Last summer, I wrote a post called “Fire Season is Coming.” Given the massive expected California droughts, it’s pretty safe to assume that fire season is coming, again. Today, I want to recap some of the issues that we’re likely to see in the coming months.
As we learned in prior fire seasons, the cannabis businesses that get hit hardest tend to be rural, outdoor cannabis cultivators in inland or isolated communities. These folks have very limited access to water, firefighting services, and other resources that may prevent fires. They also produce crops that naturally burn or are damaged by smoke or air particulates. Nearby fires – even not-so-close fires- may cause smoke or deteriorate air quality to such an extreme degree that cannabis product becomes unsalable.
Our cannabis attorneys spent a lot of time helping outdoor cultivators mitigate these damages last year. I personally helped a client secure approval to ease regulatory burdens on off-site storage of a large amount of freshly harvested cannabis. To say this was stressful for the cultivators is an understatement. Entire businesses will be on the line this summer.
As alluded to, there are regulatory provisions to help ease burdens during natural disasters. You can check out our posts on Oregon and California to read more about their respective regulations, which I won’t rehash here. California has since consolidated regulatory authority into a new agency, but the rules are still similar. Because it’s safe to say that fire season is coming, licensees probably need to brush up on these rules.
The gist of the rules is that the agencies may allow licensees to relax some regulatory requirements, but only if there is an emergency or disaster. So for example, a California licensee storing fresh cannabis may need to move it offsite to an unlicensed but secure location. Sometimes, this requires pre-approval by the agencies. Sometimes, concurrent notice and constant updates are necessary. The rules change depending on the state and even city. This is a lot of work for businesses in the path of a wildfire. Businesses can use experienced legal counsel to move the regulatory process along while taking care of operations internally.
Another pretty common issue is insurance. As our cannabis insurance attorneys will note, many cannabis businesses do not have adequate insurance coverage to cover fire-related losses. Add to the fact that cash or other valuable equipment may be stored onsite, and you get a true recipe for disaster. It’s not hyperbole to say that a fire can literally be the end of a business.
Another big problem – which also disproportionately affects cultivators – is the lack of utilities. Fire and heat routinely cause power shortages. Last summer when it was well into the 110s in parts of Los Angeles where our California team is based, huge parts of the city and county faced power outages. Indoor cultivators without access to power for even a few days face the loss of entire harvests. And I don’t even need to explain lack of access to water. Suffice it to say, when you have droughts combined with fires, cultivators will not get the water they need.
If the past tells us anything, it’s fire season is coming, again. We’ll likely see another massive spike in prices that will be felt all along the supply chain. Cannabis businesses need to start preparing now before it’s too late.