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Law California

CA tries to clarify rules around THC limits in edibles, potentially spelling relief for infused product firms, labs

California’s infused product makers and testing labs are breathing a sigh of relief now that state regulators have sought to clarify rules governing THC potency for edibles and beverages, a move that is expected to result in fewer products failing lab tests.

The brouhaha arose after California’s permanent cannabis regulations took effect last month. Two of the three agencies that oversee the Golden State’s MJ industry issued seemingly conflicting rules detailing THC limits, testing and packaging for infused products.

That caused some testing labs to unexpectedly fail products based on different interpretations of the rules. Edibles industry officials, as a result, worried the situation could expose them to the following:

  • Costly lawsuits filed by consumers claiming they were harmed because the THC limits printed on the packaging didn’t reflect the exact THC contained in the product.
  • Huge outlays tied to products that failed THC testing.
  • Added regulatory costs due to stepped-up enforcement by regulators.

Over the past several days, however, California’s marijuana regulators have sought to clarify their regulations so they no longer appear to conflict.
“The good news is, this gives more leeway for passing edibles products,” said Swetha Kaul, the chief scientific officer at Santa Ana-based Cannalysis Labs.

Here are three things you need to know about the situation.

1. MJ edibles businesses’ concerns revolved around seemingly conflicting rules released by the California Department of Public Health (CDPH) and the Bureau of Cannabis Control (BCC).

The confusion caused edibles companies to question California’s marijuana permanent regulations because:

  • The CDPH stipulated that single-serving edibles products cannot exceed 10 milligrams of THC and packages of edibles could not exceed 100 milligrams of THC.
  • By contrast, the BCC allowed edibles products to pass potency tests if their THC content varied by 10% from the legal limit. That means, for example, a single-serve edible with 10 milligrams of THC would pass BCC muster if it tested for 11 milligrams of THC.
To address the confusion, the BCC reiterated its rules on Tuesday. The CDPH then weighed in on Feb. 5, in effect saying its rules also give edibles makers some wiggle room because the THC limit can vary within that 10% band.

“Nothing in the (CDPH’s) regulations prohibits a compliant product that is labeled within the THC limits and that passes testing within the variance established by the BCC from proceeding to market,” the CDPH said in a statement to Marijuana Business Daily.

“For example, if an edible cannabis product is labeled as containing 10 mg per serving, and testing shows that it contains 10.1 mg – which is within the BCC’s 10% variance – it would also meet CDPH product requirements.”

Clayton Coker, head of product for Somatik, a San Francisco-based infused product manufacturer, called the health department’s statement “great news” for edibles companies and a “proper interpretation of the delineation of regulatory authority between the various agencies.”

2. Testing labs received some clarity on the rules.

With the two agencies’ statements, the state appears to have made its rules around THC limits more straightforward, and that’s especially useful for testing labs.

Before the CDPH statement Tuesday, labs passed or failed products based on differing interpretations of the rules.

Two laboratories, for example, told MJBizDaily via email that they regularly pass edibles products that tested within the 10% potency range.

A third lab, however, said it failed edibles products that tested above 10 milligrams of THC in a single serving or 100 milligrams of THC in a package.

Since Tuesday, however, some marijuana edibles companies and the labs that serve them have indicated they feel more sure about the rules around testing as they apply to THC variance.

While welcoming the latest clarification, Cannalysis Labs’ Kaul did note the health department’s response still left some questions unanswered – especially as they apply to distributors of edibles and infused beverages.

The rules allow distributors to label products after they’ve been tested. But, the BCC and CDPH haven’t clarified whether distributors are allowed to label products with amounts of THC that exceed 10 or 100 milligrams.

3. Are product liability lawsuits still coming?

Despite regulators’ latest efforts, infused product manufacturers still face the threat of product-liability lawsuits over THC limits governing their goods, according to Pamela Epstein, CEO of Los Angeles-based Green Wise Consulting and the founder and managing shareholder of Green Wise Legal.

She said California’s statutory language that legalized adult-use cannabis clearly states that edibles can’t “exceed 10 milligrams tetrahydrocannabinol (THC) per serving.”

As a result, Epstein predicted, increased consumption of edibles – as the products become more mainstream – could unleash more lawsuits.

“Reliance on governmental protection for the plus 10% variance is questionable given that the statutory requirement is clear with ‘standardized concentration’ not to exceed 10 milligram doses,” she noted.
 
CA governor to send National Guard to combat illegal marijuana grows

California Gov. Gavin Newsom announced during his state of the state address on Tuesday that the National Guard has been tasked with eliminating unlicensed cannabis farms, a move welcomed by the state’s legal marijuana growers.

“We applaud (Newsom) for allocating resources to eliminate very destructive and dangerous trespass grows,” Terra Carver, executive director of the Humboldt County Growers Alliance (HCGA), wrote in an email to Marijuana Business Daily.

“These operations are typically on public lands, use extremely harmful pesticides and are run by organized crime,” added Carver, whose group represents state-licensed cultivators in California.

Newsom signed a general order that redeploys 360 National Guard troops from the U.S.-Mexico border to three other state-specific assignments, with the drawdown scheduled for completion by March 31.
Some of those troops will be “redeploying up north to go after illegal cannabis farms, many of which are run by cartels, are devastating our pristine forests and are increasingly becoming fire hazards themselves,” Newsom said.

The move includes 150 troops who will be assigned to the National Guard Counterdrug Task Force, according to a news release from the governor’s office.

Another 100 National Guard personnel will target “criminals smuggling drugs and guns through existing border checkpoints,” Newsom said.

Newsom also sent a letter to acting U.S. Secretary of Defense Patrick Shanahan requesting more federal funding for the state’s National Guard Counterdrug Task Force to ramp up the fight against international cartels.

Hezekiah Allen, a longtime industry activist-turned-businessman, pointed out in an email to MJBizDaily that small businesses in the state that have not been able to obtain a permit because of zoning restrictions or outright bans at the local level need incentives and support.

“Large, well-capitalized operations that have ignored the changing regulations or businesses that clearly have no intention of complying, like those operating on public lands or those abusing their workers, should be the highest priority (for elimination),” Allen wrote.
 
To me, this is easy to address....CA allowed for municipalities to opt out of any MJ activity. I have no problem with that as long as that also opts them out of any benefit from the resulting tax dollars.

No tickee...no laundry.

Chart: Most California municipalities ban commercial cannabis activity


2-18-19-COTW.png


Two-thirds of California municipalities prohibit marijuana businesses from setting up shop, underscoring the hurdles MJ entrepreneurs face in trying to break into the world’s largest legal cannabis market.

Only 161 of California’s 482 municipalities and 24 of the 58 counties have opted to allow commercial cannabis activity of any sort, according to data from CannaRegs, a website that tracks local marijuana rule developments in the state.

In addition, many of those local jurisdictions are selective about the type of cannabis business they allow, such as testing labs only. Others permit medical marijuana companies but not recreational businesses.
In short, getting into the California market isn’t as simple as walking into San Francisco or Los Angeles and filing paperwork to start a marijuana store or grow.

The state remains a patchwork of regulations and rules, with most local jurisdictions choosing to implement their own regulatory schemes on top of state rules.

Part of the transition into a state-regulated system also means that tens of thousands of legacy operators who fueled California’s gray medical marijuana market for two decades have been shut out of the legal industry, either by local license caps or by city and county ordinances that ban their business models.

Many of those pioneers are small companies, often one-person operations, that don’t have the money to relocate to a city or county that will grant them permits to continue doing business in the legal marijuana sector.

This has led to enormous market contraction, while simultaneously opening business opportunities for newcomers to the industry down the road.
 
It's an unpleasant truth that even in towns with many open minded consumers that fully wanted mj legalized, that unpleasant attitudes developed, and a "not in my town" mentality often prevails.
It's fine a community over, and a short drive away, but they don't want it in "their" town. It helps that delivery is available, that way they aren't inconvenienced in any way.
 
"The move represents a 180-degree turn from where the county’s elected leaders were a year and a month ago, when their split 3-2 vote instituted a ban on commercial cannabis activities in Calaveras County."

Yeah, I bet it hurt to give back those license fees and lose that tax money....whatever it takes, I suppose.



Regulating commercial cannabis: Calaveras Board of Supervisors to reconsider ban


Regulating commercial cannabis and deciding what a possible second rendition will look like in Calaveras County is a task coming back to the Board of Supervisors, who directed county staff Tuesday to once again develop a regulatory ordinance.

The move represents a 180-degree turn from where the county’s elected leaders were a year and a month ago, when their split 3-2 vote instituted a ban on commercial cannabis activities in Calaveras County. November’s election results changed the makeup of the Board of Supervisors and the new board is just now beginning to grapple with the most divisive issue in the county’s recent history.

As of 5:30 p.m. Tuesday, the Board of Supervisors and county staff were on recess and planned to come back to keep discussing details until after sundown. As of 5:45 p.m., the board was discussing continuing their work at future study sessions and at possible night meetings.

Four supervisors, Jack Garamendi, District 2, Merita Callaway, District 3, Dennis Mills, District 4, and Ben Stopper, District 5, polled 3-1 on moving forward on a regulatory ordinance late Tuesday afternoon, with Mills opposed. Gary Tofanelli, District 1, was not present for the poll.

Garamendi, Callaway, Mills and Stopper spent time hashing out how large grows could be, what growers will be allowed to apply, and permitting processes with Peter Maurer, the county planning director. They decided to leave questions about distribution for a later discussion.

The decision Tuesday afternoon is another turning point in the Calaveras County cannabis debate, and it came at the end of a public hearing that consumed most of the day in San Andreas. Pro-ban people and pro-regulation people took turns making their points. One man was ejected from the hearing when he referred to unregistered cannabis growers in his neighborhood as “illegals,” “wetbacks,” “Vietnamese,” and “gooks.”

“We suggest you look at the big picture,” Maurer said near the end of the hearing, before Garamendi polled the board. “Do you want to look at regulation, or do you want to stay with the ban?”

Maurer continued asking the board for input on details including personal grows, personal use, and whether they would be allowed indoors or outdoors. They also talked about whether to regulate processing and a possible centralized processing facility for trimming, drying and cutting, not growing.

Earlier, Trevor Wittke, executive director of the Calaveras Cannabis Alliance, dismissed pro-ban arguments that county voters are opposed to regulating cannabis, by pointing out that three pro-ban candidates — for sheriff and two supervisor positions — were defeated in Calaveras County elections in November by candidates who were on the record supporting revisitation to the question of regulating commercial cannabis.

“Ben Stopper won his district, Merita Callaway won her district, Sheriff DiBasilio won his election,” Wittke said. “They all defeated pro-ban candidates. Sixty percent of the county voted to support what you are doing today, considering regulation.”

Ron Huckabee, a resident of Valley Springs, said he and other people were sold a bill of goods on how much revenue commercial cannabis would bring to county coffers. He said it sounded like some supervisors were already decided, because some were words like “when” not “if.” Huckabee said the whole of Calaveras County is a watershed, and he doesn’t want illegal growers putting chemicals into that watershed.

Al Segalla with the the Calaveras County Taxpayers Association told the board the county should consider sticking to state regulations, to simplify and reduce redundancies in local and state rules, policies and laws that growers have to follow.

“Seems like why reinvent the wheel,” Segalla said. “Let the state take care of regulation and we can focus on land use and zoning. Let the state regulate it and be done with it.”

Vicky Reinke, a resident of Angels Camp and District 4, said the board needs to take into account impacts on citizens who make Calaveras County their home, “the citizens who voted you in, the crime, the guns, the dogs, the traffic, the water issues, these were real.”

Earlier in the day, Maurer called on multiple department heads — including the sheriff’s office, public works, building and safety, code enforcement, integrated waste, the auditor-controller and treasurer — to summarize how their staff dealt with a previous urgency ordinance, which temporarily legalized commercial cultivation from May 2016 to January 2018, and what each department would need going forward toward regulation again.

Barbara Sullivan, the county treasurer-tax collector, estimated she collected $13.3 million in taxes from registered growers while commercial cannabis was allowed from May 2016 to January 2018.

Marijuana cultivation presents numerous land mines that can cause death to firefighters, Joel Schwartz with Copperopolis Fire Protection District and the Calaveras County Fire Chiefs Association told the Board of Supervisors, with hazards including fertilizers, chemicals, overloaded electrical circuits, entanglement issues, accessibility, explosion conditions, automatic sprinklers, exhaust fumes and flammable liquid extraction systems.
 
"The move represents a 180-degree turn from where the county’s elected leaders were a year and a month ago, when their split 3-2 vote instituted a ban on commercial cannabis activities in Calaveras County."

Yeah, I bet it hurt to give back those license fees and lose that tax money....whatever it takes, I suppose.



Regulating commercial cannabis: Calaveras Board of Supervisors to reconsider ban


Regulating commercial cannabis and deciding what a possible second rendition will look like in Calaveras County is a task coming back to the Board of Supervisors, who directed county staff Tuesday to once again develop a regulatory ordinance.

The move represents a 180-degree turn from where the county’s elected leaders were a year and a month ago, when their split 3-2 vote instituted a ban on commercial cannabis activities in Calaveras County. November’s election results changed the makeup of the Board of Supervisors and the new board is just now beginning to grapple with the most divisive issue in the county’s recent history.

As of 5:30 p.m. Tuesday, the Board of Supervisors and county staff were on recess and planned to come back to keep discussing details until after sundown. As of 5:45 p.m., the board was discussing continuing their work at future study sessions and at possible night meetings.

Four supervisors, Jack Garamendi, District 2, Merita Callaway, District 3, Dennis Mills, District 4, and Ben Stopper, District 5, polled 3-1 on moving forward on a regulatory ordinance late Tuesday afternoon, with Mills opposed. Gary Tofanelli, District 1, was not present for the poll.

Garamendi, Callaway, Mills and Stopper spent time hashing out how large grows could be, what growers will be allowed to apply, and permitting processes with Peter Maurer, the county planning director. They decided to leave questions about distribution for a later discussion.

The decision Tuesday afternoon is another turning point in the Calaveras County cannabis debate, and it came at the end of a public hearing that consumed most of the day in San Andreas. Pro-ban people and pro-regulation people took turns making their points. One man was ejected from the hearing when he referred to unregistered cannabis growers in his neighborhood as “illegals,” “wetbacks,” “Vietnamese,” and “gooks.”

“We suggest you look at the big picture,” Maurer said near the end of the hearing, before Garamendi polled the board. “Do you want to look at regulation, or do you want to stay with the ban?”

Maurer continued asking the board for input on details including personal grows, personal use, and whether they would be allowed indoors or outdoors. They also talked about whether to regulate processing and a possible centralized processing facility for trimming, drying and cutting, not growing.

Earlier, Trevor Wittke, executive director of the Calaveras Cannabis Alliance, dismissed pro-ban arguments that county voters are opposed to regulating cannabis, by pointing out that three pro-ban candidates — for sheriff and two supervisor positions — were defeated in Calaveras County elections in November by candidates who were on the record supporting revisitation to the question of regulating commercial cannabis.

“Ben Stopper won his district, Merita Callaway won her district, Sheriff DiBasilio won his election,” Wittke said. “They all defeated pro-ban candidates. Sixty percent of the county voted to support what you are doing today, considering regulation.”

Ron Huckabee, a resident of Valley Springs, said he and other people were sold a bill of goods on how much revenue commercial cannabis would bring to county coffers. He said it sounded like some supervisors were already decided, because some were words like “when” not “if.” Huckabee said the whole of Calaveras County is a watershed, and he doesn’t want illegal growers putting chemicals into that watershed.

Al Segalla with the the Calaveras County Taxpayers Association told the board the county should consider sticking to state regulations, to simplify and reduce redundancies in local and state rules, policies and laws that growers have to follow.

“Seems like why reinvent the wheel,” Segalla said. “Let the state take care of regulation and we can focus on land use and zoning. Let the state regulate it and be done with it.”

Vicky Reinke, a resident of Angels Camp and District 4, said the board needs to take into account impacts on citizens who make Calaveras County their home, “the citizens who voted you in, the crime, the guns, the dogs, the traffic, the water issues, these were real.”

Earlier in the day, Maurer called on multiple department heads — including the sheriff’s office, public works, building and safety, code enforcement, integrated waste, the auditor-controller and treasurer — to summarize how their staff dealt with a previous urgency ordinance, which temporarily legalized commercial cultivation from May 2016 to January 2018, and what each department would need going forward toward regulation again.

Barbara Sullivan, the county treasurer-tax collector, estimated she collected $13.3 million in taxes from registered growers while commercial cannabis was allowed from May 2016 to January 2018.

Marijuana cultivation presents numerous land mines that can cause death to firefighters, Joel Schwartz with Copperopolis Fire Protection District and the Calaveras County Fire Chiefs Association told the Board of Supervisors, with hazards including fertilizers, chemicals, overloaded electrical circuits, entanglement issues, accessibility, explosion conditions, automatic sprinklers, exhaust fumes and flammable liquid extraction systems.
MEXICO will take over the CANNABIS MARKET!
 
You can't even snark this stuff....I don't think I can be sarcastic enough to hit the target with CA state government's completely and utterly cocked up rec legal rollout. What a joke.


California’s marijuana industry needs an intervention to avoid an ‘extinction event’


Once, the cannabis industry was poised to become a multibillion-dollar industry in California. Now, it could be heading for what its advocates call an “extinction event.”

An estimated 10,000 marijuana growers could lose their licenses in the coming months if California lawmakers fail to pass a bill designed to grant them an extension, according to Sen. Mike McGuire, D-Healdsburg, who has sponsored Senate Bill 67.

“The bottom line is this: This bill is going to protect thousands of cannabis farmers, in particular, who did the right thing and applied for a state license after the passage of Prop. 64 but their temporary license is about to expire,” McGuire said in a hearing on his bill.

Under Proposition 64, California regulatory agencies were authorized to grant cannabis businesses a temporary license, good for 120 days and eligible for a 90-day extension. In the event of unanticipated delays in becoming compliant with the California Environmental Quality Act, a temporary license holder also could apply for a one-year provisional license.

Proposition 64 establishes one ounce of marijuana, or 8 grams of cannabis concentrates, as the legal limit for recreational pot possession for adults over the age of 21. Here are examples of actual amounts of products someone could carry now that

The idea was that time would let growers operate while working toward getting a full annual license.

But in reality, the state has handed out just a handful of provisional and annual licenses. McGuire said that of the more than 6,900 applications sent to the California Department of Food and Agriculture, just four provisional licenses were issued. Just 52 full annual licenses have been issued by all California state agencies, McGuire said.

Already, many of those temporary licenses are beginning to expire. And temporary license holders can no longer apply for an extension – the deadline to do so was Dec. 31, 2018.

That means that thousands of temporary license holders will soon be plunged into the black market unless state law changes.

SB 67 would grant a one-year extension to the deadline, setting it at Dec. 31, 2019.

“This is the worst way to transition a multibillion-dollar agricultural crop, which employs thousands of Californians,” McGuire said. “Without legal licenses, there isn’t a legal, regulated market in California.

California Democrats have several bills to ease the tax burden on the poor, as well as the struggling legal marijuana industry. The bills would cut the sales tax on legal marijuana, tampons and diapers, help renters.

Jackie McGowan, whose firm K Street Consulting represents the cannabis industry in California, said that the failure to pass SB 67, with a clause to make it retroactive, would mean the end of the legal cannabis industry in California.

“We’ve named these ‘extinction events,’” she said. “This bill is a bill that the industry is very anxious to see passed.”

McGowan said she is concerned that the bill might not pass through the Legislature without the support of the regulatory agencies.

State tax board to consider allowing banks to take pot customers. Video by Christopher Cadelago/The Sacramento Bee

By McClatchy
While none of those agencies have weighed in on the bill, several dozen industry groups and other organizations have lent their support to SB 67, according to a bill analysis. No groups have registered their opposition.

Terra Carver, executive director for the Humboldt County Growers Alliance, told lawmakers in a hearing that some growers have already been forced out of business because their temporary license expired before the state got around to issuing a provisional one.

If nothing is done, Carver said, “there will be dire consequences such as imminent market collapse of hundreds of businesses in the region and through the state.”

Lt. Gov. Gavin Newsom's wife, Jennifer Siebel, is concerned about how legal marijuana will affect their children, so Newsom has shown her articles about how new rules would make the drug harder for kids to get their hands on.

By Christopher Cadelago
McGuire’s bill wouldn’t just grant a reprieve to the marijuana industry; SB 67 would require every state licensing agency to provide a monthly report “presented in the aggregate, and by city and county” that lists the number of pending annual applications submitted by temporary and provisional license holders.

It also would require agencies to report the number of temporary license holders who have not submitted an annual license application, the number of temporary licenses that have expired “and any other information that may be relevant to delays in processing annual applications by the licensing authority.”

If nothing is done, more than 1,000 temporary licenses in the state could expire this month alone.

In January 2018, state and local authorities will begin issuing licenses for the sale of legal recreational marijuana. But what do you need to know before you rush to the dispensary? Information courtesy of Ballotpedia.com.

By McClatchy
“This also means the flow of legal cannabis is at risk to retailers, which very well could mean an enhanced reliance on black market cannabis at the retail level,” McGuire said.

The senator called that “the exact issue we want to avoid.”

“In a time where the Golden State is working overtime to bring the cannabis industry out of the black market and into the light of a legal regulatory environment,” he said, “we can’t afford to let good actors who want to comply with state law fall out of our regulated market just because timelines are too short and departments have been unable to process applications in time due to the sheer number of applications.”


Read more here: https://www.sacbee.com/news/politics-government/capitol-alert/article227324114.html#storylink=cpy
 

Expiring licenses, not oversupply, is California’s real ‘crisis,’ industry insiders say


Media coverage of a recent report by a California-based cannabis distribution company has caused rampant confusion and hindered lobbying efforts to accelerate the process for making permanent a wave of temporary grow licenses that will soon expire in the state.

The report that San Francisco-based Vessel Logistics disseminated March 18 claimed overproduction by California cultivators could pose a “systemic risk” to the industry and warned marijuana farmers that wholesale prices could potentially be subject to a dramatic fall.

According to the report, 1,142 acres of state-licensed cannabis cultivation could flood the market with up to 9 million pounds of product, far more than the 1.8 million-2.2 million pounds the wholesale market could allow.

Vessel Logistics’ report was picked up by several media outlets, including The Sacramento Bee, Benzinga, Newsweek and Lost Coast Outpost.


Headlines such as the Bee’s -“California is growing so much marijuana it could crash the market” – raised eyebrows among some in the industry who see the expiration of temporary cultivation licenses as a much larger – and immediate – concern.
“It did some damage to our ability to draw attention to the fact that licenses are expiring,” said Jackie McGowan, a Sacramento-based cannabis consultant.

“That’s the crisis at the moment,” she added. “Not overproduction.”

‘Worst-possible scenarios’

The author of the report, Vessel Logistics President and Founder Daniel D’Acona, said the media “just took all the headlines of the worst-possible scenarios and put it up there.”

In a phone interview with Marijuana Business Daily, D’Acona emphasized he’s not claiming there will be 9 million pounds of production.

“We’re saying that if everyone is going full bore this whole time and everything entered the market legally, that’s what would happen,” D’Acona added. “Right now, we’re not in a period of oversupply.”

His prediction: In late August or early September, when the mixed-light cultivation operations in Northern California release legal product that’s been tagged through the track-and-trace system, the market will become oversaturated.

“Once you register your product in the track-and-trace system, it gets pretty hard to sell it on the black market,” D’Acona said. “Once these guys have to put it into the system, there will be an oversupply very quickly.”

When the report was released, industry consultants and lobbyists were feverishly working in the statehouse to convince lawmakers to push through Senate Bill 67, which would amend a section of the California Business and Professions Code to extend temporary business licenses until the end of 2019. The measure likely would not become law until the end of May.

Without the extension, SB 67 would provide, thousands of these temporary permits could expire before regulators can approve annual or provisional licenses. As of Friday, licenses that accounted for 406 acres of cultivation had already expired, according to McGowan.

However, the need to pass SB67 could be rendered moot if Gov. Gavin Newsom were to issue an executive order extending the lifespan of all temporary marijuana business permits.

Talk of such an action surfaced Friday, McGowan said, though the governor’s office wouldn’t comment.

“We are hearing reports that the administration has met with some industry representatives and legislators about issuing an executive order to bridge the licensing gap and that this announcement will happen very soon,” she wrote in an email to Marijuana Business Daily late Friday.

Oversupply could occur, just later

If all the firms with temporary licenses obtained annual or provisional permits, the state could face a glut of cannabis, but that’s not likely until 2020, McGowan said.

Lauren Fraser, the Sacramento-based executive director of the Cannabis Distribution Association, agreed, saying her members expect a glut in about six months, but she doesn’t “believe there’s an oversupply at this time.”

According to Fraser, a strong demand exists for bulk biomass – trim or underdeveloped flower – to be made into oil, as well as for retail-ready, top-quality flower.

“Certainly not an oversupply when it comes to that,” she added.

Kristin Nevedal, the Garberville-based executive director of the International Cannabis Farmers Association and board member of the California Cannabis Industry Association, said she’s also heard manufacturers are looking high and low for biomass.

“If (we are) getting contacted by companies who want to meet our farmers looking for biomass, there’s probably a lot of that going on,” she added.

Prices don’t suggest surplus

Anecdotally, McGowan provided a range of wholesale prices from retailers in the state who said indoor-grown flower is selling on average for $2,800 a pound, greenhouse-grown for $1,300 a pound and outdoor for roughly $900 a pound.

Fraser said she is seeing top-shelf flower sell for $25-$30 per eighth of an ounce on the wholesale market, with the lowest-quality flower selling for around $10-$15 an eighth. That factors to a range of $1,280-$3,840 per pound.

Josh Drayton, communications and outreach director for the California Cannabis Industry Association, said he recently spoke with a grower who was getting $3,000 a pound wholesale for flower, though he’s heard some growers are fetching as low as $1,800 a pound.

“That’s why this report is hyped up,” he added. “There is fear that we’re going to be dealing with the situation in Oregon and Washington.”

Both states have seen wholesale cannabis prices slide because of overproduction.

Known unknowns

One reason it’s difficult to accurately assess the amount of supply in the legal market is California’s track-and-trace system hasn’t been fully implemented.

The state system, known locally as CCTT, went into effect Jan. 2, but only for businesses with annual licenses, of which there are only about 100, with hundreds more still operating on temporary permits.

“It’s really hard to know how much cannabis is viable in the legal California marketplace,” Nevedal said. “We have not been tracking cannabis at all.”

Morgan Paxhia, co-founder of San Francisco-based Poseidon Asset Management, said he’s aware of several choke points in the supply chain, including lab testing and packaging requirements, which lead him to believe the inventory of legal cannabis is constrained.

“We always say to any operator right now if you can produce and get it on store shelves, that’s not the problem,” Paxhia added. “Once you’re on the shelves, it sells. The problem is to be able to consistently get to the shelves.”
 
Prosecutors move to clear 54,000 marijuana convictions in California

la-1554162821-wa7ovhb5au-snap-image

Los Angeles County Dist. Atty. Jackie Lacey speaks during a news conference to announce a partnership with a tech non-profit regarding marijuana-related convictions. (Katie Falkenberg / Los Angeles Times)

After recreational marijuana was legalized in California, prosecutors in Los Angeles County expected a “tsunami” of petitions from people looking to clear their old criminal records.

But the process turned out to be cumbersome and difficult to navigate, so most people didn’t even try.

“Frankly, very few people took the legal action required to clear their records,” L.A. County Dist. Atty. Jackie Lacey said at a downtown news conference Monday. “And yet, the will of the voters was clear.”

In a move to carry out that will, prosecutors in L.A. and San Joaquin counties announced plans to automatically dismiss or reduce some 54,000 marijuana-related convictions, part of a growing movement to offer a clean slate to Californians hamstrung by their past now that pot is legal.

An estimated 50,000 convictions in L.A. County and 4,000 more in San Joaquin County are eligible. It’s unclear how far back those convictions go, but many involve possessing a small amount of marijuana and could date back decades. Prosecutors and public defenders are still working out how to notify people of the changes to their records.

The effort is part of a partnership with Code for America, a nonprofit tech organization that developed a computer algorithm to quickly analyze county data to determine which cases are eligible to be cleared under Proposition 64.

Prosecutors said decades of drug enforcement disproportionately targeted minorities. Studies have shown that people of color are more likely to be arrested and punished in connection with marijuana offenses, even though whites, blacks and Latinos use and sell marijuana at similar rates. The result, critics say, is a cycle of poverty and incarceration that has kept many minorities from getting jobs, going to school or finding housing.

A 2016 study found that although African Americans make up just 6% of California’s population, they account for almost a quarter of those serving jail time exclusively for marijuana offenses.

“Those past harms were passed from generation to generation,” San Joaquin Dist. Atty. Tori Verber Salazar said. “This allows us to go back and correct those mistakes.”

Salazar said her office slogged through a similar process without using technology to clear eligible convictions under Proposition 47, a 2014 law that reduced some low-level, non-violent offenses from felonies to misdemeanors. It took four years to process 26,000 cases, she said, at a cost of $2.5 million.

Code for America’s algorithm, she said, mined through the data in 12 seconds. She estimated the technology would save the county $1 million in time and resources.

At marijuana dispensaries in Southern California, Monday’s announcement was well-received.

“Now people who will have their convictions cleared can go back to living a normal life,” said Molly Collins, a 29-year-old budtender at Green Goddess Collective in Venice. “This is how we’re seeing L.A. make better changes.”



In February, San Francisco became the first to take on such an initiative, pledging to clear 9,300 convictions dating back decades as part of a sweeping effort to rethink “the war on drugs.”



Talks are underway to expand the program to other California counties, as well as other states where marijuana has been legalized.

Proposition 64 legalized, among other things, the possession and purchase of up to an ounce of marijuana and allowed people to grow up to six plants for personal use.

Under the measure, people convicted of marijuana possession can petition to have those convictions expunged if they don’t pose a risk to public safety. People also can petition to have some crimes reduced from a felony to a misdemeanor, including possession of more than an ounce of marijuana by a person who is 18 or older.

Nearly 60% of voters in Los Angeles County supported the measure.

Lacey, who is up for reelection next year, said in the past that her office would not automatically dismiss or reduce marijuana convictions and that people seeking to clear their records should do so using the courts.

But the Code for America software could prove useful as California continues to pursue criminal justice reforms, she said Monday.

It was uncertain when all the marijuana convictions would be cleared. A measure signed into law by Gov. Jerry Brown last year mandates that the state compile a list of all Californians eligible to have crimes expunged under Proposition 64 by July 1, with the goal of having all past marijuana-related convictions reduced or cleared in the state by 2020.



Code for America has its own goal — to expand the pilot program to more California counties and clear 250,000 convictions by the end of this year. The organization has previously delved into the realm of criminal justice, in 2016 creating Clear My Record, an online application that connects people with lawyers to clear criminal records across California.



“We never intended to punish people for life for crimes that are this minor, or that we no longer view as crimes,” said Jennifer Pahlka, founder and executive director of Code for America.

As the medicinal and recreational use of marijuana has gained wider acceptance across the nation, lawmakers in a number of states have been wrestling with how to remove marijuana convictions from people’s records.

Missouri lawmakers are considering a bill that would expunge convictions for medical marijuana patients, as it is now legal there for medicinal use. In New York, where the governor has proposed legalizing recreational pot use, officials are exploring a means of possibly expunging or sealing conviction records.

Priscilla Vilchis, owner and CEO of a medicinal and recreational marijuana cultivation company in Las Vegas and Lynwood, said the change will create more job opportunities.

“Many people have not been able to apply or even qualify for jobs in this industry,” Vilchis, 32, said. “This helps not only the entrepreneur, but the people who will now be able to apply for these jobs. This is going to put food on their table.”
 
The shit in CA just keeps on rolling out...sigh.


California cities sue state over home deliveries of pot


In the first significant challenge to California’s open cannabis market, 24 cities that restrict pot sales sued Gov. Gavin Newsom’s administration Thursday, arguing that by allowing home deliveries in their city limits, the state is violating 2016’s Proposition 64, which legalized recreational marijuana.

The lawsuit, which was filed in Fresno County Superior Court against the California Bureau of Cannabis Control and its chief, Lori Ajax, comes in response to a regulation adopted by the agency in January that permits state-licensed firms to deliver cannabis in cities that have banned pot shops. Officials from cities with prohibitions on pot sales objected to the rules, voicing concerns that home deliveries of cannabis would lead to robberies of cash-laden vans and an influx of illegal sellers blending in with licensed delivery fleets.

To avoid opposition from city leaders and police chiefs, backers of Proposition 64 offered assurances in 2016 that the measure would preserve local control of pot sales. The lawsuit notes that the measure’s introduction said that it “safeguards local control, allowing local governments to regulate marijuana-related activities…”

The cities behind the suit contend that the bureau lacks legal authority to allow deliveries in conflict with local ordinances because Proposition 64 and a law signed by then-Gov. Jerry Brown guarantee local governments veto power over pot sales in their jurisdictions.

Read the lawsuit 24 cities filed against California over home delivery of cannabis »
“We don’t want deliveries in our city because of the concern over criminal activity,” said Walter Allen III, a city councilman in Covina and retired police officer. “The problem we have is the state has taken it upon itself to bypass Proposition 64 and supersede our local ordinances, and we are really upset about that.”

Plaintiffs including the cities of Covina, Downey, Riverside and Beverly Hills are among the 80% of California’s 482 municipalities that have banned stores selling cannabis for recreational purposes. Other cities that have joined the lawsuit allow retail stores but want to ensure that only businesses they have screened and licensed are able to make home deliveries within their city limits.

Beverly Hills bans cannabis stores, while limiting deliveries to medical marijuana provided to patients. But the state rule means recreational cannabis can also be delivered, said Mayor John Mirisch, who called the state’s interpretation of Proposition 64 a “bait and switch.”

One year of legal pot sales and California doesn’t have the bustling industry it expected. Here’s why »
Riverside Mayor Pro Tem Mike Soubirous said his city should be able to regulate when deliveries are made and who makes the deliveries, but said he believes the state rule has rendered him powerless to make those decisions.

“The council should be able to run interference for the residents and protect their quality of life,” said Soubirous, a former lieutenant commander in the California Highway Patrol.

The lawsuit could jeopardize ongoing state efforts to expand cannabis sales as delivery services compete with retail storefronts in California over a legal market estimated last year to be valued at nearly $1 billion.

Proposition 64 provided for state licensing of marijuana growers and sellers, allowing purchase and possession of up to 28.5 grams of cannabis by adults 21 and older for recreational use. With supporters of legalization arguing home delivery is important to providing safe access to the legalized drug, the state cannabis bureau said its regulation is in keeping with the intent of the ballot measure as long as deliveries are handled by state-licensed firms.

The lawsuit asks the court to rule that the state regulation is invalid “because it is inconsistent with the statutory authority of local jurisdictions to regulate or prohibit the delivery of commercial marijuana to a physical address within their boundaries.” The cities behind the lawsuit said they are not opposed to deliveries in cities where they are welcomed.

In approving home delivery in all cities, Ajax cited a provision of a law approved by the Legislature that says: “A local jurisdiction shall not prevent delivery of cannabis or cannabis products on public roads” by a state licensee.

Police chiefs warn of increased crime if California allows pot deliveries statewide »
The lawsuit, which also includes Santa Cruz County as a plaintiff, argues that provision does not allow deliveries to the doorsteps of private homes, citing a memo from the Legislative Analyst’s Office.

“Driving through a local jurisdiction on a public road, as the Legislative Analyst noted, is not the same as conducting a recreational marijuana transaction in the doorway of someone’s house,” the lawsuit says.

The cities’ legal challenge notes that the official voter information guide for Proposition 64 said the initiative would create a governing system that allows local governments to regulate marijuana-related activities. A 2016 report on the initiative by the Legislative Analyst’s Office also told voters that the ballot measure allowed cities and counties to completely ban pot businesses.

“The promise to the voters and to the cities and counties who went neutral on Prop. 64 was that they would be able to decide what types of commercial cannabis would be available within their community,” said Douglas L. White, an attorney for the cities. “And we now have a state agency effectively undermining and breaking that promise that was made.”

The lawsuit is supported by the League of California Cities, which said in a statement that the home-delivery rule “undermines the voters’ intent.”

California is awash in cannabis cash. Some is being used to bribe public officials »
A representative for Ajax said the bureau chief declined to comment.

Khurshid Khoja, vice chairman of the National Cannabis Industry Assn., said the cities are “overreaching” with a lawsuit.

“They’re trying to redefine the constitutional rights of individual adult consumers to engage in activity that is customary, traditional and incidental to being in a residential zone,” said Khoja, a Sacramento attorney who represents licensed cannabis retailers. “They are couching this power grab as a reasonable restriction on commercial businesses, but they can’t ban all deliveries without affecting individual rights now guaranteed under Prop. 64.”

Those that stand to benefit from the state rules allowing home deliveries include 311 state-licensed delivery firms, as well as companies such as Weedmaps, which help consumers find and evaluate delivery businesses.

Eaze, an online platform that arranges deliveries, has a database of 450,000 cannabis consumers. Licensed retail firms working with Eaze have made deliveries to just under half of all cities in California since Jan. 1, 2018, said Elizabeth Ashford, a spokeswoman for the company.

“There's a clear appetite for legal cannabis in jurisdictions that won't zone businesses,” Ashford said. “But make no mistake, without access to legal delivery in these places, these consumers will turn to the illegal market.”

There are still more storefront sellers in California — 915 have been licensed so far — than firms that hold delivery licenses.

Assemblyman Ken Cooley (R-Rancho Cordova) has introduced legislation that would clarify that cities have veto power over home deliveries.

“[The home delivery rule] is contrary to the language of Proposition 64. It’s a unilateral act in violation of law,” said Cooley, a former mayor of the city of Rancho Cordova near Sacramento.

City officials, he said “are the ones who are most attuned to what will add to the community’s quality of life.”

Downey Mayor Rick Rodriguez said residents in his city are concerned that pot businesses will be a magnet for crime.

“We don’t want marijuana in our city. Our residents are clear about that,” he said. “This skirts that original agreement in Prop. 64. We feel lied to. It’s a broken promise.
 
Got to love this....from drug cold warrior politicians moving to BoD of cannabis companies to a story like this....what immediately comes to mind is that "the money changers in Solomon's Temple. sigh

Would this California town have become so pro-cannabis if not for a councilwoman's pot industry ties?

Few local politicians have championed marijuana as loudly as Aide Castro.

She says the drug was crucial to treating a thyroid condition. And as a Lynwood city councilwoman, she was the driving force behind the city’s decision more than two years ago to become one of the first in Los Angeles County to embrace the newly legalized industry.

But while she was helping approve the city’s cannabis regulations, Castro was also quietly making money from the industry, a Times investigation found.

Castro didn’t report any of her dealings in the marijuana business on state-required financial forms until earlier this year, when she disclosed that she is a partner in two marijuana cultivation ventures. She reported that her ownership stakes are worth millions of dollars. Both the businesses are located outside the city, but one of her partners is embroiled in a legal dispute in part over ownership of a marijuana manufacturing license in Lynwood.

In February, Castro announced the formation of Candor Collections, a marijuana partnership that markets cannabis to women.

In recent years, she has also run her own consulting firm that does work for cannabis businesses, including Weedmaps, one of the nation’s most popular pot advertising platforms. She has never listed Weedmaps or any other clients on her state financial reports.

State law requires elected officials to report the identities of clients who pay their companies at least $10,000 in a year for consulting work if those clients were doing business — or were planning to do business — within the official’s jurisdiction.


In an interview, Castro told The Times none of her consulting clients met the $10,000 annual reporting threshold. But a Weedmaps spokesman later said the firm paid Castro $93,666 in 2017 — just as she and the council were changing local regulations to allow marijuana delivery by businesses in the city, as well as crafting and passing licensing agreements with local growers. Two delivery services in Lynwood now advertise on Weedmaps.

In a follow-up email, Castro said she first learned of the requirement to disclose consulting clients during her interview with The Times, and that she would amend her disclosure forms to include them.

Shortly before she disclosed her ownership in the two manufacturing businesses, Castro began recusing herself during votes on the marijuana regulation. Still, after one vote in January, Castro approached the city’s mayor and a councilwoman and criticized how they voted.

Castro acknowledged the incident and said she has the right to express herself on marijuana issues in the city, even if she doesn’t vote.

“Just because I have to recuse myself from making decisions doesn’t mean I can’t point out bad policy,” Castro said.

In her interview with The Times, she said she stopped voting out of an abundance of caution and has done her best to follow the law. She declined to name her consulting clients, but she said they don’t have marijuana businesses in Lynwood.

“I am trying my best to be transparent,” Castro said. “If I’m doing what’s required by law, to me I’m doing the right thing.”

Bob Stern, co-author of the state’s anti-corruption law known as the Political Reform Act, said he would need to know more details about Castro’s clients and how much they paid her to determine whether she is violating or complying with state law. But, he said, continuing to advocate for pot interests on the city council while performing paid consulting work for Weedmaps would be “clearly unethical” and he believes Castro should choose either the marijuana business or serving as an elected official.

“If it’s not against the law, we should change the law,” he said.

Cultivating ties with elected officials in cities like Lynwood has become crucial to cannabis interests ever since California voters approved the sale and possession of recreational marijuana in November 2016.

Around 80% of the state’s cities have refused to allow pot businesses to operate in their towns in part over worries that the industry has a shady reputation, spurs crime and, in some cases, has resulted in bribery charges against local officials.

After the newspaper asked other Lynwood council members about Castro’s financial ties to the industry, several expressed shock, saying her business dealings present “a red flag” about her reasons for promoting cannabis. They said her income from the marijuana industry now taints the last two years city leaders spent passing pro-pot legislation.

“It’s a big conflict of interest,” said Councilman Salvador Alatorre, an opponent of allowing marijuana businesses in the city.

“Had she not had alternative interests in the industry … the process would have been cleaner,” said Councilwoman Marisela Santana, who supports allowing local marijuana businesses.

Castro was first elected in 2007 to the city council, a position with a $975 monthly salary. In the past she has worked in real estate, and in 2002 she opened a beauty salon.

In promoting marijuana, Castro draws on her personal experience with the drug. She said it helped her deal with the symptoms of having a growth on her thyroid gland and the surgery to remove it in 2016. She makes tea from marijuana — it keeps her migraines at bay and helps her sleep, she says — and uses a numbing cream derived from the plant.

“The cannabis industry is something I have a passion for,” she said.

Her history with the marijuana business dates further back. In 2001, she was charged with transporting 28 kilograms of marijuana, according to court records attached to her companies’ applications for commercial cannabis licenses in Los Angeles. She pleaded guilty to a misdemeanor and was sentenced to supervised probation for one year.

She declined to speak at length about the conviction, but said she was a passenger in a car that had the marijuana.

Prosecutors alleged in court records that she told a federal agent at the time of her arrest that she was offered $2,000 to smuggle the marijuana across the border from Mexico. A border inspection of the vehicle discovered the marijuana hidden inside the back seats, according to the records.

That conviction could help qualify her businesses for the city of Los Angeles’ social equity program, which grants priority marijuana commercial licensing to people with marijuana-related convictions.

She said her eligibility for the program is also why, in addition to her expertise in government, her business partners last year gave her shares of the companies. On her state disclosure forms, she reported that her separate stakes in Relative Phenomena LLC and Modern Determinism LLC are each worth more than $1 million. She told The Times she contributed no money in the companies.

In 2018, state law prohibited public officials from accepting gifts worth more than $470 from any single source. That limit has since been increased to $500.

One of Castro’s four business partners, Winston Park, signed a declaration as part of Relative Phenomena’s license application saying that he too has a marijuana-related conviction that makes him eligible for the social equity program. Park said he was arrested by the CHP in March 2014 and sentenced to 32 months in prison.

A Times review of court records shows that Park was also convicted in that case of evading police and has an extensive criminal record that includes felony convictions for distributing cocaine, possession of heroin while in prison, robbery and burglary.

While the two manufacturing businesses are located in Los Angeles, another partner in Relative Phenomena, Scott Kawasaki, has financial interests in Lynwood.

Kawasaki owns Los Angeles Kush, an L.A.-based dispensary and a brand of marijuana. He is embroiled in a lawsuit with a former business partner, and part of the court battle is over ownership rights to a pot manufacturing license in Lynwood.

Castro has not voted on issues involving that license since disclosing her partnership with Kawasaki on state forms earlier this year.

Castro said she regretted one council action — a proposal she made in November to negotiate a multimillion-dollar contract with Express Transportation Services, LLC. The proposal died on a split council vote.

Express Transportation Services employs Castro’s father-in-law as a shuttle driver and lists one of her marijuana consulting clients, Claudia Hernandez, as its director of administration and government affairs.

Castro said she didn’t know that Hernandez, who owns a Huntington Park marijuana dispensary, worked for Express. She provided consulting services for free because Hernandez is a friend, she said.

“I go above and beyond for all my friends,” Castro said. “That’s my reputation. It precedes me.”

A Weedmaps spokesman said the firm paid Castro as a contract employee from March to December 2017 to help with panels and workshops for local officials on marijuana policy reform. She also identified lawmakers “working to organize their own local cannabis policy” but never lobbied lawmakers on the firm’s behalf, Carl Fillichio said.

He said Weedmaps hired Castro when she approached the company “after she finalized her cannabis efforts” in Lynwood and “wanted to aid colleagues in nearby jurisdictions build effective policies.”

City records show that Castro was continuing to vote on changes to the local marijuana regulations and licensing agreements with operators while working for Weedmaps.

Castro also formed a partnership with Aaron Herzberg, who runs a marijuana consulting business that helps sell or lease properties devoted to manufacturing cannabis and helps clients obtain licenses. The Puzzle Group’s website says it was involved in several property deals for marijuana businesses in Lynwood and helped secure a manufacturing license for one.

Around the same time as those deals, Castro voted to approve development agreements and licenses for at least three businesses operating at those properties, according to city council records.

Castro said her consulting partnership with the Puzzle Group, which was announced in November, 2017, ended shortly after it began. She insisted she was never paid by Herzberg or his firm.

Herzberg did not return phone calls for comment.
 
What a farkin mess....sigh

‘Getting Worse, Not Better’: Illegal Pot Market Booming in California Despite Legalization

COSTA MESA, Calif. — In the forests of Northern California, raids by law enforcement officials continue to uncover illicit marijuana farms. In Southern California, hundreds of illegal delivery services and pot dispensaries, some of them registered as churches, serve a steady stream of customers. And in Mendocino County, north of San Francisco, the sheriff’s office recently raided an illegal cannabis production facility that was processing 500 pounds of marijuana a day.

It’s been a little more than a year since California legalized marijuana — the largest such experiment in the United States — but law enforcement officials say the unlicensed, illegal market is still thriving and in some areas has even expanded.

“There’s a lot of money to be made in the black market,” said Thomas D. Allman, the sheriff of Mendocino County, whose deputies seized cannabis oil worth more than $5 million in early April.

Legalization, Sheriff Allman said, “certainly didn’t put cops out of work.”

California’s governor, Gavin Newsom, has declared that illegal grows in Northern California “are getting worse, not better” and two months ago redeployed a contingent of National Guard troops stationed on the border with Mexico to go after illegal cannabis farms instead.

Stepped-up enforcement comes with a certain measure of irony — legalization was meant to open a new chapter for the state, free from the legacy of heavy policing and incarceration for minor infractions. Instead, there are new calls for a crackdown on illegal selling.

Conscious of the consequences that the war on drugs had on black and Latino communities, cities like Los Angeles today say they are wary of using criminal enforcement measures to police the illegal market and are unsure how to navigate this uncharted era.

The struggles of the licensed pot market in California are distinct from the experience of other states that have legalized cannabis in recent years. Sales in Colorado, Oregon and Washington grew well above 50 percent for each of the first three years of legalization, although Oregon now also has a large glut of pot.

But no other state has an illegal market on the scale of California’s, and those illicit sales are cannibalizing the revenue of licensed businesses and in some cases, experts say, forcing them out of business.

Entrepreneurs in the industry, which spent decades evading the law, are now turning to the law to demand the prosecution of unlicensed pot businesses.

“We are the taxpayers — no one else should be operating,” said Robert Taft Jr., whose licensed cannabis business in Orange County, south of Los Angeles, has seen sales drop in recent months.

It’s been a little more than a year since California legalized marijuana, but the illegal market is still thriving and in some areas has even expanded.CreditJenna Schoenefeld for The New York Times

It’s been a little more than a year since California legalized marijuana, but the illegal market is still thriving and in some areas has even expanded.CreditJenna Schoenefeld for The New York Times
“This is starting to get ridiculous,” he said of the illegal pot shops, including nearby businesses that list themselves as churches and advertise marijuana as a kind of sacrament. “It’s almost like the state is setting itself up to lose.”

California gives cities wide latitude to regulate cannabis, resulting in a confusing patchwork of regulation. Los Angeles, San Francisco, San Jose and San Diego have laws allowing cannabis businesses, but most smaller cities and towns in the state do not — 80 percent of California’s nearly 500 municipalities do not allow retail marijuana businesses. The ballot measure legalizing recreational marijuana passed in 2016 with 57 percent approval, but that relatively broad support has not translated to the local level. Cities like Compton or Laguna Beach decisively rejected allowing pot shops.

Regulators cite this tepid embrace by California municipalities as one of many reasons for the state’s persistent and pervasive illegal market. Only 620 cannabis shops have been licensed in California so far. Colorado, with a population one-sixth the size of California, has 562 licensed recreational marijuana stores.

But the more fundamental reason for the strength of the black market in California — and what sets the state apart from others — is the huge surplus of pot. Since medical marijuana was made legal in California more than two decades ago, the cannabis industry flourished with minimal oversight. Now many cannabis businesses are reluctant to go through the cumbersome and costly process to obtain the licenses that became mandatory last year.

Of the roughly 14 million pounds of marijuana grown in California annually, only a fraction — less than 20 percent according to state estimates and a private research firm — is consumed in California. The rest seeps out across the country illicitly, through the mail, express delivery services, private vehicles and small aircraft that ply trafficking routes that have existed for decades.
 
Ah...government at work. sigh

Where’s the pot? California tracking system unlikely to know

LOS ANGELES (AP) — When California voters broadly legalized marijuana, they were promised that a vast computer platform would closely monitor products moving through the new market. But 16 months after sales kicked in, the system known as track-and-trace isn’t doing much of either.

As of last month, just nine retail outlets were entering data into the network established under an estimated $60 million state contract, even though 627 shops are licensed to sell pot in California.

The rate of participation is similarly slim for other sectors in the emerging industry.

Only 93 of more than 1,000 licensed manufacturing companies producing extracts, oils and other products were documenting their activities in the network in April. And of the nearly 4,000 licensed growers, only about 7 percent, or 254, are using the high-tech system, according to a review of state data.

How are state officials watching over the nation’s largest legal pot market ? For now, it’s essentially a paper trail.

Most California companies are required to document their business on paper sales invoices and shipping manifests. But experts say that can be a doorway for criminal traffic.

With paper records, regulators are relying on an honor system, said Patrick Vo, CEO of BioTrackTHC, which provides seed-to-sale cannabis tracking in eight states, including New York and Illinois.

Without a digital crumb trail in place, “there are so many areas where things can go wrong,” Vo said. “Things can be intentionally altered.”

Track-and-trace sometimes is referred to as seed-to-sale to reflect the goal of tracking marijuana plants every step, from the time they are planted until products are purchased by consumers. The goal is to keep illegal cannabis from store shelves while making sure legally produced products don’t drift into the underground market.


Marijuana clone plants are displayed for sale at the cannabis-themed Kushstock Festival on Oct. 20 in Adelanto, Calif. (AP Photo/Richard Vogel, File)

According to state law, the tracking system is required to provide “data points for the different stages of commercial activity, including, but not limited to, cultivation, harvest, processing, distribution, inventory and sale.” It’s also intended to help the state keep track of taxes.

But for now, California’s electronic monitoring system is seeing just fragments of the legal market — not the rigorous seed-to-sale oversight envisioned when voters approved Proposition 64, the law that opened the way for broad legal sales. A spokesman for the state Bureau of Cannabis Control said he was unaware of any enforcement cases triggered by fraudulent or altered paper records; it wasn’t immediately clear how often regulators review those records that document tens of thousands of industry transactions.

According to the state, the California tracking network created by Florida-based Franwell Inc. has been functional since Jan. 2, 2018, the day after broad legal sales began.

So why are so few licensees using it? In short, time and bureaucracy.

It goes back to state regulators’ decision to first issue only temporary cannabis licenses, as California faced a tight legal deadline to begin sales on Jan. 1, 2018.

It wasn’t possible to train thousands of temporary license holders to use the tracking system “without causing significant disruption” to the new, regulated marijuana market, said Rebecca Foree, spokeswoman for the state Department of Food and Agriculture.

Instead, the state decided only annual license-holders would use the track-and-trace system. But the first annual license wasn’t issued until November 2018, and only a relatively small number have been issued since.

Meanwhile, scores of temporary licenses have expired, leaving companies in a kind of legal limbo, technically unable to do business in the state market.

Even when the tracking system comes into widespread use, it will provide only a partial look into statewide growing and sales since California’s illegal pot industry continues to thrive.

Other states also have had problems instituting their seed-to-sale systems.

New tracking software in Washington state was delayed in 2017 after regulators switched vendors. Last year, a Franwell-designed system temporarily bogged down in Maryland, in some cases preventing sales, after a new feature was added. Pennsylvania’s software has caused problems for cultivators trying to record shipments.

Green Bits, which provides business software for pot shops that can sync with state tracking systems, has over 100 clients in California. So far, only one is using the state tracking system, though two others are expected to start soon.

Charlie Wilson, the company’s chief revenue officer, said the slow rollout could be attributed in part to the daunting size of the job.

With the coming of legal sales in 2018, California began attempting to transform its longstanding illegal and medicinal marijuana markets into a unified, multibillion-dollar industry. Several agencies are involved in licensing and regulation.

For an industry that operated for decades with scant regulation, it’s a big transition.

“It’s not just tracking an edible brownie — but the specific plant that went into the creation of that brownie,” Wilson said.

Even for the relatively small number of California companies that are using the tracking system, it provides less than blanket coverage. Take the case of Moxie, which holds an annual license for manufacturing.

When the marijuana-extract company produces a fresh batch at its plant just outside Los Angeles, vice president Josh Haddox opens his laptop and types details about the product into the track-and-trace database.

Once it’s in the platform, regulators can eyeball the same information.

But when the time comes to send a sample of extract to a testing company to check for purity and potency, it drops out of the state computer system. That’s because Moxie, a brand of parent Pure CA, holds only a temporary license for its distribution arm and so doesn’t have access to the system.

Haddox likes the system and is eager to see it in wide use. But with the piecemeal practices now in place, the state “has no way to tell how many products (a company) made or where it’s going,” he said.

With the explosion of cannabis sales, seed-to-sale tracking has emerged as a fiercely competitive business, with rival companies battling over lucrative government contracts.

In 2015, lawyers for Franwell, which has a two-year contract with California, said BioTrackTHC was using misleading publicity material and other tactics to undercut its business, charges denied by the rival company. BioTrackTHC in April filed a protest to void Missouri regulators’ decision to award a medical cannabis licensing and seed-to-sale tracking contract to Franwell.

“Track-and-trace was definitely supposed to be one of those tools to define who is operating in the legal market and who is not,” said Josh Drayton of the California Cannabis Industry Association. “We clearly are not getting the results we were hoping for.”
 
“Although federally it’s still illegal and they would be in violation of federal laws, we as airport police cannot enforce federal laws,” Pedregon said. “As long as it’s a usable, personal quantity under an ounce, they’re free to go.”


Weed smuggling arrests at LAX have surged 166% since marijuana legalization

Michael Vechell had already drawn the attention of an airline worker and two passengers at Los Angeles International Airport by the time he was confronted by police.

Waiting to board his Philadelphia-bound flight with his dog Odie, Vechell had sparked concern when he sidled up to another passenger and asked if she wanted to join his “drug smuggling ring,” authorities say.

Although Vechell told LAX police it was just a misunderstanding, officers demanded to see his checked baggage. Inside, they found nearly 70 pounds of vacuum-sealed marijuana bundled into packages labeled “T-shirts,” “cold weather” and “sexy pants.”

More than a year after California legalized the recreational use of cannabis, trafficking arrests like Vechell’s have surged 166% at LAX, according to arrest records obtained by the Los Angeles Times.

Emboldened by legalization and facing only light punishment if captured, more and more smugglers are taking to the friendly skies in an effort to escape California’s glutted cannabis market, according to authorities, marijuana industry experts and a lawyer who represents accused smugglers. As a result, the world’s fourth-busiest airport is now an expanding hub in the illegal export of marijuana, they say.

“This is normal procedure for these guys, and I would say 29 out of 30 times they make it through without a problem,” said Bill Kroger Jr., a 20-year criminal defense lawyer who specializes in marijuana cases and who represented Vechell.

Authorities at LAX say they are encountering more and more airline passengers who are carrying small amounts of pot for personal use, but the number of checked bags stuffed entirely full of marijuana has soared as well. Police in Oakland and Sacramento say they are seeing the same thing.

“We intercept large quantities of marijuana regularly,” said Sgt. Ray Kelly of the Alameda County Sheriff’s Office, which has jurisdiction over Oakland International Airport. “We find it in about 50-pound quantities … the carry-on rate for luggage. I would imagine we’re only intercepting some of it, not all of it.”

The sudden increase in airport smuggling is largely the result of legalization and a saturated market. California grows far more marijuana than its residents consume — up to five times more by some accounts — and cannabis users in other states will pay a much higher price.

“Since pot’s been legalized in California, there’s no money to be made because everyone got involved in it,” Kroger said. “They’ve got these big 50,000-square-foot [grow] houses, and they’re flooding the market. The money is outside of California.”

In 2018 — the state’s first year of legalized recreational pot use — LAX police made 101 trafficking arrests, compared with 38 trafficking arrests in 2017 and 20 in 2016, according to Los Angeles Airport Police records.

“I think we anticipated it,” said Los Angeles World Airports police spokesman Rob Pedregon. “If you just look at the sheer numbers for us — 87 million passengers a year … I wouldn’t be surprised if in a couple months we do what the other airports do in a year.”

Although the medical and recreational use of cannabis is legal in California, it remains illegal in the eyes of the federal government, which considers it a Schedule 1 drug on par with heroin, LSD and ecstasy.

Hoping to avoid a confrontation with the U.S. Drug Enforcement Administration, the California Bureau of Cannabis Control has prohibited the export of marijuana to other states.

Experts, however, say prohibition will do little to stop California from illegally exporting the bulk of its marijuana crop.

In a 2017 paper on the economic effects of marijuana’s legalization, researchers for the University of California Agricultural Issues Center estimate that up to 80% of the pot grown in California is shipped out of state — never to be taxed or regulated here.

“Projections from all sources indicate that illegal cannabis will remain significant,” the study said, “given that it is a market with long-established producers and consumers.”

As a result of this ongoing black market — and other factors — the state has been disappointed by the amount of tax revenue that legal pot generates.

The bulk of illegally exported pot leaves the state by car or truck. In 2018, the California Highway Patrol seized more than 8 tons of marijuana in 63 incidents. The year before that, officers seized just over 2 tons in 76 stops. “The incidents are fewer,” said CHP Capt. Jason Daughrity, “but the weight is heavier.”

Nevertheless, the number of traffickers using commercial airlines appears to be growing. Popular flight destinations include Chicago, Atlanta, Indianapolis and Dallas, according to LAX arrest records.

Kroger said the consequences for getting stopped at a California airport with two checked bags of marijuana were relatively minor: a misdemeanor charge for someone without a history of drug or violent offenses.

In the eyes of the federal government, the surge in smuggling is a clear case of “I told you so.”

“I don’t think we’re surprised by the numbers. These are things we foresaw and we’ve warned folks about,” said Kyle Mori of the DEA’s Los Angeles office. “When states legalize it, you give folks a false sense of security that they can come through TSA checkpoints…. They believe what they’re doing is legal.”

Last year at LAX, there were 503 reports of marijuana discovered in bags, and only one-fifth of them involved trafficking suspects. In comparison, there were 400 reports of marijuana in 2017 and 282 reports in 2016.

Much of the marijuana discovered is a result of passengers being confused over state and federal jurisdictions, and where those lines are drawn. In fact, people are allowed to possess up to 28.5 grams of marijuana or 8 grams of concentrated marijuana at LAX, according to the airport’s website.

“Although federally it’s still illegal and they would be in violation of federal laws, we as airport police cannot enforce federal laws,” Pedregon said. “As long as it’s a usable, personal quantity under an ounce, they’re free to go.”

Hundreds of passengers now regularly pack personal amounts of marijuana, cannabis oil or edibles in their carry-on or checked baggage assuming it’s legal to fly with, forgetting that the federal government has dominion over the skies.

From Nov. 16 to Nov. 26 — when an estimated 2.52 million holiday season passengers usually pass through LAX — Transportation Security Administration agents called police 27 times after discovering marijuana in carry-on or checked luggage, though only six arrests were made.

Among those stopped was a UCLA student-athlete on scholarship who was carrying 34 grams of marijuana — nearly 6 grams more than the state permits one person to carry — and a pipe in her purse. The woman “spontaneously said that the marijuana was hers and she was sorry for having it.” Officers let her off with a warning, and she continued on her flight without the marijuana.

Traffickers, however, will put more effort into concealing large amounts of cannabis and its derivatives, either by wrapping the contraband in things like wax paper, tinfoil or gift wrapping or disguising their products as candy or other foods.

Such was the case Nov. 14 when TSA employees scanning checked luggage opened five suitcases that had failed to produce a scanned image on their monitors.

The luggage belonged to two men on a Newark-bound flight and contained more than 100 pounds of cannabis products, according to arrest reports.

In December, police arrested a man carrying 3 pounds of edibles and cannabis oil in his luggage. The suspect said he was struck by how low the prices were at the Inglewood dispensary he was visiting compared with prices he found at home in Hagerstown, Md.

In numerous arrest reports reviewed by the Los Angeles Times, trafficking suspects told police they flew to California to purchase better and cheaper cannabis products to sell for a profit back home.

When some states legalize marijuana but others do not, suppliers will move in to fill that void even if it’s through black market channels, said California Cannabis Industry Assn. spokesman Josh Drayton. A pound of marijuana flower that costs $600 to $800 in California can be resold for $4,000 in the Midwest, he said.

Despite the increase in commercial aviation trafficking incidents, marijuana remains a low enforcement priority, police say. The DEA’s stance is that the drug has no medical benefit and that legalizing it increases DUI-related arrests, crashes and helps fund Mexican cartels. But beyond that, their immediate focus is elsewhere.

“Heroin trafficking,” Mori said, “and the diversion of chemicals and pharmaceuticals into the hands of gang members and violent criminals — those are certainly our priority.”
 
I'm not sure that they could have fucked this up more if they tried.....sigh. With these tax rates, there will always be a thriving black market....IMO. haha

California's Marijuana Industry Is a Mess, New Data Shows

up to $75 billion a year globally by 2030." data-reactid="11">On the surface, the marijuana industry looks like the greatest thing since sliced bread to hit Wall Street. We're talking about an industry that's been collecting tens of billions of dollars under the table for decades and is now stepping into the light of legality. After generating $12.2 billion in worldwide revenue in 2018, some Wall Street investment firms foresee legal weed sales hitting up to $75 billion a year globally by 2030.

Last year, we witnessed a number of firsts for the green rush. Canada lifted the veil on nine decades of adult-use prohibition by becoming the first industrialized country to legalize recreational marijuana. We also saw a handful of U.S. states wave the green flag on medical cannabis, and California, the fifth-largest economy in the world by gross domestic product, open its doors to adult-use consumers.

Superficially, everything should be going well for the marijuana industry. Unfortunately, that's not the case. Supply-side issues have constrained sales in Canada, while California's marijuana industry is an absolute mess, according to new data from the state.

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View photos
A green highway sign that reads Welcome to California, with a large white cannabis leaf shape in the upper-right corner of the sign.
Image source: Getty Images.

California's pot industry is a disaster in the early going " data-reactid="35">California's pot industry is a disaster in the early going
already reduced expectations for cannabis tax revenue on numerous occasions." data-reactid="36">Last week, the office of Gov. Gavin Newsom (D-Calif.) released state budget documents showing that his administration has cut cannabis tax revenue projections by a whopping $223 million through 2020. Mind you, California has already reduced expectations for cannabis tax revenue on numerous occasions.

USA Today, call for $288 million in excise tax revenue from cannabis in fiscal 2019, and $359 million in fiscal 2020. Just for some context, estimates in 2016 following the passage of Prop 64 were calling for more than $1 billion in annual excise tax revenue not long after the full ramp-up of the industry. Thus, California's marijuana industry isn't even living up to a third of its long-term potential, according to these new state projections.

How could such a blatant miscalculation by state regulators be possible? Three reasons.

First, regulatory red tape is making life in the Golden State difficult if you're a cannabis business. The state has been slow to review and approve retail and distribution licenses. There's been little issue getting supply in place, but growers have struggled to get what they have grown into dispensaries in California.

aggressively low tax rates to reduce its stranglehold on California's cannabis market." data-reactid="66">And thirdly, blame the black market. Illicit growers don't have to wait for sales permits or cultivation licenses, won't pay an excise tax, and won't have to cover state income taxes on their under-the-table profits. The cannabis black market has been around for a long time, and it's going to take aggressively low tax rates to reduce its stranglehold on California's cannabis market.

California's woes could hit these marijuana stocks the hardest" data-reactid="67">California's woes could hit these marijuana stocks the hardest
In terms of sheer sales potential, California is still the cannabis king. But given the amount of premium already priced into the industry by Wall Street and investors, these early-stage hiccups could be bad news for pot stocks with a clear focus on the California market.

Origin House (NASDAQOTH: ORHOF), which is in the process of being acquired by vertically integrated multistate cannabis company Cresco Labs in an all-stock deal valued at $823 million (when announced), would be one candidate to take it on the chin. Origin House has been actively acquiring companies with cannabis distribution licenses in California and is angling to become a niche middleman. However, with the black market remaining more dominant than expected, the amount of legal weed working its way from licensed producers to dispensary stores should be lower than forecast. That's potentially bad news for Origin House's bottom line, and Cresco Labs, which is paying a king's ransom to acquire Origin House.

MedMen Enterprises (NASDAQOTH: MMNFF). Even though MedMen is best known for its California dispensaries generating sales per square foot that are on par with Apple stores, the company's preliminary third-quarter sales hint at a sizable slowdown. MedMen notes that organic sequential sales growth for its 10 Southern California locations (open during the fiscal third quarter) was a meager 5%. That's not great news for a multistate dispensary operator that's been losing money hand over fist." data-reactid="91">Another possible loser is upscale cannabis dispensary operator MedMen Enterprises (NASDAQOTH: MMNFF). Even though MedMen is best known for its California dispensaries generating sales per square foot that are on par with Apple stores, the company's preliminary third-quarter sales hint at a sizable slowdown. MedMen notes that organic sequential sales growth for its 10 Southern California locations (open during the fiscal third quarter) was a meager 5%. That's not great news for a multistate dispensary operator that's been losing money hand over fist.

Long story short, California is going to have to get serious about adjusting its tax policy if it has any chance of uprooting the state's mammoth black market. Until we see serious tax policy changes, California could be more trouble than it's worth to investors.
 

How Legalization Changed Humboldt County Marijuana

In an isolated Northern California community, the last remnants of the counterculture are confronting the future of cannabis.

For more than forty years, the epicenter of cannabis farming in the United States was a region of northwestern California called the Emerald Triangle, at the intersection of Humboldt, Mendocino, and Trinity Counties. Of these, Humboldt County is the most famous. It was here, in hills surrounding a small town called Garberville, that hippies landed in the nineteen-sixties, after fleeing the squalor of Berkeley and Haight-Ashbury. They arrived in the aftermath of a timber bust, and clear-cut land was selling for as little as a few hundred dollars an acre. In their pursuit of self-sufficiency, the young idealists homesteaded, gardened naked, and planted seeds from the Mexican cannabis they had grown to love. They learned the practice known as sinsemilla, in which female cannabis plants are isolated from the pollen of their male counterparts, which causes the females to produce high levels of THC. The cultivators smuggled in strains of Cannabis indica from South Asia and bred hybrids with sativas from Mexico. They learned to use light deprivation to encourage premature flowering, and they practiced selective breeding to isolate for the most desirable potency, scent, and appearance.

In the years that followed, the back-to-the-land movement, which began as a protest of American materialism, was increasingly subsidized, in Humboldt, by profits from cannabis. In the nineteen-eighties, as the war on drugs escalated, the growers responded by developing techniques to cultivate cannabis indoors or beneath trees. Their children, many of whom grew up poor, were less inclined to pursue “voluntary simplicity” for idealistic reasons. The cannabis industry represented the best living they could make in the place where they grew up, and a fairly lucrative one, especially after California legalized marijuana for medical use, in 1996. For those from the older generation who had believed that “dropping out” required serious economic sacrifice, the crop was the original sin of Humboldt’s Eden. Jentri Anders, the author of “Beyond Counterculture,” an anthropological study of the back-to-the-landers of southern Humboldt County, wrote, in 2012, “I believe I realized much earlier than most that, if there was indeed a shared vision, it was in grave danger of being swamped, distorted and subsumed by the advent of the growing industry.” She continued, “I feared early on that the entire geographical area, mainstream and hippie alike, would come to be defined by the outside world through the lens of the marijuana industry, and that is exactly what happened.”

In 2016, operating under California’s medical-marijuana laws, Humboldt County officials began to try to license their half-hidden industry for the first time. Farmers who had been hiding from law enforcement for years were asked to present themselves to authorities and to comply with new commercial-growing ordinances. Statewide legalization of recreational marijuana for adult use followed two years later. Before legalization, people grew cannabis however they could and developed methods to avoid getting caught by law enforcement. Regulation demands a different set of skills. Instead of burning records, farmers must now practice accounting. Instead of loading their crop into duffel bags and sending it out of state, they have to learn branding and marketing. Legalization brings with it the costs of taxes, permitting, compliance, and new competitors. It has also occasioned a rapid drop in price. Now Humboldt County is experiencing not only an economic crisis but also an existential one. What happens to a group of people whose anti-government ethos was sustained by an illegal plant that is now the most regulated crop in California? Forced into the open, and facing the very real possibility of economic extinction, the farmers of Humboldt are now trying to convince regulators and buyers that these outlaws who had profited off prohibition were not greedy criminals but people who stood for something: stewardship of the land, the biodiversity of a crop, resistance to corporate consolidation, and a spiritual connection to a psychoactive plant.

Garberville, the supply hub of southern Humboldt County, is perched on the south fork of the Eel River. The town’s main street, Redwood Drive, can be walked in five minutes. Garberville has the rough edges of a gold-rush town, but with peace flags and hemp lattes. It’s a place where men in Carhartt jackets and hunting camo drink ginger Yogi tea and park muddied Dodge Rams outside the Woodrose Café, where they eat organic buckwheat pancakes. The town has a natural-food store where you can buy locally sourced Humboldt Fog cheese, and a home-goods store where you can buy a wool mattress or a composting toilet. When I visited in February, the marquee of a shuttered movie theatre in town bore the slogan of a newly formed visitors’ bureau: “Elevate the Magic.” But Garberville did not seem entirely ready to make itself over as a place for a romantic getaway—forty years of paranoia and chosen seclusion are not easily dispelled. The town relies on a cash-heavy, still partly clandestine economy, and it has a significant population of homeless people with drug dependencies. Locals advised me in advance to avoid certain motels. I checked into the local Best Western, where the receptionist told me that the rule she had learned when she moved to Garberville was never to go down a dirt road.

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A farmer named Jason Gellman picked me up at the hotel on a night of pouring rain. He drove a gray Ford pickup truck—a four-door, high-clearance rig, which looked imposing on the outside, but, once I clambered up and settled in, it was like floating in a soundproofed cloud. Gellman is thirty-nine years old, clean-shaven, and tan from working outdoors. He wore a gray hooded sweatshirt, with green stars down the sleeves, and a flat-brimmed baseball hat, which bore the logo of his business, Ridgeline Farms. My ears popped as we drove, heading to Ridgeline on a road with no shoulder that ascended from town. We passed a rock barrier that had been spray-painted white and had the words “STAY CLASSY SOUTH HUM” written on it, in green. We splashed through puddles, and the windshield wipers were on high. The torrent outside was Shakespearean, but Gellman was pleased with the weather, which was like the winters he remembered from his childhood—weather, as he put it, in which people either got pregnant or got divorced.

Gellman’s parents were hippies who moved to Humboldt County when he was two years old, in the early eighties. They eventually managed to buy their own property, in an enclave near Garberville called Harris. Gellman’s mom did beadwork, and his father did leatherwork and carpentry. They grew their own vegetables. And, like many of their neighbors, the family grew cannabis. At that time, ten pounds of marijuana—the amount produced by eight or ten plants in a harvest cycle—could be sold for as much as forty thousand dollars, enough to support a family that grew most of its own food.

“We grew up really poor,” Gellman said, as we arrived at an electronic gate at the entrance to his property. Gellman is a fisherman, and the gate was decorated with stainless-steel salmon. He rolled down his window and typed in a code, and we drove up the driveway to a large, beige house. Gellman laughed and said, “Here I am talking about how poor we were as we pull up to this.” It looked more like a house you would find in a gated community than one on a mountaintop hundreds of miles from a major city. A border collie and a wolfish mutt wandered out of the garage and stood in the rain to greet the pickup. We passed through an entryway into a spacious open-plan kitchen that looked onto a high-ceilinged great room with a fireplace.

In Humboldt County, cannabis is known simply as “the plant.” Gellman grew up with the plant, pruning its leaves for his parents as a child. He can’t remember exactly when the federal government first raided the family farm, only that he was six or seven years old, which would have been around 1987. He told me, “I was sitting on the porch and a giant military helicopter was like a hundred feet over our house, banking on our house, and my dad comes flying up in the four-wheeler, yelling, ‘Get in the rig!’ ” When they returned later, the cannabis had been cut down; their house was ransacked. Busts, which sometimes landed growers in jail, started happening more often after 1983, when the Reagan Administration began the Campaign Against Marijuana Planting, a paramilitary operation also known as CAMP. Shortly after the first bust on the family property, Gellman’s parents split up. His dad continued to grow his crop in the same place every year. On years when the farm got busted, his dad would get depressed for weeks. Christmas would be cancelled.

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Most years, however, were good. Many of the children Gellman played with at school came from families who grew cannabis, although the subject was not openly discussed. “We couldn’t tell anyone, and that was just how our life was,” Gellman said. “You didn’t think it was bad, because when your dad does it and your mom does it, every single person, every single friend, grows weed—every one of their family members grows weed—it’s not looked upon as bad. It still isn’t bad, but you knew the outside world thought of it as bad.” Many of the children of cannabis farmers had a conflicted relationship to law enforcement. Another second-generation farmer, Wendy Kornberg, told me that one of her earliest memories was of a cop in a helicopter hovering over her house and giving her and her mom the middle finger. “That was the mentality,” she said. “ ‘You damn hippies need to go somewhere else and do something else.’ ”

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Gellman grew up fishing, hunting, riding his bike, and playing in the woods. At harvesttime, there would be parties outside, under the moon. Families would grow “pencil patches,” as one farmer called them, sections of the crop whose proceeds would go to underfunded schools in the area. By selling their cannabis, the back-to-the-landers funded a community center, the Redwoods Rural Health Center, and KMUD, the nonprofit radio station on which the Civil Liberties Monitoring Project, an organization started by local farmers, broadcast the movements of law enforcement in the area. Residents started Reggae on the River, an annual music festival, which attracted thousands of people every summer. The crop helped fund local newspapers and growers supported the Humboldt chapter of Earth First!, which organized campaigns to preserve the area’s old-growth forests.

The community also faced the kinds of problems that are bound to occur in an isolated county where people kept their savings in cash, drugs were easily accessible, and nobody called the cops when things went wrong. Gellman lost friends to drunk driving on Humboldt County’s winding mountain roads. Two friends were murdered during pot deals gone bad. He lost friends to suicide, and later, as the heroin and meth problems that have affected rural areas around the country reached Humboldt, to drug overdoses. At the age of thirty-nine, he has a dozen laminated portraits in his home, memorials to friends who died. “There were a lot of deaths,” he said. “But I think it’s just because we know so many people. We have so many friends.”

Humboldt County’s first generation of cannabis growers used the crop as one of several sources of income. The second generation “worked hard, but it was different,” Gellman said. “It was more growing weed for money,” as a career. Gellman grew his first patch of cannabis at fourteen. In high school, he helped out on his dad’s construction crew, but growing the plant was more lucrative. He worked for other growers, spending winters in the woods monitoring clandestine greenhouses, and he eventually acquired two pieces of land: the farm I visited, where he lives with his wife and two sons, and a piece of property farther up in the mountains, in Harris.

In 1996, the state passed Proposition 215, which exempted patients and caregivers from criminal marijuana laws. The medical-marijuana movement, which had been building for years, was led by AIDS activists, who wanted the right to use marijuana to treat symptoms of the disease. In Humboldt, the bill was received quietly—activism tended to attract the attention of law enforcement—but the growers soon adapted to the new legal paradigm, posting their medical marijuana cards on their fences as cover. California was slow to enact regulation under the medical-marijuana laws, and the farms in Humboldt operated in a legal gray area, monitored by a small, rural police force with little ability to control the trade. “People would get a number of 215 cards”—recommendations from a doctor to medicate with cannabis—“and then they would cultivate,” John Ford, Humboldt County’s director of planning and building, said. “It became difficult to tell who was legal and who was not.”

At first, because federal law still banned marijuana, most people feared the consequences of growing more than ninety-nine plants, the limit set by Proposition 215. But every year some farmers pushed their luck, planting bigger grows that were destined not for medical coöperatives in California but for the black market. Meanwhile, the medical-marijuana movement spread across the country, with more than a dozen states legalizing medical cannabis by the beginning of the Obama Administration. In 2009, the Attorney General, Eric Holder, announced that the federal government would not put resources toward prosecuting people who complied with their state marijuana laws.

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All of this created the conditions for what’s now referred to in Humboldt County as the Green Rush. Newcomers arrived, from the East Coast, from Texas; there was an influx of immigrants from Bulgaria. Cannabis farmers started growing as much marijuana as they wanted. They diverted water from the rivers to irrigate their crops. They dumped pesticides into the watershed. They grew plants in national forests and state parks. They flattened mountaintops. The profits were high, and the risks were low—a grower who ran a big farm for two years could make out with two million dollars and then abandon the property, leaving the land a wreck. “The state had the onus to manage the medical system, and they refused to set up any kind of regulatory system, any kind of licensing system, any kind of ownership system,” Sheldon Norberg, the author of a memoir called “Confessions of a Dope Dealer” and a member of the California Growers Association, said. At harvesttime, busloads of young people looking for seasonal work trimming buds would descend on Garberville, where they were vulnerable to exploitation.

In 2015, almost twenty years after the passage of Proposition 215, California passed the Medical Marijuana Regulation and Safety Act, in an attempt to better control the trade. The next year, under the terms of the new law, Humboldt County’s board of supervisors passed its first commercial-cannabis-growing land ordinance. Gellman was among the first to apply for a permit under the new system, despite controversy among his friends. Some farmers in Humboldt County saw the new regulations as a trap. They feared that attending an information session would mean turning themselves in. Gellman spoke of his own decision to go legal in the terms of the embittered end of a very long war. “I’ve had a great life,” he said. “I don’t want to go to jail. I’ve seen too many of my friends go to jail.”

Gellman thinks the county has used the permitting process as an excuse to correct the mistakes of a multigenerational libertarian experiment. The back-to-the-landers had not considered building codes when they constructed their homes and outhouses and catchment ponds and solar grids. “Basically, everything they’ve always wanted us to do—permit stuff, fix roads, get our wells all done right—they had us,” Gellman said. To comply with rules about water use, generator noise, fertilizer storage, and road maintenance, farmers had to hire consultants, lawyers, and engineers. To comply with environmental protections for spotted owls and marbled murrelets, they had to hire a bird-watcher “to come and sit at your house and look for a bird for four thousand dollars,” Gellman said. (The ordinance requires anyone applying for a permit to bring in a “qualified biologist” to conduct “a disturbance and habitat modification assessment” on the land, partly in response to pressure from local environmental groups.) The farmers complained that the county was sucking them dry and putting a significant percentage of the local economy at risk in the process. Ford said that old logging roads were never meant for daily use, and diverting water from streams to cannabis fields takes a toll on the surrounding ecosystems. He framed the conflict as, in part, a cultural one, between the government and a group of people that had always avoided it. “Those are the normal costs to anybody,” he said. “Whether you’re building a single-family home or beginning a business, or constructing a building, you would be expected to minimize and mitigate your impacts.”

And then, in the middle of this, Proposition 64 passed.

In the lead-up to the 2016 general election, Californians filed more than twenty ballot proposals to legalize marijuana. The one that made it to the November ballot was the Adult Use of Marijuana Act, or Proposition 64, whose success was due in part to its backers: Sean Parker, the founder of Napster and former president of Facebook, and George Soros, the billionaire philanthropist, were major donors, as were a committee funded by the dispensary-finding app Weedmaps, and a company that invests in the cannabis-news Web site Leafly. In the voters’ guide for the election, the campaign advertised “tough, common sense regulations,” so that marijuana would be “safe, controlled, and taxed.” Supporters of the measure projected tax revenues of a billion dollars.

Sixty per cent of the voters in southern Humboldt County resisted Proposition 64. Cannabis farmers told me that they opposed the legislation because it included high licensing fees and a fifteen-per-cent tax rate on cannabis purchases, which would discourage growers from leaving the black market and put those who did at a competitive disadvantage. It bothered them that three million dollars of the tax revenue would go to the California Highway Patrol, an old nemesis. But their primary worry was that the law did not do enough to protect legacy farmers from getting undercut by new agribusiness entrepreneurs. The new law was designed in a way that would allow cannabis to be grown as most crops are grown in the United States, as large-scale operations controlled by a handful of vertically integrated corporations. Proposition 64 created the conditions for “a land rush for wannabe drug-dealing venture capitalists,” Norberg told me. “And they are out there.”

Measures intended to protect small- and medium-scale farmers, such as a one-acre limit on cultivation for the first five years of legalization, were quickly undercut. In the aftermath of the law’s passage, the state announced a regulatory loophole that has allowed single entities to acquire as many small-scale licenses as they want. The law also mandated an industry of middlemen; cannabis farmers could no longer sell their own product directly to medical collectives or to retail outlets, and, instead, had to work with a licensed distribution company.

Several large agricultural companies began laying the groundwork to grow cannabis on an industrial scale in advance of statewide legalization. As of January, 2019, Santa Barbara County had received more cultivation licenses than Humboldt, most of them acquired in the dozens by large commercial farms. Prices started dropping, from more than two thousand dollars a pound, three years ago, to sixteen hundred dollars a pound, in 2017, to less than a thousand dollars a pound, last year. In Humboldt, farmers had spent their savings coming up to code, only to end up with licensed and legal weed that they could no longer off-load, now that the market was oversupplied.

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In the wake of pot legalization, Humboldt farmers found themselves facing two options: they could try to operate in the legal market and risk bankruptcy because of the related costs, or they could remain in the black market, which was being pushed ever further underground. Humboldt County officials estimate that only a third of the county’s marijuana cultivators have attempted the permitting process. Local growers describe their neighbors who have chosen to avoid local and state permits as participating in the “unregulated,” “traditional,” or “free people’s” markets.

Gellman grows nine thousand six hundred square feet of cannabis on his farm. Some of the farms in central California are licensed to produce more than a million square feet, and their production costs per pound are lowered by mechanized farming methods and the scale at which they can produce.

The only way for a farmer like Gellman to survive on the legal market might be to succeed as a seller of top-shelf, premium cannabis—and, implausibly, he did just that. In 2018, he won the top award at the Emerald Cup, a trade fair for “licensed sun-grown cannabis.” Founded in 2003, as an illegal event, the Emerald Cup is now held at the Sonoma County fairgrounds, and tickets sell for as much as four hundred dollars apiece. Gellman’s winning strain, Green Lantern, was a high-THC, sativa-dominant hybrid with what a Leafly review described as a “peppery pine aroma.” From having trouble finding a distributor, Gellman went to getting requests from all over. So things worked out, at least for now. Gellman has a beautiful farm in his back yard. His family doesn’t have to fear that he will go to jail. The banner of Ridgeline Farms hangs in the high-school gym, honoring his donations to the local booster club. In March, the South Humboldt Chamber of Commerce named the farm its business of the year. It would be a happy ending, if so many of his friends weren’t still going under.

For several days this winter, I drove up and down the dirt roads of southern Humboldt, visiting cannabis farms. They were on hills and in hollows, but mostly on hills, because cannabis is a fickle plant that thrives in sunlight and gets moldy at low elevations. Some farms were on the grid and others were not. Some were ramshackle and homemade, with abandoned cars on their land or couches on their porches; others were sleek and pristine, and outfitted with granite countertops and stainless-steel appliances. The farmers had enormous, gentle mountain dogs—Newfoundlands, German shepherds, a Russian bear dog—who would greet me as I pulled into muddy driveways and snuffle at the ground, their fur wet with dew. One farm had a peacock named Henri, who stared out at the rain from beneath a porch. As I drove between farms, I listened to KMUD, the community radio station that residents started in 1987. The d.j.s played Moby’s “Porcelain” and a cover of Jefferson Airplane’s “White Rabbit,” sung in Arabic.

At a farm called Emerald Organics Cooperative Inc., I talked with Jen Aspuria and Dan Kulchin in a geodesic dome they had recently built on a hillside. We gazed through a window at the tops of oak and madrone trees growing on the slope. Below us, in the forest, a small white “forest orb”—a mini dome—glowed in the gloom, like a satellite moon. Aspuria and Kulchin are planning to open a “bud and breakfast” in the domes, in the hope that hosting tourists might help carry them through the turmoil of legalization. The couple have secured a permit to grow ten thousand feet of cannabis on their ten-acre farm. Now that they are competing against farms that are many times the size of their property, their challenge has been finding a distributor. “We’ve had flowers that have literally rotted on the shelves and edibles that we’ve had to stop producing that we had demand for,” Kulchin said. Many of their neighbors have stopped farming. Some didn’t try for a permit at all, deciding, instead, to sell their land before real-estate prices fell. Others have gone to work for farms that are trying to scale up to compete, or have switched into forestry jobs, clearing brush.

“Essentially, the ability to sustain a loss is what the industry is right now,” Kulchin said.

“And how many more losses can you take?” Aspuria said.

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As pretty as the domes were, their farm still had the mud puddles and equipment of a working operation. It was difficult to imagine Bay Area tech workers forgoing the gentrified pleasures of Big Sur or Sonoma or Mendocino to drive their Teslas to Garberville. I thought of a recent trip I had taken to San Luis Obispo, in central California, where some counties have been permitting pot farms the size of football fields. I had gone to a cocktail bar that had marble countertops and served a Martini flavored with lemon and myrcene cannabis terpenes. High-end city-stoner marketing was a lot about distancing marijuana from nugs and tie-dye, from reggae and the Dead. Most profiles of marijuana entrepreneurs that I’ve seen have featured white people dressed in business casual, not Phish fans with crystals and patches on their coats that read “U.S. Out of Humboldt County.”

The farmers who survive will likely do so by making themselves part of the branding of their marijuana, styling themselves as representatives of an heirloom culture with a premium product—the cannabis version of the farmers pictured on cartons of organic milk. At Briceland Forest Farm, a couple named Daniel Stein and Taylor Thorton also grow vegetables and raise goats. They described their five-thousand-square-foot cannabis plot as just one crop on their regenerative agriculture farm. The most ambitious farmers speak not of cannabis strains but of “varietals,” of terroir and terpenes. One farmer, Tina Gordon, poured me glasses of Tang, Sunny Delight, and fresh-squeezed orange juice to make a point about the differences between marijuana grown indoors, in a greenhouse, and outdoors. Another farmer compared growing weed under a sunlamp to getting a fake tan.

Many of the farmers I met are placing their hopes in a distribution company called Flow Kana, which sources its product from two hundred farms in the Emerald Triangle, about sixty of which have contracts with the company. For companies like Flow Kana, the stories of the farmers are themselves a commodity. The symbolic value of the phosphorescent green of the moss-covered oaks, of the goats who fertilized the loam, of the ancient redwoods with all they have seen, is channelled to people in cities on the package of a pre-rolled joint. The C.E.O., a former produce distributor from Venezuela named Michael Steinmetz, told me that he based his business model on Sunkist, which handles the processing, distribution, and packaging of citrus fruits but does not grow a single orange. He framed the company as part of a new wave of “regenerative capitalism,” comparing it to Patagonia and Dr. Bronner’s. Flow Kana gives the contracted farmers a monthly guaranteed payment, and then processes the cannabis into products such as pre-rolled joints, extracts, and packaged flowers. The farmers then get a cut of sales, minus the company’s processing charges and other fees.

In Los Angeles, at a dispensary called Buds and Roses, I found Flow Kana’s jars of Gellman’s Green Lantern for sale, for forty-five dollars for an eighth of an ounce—ten or twenty dollars more than the cheapest California weed (although still less than the prices generated by prohibition in New York City, where the same amount of untaxed cannabis sells for fifty or sixty dollars). As prices dropped and the possibility of national legalization loomed, Steinmetz hoped that Humboldt’s small-scale cannabis culture could justify the price premium. Gellman was not the only person I spoke with who was simultaneously hopeful and skeptical. “It’s like beer,” he said. “Some people would rather buy a Coors Light than spend more money on a microbrew.”

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When I spoke to second-generation farmers about the obstacles they face in bringing their farms up to code and surviving in the legalized market, they often spoke about their elders, alternating between reverence and younger people’s general gripe about the baby boomers—that the older generation’s idealism was enabled by cheap real estate and a strong economy, and that younger generations were burdened with the fallout. The Old Guard has fretted about the decline of the institutions they created, such as the community center and KMUD, without acknowledging the stress the next generation is under. “Most of the old folks that have been surviving off fifty pounds could not care less about creating a legal industry, so now the legacy they left us is ‘All right, here’s your massive land payment, and good luck!’ ” a farmer named Rio Anderson told me. “There’s not a lot of participation in creating a local framework for a legal pot industry.” He went on, “And here’s a huge set of super-judgmental liberal issues, like, ‘You guys are greedy, you guys are capitalists, you guys are ruining the environment, you guys aren’t participating in the community,’ you know?” So the second generation tries to live up to its elders’ expectations even as profit margins shrink. Anderson feels a loyalty to Garberville, where he runs a combined natural-food store and restaurant with his mother and sister.

Many of the older farmers are doing what they’ve always done—hiding from regulators—but others are calling it quits. Gellman’s parents are among those who no longer find cultivation to be worth the hassle. One night, I listened to a show on KMUD called “The Rights Organization,” hosted by a marijuana defense attorney named Eugene (ED) Denson. Denson was a creaky-voiced old-timer who had filed lawsuits challenging Humboldt County’s marijuana tax code. The focus of the evening was abatement letters, which had become the county’s primary method for cracking down on unlicensed cannabis farms in the era of legalization.

The Humboldt County Board of Supervisors started sending out the letters in 2017. It was not an investigative process. They looked at satellite images, and any white rectangles they saw were presumed to be grow houses. If the homeowner had not begun the process of applying for a cannabis license, the property received an abatement letter, threatening tens of thousands of dollars in fines. John Ford told me that the program was showing results—most growers who have received abatement letters have chosen not to continue cultivating marijuana.

“This is weird, but the county enforcement unit has done more to wipe out cannabis farms in a year than law enforcement did for twenty-five years,” Denson said, on the radio. “Way more. They have attacked seven hundred people. I mean, even CAMP at its height was lucky to hit, say, fifty in a year.”

“I think it’s an excuse!” a caller named Emma Nation said.

“Well, it’s a revenue raiser, that’s for sure,” Denson said.

Cannabis was always a “value-based system,” Nation said. Growing the plant, she continued, was “a moral right, if not a legal right,” because it provided a way for people to “express themselves.”

A caller asked just how much marijuana he would still be allowed to grow under a medical license. The answer was a hundred square feet of canopy. “That’s nothing,” the caller grumbled. Another caller complained that the hosts were too focussed on the county regulations, rather than on the drop in prices. “The economy is bad here because it’s legal, and there’s big business getting into it, not just in Humboldt County—all over the world!” he cried in dismay. They discussed Governor Gavin Newsom’s recent promise to send in the National Guard to eradicate illegal grows. Bonnie Blackberry, one of the founders of the Civil Liberties Monitoring Project, which tracked the actions of law enforcement in the nineteen-eighties, got on the phone and suggested that the project might need to be resurrected.

“I’m going to say something real quick, and everyone can chew on this for a bit,” Denson said. “Southern Humboldt pot growing started off as a libertarian experiment: back-to-the-landers in way-back-at-the-end-of-the-road seclusion, the government basically never showing up, they could do whatever they wanted. They were growing illegally so they could keep all the money, and that’s where the prosperity came from. Then they were unable to deal with the problem of evil. They could not enforce penalties, against, say, people who took all the water out of the creek, or something like that. Then, also, the thing grew out of hand. Suddenly, the endless supply of resources dried up, and action had to be taken.”

For multiple generations, the people of Humboldt thought that they had found a back door out of the mainstream economy. While small towns and family farms across America saw economic decline, Garberville held on to its main street, its independent businesses, and its reputation as a haven for people who did not fit in. Cannabis allowed the community to sustain the illusion that it was a place apart, but the conceit is now ending. You could blame the correction that has been playing out on the first generation, for naïveté; or on the second generation, for pursuit of profit; or on the county, for demanding changes; or on the state government, for not protecting small farmers. But Humboldt can no longer claim its independence, and it will now have to see if it can hold on to its values.

In 2017, when statewide legalization was on the horizon, a hundred and forty people gathered at the Mateel Community Center, in the town of Redway, to attempt to define the values of Southern Humboldt. The Mateel, like other local nonprofit organizations, was having trouble paying its bills, but the people of Southern Humboldt still gathered there for weddings and concerts and civic happenings. During a three-day conference, they expressed what was important to them, and then mapped and clustered and redefined these values until they were distilled into eight essential tenets. These included “We treat everyone with respect and compassion and empathy regardless of their capabilities, acknowledging that everyone is born with a pure spirit”; “We respect and value the beauty of our ecosystems”; and “It’s imperative that we in a positive way accommodate the continuing evolution of the counterculture, so that refugees are integrated in a way that respects human rights and existing communities while cultivating wellness, personal growth, generosity, accountability, and honesty.”
 
Medical Cannabis Patients Could Use The Drug At Hospitals Under New California Bill

In his final weeks with pancreatic cancer, 42-year-old Ryan Bartell was on hospital-issued painkillers that put him to sleep for long stretches.

That’s why his father, Jim Bartell, who lives in San Diego, started looking for a hospital that would allow Ryan to use cannabis. When they found one, it was a game-changer.

“He was awake during the day, pain-free, talking to friends, texting, getting visitors,” Jim Bartell recalled.

Because cannabis is illegal under federal law, doctors can’t prescribe or dispense it. But some hospitals allow patients to use their own cannabis.

After his son’s death, Jim Bartell started pushing a lawmakers to require hospitals to let terminally ill patients with medical cannabis cards use edibles or topicals.

“It’s my son’s legacy,” he said of the bill. “And it’s sort of been my therapy”

The California Hospital Association says they don’t oppose medical cannabis, but that they are concerned about legal risks. They’re opposing Senate Bill 305 unless amended. The conflict with national cannabis policy could lead to a loss of federal funds for some hospitals.

Still, some doctors and nurses are exploring the use of cannabis to reduce nausea, stem anxiety and improve sleep for patients with cancer and other illnesses. It’s playing a growing role in palliative care — a specialty that revolves around alleviating pain and stress.

“I’m trained to give opioids to people,” said Dr. Vincent Nguyen, who runs the palliative care program at Hoag Hospital in Southern California. “These medications have side effects and can impair their thinking, make them drowsy. … When it comes to cannabis, there are components within the plant that we’re just basically learning can help to address these symptoms.”

New York and other states that have legalized medical cannabis are having similar conversations about whether to increase access to the drug in hospital settings.

Experts say it’s part of a larger conversation about how and where cannabis can be used. Last year, former Gov. Jerry Brown vetoed a law that would have allowed a child’s parent or guardian to administer cannabis on a school campus.

“People are being much more open about trying to push the envelope on where cannabis can be,” said An-Chi Tsou, former senior policy advisor of the state’s Bureau of Medical Marijuana Regulation, now known as the Bureau of Cannabis Control. “But there’s still a lot of doubt, tension, and misunderstanding to some extent on what it does and how it can help people, and whether or not it should really be regulated.”

Mieko Hester-Perez became an advocate for cannabis in hospitals after watching her son suffer from autism spectrum disorder and muscular dystrophy. He passed away last year.

Now the Orange County mom spends her time teaching special needs families about cannabis and working with doctors on treatment plans. She says the new bill is a huge step in the right direction.

“Physicians want to be involved,” she said. “I think this may be the first open door for them to be able to do it.”
 
"Mulder voted for Prop 64, reasoning that the initial proposals—like a one-acre cap on licenses—were designed to help farmers."

Yep, CA fucked over all of the existing small operators by allowing license stacking and basically shit canning protection for the existing small growers in favor or big corporate MJ. Asshole politicians at it yet again.


How Legal Weed Is Killing America’s Most Famous Marijuana Farmers
In the forests of Northern California, the regulatory state—not the DEA—is forcing thousands of growers out of business, or back underground.
By NATALIE FERTIG
June 04, 2019

EUREKA, Calif. — On a sunny day in the spring, Thomas Mulder walked through his greenhouse, down a narrow path between two long, knee-high, wooden planters. In a few weeks, the greenhouse would be full of marijuana plants a foot or two high—indica-sativa hybrid strain Sour G, or White Tahoe Cookies with its characteristic golden hairs around the flower. A few more months and the plants would reach Mulder’s shoulders. But at that moment, the planters were empty as Mulder gestured with his hands to show how tall his crop would eventually become. Mulder has three greenhouses that sit on this flat patch of land deep in the mountains of Humboldt County. This part of his farm is accessible only by a steep, newly paved road that passes in and out of Humboldt Redwoods State Park, and giant trees crowd so close on either side of the property that you don’t even notice Mulder’s farm until the last bend of the road.

It’s pretty obvious why Mulder’s parents chose this place in the late 1970s to grow marijuana. Back then, camouflage ropes pulled tall branches over the clearing to hide the illegal but highly prized crop from Drug Enforcement Administration helicopters; huckleberry bushes grew among marijuana for extra concealment. Now, the array of bright white buildings would be easily spotted from above, that is if anyone was up there looking. The berry bush camouflage came out when Mulder bought this land a decade ago when California became the first state to approve medical marijuana.

Since then, as the stigma around marijuana has evaporated in a grassroots legalization movement that has swept the nation, Mulder’s farm has thrived in a three-county region known as the Emerald Triangle that has become to high-grade cannabis what Napa Valley is to wine—a tentpole of the Northern California economy. In an ideal season, Mulder’s farm produces about 1,000 pounds of cannabis, an amount that should earn him $1.5 million. After taxes, fees and farm operating expenses, Mulder can expect about $100,000 in net income. It has afforded him enough money to own his own house and set aside a retirement account and a college fund for his children. No longer an outlaw like his parents, Mulder is the very picture of middle-class respectability. He has served on the local school board for a decade without anyone batting an eye at how he earns a living.

In theory, business should have gotten better for Mulder after voters passed Proposition 64 in 2016, legalizing recreational marijuana. But the opposite has happened.

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Thomas Mulder had to dip into his retirement fund and his children's college fund to keep from closing the farm after recreational marijuana was legalized in California. | Talia Herman for Politico Magazine

The costs of shifting his farm from California’s loosely regulated medical marijuana program into the stringent legal market have been high. Mulder actually lost money last year—the worst loss his farm has ever experienced—and he had to dip into his retirement fund and his children's college fund to keep from closing. A few years ago, his retirement savings totaled over $80,000. After last year, he says, he has about $500 left.

Mulder is not alone. As industrial-sized growers in places like California’s famously fertile Central Valley have flooded the market, the price of legal marijuana has plummeted by more than half. An array of upfront fees and stricter regulations, combined with a lack of access to bank loans, are all reasons farmers in Humboldt and neighboring Mendocino and Trinity counties say they can’t afford to remain in the legal market. Only 2,200 farmers applied for cannabis licenses last year, according to California NORML, compared with the estimated 30,000 or more growers who existed in the Emerald Triangle pre-legalization. It’s hard to know how many of the rest are continuing to grow in the illicit market. An estimated 10 percent of growers have simply shut down. Some expect that number to rise fivefold by year’s end.

“The regulatory climate in California and the cost of all of those regulations certainly does make the prospect of a viable small farm really small,” says Trillian Schroeder, a cannabis farm consultant in Humboldt County.

In effect, legal marijuana is doing what the DEA’s war on drugs never managed to accomplish. Some observers fear the era of cannabis in Humboldt—legal and otherwise—is over.

Mulder voted for Prop 64, reasoning that the initial proposals—like a one-acre cap on licenses—were designed to help farmers. But now he’s not so sure it was the right call.

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Thomas Mulder on his pot farm in Miranda, California, May 31st, 2019. Legalizing marijuana is having the unintended consequence of forcing many farmers to dip deep into savings or go out of business altogether, Mulder included. | Talia Herman for Politico Magazine

“I don’t want to see more victims of the war on drugs,” Mulder says. “But now it’s different because it’s a different war—it’s pricing [farmers] out.”

“I wish I could go back in time,” he says. “Maybe not pass Prop 64.”

***

When medical marijuana was first legalized with the passage of the Compassionate Care Act in 1996, some of Humboldt’s farmers were wary of coming forward and registering with a government they had seen for so long as the enemy. Eventually, though, many came out of the illicit market to grow in licensed medical collectives. The medical industry that existed from 1996 to 2016 had some regulations—there was a limit to the number of plants a farm could grow, for example, set by each county individually. Farmers had to apply for a license and pay taxes to the state. And in the late 2000s, some towns—such as Oakland—started putting local sales taxes in place. But in the spectrum of regulatory oversight, it was a modest burden.

Under Prop 64, though, cannabis has become what some in the industry call “the most regulated crop in the nation’s most regulated state.” Each plant must be meticulously monitored through a central system called “track and trace.” There are separate state and county regulations, and the county requirements—from additional taxes to environmental impact studies—can be drastically different for farmers in different parts of the state. And where farmers once paid just income and maybe some sales taxes on their medical marijuana, they are now paying taxes before they grow, after they grow, and after they sell.

Zoning certificates and water board fees can cost $3,000 to $5,000, but the biggest costs come in environmental and structural changes to the property. Many Humboldt farms lie in the mountains, deliberately out of the way to avoid easy detection, at the end of long dirt roads that are hard to navigate. Paving the dirt roads alone can cost over $100,000.

Some farms have discovered their land includes habitat for endangered species like the spotted owl. When these farmers apply for construction permits to meet Prop 64 requirements like paved roads or new, California Department of Agriculture-compliant processing facilities, they are told they need to wait two years for an environmental impact study, certifying the proposed changes won’t disturb endangered habitat. The farmers are caught in a bureaucratic trap: If they don’t build immediately, the farms won’t be considered compliant, and therefore may not receive a new license to keep growing.

Other farms have man-made geological features, such as culverts, that were put in by previous tenants—often loggers. Under state and local regulations, these man-made features have to be returned to a more ecologically friendly form, a process which also requires engineering fees and construction costs to repair.

And for farms that have good existing infrastructure on good land, there are still high taxes and fees they have to pay in addition to their startup costs. The “canopy tax” is a county tax on the space in which a farmer will grow his crop—levied before anything is grown. Last year, it was $1 per square foot. Many farmers grow multiple plots of 5,000 or 10,000 square feet, so canopy taxes can quickly reach the tens of thousands of dollars. The cultivation tax, meanwhile, is a state tax levied on harvested marijuana before it is sold, regardless of whether it sells. Neither the canopy or cultivation taxes supplant state or federal income taxes, which also have to be paid on the revenue from cannabis sales.

For Mulder, the cultivation tax on dried cannabis flower last year was $148 per pound. After paying it, a modest $15,000 profit turned into an $80,000 loss.

“It’s death by a thousand cuts,” says Schroeder, the farm consultant.

Some of these farmers feel that they are being held to standards intended for “big ag” that don’t make sense for small family farms. “You know, $20,000 to a big avocado farm is absolutely nothing,” Schroeder says. “But you put that same cost onto a small three-person farm, it’s a big hurdle for them to overcome.”

One Humboldt County farmer, Wendy Kornberg, says she cannot hire temporary workers to help her harvest her crop because she would need a bathroom on her property that is compliant with the Americans with Disabilities Act. Getting a cement truck up her hill to construct such a bathroom without paving the road first is impossible, and she won’t have the money to pave until harvest is over. So her 70-year-old mother has been helping out, instead.

Kornberg, a second-generation cannabis farmer, has used most of her savings trying to meet state and local licensing requirements.

She applied for a permit to construct a rainwater pond to water her crops. The building and planning department said her papers were in order, and all she needed was her county cannabis license in order to build. She waited eight months for that license. When it was issued, it included extra requirements for the pond, raising the cost from $20,000 to as high as $100,000. She had to scrap the pond altogether, and the lack of water meant she grew and harvested only about 10-15 percent of her annual yield, even after paying $53,000 in canopy taxes and fees.

“If you were a corn farmer, and you were only cultivating 100 acres of corn, and you’re suddenly told, ‘OK, you can only cultivate 10 acres of corn,’ you’re basically going to be bankrupt,” Kornberg said. “It’s ridiculous to think a farm can operate at 10 percent.”

***

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Some of the biggest blows to farmers under the new regulations come in the form of cultivation and canopy taxes . For Mulder, the cultivation tax on dried cannabis flower turned a $15,000 profit into an $80,000 loss. | Talia Herman for Politico Magazine

In other industries, startup costs or unexpected regulation changes are funded by small-business loans. In the marijuana industry, however, access to loans is almost impossible to come by. Cannabis’ status as a Schedule I drug means the federal government considers it as dangerous as heroin, and consequently banks won’t open accounts, issue loans, or open lines of credit for businesses in the industry. Farmers can’t apply for crop insurance, either, or file for bankruptcy if their farm collapses.

There are some loans available, but they are high-interest private loans or venture capital—both of which many farmers don’t trust.

Mariah Gregori says she could really use a loan. Gregori spent 20 years building her homestead in the mountains with her partner and their children. But when she began the process of switching her farm into the regulated market, she found that the costs of making her land compliant were more than her farm was worth—and far more than she had the money to pay.

So Gregori, 41, and her partner drained their savings and bought a new piece of land, on a flat patch near a river. There, they are building a new cannabis farm from the ground up, gambling that the costs of bringing this flat land up to code will be cheaper than wading through the regulatory minefield her original farm presented.

Just trying to build and permit the same water tank she has at her homestead on the new farm plot is promising to cost Gregori over $50,000, and Gregori says she cannot get a line of credit to help build her water supply and make other improvements to the new property. She also can’t write off business expenses like $50,000 water tank projects on her federal taxes.

“I mean this is my life … it’s the only thing we’ve ever worked for,” Gregori says. “We’ve done it since out of high school.”

***

The California state government is not oblivious to the fact that taxes and regulations have overburdened the state’s cannabis industry. In fact, it’s suffering too.

State-wide revenue from cannabis taxes in 2018—the industry’s first year under full legalization—met only 30 percent of projections set by the state. California projected $1 billion in tax revenue, but at the end of 2018 had seen only $345 million, according to the Orange County Register.

On the local level, Humboldt County decided this year to charge its farmers the canopy taxes after the harvest rather than before growing, so farmers can pay from their revenue. And in Sacramento, a law called the “Temporary Cannabis Tax Reduction Bill” was introduced by state Rep. Rob Bonta (D-Oakland) and California State Treasurer Fiona Ma, but did not pass out of committee. Their bill would have temporarily suspended some taxes for three years, with the hopes of giving farmers as much capital as possible to get on their feet, and Bonta plans to reintroduce the bill next year.

Meanwhile, California’s Senate did pass a bill that will create a state-chartered bank to offer bank accounts to cannabis busineses, though Bonta says it will not issue loans or lines of credit. Ultimately, he says, banking is the purview of the federal government. Congress is working on the issue of cannabis banking right now, with the SAFE Banking Act legislation. The bill passed the House Financial Services Committee in April with a bipartisan vote of 45-15.

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Humboldt County was the only county in California that lost sales tax revenue last year--$424,000 of it. California overall saw a 4 percent increase. | Talia Herman for Politico Magazine

Democrat Representative Jared Huffman’s California district includes Humboldt County, and he is a co-sponsor of the House bill. “Criminalizing banking for businesses that are legal under state law is completely absurd,” Huffman said in a statement, adding the SAFE act has overwhelming public support.

While it enjoys widespread support in the U.S. House—165 members from both parties have already signed on to co-sponsor the bill, and it is backed by the American Banking Association—its passage isn’t guaranteed in the Senate. Since pushing through a legalization of hemp (the nonpsychoactive cousin of cannabis that is being used as a substitute crop in tobacco country) in the 2018 Farm Bill, Senate Majority Leader Mitch McConnell (R-Ky.) has said he will not bring a cannabis legalization bill to the floor. If McConnell doesn’t block a vote in the full Senate, though, the banking bill has support on both sides of the aisle, including five Republicans, among them Rand Paul of Kentucky, Kevin Cramer of North Dakota and Cory Gardner of Colorado, as well as Democrats such as Kamala Harris of California and Bernie Sanders (I-Vt.) and lawmakers from states where cannabis is still illegal, such as Senator Tim Kaine (D-Va.).

Should that federal bill not pass, California’s lawmakers don’t yet have a solution—though some say they are working on one. Some have proposed using cryptocurrency or credit unions.

Meanwhile, though, Humboldt County’s economy has been hit hard by cannabis legalization. Humboldt was the only county that lost sales tax revenue last year—dropping 2 percent from 2017 to 2018, or $424,000. In Eureka, it dropped 3 percent. Meanwhile, California, over the same period, saw a 4 percent increase.

“For us, it was such an important part of our economy that [legalization] really has been an upheaval to the way we’ve been doing business for decades,” says Mayor Susan Seaman of Eureka, Humboldt’s largest town.

Seaman says Eureka has seen a marked decrease in sales tax in the past year, as farmers spend their money on fees and regulations rather than in town. This change in spending has led some noncannabis businesses in Humboldt County to close, while others have dramatically shifted their inventory in order to stay afloat.

Humboldt County’s Small Business Development Center did an unscientific survey of its members in June 2018, and of those who answered, only 28 percent believed business would be better in 2018 than it was in 2016. In the same survey, more business owners selected “changes in the cannabis industry” as the reason for the economic decline than any other factor.

Over the past three decades, cannabis farmers in Humboldt put their income back into the local economy, buying clothes and home goods, machinery and cars, and eating in local restaurants.

In Eureka, sales tax revenue decreased in the past year despite cannabis manufacturers like Los Angeles-based Papa & Barkley bringing over 100 jobs to the area. And should the small cannabis farms go under, Seaman worries the new jobs won’t stay.

Annie Bignon, 37, owned a boutique clothing store in Garberville called Indigo Denim Bar. In 2017, Indigo Denim Bar saw a 30-percent drop in revenue. July 2018 was the tipping point, when her shop registered 60 percent less revenue than the previous July.

She and her husband—who owns a construction business—both grew up in Humboldt. “It was a thriving community, with people who had the disposable income,” Bignon said. But in November 2018, they decided to leave Garberville and open her store elsewhere, before they lost everything. Now, they and their two kids live four hours south, in Sebastopol. Every time she talks about it, Bignon starts crying. Her family was one of five from the same block who moved in the past year. Two families moved to northern Humboldt, but the other three—including Bignon’s—left the county entirely. “One of my friends said ‘Who’s going to still be here?’”

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Thomas Mulder in a cabin on his farm in Miranda, California. | Talia Herman for Politico Magazine

On his farm on the backside of the mountain, Thomas Mulder continues to lose sleep over farm expenses. But he has a good reason to keep going, he says. His son Tyson, 8, loves to grow things. While regulations keep Tyson out of the cannabis plots, he attentively listens to everything his father teaches him about running a farm—from creating healthy soil to road upkeep. He helps out wherever he can, filling in potholes on the road and working with vegetables and trees in his own garden space.

Like other second-generation farmers, Mulder believes in the greater Humboldt community and wants to see it continue to flourish. Cannabis farmers have done a lot of good in Garberville, he says, like donating money to refurbish the local school. Now, as his daughter nears graduation from high school, he wants to make sure there is a future for her and for her brother in Humboldt County.

“I’m not saying my kids have to join the industry,” Mulder says. “But I want to make sure … that I’ll have something to pass on to them, and this farm will still be around.”
 
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