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The Marketplace & Enforcement

It seems Mendocino County is unaware that state resource agencies are charged under state legislation legalizing marijuana to actually enforce state resource laws. These are basic laws that prevent environmental degradation on all lands, illegal water diversion and discharge, illegal or “moonscape” grading, illegal timber harvests, illegal use of pesticides and herbicides, etc.

A month ago, as you may recall, represntatives from two state resource agencies addressed the Board of Supervisors at a meeting regarding proposed amendments to the county’s three-month old cannabis ordinance.

CALFIRE’s Unit Resource Manager Craig Pederson, who oversees the state’s forest practice program in the county, spoke on the lack of enforcement regarding tree removal associated with marijuana cultivation.

“CALFIRE was satisfied with the final ordinance language which clearly prohibited tree removal” for grow sites, Pederson said.

But, he stated, “In practice we find that not to be the case as conversion of timberland to cultivate marijuana has continued.”

He pointed out that ‘the number of issues and potential CALFIRE law enforcement cases are escalating …”

He told the Supes, “CALFIRE encourages the county to promptly and consistently enforce the cultivation ordinance. The ordinance must be enforced by the county …” He reminded the Supes that the ordinance created a “zero tolerance for tree removal. It doesn’t allow a single tree to be removed for cultivation purposes.”

The bottom line for CALFIRE is they are not happy that they are being forced by the “escalating” tree removal activities of growers to do the enforcement duties that are actually the county’s responsibilities.

Next, Angela Liebenberg,of Fish & Wildlife (DFW), made a series of succinct but no nonsense recommendations to the Board.

• The county needs “robust enforcement” of its ordinance;

• Additional county enforcement staff is needed ASAP;

• Cultivators with prior DFW violations should not be allowed to apply for permits;

• State law requires cultivators when circumstances warrant to apply for streamside alteration permits; and

• The county’s CEQA document “may not be sufficient.”

Both agencies were putting the county on notice there are potential legal problems looming on the horizon if they did’t start enforcing their marijuana ordinance.

Earlier in this series on evolving public policy in marijuana regulaltion, it was pointed out that another state resource agency, the State Water Resources Control Board (SWRCB), is developing and will implement new regulations and programs to address potential water quality and quantity issues related to cannabis cultivation. Their approach is obviously influenced and shaped by the not-so-friendly watershed practices of too many cultivators.

“We have anecdotal stories and evidence of just buckets of stuff just being dumped into streams killing fish, poisoning the water,” stated Water Board Chairwoman Felicia Marcus. “The illegal cannabis issue has been a huge one that our enforcement efforts have grown on, and now as cannabis is legalized with more people coming into the fold the expectation is they are going to meet the same rules or even stricter rules.”

The proposed regulations will also nail down the permitting process for marijuana farms and enforcement of waste discharged violations.

“What we are trying to do is do a regulation that can deal with the scale of applications we're going to be getting in a reasonable amount of time,” Marcus said, "that will adequately protect water quality, will adequately protect water rights and will create a level playing field for all the folks who've been complying with all of our other rules for so many years, so its a massive undertaking.”

Keep in mind that state legislation legalizing marijuana requires the State Water Resources Control Board, in consultation with the Department of Fish and Wildlife, to adopt principles and guidelines for diversion and use of water for cannabis cultivation. It’s a pretty broad mandate.

Two years ago, California Department of Fish and Wildlife officials estimated that marijuana production on public lands had increased by 55 to 100 percent in ecologically fragile Northcoast watersheds over the past five years alone. That pace has not abated in the past two years as evidenced by the proliferation of mega pot plantations and a construction boom of greenhouses and “hoops.”

Pretty much across the board, state resource agencies are coordinating, cooperating, and communicating with one another on creating a unified approach to enforcing the state’s marijuana regulations relative to resource protection.

This is a concept deserving of emulation in Mendocino County.

The foregoing is a lead-in to a curious report in the Ukiah Daily Journal regarding a letter sent by the Board of Supervisors to the state Natural Resources Agency complaining of recent eradications by DFW in Mendocino County.

The letter in part reads, “The Mendocino County Board of Supervisors is concerned that recent activities by (DFW) may prove counterproductive to our efforts to bring cannabis cultivators into a regulated system … we question the necessity and advisability of heavy handed summary eradication of small scale cultivation operations that are in the permit process … We are very concerned that actions of this type will have a chilling effect on the willingness of cultivators to apply for permits.”

Without attempting to resolve the accuracy of, or what constitutes alleged “heavy handed summary eradication,” the county’s contention that DFW’s enforcement activities may prove “counterproductive” or have a “chilling effect” on individuals making application for cultivation permits is quite a stretch.

The fact is long before these recent eradications, marijuana farmers were (and are) staying away in droves from the application counter. As I’ve said many times before, there’s probably 9,000 to 15,000 growers in the county. To date, 700 or so have initiated the process. Unless the decline-to-apply folks were gazing into their crystal balls and glimpsed the recent enforcement eradications, there must be something else preventing them from signing up.

Perhaps what generated the county’s letter was last month’s appearance by Department of Fish & Wildlife’s Ms Liebenberg when she informed the county they need “robust enforcement” of their ordinance.

Could be tit or tat, but sometimes, literally, the truth hurts.

Pot Economic Study: The Market

As discussed here last week, the three main agencies (Department of Consumer Affairs’ Bureau of Cannabis Control, Department of Public Health, and Department of Food and Agriculture) responsible for rolling out regulations for the state’s cannabis reg package, are expected to have their work completed by late fall.

One of the interesting things growing out of the agency rulemaking process is an economic report, commissioned by the state Dept. of Ag. The economists looked at just how much pot is being grown in California.

The report estimates that approximately 13.5 million pounds of weed is harvested in the Golden State, annually. I’m sure that tonnage has increased dramatically recently, but the study looked at previous years. Not surprisingly, 9,200,000 pounds (68 percent) is grown in Northern California,and of that total 4,150,000 pounds (31 percent of the state’s total pot) is produced right here on the Northcoast. On the consumption side, it was estimated that only 2.5 million pounds found an end use in the state. Those numbers support other long-held analyses that approximately 80 percent of Cal weed hits interstate highways for sale on the national black market. The Dept. of Ag study also forecasted that about half of the 2.5 million pounds will be sold in California’s “black/grey” market instead of licensed dispensaries. Anyway you look at it, there’s a bunch of pot flooding the market, whether it be legal, black, or black/grey. That much supply drives the price downward, which is not a good thing for small growers. Somebody told me a few days ago that a grower he knows unloaded last season’s harvest for $300 per pound. That’s quite a hit compared to the old days when it sold for $5K.

In the report, economists zero in on the problems associated with establishing a legal market for what was previously an illegal product:

“The market for medical cannabis is different than other conventional agriculture industries, or more generally, the market for any other established product because cannabis has historically been produced and sold on an unregulated illegal market. This affects the economic impact analysis in two key ways. First, the medical cannabis industry is a new (legal) industry that is still evolving. Medical cannabis businesses—from cultivation through final retail—operate in a market where consumer demand is partially met through the informal black/grey market for non-medical cannabis. In addition, there are no official statewide production statistics, financial data, and limited information about important economic parameters that characterize the market for medical and non-medical cannabis. The second significant factor in the economic impact analysis is that Proposition 64, the adult Use of Marijuana Act (AUMA), passed by California voters on November 8, 2016, fundamentally changes the baseline for the medical cannabis industry by introducing an adult use cannabis market that is a direct substitute for the medical market for many consumers. Accordingly, some current medical cannabis consumers will substitute to the adult use market as it becomes legal, which will decrease for the size of the medical cannabis market and cause some medical cannabis businesses to shift to the adult use sector. That is, legalizing adult use cannabis has an effect on the medical cannabis industry that is separate from the impact of medical cannabis regulations. This significant change in the market structure must be analyzed as part of the baseline medical cannabis industry in order to isolate the effect of legalizing adult use cannabis and hold this separate from the impact of medical cannabis regulations.”

That’s a very concise and easily understood explanation of the murkiness of the marijuana market and why attempting to forecast its future direction or destination is a fool’s mission.

(Jim Shields is the MCO’s editor and publisher, and also manages the Laytonville County Water District.)

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