Chris Jennings, owner of Lakeside Herbal Solutions, hired a handful of consultants and spent tens of thousands of dollars to fulfill California’s environmental impact requirements for marijuana cultivation applicants.
The result was a 126-page report describing his planned South Lake Farms growing and processing operation in the Northern California city of Clearlake, the environmental findings and the steps that would be taken to ensure minimal impact on the environment.
Marijuana growers like Jennings face a slew of requirements under California’s environmental regulations, with applicants spending tens or even hundreds of thousands of dollars to meet requirements, industry watchers reported.
But California cultivators aren’t the only ones bracing to deal with the financial load surrounding environmental rules. Growers in other states are experiencing it as well.
Not only is the trend likely to continue amid concerns about climate change and development pressures on natural resources, but the regulations are ever-changing, creating a financial burden and uncertainty for growers operating on tight margins.
“Since (regulators) get to design these requirements from scratch, you are seeing each subsequent state pick up things they like from other states … and upgrade them,” said Charlie Bachtell, CEO of Chicago-based Cresco Labs, an integrated marijuana company with operations in six states across the country, including California.
Golden State in context
California is historically known for having a progressive environmental culture, and its regulations are the toughest in the country, according to MJ business executives and consultants.
The state’s priority is to protect the environment from the “individual and cumulative effects” of marijuana cultivation operations, according to Rebecca Forée, communications manager for CalCannabis Cultivation Licensing, an agency that licenses and regulates cultivators.
Hezekiah Allen, executive director of the California Growers Association, said it’s typical for small cultivators to spend $40,000-$60,000 on environmental analysis and impact reports.
He noted the association has members with bigger projects that have spent several hundred thousand dollars on the process – and sometimes much more.
Is there grumbling?
“Of course. Where it’s really challenging is when a small grower has to do this,” he said.
California’s environment impact report requires growers to disclose how they plan to mitigate potential adverse environmental issues, including their effect on:
- Surface and groundwater quality
- Water and energy use
- Air quality
- Wetlands, rivers, fisheries and plants
- Pesticide use
- Agricultural discharge
- Cultural resources
Jennings suggested growers need to be wary when it comes to selecting consultants, and he even called some “snakes.”
One he contacted wanted $7,500 for a required archaeological study of his property, he said. Jennings instead hired someone off a county list who charged $800.
Jennings ultimately found a handful of consultants he liked working with, but completing the entire process will still cost him roughly $45,000. He paid another $15,000 in licensing and other fees to Clearlake, which helped prepare the initial environmental impact study.
His report included comments from various government agencies that reviewed the site management plan and environmental-impact analysis.
For example, Yuliya Osetrova, a water resources engineer for California’s Lake County, expressed concerns in the report about potential groundwater contamination, questioned water-usage estimates and said the initial solid-waste management plan was inadequate to mitigate the amount of cannabis refuse that would be generated by the project.
The report shows that her apprehensions were alleviated partly by a site runoff-mitigation plan, which included ensuring at least a 100-foot setback between groundwater wells and the processing facility.
Stringency in other states
Kris Krane, president of 4Front Ventures that has offices in both Phoenix and Boston, noted that Massachusetts put in place strict energy regulations earlier this year pertaining to cultivation lighting that growers “are figuring out how to comply with.”
- In Colorado, cultivators now face mandatory pesticide testing.
- In Oregon, growers must prove they have a legal source of water. Stricter water requirements are increasing in markets across the country.
- In Boulder, Colorado, marijuana facilities must report energy use and offset their consumption by installing a renewable-energy facility, participating in a verified solar garden or paying into a city fund.
How MJ business can save costs
In California, some counties provide environmental-impact reports, so one way a cultivator can lower costs is to operate in one of those jurisdictions, said Allen of the California Marijuana Growers Association.
But even if the county has taken care of the basic requirements, applicants still face a handful of potentially costly requirements, he said, such as registering water rights and commissioning environmental surveys of their properties.
He noted the association encouraged small growers in an area to form cooperatives and share the costs of environmental analysis and reporting. That approach can yield significant savings, he added.
Because regulations are constantly changing, consultants are scrambling to keep up to date, so MJ cultivators must be cautious when selecting them to do environmental analysis, Allen observed.
“We see a lot of cannabis consultants who might be good at setting up financial models but don’t necessarily have experience in the regulations,” Allen said. “So, we have seen a lot of messy consultant-licensees relationships.”
And what about potential gouging, as Jennings reported?
“Absolutely,” Allen said. “There’s the really damaging myth that cannabis owners are rolling in money, and that’s simply not true. The margins have been thin for many, many years.”
Growers should approach the process of choosing consultants as they would go about hiring a home repair person, he advised: Talk with friends and get referrals.
Jeff Smith can be reached at [email protected]