How Does the California Environmental Quality Act Impact Cannabis Cultivators?

The California Environmental Quality Act (CEQA) is meant to ensure that impacts to environmental quality are considered in every governmental action. The statute could ensnare the state’s cannabis licensing bodies in litigation; Nastich Law’s Summer Nastich says the worst is over, however, now that the California Department of Food and Agriculture (CDFA) has released its Environmental Impact Report (EIR).

According to CEQA, if an individual wants to obtain a permit to engage in an activity that may impact the environment—such as building a subdivision or participating in commercial cannabis cultivation—the permitting agency (i.e. the state, county or municipality) must follow the CEQA process. This is now the case in the state’s cannabis industry, too.

“It gives opportunities for the public to comment every step of the way, and it’s a forced evaluation,” Nastich says.

First, an initial study is conducted to determine if there’s potential for significant environmental impact of an activity—such as licensing a commercial cannabis cultivation program. There are three outcomes:

If there is no impact, a Negative Declaration is issued, and the permit can be awarded.

If there is potential for significant environmental impact but the impact can be mitigated by altering certain aspects of the project, then a Mitigated Negative Declaration (MND) is issued, and the permit is issued as long as the permit holder implements the required mitigation methods to avoid significant environmental impacts.

When significant environmental impact cannot be mitigated, the permitting agency must conduct an environmental review and issue an EIR, which evaluates the possible environmental impacts on water, air, traffic, greenhouse gases, cultural resources and more.

“With cannabis, [the CDFA] did what’s called a Programmatic Environmental Impact Report for cannabis cultivators,” Nastich says. “If what [the licensing body, CalCannabis, is] proposing to do now [to evaluate and license cultivators] is not different than what was evaluated in that programmatic EIR, they can basically get under the umbrella of that programmatic EIR, and they don’t have to do any additional environmental review. But, if what they’re proposing falls outside of what was evaluated in that EIR, then they have to do environmental review under CEQA for anything that’s different, anything that’s outside of that envelope.”

The CDFA released its final EIR for CalCannabis’s cultivation licensing program in November 2017. The agency analyzed various aspects of cannabis cultivation’s impact on the environment, particularly as it relates to water.

“Cannabis is a pretty thirsty crop, so there’s usually a water availability analysis that you have to go through, and any time you want a lake and streambed alteration agreement from Fish and Wildlife, they have to ensure that they’re satisfying CEQA in issuing that permit,” Nastich says. “It could be that in certain cases, there’s going to be more impact to water resources due to runoff or pesticides in the water stream or diversion of water out of the lakes and streams. These are all things that have to be evaluated under CEQA.”

The CDFA evaluated these aspects for its 2017 EIR, and now that the report has been issued, as long as municipalities’ licensing plans do not affect environmental factors outside of what was evaluated in the EIR, they should not be subject to any additional environmental review, Nastich says.

“They should design whatever it is they want to do to be consistent with that programmatic EIR—then they don’t have to do any additional environmental review under CEQA, and it’s a streamlined process,” she says. “If they fall outside of it, they do a much more abridged environmental review process, where they only have to evaluate the things that are outside of that envelope, and it’s a much easier, cheaper process.”

Cultivators should comply with any mitigation methods that might apply, as outlined in the EIR, when setting up their business, Nastich adds. “Whatever mitigation methods are imposed on them, either through the programmatic EIR or the local licensing agency, they need to be sure they comply with those mitigation methods or they’re going to be in violation. …That all relates back to CEQA trying to mitigate the impacts to the environment of the cannabis licensing program.”

However, through public comment periods, any member of the public can challenge an environmental review, and if a court determines that the environmental review was lacking, the project must go back for more analysis.

“When people are complaining about CEQA and they think it’s an anti-development statute … [it’s] because it’s a very expensive process if you have to go through full environmental review and people can force you to go through this never-ending loop if they can make these arguments about how you didn’t do this or that under CEQA,” she says. “That’s why there’s so much CEQA litigation.”

Recent CEQA litigation has emerged in California’s nascent cannabis industry, as outlined on a blog by the Law Offices of Omar Figueroa. In Trinity County, for example, an anti-cannabis association called the Trinity Action Association sued the county’s planning director and anonymous cannabis licensees, alleging that the county has been violating CEQA by failing to facilitate thorough public reviews of each cannabis cultivation license application and renewal.

These cases “are cautionary tales that local permits will become available only to the extent that local jurisdictions comply with CEQA in the first place.  Further, these cases demonstrate the importance of CEQA compliance for all cannabis industry actors because CEQA is a powerful tool for cannabis industry opponents (like anti-cannabis public interest groups, or NIMBY neighbors), potentially delaying projects by years and at immense cost to all parties involved,” the blog reads.

However, for now, as long as cities and counties pay close attention to CEQA and CDFA’s EIR for CalCannabis, cannabis cultivators should be unaffected.

“Somebody could always sue and say this project isn’t in compliance with the programmatic EIR [and that] they were planning to do something outside of it, so you didn’t actually so a sufficient review, because you didn’t review these aspects of the project,” she says. “They could use it that way, but I have to imagine that … if the counties do it correctly and they properly administer CEQA—which they’ve always had to do with every other permit they’ve had to issue—then I can’t imagine those would go very far. Will they cause delays? Yeah. Will they be a huge pain for people who want to get licenses? Sure. But will it actually stop people from cultivating cannabis? I doubt it.”

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