Insights
Publications

Be Prepared for California’s Environmental Rules: Regulated Cannabis Brings Forth New Water Use Guidelines

3/2/2017 Articles

Some estimates indicate that up to 70% of marijuana used in the United States comes from California. With the recent passage of Proposition 64, California cannabis production is likely to increase, and the state’s environmental regulators will have the significant responsibilities of overseeing the cultivation, manufacturing and distribution of cannabis products.

California became the first state to legalize medical marijuana with the passage of Prop 215 in 1996. Twenty years later, the Medical Marijuana Regulation and Safety Act (MMRSA) became law and sought to improve regulation of the medical marijuana industry. These reforms involved strengthening California’s oversight and management of the environmental impacts of cannabis cultivation.

Prop 64, which legalizes the recreational use of marijuana, builds on the MMRSA’s framework of environmental oversight. The two measures will result in regulations regarding water use, air and water quality, pesticides, chemicals, waste discharges, energy, wildlife and natural resources, all of which will impact cannabis businesses.

Environmental Regulations

As part of the MMRSA, the State Water Resources Control Board (SWRCB), Department of Pesticide Regulation (DPR) and Department of Fish and Wildlife (DFW) are required to set limits on pesticide use, identify and register water diversions, and create a mechanism to protect water and wildlife. Prop 64 compels recreational operators to comply with the existing MMRSA environmental regulatory framework and builds on those requirements. Growers of marijuana for recreational use will need to secure cultivation licenses. The licensing program will begin in 2018 and will be managed by the Bureau of Marijuana Control.

Water and Cannabis

In the next two years, recreational cannabis business owners should expect to see significant regulation of water use, water quality and waste discharges. Right now, these appear to be the primary environmental objectives of the new law and regulatory efforts. The MMRSA and Prop 64 will require growers to detail the legal sources of water for their operations. Licenses can be denied or later revoked if the cultivator fails to protect instream flow and water quality.

The Department of Food and Agriculture is required to work with the SWRCB and DFW to develop regulations to “ensure that individual and cumulative effects of water diversion and discharge associated with cultivation do not affect the instream flows needed for fish spawning, migration, and rearing, and the flows needed to maintain natural flow variability, and to otherwise protect fish, wildlife, fish and wildlife habitat, and water quality.” Already, the SWRCB and certain regional water quality control boards (including the North Coast and Central Valley) have developed waste discharge regulations for cultivators.

The marijuana licensing authority will develop regulations requiring growers, manufacturers, distributors and retailers to comply with state and federal environmental laws, including the Clean Water Act and the Porter-Cologne Water Quality Control Act, among others. In addition to the water supply and quality regulations impacting growers, cannabis manufacturers and distributors will have to comply with California’s storm water permit requirements (both as part of construction and later operations), waste discharge requirements and other water quality regulations.

Regulations and Enforcement

As expected, cannabis cultivation, manufacturing and distribution will be subject to the full panoply of state and local environmental laws and regulations, including the California Environmental Quality Act. Compliance with DFW requirements, including streambed alteration agreements, will also be required. All cannabis operators in the retail and distribution chain will need to be mindful of Proposition 65, which regulates substances that cause cancer; marijuana smoke was added to the Prop 65 list in 2009. Cannabis product manufacturers should also be mindful that certain food additives may also implicate Prop 65 warning requirements.

Business owners can expect inspections and — as the regulatory program develops — possible enforcement regarding situations of non-compliance. Statements by the North Coast Regional Water Quality Control Board, for example, suggest that a “progressive” enforcement approach will utilize limited resources efficiently and effectively. As such, enforcement activities could proceed very informally (for example, phone calls to alert growers/operators to certain issues) or more formal tactics such as the issuance of administrative civil liability complaints.

A multi-agency task force to address environmental harm from current cultivation operations will be made permanent. Also, we would expect that district attorneys’ offices will become aware and possibly active from an environmental compliance and enforcement perspective, and could prosecute enforcement actions under a variety of laws.

Conclusion

Marijuana growers, manufacturers, distributors and retailers should be aware that Prop 64 and the MMRSA have only strengthened environmental regulation of cannabis operations. We encourage cannabis businesses to address environmental issues as soon as possible to avoid scrutiny or enforcement from environmental regulators and citizen groups.

Firm Highlights

Event

17th Annual Santa Fe Advanced Conference on Natural Resource Damages

Farella Braun + Martel is a sponsor of the Law Seminars and Internationals' 17th Annual "Santa Fe" Advanced Conference on Natural Resource Damages.  Christopher Rendall-Jackson will participate on a panel titled "The Latest on the...

Read More
News

Farella Advises TILT Holdings Inc. on $10.5M Loan Transaction

Northern California legal powerhouse Farella Braun + Martel advised TILT Holdings Inc. , a global provider of cannabis business solutions, and its Pennsylvania subsidiary, grower and processor Standard Farms, on a $10.5 million loan transaction...

Read More
Publication

Regulatory Changes Underway To Address Dwindling California Property Insurance Market

We keep hearing about how difficult it is for our clients to get property insurance these days, both for homes and businesses in Northern California’s wildfire-prone areas. Which, of course, is most of Northern...

Read More
News

Chambers USA 2024 Recognizes Farella Braun + Martel Lawyers, Practices

Farella Braun + Martel is pleased to announce that Chambers USA has recognized 16 lawyers and six practice areas in the legal directory’s 2024 edition. Individual California and Western U.S. Rankings: Sarah Bell &ndash...

Read More
Publication

A Simpler Approach To Expanding Banking Access

While the cannabis community anxiously awaits what feels like Congress’ hundredth attempt to pass the SAFE Banking Act, there is one simple step that can be taken today to improve access to banking services...

Read More
News

North Coast Industry Insiders Weigh In on Why California Cannabis Tax Revenue Slipped in 2023

Jeff Hamilton spoke to Susan Wood with the North Bay Business Journal for the article "North Coast Industry Insiders Weigh In on Why California Cannabis Tax Revenue Slipped in 2023." Read the article with Jeff's...

Read More
Publication

New PFAS Listing Under Superfund Will Lead to Major Expansion of Liability

On April 19, 2024, the U.S. Environmental Protection Agency (USEPA) announced its final rule designating perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as hazardous substances under Section 102(a) of the Comprehensive Environmental Response, Compensation...

Read More
Publication

Hsu Untied Interview With Jeff Hamilton, Partner at Farella Braun + Martel

Jeff Hamilton was a guest on Hsu Untied , an award-winning podcast hosted and produced by Richard Hsu featuring entrepreneurs, venture capitalists, best-selling authors, and more.  In the podcast, Jeff discusses his journey from...

Read More
Publication

Navigating Cannabis in the Workplace: A Guide for California Corporations

The landscape surrounding cannabis in the workplace is rapidly evolving, posing challenges for California corporations and businesses to establish effective policies and procedures. As the use of cannabis, both medical and recreational, becomes more...

Read More
Publication

A Summary of New Laws Coming for California Employers in 2024

In 2023, California has adopted several new employment laws either introducing new employee protections or codifying existing practices into state law. With these changes, employers will need to examine and adjust some of their...

Read More