Reasonable Rules? – This article was also prompted by the article on the opening of the regional offices for four cannabis regulatory agencies in the Times-Standard Building in the City of Eureka. As we have already indicated neither the opening of these offices, nor the welcoming of the opening of these offices, nor the newspaper reporting made complete sense to us. Why should everything make sense? Every day we hear reports regarding events that make no sense. Frequently it seems both the events and the reporting involve elements of fantasy.
We will again start with a question. In this instance, the question is rhetorical. We will ask the question. We will then answer our own question. Our question is, How did California’s cannabis regulatory agencies acquire the authority to crush the cannabis industry that existed prior to the enactment of Proposition 64? The answer is, California’s regulatory agencies wholly lack authority for many of the actions they are taking. You have to ask, How can this happen? The answer is that this happens all the time. It usually happens to others and you do not notice it happening.
Governmental agencies frequently exercise the authority they do not have just because they can. This is particularly true of regulatory agencies. It is far easier to impose regulations on individuals or businesses with limited resources than on those that have resources. In this case, we are talking about the small cannabis cultivators who were the backbone of California’s cannabis industry until recent years. CalCannabis is now crushing them out of existence as a consequence of Proposition 64.
Proposition 215 granted every California citizen the personal right to grow, possess and use cannabis for medical purposes. Proposition 215 contains a phrase that most seem to have forgotten. Proposition 215 granted every California citizen the right to “safe and affordable” medicine. All of the rights granted to California citizens pursuant to Proposition 215 were preserved in Proposition 64. As a consequence of the preservation of existing rights under Proposition 215 in Proposition 64, many actions that have been taken in connection with the regulation and taxation of cannabis, particularly by cities and counties, violate the “safe and affordable” language of Proposition 215. In the rush to tax and regulate adult-use cannabis, many appear to have forgotten about the rights granted to Californians in Proposition 215.
We want to state it here first. As the financial shake-out in California’s cannabis industry evolves over the next couple of years, California’s medical cannabis industry will arise like the Phoenix as a force in the commercial cannabis market. We will write more another time. For now back to Proposition 215.
Any action that directly or indirectly imposes a cost on cannabis, whether through the imposition of a tax or through the imposition of a regulatory requirement, that does not distinguish between medical cannabis and adult-use cannabis potentially conflicts with the “safe and affordable” language of Proposition 215. Some local jurisdictions have recognized the need for different tax rates. Many did not. We believe those that did were oblivious to the risk that the failure to do so exposes the jurisdiction. The taxation of medical cannabis at the same rate as adult-use cannabis appears to always be exposed to a claim the tax was unconstitutional with respect to medical cannabis because of Proposition 215. An argument can be made, and no doubt before too long a case will be brought, contending Proposition 64 conflicts with Proposition 215 in imposing identical cannabis taxes on medical and adult-use cannabis. This article addresses reasonable rules, not taxes, although the thought processes for evaluation are comparable.
We have accused the legislature on other occasions of failing to provide California’s regulatory agencies with a proper mandate. We have also accused the Bureau of Cannabis Control (“BCC”) of failing to provide appropriate guidance, coordination, and oversight. We were not just winging it. Proposition 64 expressly limits the nature and scope of the regulations that were to be imposed on California’s cannabis industry. California Business and Professions Code (“B&P”) Section 26013, which is entitled Reasonable Rules provides:
“(a) Licensing authorities shall make and prescribe reasonable rules and regulations as may be necessary to implement, administer and enforce their respective duties under this division in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. Such rules and regulations shall be consistent with the purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act.
“(b) Licensing authorities may prescribe, adopt, and enforce any emergency regulations as necessary to implement, administer and enforce their respective duties under this division. Any emergency regulation prescribed, adopted or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.
“(c) Regulations issued under this division shall be necessary to achieve the purposes of this division, based on best available evidence, and shall mandate only commercially feasible procedures, technology, or other requirements, and shall not unreasonably restrain or inhibit the development of alternative procedures or technology to achieve the same substantive requirements, nor shall such regulations make compliance unreasonably impracticable.”
In view of the express language of B&P Section 26013, consider what differences are appropriate in connection with the regulation of cultivation of cannabis as an agricultural commodity as compared to the cultivation of grapes or hops as agricultural commodities. We suggest at a state-wide level there is no reason for the regulation of cannabis cultivation to significantly differ from the regulation of the cultivation of grapes or hops. Cannabis cultivation, of course, must be separately licensed because all commercial cannabis must be grown by licensed cultivators. Issues relating to pesticides, fungicides and water usage seems comparable. Of course, issues relating to land use and public health and safety are primarily local issues that appear to require only general state-wide guidance.’
CalCannabis is required to defer to local jurisdictions to the maximum extent possible with regard to issues relating to land use and public health and safety by B&P Section 26013. CalCannabis has wrongfully exercised authority it lacked to the extent it has imposed regulations on the cultivation of cannabis that was not reasonable, were not necessary, were not commercially feasible, or were unreasonably impracticable. To the extent the BCC has allowed CalCannabis to impose any such regulations, BCC has failed to provide appropriate guidance, coordination, and oversight to CalCannabis.
We devoted this article to Section 26013 in order to close with a final point. CalCannabis has committed a grave disservice to small cannabis cultivators throughout California, and particularly to Humboldt County cultivators, in its failure to consider need and scale in its promulgation of licensing regulations. BCC has committed a grave disservice to California’s cannabis industry to the extent it has allowed CalCannabis to create regulations in excess of the mandate of B&P Section 26013. It is our opinion that both BCC and CalCannabis have does so as a matter of self-validation.
We doubt there is a single small cannabis cultivator in all of California who would agree CalCannabis and BCC have complied with the express mandate of B&P Section 26013 to establish REASONABLE RULES. We are, of course, aware of the rules of statutory construction that headings are to be disregarded. Please disregard the heading REASONABLE RULES and read the statutory language CalCannabis and BCC.
We have written this article to implore the California legislature, and perhaps more importantly, the Office of the Governor to require CalCannabis and BCC to clean-up their acts.