Cannabis Industry Jammed With Extensive Environmental Regulations

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The surge of new cannabis-related regulations continues in California this month, this time courtesy of the State Water Resources Control Board.  In response to Senate Bill 837, the agency recently released a draft Cannabis Policy and General Order aimed at regulating the water-quality impacts of cannabis cultivation.

The proposed Order lists well over 100 requirements and prohibitions, which range from the expected, such as riparian setbacks, in-stream flow limits, and water-use recording mandates, to the burdensome:  under the Order, legacy impacts from poorly-designed logging road would become the current landowner’s financial responsibility.  To be prepared for state licensure, cannabis cultivators will need to apply for coverage under the Order, pay application fees, and within 90 days of applying, submit a host of reports demonstrating compliance with the voluminous requirements.

The Order primarily applies to outdoor commercial cultivators, with a few exceptions.  The Order exempts personal-use cultivators (with 6 plants or less), outdoor commercial cultivators with sites less than 2,000 square feet, and indoor commercial cultivators discharging to community sewer systems.   Commercial cultivators must still, however, submit applications and pay fees to secure proof for state-license applications.  As proposed, indoor cultivators with on-site wastewater treatment (i.e., septic or leach fields) will not be covered under the Order, and must obtain separate regulatory authorization.

The Order’s regulatory rigor will be tiered depending on a site’s slope and distance to surface waters—sites with steeper slopes or closer distances will be subject to heavier regulation.  Notably, the Order applies to cultivators in some form regardless of their proximity to surface water; even those with sites miles away from the nearest stream will need to comply with the onerous rules intended to prevent discharges to “waters of the state.”

Enforcement actions brought for noncompliance with the Water Code can be extreme:  cultivators can be reported to state officials in charge of licensing; the Regional Water Boards can administratively issue cleanup-and-abatement orders, requiring remediation and monitoring;  the State and Regional Boards can administratively impose civil penalties, often reaching into the millions of dollars; and the California Department of Justice can seek civil or criminal penalties, with threatened fines running into the tens, or even hundreds, of millions.

Although the General Order adds new requirements, it does not displace other regulatory programs.  Cultivators who propose work within, or plan to divert water from, a “bed, channel, or bank of, any river, stream, or lake” will need a lake and streambed alteration agreement from the California Department of Fish and Wildlife.  A section 404 permit, from the U.S. Army Corps of Engineers, is needed before placing any “dredged or fill material” into a “water of the United States,” which can include ephemeral streams and vernal pools.

Those cultivators already covered under the North Coast or Central Valley Regional Board Orders will need to transition to the State Board General Order by July 1, 2018.

Staff will be explaining the Cannabis Policy and General Order in Sacramento this Thursday, July 27, 2017 and again on August 2, 2017.  Written comments must be received by September 6, 2017.   The State Board will decide whether to adopt the regulations at its meeting on October 17, 2017.  If adopted, the regulations must also be approved by the Office of Administrative Law, with an intended effective date of November 22, 2017.  (See the notice here.)

If you have any questions regarding this regulatory proposal or seek assistance in comments, please contact Maureen Gorsen, Chris Roux, or Max Rollens at Alston and Bird.