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Discussion on the Regulation of Cannabis, Industrial Hemp

Cultivation, and R&D, Testing, and Processing

City Council MeetingOctober 23, 2019

What is Cannabis?

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What is Cannabis?

• Cannabis is a plant containing more than eighty biologically active chemical compounds that each have a different effect on the body.

• The most commonly known compounds are THC and CBD. • THC is the psychoactive compound that produces the high in recreational

cannabis. • CBD does not produce any psychoactive effects and may have health benefits.

• Cannabis, commonly referred to as “marijuana”, has been controlled under the Controlled Substances Act (CSA) since 1970 under the drug class "Marihuana" [21 U.S.C. 802(16)].

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CA Cannabis Regulatory History

• November 8, 2016 - CA voters passed Prop 64 “Adult Use of Marijuana Act” (AUMA), allowing for recreational marijuana use.

• June 27, 2017 – CA Senate Bill 94 combined the medical marijuana and recreational marijuana law into the Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”) and renamed marijuana to cannabis.

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City Regulatory History• November 15, 2017 – City Council adopted an Ordinance No. 1146 which includes

a number of provisions regarding cannabis. Ordinance No. 1146 includes the following restrictions:

• NO cannabis businesses of any type are allowed in the City including, but not limited to, cultivators, manufacturers, distributors, retailers, and testing laboratories.

• NO outdoor cultivation.

• LIMITS on indoor cultivation. No more than six plants inside a private residence (or in a secured residential accessory structure) subject to three requirements: • written consent of Property Owner.• compliance with Building Code.• no gas products (CO2, butane, etc. to make “honey” oil).

• NO delivery of cannabis except for deliveries of medical cannabis by a caregiver to a qualified patient subject to the following requirements:• Deliveries are only permitted to occur from the hours of 7:00 am to 8:00 pm.• The delivery must be in an unmarked vehicle.• Deliveries are only permitted to a private residence.

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State Regulatory Conflict

• January 1, 2019 - CA Office of Administrative Law in conjunction with the CA Bureau of Cannabis Control (BCC) stated, “A local jurisdiction cannot prevent delivery of cannabis or cannabis products on public roads by a California cannabis licensee acting in compliance with California state laws.”

• BCC restrictions on cannabis deliveries:• Delivered cannabis must be sold by state-licensed retailers.• Deliveries must be at a specific distance from schools, youth centers and

day care centers.• Delivery cars must be unmarked.

Therefore, the City must change the ordinance to allow deliveries, but we can regulate them and require a license.

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Port Hueneme

• Allow cannabis uses with a Development Agreement.

• 6% profit sharing.• 5% to the City.

• 1% distributed to local non-profits.

• Adopted an ordinance for administrative cost recovery (fees).• $10,000 processing deposit.

• Business Owner and ALL employees must undergo a Live Scan.

• Fees can be adjusted by resolution.

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Cannabis Delivery

How are other Cities allowing Deliveries?• OJAI – February 13, 2017 - Accepts applications to license revocable “medical

cannabis delivery” via lottery system to no more than three delivery service providers. (Outdated)

• PORT HUENEME – Unlimited amount of licenses. Requires a revocable permit.

• THOUSAND OAKS – As of 10/3/19 unlimited business license permits; retailers have to pay a business tax and provide the city access to their point of sale systems for audits. The city will conduct background checks of delivery drivers.

• OXNARD – As of 10/3/19 unlimited permits; Must be part of a licensed dispensary; $104 fee + $52 processing fee.

• VENTURA – Was limited to 3 however, effective Jan.1, 2020, unlimited; Annual $293 fee each delivery business; $94 fee for each owner, driver, manager and entity must pay all background check fees. Also requires a city business license; proof of insurance; dashcam and vehicle GPS tracking.

• Recently, staff discovered an unlicensed commercial cannabis delivery operator within city limits.

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Cannabis Delivery Legal Challenge

24 CA cities, the League of California Cities Board, and one CA county are suing the state arguing that the rule conflicts with a provision in state law that gives cities control over how cannabis companies operate within city boundaries.

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Cannabis Testing & Research Facilities

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What are Testing & Research Facilities?• The Bureau of Cannabis Control (BCC) states: All cannabis harvested or

manufactured on or after December 31, 2018, are subject to testing.

• Cannabis products are required to undergo testing to measure: cannabinoids, foreign material, heavy metals, microbial impurities, mycotoxins, moisture content and water activity, residual pesticides, residual solvents and processing chemicals and terpenoids.

• Edible cannabis products that contain more than one serving per unit will be tested for homogeneity to ensure consistent concentrations of tetrahydrocannabinol (THC) or cannabidiol (CBD). (Example: One cookie could be 3 servings)

• Upon completion of the test, laboratory generates a certificate of analysis that contains the results of the testing and whether the tested batch passed or failed.

• Owners of any testing laboratories are prohibited by law from having any level of ownership in any other type of cannabis business.

• The Bureau of Cannabis Control has only issued 31 licenses for testing laboratories in all of California. Santa Paula is the only city in the county with one Testing/Research Facility, Consumables Analytical Laboratory, LLC.

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Testing & Research Facilities Economic Factors

• Forbes reported in May 2019:• Cannabis industry added more than 64,000 jobs last year, a 44% increase

according to a study by Leafly.

• Cannabis employs more than 211,000 full-time workers in the U.S. 20,000 jobs are being created this year in California and Florida alone.

• Testing/research lab technician median salary is between $65,000 -$112,000.

• Port Hueneme has a 6% profit sharing.

• VC Star article dated July 20, 2019, stated Port Hueneme anticipates receiving $1.7 million in revenue for FY 2019/20.

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Land Use Considerations

• The State of California stipulates that cannabis related uses cannot be located closer than 600- feet from a sensitive use, which is defined by state law as K-12 schools (including private and charter schools), day care centers, youth centers, and public parks.

• Local governments, however, are allowed to designate smaller, or larger, buffer zones if these buffer zones are codified in an ordinance. The state will defer to the local government on a buffer zone that differs from the default standard of 600 feet.

• State law is silent on the buffer zone from a cannabis use to residential properties; setting that buffer is entirely up to local government.

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Industrial Hemp

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What is Industrial Hemp?

• 2018 Farm Bill - Industrial hemp is no longer a federally controlled substance.

• Industrial hemp and cannabis plants are nearly identical, with a key difference being that hemp contains less than 0.3 percent of THC, the psychoactive component normally associated with cannabis.

• Because of industrial hemp’s similarity to cannabis, some of the same concerns associated with cannabis (odor, processing safety, and manufacturing use impacts) may exist with industrial hemp.

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2018 Farm Bill Industrial Hemp Status• California Department of Food and Agriculture (CDFA) is developing a

program to administer this new law (no current regulation).

• Under the 2018 Farm Bill, the State of California must submit a plan on how to implement hemp cultivation to the United States Secretary of Agriculture for approval.

• The plan must also include establishing an Industrial Hemp Advisory Board to:• develop the registration process• fee structure• regulations• other administrative details

• This is uncharted territory; some cities are taking a “Go-Slow” approach.

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Industrial Hemp County/Cities Status• More than 35 counties imposed a moratorium on hemp production

until there’s more clarity on impacts and law enforcement responsibilities.

• Approximately 4,100 acres for cultivation of hemp in Ventura County.

• Santa Barbara County does not allow hemp cultivation, however they have the largest legal cannabis grow in the region.

• Ojai has prohibited cultivation of hemp and Thousand Oaks has imposed a temporary ban, yet both cities allow cannabis dispensaries/deliveries.

• Concerns about Industrial Hemp:• Lack of approved testing of THC levels• Lack of pesticides registered for use on hemp• Possible threats to other agriculture• Nuisance (Odor)• Cultivating cannabis disguised as industrial hemp (enforcement)

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Industrial Hemp Impacts

• Nuisance• The city has received numerous complaints of odors from the hemp fields

south of the city.• Other nuisances unknown.

• Environmental Concerns/Benefits• Unknown.

• Best practices are still under development nationwide.

• Security/Safety• Hemp can be confused with cannabis, requiring increased security personnel

onsite.• On October 5, 2019, the Ventura County Star reported an armed robbery at a

hemp field outside of Oxnard involving field security guards.

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Industrial Hemp Land Use Considerations• Ventura County has not implemented any land-use restrictions.

• The state is in the process of developing land use regulations. Some counties/cities have enacted their own regulations:• City of Pajaro, CA utilizes 1,000 feet buffer from schools and youth facilities.

• King City, CA has a two-mile buffer between the city and hemp sites.

• Monterey County uses a 3-mile buffer zone to protect cannabis seeds from cross-pollination of other hemp and cannabis grows. The county also has a half-mile buffer for hemp cultivation around cities, community areas, and rural centers.

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Staff Recommendation

Provide direction to staff on:• Cannabis Deliveries.

• R&D, Testing and Research Facilities.

• Industrial Hemp Cultivation.

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Sources

2018 Cannabis Salary Guide https://vangst.com/cannabis-salary-guide-2018

California Legislative Information https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=26090. September 12, 2019

Forbes Magazine May 2019 Issue

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