Weed and Wildfire (and Insurance Law)

Image: Texas Military Forces 

The last two posts on this blog have covered wildfire policy and marijuana regulation, so it seems like a good time to address the convergence of those dynamics.  In the American West, which just happens to host an inordinate amount of high intensity wildfires and marijuana farms, the wildfire season is taking its toll on the marijuana industry.  Other industries are taking a beating as well, but the marijuana industry is particularly vulnerable.  First, because its clandestine history pushed marijuana farming into remote and mountainous locations, otherwise known as the wildland-urban interface, where people and property are most at risk of wildfire damage.  Almost a third of US housing units are located in the wildland-urban interface, but land use laws, zoning ordinances, and building codes can mitigate wildfire risk to some extent.  For the marijuana community, many of whom have long been operating in the shadows, those legal adaptation mechanisms haven't historically been available to reduce risk.

But now that marijuana cultivation is being legalized in many states, the farming community should be more comfortable working with firefighters and fire prevention programs.  That appears to be happening, according to Madeleine Thomas:

Some growers, like Tim McCormack, have been lucky. McCormack serves as CEO of Antoine Creek Farms, one of the largest licensed farms permitted by the state of Washington. The few thousand plants he tends comprise nearly 20,000 square feet of plant canopy. Flames from the Chelan Complex fire, one of the largest wildfires still burning across the state, were about five feet from his farm before firefighters were able to divert their course elsewhere. Had Antoine Creek Farms been caught in the Chelan Complex, McCormack estimates he would have lost several hundred thousand dollars [...] "the courageous firefighters actually did a back-burn on the back third of my property, and they saved us from a third fire."

But the legalizing marijuana industry still has a second hurdle to overcome: the reticence of financial institutions to participate in the market.  In the case of wildfires, farmers don't have access to crop insurance:

Compounding McCormack's worries, the issue of financing in the marijuana trade is a cumbersome one, as many farms and shops continue to find themselves spurned by pessimistic (sometimes moralistic) banks and insurance agencies.

"If I was growing wheat or if I was growing grapes, it wouldn't be that bad because I would file an insurance claim and they would send in an adjuster and they would evaluate what we had and make some appropriate claims based on the loss," McCormack says. "Well, the marijuana industry doesn't yet have crop insurance, so basically if we had burned down we would be out of business. That'd be it for us."

That's not entirely the banks' fault, as the federal government hasn't exactly embraced marijuana financing.  The Obama administration issued marijuana banking guidelines earlier this year, but reserved the right to penalize banks if they reported inaccurate information about marijuana businesses.  At this point the benefits of servicing the marijuana industry don't appear to outweigh the costs:

"There's tremendous risk and little reward," said Rodney K. Brown, president and chief executive of the California Bankers Assn. "The bottom line is it's still against federal law … and you're subject to both prosecution and loss of a bank's charter."

Complaints about the banking issue have so far focused on the security risks of marijuana businesses dealing in large quantities of cash, or the inefficiencies of a cash-only marketplace, but now we can add crop insurance and wildfire vulnerability to the list.