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South Dakota Moves Forward on Licensing Procedure: Week in Review

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This week, we’re spotlighting state cannabis markets in various states of flux: hung up in court, on the precipice of sales and somewhere in the early stages of the transition from medical to adult-use. It’s an exciting time in the industry. As 2021 opens, we can see new business landscapes taking shape in nearly every corner of the U.S.

Federal reform, while far from clear, is inching closer into our sightlines, too.

Here are some of the top headlines from this past week:

  • Despite the entire adult-use market being held up by a recent appeals court ruling (deemed unconstitutional, in fact), South Dakota legislators are moving forward with plans to license retail businesses. It’s new territory for the cannabis landscape, and it remains unclear how this tension will resolve. Read more 
  • Meanwhile, in West Virginia, dispensaries are getting ready to open their doors once product is in place later this year. Read more 
  • And in Pennsylvania, a bipartisan bill has emerged that would legalize adult-use cannabis. It’s a significant step forward in a state whose governor and lieutenant governor have championed the cause. Read more 
  • In Arizona, Verano Holdings announced its acquisition of Territory Dispensary, expanding the multi-state operator’s footprint in this newly legalized adult-use market. Read more 
  • Texas Original Compassionate Cultivation CEO Morris Denton provided a glimpse into his business’s response to severe winter weather this month. “Our team is a resilient bunch,” he said, “and very purpose-driven and passionate about doing our best to get our medicine safely and quickly into the hands of our patients whom we serve throughout the state of Texas.” Read more 

And elsewhere on the web, here are the stories we’ve been reading this week:

  • Virginia Mercury: As of Friday morning, Virginia lawmakers were scrambling to align an approach to adult-use cannabis legalization—resolving differences over regulatory language set up for 2021—and it wasn’t quite clear whether a Saturday deadline would be met. Read more 
  • NJ.com: New Jersey Gov. Phil Murphy has announced his picks for the Cannabis Regulatory Commission, which will oversee the recently legalize adult-use marketplace. Read more  
  • MLive.com: Cookies, which already had a retail site in Detroit (medical-only, for now) celebrated its grand opening in Kalamazoo, Mich., on Friday. Read more   
  • ABC15: While Arizona got off to a quick start with its adult-use licensing process, the medical cannabis market in rural areas of the state is suffering. Retailers have sued the state, insisting that the licensing procedure over the past few years has left an imbalanced landscape for patients to navigate. Read more  
  • Marketwatch: Soccer star David Beckham’s cannabis skin care company, Cellular Goods, is off to a hot start on the London Stock Exchange—only a few days after the trading platform began allowing cannabis businesses into the fold. Read more 

 

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Job Boom Continues to Soar in Cannabis Sector, Outdoing Nearly All Other American Industries

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Shannon Price | Adobe Stock

Job growth in the cannabis sector doesn’t appear to be slowing down anytime soon.

The legal cannabis industry now supports 321,000 workers in the United States, with 77,000-plus jobs created in 2020, or roughly a 32% increase across the 37 states and the District of Columbia with medical or adult-use markets, according to a report by Leafly.

While cannabis companies were not immune to layoffs and furloughs during the onset of COVID-19, as job growth experienced a lull between March and August, hiring picked back up, and many operations thrived during the pandemic. The year-over-year growth showed that the cannabis sector created jobs at a faster rate than almost any other American industry, according to Leafly.

James Yagielo, the CEO of HempStaff, a recruiting and training company based in Miami that specializes in the cannabis and hemp industries, said the 32% increase reported by Leafly did not leave him open-mouthed. 

“It was not really that surprising because it was essential business, so that really narrowed down a lot of the different industries because a lot of industries are not essential,” he said. “So, I think that may have definitely skewed the numbers in cannabis’ favor. But, additionally, even though last year was a horrendous year for most people, our recruiting numbers pretty much matched 2019. We didn’t get the increase we expected, but we didn’t really get decrease either.”

When September 2020 hit, job growth picked back up in the sector, Yagielo said.

“We’ve kind of had a boom, say, post Labor Day in the cannabis industry in hiring that to [this] day is still going on,” he said. “So, while we did have that few-months lull, it really picked back up once they realized that the cannabis industry was not going to be hurt by the pandemic.”

The 32% increase in job growth in the cannabis sector came at a time when the broader U.S. economy shrank by 3.5% in 2020, according to the Bureau of Economic Analysis.

Although the cannabis industry may have appeared recession-proof to some, Vangst, a Denver-based recruiting platform that connects cannabis job seekers with employees, reported 80% of its clients had to lay off or furlough employees when stay-at-home orders rolled out at the onset of COVID-19, CEO Karson Humiston said.

“Nobody knew how the cannabis industry would respond to really its first economic downturn,” she said. “And, at the end of the day, cannabis was deemed essential and businesses did well, and people continued purchasing, consuming cannabis, but nobody knew that that would happen. And, so, capital stopped blowing into the space, which is a big driver of expansion, and businesses really kind of reined in their growth and expansion plans to see how the year would shake out.”

By the end of the year, companies were back on track with their hiring plans, Humiston said.

“Fortunately, the year went great and the election results were great, and I think that’s setting us up for huge, huge, huge growth potential in 2021 and beyond for jobs and cannabis,” she said.

With the hiring increase experienced in 2020, the U.S. cannabis industry now supports nearly as many jobs as there are firefighters in the country, according to U.S. Bureau of Labor Statistics.

As employment continues to heat up, so are salaries and benefits in the sector, Humiston said. According to Vangst’s 2020 Cannabis Industry Salary Guide released last month, 83% of cannabis companies Vangst surveyed offer paid-time off, 73% offer medical insurance, 63% offer dental insurance, 62% offer vision insurance, 28% offer equity or stock options and 29% offer 401(k) plans—a more than 10% year-over-year increase.

“You have to remember the cannabis industry is a startup,” Humiston said. “The entire industry is a startup. This is one of the most immature market industries in the country, and yet they’re providing these great benefits and every year they keep on getting better. And, so, I think this industry is doing a great job in terms of how it’s paying its employees and in terms of the benefits that it’s providing.”

According to Cannabis Business Times and Cannabis Dispensary’s recent Best Cannabis Companies To Work For research, many employees are not satisfied with their pay and benefits, according to anonymous questionnaires distributed to teams of companies that applied to be in the program. The feedback showed 65% of cultivation employees at Best Cannabis Companies said they agreed their pay was fair for the work they perform, while that number was 59% for companies that applied but did not rank. Those numbers were 78% for dispensary employees working for top companies and 60% for others.

Budtenders, trimmers/post harvesters, packagers and delivery drivers in the 15 select states surveyed in Vangst’s guide made an average wage of $15 to $16 per hour, while some of the higher-paid jobs, like vice presidents of retail operations, manufacturing or sales, and directors of cultivation or extraction, all earned averaged salaries in the range of $105,000 to $160,000.

At HempStaff, Yagielo said the biggest increase in salary his company has noticed is for testing lab managers.

“There’s a lot of testing labs across the country trying to get online, when there’s not a lot of people that are your high-level Ph.D. scientists to get a lab set up,” he said. “So, we’ve seen, you know, salaries of lab managers go up above the $200,000-a-year mark recently. They’re usually looking for a Ph.D. in chemistry or something along those lines.”

When new states enact medical or adult-use cannabis programs, there’s often a big rush to relocate top-level managers to those states, whether it be for cultivation, extraction, manufacturing, retail or testing lab operations, Yagielo said. And once those people are relocated, then they start hiring their staff locally, he said.

“And these newer states tend to bump up salaries to entice people, because you’re going to have not as many growers that want to leave a state like Colorado, that’s totally legal, to go to a Mississippi, [which just passed medical cannabis legalization in the November 2020 election],” Yagielo said.

According to Leafly, more than 35,500 Coloradans are employed by the cannabis industry, where sales began in 2014 and raked in $2.2 billion in 2020. Colorado is only outdone by California, which supported roughly 58,000 cannabis jobs in a $4.4 billion market in 2020.

In New Jersey, where Gov. Phil Murphy signed legislation Feb. 22 to legalize adult-use cannabis following voters’ approval of the constitutional amendment, job numbers are estimated to grow by 25,000 in the sector during the first year it enacts a program, Humiston said.

“That’s a lot of brand-new jobs being created, in addition to all the tax revenue that’s being created,” she said. “I mean, cannabis creates jobs, period, and helps communities help people get to work.”

When asked if some of the more mature markets, like Colorado and California, will level off with future job growth, Humiston said she doesn’t see that happening anytime soon.

“The beauty is that more and more consumers are coming into the market every year,” she said. “There’s a whole population of people that haven’t tried cannabis yet. As those consumers continue to become customers, the businesses continue growing. And, so, we’ve certainly seen a level of consolidation, but, if you look at the market trends, the market has continued to grow every single year since it legalized. And as the market grows, meaning just general cannabis sales, there’s a need for more employees.”

With the need for more employees comes the need for job-seeking candidates, who are not on short supply for many entry-level positions. Yagielo said he sees anywhere from 100 to 300 resumes for each job opening, with the number ranging on the high end for budtender positions. But future demand could come by way of factory jobs, he said.

While cannabis job growth has continued to boom, the United States’ industrial hemp industry has leveled off in the past year or so because of market saturation without enough factories to support it, Yagielo said.

“Until you have more of those factories, unfortunately, there is a lot of hemp just getting moldy in people’s barns,” he said. “When [more infrastructure is created], I think your job market is going to explode, because factories need thousands of people to run them.”

Both Humiston and Yagielo said there’s a direct correlation between more capital entering the space and increased hiring in the industry.

In addition to more states coming on board with cannabis legalization, financing options at the federal level would bring a new round of capital into the industry, Humiston said. The Secure And Fair Enforcement (SAFE) Banking Act—proposed legislation regarding the disposition of funds gained through the cannabis industry in the U.S.—would open those doors, she said.

In other words, some companies that have the financial wherewithal to join space in the industry haven’t yet pulled the trigger without fiscal confidence at the federal level.

“I think the other big factor outside of states becoming legalized is businesses having access to capital,” Humiston said. “As businesses can take on more traditional financing options, that will allow them to grow and expand and hire more people. So, I think SAFE Banking is a big bill that everybody’s kind of paying attention to, hoping that that pushes through.

“And then just as more investors get comfortable with the space, capital will lead to growth, which the No. 1 thing people do when they grow is hire.”

TerraVida Holistic Centers Inks Agreement to Merge With Verano Holdings

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In early February, the West Virginia Office of Medical Cannabis (OMC) announced the successful applicants to receive a medical cannabis dispensary permit.

RELATED: Medical Cannabis Dispensary Permits Announced in West Virginia

The OMC posted the full list of dispensary permit holders on its website, which consisted of Ohio-based medical cannabis dispensary Terrasana Cannabis Co. and West Virginia-based medical cannabis dispensary Harvest Care Medical.

Terrasana applied to receive six dispensary permits at the beginning of this year and was awarded all six. The dispensary business was also granted a cultivation and processing license, said William Kedia, Terrasana Cannabis founder and CEO. 

Both dispensaries are making changes and finalizing a game plan in preparation for the expansion.

“The hiring process will not start until we start construction, just because of the timeline,” Kedia said. “I don’t want people waiting on us to do the project for three to five months until it’s finalized. So, as we get to those time points in our game plan, we will hire appropriately and train everyone so everyone is on the same page and ready to go the minute we get the dispensaries, growing and processing facilities all open at the same time.”

RELATED: Harvest Care Medical Prepares to Launch Medical Cannabis Operations in West Virginia: The Starting Line

As for Harvest Care Medical, who won ten dispensary permits, along with cultivation and processing permits, the company is in the process of locking in its properties and is working with architects, engineers and general contractors, said Chief Development Officer Dustin Freas.

Although both dispensaries are getting ready for the expansion, they are unsure when their dispensary, cultivation and processing sites will officially open.

“Our plan is to have all six built out and open later this year, but between COVID and the wintertime, getting contractors to do the build-out has been a challenge,” Kedia said. “And now you have this mass influx of construction projects in West Virginia with everyone trying to build their dispensaries and processing centers, so finding good quality contractors to complete the project in a timely fashion is going to be a challenge.”

Harvest Care Medical is facing a similar challenge.

“We’re in the middle of a pandemic, so it’s not exactly business as usual,” Freas said. “Ordering supplies and equipment that you need could be on backorder, or a construction crew could get COVID, you know?”

Freas said the dispensary must have its grow site operational within six months from the day of the award with one 90-day extension, meaning he thinks that most cultivators who want to be the first to market patient access could have plants propagated by either May or June.

Both Freas and Kedia said one of the biggest challenges would be making sure the product is available and ready for sale when dispensaries open. 

“There is going to be a time lag between when cultivating facilities are constructed and when products are available,” Kedia said. “So, you plant the seed, and then by the time you actually harvest and market the products, it’s about a 10-12 week process. So, you don’t want to have the dispensary open, and then they have the expectation of having the product, and you don’t have anything on the shelves, so there’s a bit of juggling we are going to have to do to make sure this all lines up correctly.”

Additionally, one of the areas that Freas is trying to lobby and work hard on is increasing the patient count in the state, he said.

“There are currently 85 patients registered and certified for cannabis in the entire state of West Virginia right now,” Freas said. “And they’re not really letting doctors market the service, and the state’s not really putting any money behind it, but this isn’t uncommon.”

Freas said that he’s not indicating that West Virginia is dropping the ball, but it creates a back-end concern when opening ten dispensaries and the patient count is low.

However, Bill Freas, Harvest Care Medical CEO and Dustin’s father said that the cannabis commission in West Virginia has been more supportive than any other state they’ve worked with. 

“They really want this to succeed,” Bill said. “They are working with the people that run the applications, and they’re very receptive, and because of that, I think it’s going to be a lot less pain to get to market.”

Aside from challenges, Freas and Kedia said they are excited to become part of the West Virginia market.

Kedia, who has been a physician for the last 20 years in Ohio, said his first-hand experience with the opioid epidemic was challenging. It initially led him to want to be part of the medical cannabis market in Ohio.

“I really felt then, and I feel even more strongly now, that cannabis and medical cannabis, specifically, is a fantastic alternative to our opioid and pain medication our patients depend on,” Kedia said. “And I do think having this alternative is better for patients and better for patients care, and most importantly, better for the quality of life. So, that’s where I get excited because I can now do what I did for patients in Ohio for patients in other states like West Virginia.”

Kedia’s number one goal with the expansion is to help people, he said. 

“Yes, we need to make money to keep places open, we all have bills to pay, our company has bills to pay, but all that aside, our primary focus has to be centered around patients and their well being, and that is more important to me than anything else,” he said.

And Freas and his father, Bill, have similar expectations and goals for Harvest Care Medical and West Virginia patients.

“Our number one goal is to get quality medical cannabis medicine to the residents of West Virginia as quickly and as effectively as possible,” Bill said. “West Virginia has a lot of challenges. One of the big ones is their opioid crisis. We believe that medical cannabis can be a real help. With all the data supporting it, we’re seeing a real difference in reducing the use of opioids and transitioning people, and we’re very committed to helping people.”

South Dakota Senate Passes Retail Licensing Bill for Adult-Use Cannabis

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In early February, the West Virginia Office of Medical Cannabis (OMC) announced the successful applicants to receive a medical cannabis dispensary permit.

RELATED: Medical Cannabis Dispensary Permits Announced in West Virginia

The OMC posted the full list of dispensary permit holders on its website, which consisted of Ohio-based medical cannabis dispensary Terrasana Cannabis Co. and West Virginia-based medical cannabis dispensary Harvest Care Medical.

Terrasana applied to receive six dispensary permits at the beginning of this year and was awarded all six. The dispensary business was also granted a cultivation and processing license, said William Kedia, Terrasana Cannabis founder and CEO. 

Both dispensaries are making changes and finalizing a game plan in preparation for the expansion.

“The hiring process will not start until we start construction, just because of the timeline,” Kedia said. “I don’t want people waiting on us to do the project for three to five months until it’s finalized. So, as we get to those time points in our game plan, we will hire appropriately and train everyone so everyone is on the same page and ready to go the minute we get the dispensaries, growing and processing facilities all open at the same time.”

RELATED: Harvest Care Medical Prepares to Launch Medical Cannabis Operations in West Virginia: The Starting Line

As for Harvest Care Medical, who won ten dispensary permits, along with cultivation and processing permits, the company is in the process of locking in its properties and is working with architects, engineers and general contractors, said Chief Development Officer Dustin Freas.

Although both dispensaries are getting ready for the expansion, they are unsure when their dispensary, cultivation and processing sites will officially open.

“Our plan is to have all six built out and open later this year, but between COVID and the wintertime, getting contractors to do the build-out has been a challenge,” Kedia said. “And now you have this mass influx of construction projects in West Virginia with everyone trying to build their dispensaries and processing centers, so finding good quality contractors to complete the project in a timely fashion is going to be a challenge.”

Harvest Care Medical is facing a similar challenge.

“We’re in the middle of a pandemic, so it’s not exactly business as usual,” Freas said. “Ordering supplies and equipment that you need could be on backorder, or a construction crew could get COVID, you know?”

Freas said the dispensary must have its grow site operational within six months from the day of the award with one 90-day extension, meaning he thinks that most cultivators who want to be the first to market patient access could have plants propagated by either May or June.

Both Freas and Kedia said one of the biggest challenges would be making sure the product is available and ready for sale when dispensaries open. 

“There is going to be a time lag between when cultivating facilities are constructed and when products are available,” Kedia said. “So, you plant the seed, and then by the time you actually harvest and market the products, it’s about a 10-12 week process. So, you don’t want to have the dispensary open, and then they have the expectation of having the product, and you don’t have anything on the shelves, so there’s a bit of juggling we are going to have to do to make sure this all lines up correctly.”

Additionally, one of the areas that Freas is trying to lobby and work hard on is increasing the patient count in the state, he said.

“There are currently 85 patients registered and certified for cannabis in the entire state of West Virginia right now,” Freas said. “And they’re not really letting doctors market the service, and the state’s not really putting any money behind it, but this isn’t uncommon.”

Freas said that he’s not indicating that West Virginia is dropping the ball, but it creates a back-end concern when opening ten dispensaries and the patient count is low.

However, Bill Freas, Harvest Care Medical CEO and Dustin’s father said that the cannabis commission in West Virginia has been more supportive than any other state they’ve worked with. 

“They really want this to succeed,” Bill said. “They are working with the people that run the applications, and they’re very receptive, and because of that, I think it’s going to be a lot less pain to get to market.”

Aside from challenges, Freas and Kedia said they are excited to become part of the West Virginia market.

Kedia, who has been a physician for the last 20 years in Ohio, said his first-hand experience with the opioid epidemic was challenging. It initially led him to want to be part of the medical cannabis market in Ohio.

“I really felt then, and I feel even more strongly now, that cannabis and medical cannabis, specifically, is a fantastic alternative to our opioid and pain medication our patients depend on,” Kedia said. “And I do think having this alternative is better for patients and better for patients care, and most importantly, better for the quality of life. So, that’s where I get excited because I can now do what I did for patients in Ohio for patients in other states like West Virginia.”

Kedia’s number one goal with the expansion is to help people, he said. 

“Yes, we need to make money to keep places open, we all have bills to pay, our company has bills to pay, but all that aside, our primary focus has to be centered around patients and their well being, and that is more important to me than anything else,” he said.

And Freas and his father, Bill, have similar expectations and goals for Harvest Care Medical and West Virginia patients.

“Our number one goal is to get quality medical cannabis medicine to the residents of West Virginia as quickly and as effectively as possible,” Bill said. “West Virginia has a lot of challenges. One of the big ones is their opioid crisis. We believe that medical cannabis can be a real help. With all the data supporting it, we’re seeing a real difference in reducing the use of opioids and transitioning people, and we’re very committed to helping people.”

Dispensaries Prepare to Sell Medical Cannabis in West Virginia

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In early February, the West Virginia Office of Medical Cannabis (OMC) announced the successful applicants to receive a medical cannabis dispensary permit.

RELATED: Medical Cannabis Dispensary Permits Announced in West Virginia

The OMC posted the full list of dispensary permit holders on its website, which consisted of Ohio-based medical cannabis dispensary Terrasana Cannabis Co. and West Virginia-based medical cannabis dispensary Harvest Care Medical.

Terrasana applied to receive six dispensary permits at the beginning of this year and was awarded all six. The dispensary business was also granted a cultivation and processing license, said William Kedia, Terrasana Cannabis founder and CEO. 

Both dispensaries are making changes and finalizing a game plan in preparation for the expansion.

“The hiring process will not start until we start construction, just because of the timeline,” Kedia said. “I don’t want people waiting on us to do the project for three to five months until it’s finalized. So, as we get to those time points in our game plan, we will hire appropriately and train everyone so everyone is on the same page and ready to go the minute we get the dispensaries, growing and processing facilities all open at the same time.”

RELATED: Harvest Care Medical Prepares to Launch Medical Cannabis Operations in West Virginia: The Starting Line

As for Harvest Care Medical, who won ten dispensary permits, along with cultivation and processing permits, the company is in the process of locking in its properties and is working with architects, engineers and general contractors, said Chief Development Officer Dustin Freas.

Although both dispensaries are getting ready for the expansion, they are unsure when their dispensary, cultivation and processing sites will officially open.

“Our plan is to have all six built out and open later this year, but between COVID and the wintertime, getting contractors to do the build-out has been a challenge,” Kedia said. “And now you have this mass influx of construction projects in West Virginia with everyone trying to build their dispensaries and processing centers, so finding good quality contractors to complete the project in a timely fashion is going to be a challenge.”

Harvest Care Medical is facing a similar challenge.

“We’re in the middle of a pandemic, so it’s not exactly business as usual,” Freas said. “Ordering supplies and equipment that you need could be on backorder, or a construction crew could get COVID, you know?”

Freas said the dispensary must have its grow site operational within six months from the day of the award with one 90-day extension, meaning he thinks that most cultivators who want to be the first to market patient access could have plants propagated by either May or June.

Both Freas and Kedia said one of the biggest challenges would be making sure the product is available and ready for sale when dispensaries open. 

“There is going to be a time lag between when cultivating facilities are constructed and when products are available,” Kedia said. “So, you plant the seed, and then by the time you actually harvest and market the products, it’s about a 10-12 week process. So, you don’t want to have the dispensary open, and then they have the expectation of having the product, and you don’t have anything on the shelves, so there’s a bit of juggling we are going to have to do to make sure this all lines up correctly.”

Additionally, one of the areas that Freas is trying to lobby and work hard on is increasing the patient count in the state, he said.

“There are currently 85 patients registered and certified for cannabis in the entire state of West Virginia right now,” Freas said. “And they’re not really letting doctors market the service, and the state’s not really putting any money behind it, but this isn’t uncommon.”

Freas said that he’s not indicating that West Virginia is dropping the ball, but it creates a back-end concern when opening ten dispensaries and the patient count is low.

However, Bill Freas, Harvest Care Medical CEO and Dustin’s father said that the cannabis commission in West Virginia has been more supportive than any other state they’ve worked with. 

“They really want this to succeed,” Bill said. “They are working with the people that run the applications, and they’re very receptive, and because of that, I think it’s going to be a lot less pain to get to market.”

Aside from challenges, Freas and Kedia said they are excited to become part of the West Virginia market.

Kedia, who has been a physician for the last 20 years in Ohio, said his first-hand experience with the opioid epidemic was challenging. It initially led him to want to be part of the medical cannabis market in Ohio.

“I really felt then, and I feel even more strongly now, that cannabis and medical cannabis, specifically, is a fantastic alternative to our opioid and pain medication our patients depend on,” Kedia said. “And I do think having this alternative is better for patients and better for patients care, and most importantly, better for the quality of life. So, that’s where I get excited because I can now do what I did for patients in Ohio for patients in other states like West Virginia.”

Kedia’s number one goal with the expansion is to help people, he said. 

“Yes, we need to make money to keep places open, we all have bills to pay, our company has bills to pay, but all that aside, our primary focus has to be centered around patients and their well being, and that is more important to me than anything else,” he said.

And Freas and his father, Bill, have similar expectations and goals for Harvest Care Medical and West Virginia patients.

“Our number one goal is to get quality medical cannabis medicine to the residents of West Virginia as quickly and as effectively as possible,” Bill said. “West Virginia has a lot of challenges. One of the big ones is their opioid crisis. We believe that medical cannabis can be a real help. With all the data supporting it, we’re seeing a real difference in reducing the use of opioids and transitioning people, and we’re very committed to helping people.”

Verano Holdings Enters into Agreement to Expand Arizona Footprint

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District Growers established itself in Washington, D.C., in 2012, part of a medical cannabis market that has grown steadily ever since. 

Founder and President Corey Barnette says that his extensive business background gave him a solid foundation for his entrance into the cannabis space. And now that he’s spent years here, navigating the cultivation side of the industry and monitoring broader trends in the U.S., he says that there are ways for business owners to challenge the working assumptions about social equity and market development.

While he may be in D.C., a smaller market than many of the larger states coming online, he points to the fragmentation of the U.S. cannabis space as a major problem.

“We have to build long-term relationships to build a stronger cannabis community among ourselves to be competitive and profitable for years to come,” he says.

Here, our recent conversation with Barnette helps illuminate that need.

Mila Marshall: You are one of the licensed industry’s few African American growers. How did you find yourself one of the few history makers in the cannabis industry?

corey barnette district growers

 

Barnette

Corey Barnette: I have a background in business and graduated from Duke School of Business. I had been strategically buying and selling businesses—like an automotive parts manufacturer, a clinical research company and other small businesses. In 2008, I was invited by a colleague to sit on the Board of the San Diego Medical Marijuana Collective, and subsequently ended up purchasing the company. After owning and operating that company I opened a second dispensary, Chi Holistic Collective.

My companies were two of the top 10 largest businesses in San Diego at the time, and, while that success was phenomenal, my family was based in Washington, D.C. The industry was just beginning and I was able to engage and help influence the market using my previous experience. When the Capital market began to move toward medical marijuana, I took advantage of the opportunity to help shape the market and opened District Growers.

MM: You have engaged in a diversity of business. What was so special about the cannabis sector?

CB: Not only did I think cannabis was an incredible opportunity to monetize and do well financially, I thought it was an opportunity to do good at the same time. For me, it was a situation where I could now put the tools that I had spent time developing over my career to work for me and benefit the broader community too.

MM: There is something quite special about your cultivation process. Where did the idea to use aeroponics come from and what is that exactly?

CB: Aeroponics is growing without soil, using air or a mist environment. District Growers is actually an extension of what I had been doing in San Diego. I had been inspired to maximize the use of space to increase profitability from the gardens on the West Coast. By the time I had returned to the Capital, I had a really solid plan for clean growing.

MM: Aeroponics is not a common practice. What are your thoughts about clean growing as a strategy for social equity growers?

CB: I know some absolutely magnificent master growers that use soil. I can’t knock anyone’s preferred method of growing. Everyone has what they are good at. Ultimately, you know what you like and you learn to do that well. There are other growers that use aeroponics and what we are looking for is always consistency and quality for our customers. However, using soil is very, very forgiving. A grower can lean on the living nature of the ecology of the soil if management practices are still being figured out. Essentially, Mother Nature saves us as growers. With aeroponics, an error can be financially costly and disrupt access to the patients that rely on our products for their health and well being.

MM: What is the benefit of “clean growing” then if it is so high-risk?

CB: It is indeed high-risk but a very high-reward method of cultivation! I think the yield and cleanliness of the smoke itself gives us the results we are looking for in a medical marijuana product. You get a better terpene profile and I enjoy that our process gives us direct access to influence the outcome of the harvest in an intentional way.

MM: We cannot talk about cannabis without addressing equity. As a grower, how have you engaged with the social equity aspects of the industry?

CB: While we are strictly focused on medical marijuana for our consumers, we have worked with the city to remove all legislative hurdles that pose barriers to impacted communities. We have worked on medical marijuana legislation; decriminalization; Initiative 71, which allowed for the possession of two ounces of marijuana and home growing of no more than three marijuana plants; and we are currently deeply engaged with helping the city create its adult-use recreational policies. District Growers wants to create some opportunities in the city, so we do the policy work to help make that happen.

MM: Much of the equity and ownership conversation has been directed toward dispensary ownership. Can you share your personal reflections on the broader conversation of social equity in the industry?

CB: You know, honestly, I believe that we’re doing it all wrong. There has been a vicious costly war that has played out in our communities that has destroyed our families for generations. We are feeling it now, and our society will feel the effects for decades to come. A terrible price has been paid, and the programs designed to address the systemic inequities are weak and unreasonable. The limitations and legalities of licensing in states isn’t working for who it is even designed for.

It doesn’t sit well with me how prisons are filled with citizens who were trying to pay their bills selling the very product others are making money off of legally at the same time.

MM: In your opinion, how do communities get what they deserve from this industry?

CB: I think the approach we’ve taken in Washington, D.C., going to our regulators and city council and demanding pathways to influence the industry so that we are setting the equity agenda for people who have been hit hardest by the war on drugs, is necessary. We are owed a place in this industry and it isn’t about waiting to get what they give us but moving forward to get what we deserve. We want people that look like us and it is our responsibility to help make that happen.

MM: Is it true that the Capital has the largest number of African American dispensary owners?

CB: Yes, the majority of dispensary owners in D.C. are Black. I’m not saying that the largest shareholder is Black, but 51% majority ownership. I believe Black ownership is important, it means jobs for Black people. When you go into a dispensary in Washington, D.C., and you look to see who is employed, you have Black employees. You see us working in there, managing stores: We are the marketing experts and getting accounting contracts. You see us getting the jobs for advisers, consulting and more.

MM: What are some of the policy barriers as it relates to social equity access to the industry?

CB: A lot of times our elected officials that represent us lead from fear rather than the desire to push the envelope to serve our community. In my opinion, people want to stay elected, and championing cannabis is risky. If we think jobs are important, we have an opportunity to participate in the birth of an entire industry, but politicians between 2008 to 2011 were not even open to a conversation on marijuana—legal marijuana in the Black community. So, I believe educating elected officials on the facts about the industry and its potential to address employment, and entrepreneurship is key to advancing access to the industry.

MM: What are your words of wisdom for emerging minority cannabis entrepreneurs and industry leaders?

CB: Minority businesses have to find ways of working better together. Make sure you are willing to work to make this market inclusive whether you win a license or not. Make sure your emerging cannabis market directly benefits your community. There has to be a goal of inclusivity and diversity for owners but also on these cannabis councils, advisory boards, grant committees and policy working groups. Occupy and diversify at all levels and across the supply chain.

We also need to be willing to merge, willing to connect and contract with each other. We have to build long-term relationships to build a stronger cannabis community among ourselves to be competitive and profitable for years to come.

 

Indus Holdings Inc. Announces the Acquisition of Lowell Herb Co.

by

<![CDATA[

SALINAS,
Calif., Feb. 25, 2021 (GLOBE NEWSWIRE) — PRESS RELEASE — Indus Holdings, Inc., a vertically-integrated,
California-focused cannabis company, announced the acquisition of substantially
all of the assets of the Lowell Herb Co. and Lowell Smokes trademark brands,
product portfolio, and production assets from The Hacienda Group effective
immediately. Lowell Herb Co. is a California cannabis brand that
manufactures and distributes distinctive and highly regarded premium packaged
flower, pre-roll, concentrates, and vape products.

The
transaction is valued at approximately $39 million and is comprised of a
cash payment of $4.1 million and the issuance of 22,643,678 Subordinate
Voting Shares of the Company (of which 5 million will be held in escrow to
secure certain indemnification obligations undertaken by the sellers in the
transaction). The share consideration was issued in a private placement
transaction and the Company has agreed to register such shares for resale in
the United States. Hacienda has agreed to continue to produce Lowell products
for an interim period for the account of the Company pending completion of the
transfer of certain regulatory assets.

In connection
with this acquisition, the Company intends to complete a change in its
corporate name to Lowell
Farms Inc.

It is currently anticipated that the Company’s
Subordinate Voting Shares and Warrants will begin trading on the Canadian
Securities Exchange effective on March 5, 2021, under the ticker symbols
LOWL and LOWL.WT, and that the Subordinate Voting Shares will begin trading on
the OTCQX effective on March 5, 2021, under the ticker symbol LOWLF. No action
is required to be taken by existing securityholders of the Company with respect
to the name change. Outstanding share and warrant certificates are not affected
by the name change and do not need to be exchanged.

"The
combination of Indus and Lowell will create a leading producer of California
cannabis and the next step for the first great American cannabis brand,"
said Gregory Heyman, founder of Beehouse, Lowell’s largest investor. "The
Indus team’s commitment to growing excellent cannabis and the communities they
serve also realizes Lowell’s mission to normalize cannabis in America."

“The cannabis
industry is awash in brands competing for our attention, but Lowell has risen
to the top of the fray as a brand that simultaneously empowers a movement,
welcomes the curious, and greets the reacquainted all with a grace and elegance
that other brands can only aspire to,” said George Allen, Chairman of the
Board for Indus Holdings, Inc. “Every resource under our control will be
employed in unlocking Lowell’s full potential.”

The Company
will provide updates to its cultivation expansion plans as well as the
operational status of our greenhouse in the upcoming earnings call and release
scheduled for March 2, 2021.

 

]]>

Pennsylvania State Senators Team Up to Introduce Bipartisan Adult-Use Cannabis Legislation

by

California’s regulatory framework for cannabis and hemp-derived products, including CBD, continues to evolve, most recently via updated Proposition 65 warning requirements that came into full effect Jan. 3, 2021. As of that date, anyone offering for sale cannabis and hemp-derived products in California must provide an appropriate warning in accordance with the current regulations, with limited exceptions.

Noncompliance with the new regulations may result in government or private prosecution, with potential penalties of up to $2,500 per day for an alleged violation.

Proposition 65 Warning Requirement

California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as Prop. 65, requires the state of California to maintain an updated list of chemicals known to the state to cause cancer or reproductive toxicity.

Persons or companies who offer products for sale in California containing Proposition 65-listed chemicals must provide a “clear and reasonable” warning to the consumer (with limited exceptions) or face the prospect of penalties. Businesses usually choose to apply either the standard or “short form” default warnings provided in the Proposition 65 regulations, as these are deemed presumptively “clear and reasonable,” whereas any other warning language runs the risk of being challenged as noncompliant.

Prior Proposition 65 Requirement Limited to Smokable Cannabis

“Marijuana smoke” was added to the Proposition 65 list in 2009 solely as a cancer-causing agent. After that date, a cancer-specific warning was required for all smokable cannabis. In addition, if a cannabis product contained other Proposition 65 listed chemicals—such as certain heavy metals or pesticides—warnings for those chemicals were also applicable.

However, THC was not a listed Proposition 65 chemical. As such, no warning was required for non-smokable cannabis products, including edibles or hemp-derived CBD products, unless those products contained other listed chemicals.

Until recently.

READ MORE: What Should California Dispensaries Know About Prop. 65? 

New Chemical Listings Expand Warning Requirement, Including to Hemp-Derived CBD

On Jan. 3, 2020, the state of California agency that oversees Proposition 65 (the Office of Environmental Health Hazard Assessment, known as OEHHA) updated the Proposition 65 list to add “cannabis (marijuana) smoke” as a reproductive toxin causing developmental harm (in addition to the prior listing as a cancer-causing agent) and add Δ9-tetrahydrocannabinol (Δ9-THC) as a reproductive toxin causing developmental harm.

The one-year grace period to provide adequate warnings based on these new listings expired on Jan. 3, 2021.

As such, to avoid a potential claim of a Proposition 65 violation:

  • persons offering for sale smokable marijuana should now be providing appropriate warnings that address both cancer and reproductive/developmental harm, and
  • persons offering for sale any THC-containing products—including, but not limited to, edibles/concentrates/vapes and hemp-derived CBD products—should now be providing an appropriate reproductive harm warning.

It is important to note that the warning requirement applies to any products offered for sale as of Jan. 3, 2021, not just products manufactured or distributed to retailers after that date. Any items “on the shelf” (either physically or online) after Jan. 3, 2021 are subject to the newly applicable Proposition 65 warning requirements, regardless of packaging dates. Products sold online generally require online warnings at the website point-of-sale, in addition to warnings on the product itself.

The “Safe Harbor” Exemption for Low Levels of Exposure: Not So Safe

Proposition 65 does provide an exemption from the warning requirement if a business can demonstrate that the exposures caused by its product create “no significant risk” (if the chemical is listed as a carcinogen) or cause “no observable effect” (if the chemical is listed as a reproductive toxicant). However, it is very difficult for businesses to take advantage of this exemption in a cost-effective manner.

Even where OEHHA has set numeric “safe harbor” thresholds for listed chemicals, those thresholds only identify the volume of chemical per day that is considered safe for a person to be exposed to. Determining how that safe harbor number applies to use of a product containing the chemical requires a product-specific exposure analysis by a toxicologist or other qualified expert. 

An exposure analysis involves a number of complex factors, including the route of exposure (e.g., inhalation, skin contact, eating/drinking) and the amount of product to which the range of potential customers is exposed on a daily basis. 

For products subject to Proposition 65 because of the marijuana smoke or THC listings, this analysis is even more difficult, as neither chemical has an OEHHA-approved safe harbor threshold. As such, the toxicologist or other expert would need to propose such a threshold themselves, based on a review of the totality of available scientific evidence, as the starting point in their analysis.

Not surprisingly, exposure assessments are expensive and time-consuming. In addition, they often result in a determination that a warning is, in fact, required. Finally, even where the assessment would support use of the safe harbor exemption, the cost of defending use of the exemption in potential litigation with a governmental or private enforcer often outweighs the cost and burden of providing a warning.

Impact of New Requirements: Potential Legal Enforcement and Penalties

Persons violating the new Proposition 65 requirements could face enforcement actions by the California Attorney General, district attorneys or (in cities with populations of over 750,000) city attorneys. Importantly, even if government enforcement does not occur, penalties may also be sought by private “citizen” enforcers of Proposition 65, who are very active across California. In addition to seeking recovery of up to $2,500 per day of an alleged violation, enforcers may also seek recovery of their attorneys’ fees in prosecuting the action.

Citizen enforcers must serve a notice of the alleged violation at least 60 days prior to initiating an enforcement action in court. Anyone receiving such a notice should promptly seek advice from an attorney experienced with Proposition 65, with the goals of promptly:

  • identifying and enforcing any potential right to defense and indemnification from another party in the chain of distribution for the product at issue;
  • determining whether a viable defense to the Proposition 65 claim may exist: for example, businesses employing under ten persons are exempt from providing warnings (although such a business may have indemnified a party in the chain of distribution that is not exempt);
  • if appropriate, negotiating a prompt settlement with the citizen enforcer, before the enforcer incurs attorneys’ fees to initiate a court proceeding at the expiration of the 60-day notice period.

For these reasons, anyone offering for sale cannabis and hemp-derived products in California should ensure they are implementing Proposition 65 warnings in accordance with the current listings and regulations, absent a strong technical and legal basis for asserting that an exemption applies.

Donald E. Sobelman is an environmental law partner in Farella Braun + Martel’s San Francisco office. He can be reached at dsobelman@fbm.com.

Wendy M. Hernández earned her law degree from UC Hastings and passed the California bar in 2020 (pending admission). Hernández currently works with Farella Braun + Martel LLP.

 

How Texas Original Compassionate Cultivation Weathered the State’s Winter Storm

by

District Growers established itself in Washington, D.C., in 2012, part of a medical cannabis market that has grown steadily ever since. 

Founder and President Corey Barnette says that his extensive business background gave him a solid foundation for his entrance into the cannabis space. And now that he’s spent years here, navigating the cultivation side of the industry and monitoring broader trends in the U.S., he says that there are ways for business owners to challenge the working assumptions about social equity and market development.

While he may be in D.C., a smaller market than many of the larger states coming online, he points to the fragmentation of the U.S. cannabis space as a major problem.

“We have to build long-term relationships to build a stronger cannabis community among ourselves to be competitive and profitable for years to come,” he says.

Here, our recent conversation with Barnette helps illuminate that need.

Mila Marshall: You are one of the licensed industry’s few African American growers. How did you find yourself one of the few history makers in the cannabis industry?

corey barnette district growers

 

Barnette

Corey Barnette: I have a background in business and graduated from Duke School of Business. I had been strategically buying and selling businesses—like an automotive parts manufacturer, a clinical research company and other small businesses. In 2008, I was invited by a colleague to sit on the Board of the San Diego Medical Marijuana Collective, and subsequently ended up purchasing the company. After owning and operating that company I opened a second dispensary, Chi Holistic Collective.

My companies were two of the top 10 largest businesses in San Diego at the time, and, while that success was phenomenal, my family was based in Washington, D.C. The industry was just beginning and I was able to engage and help influence the market using my previous experience. When the Capital market began to move toward medical marijuana, I took advantage of the opportunity to help shape the market and opened District Growers.

MM: You have engaged in a diversity of business. What was so special about the cannabis sector?

CB: Not only did I think cannabis was an incredible opportunity to monetize and do well financially, I thought it was an opportunity to do good at the same time. For me, it was a situation where I could now put the tools that I had spent time developing over my career to work for me and benefit the broader community too.

MM: There is something quite special about your cultivation process. Where did the idea to use aeroponics come from and what is that exactly?

CB: Aeroponics is growing without soil, using air or a mist environment. District Growers is actually an extension of what I had been doing in San Diego. I had been inspired to maximize the use of space to increase profitability from the gardens on the West Coast. By the time I had returned to the Capital, I had a really solid plan for clean growing.

MM: Aeroponics is not a common practice. What are your thoughts about clean growing as a strategy for social equity growers?

CB: I know some absolutely magnificent master growers that use soil. I can’t knock anyone’s preferred method of growing. Everyone has what they are good at. Ultimately, you know what you like and you learn to do that well. There are other growers that use aeroponics and what we are looking for is always consistency and quality for our customers. However, using soil is very, very forgiving. A grower can lean on the living nature of the ecology of the soil if management practices are still being figured out. Essentially, Mother Nature saves us as growers. With aeroponics, an error can be financially costly and disrupt access to the patients that rely on our products for their health and well being.

MM: What is the benefit of “clean growing” then if it is so high-risk?

CB: It is indeed high-risk but a very high-reward method of cultivation! I think the yield and cleanliness of the smoke itself gives us the results we are looking for in a medical marijuana product. You get a better terpene profile and I enjoy that our process gives us direct access to influence the outcome of the harvest in an intentional way.

MM: We cannot talk about cannabis without addressing equity. As a grower, how have you engaged with the social equity aspects of the industry?

CB: While we are strictly focused on medical marijuana for our consumers, we have worked with the city to remove all legislative hurdles that pose barriers to impacted communities. We have worked on medical marijuana legislation; decriminalization; Initiative 71, which allowed for the possession of two ounces of marijuana and home growing of no more than three marijuana plants; and we are currently deeply engaged with helping the city create its adult-use recreational policies. District Growers wants to create some opportunities in the city, so we do the policy work to help make that happen.

MM: Much of the equity and ownership conversation has been directed toward dispensary ownership. Can you share your personal reflections on the broader conversation of social equity in the industry?

CB: You know, honestly, I believe that we’re doing it all wrong. There has been a vicious costly war that has played out in our communities that has destroyed our families for generations. We are feeling it now, and our society will feel the effects for decades to come. A terrible price has been paid, and the programs designed to address the systemic inequities are weak and unreasonable. The limitations and legalities of licensing in states isn’t working for who it is even designed for.

It doesn’t sit well with me how prisons are filled with citizens who were trying to pay their bills selling the very product others are making money off of legally at the same time.

MM: In your opinion, how do communities get what they deserve from this industry?

CB: I think the approach we’ve taken in Washington, D.C., going to our regulators and city council and demanding pathways to influence the industry so that we are setting the equity agenda for people who have been hit hardest by the war on drugs, is necessary. We are owed a place in this industry and it isn’t about waiting to get what they give us but moving forward to get what we deserve. We want people that look like us and it is our responsibility to help make that happen.

MM: Is it true that the Capital has the largest number of African American dispensary owners?

CB: Yes, the majority of dispensary owners in D.C. are Black. I’m not saying that the largest shareholder is Black, but 51% majority ownership. I believe Black ownership is important, it means jobs for Black people. When you go into a dispensary in Washington, D.C., and you look to see who is employed, you have Black employees. You see us working in there, managing stores: We are the marketing experts and getting accounting contracts. You see us getting the jobs for advisers, consulting and more.

MM: What are some of the policy barriers as it relates to social equity access to the industry?

CB: A lot of times our elected officials that represent us lead from fear rather than the desire to push the envelope to serve our community. In my opinion, people want to stay elected, and championing cannabis is risky. If we think jobs are important, we have an opportunity to participate in the birth of an entire industry, but politicians between 2008 to 2011 were not even open to a conversation on marijuana—legal marijuana in the Black community. So, I believe educating elected officials on the facts about the industry and its potential to address employment, and entrepreneurship is key to advancing access to the industry.

MM: What are your words of wisdom for emerging minority cannabis entrepreneurs and industry leaders?

CB: Minority businesses have to find ways of working better together. Make sure you are willing to work to make this market inclusive whether you win a license or not. Make sure your emerging cannabis market directly benefits your community. There has to be a goal of inclusivity and diversity for owners but also on these cannabis councils, advisory boards, grant committees and policy working groups. Occupy and diversify at all levels and across the supply chain.

We also need to be willing to merge, willing to connect and contract with each other. We have to build long-term relationships to build a stronger cannabis community among ourselves to be competitive and profitable for years to come.

 

Segra Enters Agreement Making BioAgronomics Group’s Premium Cannabis Cultivar Portfolio Available to Licensed Producers Across Canada and Select International Markets

by

California’s regulatory framework for cannabis and hemp-derived products, including CBD, continues to evolve, most recently via updated Proposition 65 warning requirements that came into full effect Jan. 3, 2021. As of that date, anyone offering for sale cannabis and hemp-derived products in California must provide an appropriate warning in accordance with the current regulations, with limited exceptions.

Noncompliance with the new regulations may result in government or private prosecution, with potential penalties of up to $2,500 per day for an alleged violation.

Proposition 65 Warning Requirement

California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as Prop. 65, requires the state of California to maintain an updated list of chemicals known to the state to cause cancer or reproductive toxicity.

Persons or companies who offer products for sale in California containing Proposition 65-listed chemicals must provide a “clear and reasonable” warning to the consumer (with limited exceptions) or face the prospect of penalties. Businesses usually choose to apply either the standard or “short form” default warnings provided in the Proposition 65 regulations, as these are deemed presumptively “clear and reasonable,” whereas any other warning language runs the risk of being challenged as noncompliant.

Prior Proposition 65 Requirement Limited to Smokable Cannabis

“Marijuana smoke” was added to the Proposition 65 list in 2009 solely as a cancer-causing agent. After that date, a cancer-specific warning was required for all smokable cannabis. In addition, if a cannabis product contained other Proposition 65 listed chemicals—such as certain heavy metals or pesticides—warnings for those chemicals were also applicable.

However, THC was not a listed Proposition 65 chemical. As such, no warning was required for non-smokable cannabis products, including edibles or hemp-derived CBD products, unless those products contained other listed chemicals.

Until recently.

READ MORE: What Should California Dispensaries Know About Prop. 65? 

New Chemical Listings Expand Warning Requirement, Including to Hemp-Derived CBD

On Jan. 3, 2020, the state of California agency that oversees Proposition 65 (the Office of Environmental Health Hazard Assessment, known as OEHHA) updated the Proposition 65 list to add “cannabis (marijuana) smoke” as a reproductive toxin causing developmental harm (in addition to the prior listing as a cancer-causing agent) and add Δ9-tetrahydrocannabinol (Δ9-THC) as a reproductive toxin causing developmental harm.

The one-year grace period to provide adequate warnings based on these new listings expired on Jan. 3, 2021.

As such, to avoid a potential claim of a Proposition 65 violation:

  • persons offering for sale smokable marijuana should now be providing appropriate warnings that address both cancer and reproductive/developmental harm, and
  • persons offering for sale any THC-containing products—including, but not limited to, edibles/concentrates/vapes and hemp-derived CBD products—should now be providing an appropriate reproductive harm warning.

It is important to note that the warning requirement applies to any products offered for sale as of Jan. 3, 2021, not just products manufactured or distributed to retailers after that date. Any items “on the shelf” (either physically or online) after Jan. 3, 2021 are subject to the newly applicable Proposition 65 warning requirements, regardless of packaging dates. Products sold online generally require online warnings at the website point-of-sale, in addition to warnings on the product itself.

The “Safe Harbor” Exemption for Low Levels of Exposure: Not So Safe

Proposition 65 does provide an exemption from the warning requirement if a business can demonstrate that the exposures caused by its product create “no significant risk” (if the chemical is listed as a carcinogen) or cause “no observable effect” (if the chemical is listed as a reproductive toxicant). However, it is very difficult for businesses to take advantage of this exemption in a cost-effective manner.

Even where OEHHA has set numeric “safe harbor” thresholds for listed chemicals, those thresholds only identify the volume of chemical per day that is considered safe for a person to be exposed to. Determining how that safe harbor number applies to use of a product containing the chemical requires a product-specific exposure analysis by a toxicologist or other qualified expert. 

An exposure analysis involves a number of complex factors, including the route of exposure (e.g., inhalation, skin contact, eating/drinking) and the amount of product to which the range of potential customers is exposed on a daily basis. 

For products subject to Proposition 65 because of the marijuana smoke or THC listings, this analysis is even more difficult, as neither chemical has an OEHHA-approved safe harbor threshold. As such, the toxicologist or other expert would need to propose such a threshold themselves, based on a review of the totality of available scientific evidence, as the starting point in their analysis.

Not surprisingly, exposure assessments are expensive and time-consuming. In addition, they often result in a determination that a warning is, in fact, required. Finally, even where the assessment would support use of the safe harbor exemption, the cost of defending use of the exemption in potential litigation with a governmental or private enforcer often outweighs the cost and burden of providing a warning.

Impact of New Requirements: Potential Legal Enforcement and Penalties

Persons violating the new Proposition 65 requirements could face enforcement actions by the California Attorney General, district attorneys or (in cities with populations of over 750,000) city attorneys. Importantly, even if government enforcement does not occur, penalties may also be sought by private “citizen” enforcers of Proposition 65, who are very active across California. In addition to seeking recovery of up to $2,500 per day of an alleged violation, enforcers may also seek recovery of their attorneys’ fees in prosecuting the action.

Citizen enforcers must serve a notice of the alleged violation at least 60 days prior to initiating an enforcement action in court. Anyone receiving such a notice should promptly seek advice from an attorney experienced with Proposition 65, with the goals of promptly:

  • identifying and enforcing any potential right to defense and indemnification from another party in the chain of distribution for the product at issue;
  • determining whether a viable defense to the Proposition 65 claim may exist: for example, businesses employing under ten persons are exempt from providing warnings (although such a business may have indemnified a party in the chain of distribution that is not exempt);
  • if appropriate, negotiating a prompt settlement with the citizen enforcer, before the enforcer incurs attorneys’ fees to initiate a court proceeding at the expiration of the 60-day notice period.

For these reasons, anyone offering for sale cannabis and hemp-derived products in California should ensure they are implementing Proposition 65 warnings in accordance with the current listings and regulations, absent a strong technical and legal basis for asserting that an exemption applies.

Donald E. Sobelman is an environmental law partner in Farella Braun + Martel’s San Francisco office. He can be reached at dsobelman@fbm.com.

Wendy M. Hernández earned her law degree from UC Hastings and passed the California bar in 2020 (pending admission). Hernández currently works with Farella Braun + Martel LLP.