Industrial Hemp on Hold in Ventura County

As it turns out, 2020 has fouled the air for local hemp production. In the wake of the 2016 passage of Proposition 64, which legalized recreational marijuana in California, and the Federal Agriculture Improvement Act of 2018, which downgraded hemp from controlled substance to agricultural crop, Ventura and Santa Barbara counties have become a hotbed of industrial hemp farming. However, a huge dent in that economy arrived Jan. 15 when the Ventura County Board of Supervisors unanimously voted for a ban that would prohibit the planting of hemp on land within a half mile from a city that is zoned for residential use. Now, many local agricultural communities — including Camarillo, Thousand Oaks and Moorpark — have instituted temporary bans on hemp production, largely because of offensive odor issues. Coastal convention On Jan. 30, attorney Amy Steinfeld, managing partner of Brownstein Hyatt Farber Schreck in Santa Barbara, presented her comprehensive discussion on the local impact of the issue at the Hilton Santa Barbara Beachfront Resort, under the auspices of California Lutheran University’s Corporate Leaders Breakfast. Steinfeld —who often deals with lawsuits related to water and land use as well as California Environmental Quality Act issues — discussed the differences between the cannabis industries in Ventura and Santa Barbara counties, the financial and legal impacts on businesses in the two counties, and related water, land and home value issues. After a quick overview of the history of marijuana, Steinfeld brought the timeline up-to-date as 13 states have decriminalized but not legalized cannabis. Cannabis is still illegal on the federal level, where it is listed as a Schedule 1 drug, along with opioids, which claims 70,000 lives a year. “You can’t travel with it,” Steinfeld said of cannabis, adding that legislative attempts to legalize it federally will probably die in the Senate. Steinfeld, whose law firm has an office in Denver, told the Business Journal that the Colorado-to-California comparison is not analogous. The primary difference between the pot industry in Colorado and California, she explained, is that the former state is “more libertarian” and marijuana there “is not grown outside.” The very statewide stringency that has produced California’s $3 billion-a-year legal cannabis industry is also putting many businesses to the test. “(The year) 2020 is going to be a hard year for a lot of smaller companies that will get into this space in California,” which, with a population of 40 million people, has been seen as “the largest recreational marijuana market in the world,” Steinfeld said. ‘Ag’-ravation Ever since the Farm Bill (Federal Agriculture Improvement Act of 2018) removed hemp as a controlled substance, “hemp is now treated as a regular crop,” Steinfeld said. Hemp is a cannabis plant with a lower concentration of the psychoactive substance THC than the marijuana cannabis plant. Industrial hemp contains less than 0.3 percent, while marijuana plants may have THC concentrations of 10 percent or more. Sophisticated detection can determine if a crop meets the 1 percent or lower THC levels required. In contrast, CBD, a marijuana derivative now used as an ingredient in products from coffee to cookies, is considered a Schedule 4 substance. Yet only 12 counties allow hemp farming, Steinfeld noted. “Entering the cannabis industry is entering a compliance industry and it’s very difficult to keep up with the regulations,” Steinfeld said. “A lot of these smaller local farmers are being regulated out of existence. The permitting process can take two years and $1 million adjusting the groundwater wells to state rules. Santa Barbara County has become a coveted place to cultivate cannabis crops because of its ideal climate, soil and proximity to California’s major metropolitan hubs. Specific areas such as Carpinteria includes traditional agricultural infrastructure such as greenhouses. Hemp production uses half the water of other agricultural plots, Steinfeld said, and while local homeowners in Carpinteria initially feared that the rise of hemp production would negatively impact home values, “quite the opposite” has unfolded, she said. “There’s been an 11 percent hike in housing value in Carpinteria. Ranches are selling for $20 to $50 million.” Steinfeld remains optimistic that synergy, such as CBD incorporated into wine produced by Francis Ford Coppola’s vineyards, will put California on the forefront of the global cannabis industry. Much as with wine, Steinfeld believes that certain regions will become synonymous with quality cannabis, and that Coastal California product from Santa Barbara County will become premium-label quality. With oil and gas production chased out of Santa Barbara County, industrial hemp is even more crucial to California agriculture. “At the end of the day, the county needs this much-needed source of revenue,” she said. Ventura County moratoriums While Santa Barbara has become a leader in hemp production, Steinfeld said, the opposite appears to have happened in Ventura County, which the attorney described as “a complete prohibition.” After the 2018 Farm Bill passage, Ventura County became the state’s fourth largest hemp producer, approving 53 registrants to grow 3,798 acres of hemp on 134 sites, largely for the production of biomass and CBD oil. However, the Ventura County Board of Supervisors ban on Jan. 14 vote means no hemp planted within half a mile of land zoned for residential use. Buffer zones would also affect large unincorporated areas where much of the hemp was planted last year, with the exception of a 22-acre site in Camarillo. Although the measure will last for only 45 days, it can be extended by additional votes. Those votes could prolong the ban for up to two years, and violations, classified as misdemeanors, could see fines reach $1,000 and six months in jail. Since the mid-January ban on hemp, all eyes are now on Ventura County to see how the issue unfolds. “The chaos is going to end,” Steinfeld said. “The odor problem will not be an issue in three years.” In Ventura County, Steinfeld said that the various municipalities “want to wait and see what happens in Santa Barbara and then poach the rules.” Yet the Ventura County cities of Camarillo, Moorpark, Thousand Oaks, Ojai and Fillmore have instituted hemp-growing bans within their city limits. Prior to hemp, Thousand Oaks had already cannabis-related headaches regarding the implementation of a medical marijuana station. After the city had chosen local outfit Legendary Organics to operate a dispensary in an industrial park at 2712 Conejo Center Drive in Newbury Park, a problem arose because Legendary’s presence on a property where it shared common areas with other companies would jeopardize potential federal financing for the property. “They asked us to reconsider a new location,” recalled City of Thousand Oaks Assistant City Attorney Patrick Hehir. As a result, Legendary failed to open the dispensary on schedule and while the company searched for a new location, candidate Leaf Dispensary successfully lobbied the city to allow for a second medical marijuana dispensary in Thousand Oaks. “Our consultant said absolutely that two of them could be successful in our city,” Hehir said. After the City Council voted to allow two dispensaries in Thousand Oaks — and even as Legendary landed approval on its current 1339 Lawrence Drive address in Newbury Park — Leaf ran into the same problem Legendary did with its first location. Leaf is currently in the process of trying to get its second location approved by the City Council. As for industrial hemp, Thousand Oaks had become an early adopter in banning local cannabis production in the county, where approximately 4,000 acres had been designated toward hemp production. However, most of that acreage lied in unincorporated areas. “Hemp was becoming a hot button issue (by 2019),” Hehir said. “We thought it might be something to keep an eye on because we knew the federal government was taking (hemp) out of Schedule 1.” As various counties started to allow their communities to start growing hemp, entrepreneurs in Thousand Oaks were rushing to engage in the manufacturing part of the hemp process, such as drying in warehouses. “We looked at it and we decided let’s slow it down and put a temporary stop on any hemp licenses on manufacturing, drying, transporting,” Hehir said. Among the issues the city of Thousand Oaks has to sort out are odor control, noise pollution and control over the different variations of CBD oil derived from hemp versus cannabis. While technically Thousand Oaks can extend their moratorium for another year, “I don’t plan to do that, frankly,” Hehir said. “Right now, (the moratorium’s function) is to slow it down to say, ‘Hey, this business is going way faster than the regulation is happening.’ My goal is to get it to have something on the books.” Meanwhile in Moorpark, Ventura County had permitted 47 registrants to grow 3,600 acres of hemp in 2019 on 110 sites, including Tierra Rejada Valley, located less than a half mile from Moorpark’s city limits. Moorpark City Manager Troy Brown told the Business Journal that since that time, local complaints have increased as the hemp crop’s odor from Tierra Rejada Valley has wafted into the Peach Hill, Mountain Meadows and Serenata neighborhoods. “The more the plant flowers, the better the hemp at the end, the byproduct is it lets off this odor,” Brown said. “It’s hard to distinguish between hemp and cannabis and skunk. (It becomes) so pungent and so noticeable.” Once the city had identified the odor emanating from Tierra Rejada Valley, in an effort to create a buffer zone and mitigate the smell, Moorpark City Council first considered an urgency ordinance Dec. 4. Since Jan. 15, Moorpark’s moratorium has been extended for an additional 10 months and 15 days through Nov. 16. Ultimately, the moratorium through winter 2020 buys Moorpark time to hold planning commission discussions and public meetings has it tries to figure out the issues. “2020 is the year we will reckon with the long-term solutions for hemp and CBD in Moorpark,” Brown said.