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California releases cannabis regulations, with no limit on farm size

At Justice Grown farm in rural Santa Rosa, Wednesday Sept. 27 2017, from left, Mikayla Crum, Shivawn Brady, Director of Operations at the farm, and Jamie Scott trim up freshly harvested cannabis as the pot harvest gets in to full swing across the north coast. (Kent Porter / The Press Democrat)

JULIE JOHNSON,

California’s headlong race to write its rules for the legal cannabis marketplace before Jan. 1, when recreational business can commence, took a leap Thursday with the release of a comprehensive set of temporary regulations for the emerging industry.

The long-awaited guidelines cover everything from dosage amounts of psychoactive THC in marijuana products to facility inspections and authorized businesses, ranging from delivery services to small manufacturers with shared facilities.

The regulations will enable the state to begin issuing temporary licenses for cannabis businesses in January, when recreational sales become legal.

Cannabis industry leaders overall had positive feedback about 278 pages of rules developed over months. The most controversial aspect of the regulations is what’s missing: Any limit to the size of marijuana farms.

That immediately posed a threat to established growers, including the smaller operations that blanket the North Coast.

“It is going to be a catastrophe if California increases our supply of cannabis. The marketplace is already flooded,” said Hezekiah Allen, executive director of the California Growers Association.

“We’re already producing several times more than we need. Why would we scale up?”

The regulations have been in development for many months and in some cases covered familiar ground: At first, the state will issue only temporary licenses to growers and retailers, provided they have a local permit to open for business. The state has been trying to identify the appropriate size limit for cannabis farmers, a debate that has echoed fights over corporate-scale farming in the Midwest.

On Monday, the state Department of Food and Agriculture issued an environmental impact report that proposed a 1-acre cap on cannabis farms and nurseries.

But by Thursday, the same agency issued rules that put no limit on farms, apparently opening the door for large-scale cultivation in California.

Steve Lyle, spokesman with the department, said in an email the 1-acre limit “was left out following evaluation of the emergency regulations, including input from stakeholders, that went on right up until the regulations were finalized.”

The regulations won’t expand the size of cannabis farms allowed in Sonoma County, where cultivators can grow no more than an acre of marijuana.

Under state law, local jurisdictions can craft policies limiting the local marketplace, such as the size of farms and the types of businesses allowed.

Erich Pearson, executive director of SPARC dispensaries in Sonoma County and San Francisco, has a 1-acre farm in Glen Ellen, which was partially burned in last month’s fires. Pearson called the regulations “a monumental step forward” and said it was a “relief” to finally have a comprehensive guidebook.

He said he hasn’t yet analyzed how the regulations will impact his businesses in Sonoma County, but he’s optimistic.

“We hope the publication of these regulations will spur local jurisdictions to update their own rules to ensure a level playing field for operators across the entire state,” Pearson said in a text message.

Nick Caston, a cannabis industry consultant and board member of the Sonoma County chapter of the California Cannabis Industry Association, said allowing large farms is good for manufacturers that would rather source flowers from one farm versus many small farms.

The rules give a six-month grace period before more stringent distinctions between recreational and medical cannabis apply, a transition period that will make it easier for dispensaries and other businesses to stay afloat while many businesses are still getting local permits and state licenses, Caston said.

On the other hand, Proposition 64 supporters campaigned last year with a promise there would be a five-year buffer before the state would allow large-scale cannabis farms, Caston said.

“The flower market could get saturated,” Caston said. “

It’s a justifiable concern.”

The state Department of Food and Agriculture estimates 13.5 million pounds of cannabis were produced statewide last year — but only about 18 percent of that was consumed in California, with the rest ostensibly taken out of state.

And of the 2.5 million pounds consumed in California, only an estimated 650,000 pounds were purchased in the legal medical marijuana marketplace.

Passing Prop. 64 last year, voters legalized the recreational use of marijuana beginning Jan. 1, a watershed step that will unite that new market with the state’s long-running medical marijuana industry.

Within several years, the state expects to collect up to $1 billion in new taxes.

The rules were issued just 45 days before legal sales can kick off, and at a time of widespread confusion and anxiety for many in the industry.

Some predict high taxes — in some places, as high as 45 percent — will drive consumers to the black market. Most banks won’t do business with cannabis companies.

And Los Angeles and San Francisco are among many cities without local rules in place.

According to the regulations, annual fees for cultivation licenses could be nearly $80,000, or as little as $1,200, based on production.

In issuing growers’ licenses, the state must ensure also it doesn’t violate any local rules.

Meanwhile, big gaps loom in the system intended to move cannabis from the field to distribution centers, then to testing labs and eventually retail shops.

In general, California will treat cannabis like alcohol, allowing people age 21 and older to legally possess up to an ounce and grow six marijuana plants at home.

Find the regulations at plantingseedsblog.cdfa.ca.gov.

The Associated Press contributed to this story. You can reach Staff Writer Julie Johnson at 707-521-5220 or julie.johnson@pressdemocrat.com. On Twitter @jjpressdem.