Pot Growers Nipped in the Bud by Bureaucratic Bungle

The biggest bureaucratic screw-up of California’s legal marijuana era has left farmers statewide suddenly without permits and unable to grow pot.

At the beginning of this year, there were nearly 6,000 legal and licensed marijuana growers in the state of California. As of today, there are fewer than 1,000.

About 85 percent of California cannabis cultivators have seen their legal status go up in smoke thanks to a bureaucratic backlog in state permit renewals.

Just like a dispensary needs a specific permit to legally sell marijuana, cultivators need a specific permit to grow the plant. Since the dawn of recreational cannabis, California regulators have issued six- to 12-month “temporary” licenses as they figure out this fledgling new industry, promising to issue more permanent “annual” licenses to operators who show they can play by these new legal rules.

But for cannabis farmers, the state has choked on issuing annual cannabis licenses. Almost every day, nearly 400 farmers saw their temporary permits expire, leaving them with the very hard choice of operating illegally or shutting down.

Most state marijuana permits are handled by the California Bureau of Cannabis Control. But since cultivators grow plants, their licenses are instead issued by the California Department of Food and Agriculture (CDFA). And the CDFA’s CalCannabis Cultivation Licensing System is slogging through a months-long backlog that’s leaving temporary permit renewal high and dry.

SF Evergreen has obtained emails from CDFA officials acknowledging to growers that the agency’s own internal software issues have held up permit applications that were submitted on time.

“It looks like your applications hit a glitch in our system and never moved over to my manager,” says one email from CDFA personnel. “Since our system is new, we keep running into ‘fun’ glitches that happen.”

Other emails acknowledge applications disappeared from the regulatory process “due to a recent system change.” Industry advocates note that the vast majority of these applications were submitted on time.

“Many of these licensees submitted full annual applications over six months ago and never received any notifications from this agency,” says cannabis consultant Jacqueline McGowan of K Street Consulting. “Through no fault of their own, their ability to operate in the legal marketplace has now vanished.”

McGowan notes that only 235 acres of legal cannabis cultivation exist in the state right now, which is about a fifth of what the market needs. This will inevitably cause supply shortfalls and price spikes.

“We will see a wave of manufacturers, distributors, and retailers suffer once the effects of this shortage begins to show signs of a price surge,” she predicts. “This will ultimately affect the price the consumer is paying at the retail level, which will then lead to lower than expected tax revenue for the state.”

Some growers tell us they’ve received verbal commitments from the CDFA that the agency will hold off on any kind of enforcement crackdown. But that’s little comfort to growers who are receiving nasty letters from that same CDFA telling them that their temporary permit has expired and they must immediately cease operations.

“There is an automatic letter that’s sent out the day your license expires that says that you’re supposed to cease all activity at that point, or face fines,” says Aaron Flynn, former co-chair of the S.F. chapter of the California Growers Association, and current leadership team member of the San Francisco Cannabis Coalition. “It’s really disheartening to receive a letter that says you have to shut all your operations down and then just live in this sort of vague, gray, ambiguous space.”

Flynn is among many who are exasperated by the lack of guidance from state regulators.

“Emailing CDFA at this point doesn’t work,” he says. “There used to be a phone number you could get a person on, now it just directs you to a couple of different voicemails, and one voicemail is so full that it just ends the call. It just hangs up.”

A cultivator cannot simply keep selling their crop in hopes of getting the license any day now.

“Without an up-to-date license, you can’t sell any product,” Flynn says. “A distributor needs an up-to-date license. People are already in a position where they cannot sell product and it is starting to degrade on shelves.”

The whole snafu is already costing cultivators thousands, if not tens of thousands of dollars, though industry observers do figure that most permits will eventually be renewed.

“The sense is that CDFA is eventually going to issue provisional licenses,” according to Flynn. “Are they going to be 30 to 45 days late? Yes. But they’re eventually going to get them out there.”

Still, serious damage has been done to California growers.

“The industry was urged to come out of the shadows and into the light, and thousands of them did just that,” McGowan says. “And now, each and every one of them has been betrayed. The state has failed to uphold their end of the bargain.”

The cannabis industry has dealt with a number of crazy curveballs in the legal era, but this is probably the most perilous. Without growers, you simply cannot have a cannabis industry. And with endless delays on legal permitting, many California marijuana farms will be put out to pasture.