Why is California failing to bring small cannabis growers into legal market?

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UKIAH — California is falling short of its mission to bring existing cannabis growers into the legal market. That was the message repeated Thursday night in Ukiah by both government officials and regional marijuana industry leaders alike.

At a first-of-its-kind meeting with the state’s top cannabis officials and North Coast marijuana industry leaders to discuss the state’s new regulations for the business sector, Sonoma County Agricultural Commissioner Tony Linegar was unequivocal in his biting analysis that both state and local regulations are prohibitively stringent and have stifled the ability of existing cultivators to legalize their operations.

“If the overall goal of the program was to favor a corporate, big dollar, new money industry then we have succeeded,” Linegar said. “If the goal was to create a workable pathway for existing operators, then I think we have failed.”

Linegar’s statement brought many to their feet — with cheers and applause from those frustrated by the new rules — among about 250 people who filled the room at the Ukiah Valley Conference Center for the event, a joint meeting of the state senate committees on governance, finance, business and professions.

Hosted by State Sen. Mike McGuire, D-Healdsburg, and Assemblyman Jim Wood, D-Healdsburg, the event included a broad discussion lasting more than three hours with the state’s top cannabis officials, including Lori Ajax, who oversees the California Bureau of Cannabis Control, as well as Richard Parrott, director of the CalCannabis Cultivation Licensing division.

Ajax reported that so far the state has issued 1,307 temporary licenses for cannabis businesses and has begun a proactive effort to contact entities operating outside the legal system.

The state is in a headlong race against the state’s entrenched and lucrative black market for cannabis. Most of the pot produced in California is shipped out of state.

McGuire said 60 percent of the nation’s cannabis is grown in Mendocino, Humboldt, Trinity and Lake counties.

“We wanted to hold this hearing on the North Coast because legalization and regulation of cannabis is transforming our region,” McGuire said.

Parrott, who oversees the licensing program for cannabis farmers, said the state is aware it needs more compliance in order for the program to meet its goals.

“We realize there’s a long way to go,” Parrott said. “The number is lower than what we know is out there.”

Steep taxes and high upfront costs for environmental reports and other assessments make it hard for most existing growers to continue.

“For farmers, the incentives aren’t there,” said Michael Steinmetz, founder of Flow Kana, which is being built into a cannabis distribution hub in Redwood Valley.

Mendocino County Supervisor Dan Hamburg said although he feels the county is ahead of most others in the state, they have a long way to go toward getting more farmers and other businesses to legalize.

“We are struggling,” said Hamburg. “This is kind of like putting toothpaste back in the tube after 40 years of having a cannabis industry, a cannabis community, a cannabis culture.”

Linegar said Sonoma County had an estimated 5,000-to-7,000 cannabis cultivators — but only three have so far received permits to plant.

About a dozen members of the public spoke in an hourlong back-and-forth discussion with state officials.

Cannabis farmer Mark Shaffer, 38, of Comptche spoke of the hurdles local growers face competing with bigger entities — and he gave the example of Santa Barbara County where one entity was said to have nabbed 87 cultivation licenses.

“We want to show you we are the people ready to do the right thing and we will pay our taxes,” Shaffer said. “Please help give us a chance to keep the legacy of Mendocino County sustainable.”

Wood, the assemblyman, was incredulous one entity had received so many licenses and asked Parrott to confirm.

“I heard 87 licenses went to one person, is that correct?” Wood said.

Parrott confirmed it was.

“It’s a huge loophole in the system that’s hurting small farmers,” McGuire said.

McGuire had started the night alerting the crowd that Parrott wouldn’t be able to address one of the biggest issues facing North Coast growers: the state’s last-minute move to allow large-scale farms.

The California Growers Association has sued the state for the move, claiming it goes against state laws which were supposed to limit regulated farms to small- and medium-sized ones of no more than 1 acre until 2023.

“We are aware of the concerns of many family farmers regarding the subject of an acreage cap,” Parrott said.

Hezekiah Allen, executive director of the California Growers Association, spoke of the ingrained stigma of marijuana and urged lawmakers to “be vigilant to root out that prejudice from the very core of our governance.”

Low numbers of licensed cultivators and manufacturers slows the entire supply chain.

Bill Silver, chief financial officer of Santa Rosa-based CannaCraft, said there aren’t enough licensed entities to fulfill his company’s demands.

“There’s no way we can stay in business unless something happens to free up supply, it’s a chokehold,” Silver said.

The lack of inventory is clearest on the shelves of dispensaries.

About 15 miles south of Ukiah in Hopland at Emerald Pharms dispensary, a selection of cannabis-infused foods and candies filled four shelves prior to Jan. 1. Today, three shelves are sparsely packed with infused mints, chocolates, granola, salted caramels and other items, but what’s missing are the products from about 12 manufacturers who have stopped bringing their products to the store.

Most cooked their products in home kitchens, and while some are seeking licenses, most have said it’s too expensive to comply with new rules, dispensary director Chelsea Lucich said.

But business is up. Lucich said about 100 people have walked through the door each day since January, a steady flow for a dispensary down a gravel driveway in the sleepy south Mendocino County town.

Most of their customers are between 50 and 70 years old, a demographic interested in the therapeutic properties of cannabis, whether they have medical recommendations or not.

“For many first time customers, they’re coming in after years of stigma has been lifted,” she said.