My latest in the Wall Street Journal

The Wall Street Journal was kind enough to publish my latest article discussing Craft Weed in their series on The Future of Everything. Introduction below. Read the full article here.

Bring a bottle of Champagne to a party, and you’ll get a reaction no other wine elicits. The reason dates back to 19th-century France. Inferior viticulture regions and fraudulent winemakers were selling counterfeit bottles of Champagne, taking advantage of its hard-earned reputation as a luxury good. The French government’s solution was to enact geographic designation rules, preventing anyone outside the region from using its name on products. By the early 20th century, however, local producers were cutting corners and pocketing the extra profits, so the government created an agency to enforce quality standards. Today, the Champagne appellation promises two things: a specific flavor imparted by the region’s environmental conditions (known as a terroir) and a level of quality based on strict production methods.

An appellation system that regulates quality and designates a product’s origin could benefit the cannabis industry, protecting small-scale farmers from corporate growing operations and offering consumers high-quality choices beyond generic weed….

Cannabis Now reviews 'Craft Weed'

My book Craft Weed: Family Farming and the Future of the Marijuana Industry comes out in a couple weeks. I’m thrilled to see K. Astre of Cannabis Now provide an early review of the book. See the full review here. An excerpt is provided below:

Stoa weighs a lot of factors in making a case for craft weed as an industry staple. For example, he considers whether or not a high maintenance plant like cannabis is fit for commercial growth and if corporations would be able to keep up with the demand for a variety of strains and resist commoditizing marijuana like wheat, soy or rice. The book beckons consumers to consider how a move toward commercial cannabis would not only influence their access to the seemingly endless amount of strains and products they have grown accustomed to, but also how it would impact the quality and efficacy of what they are consuming.

With 10 chapters and just under 200 pages of content (minus notes and an index), “Craft Weed” is a good read for people who are interested in going beyond the surface of business and learning about some of the other pieces that impact the vulnerable cannabis market. It’s a look at cannabis agriculture from all angles, with a little something for people with different interests in the topic. Some readers will appreciate the chapter on cannabis and its environmental impact, others may be fascinated about genetics and some will be drawn to stories and anecdotes from old-timers with decades of experience in the industry. For example, the book includes an interview with 65-year-old Elaine, who questions whether she can still survive in the new market after selling some of her harvest for record-low prices, and an interview with Sunflower, a seasoned grower who started her career working on guerilla grows and weathered multiple raids, but is now considering going legal.

The clear message throughout the book is that cannabis should not only be cultivated with the care, consideration and agricultural skill that it deserves, but also that the families who have dedicated their lives to farming quality cannabis and growers that maintain sustainable farming practices should be the ones growing it, not corporations looking to get rich. Stoa believes that marijuana legalization has the potential to revitalize the American family farm and rural economies nationwide and “can’t think of a more responsible approach to marijuana agriculture than a vigorous and cooperative community of family farms, supplying consumers with sustainable, high-quality marijuana, right here in the USA.”

Canadian Cannabis Regulation

Photo: Douglas Sprott.

In early March I participated in a fascinating symposium hosted by the McGeorge School of Law entitled Regulating Marijuana at Home and Abroad.  Perhaps because the marijuana industry is evolving so rapidly, every participant (and many of the attendees) seemed to have some new insight that no one else had picked up on yet.  I was given the opportunity to speak about the differences between US and Canadian marijuana agriculture regulations, highlighting some recent trends among US states on the one hand, and the Canadian federal government on the other hand.  

Canada's marijuana industry is at an inflection point this year, as Parliament is expected to consider and pass legislation that would legalize recreational marijuana use on the national level. Existing national regulations have proceeded in piece-meal fashion with mixed results.  This could be due to the fact that Canada's Parliament was forced to pass medical marijuana legislation by a series of court decisions that found it to be an unconstitutional violation of individual liberty and public health to maintain a federal marijuana prohibition.  I wrote an article comparing Canadian and US approaches to marijuana agriculture regulation that is forthcoming in the McGeorge Law Review (access it here). The introduction to the article is below: 

Federal marijuana policy in the United States and Canada has, in recent decades, been fixated on prohibition. That may be about to change.  In 2017, Canada is expected to become the first ‘Group of Seven’ nation to propose legislation that would legalize and regulate marijuana for recreational use.  According to the Canadian government’s party platform, “marijuana prohibition does not work.”  In a change of direction from decades of prohibition, the government is now calling for Parliament to “legalize, regulate, and restrict access” to marijuana.  Importantly, policymakers and regulators are in the process of developing a federal framework for marijuana regulation that would address agricultural considerations, including environmental impacts and protections for small-scale farmers.

The mood of the United States federal government is a marked contrast.  Marijuana has been a federally criminalized substance since passage of the Controlled Substances Act in 1970.  Following the 2016 presidential elections, there is uncertainty regarding President Donald Trump’s stance toward marijuana legalization and regulation on the state level. However, early indications suggest his administration is not interested in a federal regulatory framework.  Although the Republican Party in control of the federal government is generally supportive of federalism principles and state autonomy, there is fear that the federal government will interfere with state marijuana legalization and regulation efforts.  Absent a regulatory framework that goes beyond prohibition, there is little hope for federal involvement in agricultural or environmental issues facing the marijuana industry.

In addition to this contrast on the federal level, the United States and Canada have divergent experiences when it comes to subnational marijuana legalization and regulation.  In the United States, marijuana legalization has gained momentum and become commonplace on the state level.  California became the first state to legalize medical marijuana use in 1996.  Colorado and Washington then became the first states to legalize recreational marijuana use in 2012.  At the time of writing, twenty-eight states had legalized medical marijuana, while eight states (plus the District of Columbia) had legalized recreational marijuana.  Only five states have maintained a strict prohibition policy on marijuana cultivation, distribution, sale, or consumption.  These states represent less than five percent of the U.S. population.  Despite the federal prohibition, there are now a multitude of state regulatory frameworks in place, with a variety of statutory goals and approaches to compare. 

Canada has not experienced the same subnationally-driven path toward legalization.  Instead, the erosion of prohibition has been driven largely by the courts.  Regina v. Parker, 49 O.R. (3rd) 481 [2000], set the stage for legalization by declaring the federal government’s marijuana prohibition unconstitutional absent an exemption for medical necessity.  As the Court stated, “the marijuana laws forced the accused to choose between commission of a crime to obtain effective medical treatment and inadequate treatment,” a deprivation of liberty, security, and fundamental justice.  Invalidating the marijuana prohibition forced the Canadian Parliament to develop at least a basic framework for medical marijuana use.  Although the development of subsequent regulatory frameworks has been inconsistent, Canada’s experience with marijuana regulation on the federal level can serve as a meaningful starting point with which to pursue recreational legalization and regulation. 

A more developed exploration of U.S. and Canadian experiences with marijuana legalization and regulation is provided in the next section. However, this essay’s primary focus is on the contrasting experiences of these two countries with respect to marijuana agriculture.  The agricultural component of the marijuana industry is, after all, where the chain of supply begins.  And yet, the need for thoughtful and realistic agricultural regulations often takes a back seat to more visible concerns, such as distribution, marketing, sale, and consumption.  The lack of attention paid to marijuana cultivation is a disservice to farmers, regulators, and consumers.  Farmers often confront ambiguous or unresponsive legal requirements, and are forced to choose between staying in the shadows of the illicit market or attempting to comply with a confusing web of unrealistic regulations.  Policymakers and administrative agencies face their own challenge, tasked with creating an ambitious regulatory framework from scratch.  These regulators often do not have a history with the marijuana industry, or analogous regulations to fall back on.  Consumers and the public at large, finally, benefit from having a diversity of market options, as well as marijuana that is sustainably cultivated. 

The early record of marijuana agriculture regulation in the U.S. and Canada is mixed.  Some U.S. states, such as California, acknowledge the agricultural component of the marijuana industry and are taking steps to develop a regulatory framework that supports farming communities and the environment.  Other states, such as New York and Florida, aim to control cultivation by severely limiting the number of producers.  In any case, most states have not developed a robust regulatory scheme for marijuana that comprehensively addresses agricultural issues.

Canada’s approach to marijuana agriculture regulation has been simultaneously restrictive and permissive under the current medically-focused framework.  On the one hand, Health Canada (authorized to regulate cultivation) has only issued thirty-seven cultivation licenses nation-wide, despite receiving 1,561 applications.  Eleven Canadian provinces have two cultivators or less.  In addition, marijuana can only be grown indoors, an energy-intensive agricultural method that artificially reproduces the light, soil, and water conditions found on outdoor farms.  On the other hand, licensed cultivators are allowed to develop, grow, and sell whatever strain(s) of marijuana they see fit, and are free to set their own prices. 

In anticipation of legislation that would legalize and regulate recreational marijuana in Canada, the federal government formed a task force to make recommendations on marijuana policy.  The task force report recommended significant changes to the current approach to agricultural regulation.  Notably, the report recommended that: 1) the federal government take the lead on regulating agriculture; 2) licensing schemes be adapted to promote a diversity of cultivators, including small-scale farmers; and 3) environmental protection be promoted through regulations that include licensing and supporting outdoor farmers.  If implemented, the recommendations would represent a markedly more diverse and inclusive approach to marijuana agriculture regulation.

This essay proceeds accordingly.  In Part II, a brief history of marijuana prohibition, legalization, and regulation in the U.S. and Canada is provided and contrasted.  Part III paints a picture of marijuana agriculture regulation in the U.S. by exploring approaches in three states (California, Colorado, and Washington) where regulatory frameworks for cultivation are relatively developed.  Part IV tells the Canadian story (where agricultural production is, for now, scarcely permitted), while looking ahead to impending regulations for recreational marijuana.  Part V concludes by drawing out common regulatory successes and failures, with an eye toward lessons learned that can inform the future development of marijuana agriculture regulations in the United States and Canada. 

Listen to my interview on News Talk 770

Screenshot taken from The New Republic.

Last week I wrote a piece in The New Republic (originally published in The Conversation) on the subject of Big Marijuana and the promise of the appellation model as a mechanism to regulate marijuana agriculture.   Long-time readers of this blog will be familiar with my arguments, but it's always a pleasure to see them published, posted, tweeted, and commented on in the broader media.  Thanks to all who wrote personal messages (even if some were, let's say, skeptical of my ideas).  

Dan Riendeau is the host of @Night on News Talk 770, a Calgary-based news radio station.  He interviewed me last week to flesh out some of the ideas I wrote about in the New Republic.  We talked about the trade-offs of legalization, the rise of Big Marijuana (and whether or not it is truly inevitable), and the wine industry's appellation model.  You can listen to the full interview (about 15 minutes) below.  An alternate link is available here.

Introducing "Marijuana Appellations: The Case for Cannabicultural Designations of Origin"

A hemp farm at the University of Kentucky was shown to the public in 2015.  Appellations for the cannabis industry may be effective in organizing agricultural regions according to plant type.  Photo: UK College of Agriculture.

Back in April, I posted my second law review article on marijuana regulation, "Marijuana Agriculture Law," forthcoming in the Florida Law Review.  I also previewed a section of the article that addressed the novel concept of applying appellations (or designations or origin) to the marijuana industry.  The thoughtful editors at the Harvard Law and Policy Review enjoyed the article, and I agreed to expand my research on marijuana appellations into an article for their forthcoming issue on the war on drugs.  

The article, "Marijuana Appellations: The Case for Cannabicultural Designations of Origin," is now available for download.  The introduction is provided below:

When California Governor Jerry Brown signed the Medical Marijuana Regulation and Safety Act (MMRSA) into law in October of 2015, the bill was hailed as the first step towards putting into place a regulatory framework for marijuana agriculture.  Although the state had legalized medical marijuana in 1996, there had been little to no effort to regulate the industry in any way, particularly its many farmers.  The MMRSA was a step in the right direction in many ways, not least of which was to prepare for the prospect of full-blown recreational use legalization in 2016.  The MMRSA comprehensively tasked state agencies with creating regulatory frameworks for a number of key issues facing the marijuana industry, including licensing, product tracking, labeling, pesticide use, and environmental impacts.

Buried deep in the text of the MMRSA is a provision that would allow the newly-established Bureau of Medical Marijuana Regulation to profoundly shape the nature and direction of the marijuana industry: “the bureau may establish appellations of origin for marijuana grown in California.”  Even if the bureau does not establish marijuana appellations, the MMRSA prohibits the use of California county names in the marketing, labelling, or sale of marijuana products unless the marijuana was grown in that county.    

An appellation is a certified designation of origin that may also require that certain quality or stylistic standards be met.  Appellations are most commonly associated with the wine industry, but they can be applied to any agricultural product in which the geographic origin carries importance.  The MMRSA provision, although seemingly innocuous, may have far-ranging effects on the marijuana industry in the United States.  As the most populous state in the Union and most prolific marijuana producer, California’s approach to marijuana agriculture regulation is likely to dictate, or at least influence, how, where, and by whom marijuana is grown. Already there is evidence in California that grassroots efforts are underway to establish local designations of origin for marijuana agriculture.  

If the marijuana industry (or even California) were to adopt the appellation model, it would throw cold water on prevailing assumptions that marijuana will become an agricultural commodity in a post-prohibition world.  The demise of the small-scale marijuana farmer is a common narrative of marijuana legalization discourse.  States across the country are legalizing the medicinal or recreational use of marijuana, and with rapid legalization is sure to come an increase in demand.  According to this narrative, it is inevitable that the marijuana industry will consolidate into a handful of agricultural conglomerates producing vast quantities of indistinct marijuana.  As it becomes an agricultural commodity the market will be flooded with cheap marijuana, driving down prices and driving out small-scale farmers.

The narrative is compelling, but misguided.  This Article argues that commoditization and consolidation of the marijuana industry is not inevitable (or even likely), and that marijuana appellations, or American Cannabicultural Areas (ACAs), offer a more promising alternative.  The early history of marijuana legalization suggests that the potential for marijuana farming to remain a small-scale vocation is strong.  To begin with, the market is already dominated by small-scale farms – there are an estimated 50,000 marijuana farms in California alone.  While legalization will no doubt disrupt the industry and create new market participants, it is unlikely that these farms will submit to the ‘Big Marijuana’ narrative.  On the contrary, many of the earliest states to legalize marijuana cultivation have placed severe restrictions on cultivation areas.  In addition, the market for marijuana products is subdivided into an incredible number of marijuana strains, each of which produce their own effects and flavor profile.  As the industry continues to create unique and differentiated strains, it will be difficult to envision marijuana as an agricultural commodity.

Some regions are already experimenting with marijuana appellations, and while challenges to widespread adoption are significant, a marijuana appellation model has promise.  On the other hand, there may be a role for large-scale cultivation and distribution of hemp, a derivative of cannabis plants that is used for industrial products instead of direct human consumption.  Whether or not this duality becomes the norm, commoditization and consolidation is not inevitable.  Marijuana appellations have a bright future, and represent a more local and sustainable agricultural model for the marijuana industry.

Access the full article here.

Introducing 'Marijuana Agriculture Law'

Photo: Brittney

If you've been following this blog for the past few weeks, you've noticed that I've been teasing out my forthcoming article entitled "Marijuana Agriculture Law: Regulation at the Root of an Industry."  I wrote about marijuana appellations, as well as the potential for counties across the country to start adopting a marijuana ordinance.  I've been working on the article for the past few months, and I'm pleased to finally post a full draft online.  See here for access to the article.  The article will be published in the Florida Law Review sometime next year, but this draft is available immediately.  Major themes covered include the potential commoditization/consolidation of the marijuana industry, the environmental regulation of marijuana agriculture, and the administrative challenges of regulating this new industry.  Below is the introduction to the article:  

Across the United States, voters are weighing the costs and benefits of marijuana legalization.  As many as sixty marijuana legalization initiatives may appear on election ballots in 2016, legalizing the recreational or medicinal use of marijuana in as many as 17 states and adding to the growing number of states that have already legalized marijuana.  As states move toward legalization, governments will need to address a broad range of regulatory issues, including the distribution, sale, and consumption phases of the supply chain.  But legal marijuana’s track record so far suggests that the agricultural component of the marijuana industry is being ignored.  Whether states are failing to appreciate marijuana’s agricultural roots or choosing to disregard them, the industry’s direction will be out of state control until regulatory frameworks are in place.  

Nowhere has this been more apparent than in California.  In 1996, California voters passed Proposition 215, the Compassionate Use Act (CUA).  With the CUA California became the first state to legalize the medicinal use of marijuana, exempting patients and prescribing physicians from criminal prosecution.  The text of the act was short, and did not address how the state or local governments were intended to regulate the marijuana industry.  It did not, for example, assign regulatory authority to an administrative agency, articulate limits on possession or cultivation, or propose a broad regulatory framework from which the state or local governments could operate. 

In the wake of the CUA a legal medical marijuana industry was created in California, and the industry experienced tremendous growth, notwithstanding the absence of any meaningful state regulations.  But the CUA’s omissions prompted the state legislature to enact the Medical Marijuana Program Act (MMPA) in 2003, which, among other measures, restricted the number of plants medical marijuana patients or designated caregivers could cultivate, and assigned further regulatory authority to the Attorney General.  Even these limits, however, became legally ambiguous guidelines after the California Supreme Court ruled that the rights established by constitutional amendment Proposition 215 could not be limited by legislative act.  The upshot of these early experiments with marijuana legalization is that California’s burgeoning marijuana industry has been more or less unregulated for twenty years.

In the absence of regulation, marijuana cultivation in California has exploded, with approximately 50,000 marijuana farms accounting for 60% of all marijuana grown in the United States.  There are as many marijuana farms in Humboldt County, California, as there are wineries statewide.  And this un-checked growth in marijuana agriculture has consequences for the sustainability and potential growth of the industry.  Marijuana farming has been blamed for sucking rivers dry, poisoning soil and water resources with pesticides and rodenticides, and clearing mature forests.  Much of these criticisms are flawed, as research on the environmental impacts of marijuana farming is nascent and rarely acknowledges that farmers can grow responsibly and sustainably on private lands. 

Many farmers would welcome the security of being in compliance with state and local laws, while being distinguished from cartel operations or destructive “trespass grows” on public lands.  As it stands, farms on private property remain vulnerable to police raids and asset forfeiture laws, and are unable to take advantage of typical agricultural government services, such as crop insurance programs or pesticide-free certifications.  Because marijuana agriculture’s regulatory contours have remained ambiguous for so long, the marijuana agriculture industry has been poorly understood by states and the public.  This disconnect presents a threat to responsible management of legal marijuana markets. 

Fortunately, change is on the horizon in California.  In January 2016, the Medical Marijuana Regulation and Safety Act (MMRSA) came into effect, with ambitious proposals to create comprehensive regulations for marijuana agriculture.  The MMRSA assigns authority for various regulatory responsibilities to a variety of state agencies, including the Department of Food and Agriculture, Department of Fish and Wildlife, Department of Public Health, and the State Water Resources Control Board.  Said the author of the bill, “cultivators are going to have to comply with the same kinds of regulations that typical farmers do…it's going to be treated like an agriculture product.”  It took twenty years to get there, but marijuana cultivation has finally been recognized as an agricultural activity in California, and may now be regulated as such.

The same cannot be said for every state that has legalized, or is considering legalizing, medicinal or recreational marijuana.  In many states the immediate regulatory priority is the distribution, sale, and consumption of marijuana.  Colorado legalized recreational marijuana by passing Amendment 64: The Regulate Marijuana Like Alcohol Act of 2012.  For political and public health reasons the analogy makes sense, but it also reveals a regulatory blind spot.  States may be using alcohol as a model for regulating the distribution, retail, and consumption of marijuana, but marijuana is much more than a retail product.  It is also an agricultural product, and by some measures, the largest cash crop in the United States.  Since marijuana prohibition laws were passed long before any regulations for cultivation were developed, states are facing an unprecedented challenge: regulate, for the first time ever, one of the country’s largest agricultural industries.  

Early indications suggest that states are making little effort to regulate marijuana cultivation, or fail to appreciate the disruptive potential of marijuana agriculture.  21 states may have marijuana legalization initiatives on their ballots for the 2016 elections.  Colorado, Washington, Oregon, Alaska, and Washington DC have already legalized the medicinal and recreational use of marijuana.  But few of these states are anticipating the unique regulatory challenges that marijuana agriculture presents.  Even fewer are prepared to tackle them.

This Article argues that marijuana is a burgeoning agricultural industry, and calls for regulations that recognize it as such.  As the field of marijuana agriculture law is incipient, this article provides a roadmap for the major regulatory issues states and the industry are likely to encounter.  Many agricultural policies and programs are created or supported by the federal government, and would not apply to marijuana agricultural activities that run afoul of federal marijuana prohibition laws.  Therefore, states and the marijuana industry will need to be creative in providing analogous regulatory functions.

The most immediate choice regulators will be forced to make is between an approach that incorporates the marijuana industry into the existing regulatory framework for agriculture (essentially treating marijuana like any other agricultural product), or an approach that creates a separate regulatory framework for marijuana cultivation.  While the former has its benefits, and may be achievable long-term, marijuana’s transition from the black market may call for a targeted regulatory scheme in the interim. 

Another fundamental issue facing the marijuana agriculture industry has not yet been conclusively resolved: is marijuana an agricultural commodity?  Commodities are fungible goods with no qualitative differentiation, such as wheat or soybeans.  Many existing farmers fear that marijuana markets will be flooded with cheap, indistinct marijuana grown by “Big Ag” conglomerates.  To counteract these concerns, some industry groups are advocating for states to adopt an appellation model of marijuana cultivation that would preserve markets for regional marijuana products and maintain quality standards.  States and counties can play a large role in this existential question by adopting or rejecting the appellation model, or by enacting other regulations that facilitate or preclude the consolidation of marijuana agriculture.

There is an environmental component to marijuana agriculture that will also require regulatory attention.  Pesticides and fertilizers facilitate plant growth, but may reduce soil and water quality.  There is a market for organic or pesticide-free marijuana that states and the marijuana industry may wish to cultivate.  Marijuana agriculture also requires appropriate quantities of water for irrigation and, when grown indoors, energy resources.  Regulators must balance an interest in providing resources to a growing industry with the need to manage those resources sustainably.  

When the environment does not cooperate, the federal government has been instrumental in providing stability to the agricultural industry by regulating crop insurance and providing disaster relief.  As marijuana farmers would not be eligible for these programs, states may want to provide their own support structures.  However, it may be difficult to avoid the federal government’s institutional and legal reach, presenting federal preemption concerns.

Another question concerns power sharing: where can/should regulatory authority be placed?  Local governments may play a large role in the direction of marijuana agriculture, as states with marijuana regulations have so far been broadly permissive of counties and municipalities creating their own (often more restrictive) marijuana agriculture regulations.  Local governments can utilize their lawmaking powers to shape agricultural policy for the marijuana industry, but this decentralized nature of policy-making may come at the expense of regulatory clarity for the state as a whole.

Keeping the regulatory framework centralized on the state level provides more consistency, but may be difficult to apply in states where political support for marijuana cultivation changes drastically by jurisdiction.  In addition, states will need to decide whether to consolidate regulatory authority for marijuana into one state agency, or to assign different roles and responsibilities to several agencies and regulate cooperatively.  Colorado has adopted the former model, while California the latter.  

In February 2016, Humboldt County passed a comprehensive commercial marijuana cultivation ordinance, one of the first of its kind.  As the heart and soul of California’s marijuana agriculture sector, Humboldt County has consistently played a leadership role in the development of the marijuana industry, and this ordinance may prove instrumental in shaping marijuana agriculture policies around the country.  The ordinance addresses many of the issues identified in this article, placing limits on farm size, water, and energy use, while developing an artisanal labelling program.  The Humboldt County ordinance is an ideal case study for the nascent field of marijuana agriculture law, and underscores the need for state and local governments across the nation to start developing their own regulatory framework.   

Never before has a major agricultural product entered legal markets with the pace and scale that marijuana is entering them today.  States face an unprecedented regulatory challenge, and ignoring the agricultural dimension of the marijuana industry is not a sound long-term approach.  This article will present and analyze the most significant legal and regulatory challenges states will face when legalizing marijuana.  Responsible and sustainable marijuana agriculture can be fostered at the state level, but only if regulations are responsive to the unique and unprecedented challenges that marijuana agriculture presents.

The Marijuana Ordinance

Arcata Plaza, Humboldt County, California.  Photo: Terrence McNally.

One of the early trends in marijuana regulation is to include a heavy dose of local governance.  States that have legalized marijuana cultivation, sale, and consumption are being broadly permissive of local governments that want to enact their own marijuana regulations.  Local regulations can be more or less permissive of marijuana activities (often they outright prohibit the cultivation or sale of marijuana), and for states the advantages of local governance are numerous.  Because marijuana regulation is so new, states often have little experience or expertise on the subject, so getting local governments involved helps develop institutional capacities.  It also encourages experimentation with diverse regulatory approaches that might lead to innovative or create policies that can be replicated in other localities or on the state level.  And, since many legalization statutes are created by ballot initiative, allowing local governments to create their own rules makes marijuana regulation a less divisive issue on the state level, where politicians might retain some discomfort with the industry.

Local governments can use their power to enact ordinances to regulate marijuana agriculture, and that power has been utilized in states like California, Colorado, and Washington.  In most cases, though, ordinances make small changes or adopt broad positions.  There are few ordinances that comprehensively address marijuana agriculture.  Humboldt County, however, is an exception, having recently passed the Commercial Medical Marijuana Land Use Ordinance. Humboldt County officials had been working on the Marijuana Ordinance for several years, in collaboration with marijuana industry groups and farming representatives.  The close collaboration between local officials and industry representatives enabled the ordinance drafting process to move forward quickly and with political support, a dynamic that may prove to be equally helpful in other jurisdictions.  

My forthcoming article on marijuana agriculture goes into detail on the Humboldt County Marijuana Ordinance.  Part of that analysis is reproduced below:

The Marijuana Ordinance itself is relatively comprehensive in scope, addressing farming styles (indoor, outdoor, and mixed), historical use protections and benefits for existing farms, tiered permitting requirements based on zoning classifications, total farm acreage and marijuana cultivation area, water quantity and quality protections, energy use, and farm labor standards.  The ordinance addresses many of the issues explored in this article, and the choices those issues present to local governments.  The ordinance represents a clear attempt to regulate marijuana agriculture in a tailored fashion; marijuana cultivation limits (no more than one acre) indicate a preference for small scale farming and a rejection of large-scale consolidation models, demonstration of sufficient water rights and water quality compliance permits are required, and energy used in indoor farms must come from renewable sources or be offset with carbon credits.  The ordinance even attempts to create a ‘Humboldt Artisanal Branding’ certification program for small-scale, organic marijuana farms.  The Marijuana Ordinance does not address crop insurance or disaster relief, but local governments are not well-suited to provide financial services of this nature.

The central tension local governments face when regulating marijuana agriculture, particularly in jurisdictions where marijuana is already a primary crop, is between the need to bring farmers out of the shadows and into the regulatory system, on the one hand, and the need to create and enforce regulations that have a meaningful impact on cultivation and the direction and impact of the industry, on the other hand.  The Marijuana Ordinance addresses this tension by incentivizing existing farmers to register and participate with the county by providing benefits to those farmers who step forward within 180 days following passage of the Ordinance.  Those benefits include a larger maximum cultivation area (43,560 square feet, as opposed to a maximum 10,000 square feet for new farms), as well as a certificate of good standing for purposes of priority processing of state permits.  In addition, the ordinance incentivizes the retirement and relocation of existing farms located in environmentally sensitive areas by allowing farmers to cultivate an area four times larger in environmentally resilient areas.

It remains to be seen if the certificate of good standing will have meaningful value, but the cultivation area restrictions on new farms (which would include existing farms that chose not to register by the deadline) are significant, and may ultimately provide a pronounced advantage to existing farmers, who can cultivate an area over four times larger than new farmers.  In my conversations with farmers in the county, “to legalize or not to legalize” has been a frequent topic of debate.  Considering the isolationist nature of the marijuana farming industry in northern California, that debate is a promising sign for the county.

In other aspects, the Marijuana Ordinance is less well thought out.  It is logical to require that marijuana farmers have water rights (either riparian or by appropriation) sufficient to meet their agricultural needs, as well as water use plans and other documents certifying water use, but the ordinance may require water rights holders to agree to forego any water diversions from May 15th to October 31st.  Instead, marijuana farmers would be required to collect and store water during the rainy season in quantities sufficient for the dry season.  While there is some evidence that water used for purposes of marijuana cultivation may have adverse effects on water resources during periods of low flow, the ordinance’s prohibition on dry season water use as a general rule is unprecedented.  

The environmental impacts of this rule are unclear, as well.  While wet season flows are high and waterways can likely support an increase in diversions, ecological processes may depend on these traditionally high flows, and widespread wet season diversions and water storage may disrupt the wet season environment.  In addition, since irrigation demands are substantial during the dry season, the environmental impact of building large storage tanks on every marijuana farm, necessitating building materials, construction waste, and a storage footprint, may outweigh the benefits intended by the rule.  Moreover, if this rule is perceived to be unreasonable and infeasible by marijuana farmers, they may reject the ordinance and regulatory process as a whole.

Cognizant of its shortcomings and the hurried nature of its drafting, the Marijuana Ordinance contains a flexibility provision that may reassure skeptical farmers that compliance is attainable.  If, upon inspection, a marijuana farm does not comply with the requirements of the ordinance, a farmer may nonetheless be granted a provisional license, as well as a two-year window within which to cure the violation.  The provision is not only generous with respect to the compliance grace period, it also may provide enough time for county officials and marijuana farming representatives to address problematic aspects of the ordinance and make amendments prior to enforcement of violations.  It will take time for farmers to adjust to the dry season water use ban, if they adjust at all, but two years may be sufficient to devise wet season storage infrastructure or develop an alternative water use plan with the county and state officials. 

It is clear that marijuana ordinances are in their infancy.  So far most local governments have only superficially addressed marijuana agriculture.  Humboldt County, however, has capitalized on its economic and political ties with the marijuana farming community to develop a first-of-its-kind marijuana agriculture ordinance.  It remains to be seen if the county’s marijuana farmers buy into the regulatory framework, but initial signs are promising.  As marijuana legalization and regulation moves forward, the Humboldt County Marijuana Ordinance may prove to be a model for local governments.

Marijuana Appellations: the future of the marijuana industry?

Photo: Gavin White

For the past few months I've been working on another article about marijuana regulation.  This time I'm looking at the ways in which the marijuana industry will interact with state agricultural laws and policies.  One of the issues I address in the article is the perceived inevitability of the marijuana industry becoming consolidated into a small number of large-scale farms producing vast quantities of marijuana.  This would have the effect of turning marijuana into an agricultural commodity, indistinct, cheap, and widely available.  For understandable reasons many in the marijuana industry, as well as other stakeholders, bemoan this inevitable future.  

I don't believe that consolidation and commoditization is inevitable.  In fact, there are a number of ways in which the marijuana industry can evolve and continue providing a role for small-scale farmers producing unique products.  One approach is to follow the wine industry's lead and adopt appellations for marijuana.  As a preview of my article, I'm posting below my discussion of marijuana appellations and their viability going forward:

In response to fears that legalization will lead to commoditization of the marijuana industry and a consequent influx of generic marijuana that runs small-scale farmers out of business, some jurisdictions have proposed adopting appellations for marijuana cultivation.  An appellation is a certified designation of origin, that may also require certain quality or stylistic standards be met.  Appellations are most commonly associated with the wine industry, but they can be applied to any agricultural product in which the geographic origin carries importance.  The wine industry’s model rests on the assumption that environmental conditions (soil, aridity, temperature, etc., collectively known as the “terroir”) influence grape quality, and there is general agreement that assumption has merit.  Designation requirements that have quality standards also tend to increase the quality of grapes grown in the appellation, improving wine quality and the region’s reputation.

As the reputation of a region’s agricultural product grows, the appellation designation creates a unique market for the product, increasing prices while precluding other producers from associating their products with the region.  Appellations therefore create mandatory differentiation in the market, frustrating efforts to commoditize the industry.  Protectionism of local industries and their brands (e.g., Champagne, France) has a secondary benefit: by certifying that products with geographic indicators are accurately designated, consumers are assured of authenticity.  These twin goals of providing economic benefits and consumer protection underlie the basic motivations of most appellation systems.

There are several reasons the appellation model may be well-suited for the marijuana industry.  First, there is some merit to the claim that environmental conditions influence marijuana quality, and would therefore provide a basis for place of origin designations.  Marijuana farming has become so widespread in northern California in part because growing conditions there are ideal.  While California is known for being an infamously arid state, in reality the problem is distributional: while almost all of its population is located to the south, most of the state’s water resources were historically located north of Sacramento.  That is a problematic dynamic for population centers and the agricultural Central Valley, but it provides ample water resources for marijuana farming.  As a double bonus, California’s northern counties are dry during the summer growing season, when excess precipitation and humidity might dampen and spoil marijuana crops.  

In Jamaica, by contrast, marijuana farmers traditionally used genetic strains that were accustomed to tropical humidity and temperatures, cultivating marijuana with unique characteristics.  Seed companies regularly market their strains to match a diversity of outdoor conditions.   Instead of competing with each other to produce the most popular generic strains, appellations allow regions to embrace the strains that grow well in their environment.  For example, France’s Burgundy and Rhône regions are well-known for growing pinot noir and syrah grape varietals, respectively.  Neither region is threatened by outside producers or forced to adopt ill-suited varietals because they have created individual markets for their own well-respected grapes.  The same could be true of marijuana producing regions.

The economic incentive to provide monopolistic protections and marketing power to appellation regions is, without doubt, relevant to the marijuana industry.  Counties that have developed robust marijuana farming industries may feel that the influx of mass-produced generic marijuana that would come from national legalization may wipe out their existing small-scale farmers. Appellations can protect the brand-name associated with a region.  An appellation system could ensure that only marijuana grown in Humboldt County, California carries with it the Humboldt County designation.  In addition, marijuana appellations can adopt specific standards that collectively enhance the quality and reputation of their region.  In France, for example, wine appellations can require that vineyards only use certain varietals, limit irrigation practices that increase yields at the cost of grape quality, or attain a predetermined alcohol content.  While these requirements make production more challenging, they collectively increase the region’s overall product. Many of these practices could be applied to marijuana cultivation as well.

Of course, this model would require a broadly inclusive (i.e., transboundary) regulatory framework in order to be effective.  The United States wine industry’s appellations are regulated by the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB), but for obvious reasons the TTB is unlikely to establish a national appellation system for marijuana if cultivation remains illegal under federal law.  States can develop their own appellation frameworks, however, and as long as states maintain import/export bans (likely in the short-term given federal interstate commerce enforcement concerns) those state regulations may prove effective.  State appellation regulations may even prove resilient if the federal prohibition is lifted and a federal agency regulates the industry.  

It would be difficult for individual counties or local government bodies to enforce their own appellation designations if other jurisdictions do not follow suit.   Enforcement of geographic indicators outside of the regulatory body’s jurisdiction is notoriously difficult.  In one infamous case, it took fourteen years and a trade mission for the Napa Valley Vintners Association to convince the Chinese government to grant protected status to the term “Napa.”   While the marijuana industry is increasingly mobilized and represented through interest groups, it will be difficult to force jurisdictions to recognize geographic indicators without the assistance of a broader regulatory framework.  Still, local attempts to create appellations can generate momentum and set precedent for other jurisdictions to replicate the model.  It is not a given that the TTB will establish marijuana appellation regulations upon legalization, but state and local governments can make that more likely by creating the foundations for regulation.

The second incentive to create appellations – providing consumer protection – is equally compelling in the marijuana industry.  Because marijuana has been (and in many jurisdictions continues to be) cultivated on the black market for so long, consumers have traditionally had little to no information regarding where or how their marijuana was grown.  It is notoriously difficult to determine the origin of marijuana even in the aggregate, but by one estimate two-thirds of marijuana consumed in the United States came from Mexico in 2008.  Given the well-publicized violence and corruption associated with Mexican drug cartels, it is not unreasonable to believe consumer behavior would reflect a preference for domestically grown marijuana if geographic designations were reliable.  Given marijuana’s illicit dimensions in many jurisdictions where it remains prohibited, marijuana appellations can provide some assurance of authenticity and ethical cultivation.  There is evidence that legal marijuana cultivation in the United States is driving “cartel grows” out of business; appellations can assist the market in providing consumers with choices that meet their standards in similar fashion.

Appellations can provide consumers with more information than place of origin as well.  The requirements common in French wine appellations mentioned above (e.g., restricting supply, eligible varietals, or alcohol content) are not only collectively beneficial to the region’s producers, they can provide more information to the consumer as well.  Considering how many strains of marijuana are in existence, there is value in a regulatory framework that easily and reliably communicates important characteristics to consumers, such as the strain and its THC or CBD levels.

There is reason to doubt that the marijuana industry can or should adopt appellations, however.  Perhaps the most significant obstacle is the fact that a significant percentage of marijuana is grown indoors.  Since outdoor cultivation was risky during prohibition, the marijuana industry has a long-track record of, and experience with, indoor cultivation.  Growing indoors now offers advantages beyond privacy, allowing farmers to manipulate growing conditions such as soil content, air temperature, and light energy to maximize yields.  As one might expect, however, growing indoors makes the “terroir,” or geographic elements, irrelevant. 

However, appellations can still be useful in creating unique localized markets if regions adopt certain growing standards.  The marijuana industry has come under intense scrutiny on account of the energy demands of indoor agriculture (see below), and appellations could require indoor operations to meet clean energy standards.  One county has already required indoor farms to use exclusively renewable energy sources.  Appellations could also provide incentives for the industry to transition to, and embrace, outdoor cultivation by providing the geographic indicator protection (and its economic benefits) solely to outdoor marijuana farms.

Of course, while appellations would frustrate efforts to commoditize marijuana, an appellation system would not preclude consolidation.  The U.S. wine industry has been experiencing rapid consolidation despite a robust origin-focused appellation system.  Nonetheless, the number ofsmall-scale vineyards has remained stable, indicating a strong market for unique wines.  And it may be that consolidation is facilitated by the fact that U.S. appellation designations are only concerned with geographic origin, and do not impose quality or cultivation standards on producers.  In any case, the benefits of a marijuana appellation system are sufficient to justify consideration.  Especially in regions concerned that mass-produced generic marijuana will have devastating economic consequences for small-scale farmers, finding ways to differentiate products and generate market value will be an important policymaking objective.  A marijuana appellation system may provide the regulatory framework needed to achieve it.

California passes bills to regulate marijuana cultivation

California Governor Jerry Brown.  Image: Ohad Ben-Yoseph.

Medical marijuana has been legal in California since 1996, when the state passed Proposition 215 establishing the Compassionate Use Act.  It took almost 20 years, but legislators finally took steps to create regulations for the marijuana industry.  Over the weekend three bills - AB 243, AB 266, and SB 643 - were signed into law by Governor Jerry Brown.  Of these, AB 243 is the most significant in my view, as it finally creates a regulatory framework for marijuana cultivation, the first step in the supply chain that is often overlooked.  The bill would empower several agencies, including the Department of Food and Agriculture, the Department of Fish and Wildlife, and the State Water Resources Control Board, to develop regulations that would minimize the environmental impacts of marijuana cultivation while encouraging farmers to participate in the regulatory process instead of remaining in the shadows.

That last part is important - by some counts there are around 50,000 marijuana farms in California, and many of them are adept at clandestine agriculture.  Alissa Walker, writing for Gizmodo, wrote a really nice article this week pushing back on the "weed is sucking rivers dry" narrative.  It's worth a read.  She also quotes me saying that the job isn't done yet: regulators still have to develop the regulations and get farmers to participate:

[T]here’s another risk for suddenly applying regulations to what has thrived as an essentially black market industry for decades, according to a study by Ryan Stoa, a Senior Scholar at Florida International University who specializes in environmental and natural resources law.

He spent the last few months interviewing cultivators and scientists throughout the Emerald Triangle and believes that some regulatory water rights issues still need to be worked out—especially because so much of the state’s meager rain falls in those northern counties where pot cultivation is expanding. “If you take a really heavy-handed approach to regulation, people will stay on the black market,” he says. “Regulators need to find that delicate balance between regulations that protect the environment while providing incentives for farmers to participate.”

It will be fascinating to watch California set up these environmentally-conscious cultivation regulations.  Even states that have legalized recreational marijuana use (like Colorado or Washington) have done very little to address cultivation, much less the environmental impacts of it.  California, it seems, is giving it a shot.

Regulating Marijuana: Water Agencies vs. Law Enforcement

Photo: USFS Region 5

Marijuana legalization is spreading quickly across the United States.  One of the toughest challenges for state governments will be to create a regulatory infrastructure for the marijuana industry that strikes the right balance.  Enact policies that are heavy-handed and the industry will continue to show itself capable of surviving on the black market.  Fail to regulate at all and the legal marijuana market will struggle with uncertainty and negative externalities.  Colorado's nascent marijuana regulations have been relatively well-reviewed, in part because it had the luxury of starting from nothing.  But in California the marijuana industry has been entrenched for decades, while cultivation and consumption for medicinal use has been legal since 1996.  Nonetheless, the state has not prioritized regulation of the industry, nor made any meaningful attempts to innovate or adapt to changing conditions.  I've written in the past about the environmental impacts of excluding the industry from the regulatory framework (see here and here), as well as the difficulties states may have when choosing which of their many administrative agencies will take responsibility for regulation (see here).

Both of those issues are now converging in Northern California, where the state's regional water board is at odds with state and local law enforcement.  Adrian Fernandez Baumann reports on the North Coast Regional Water Quality Control Board's efforts to partner with marijuana farmers to regulate water resources:

The water board reps' basic pitch: Starting this summer, and going fully into effect next spring, the board would regulate cannabis cultivation on the basis of environmental impacts. Growers would be asked to invest time and money in the proper stewardship of the land and in repairing damage that had already been done. In exchange, the board offered, basically, an understanding: the government would give growers time to fix old problems and would provide a them with a framework to diagnose and repair issues. And all of it would be totally, officially, unconcerned with the legality of marijuana.

In principle the system should work, and some growers are enthusiastic.  But this program, and any others promulgated by state or local agencies, will face the same challenge: establishing sufficient (if not exclusive) control over marijuana regulation such that the actions of other agencies don't interfere.  This was a problem for a similar program that was eventually broken up by the federal government.  And considering that marijuana raids as recently as late June targeted private property owners, it may be a problem for the water board's program as well.

For law enforcement, there are strong incentives to ignore the water board's call for cooperation and to just keep raiding. Asset forfeiture laws allow police to seize large amounts of money and assets in pot busts. In 2014, Mendocino County seized $5.2 million in assets, including $3.9 million in cash.The Mendocino District Attorney's Office takes things even further with its "restitution" program, which co-opts a law intended to pay for meth lab clean-ups to extract more money from growers. Basically, the DA approaches busted growers with a deal: Give us some cash for each pound confiscated and you get no jail time. The amount is negotiable. Officially, it's $50 per plant and $500 per pound, but it often ends up in the tens of thousands of dollars. The funds then get divided up between the DA and the arresting agency, creating a revenue stream with little democratic oversight.  

There are advantages to decentralized regulation, among them the innovation and experimentation that local agencies create.  But there are drawbacks as well, and generally speaking, decentralization and fragmentation are not the same thing.  The former shifts power to local governments with local expertise, while the latter spreads overlapping mandates around between agencies and requires extensive coordination and cooperation.  The marijuana industry will implicate many state and local agencies, but to be effective and integrated, the state will need to set some ground rules for how those agencies interact.  If it does not, expect more programs working at cross-purposes.

The Environmental Impacts of Marijuana Prohibition, Ctd

Photo: California National Guard.

A reader sends along an interesting take from Mother Jones on the recent large-scale raids on marijuana properties in northern California.  The report supports my concerns (outlined here) that water-stressed areas might start experiencing an awkward convergence of water and marijuana legal frameworks as states begin focusing their limited enforcement capacities on properties allegedly violating both paradigms:

There were helicopters, SWAT teams, and nearly 100,000 marijuana plants yanked out of the ground, but last week's massive raid in Northern California's rugged Emerald Triangle was not your father's pot bust. Carried out by county law enforcement with no help from the DEA, it targeted private landowners—and not just because they were growing pot, police say, but because they were illegally sucking some 500,000 gallons of water a day from a section of the nearby Eel river that is now stagnant and moss-ridden.  In short, the cops say this was as much a water raid as a pot raid. 

I remain skeptical of using water rights violations as a justification for marijuana raids, largely because marijuana cultivation remains at-best a gray-market activity, making it difficult for growers to comply with state environmental regulations without making themselves vulnerable to federal seizures and arrests.  And as with other regulatory realms, the state will struggle to enforce consistently:

A leading advocate for Northern California pot growers scoffs at the notion that the raid was environmentally motivated. "This isn't about the environment; this is about business as usual," says Hezekiah Allen, director of the Emerald Growers Association [...] "There are 2,200 un-permitted water diversions for wine grapes in the Central Valley," he points out, citing a state report, "so I am curious when we are going to see the sheriff show up and chop down un-permitted vines. If we are agnostic about what the crop is, the same crime should lead to the same activity. That is all we are asking, just to be treated like any other crop."

Who should have regulatory authority over marijuana?

The Mayor of Seattle signs an ordinance creating a regulatory framework for marijuana in the city.  Photo: Jen Nance.

Recreational use of marijuana is now legal in Colorado, Washington, Oregon, Alaska, and Washington DC.  Between now and election day 2016, an additional 14 states may place marijuana legalization initiatives on their ballots, including: Arizona, Arkansas, California, Georgia, Ohio, Maine, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, and Wyoming.  23 states and Washington DC have legalized medical marijuana, with up to seven states pending legislation.  In 2016 Florida is likely to again consider legalizing medical marijuana; a similar 2014 ballot measure narrowly failed to reach the 60% supermajority required.  

Amid the stampede to legalize marijuana production, distribution, sale, and use, states are experimenting with various regulatory schemes.  A central question in developing a regulatory framework for marijuana is: who should have authority to regulate it?  So far there have been a multitude of approaches.  Some states are proposing to create a new institution devoted to marijuana regulation.  Ohio's 2015 ballot initiative proposes a Marijuana Control Commission.  Pending legislation in California proposes an Office of Medical Marijuana Regulation responsible for creating rules, with local governments in charge of enforcement.  Elsewhere states are placing authority in an existing institution, such as the Oregon Liquor Control Commission or the Washington State Liquor Control Board.  Colorado uses a hybrid model in which local governments and the state legislature share responsibilities.  And some ballot initiatives require the legislature to decide at some future date where authority should lie.

The marijuana legalization movement is developing rapidly, but it's worthwhile for states to think about which of their many institutions is best equipped to handle regulation of the burgeoning marijuana industry.  There remains a great deal of uncertainty in this regard, but at the very least it seems clear there isn't a one-size-fits-all model available.  A relatively small state like Maine might be able to handle a centralized approach, concentrating regulatory authority in a state-level institution.  California, on the other hand, has a diversity of stakeholders with varying degrees of tolerance for marijuana cultivation and use, so a decentralized power-sharing arrangement, where local governments set the terms of engagement, makes sense.  

Regardless of the choice, it will be important for states to understand the limitations of their choice.  Local governments are typically not as well-funded, staffed, or equipped to handle administrative burdens as state-level agencies are.  On the other hand, state agencies tend to be less responsive to local context and might be overwhelmed themselves with state-wide regulation.  

Take California, for example.  A pending Senate proposal would establish a regulatory body - the Office of Medical Marijuana Regulation - that would create regulations and issue licenses.  Local governments would be responsible for enforcement.  The proposal is a poor approach in my view, as state-wide regulations may not be responsive to local conditions, and as a consequence, local governments may not be enthusiastic about their enforcement obligations.  On the other hand, the California Assembly is proposing to establish a regulatory agency that sets the rules, while various state agencies would be responsible for enforcement.  Again, the proposal doesn't maximize local knowledge and sensitivity, and this time, fragments enforcement responsibilities across departments, creating the potential for confusion or diffusion of responsibilities.  A better approach for California, in my view, would create a state-level agency dedicated to marijuana regulation that creates a basic regulatory framework and serves to support local governments in setting specific rules and developing enforcement capabilities by providing technical expertise and financial assistance.  In any case, adoption of any of these proposals is likely better than nothing.  California's lack of marijuana regulation does not bode well for the state's preparation if current polling accurately foretells full blown legalization in 2016.  

Some states are using existing mechanisms - like their liquor control boards - to create a smooth transition.  But marijuana is a unique industry, and may eventually require a more tailored regulatory framework.   The legal marijuana industry is the fastest growing industry in the United States, and may eventually become larger than the entire organic food industry, the NFL, or newspaper publishing.  Estimates of the size of the US black market marijuana industry range from $10 to 120 billion annually.  Slotting marijuana regulation into existing mechanisms might avoid messy transitions for now, but eventually states will have to come up with a more dedicated regulatory plan.  Where states choose to allocate regulatory powers is an issue that will require more attention than it currently receives.