The California Department of Food and Agriculture has defied the will of voters by allowing large-scale marijuana farms, a group representing growers alleged in a lawsuit filed Tuesday.
At issue is a dispute that has divided the industry over whether the state should prohibit sizable cultivation facilities for the first five years of legalized retail marijuana sales, which started Jan. 1 of this year.
According to Hezekiah Allen, executive director of the California Growers Association, which filed the suit in Sacramento County Superior Court, the farm-size caps are essential to stop the industry from becoming “Big Tobacco 2.0” and protect the relatively small growers he represents, particularly in Humboldt County and other Northern California counties.
On the other side, Steve DeAngelo of Harborside, who runs two large Bay Area dispensaries and one of the biggest cultivation sites in the state, has argued that larger grows will keep costs down, a necessity with prices already going up due to taxes and other costs associated with legalization.
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The lawsuit states that Proposition 64, approved by voters in November 2016, was intended to “ensure the non-medical marijuana industry in California will be built around small and medium sized businesses by prohibiting large-scale cultivation licenses for the first five years.”
Large-scale licenses are defined as 1 acre or more. State regulations released last year restrict those licenses for five years, but allow operators to receive an unlimited number of licenses for smaller grows, creating a loophole in which operators can bundle licenses to get large farms approved, the lawsuit states.
“Approving large cultivation operations in 2018 will significantly reduce the ability of small and medium businesses to compete economically in the regulated market,” the lawsuit states. “As a result, more small and medium cultivators will choose not to enter the regulated market and will instead stay in the illegal market.”
Steve Lyle, a spokesman for the department, said the agency is not commenting on the lawsuit.
Allen said his association debated how to challenge the regulations for two months. He said members decided to file suit instead of pursuing legislative action because they need immediate relief. Protecting small farmers was part of the campaign for Proposition 64, which was approved by 57 percent of voters. The measure called for no cultivation sites larger than 1 acre until 2023.
The language was necessary to gain support of north state growers who opposed a previous legalization measure because they feared it would push them out of business or into the black market, Allen said.
Allen and others in the cannabis industry expressed shock when the Department of Food and Agriculture in November released emergency regulations that allowed for a single entity to apply for an unlimited number of small-grow licenses. The final regulations are expected later this year.
The department’s reasoning behind the decision never has been been fully explained. Around that time, Lyle said to The Press Democrat that the decision was made “following evaluation of the emergency regulations, including input from stakeholders, that went on right up until the regulations were finalized.” Lyle did not say who those stakeholders were.
Adding to the mystery of the decision, Amber Morris, branch chief of the division responsible for the regulations, resigned just weeks after they were released. Allen and others said they believe was due the removal of the cultivation-size caps. Lyle has declined to say why Morris left. Morris declined to comment when she was reached by phone and later did not respond to specific questions sent to her personal email account.
Multi-acre marijuana farms already operate in California. Harborside’s DeAngelo, who recently wrote a column in defense of larger grows for the cannabis news website Leafly, runs a 4-acre cultivation site in the Salinas Valley through his company FLRish.
FLRish spent about $300,000 to lobby lawmakers and state officials over the past two legislative sessions. The money was paid to California Strategies, one of the capital’s best known firms. California Strategies’ partner Jason Kinney served as spokesman for the 2016 legalization campaign. Kinney has declined to say how the firm lobbied on FLRish’s behalf.