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Grower groups skeptical about legalization ballot measure

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NOT SO FAST Cannabis legalization may be at hand, but pot farmer groups fear the initiative may open the door to market consolidation from big business.
  • NOT SO FAST Cannabis legalization may be at hand, but pot farmer groups fear the initiative may open the door to market consolidation from big business.

The architects and defenders of Proposition 64, the upcoming statewide referendum that would legalize adult cannabis use in California, say that they've gone to great lengths to address concerns expressed by the medical-cannabis community, which is split on the question of adult legalization.

"We are neutral with concerns, and leaning toward 'oppose,'" says Hezekiah Allen, chair and executive director of the California Growers Association. Allen heads up the state's leading cannabis trade-advocacy group, which sees the legalization initiative as a threat to the small-time growers who have dominated the state's cannabis economy for generations. But why? (Read Allen's Open Mic, p7.)

Defenders of the Adult Use of Marijuana Act (AUMA) say the referendum takes into account the Emerald Growers' push to make sure that California remains a small-farm-focused marketplace that's not overrun by big corporate players in the so-called Green Rush already underway.

Jason Kinney is the Sacramento-based spokesperson for the AUMA and says the language of the referendum sets out numerous protections designed to protect small-scale growers from overly aggressive acts of capitalism. He notes, via email, that the AUMA protects farmers by delaying the issuance of large cultivation permits for the first five years after Proposition 64 is enacted, "allowing small growers to establish themselves in the market."

Any large-scale grows that emerge, says Kinney, "will be subject to similar restrictions on vertical integration as contained in the medical marijuana legislation, meaning large-scale cultivators cannot also be distributors of marijuana."

The AUMA also gives state cannabis regulators the power to deny licenses or license renewals if those efforts lead to the "creation or maintenance of unlawful monopoly power," Kinney notes, and the referendum also bans any cannabis producer from undercutting the competition by offering product at below-market costs—while also giving licensing priority to existing medical-marijuana businesses.

And it aims to protect small-time growers' particular brands by requiring the new cannabis bureaucracy to "establish appellations of origin for marijuana grown or cultivated in a particular California county."

But even as the AUMA offers assurances to the existing marijuana industry in California—and requires that California universities study whether further protections are needed to prevent monopolies or anti-competitive behavior—Allen emphasizes that it doesn't address a key concern.

"Anti-competitive practices are not the same as consolidation," Allen says, adding that the authors of the AUMA "skirted around the issue of consolidation" and only inserted the five-year-rule after lobbying from California growers who were firmly in the "no" camp before that fix. What's the point of anti-competitive language in the AUMA if there's nothing to stop entrepreneurs from buying out small farms—especially if the price of cannabis drops once pot is legal?

It was a big enough fight, Allen says, to get the architects of the AUMA to go along with the five-year roadblock to large operators encroaching on small-time farmers' land and product. Before the timeline was added, it created an "immediate strong-oppose position" when the AUMA was being hashed out.

Small-operators' concerns are addressed in 2015's Medical Marijuana Regulation and Safety Act, which Allen describes as a groundbreaking medical-cannabis effort that was the first in the nation "to disrupt vertical integration" and limit the size of commercial grows. Contrary to other states that have dabbled with medical-cannabis laws, "California went in a very populist direction," he says. "This is the most small-business-friendly cannabis-regulatory framework in the nation, and we'd like to see this regulatory model reverberate nationally."

Other states that have taken steps to legalize or decriminalize medical cannabis, says Allen, have gone in the opposite direction as California and "encouraged verticalization and consolidation."

Allen says California needs to remain the bulwark against rampaging corporate interests as other states consider medical or adult-use initiatives of their own.

There are already efforts at consolidation "in every segment of the marketplace," Allen says. Just last week Scotts Miracle-Gro announced a $500 million investment in the cannabis industry in order to kick-start that company's flat profits.

Other states don't provide much in the way of a useful comparison for California, with its large and diverse population—and as a historical exporter of much of the nation's weed. The Green Rush has arrived in Colorado with numerous large-scale grows, but Allen says a comparative analysis between California's AUMA and Colorado's experiment with adult legalization is beside the point, and not just because of population and demographic differences. Before legalization, Allen notes, Colorado got 70 percent of its cannabis from California.

"There is a huge pre-existing business in California," says Allen. "They didn't have a market to consolidate in Colorado; they just had consumers."

As the AUMA moves toward a vote in November, California stakeholders are arguing over what comprises a small farm, in order to protect them. "We like an acre or less," Allen says. "But what exactly is a small farm is a very bitter divide."

Allen says it's tough for him to see how his membership could come to support the AUMA. "To get them in the support column would require a heavy lift from the industry that has not been forthcoming. There would have to be a firm commitment within the industry that there's no place in California" for large-scale grows.

"The closer to November we get, the more open this fight will be. Folks who support the AUMA have to own up that they are supporting consolidation," Allen says.

Tawnie Logan is executive director of the Sonoma County Growers' Alliance and a contributor to the Bohemian's weekly pot column, the Nugget. Logan's organization is neutral on the AUMA as she highlights the "too soon" aspect of adult legalization, which has emerged just as cannabis growers and others in the industry are getting up to speed about new regulations under the Medical Marijuana Regulation and Safety Act, "and most local governments around the state barely understand it, let alone the operators who have to learn a complex set of rules—that's a very big, daunting task, to say the least. And when you add adult use that has add-ons and some lack of clarity on how it impacts local economies and local efforts, it just complicates the matter."

Logan says her group might look more favorably on the AUMA if it were more tuned into the specifics of how adult legalization would play out at the hyperlocal level, where raids are still common and the gray-area legality of cannabis remains in flux because of the long-standing federal scheduling of it as a dangerous drug with no medical value.

"What would benefit and be encouraging for myself and many members is if the proponents of AUMA looked at the impacts at the local level and see how this works in local government, how does it work for local operators."

Logan says that part of the problem with the AUMA is that adult legalization wasn't taken on as a legislative agenda-item in Sacramento. "Because it's a proposed initiative from businessmen, it really hasn't taken into account how this would benefit the existing economy in California, with the exception of saying 'We'll give you tax income,'" Logan says.

She adds that she's been hearing concerns about the AUMA and what it might mean if California voters reject it, in light of broader efforts to get the American government to entirely deschedule cannabis from its current Schedule I status (no medical value whatsoever)— and avoid a Schedule II reclassification that could lead to a Big Pharma takeover of cannabis medicine. In that context, the proposed AUMA might have had a stronger national influence on pot policy if it had emerged from a public-policy debate and vote.

"If California didn't vote for it because of public safety, or environmental, economic [concerns], I believe that the Democratic community that supports legalization in California—it would be introduced as a bill in the Legislature and it would be done right," Logan says. "It would go through the committee process and would lead to strong legislation."

And an adult-use bill written in Sacramento would have gone a long way toward limiting disparities and confusion where cannabis law intersects with, for example, state law around water use, she says. If voters do indeed usher in adult legalization—and about two-thirds of Californians say they support it—"I guarantee that there will be 'clean-up' legislation," says Allen, as he cites "a tremendous amount of inconsistencies" between existing state law and the AUMA.

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