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UPDATE: California’s stance on one-acre grow limit unclear Thursday

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UPDATE Nov. 16:

California has scrapped a cap on cannabis cultivation that would have limited a person to growing a maximum of one acre of marijuana until 2023. The one-acre grow size cap was included in the California Department of Food and Agriculture’s environmental review of its proposed cannabis cultivation rules, which was released Monday. But the actual rules released Thursday morning did not include the cap.

“The entire regulatory package was being evaluated right up until the time it was released,” the Department of Food and Agriculture’s Director of Public Affairs Steve Lyle wrote in an email to the Times-Standard on Thursday. “After careful consideration, including input from stakeholders, the cap was left out.”

But California Growers Association Executive Director Hezekiah Allen, who supported the one-acre cap, said he has received multiple reports from individuals attending the state’s Cannabis Advisory Committee’s first meeting today that officials are saying the cap is still in place.

“I don’t know what’s going on,” Allen said over the phone with a hint of exasperation. “The [department’s environmental report] was very clear, the regs were very clear in the other direction and now we’re getting word of a third change in direction.

“It’s building the plane while we’re flying it. Apparently air traffic control didn’t talk to the pilot or something,” he continued.

Reached this afternoon for clarification, Lyle said that the two individuals who would be able to provide clarification are attending the advisory committee meeting.

The state rules still appear to impose limits on cultivation.

The state’s marijuana market opener is set for January, which is also when the state anticipates to begin issuing licenses for cannabis businesses. In order to be deemed legal, a cannabis business must obtain both a state license and approval from their local government.

The rules include limits on the types of cultivation licenses one person or business can obtain. A person, for example, can only obtain one “medium” cultivation license, with the largest grow size under this category being one acre of outdoor cultivation. This limitation will expire in 2023.

There appears to be no limit on smaller cultivation licenses, which allow for up to about a quarter-acre of cannabis cultivation. However, the rules limit a business to having only one license for each premises they cultivate on. The rules define a premises as “a designated structure or structures and land specified in the application that is owned, leased, or otherwise held under the control of the applicant or licensee where the commercial cannabis activity will be or is conducted.”

The premises is required to be a contiguous area and can only be used by one licensee, according to the state rules.

The Eureka Times-Standard has requested clarification from the Department of Food and Agriculture on these cultivation limitations and is awaiting a response.

Previously

Until 2023, California cannabis farmers will not be allowed to grow more than 1 acre of marijuana, regardless of whether they are allowed to do so at the local level, according to an environmental review of proposed state regulations released this week.

Some in the industry are lauding this restriction as a way to protect small farmers over larger corporate mega-grows.

“I know this is going to be very difficult, costly and painful for some producers,” California Growers Association Executive Director Hezekiah Allen said Wednesday, “but when you look at the big picture and the entirety of the state of California or even bigger with the national cannabis reform movement, this is a very prudent decision to have been made.”

Others like Honeydew Farms LLC owners Alex and Miranda Moore of Ferndale, who have already been permitted to farm more than 1 acre, now find themselves potentially having to completely overhaul their business plan just six weeks before the statewide marijuana market opener in January.

The couple has more than 6 acres of medical cannabis cultivation that has been permitted by Humboldt County and are already about a year-and-a-half into their operations.

“It’s frustrating,” Alex Moore said Wednesday. “Ultimately, I’m staying positive. If Honeydew Farms has farms for our company and ends up being landlords with the rest and leasing to other companies then so be it.

“There is no other option. There is no going back,” he continued with a laugh.

State vs. local rules

The Moores were one of the first farms in Humboldt County and likely the state to receive a county permit for a medical cannabis farm back in July 2016. At the time, the state’s medical marijuana laws under the Medical Cannabis Regulation and Safety Act were the only rules in place and included a license type that allowed up to 4 acres of cultivation.

However, after the passage of the recreational marijuana legalization measure Proposition 64 later that year and the state Legislature’s merging of the medical and recreational laws this year through Senate Bill 94, this 4-acre allowance did not make the cut.

“To just dump that and have us or how many others there are like us that have invested a lot into infrastructure and building a company and then to say, ‘We changed that, sorry,’ it’s kind of ridiculous,” Alex Moore said.

The 1-acre grow limit was released this week as part of the California Department of Food and Agriculture’s environmental review of the state’s revised cannabis cultivation rules. These revised rules are expected to be released today along with others regulating testing, licensing and other aspects of the industry.

In order to be a legal cannabis grower in the state, a person must have both a state license and a local permit.

If the 1-acre limit is adopted, it would conflict with Humboldt County’s efforts to expand its cannabis industry, with the county’s draft ordinance currently allowing for grows larger than 1 acre.

Despite this, county Planning and Building Department Director John Ford said he does not expect the county will change its ordinance.

“We’re trying to maintain a completely separate kind of path that is independent, but not in conflict,” Ford said Wednesday.

So while the Moores might be permitted to cultivate 4 acres of cannabis at the local level, the state will only license 1 acre of that. That means the other acres will either have to be leased out to other people or sold, Ford said — at least until 2023.

“That doesn’t mean the permits that we have issued are invalid,” Ford said.

While there have been a few farms that have been permitted to grow more than 1 acre, Ford said the vast majority of cannabis farm applications in Humboldt County seek to grow under 1 acre.

Why one acre?

Allen and others have said the 1-acre limitation is not a surprise, especially after Senate Bill 94 did not include the 4-acre cultivation allowance.

“I have, at times, been critical of the speculators who are promoting the green rush,” Allen said Wednesday. “There was some willful ignorance here where they read what they wanted to in the law. They wanted to go big and want to go industrial. Our read of the law has always been clear that the limit is one acre.”

Allen said that it goes against the state’s interests to allow for farms larger than one acre.

“Consolidating the marketplace runs counter to the public safety and environmental goals that the state is trying to achieve,” he said. “… The [environmental impact report] is very clear in one of the preceding sections that oversupply is a problem. If the state of California has too much product, it’s likely to drive people back into the unregulated market.”

Allen said that while they supported the 4-acre allowance under the old rules, the association also supports the one-acre limit.

“At this point, it is very unlikely that four-acre allowance will be coming back,” Allen said. “The response that I’m hearing from our membership and organization is this is probably the most prudent, responsible and impactful policy decision that has been made to cannabis to date.”

This reporter’s attempts to contact the Department of Food and Agriculture press office were not returned by Wednesday afternoon.

California’s cannabis laws under Senate Bill 94 prohibits the state from issuing licenses for farms larger than 1 acre before Jan. 1, 2023. While some may celebrate the limitation as a win for small farmers, Alex Moore said he doesn’t think it will change much and will only delay the influx of larger farms.

“I see it as mega corporations are going to own these huge greenhouse facilities and lease square footage to different businesses regardless of how many businesses there are [in the statewide market],” he said. “There will be more companies out there, but I don’t think it will cap the amount of cannabis that will be produced. It means more people will hold those licenses. Then that’s only for five years.”

Alex Moore said that the state should make an exception for farms like his, which were following existing state laws at the time they were permitted.

“This whole industry is a roller coaster ride right now. That route might change,” he said. “We’re going to be riding the roller coaster, and whatever changes happen, we’ll absorb them and that will be that.”

Will Houston can be reached at 707-441-0504.

UPDATE: California’s stance on one-acre grow limit unclear Thursday Share this: Click to share on Facebook (Opens in new window) Click to share on Twitter (Opens in new window)

California’s Best Places to Grow

Erich Pearson, CEO of SPARC, a vertically integrated retail chain, on site at his new farm in Sonoma County. Photo by Joseph Guillory.

With the legalization of recreational cannabis in California, cultivation on a grand scale is a forgone conclusion. As with other states that have made adult-use cannabis a regulated, taxed industry, growing and processing marijuana will easily become a multibillion-dollar industry.

However, if mistakes made in Washington and Colorado are repeated — and it’s likely they will be — investors looking at a cultivation license as a fast path to riches are in for a big surprise.

California by the numbers

Although California may be a bit smaller geographically than Texas, it dwarfs every other U.S. state by almost every other measure.

The state covers 160,000 square miles and it is 800 miles long from its northern border to the southern tip. It has the highest and lowest points in the Lower 48 (Mount Whitney and Death Valley, respectively). It has the largest population of any state at nearly 40 million.

California’s economy is the largest of any U.S. state with a gross domestic product of $2.5 trillion — the world’s sixth-largest standalone economy. It has three of the world’s five largest companies by market capitalization: Apple, Google and Facebook. (The other two, Microsoft and Amazon, are based in Washington, another blue state with legal marijuana!)

In short, just about everything in California is big, from its physical size, to its economy, to its geographical diversity.

The new SPARC cultivation hub in Sonoma County prepares for he California recreational launch. Photo by Joseph Guillory.

Agriculture

California is best known for its beaches, Hollywood movies and tech companies. However, the Golden State is also an agricultural giant, producing a staggering $45 billion a year in fruits, vegetables, nuts and other crops to lead all other states by a wide margin.

It’s the nation’s No. 1 producer of many agricultural products, including celery, almonds, lettuce, tomatoes, carrots, grapes and peaches, among others. California’s Central Valley, which stretches 450 miles from Bakersfield to Redding, is the largest single patch of Class I soil in the world.

Soils are rated in terms of their agricultural limitations. Class I soils have the fewest limitations; Class VIII is considered not appropriate for agriculture.

According to the USDA’s Natural Resources Conservation Service, Class I soils are “suited to a wide range of plants and may be used safely for cultivated crops, pasture, range, woodland and wildlife. … They are deep, generally well drained and easily worked. They hold water well and are either fairly well supplied with plant nutrients or highly responsive to inputs or fertilizer. … They are productive and suited to intensive cropping.”

Based on sales figures in Washington and Colorado, simple math indicates that the legal, recreational marijuana market in California will rapidly reach between $5 billion and $7 billion per year.

Furthermore, with its enormous stretch of Class I soil and ideal climate for growing, California’s productivity per acre will likely be much greater than the other states with legal cannabis.

Photos by Joshua Hoffman.

Lessons learned

When Washington first legalized recreational marijuana, would-be growers scrambled to find suitable locations. Long-vacant warehouses and sub-par agricultural land got snapped up quickly, often at rates far above fair-market value.

Cannabis cultivators who had little experience in leases and commercial agriculture were often targeted by shady operators. Many made deals they soon regretted on properties no savvy farmer or orchardist would have given a second look. Compounding the problem, many businesses hired so-called “master growers” with little more experience than growing cannabis in a garage or basement to manage a sprawling commercial farm.

The results were often disastrous for investors and license-holders. But the good news is that the lessons learned in Washington and Colorado can easily be avoided with a little advice from real experts and some simple due diligence on the part of the investors.

Photos by Joshua Hoffman.

The Right Hire

The owners of struggling cannabis farms often make the same mistakes.

They spend too much money on labor. They overestimate the wholesale value of cannabis when setting up their business plan. They believe quality alone will generate sales and demand for their products.

But the most common flaw usually involves hiring unqualified operators. The aforementioned “master grower” who learned cultivation techniques by reading High Times and other marijuana books is not going to know how to run a full-scale commercial farm.

Cannabis, with its cult-like following of backyard “experts,” is not difficult to grow — despite what the purveyors of “how-to” books would like you to believe. In fact, cannabis is an extremely hardy annual that can survive — and even thrive — in a wide variety of environments and the plants will grow a foot a week with good sun, soil and the occasional dose of fertilizer.

Successful businesses in Washington have shown that the correct person to run a commercial cannabis operation has managed a professional greenhouse, graduated from a university with a degree in plant sciences or has real-world experience in commercial agriculture. In the long run, success in the commercial cultivation of cannabis will boil down to efficiency, just like every other field of commercial agriculture.

Wine country making way for weed county: One of the many vineyards in Northern California that is now sharing its hillside with marijuana producers. Photo by Joshua Hoffman.

Selecting a site

Without a doubt, selecting the right location for a new cannabis farm is going to have more impact on success or failure than any other single decision in the process. In drought-prone, federally-irrigated California, water may be the single-most important consideration of all.

While the Central Valley might seem like the ultimate location because of its superior soil and abundant sun, the issue of water/irrigation is a potential business killer.

“The smart money is in water,” says Hezekiah Allen, executive director of the California Growers Association (www.calgrowersassociation.org). “Current U.S. law does not allow for federal irrigation water use in the cultivation of cannabis, and almost all the irrigation in the Central Valley is part of a huge federal project.”

If the Central Valley is a problem, what about the Salinas Valley? According to Allen, the problems in the Salinas Valley could be just as acute because of rapidly disappearing ground water and severe restrictions on the use of well water.

Northern California

The traditional center of illegal marijuana cultivation in California has been the area known as the Emerald Triangle.

In the past, it was a favored because of its rugged geography and low population density. Ironically, for a completely different set of reasons, it might still be the safest location for legal marijuana cultivation. If water ends up being the most important consideration for a good location, Northern California, including Humboldt, Mendocino and Trinity counties, could end up the clear winner.

Consider some of the average annual rainfall totals in different California cities:

Bakersfield, near the southern end of Central Valley, receives an average of six inches of rainfall per year. Further north, Fresno in the San Joaquin Valley, receives 13 inches.

Napa, located closer to the center of the state, receives 27 inches.

Meanwhile, in Northern California, Eureka in Humboldt County and Ukiah in Mendocino County both receive 40 inches of rain annually and Redding in Shasta County receives 35 inches.

Crescent City in Del Norte County, just south of California’s northern border, receives an incredible 71 inches of rainfall on average — more than double the rainfall of notoriously wet Seattle.

Put in simple terms, Northern California and the Emerald Triangle have good average rainfall totals that will support a thriving cannabis industry without the need for outside irrigation and with little worry of wells drying out.

Allen suggests that a smart cannabis farmer could easily set up a rain catchment system that takes advantage of the ample winter rains by storing it for use during dry summer months when rainfall is historically low.

Buying land

It’s always advisable to hire a professional when making a real estate purchase. That rule applies to residential houses and recreational properties, but it’s especially important with commercial real estate. Many pioneering growers in Washington and Colorado, who had little experience in farming, made bad deals they came to regret. Working with an experienced real estate agent can save a lot of heartache.

Real estate broker Kyla Tripodi says the most common mistake among buyers is failing to research and fully understand Humboldt County’s ordinance before they invest.

“While we are on the forefront of cultivation in California, based both on reputation as well as being the first county in the state to pass an ordinance, the process is still complex,” says Tripodi, who owns The Land Man Office along with her father. “The permit application is lengthy and requires compliance with several different county, state and federal agencies. Additionally, there are ongoing maintenance requirements once a permit is issued, including inspections from various departments.”

Sandi DeLuca, a real estate agent with Coldwell Banker in Arcata, says, “The cannabis industry is well established (in Humboldt County), and with the passing of legalized marijuana, the Building and Planning Department has said that it wants to be seen as a friendly, pro-business area for the industry. Property owners are working with lawmakers, contractors, engineers, surveyors, consultants and California Fish and Game to get all their ducks in a row.”

When looking at a site in the Emerald Triangle, DeLuca, who represents buyers and sellers in Northern California, emphasizes the importance of working with someone who knows the “ins and outs” of both the industry and local regulations. She says she’s seen outsiders get bad advice that led to a poor purchase.

“I have seen and cleaned up a lot of deals done by a handshake in the hills — properties sold that had no water, no legal roads, improper transfers, liens, etc.,” she says. “I recently heard of a property owner who refused to return a deposit on a piece of land that an out-of-town buyer was hoping to purchase, even though the land was not even zoned for cannabis cultivation.”

When evaluating land in Northern California, DeLuca says the main things to look for depend on what the property will be used for.

“Zoning can affect not only current use, but also future use,” she says. “The commercial cannabis cultivation permits offered in Humboldt County had deadlines. Did the seller meet those? What was applied for? Water and its source are huge considerations.”

Roads, slope, easements and liens can also have big impacts on selecting the right location for a business, she says.

While the price of properties that meet the county’s cultivation ordinance have grown exponentially, Tripodi says there are still deals to be found.

“The county stopped taking permits at the end of 2016, which led to a limited supply of cultivation properties on the market while buyers from out of the area continued to flood in,” she says. “However, it appears that prices have peaked, and may come down. Some overpriced properties have not moved. When you consider everything the county has to offer, and the price in the rest of California for an acre of land, Humboldt County is still a relatively good deal.”

A thorough review of where to buy and where to grow in California, home to the largest patch of class 1 soil in the nation.