment – with dirt getting into the creeks from roads and grading activities and bad water crossings; about 9% is water diversions, and another 1% has to do with pesticides and other related issues, water pollution issues. So from the perspective of watershed impacts, that’s the picture we’re concerned about.”
“One interesting piece of Prop 64 was a specific proviso that says basically the state is not going to issue ‘unique identifiers’ – by inference licenses – to operations in watersheds where we have too much dirt going into the creeks or too much water being taken out,” Mr. Graecen said. “Now if that provision means anything anywhere, it should mean that places like Redwood Creek, like Salmon Creek on the South Fork Eel don’t get any more impacts. The problem is there are too many – we’ve probably got about 15,000 outdoor operations in Humboldt County right now. So the question is, how many of those can be licensed, how many can we license under what conditions, and still have fish in the future. And we don’t know, is the answer.
Mr. Graecen said that from the perspective of environmental impacts, regulation is going very badly and not with any rapid pace. A grab bag of state agencies are involved in cannabis regulation, including the Department of Food and Agriculture, the State Water Board, and the Department of Fish and Wildlife; all of these state agencies have issued emergency regulations for 2018 to begin to regulate weed impacts.
“In their emergency regulations, both the State Water Board and the Department of Fish and Wildlife actually took a big step back from what we’ve been doing in terms of moving toward environmental sustainability,” he said. “They have removed the requirement that people who divert from streams forbear from doing so during the dry season for 2018. That rule is not in place this year, and that’s one of the big steps we’d made toward getting some protection for our streams was by requiring people store their water from winter water, and not divert from the summer.”
Moderator Mark Horne clarified that storing water means putting it in a tank or pond; Mr. Graecen said this is most often in tanks. “There are places where ponds can work, but we have steep and unstable geology, and if you want a pond, you’re going to need to engineer it. So you can’t just assume a pond is always going to work.”
Kristin Nevedal, Chairperson of the International Cannabis Farmers Association, agreed that regulation is slow, complex and complicated. She also noted that farmers that entered the pilot program in 2015 are held accountable for those forbearance periods; a lot of the existing cultivators that are seeking permits in places like Humboldt County came into that order early on.
Ms. Nevedal noted that there were two pilot districts set up with the North Coast Regional Water Quality Control Board district and the Central Valley Regional Water Quality Control Board; those programs launched in 2015. She said that the Central Valley program has had more bans with cultivation, but Humboldt County and to a lesser extent, Mendocino County have pursued moving forward with permitting cultivation within their unincorporated parts of the counties. “A lot of the cultivators that were preparing for local permits and state licensure entered into the Regional Water Quality Control Board’s pilot programs, and those did require, have required, and still require forbearance,” she said. “Some agreements have been made to shrink those forbearance periods while farmers have had phased in approaches to developing more water storage, but I agree, it’s not moving quick enough.”
“It’s hard for us to understand as cultivators because the agencies have put a lot of energy into enforcing the orders that we’ve been moving into with the Water Board and enforcing that cultivators obtain their lake and streambed alteration agreements, and so the focus from enforcement has really been on the people participating in the program,” Ms. Nevedal said. “Yet we do see egregious environmental activities taking place with cultivators that have not come into compliance and probably aren’t interested in coming into compliance, but enforcement maybe hasn’t had the funding; it hasn’t been able to address those other issues. It’s a thin sliver of early adapters that are moving forward with the program, but there’s still a lot of fringe that has not been addressed.”
Scott Graecen then explained the problem with diversions and water rights, pointing out that in California, there are two systems of water rights that mash together: the miners’ system of prior appropriation and the old English and East Coast system of riparian rights. Most states in the west have the prior appropriation – ‘first in time, first in right’; most states in the well-watered east have riparian rights, meaning you have rights to draw from the stream if you have property adjacent to a stream or has a spring on it.
“California in its infinite wisdom decided to do both, which means that on the north Coast where it’s dry every year from May to October and in drought years, it’s really dry, someone who has property with a spring on it or next to a creek technically has a riparian right to divert from that stream, up until the point it causes harm to downstream resources, other users, or public trust benefits,” Mr. Graecen said. “California has no system for protecting fish from excessive riparian diversions. Now you can divert under a riparian right and water your weed, but you can’t store your riparian water, so to get a right to store water, you have to get an appropriative water right from the [State Water Board], so what we’ve wound up with is this cobbled together kluged solution, which is, we’ll give you permits to divert and we’ll give you permits to store, but what we want in exchange is an agreement to forbear from diverting – from exercising your riparian rights during the summer. All of this is a half-baked cobbled together answer to what’s not a very rational system to begin with; it might work for the rest of the state, but for the North Coast, it’s kind of strange.”
Cannabis in Calaveras County
Moderator Mark Horne noted that Prop 64 gave local jurisdictions the ability to decide whether or not they wanted cannabis businesses within their jurisdiction, and that has resulted in bans in many locations. A lot of jurisdictions have not permitted adult use dispensaries; in some counties, there are no dispensaries, only delivery service. In Calaveras County, county supervisors decided to ban cannabis and some now are facing recall. He asked Dave Eggerton, General Manager of the Calaveras County Water District, to discuss how Calaveras County is dealing with cannabis.
Dave Eggerton began by noting that some of what he is going to say is strictly his opinion. “Our agency has taken a position on some of this; it’s very difficult being in the position of a local water agency when you’re trying to weigh in on things that are so controversial in your community and with the land use vested in the county to make the call, and literally on given day, it could be 51-49 either way. It’s very hard to tell where exactly the majority of the county’s population is, but our perspective all along has been that we’re trying to protect our water resources and knowing they are at great risk by what’s happened.”
The year prior to the passage of Prop 64, the Butte Fire burned most of one of three of the county’s watersheds and a lot of the Mokelumne watershed as well. There was a land rush in Calaveras County to buy up property that was now open and in a very good climate for growing cannabis; at the same time, there was a lot of people leaving, now that they realized the scenic values and things that they cared about were gone, he said.
The County needed to do something to try to mitigate the environmental effects and the safety concerns as there was a lot of activity going on such as grading that was basically unregulated, some of it in plain sight. “Under that law, county governments can step in and either regulate it itself or by default, allow the state to take over, and then applicants go to the state and register,” said Dave Eggerton. “The County wanted to do something, so they adopted an emergency ordinance that was exempt from CEQA under the basis that it was necessary for public health and safety and for environmental protection; that basically said, stop everything that’s happening right now, do not continue to grade or plant or start a new farm, but if you come in and apply with us to get an application and you pay the fees for that, you can gain the authorization to operate. But this was all temporary and with the knowledge that they had to go through environmental review.”
The environmental review for taking the temporary ordinance and turning it into a permanent regulatory framework proposed 750 grading applications with a maximum canopy area of 22,000 square feet per grow. “It sounds like a lot, but when you think about it, in total, it really is only about 375 acres in a county of over 600,000, so the land area is really not that great within the permitted program that was considered,” he said.
“But from our perspective, the thing that scared us to death was the stories that would come out in the news with the law enforcement raids of the illicit grows that were outside of any permitting process, and finding chemicals on the property – literally in one case, they found a pesticide that was banned in every country in the world except for Kenya, and there it is used to kill lions,” said Mr. Eggerton. “So this garbage is now on our landscape and our watershed and the eradication is incredibly complicated and expensive, because in a lot of cases, they have changed the topography, they’ve deforested, they’ve graded, and they’ve brought these incredibly toxic chemicals in to areas that are very close to stream courses. So the perspective we took as the EIR developed was whatever happens, you have to make sure we have an adequate regulatory system locally and in tandem with the state requirements, and the funding necessary to make sure that we do everything possible to prevent that from happening and that we can deal with it when it does happen.”
Mr. Eggerton acknowledged that cannabis for some is a religious issue. “A lot of people are still in the ‘say no to drugs’ campaign,” he said. “There are a lot of people who fundamentally cannot disassociate this from the most toxic and dangerous of all narcotics in the world, so that was always in play.”
“One of the most effective and informative voices we had in the conversation was a cannabis alliance within our own County of growers,” he said. “Their goal was to create a stringent best management practices around their operations; many of them wanted to go organic and wanted to have integrated pest management and really create a product that they thought was consistent with the whole idea of medical cannabis. They thought this would be the preferred alternative – that people could buy something they know is not being sprayed with things that are not certified as organic … they wanted to see that flourish and at the same time, they wanted to work actively to stop the illicit stuff, which most people can agree is where the real danger is. A lot of these operations, some of them have been identified as being operated by different cartels and gangs out of the area that actually have human trafficking going on. There was one operation where people were enslaved to the operation, living in squalid conditions, human waste all over the place – it’s really hideous stuff.”
The regulatory environment has enormous challenges within itself and it’s going to be a very difficult road to get any dramatic improvement, Mr. Eggerton said. “My thought is with this operating in a black box outside of environmental laws, labor laws, banking laws, all this kind of stuff, it heightens all the dangers and risk of a cannabis farm.”
In the end, the County decided to ban it; there was a change in the electeds and some of the supervisors who voted for the ban are in the process of being recalled. “All I know is that the cannabis industry that still exists in the County is well funded and very motivated to change the status quo and to reinitiate a permanent program again, so it’s very likely,” he said.
Mr. Eggerton pointed out that the ban has meant lost revenue for dealing wtih the impacts. “There was over $10 million in tax money collected that was put into place by the local voters by the measure; there was also several million dollars in permit fees that went to pay the costs associated with enforcing and qualifying for the permit. Now that goes away and we don’t have some of those resources to deal with the illicit stuff. There’s also expected layoffs in the County, the sheriff’s office could lose as much as 20 personnel … that’s a dramatic problem, and the County will be forced to defend some very expensive lawsuits, probably most definitely around the environmental document itself, so it’s yet to be seen what happens.”
The problem of ‘trespass’ grows
The panelists all agreed the real problem are the ‘trespass’ grows – the ones which are established on public lands or large private timberland ownerships. These are the grows that are associated with large scale criminal activity, really egregious pesticide use, wildlife abuse, and water abuse.
“It’s really clear that those kind of operations are by far the most damaging per unit and in general, and everyone I’ve talked to in this policy arena agrees that those are the kinds of operations we need to be focused on getting rid of,” said Scott Graecen. “Having said that, legalization does nothing to deal with these folks. They are not interested in getting permits; they are producing for a black market, whether in California or in the rest of the country. Their consumers are not concerned about the level of pesticides that might be in the weed they are smoking or otherwise ingesting. They are not worried about carbofurans getting into our wildlife. There’s an entirely different conversation around what does it take to actually stop trespass grows, as opposed to trying to prosecute them or trying to clean them up, which are problems above and beyond.”
“The problems I think we can focus on in the policy arena are grows on private land that are happening with the consent or the knowledge of the owner,” said Mr. Graecen. “That’s what I’m talking about when I am talking about 15,000 grows in Humboldt County. I’m not talking about trespass grows, and that’s the arena where the County is either allowing or disallowing grows in Calaveras County. Nobody allows trespass grows to begin with; that’s why they are called trespass grows.”
Dave Eggerton said that their permitting system generated funds that could be directed toward the trespass grows, but now with the ban, their greatest concern is to lose the local resources and law enforcement and environmental management in the permitting staff; they are about to be cut in half. “We’re not going to have the local resources to deal as effectively with the most egregious stuff,” he said. “We’re not the experts; we don’t know what the preferred project or alternative would be, but we said, whatever you do, you have to thoroughly evaluate the loss of revenue and its impact on our resources to go after those particular types of situations which we know are happening and will continue to happen. That’s really what does concern us the most at this point.”
Kristin Nevedal noted that the trespass grows that she has experienced are very remote; there are often temporary living shelters put in place, trash isn’t carried out, and wildlife get into it and spread it all over the place. And then during the eradication process, usually the only items to be removed during eradication are the plants; oftentimes there’s a lot of infrastructure left over – the water lines are often still there, pots or holes, and trays are often stashed underneath bushes.
“It’s very easy to move back into these settings when you have water infrastructure in place, you have pots out there, you’ve got medium out there,” she said. “It’s literally hiking some small plants back in, or a packet of seeds and making sure that you cull males, so that makes for a very ineffectual clean up if the focus or the only monies available are literally just to eradicate the plants. It doesn’t stop the process from being repeated over and over again; sometimes even in the same summer, you’ll see eradication and then plants being put back in a couple weeks later.”
Dave Eggerton agreed, and noted that largely the responsibility for cleanup falls back to the county government, and Calaveras County is incredibly poor: he noted that the average median income is 80% of the state income, so on average they qualify as a disadvantaged community. “The area where most of the growing activity, at least the permitted and I would suspect the unpermitted that continues, is within an area within the Mokelumne watershed on the northern boundary that is 60% of median income, so it’s a severely disadvantaged community, it’s to the point that we as a water agency actually qualify for 100% financing for the State Revolving Fund grants administered by the State Board.”
Moderator Mark Horne noted that given some of the trespass grows occur on national forest lands … doesn’t the Forest Service have funds for eradication?
Scott Graecen said that the forest service does have significant budget for eradication, but what they don’t have is any money for cleanup. “They’ll do a bust, they are going after the perpetrators, they are getting out the crop, but they leave behind the water lines, the garbage, and the pesticides,” he said. “Individual operations are being set up to do clean up and to get grant funds to do cleanup, but we have toxic bombs all over our public lands because of this legacy of trespass grows over the last several decades. I have a lot of criticism for the forest service. Among other things, we can’t get a map of those bombs. We can’t find out where they are – they don’t want to tell us.”
Kristin Nevadal pointed out that no one can go in there without law enforcement to clean them up because once it’s eradicated, it’s a crime scene. “So even if Friends of the Eel River had grants and wanted to go out with a team of volunteers to clean up these sites, they can’t do it; we can’t do it with a group of farmers without bringing law enforcement with us, so it has to have a combination of agencies support for the cleanup, otherwise there’s no way to embark on it.”
Scott Graecen said that HazMat teams for these operations because in many cases, carbofurans are present and those are really, really dangerous pesticides, so much so that a teaspoon of carbofuran would kill everybody at this conference; it was used to kill bears.
“What we need as a policy shift to preventing trespass grows as opposed to prosecuting the perpetrators of it, which rarely happens,” he said. “From law enforcement’s perspective, the game is to get the guys who are doing it. You try to roll up the organization that’s doing it, that’s how you prevent future crimes, and that makes a lot of sense. The problem is that that’s not addressing the problem of impacts on our public lands and waters, so if we’re going to prevent these things from getting established, we need to adopt a different set of practices, like for example, going to the places where we’re most concerned about trespass grows happening, not in the late summer and fall when operations are in full swing and we can find the plants, but in the early spring when they are getting established, and running them the heck out of there. Now there are ways to do that.”
Question: How many permits for cannabis cultivation?
Scott Graecen said that in Humboldt County, the number of permits under the 2015 medical marijuana ordinance is about 1500, but Kristin Nevedal acknowledged that some of those will fall out of the system. About 500 have permits now, but a lot of them are temporary as the county is backlogged in processing, she said.
“I think almost 3000 applications came in which included dispensaries, but the vast majority of them are probably cultivation related,” said Ms. Nevedal. “Out of those 3000, a lot of those applications either were not complete or the applicant chose not to complete them, and so that brought us down to about 1500. And so now, they’ve issued interim permits because they haven’t been able to process the applications fully, so we have about 500, and we have a cue for another 200, so I think we’ll be around 700 temporary and permanent permitted cultivation sites; that’s roughly where we’re sitting in Humboldt County.”
So do the other 14,000 continue to grow?
“Yes and no,” replied Ms. Nevedal. “We’ve seen some abatement letters be sent. The county is sending abatement warnings and if you don’t abate within 6 days of receiving an abatement letter, you can become subject to a $10,000 per day fine; part of not only the abatement but staying out of that finding situation is to go into the County, show that you’ve abated the crop, and then to sign a compliance agreement that is you basically agreeing that you will not cultivate on that piece of property unless you obtain a permit from the County. We’ll see what happens this summer. Those kind of just started coming out late last season, so we started seeing those in September or October-ish.”
Scott Graecen said he’d be surprised if there were more than 100 of those out at this point. “We’re looking at a decade or so if that’s the method for dealing with the 15,000,” he said. “The overarching question is really given the new economy of marijuana production, how many of those operations can we realistically expect to continue to be profitable? The big problem is that we have environmental costs and production costs that are quite a bit higher than many other parts of the state. Many folks in Humboldt County insist that we grow the best weed in the world, and that’s going to mean that we’re going to keep a big share of the state’s overall market. But it looks like many of the counties that are creating licensed weed program are preparing to supply the entire state demand, over and over again. My best guess is we’re looking at about 500 operations being viable in Humboldt in the future, which means 98% of the existing operations don’t have an economic future.”
Moderator Mark Horne then gave some numbers, acknowledging that since the cannabis industry has been hidden in past years, the numbers are fraught with speculation. ”I have seen estimates that the state of California produces 12.5 million to 13.5 million pounds. And the consumption, both legal and illicit in California, is about a quarter of that, which means a big chunk of cannabis been grown in California is going somewhere other than California,” he said. “With respect to the cultivators who have received a permit, I read a report a month ago that said statewide, about 5% of the estimated number of cultivators had obtained a permit, and that it’s very difficult.”
Mr. Horne also noted that he’d taken a look at the permit application. “It has about a half a page on where does your water come from, where do you get it, where is the source, and how certain is it,” he said. “If you’re a farmer and you want change from growing alfalfa to peaches, nobody asks you where does your water come from in order to do that, and yet this is part of that process.”
What about the viability of cannabis growers?
Moderator Mark Horne then asked about the farmers and cultivators who are working to get permits and make a living. “I understand that there is a great deal of apprehension and fear in that arena in terms of how this is all going to shake out … Scott you even suggested that 98% of the current growers in Humboldt County may lose their livelihood because the County isn’t going to hand out enough permits.”
“I can’t say the county is not going to hand out enough permits,” said Kristin Nevedal. “I think that a lot of the properties that are being cultivated on right now are going to find that they aren’t eligible for permits – maybe not even due to the county’s standard, but due to the regulations they have to comply with through the Department of Fish and Wildlife, or through the water board order because maybe they aren’t going to be able to meet forbearance needs because they don’t have the proper water right to be able to water throughout the summer, and they don’t have any place to build a pond or the stable ground needed to put large tanks out to collect rainwater or store winter water, so getting that infrastructure in place is literally going to be impossible for some of these properties.”
“Then there are segments in the community,” Ms. Nevedal continued. “There’s the family farmer that’s been there, that’s worked on their land for a decade, maybe more; and then there’s this green rush that has happened in our local communities, so you have these two demographics inside our communities that are having a pretty substantial rub. We have family farmers who are trying to come into compliance and they have been working oftentimes on their property and land use issues for a number of years. They’ve put ponds in or they’ve developed the water storage that they think they are going to need, seeing what might be coming down the pipe with regulations, and then you have folks that have moved into the community next door that are still cutting down TPC lands and bulldozing in flats and sucking water out of the creeks. … That TPC land that has been logged and the trees jackstrawed over the edge of a bulldozed flat with no power is probably not going to qualify for a license to use those high intensity discharge lights to even grow on that flat.”
“I think that what we’re seeing is a lot of confusion amongst the growers that are trying to come into the marketplace to try to be regulated and why the magnifying glass is on them to do all of their improvements right now, instead of having a timeline where they can actually afford to do the land-use improvements that will help the environment and why the enforcement isn’t focused more on some of the more egregious properties,” Ms. Nevedal said. “A lot of those green rush properties don’t even have the intention of coming into compliance within some of our communities.”
“There are people who got here five years ago who are green rushers who have outstanding environmental ethics, substantial business sense, and are doing operations that have almost no impact, and there are people who have been in Humboldt County for 30 or 40 years who are acting like complete idiots,” said Scott Graecen. “There’s some crazy stuff. You can’t just sort it out, all the hippies and the crazy new people who are capitalists who don’t care about the land. It’s really complicated at a social scale and at a landscape scale as well, and I think ultimately what we’ve got to do is have fair standards that we can actually apply effectively and then apply them.”
“The problem is that in Humboldt County, we built a weed industry not because it’s a great place to grow the best weed in the world, but because it’s a great place to hide,” Mr. Graecen said. “So if we’re now creating a weed industry that’s basically an agricultural commodity – well, look at the world we have right now. Where do we grow agricultural commodities? We don’t grow them in places where we have endangered fish, mostly. I would submit that we probably shouldn’t focus most of our energy on trying to figure out how many operations we can pack into watersheds where we have endangered fish. We should be focusing on the endangered fish. We can grow all the weed we need on 1100 acres.”
How much water does cannabis use?
“Pot itself doesn’t use that much water. Many other crops use a great deal more water,” said Scott Graecen.
“We have a lot of dry farms in Humboldt County that are using no nutrients, no water, and producing some very lovely cannabis, very high quality and very clean,” said Kristin Nevedal. “We’re seeing really fabulous outdoor grows with no water consumption whatsoever.”
“How much water the plants use depends on the cultivator and how mindful they are and the type of practices they put into place,” continued Ms. Nevedal. “Cannabis is a xeriscape crop; it definitely does not require a lot of water, but you can literally feed it heavily, water it heavily over the course of the summer, and it loves to veg and it will put on more leaf and more green material and turn into the trees. Under plant count based models, what we generally see is very large resource consumption happen.”
“If someone says, you can only have 25 plants and you plant them in May, the idea is to grow them as big as possible. … those are going to use vastly more water and nutrients and other resources, then allowing cultivators to have more plants with light depradation techniques in place possibly, or dry farm as those plants are often smaller,” said Ms. Nevedal. “It’s really dependent on how the cultivators grows. In the ground, less water. In pots, more water. In smart pots, even more water, so it really is dependent on the techniques used.”
Indoor cultivation of cannabis
Question about cannabis farming in Southern California: In some locations, there are warehouse grows under lights and they depend on a water supply which is often groundwater based; in some locations, those basins are either already overdrafted or have the potential to be overdrafted.
“Frankly I don’t think we should be cultivating cannabis indoors in warehouses anywhere, even in the desert – especially in the desert,” said Ms. Nevedal.
“The carbon footprint associated with that type of cultivation is incredibly excessive, so if we look at the state’s indoor policy, more than 25 watts per square foot, a maximum cultivation permit is 22,000 square feet indoors, so if you calculate the kilowatt hours used just in lighting at 30 watts per square foot, you’re adding almost 300 homes to the grid, just in lighting for one 22,000 square-foot cultivation site indoors. In those settings, trying to put cannabis into greenhouses, while it might bring the lighting down, it brings the heat trap up, and so now your consuming vast amounts of energy to mitigate the heat. You have dehums, cooling, you name it, that’s going to shoot energy up … if that area isn’t appropriate for cultivating other crops, you probably should not be cultivating cannabis there.”
“I think really the key here is to bring this back to an agricultural model,” said Ms. Nevedal. “Cannabis should be cultivated outdoor in the ground in an agricultural setting where it’s appropriate to produce other crops. The water use whether it’s indoor or outdoor, is really going to be dependent on how that cultivator chooses to cultivate. Are they going to do hydroponic model and probably consume copious amounts of water? It really depends on the technique used in each of those settings.”
Local water impacts of cannabis
Question: The water impacts, could you quantify them?
“This is ag in one sense, but it’s really quasi-ag, that’s what state regulators will tell you,” said Dave Eggerton. “They don’t see it as traditional ag, and you can see the layers of regulation. Just like representing where you have a legal water source, then the local permitted realm and the application, that’s part of one of the disclosures that has to be made. What I was told by County staff administering the program that 98% indicated they had groundwater to support their operations, which is interesting, because these I would suspect 99% of these operations were outside of a groundwater basin and in fractured rock groundwater areas in the Sierra Nevada that don’t have defined basins.”
“We looked at this from the perspective of our urban water management planning process as we went through with our update a few years ago, how would this affect our ability to serve our customers in the future,” continued Mr. Eggerton. “Our thought was that in areas of the county and these rural areas that are outside of our public water systems, there was a real risk that we may lose access to sustainable supplies if there’s an overdraft on these pockets of water, and that could affect our residences as well and possibly other ag. We needed to prepare for that as there could be an opportunity that we would have to then provide a public water supply; in that area, it’s all surface water, so we’d have to build out a system to supply them. That’s something that previous to the ban, we’ve had some conversations with the growers association about that and they expressed some initial interest in that as well.”
How about artisanal cannabis? What is the viability of the legal cannabis market?
Moderator Mark Horne asked if artisanal weed is in the future.Kristin Nevedal seemed doubtful. “What we’re seeing with the costs of regulation and taxation and the fact the regulations are exponentially more expensive for the outdoor operations … they don’t actually have enough cycles to produce enough cannabis oftentimes to afford the levels of regulation right now. The wholesale cannabis market has commoditized – what you see across the board in the US is that outdoor cannabis tends to be the lowest priced cannabis in the wholesale market, followed by greenhouse cannabis in the middle, and indoor cannabis at the top. And that’s span between outdoor cannabis pricing in the wholesale market and indoor cannabis pricing can be anywhere from $500 to $1000 per pound.”
“What we’re seeing in the legal market place for a multitude of reasons is that outdoor cannabis is selling into the legal place at around $700 a pound,” she continued. “At $500 a pound, an acre of outdoor cannabis that has paid for state applications, state license, 20% to the distributor which is a very low number, especially if you are in Humboldt, $125 per pound for production fees or costs, pretty low, $175 a pound for packaging and processing your material – these are low input volumes I’m talking about. And so by the time you’ve paid those pieces out, you are $133,000 in the hole and you have done no local permitting, no lab testing, no workman’s comp, no surety bonds, no insurance, no mortgage, no lease – you name it.”
“So is artisanal cannabis the wave of the future? I certainly hope so,” Ms. Nevedal said. “How we get there in the framework we have today – it isn’t going to happen. We’re really going to have to be creative and hope that the state can be creative as well and create some sort of tax incentive programs, or find a way to help incentivize these small businesses, otherwise we’re just going to lose them.”
Ms. Nevedal said that the Salmon Creek watershed is heavily cultivated and heavily impaired; land rarely hits the market there, but there are multiple properties that are listed right now, and they are not moving. “When the housing bubble busted, one thing that happened is that it didn’t affect Humboldt. Land still sold, still maintained its value, shops didn’t close on Main Street, we’re a largely cash economy, and all of those pieces are changing.”
Question: Is it the regulations or is it the changing market?
“I think it’s a combination of both,” Ms. Nevedal said. “For example, my sister has two properties in Salmon Creek. She had to get LSAA’s – Lake and Streambed Alteration Agreement which is a diversion permit. She has cannabis on one property and no cannabis on the others, and the non cannabis property was a $500 LSAA and her cannabis property was an $11,000 LSAA, so once you click the cannabis box, your rate often goes up twentyfold or more. When I file my water use numbers at the end of the year and I click the cannabis box, they charge me $200. But that doesn’t happen for other people filing water use numbers. They just file them.”
Ms. Nevedal said that it’s these higher rates for cannabis that’s like ‘death by a million paper cuts’ that people are having a hard time with. “The state hasn’t put together data that starts to show the cumulative expenses associated with permitting. CDFA says well, we’re tiered and we’re scaled and direct and indirect costs as we think it’s going to be, we have to cover tag and trace tags, so great that’s one cost. But then there’s fish and wildlife costs, there’s SWRCB costs, there’s mitigation expenses that whether you have issues to mitigate or not, you’re subject to that you don’t get the monies back from. Then we have additional costs that have been layered on by the County, and then more costs that are coming in from Fish and Wildlife … Who can afford to do a box turtle study and a Western owl study and .. the list goes on and on, so I don’t know that we’re going to get to artisanal cannabis anytime soon. We’re barely trying to get into the permitted system right now.”
“One question is how do we make the domestic legal market in California work, but the vast majority of pot production and on the North Coast isn’t domestic legal production, and it isn’t going to California’s domestic legal market,” said Scott Graecen. “The other problem that people face in keeping a weed economy alive, if that’s your frame, is that the national market is also flooded, and prices are also going down on the national market, because Oregon, Washington, Colorado, Nevada, New Mexico – they no longer need to buy weed from California. They are producing their own.
“The point being that we constructed an economy on the North Coast in an era of $5000 pounds, $3000 pounds, $2000 pounds, and that isn’t going to be sustained when you’re commodity prices are $300 a pound, or $150 a pound,” said Scott Graecen. “Realistically, what do you think farmers in the Central Valley are going to produce weed for? I think they’ll do it pretty cheaply.”
Ms. Nevedal pointed out that they also aren’t subject to the same regulations as on the North Coast. “Once you enclose cultivation in California, you put it into an all season greenhouse or indoor structure where the rain never hits the earth where the cultivation is taking place or the pots or the beds in which the cultivation occurs, you are no longer subject to the water board’s agricultural discharge program,” she said. “Oftentimes, those properties are in agricultural zones where they don’t require a lake and streambed alteration agreement. They are on wells or municipal water systems so you don’t have the water rights issues nor do you have the forebearance periods. Monterey is not setting up ponds and tanks to store water for their cultivation for the months of May to October. None of those farmers have to bear that expense.”
“So this poses challenges,” said Ms. Nevedal. “We need to address the environmental impacts but what we’re ultimately unfortunately doing is pushing existing cultivators who are trying to be compliant out of the marketplace. The concern in our neighborhoods is that we fought long and hard to get diesel generators and indoor grows out of our watershed. That was a brutal community battle and those are coming back. People do know how to grow cannabis under trees and under cover, and I just worry more about going back to what I remember when I first moved to Humboldt in 1995 was, a lot of indoor grows, a lot of loud diesel generators, and a lot of cannabis under the trees. Finding the balance is going to have to happen really soon, and I don’t know what those answers are.”
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