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Mendocino County Working Group Comments on CA Emergency Cannabis Regulations

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Public Comment for the State's recently released Emergency Cannabis Regulations closes end of day Monday 12/4/17.

The Mendocino County Cannabis Working Group on County–State Regulatory Compatibility - Rapid Response Team (Hannah Nelson, Jude Thilman, Genine Coleman, Casey O'Neill) have reviewed the emergency regulations, drafted the following comments and submitted them to county staff as of today, Thursday 11/30, in order to afford county staff the time to review and integrate these comments into Mendocino County's official comments to be submitted by Monday 12/4/17.

In addition, we have submitted 191 signatures offered by residents of Mendocino County in support of these comments being integrated into official County Comment to State agencies.

If you have not already done so, and would like to add your signature to support these comments being integrated into Mendocino County's official comments, please sign this online petition.


Public Comment for the State's Emergency Cannabis Regulations
Mendocino County Working Group on County – State Regulatory Compatibility
November 30, 2017

Mendocino County is a pre-eminent producer county in the state of California, home to a very
large number of multi-generational cultivators, manufacturers, and other added-value cannabis
industry participants. We offer these comments and suggestions in the spirit of protecting our
long-time craft farmers and medicine-makers for whom regulatory protections are essential to
guarantee their continued participation in the world’s largest medical and adult-use cannabis
market in the world. These small farmers and entrepreneurs are a resource worthy of support in
every way possible, from reasonable regulations to fair and just taxes and fees.

Our Primary Concern In every license category, consideration must be given to the
difficulties facing small cannabis operators in rural communities, unable to compete in the
emerging legal market if it demands large sums of investment to scale up and meet regulatory

The Authority for this regulatory consideration lies in the the passage of SB 94 and its
incorporated terms in California Business & Professions Code Section 26013 (c). This very
important section frames our input to the current Emergency Cannabis Regulations. It requires
that MUACRSA “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 so onerous that the operation under a cannabis license is not
worthy of being carried out in practice by a reasonably prudent business person
.” (our emphasis)

With these considerations in mind, Mendocino County Board of Supervisors and numerous
cannabis business operators who are either in the process of being, or have been, permitted
locally respectfully request the following modifications be made to the Emergency Regulations
of the CDFA, BCC and CDPH:


A. Reinstate the One-Acre Cap in line with previous legislation and proposed regulations.
The One-Acre Cap was included in MCRSA; it specified a five-year limit in Proposition 64; and
the Cap was further codified in the California Department of Food and Agriculture Program
Environmental Impact Review. Reinstating the One-Acre Cap is consistent with the requirement
that Cooperative Associations be capped at four acres. If the one-acre cap is not implemented
for the first five years, the intended benefits of the cooperative associations in Business &
Professions Code Section 26222 et. seq ., would become meaningless. Furthermore, the failure to institute a lower individual cumulative cap specifically undermines MAUCRSA’s intent to allow
small farmers five years in which to transition to the regulatory market without the necessity of
transforming into (or being bought up by) large scale operations.

B. Allow SMALL licensees to permanently conduct business with both Adult Use and
Medical licensees irrespective of which type (A or M) license is held
, beyond the stated
transition period defined in B&P Section 8214. This will allow for long-term business planning
and increase much-needed financial stability for small entrepreneurs during this volatile period.

C. Products should be designated A or M after testing so that small farmers (under 10,000 sq. ft.) will know which crops are definitely in which category. Permitting post-lab testing A or M categorization will allow small farmers to adjust to market demand in either the A or M category so long as the product meets the appropriate testing standard for that category. Failure to allow this would likely result in huge product losses due to uncertain market conditions.

D. Fair protection of small businesses in the cannabis industry. For small businesses
applying for both A and M licenses, including the microbusiness license, and conducting the
same commercial cannabis activity at the same property (not premises), regulations should
require single costs for application fees, license fees, liability insurance and bond requirements.
Small cultivators and entrepreneurs shall be defined, for this purpose, as operators of less than
10,000 sq. ft. of cultivation or less than $500,000 gross annual sales for non-cultivation

Specific consolidation of costs:
1. Fees: Reduce application and licensing fees for small operators seeking to hold both an
A and M license as they present a double regulatory financial burden.

2. Bond Requirements: Smaller businesses should not have the same Bond or insurance
requirements as larger businesses. Institute a tiered structure for these costs. Smaller
businesses with gross receipts of less than $500,000 should be required to meet a bond
obligation of $2,000 while larger entities provide a $5,000 bond.

3. Insurance Requirements. Change current language requirements that distributors (and
other sectors?) must carry and maintain commercial general liability insurance in the
aggregate in an amount no less than $2,000,000 and in an amount no less than $1,000,000
for each loss. Instead, small operators should be required to carry and maintain
commercial general liability insurance in the aggregate in an amount no less than
$500,000 and in an amount no less than $250,000 for each loss.

4. Distributor/Transporter Only licensees should not have to carry the same level of
insurance as “full service” distributors, especially for self-distribution transporting.

E. Exempt Small Operators from Some Security Requirements: Remove Section 5045
Mandating Security Personnel. Small businesses in rural areas have limited incomes and cannot
afford to hire or contract security staff. Please reference Attachment A regarding detailed
rationale for this request and further modifications to security requirements.

F. Further Amendments to implement the intent of B&P Section 26013 (c) and to Keep
Small Businesses in Operation:

1. Distributor / Transport Only License (§ 5308) : Please clarify that the following onerous
requirements do NOT apply to Distribution/Transporter licenses: B&P Sections 5043
-5045 Section 5047, and Section 5309. At the very least, these sections should not apply
to licensed self-distribution/transport activities.

2. Processing & Packaging License:
a. Tiered Processing license to facilitate economy of scale for smaller operators,
some of whom may be located within a closer geographical vicinity and want to
work together on processing.
b. Tiered processing should also be available to Cooperative Associations.
c. Allow Processing License as one of the three possibilities for microbusiness

3. Generators: Amend B&P Section 8306 (d) to read “All generators except those listed
in B&P Section 8306 (c) (1) shall be equipped with non-resettable hour-meters.” Many
existing sites have small backup generators that do not have an hour counter on them. As
is, this section requires cultivators to purchase a new generator -- an unnecessary

4. Canopy: Allow 2500 sq ft for Cottage Outdoor instead of only 25 plants. Define
Canopy as the cumulative total square footage as measured by the dripline of each plant.

5. Vegetative Cultivation Waste: Specify that waste removed during vegetative cycle (big
leaves and suckers) is not subject to weight requirements unless it is being used for
juicing or manufacturing.
a. Specify that such waste MAY be fed to noncommercial livestock onsite as part of
diversified farming practices.

6. Events: Allow cultivators , manufacturers and nurseries to engage in retail sales at events
so long as product has been quality assured by distributor.

7. Event Transport: Allow Cultivators , Cooperative Associations , manufacturers and
nurseries with Distributor/Transport Licenses to transport products that are ready for
retail to special events.

8. Banking for Cooperatives: Remove requirement that Cannabis Cooperative
Associations include “Cannabis” in their names. This provision effectively makes these
Associations unable to obtain bank accounts.

9. Remove 4-Acre Cumulative Cap for Cooperative Members: Modify B&P Section
26223 (d) to remove limits for association member cultivators under 10,000 sq. ft.

10. Correct B&P Section 26223(c) which prohibits association members from having
more than one Type 1 or Type 2 license --
not only are both needed in order to participate in both A and M markets, small operators will likely need to diversify by
having multiple growing styles (i.e., low wattage mixed light and outdoor) as a necessary
survival tactic in the unpredictable emerging market.

11. Track and Trace: 5049(c) specifies a very short time in which businesses must enter
their T&T data. We recommend allowing businesses a minimum of 48 hours to enter
data, except when reporting loss.

12. Modify 5412(b): Permit retail and microbusinesses to package and/or label cannabis
goods, providing they hold a Distribution and/or Processing License.

13. Modify 50 Lb Sample B&P Section 5707(c): Reduce disproportionate cost impact on
small batches. Due to storage concerns, the point of taxation, and the prohibition on the
distributor’s return of product to be resold, Distributors are likely to limit product
submissions to small batches unless there is a contract in place for larger quantities.
This results in disproportionately higher overall costs since each smaller batch incurs
separate testing fees whereas large batch testing will be more economical , which will
affect smaller operators severely.

14. Modify Section 5500 Microbusiness (d): Specifies that all cultivation, manufacturing,
distribution, and retail activities performed by a licensee under a Type 12-microbusiness
license shall occur on the same licensed premises. This requirement severely
disadvantages rural cultivation communities which have significant zoning and land use
obstacles to co-locating cultivation production with manufacturing, distribution and retail
on a single premise. These rural cultivation communities are relying on vertical
integration and direct consumer sales to support a viable local cannabis industry. We
recommend allowing microbusinesses to conduct licensed activities on separate premises.

G. Requests for Clarification:

1. Weight: Clarify Definitions of Wet Weight vs Net Weight. CDFA needs to
provide definitions of these two terms.

2. § 5025. Premises/ § 5500 Microbusiness conflict with each other.
Section 5025 states the Bureau may allow a licensee to have the same licensed premises for two separate commercial cannabis licenses if all of the following criteria are met:
a. The licensee holds both an A-license and an M-license for the identical type of
commercial cannabis activity;
b. The licensee who holds both licenses is identical in name, business formation, and
c. The licensee only conducts one type of commercial cannabis activity on the

However, § 5500. Microbusiness states all cultivation, manufacturing, distribution, and retail
activities performed by a licensee under a microbusiness license shall occur on the same licensed premises. We request to remove the restriction on multiple cannabis activities on same premisesfor Microbusinesses.

Top Priority from the point of view of small businesses and cultivators in the microbusiness category is to remove Section 5045. Security Personnel in its entirety and modify surveillance equipment requirements.

This regulation is an excessive, onerous and impractical requirement for small retail and otherbusinesses that operate in small towns, rural and suburban areas, and medium-sized cities.Cultivators, even under 10,000 sq. ft under the microbusiness requirement, would be
hard-pressed to hire a security guard to be on-site 24/7 and actually effectively prevent criminalactivity from occurring. This is just not practical.

For our retail dispensaries in Mendocino County, there has never been a complaint of any
criminal activity of any sort by law enforcement. Nor have there been any civil complaints of
record, as noted by our Board of Supervisors. We are a quiet, low-population, rural county. It
would be hardly cost-effective for us to be required to hire or contract with security personnel,
nor would it be effective in preventing something that, in fact, has not happened.

Authority: Section 5045 mandating Security Personnel cites Business & Professional Code,
Section 26070 as authority . However, there is no requirement in 26070 that supports this
regulation. Here is the language in 26070 regarding security measures for microbusinesses:

(j) Licensed retailers and microbusinesses, and licensed nonprofits under Section 26070.5
(future nonprofit license), shall implement security measures reasonably designed to
prevent unauthorized entrance into areas containing cannabis or cannabis products and
theft of cannabis or cannabis products from the premises. These security measures shall
include, but not be limited to, all of the following:

(1) Prohibiting individuals from remaining on the licensee’s premises if they are not
engaging in activity expressly related to the operations of the retailer.

(2) Establishing limited access areas accessible only to authorized personnel.

(3) Other than limited amounts of cannabis used for display purposes, samples, or
immediate sale, storing all finished cannabis and cannabis products in a secured and
locked room, safe, or vault, and in a manner reasonably designed to prevent diversion,
theft, and loss.

Likewise, Section 5045 mandating Security Personnel cites B & P Section 26013 as its authority. BPC 26013 in fact stipulates against requiring such an expensive and onerous regulation, as was cited at the beginning of this document.

Modify Section 5044. Video Surveillance System

Section 5044 should be modified because it is more reasonable that security systems match the types of activities and physical infrastructure to be monitored. A small contiguous building
offering retail sales or manufacturing requires far fewer cameras and has fewer exits and
entrances than does a cultivation site. Neither BPC 26070 or 26013 supports these stringent and onerous requirements.

The following requirements under Section 5044 should be deleted or adjusted as being
excessively expensive and not effective, especially for cultivation sites:

(b) The video surveillance system shall be capable of supporting remote access by the licensee.
Comment: Some remote home businesses do not have electricity or a reliable phone (let alone internet access) this provision should be waived if site specific conditions/common sense dictates it.

(e) (1) Areas where cannabis or cannabis products are weighed, packed, stored, quarantined,
loaded and/or unloaded for transportation, prepared, or moved within the premises;
Comment: For home-based microbusinesses, permanent cameras on 24/7 are an invasion
of privacy. Other designated areas in this section are more appropriate.

(e)(4) Areas storing a surveillance-system storage device with at least one camera recording the access points to the secured surveillance recording area;
Comment: This would be unnecessary for home-based microbusiness.

(e)(5) Entrances and exits to the premises, which shall be recorded from both indoor and
outdoor vantage points.
(f) All recording and monitoring equipment shall be located in secure rooms or areas of the
premises in an access-controlled environment.
Comment: Site specific/Common sense exceptions shall be made for home-based

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