It is hard to believe that it has been five years since the passage of Proposition 64, which legalized the distribution and sale of cannabis for adults 21 and older in California.

Like all “marijuana-friendly” states, California has problems and time delays in launching a licensing framework. Of course, since marijuana is still a Schedule I controlled substance under federal law, this makes this even more difficult. In my ten years of practice in this field, I have learned that regulators often fidget when dealing with rulemaking, so that they can only be resolved when industry problems arise. (Remember that the fate of these democratic experiments is fully controlled by the states, and there is no gold standard for the ideal cannabis licensing system.) Often, cannabis companies experience frustrating operations and compliance due to regulators (and legislators) The problem has not caught up with the real problems these companies face in this unique business field.

California marijuana seems to suffer more losses than most other states because of its large scale, extremely diverse interest groups, and correspondingly huge illegal market, and generally refuses to seek state licenses. Current regulators also seem to give priority to piecemeal enforcement of the worst, unlicensed cannabis activities, while other bad behaviors and violations have not been resolved. In addition (somewhat unbelievably), the vast majority of cannabis commercial license holders are still struggling to obtain a full annual license that is updated every year. Instead, the licensee is being supported by a temporary temporary permission system that seems to have no end in sight.

We have written a lot of articles about California’s temporary permit system (see Here, Here with Here).The biggest obstacle from temporary permit to annual permit is undoubtedly California Environmental Quality Act (“CEQA”) review This is done at the state (and sometimes local) level. In order to obtain a temporary permit in California, you must submit a “complete” annual permit application, which includes a comprehensive CEQA review (this may have a greater impact on growers than any other licensee because of the environmental impact of planting Serious impact) .

The Governor’s Office of Planning and Research provided a brief summary (which may be very complicated) of CEQA as follows:

CEQA usually requires state and local government agencies to inform decision makers and the public about the potential environmental impacts of proposed projects [CEQA-triggering “projects” are subject to discretionary government agency approval, which may result in physical changes to the environment, and are non-ministerial in nature], And reduce these environmental impacts to the extent feasible. … The laws and rules governing the CEQA process are contained in the CEQA regulations (Public Resources Act Section 21000 and below), CEQA Guidelines (California Regulations, Section 14, Section 15000 and below), published court decisions explaining CEQA, and The CEQA procedure is adopted locally.

Excerpted from the California Department of Food and Agriculture (“CDFA”) requirements for obtaining an annual permit application, the CDFA requires:

“[e]Evidence of exemption or compliance, [CEQA]The evidence provided should be one of the following: (1) A signed copy of the project-specific decision notice or exemption notice and a copy of the relevant CEQA document, or electronically provided references, project descriptions, and/or local jurisdictions (2) If the applicant does not have the evidence specified in paragraph (1), or if the local jurisdiction has not prepared CEQA documents, the applicant will be responsible Prepare environmental documents that comply with CEQA, which can be approved or certified by the department, unless otherwise specified by the department.

In terms of annual permit applications, the Marijuana Control Board and the California Department of Public Health also have their own CEQA requirements.

The problem with CEQA is the time and money required to successfully complete the review, while also avoiding legal challenges from the public. The basic CEQA trajectory is:

1. The government’s decision on whether the proposed activity is a “project” subject to CEQA.
2. If it is subject to CEQA, the government will determine whether the project is exempt based on the legal exemption provided by the law.
3. However, if the project is subject to CEQA and is not exempt, the government will determine whether the proposed project is likely to have a significant impact on the environment through “preliminary research”.
4. Preliminary research is used to decide whether to prepare (a) an environmental impact report (“EIR”), which contains an in-depth study of potential impacts, measures to reduce or avoid these impacts, and an analysis of alternative project options, or (b) a negative statement ( It is also worth noting that a key feature of the CEQA process is that the public has the opportunity to review negative statements and EIR and provide comments).
5. If the government finds that the proposed project has no potential significant environmental impact, it can issue a negative statement. If the preliminary research determines the possible significant impact of the project, but the project has been changed or the applicant agrees to mitigate the conditions for the determined significant impact, the government may issue a negative mitigation statement.
6. Nevertheless, if the preliminary research finds a large amount of evidence that the project will have a significant impact on the environment, the EIR have to be prepared.

It is conceivable that the government agency review schedule of the CEQA project is relatively unpredictable, but it will certainly be very long, depending on the details of the project. Nevertheless, for private projects, the agency has 30 days to review the application and let the applicant know if other information is needed, which can be extended by another 15 days with the applicant’s consent. Negative statement of “certain private projects” should Completed within 180 days from the date the application is deemed complete according to CEQA guidelines and EIR should Complete within one year. The time limit may be extended due to various specific circumstances stipulated by the law. Regarding the initial research, the actual processing review time frame may span several weeks or even months. In fact, it usually takes 12 to 18 weeks to obtain a negative statement. The standard EIR measurement may take a year or more to complete.

In the case of many licensees, they attempt to take advantage of certain CEQA exemptions by submitting to the state cannabis agency the CEQA documents of the city or county where their “cannabis program” is located, which provide a negative statement about cannabis.Cannabis for local government RegulationsBut this does not exempt the licensee from the responsibility of complying with CEQA, because their personal “project” must receive a negative statement or EIR.

In order to make up for California’s license issue, on June 14, the General Assembly passed a plan, USD 100 million deployed California’s cannabis industry. These funds are designed to assist local governments in complying with the licensee’s CEQA to ensure that they obtain more annual permits. Although it is great to see the state supporting this still emerging industry, I doubt that this kind of capital injection will greatly ease the pain of dealing with CEQA, because potential licensees still have to accept these potentially, lengthy and expensive Environmental review. In addition, when it comes to current laws and regulations, it is extremely unlikely that cannabis companies can obtain some special exemptions from CEQA compliance.

Bottom line: California has many problems with the cannabis system directly attributable to CEQA compliance requirements. Cities and counties will now have better equipment and personnel to handle CEQA compliance and cannabis business, adding millions of dollars, but that is not enough. If licensees have any hope of obtaining an annual license in California, they still need to help themselves by accelerating their understanding of the complexities and nuances of CEQA compliance.