New cannabis businesses face a years-long queue in California. Lawmakers will weigh cutting the wait

California lawmakers in the new year will weigh whether to streamline the process of obtaining permits to grow and sell cannabis in the state, in an effort to bolster small businesses.

Their consideration comes at a critical juncture, as California’s prevailing system of softer “provisional licenses” for cannabis cultivation and retail will expire in favor of stricter annual licenses in 2026. And for many, the wait for permits has already stretched on for years.

“A lot of these farmers, they probably entered the system to try to get permitting as early as 2018,” Sarah Dukett, cannabis policy lead for the Rural County Representatives of California group, told The Hill.

“We have a lot of people in the queue,” Dukett continued. “We want to make sure we can issue annual licenses as soon as possible.”

The bill set for consideration, SB-508, seeks to speed permitting by consolidating the requisite environmental review process. All California cannabis businesses must currently comply with the state’s environmental laws, as mandated by Proposition 64 in 2016.

Supporters of the bill argue that it would reduce excess oversight that could encumber small business owners. Opponents, however, fear that the proposal would both fail to accomplish this goal and harm natural resources. 

State Sen. John Laird (D), who introduced SB-508 in February 2023, said in a statement of purpose that the measure would serve to expedite the “approval of cannabis licenses by eliminating a redundant review” and help bolster a struggling legal cannabis market.

The bill would do so by minimizing state oversight of environmental review and shift the responsibility to local governments — to an extent. 

Under the 1970s-era California Environmental Equality Act (CEQA), a so-called “lead agency” — typically a local jurisdiction, such as a county or a city — has primary responsibility for overseeing the preparation of an environmental impact assessment like the reviews required for cannabis permitting.

Accompanying that lead agency is a state-level “responsible agency” — in this case, the state’s Department of Cannabis Control — that has some discretionary authority over projects as well.

If SB-508 became law, the local jurisdiction could act as the lead agency without state-level supervision and could take sole charge of submitting compliance documents to the branch of the governor’s office that handles CEQA.

For commercial cannabis cultivation, the city or county would need to either show that it had completed an environmental impact report or issue a “mitigated negative declaration” — a notice indicating how project revisions would avoid specified impacts of concern.

Retail cannabis projects, meanwhile, would require submissions of a “notice of exemption,” indicating why a project is exempt from CEQA.

SB-508 passed the California Senate floor at the end of May and won the approval of the State Assembly’s Business and Professions and Natural Resources committees this past summer. ßfine!

Although a September hearing in the Assembly’s Appropriations Committee was ultimately postponed, that session could occur in early 2024, according to sources familiar with the bill.

Asked to confirm when the next hearing would occur, Justin Tran, press secretary for Laird, said he didn’t want to speculate as to a precise date.

“The Senator looks forward to working with stakeholders throughout the legislative process next year to ensure we support small cannabis growers,” Tran said in an e-mailed statement.

Dukett, whose organization advocates for California’s rural areas, expressed her support for a bill that she believes could “cut down the length of time” that businesses need to wait for an annual license.

“That’s really key for regulatory stability and to be an operating business,” she said.

Dukett argued that the legislation would not actually soften CEQA requirements, as the review would simply occur through a local jurisdiction without as much involvement from the state.

Already today, the counties and cities are “the ones that are actually doing the on-the-ground, site-specific CEQA review,” she explained.

Following a “robust local process,” which can take up to a year to complete, the state then assesses the findings, makes comments and requests various conditions, according to Dukett.

“That will allow them to essentially issue an annual permit a lot quicker because it’s one less step,” she said. 

“And in many ways, it’s a duplicative step because there is still CEQA happening — it’s done by the local jurisdiction,” Dukett added.

But environmental groups argue that the bill “is contrary to the intent of the voters when they passed Proposition 64,” according to an August analysis from the State Assembly’s Appropriations Committee.

If the bill’s opponents end up suing in response to its passage, the state could weather hundreds of thousands of dollars in general fund costs, the document stated.

A separate analysis, from the Assembly Natural Resources Committee in July, expressed concern that “CEQA procedures for cannabis projects vary widely by county,” while casting doubt on the notion that state-level review “is burdensome or duplicative.”

The document concluded that “unconditionally relying on local CEQA reviews that are known to be inconsistent does not seem in keeping with Proposition 64’s lofty promises.”

Rosalie Pacula, a professor at the University of Southern California’s Price School of Public Policy, said she believes that loosening these environmental requirements wouldn’t even help small business owners.

Any step taken to cheapen the production of cannabis, she contended, would benefit larger growers, as “they can already produce more economically than the small producers.”

“Changing a regulation that is uniformly distributed across big and small growers doesn’t help the little guy at all,” said Pacula, who is also a senior fellow at the USC Schaeffer Center for Health Policy and Economics.

“This is a product that is an agricultural good, that can always be produced more cheaply at larger scale,” she added.

Dukett agreed that regardless of the potential shift in environmental review practices, small cannabis growers and retailers would face challenges up against larger corporations.

“It’s hard to compete right now — it definitely is,” she said, noting, however, that this is all the more reason to streamline the licensing process.

Enacting such a “minor change,” she explained, would be low-risk in terms of ecological impacts and could help pull people away from the illicit cannabis market, which she holds responsible for most of the environmental damage.

Illegal cannabis growth typically occurs up in the hills or in other remote areas, where growers end up clearing forests and using prohibited pesticides, according to Dukett.

Such activity, she stressed, can cause long-term damage to the land pollute Northern California streams that serve as tributaries for the rest of the state’s drinking water supply.

“We really need to make sure that we’re looking at where the real environmental degradation is happening — and the worst of the worst is not the legal market,” Dukett said.

“From a local perspective and a state perspective, it’s important that we make sure that we have a system that works and that people can get licensed,” she added.

Pacula argued, however, that the changes wouldn’t make that system work and that supporting small businesses would mean promoting “a less efficient version of growing cannabis.” 

One way to level the costs, for example, would be to make their loans cheaper by giving them a more advantageous interest rate, Pacula explained.

“That’s the best you can do for the little guy,” she added.

But Pacula also said she disagrees with the entire premise of encouraging more cannabis growers in California right now, as the state already has a glut in supply.

California should not be increasing cannabis cultivation until the state is legally allowed to export the product, she contended.

“We have overproduced for our marketplace, so all you’re going to do is shift prices down further and push more people out of business,” Pacula added.