Federal legality of grant program debated
October 5, 2022 — Members of the rapidly dwindling cannabis community showed up en masse at the Board of Supervisors meeting this week, to speak about the hardships of the market, the recommendations of the cannabis ad hoc committee, and a proposal to limit the cannabis equity grant program. Dozens of cannabis business people in yellow T-shirts waited in the hallway outside the Board of Supervisors chambers on Tuesday afternoon as the Board held an extended closed session that lasted until after 3:00 pm.
Monique Ramirez, a farmer and policy advocate for the Mendocino Cannabis Alliance, had driven down from Covelo, a week before she was due to give birth to her second child.
“Our harvest is going wonderful, especially with the great weather we’ve had,” she said. “The market, that’s a whole other story. Not doing so great.” Other farmers who were spending a sunny fall day off the farm described offers of $350 and even $100 a pound for their product. Ramirez said she was still struggling to sell last year’s product from her cottage farm, which is the smallest license type. “For us, $200-$300 a pound does not work when you’re yielding maybe 80-100 pounds, max,” she explained.
Ramirez told the Board that the reason she is such a staunch legal policy advocate is that she was raided years ago. She was harmed by the war on drugs, which makes her eligible for a cannabis equity grant. The much-delayed program was the subject of a Grand Jury report this year.
This week, Supervisor Ted Williams sponsored an item proposing that staff limit the program to “legitimate government purposes,” and to “void any program elements found to be impermissible under federal law.” The grant guidelines are set by the state. The item was not accompanied by explanatory materials, which was frustrating to some of the leading cannabis advocates in the room.
Supervisor John Haschak didn’t think the feds were much of a threat. “We’ve been into this program for two years,” he said. “And so what is the concern right now? You know, I don’t hear that the feds are coming. We can’t even get the federal government to deal with the cartel growers in this county.”
In a brief interview after the meeting, Supervisor Ted Williams, who sponsored the item, said that he has been asking County Counsel for a long time if the grant program is legal, or if it exposes the county to legal liability for violating federal laws about cannabis cultivation. “It appeared (on this week’s agenda) because I finally got a different answer,” he said. He was particularly worried that the state currently allows grant funds to be used to pay the start-up costs of cannabis businesses.
County Counsel Christian Curtis insisted on getting majority board approval before he would answer the question of whether or not grant applications are in keeping with federal law. After a three-vote approval, with Dan Gjerde and Maureen Mulheren dissenting, he offered his opinion.
“With respect to whether the activities that were to be funded by the grant program were compliant with federal law: no,” he said. The activities that are to be funded are the cultivation of cannabis. Cultivation of cannabis remains unlawful under federal law. The review that my office conducted was for the purposes of determining whether or not the applications met the requirements of the grant program and state law. Those that went through, we did believe met those requirements and were consistent with the statute, the guidance put out by the state, et cetera. Whether the underlying grant program is consistent with federal law, I can’t say that it is.”
But Hannah Nelson, an attorney with thirty years’ experience in cannabis and criminal law, offered a history lesson on the county’s original permitting program, originally enacted in 2008, which sought to regulate cannabis cultivation locally, in contravention of federal law. “The feds came in and threatened to intervene with the county for starting a permitting program, and that’s why that program shut down,” she said. “But the specific reason was because at the time, that was under Prop 215, and the State of California basically only had the Attorney General’s guidelines, which were pretty loosey-goosey. And the feds said, when California enacts a complete, robust regulatory system, we’ll back off.” In a memo to the Board, Nelson wrote that “each year since 2015, the federal budget was passed with a specific amendment that prohibited the feds from spending money on pursuing cases regarding medical cannabis (later expanded to recreational) if the activity was in conformance with state law where the activity was legal in that state.”
During the October 4 meeting, Nelson opined that the risk of running afoul of federal regulations is minimal at best, and that if county counsel thought differently, he should have addressed it long ago. “This is an issue without a problem,” she declared, as farmers laughed and cheered. “And it has been decided by the courts, by the annual budget, and it is so far beyond the scope. And it is, in my opinion, and I respect County Counsel Curtis, but this is malpractice, legal malpractice to not have raised this issue if it was a concern when your office has reviewed every single equity grant contract. And in fact, a lot of the bottleneck and a lot of the delay was because everything was being reviewed by your office, and new issues kept coming up, all of a sudden.”
The board decided 4-1 with Haschak dissenting, to continue adhering to the state’s requirements for the current round of cannabis equity grants, and to seek an outside legal opinion about federal liability for the next round of grant funds.