Environmental Issues Decided For San Diego Cannabis Dispensaries

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AUTHOR:   aBIZinaBOX Inc. and Jordan S. Zoot, CPA
PUBLISHER:  CANNABIS LAW REPORT

On August 19, 2019, the Supreme Court of California issued a unanimous opinion in Union of Medical Marijuana Patients, Inc. (“UMMP”) v. City of San Diego. Except for the parties and the limited number of individuals who follow litigation involving environmental law, this case has moved through the California court system with little notice.

The real party in interest in the case is the California Coastal Commission. The City of San Diego was not particularly interested in the case even though its zoning actions relating to cannabis were the genesis for the lawsuit. The issue in this case involves the reconciliation of language in two sections of the California Environmental Quality Act (California Public Resources Code (“PRC”) §§21000 et seq. (“CEQA”)).

We decided to write a note on this case because the legal landscape relating to the interplay between CEQA and cannabis law in California has changed dramatically while this case was pending. It seemed to us an opinion by the California Supreme Court reversing a determination by San Diego relating to the impact of CEQA on the licensing of medical cannabis dispensaries must be significant for California’s cannabis industry. We were correct! The premise for writing this article was accurate. We find, however, we have far more questions than answers.

The California Supreme Court summarized the UMMP case as follows:

“In 2014, the City of San Diego (City) adopted an ordinance authorizing the establishment of medical marijuana dispensaries and regulating their location and operation. The central provisions of this ordinance amended various City zoning regulations to specify where the newly established dispensaries may be located. Because the City found that adoption of the ordinance did not constitute a project for purposes of CEQA, it did not conduct any environmental review. Petitioner Union of Medical Marijuana Patients (UMMP) challenged the City’s failure to conduct CEQA review in a petition for writ of mandate, which was denied by the trial court.”

The key word in the California Supreme Court’s explanation of the case before the Court is “project.” CEQA broadly defines “project[1]” and then relieves those who are responsible for developing a “project” from the necessity of the preparation of an Environmental Impact Report through a Negative Declaration. CEQA is an issue for California’s cannabis industry, and the significance of this case extends far beyond California’s cannabis industry, because “project” has a far broader meaning for the purposes of CEQA than the common meaning of the word.

All our readers will agree that building a coliseum or a shopping center is a project. The rehabilitation of a building may or may not be a project in the minds of most of our readers. Most of our readers would agree that whether or not the rehabilitation of a building is a project depends on the size of the building and the extent of the work required for rehabilitation. The word “project” has a far broader meaning for the purposes of CEQA than the meaning of the word in common usage, but questions relating to size, scope and impact discussed at the beginning of this paragraph remain relevant.

The adoption of ordinances and regulations by governmental agencies may fall within the definition of a “project” for the purposes of CEQA. In fact, this was the issue that caused San Diego’s adoption of changes to its zoning ordinances in 2014 to allow a limited number of medical marijuana dispensaries in certain locations to end up before the California Supreme Court. San Diego did not conduct an environmental review in connection with these zoning changes. San Diego erroneously determined that CEQA did not apply to the zoning ordinance changes that it adopted to allow for medical cannabis dispensaries.

UMMP challenged San Diego’s failure to conduct a CEQA review in connection with adoption of the zoning changes. The trial court upheld San Diego’s determination a CEQA review was not required. UMMP appealed to the Court of Appeal The Court of Appeal affirmed the decision of the trial court. UMMP appealed to the California Supreme Court. The California Supreme Court reversed the decision of the Court of Appeal, and remanded the case back to the trial court. The trial court was instructed to conduct further proceedings relating to whether an environmental review was required in connection with San Diego’s changes to its zoning ordinance based on the Court’s refinement of the meaning of “project” for the purposes of CEQA.

We need to address a tangential issue before discussing the application of this case to cannabis. The opinion in the UMMP case involves the definition of “project” for the purposes of CEQA. That the ordinances in issue related to cannabis are incidental. The question before the Court in the UMMP case was whether San Diego had erroneously concluded a CEQA review was not required in connection with changes to its zoning ordinances. Many cities in California are considering amending zoning ordinances in connection with the licensing and regulation of electric scooters. Medical cannabis dispensaries and electric scooters are equivalent for the purposes of the UMMP case.

We are writing about this case in connection with California’s cannabis industry because so much has happened in California’s cannabis industry while this case was pending. It is our understanding San Diego has amended its ordinances relating to cannabis on multiple occasions while the UMMP case was pending. Did San Diego act properly under CEQA in adopting its post-2014 zoning ordinances changes relating to cannabis? We suspect solely the attorneys for San Diego can answer that question. We doubt they have as yet even considered this question. We will boldly suggest that our comments in the balance of this article may be of some modest assistance in answering such a question.

Do the changes in the law relating to cannabis that has occurred while this case was pending render the California Supreme Court’s opinion in the UMMP case irrelevant to California’s cannabis industry? We can readily answer this question. CEQA has not changed significantly over the past five years. California’s cannabis laws have changed significantly. As a consequence, the California Supreme Court’s opinion in the UMMP case cannot be irrelevant to California’s cannabis industry. Any determinations regarding the application of the opinion in the UMMP case to California’s cannabis industry have been made far more difficult as a consequence of the changes in California’s laws relating to cannabis during the past five years.

At least three significant complications to the application of the opinion in the UMMP case as a consequence of the changes that have occurred during the past five years in California law relating to cannabis come immediately to mind.

San Diego changed its zoning ordinances to provide for the licensing of medical marijuana dispensaries. Proposition 64 legalized adult-use cannabis. Proposition 64 also preserved the rights granted to California residents under Proposition 215. The Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) adopted a combined regulatory scheme for medical and adult-use cannabis based on Proposition 64.

Is medical cannabis identical to adult-use cannabis for the purposes of CEQA? Before you attempt to answer this question, consider that medical cannabis and adult-use cannabis are the same in the hands of a cultivator for the purposes of CEQA, but the delivery of medical cannabis through a legal collective may be different from the sale of adult-use cannabis through a dispensary for the same purpose.

As is obvious from the UMMP case, CEQA applies in some instances to the actions of local governmental agencies in their adoption of ordinances and regulations. CEQA also applies to the adoption of regulations by agencies of California. The Bureau of Cannabis Control (“BCC”) avoided the preparation of an Environmental Impact Report through the adoption of a Negative Declaration.

In a very simple sense, the Negative Declaration was justified by the premise that BCC and the other cannabis regulatory agencies would quickly license California’s cannabis industry and the environmental issues would all be properly addressed at a local level. Some of the premises for BCC’s Negative Declaration have proved inaccurate. Of what value is a Negative Declaration if the legislature and the agency regularly adjust the premises?

Many of the actions of local agencies in the last five years relating to cannabis were taken in reliance on an exemption from CEQA that Proposition 64 added in Business and Professions Code (“B&P”) §26055(h). The Legislature extended this provision to July 1, 2021. This provision was originally set to expire July 1, 2019.

The first sentence of B&P §26055(h) states,

“Without limiting any other statutory exemption or categorical exemption, . . . [CEQA] does not apply to the adoption of an ordinance, rule, or regulation by a local jurisdiction that requires discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity.”  

By its express terms, B&P §26055(h) is limited to local agency actions.

This exemption is likely far narrower than many have supposed as a consequence of its second sentence. The second sentence of B&P §26055(h) states,

 

“To qualify for this exemption, the discretionary review in any such law, ordinance, rule, or regulation shall include any applicable environmental review pursuant to . . . [CEQA].” [2]

This language appears to describe the error that San Diego made. The California Supreme Court has concluded San Diego made an erroneous decision regarding the “applicable environmental review” required in connection with the amendment of its zoning ordinances.

The UMMP case significantly expanded the opportunities for filing meritorious lawsuits. A number of California cities and counties have amended their zoning ordinances during the past five years in response to pressures from the cannabis industry. Some – perhaps many – of these actions are likely to be open to question-based on the opinion in the UMMP case.

We believe one definite conclusion can be drawn from the opinion in the UMMP case. We believe it is a certainty some members of The State Bar of California will view this opinion as a financial stimulus package. We have a myriad of additional questions. We are confident California lawyers will soon begin asking and answering many of our questions.

[Note – while this isn’t directly relevant to this article, we located a significant number of CEQA related reports and documents that are going list and link merely to provide a location to find them quickly in the future.

CEQA Exemption Petition, Form BCC-LIC-026

CEQA Project-Specific Information, Form BCC-LIC-025

CEQA Overview Presentation – Bureau of Cannabis Control

Finding of facts

[1] Sec. 21065

[2]

Sean Hocking

Sean Hocking


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