Change in laws about pot farm size riles North Coast lawmakers, growers

For about seven years, Keala Peterson’s family has grown cannabis on a terraced hillside in the rugged hills north of Guerneville, first for a cancer-stricken grandfather and eventually for dispensaries.

Peterson, 28, and her mother, Kila Peterson, are partners in a new venture: getting their 5,000-square-foot cannabis patch permitted by Sonoma County and licensed by the state. It’s a gamble whether they’ll earn enough to cover steep startup costs and taxes, but they are deep into the permit application process with Sonoma County staff.

So it was a shock last month when California released a set of rules omitting long-promised provisions that the state would limit the size of licensed cannabis farms to 1 acre until 2023. North Coast cannabis industry advocates fought hard for the five-year transition period to help small-scale cultivators launch before large farms entered the cannabis marketplace.

“It was shocking,” Peterson said.

Called emergency regulations, the rules were published Nov. 16 by the California Department of Food and Agriculture. They allow a person or entity to hold an unlimited number of medium-sized cultivation licenses, which is capped at 1 acre for outdoor and 22,000 square feet for cultivation indoors or in greenhouses, essentially skirting limits on farm size.

The state’s move has put two North Coast lawmakers, State Sen. Mike McGuire, D-Healdsburg, and Assemblyman Jim Wood, D-Healdsburg, on a warpath to advocate for the type of small-scale outdoor marijuana farms in the cannabis-rich Emerald Triangle region and its cannabis commerce hub in Sonoma County, and protect local governments’ ability to coax farmers out of the black market to become tax-paying cultivators.

“This is a broken promise,” McGuire said in an interview.

He and Wood fired off a joint letter of complaint Dec. 4 to the state Department of Food and Agriculture’s CalCannabis Cultivation Licensing division director Richard Parrott, stating they are “deeply concerned that a lack of a cap on small cannabis cultivation permits is undermining the desires of California voters through Proposition 64.

“This last minute-revision rolls out the red carpet for large corporations to crush the livelihood of small family farmers who should be given a fair chance to succeed in a regulated market,” the letter states.

Department of Food and Agriculture spokesman Steve Lyle said the agency is evaluating the letter “for a possible response.”

Each county and city has the ability to shape local rules limiting farm size or banning cultivation altogether. Sonoma County allows cannabis farmers to cultivate a maximum of 1 acre. In Humboldt County, the first farm to be approved was cultivating a 7-acre area.

Provisions allowing cultivators to hold an unlimited number of outdoor cultivation licenses were added between Nov. 13 when the department released an environmental impact report and Nov. 16 when the department issued its draft emergency regulations, which have since been finalized by the state Office of Administrative Law. The emergency regulations are current law and will undergo an additional review process in 2018 before becoming permanent law.

Lyle wrote in an email the regulations were changed in response to “stakeholder feedback” but declined to elaborate further. He also said the language of Proposition 64, the Adult Use of Marijuana Act voters passed in November 2016, didn’t specifically “provide authority to include” limits on the number of licenses held by a single entity.

McGuire called the explanation “hogwash,” noting the issue never arose in public forums discussing drafts of the regulations over the last year.

Proposition 64 doesn’t specifically address the concept of multiple licenses for a single entity, but the spirit of the law - and the way it was presented to voters - was clearly set out to keep farms small until 2023, according to Hezekiah Allen, executive director of the California Growers Association.

“The Adult Use of Marijuana Act ensures the nonmedical marijuana industry in California will be built around small- and medium-sized businesses by prohibiting large-scale cultivation licenses for the first five years,” the initiative read.

Cultivators must pay steep upfront costs to secure local permits and state licenses, plus taxes going forward, and the temporary limit on farm size was viewed as an incentive for many existing cannabis growers to gain a foothold before corporations got licenses for large-scale farms, Allen said.

“We want to have 3,000 cultivators in the queue to become licensed, with another 10,000 in the wings, not 3,000 in the queue with half now trying to find a way to get out of the regulated market,” he said.

McGuire, Allen and others involved in the cannabis industry said it’s unclear why the state made the last-minute provisions allowing one entity to hold unlimited licenses, and are seeking information about what lobbyist groups may have been involved.

“I would like to be able to know who had the Department of Food and Agriculture’s ear on this issue,” McGuire said.

In the hills north of Guerneville, a hawk cried overhead as Peterson walked down the three terraces of her cultivation area - dubbed Sweet Creek Farm - planted in winter with hairy vetch, bell bean and fava to infuse nitrogen into the soil. She and her mother hope to secure a Sonoma County permit in March and replant in May. The garden can hold between 50 and 100 plants, depending on strain and genetics.

The prospect of competing so soon in a marketplace with large farms has led them to reconsider their plans for how to get their flowers to market, and focus on ways they can band together with other farmers.

“It lights a fire to look at working with other small farmers to establish a processing hub so we can compete - economies of scale,” Peterson said.

You can reach Staff Writer Julie Johnson at 707-521-5220 or julie.johnson@pressdemocrat.com. On Twitter @jjpressdem.