Comments on Comprehensive Cannabis Program Update – Outdoor Cultivation Issues

December 28, 2023

Tennis Wick, Director (Tennis.Wick@sonoma-county.org)

Scott Orr, Assistant Director (scott.Orr@sonoma-county.org)

Crystal Acker, Supervising Planner (crystal.acker@sonoma-county.org)

Re: Comments on Comprehensive Cannabis Program Update – Outdoor Cultivation Issues

Dear Scott and Crystal:

The Neighborhood Coalition advocates for sustainable, environmentally sound, and neighborhood-compatible cannabis policies in Sonoma County. This submission on outdoor cultivation issues is part of a series of comments on the elements of the cannabis program update that Permit Sonoma released in support of its December 13 meetings on these issues. Policies concerning outdoor cultivation are a vital component of Permit Sonoma’s “effort to improve compatibility between cannabis land uses and the neighborhoods they are located within or near.” 1

The Neighborhood Coalition particularly objects to the proposal that “Cannabis cultivation outdoors is encouraged over cultivation in fully enclosed structures in agricultural areas to protect and conserve agricultural soils for agricultural production.”2 Any justification for this recommendation is specious and the conclusions and proposal fail accordingly.

The Environmental Impact Report (EIR) must not only research, evaluate, identify, and measure the potential for expansion of cannabis cultivation but, more fundamentally, analyze a project alternative that would limit, ban, or reduce outdoor cannabis cultivation. Small outdoor cultivation projects create many of the environmental problems for neighbors (odor, noise, crime) and cannot survive economically. Why promote this? Sonoma County is the only Bay Area (ABAG) county to allow outdoor cannabis grows with the assocaited cascade of harm to the environment and to neighborhoods that other counties avoid. The vision for the General Plan update and the revised cannabis ordinance should emulate Napa and Marin counties, not Humboldt County.

_{1 Press Release, Permit Sonoma to host cannabis ordinance update information meetings Dec. 13 (Nov. 29, 2023).}

_{2 General Program Elements for Cannabis Land Uses, p. 1.}

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I. Justification for Policy

The purported justification for encouraging cultivation outdoors over cultivation in fully enclosed structures is a claim that this will “conserve agricultural soils for agricultural production.” This justification is nonsensical. According to Agricultural Commissioner in a report to the Supervisors entitled “2022 Sonoma County Crop Production - Cannabis Addendum” (November 2023), the total amount of cannabis cultivated in 2022 was 9.2 acres. Even before the price of cannabis crashed due to oversupply, the number of acres of cannabis cultivated in Sonoma County has never exceeded 40-50 acres. Even at the high end of production3, the number of acres supposedly “conserved” (50 acres) is de minimis in a county whose land area is about 1,008,000 acres.4 Nevertheless, the damage to the environment and to neighborhoods from these grows is grossly disproportionate to their minimal acreage.

II. Purported soil conservation

We challenge the assertion that cultivation outdoors conserves soil. The techniques used today to cultivate “outdoors” are industrial in nature and involve growing cannabis plants in bags with chemicals and soils typically brought in from offsite. With humidity often above 63 percent, the dampness of Sonoma County’s climate encourages molds to destroy cannabis plants so most “outdoor” grows are in hoop houses,

An image of an “outdoor” grow in Bennett Valley depicts the absurdity of any contention that

outdoor grows conserve soil over indoor grows. The soil on the footprint of the grow is not “conserved” in any meaningful way. Calling these “outdoor grows” is simply an end-run around the costs of building safe, healthful, and environmentally appropriate greenhouses as opposed to the types of grows shown above which leave scars on the land and in the neighborhoods they invade. Notably, outdoor cultivation uses much more land to produce the same amount of cannabis as does indoor cultivation which uses multiple vertical layers and multiple harvests per year to generate much higher yields per unit of floor space. Outdoor grows do nothing to conserve agricultural land. In fact, these grows often leave the land on which they’re situated in shambles including the soil which requires remediation to function again for safe agricultural uses. Whatever the actual motivation of Permit Sonoma might be to propose this policy, its stated justification cannot withstand scrutiny.

_{3 Which, in all probability, will never be reached again (see economic analysis below).}

_{4 Per Wikipedia.}

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III. Economics of Outdoor Cultivation

The economics of outdoor cannabis grown in Sonoma County must be analyzed to understand IF a viable business opportunity exists for growers and IF the tax revenue generated will cover the County’s costs to manage the cannabis program and deliver the tax promised revenue when cannabis cultivation was legalized in 2016. The County’s 2022 economic analysis (HdL, Fiscal Analysis of the Commercial Cannabis Cultivation Industry) determined that outdoor cannabis is not and will not become a viable business, nor will it ever deliver the tax revenue that supervisors and other advocates promised would pay for a wide range of county programs. It is time to hit the reset button.

According to the County’s own reports, sun-grown outdoor cannabis cannot compete with indoor (HdL report, Figure 1, p. 5). Sonoma County’s 2023 Agricultural report further emphasizes this point, where indoor generated $38.5m revenue on only 0.78 acres, verses outdoor which generated $1.5m on 8.27 acres.5 The County’s proposal to promote outdoor grows makes no economic sense and unnecessarily harms neighborhoods for no benefit. The HdLreport (p. 4) concludes that sun-grown outdoor cannabis cannot compete with indoor or make a profit: “Outdoor cultivators are financially struggling to a far greater degree than indoor cultivators….where outdoor cultivators are struggling to sell product at a price that even covers their own costs…. We do not foresee prices returning to their previous highs….”6 The County should not subsidize a dying outdoor industry, which is a modern equivalent of subsidizing buggy whip factories to protect jobs.

The economic analysis under the EIR cannot ignore the impact on the health, safety, and welfare of residences near current or proposed outdoor cannabis grows and the associated economic and non-economic costs. Sufficient and scientifically supported setbacks must be required to protect all neighboring parcels from noxious odors, including carcinogenic beta-myrcene, from entering the neighboring non-cannabis parcels. The locations also must satisfy environmental dangers including fire and evacuation safety as well as water resources relative to all water usages in the same aquifer and even county wide as requested by the state. These are basic requirements under CEQA. Independent of the health and non-economic concerns, outdoor cultivation generates significant expenses for the County. These costs will be absorbed by outdoor cannabis growers or taxpayers and must be considered in the EIR. These are independent of any formally defined residential enclaves which may require even stricter protections from the noxious emissions from outdoor cannabis grows. These environmental impacts add economic costs to outdoor operations that do not exist for indoor grow sites located in industrial zoned areas, further rendering outdoor cultivation non-competitive.

_{5 Ag commissioner report to BOS Nov 2023, “2022 Sonoma County Crop Report- Cannabis Addendum.”}

_{6 Regarding Humboldt County, which has a much longer history of cannabis grows, HdL (p. 14) states that there is no viable market for Humboldt County sun-grown organic cannabis (“Outdoor cultivation has struggled to find a place in the cannabis market. Legacy growers in Humboldt and Mendocino counties had hoped the market would reward organic, sun-grown cannabis with a premium price, but the difficulty in producing consistent product in large volumes has driven the price precipitously downward.”)}

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Subsidizing the precipitously declining number of outdoor cannabis growers is illogical and misguided. The market has proven that outdoor cannabis cultivation is not economically viable. In addition to neighborhood compatibility issues, it is bad environmentally for multiple reasons, including depletion of ground water, use of non-native soil in bags that must be disposed of each year, use of hoop houses with plastic sheeting that must be disposed of every few years, and contaminated wastewater drainage into streams and aquifers. The remediation of the damage caused by these grows adds even further costs to allowing outdoor grows, which cannot be justified economically or environmentally.

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IV. Related Economic Dynamics Impacting Outdoor Grows

1. Boutique/Appellation Branding

The use of bags and hoop houses precludes outdoor cultivation being declared an appellation of origin under state law. CA Bus & Prof Code § 26063(c) (2022):

(c) An appellation of origin shall not be approved unless it requires the practice of planting in the ground in the canopy area and excludes the practices of using structures, including a greenhouse, hoop house, glasshouse, conservatory, hothouse, and any similar structure, and any artificial light in the canopy area.

Under the clear requirements of this statute, the desire of Sonoma County’s growers for a local boutique cannabis branding does not withstand legal scrutiny and cannot be permitted by the County. Furthermore, cannabis consumers have demonstrated they will not pay a premium (Weedweek Nov 16, 2023 Webinar). The HDL report (p. 4) notes that “while there will always be some demand for high-end specialty product, this is likely to be a small niche market, at best.”

The desire to sell cannabis onsite at outdoor grow sites seems to be a means of “branding” without complying with state law. This issue will be further discussed in another set of comments, but seems unlikely to withstand legal challenge.

2. Market Saturation and No Export Market

Market saturation has been reached. According to the HdL report (p. 4), the largest 20 growers the state can supply all of California’s demand for cannabis. ANY cannabis grown in Sonoma County is likely to exacerbate the decline in pricing which will undermine any chance of a tax benefit for Sonoma County from outdoor cannabis.

The numbers from Ventura County prove that Sonoma County Growers cannot compete on price. Glass House Farms has a cultivation facility in Ventura County with 5.5 million square feet (126 acres), located on a 165-acre property. Its cost of production is $139 per pound, and Glass House Farms makes a profit selling it at $340 per pound. Moreover, the company believes it can beat the illicit market on price. The track record to date of small Sonoma County growers demonstrates they cannot compete with Glass House Farms and other large growers, and the EIR should analyze this. The HdL report (p. 23) states “it should be expected that the same number of cultivators producing the same volume of product will generate lower gross receipts and related tax revenues in the future.”

Compounding market saturation is the fact that there is no legal export market for cannabis, regardless of how it’s grown. The California Attorney General has recently confirmed that California growers cannot export cannabis to other states. Therefore, there is no possibility of expanding the market beyond California for the outdoor cannabis products.

3. Cannabis Program Budget - Program Management and Enforcement Costs

Costs to manage outdoor grows are far higher than the tax revenue generated. Permitting more outdoor grows will exacerbate this problem. The County’s limited resources has led to failures to respond to code violations let alone crime events in a timely manner. Indoor grows are far more efficient on County resources including tax collection, grower accountability, resource management, fire safety, security, and law enforcement.

The EIR should analyze the existing outdoor and indoor legal cannabis market size and the forecasted market size for the coming 10 years. Sonoma County’s current cannabis tax revenue and expense forecast shows program costs exceeding tax revenue for all years and provides no evidence that losses in future years could be trimmed. At a minimum, the EIR analysis should include:

(a) An evaluation of cannabis tax collection revenue and method(s) requiring a tax revenue structure that pays for the program and complies with the express purpose of providing tax revenue for other non-cannabis county services. This must include an evaluation of staffing costs to implement and manage the program, including permitting, compliance, inspection, code enforcement, and legal costs; and

(b) An analysis of indoor growing as a primary Project or Alternative Project. In this regard, it should be noted the Yolo County cannabis EIR is being challenged in court because Yolo County “improperly analyzed other alternatives, including indoor cultivation alternatives…” (Writ of Mandate, Oct. 14, 2021). Ascent Environmental was the consultant on the Yolo EIR and should be fully aware of this requirement.

4. Economic Costs of Outdoor Cannabis Resulting from Environmental Damage

The detritus of failed and abandoned outdoor cannabis grows is long term environmental damage with associated and substantial economic costs. The “boom to bust” failed outdoor cannabis grows have left debris in their wake, thereby inflicting environmental damage on Sonoma County’s landscape. The formerly bucolic landscape is now littered with decaying white plastic hoop houses, abandoned fences, engineered soils, unapproved grading, chemicals, fertilizers, and other plastic infrastructure resulting in further destruction of natural resources. Even with remediation, these abandoned grows permanently change the rural character and beauty of the locales and neighborhoods. The land which has taken decades to develop cannot instantaneously revert to its original condition. When growers fail, they tend to abandon their operations and leave messes behind that the county or viable growers never seem to clean up. A recent example is in the Willowcreek Watershed where State Parks and Law Enforcement removed thousands of pounds of plastic fencing, water lines, illegal chemicals, firearms, etc. with years of work to go to restore the native landscape. Environmental damage from any outdoor cannabis grows, whether active or abandoned, must be addressed in the EIR. The county should require growers to post bonds to remediate damage when they abandon their grows.

V. Non-Economic Issues Relating to Outdoor Grows Requiring Study in the Environmental Impact Report

In addition to the issues outlined above, the EIR must analyze the following with respect to outdoor grows:

1. Health, safety, and welfare of residences

The many problems experienced under the current cannabis ordinance highlight the importance of: (1) preventing cannabis odors and noxious chemicals from reaching any off-site residences; (2) preventing traffic and noise from impacting rural neighbors; (3) not overburdening local aquifers that affect neighbors’ wells; and (4) preventing crime.

2. Odor

Outdoor cannabis grows emit noxious odors, including terpenes, that are health hazards to humans. In Sonoma County neighbors of cannabis cultivation often cannot open windows or use their yards, and frequently experience nausea, headaches, and respiratory problems. The noxious odors contain a large amount of the carcinogen beta-myrcene, listed by California’s Environmental Protection Agency’s Office of Environmental Health Hazard Assessment as a chemical known to cause cancer in 2015. Beta-myrcene is highly volatile and can travel thousands of feet. Because odor from outdoor grows (unlike indoor grows where filtration systems work) cannot be contained or destroyed, very large parcels with significant setbacks would be required to ensure that the terpenes do not impact residents. Large outdoor cannabis grows can blanket a sizable area in noxious odors, negatively impacting food products, wine grapes, and tourism. Such problems are occurring in Santa Barbara County and the subject of litigation.

3. Crime

Cannabis is a very valuable product that attracts crime. Outdoor grows located on large parcels away from residences subject rural residents to increased crime because of the lack of scrutiny by law enforcement and the inability of law enforcement to respond quickly. Rural residents become captive to the criminal element drawn to the outdoor grows.

4. Cultivation Environment

Sonoma County has poor weather conditions for successful outdoor cultivation, causing cannabis to be grown in hoop houses to assure marketable product. Fire season coincides with the harvest of outdoor cannabis, jeopardizing its economic viability due to losses from smoke, forced evacuations, lack of water, and being covered with fire retardant. We appreciate these are complex issues but the EIR must address them all because they relate to outdoor grows.

Thank you in advance for listening to and addressing our concerns.

Neighborhood Coalition

Nancy and Brantly Richardson, Communications Directors SonomaNeighborhoodCoalition@gmail.com

cc: cannabis@sonoma-county.org