Argent Communications Group FEATURE ARTICLE Auburn, CA EDITORIAL BOARD More Money, More Problems—Cannabis Faces California’S Gauntlet of Pamela Epstein, Esq
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Volume 1, Number 1 May 2019 CONTENTS EXECUTIVE EDITOR Robert M. Schuster, Esq. Argent Communications Group FEATURE ARTICLE Auburn, CA EDITORIAL BOARD More Money, More Problems—Cannabis Faces California’s Gauntlet of Pamela Epstein, Esq. Water and Environmental Laws by Hanspeter Walter, Esq. Kronick Moskovitz GreenWise Consulting, LLC Tiedemann & Girard, Sacramento, California. 3 Los Angeles, CA Mia Getlin, Esq. CANNABIS NEWS Gleam Law, LLC Portland, OR Statewide Cannabis Delivery in California Faces Outrage from Certain Municipalities . 8 Joshua Horn, Esq. Fox Rothschild, LLP Philadelphia PA The State of Receivership Law in Colorado as Applied to the Marijuana Business . 10 Eric B. Liebman, Esq. Moye White LLP Allocation of Oregon Recreational Cannabis Taxes and Lack of Funding for Denver, CO 80202 Rural Counties . 13 Nedda Mahrou, Esq. Jackson/Tidus, LC LEGISLATIVE DEVELOPMENTS Irvine, CA Hanspeter Walter, Esq. The Agriculture Improvement Act of 2018 and Its Impact on the State of Kronick, Moskovitz, Tiedemann ‘Hemp Banking’ . 16 & Girard Sacramento, CA New Jersey’s Proposes to Legalize Recreational Cannabis . 17 REGULATORY DEVELOPMENTS California’s New Cannabis Regulations Approved by the State Office of Administrative Law, Now in Effect . 20 LAWSUITS FILED OR PENDING Environmental Advocacy Group in California Sues Humboldt County over Cannabis Regulations Pursuant to the California Environmental Quality Act . 22 Continued on next page RGENT A COMMUNICATIONS GROUP WWW.ARGENTCO.COM Cannabis and the California Environmental Quality Act—Trinity Action Association Sues Trinity County . 23 JUDICIAL DEVELOPMENTS Federal: U.S. District Court Holds Employer Does Not Need to Excuse Compliance with Drug Testing Policy for Medical Marijuana User . 26 Cotto v. Ardagh Glass Packing, Inc., ___F.Supp.3d___, Case No. 18-1037 (D. N.J. 2018). 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CLR FEATURE ARTICLE MORE MONEY, MORE PROBLEMS—CANNABIS FACES CALIFORNIA’S GAUNTLET OF WATER AND ENVIRONMENTAL LAWS By Hanspeter Walter, Esq. For decades California’s cannabis industry oper- affected, and they (like every cannabis market partici- ated in the proverbial shadows, but the state’s recent pant) will need to scrupulously comply with all re- enactment of comprehensive legislative schemes for quirements. Failure to adhere to any rule, regulation, both medical and recreational cannabis heralds the or requirement for protection of natural resources, advent of an entirely state-legal regime. Stepping stream flows, or water quality could result in denial forward into the sunshine, however, carries with or loss of a cultivation license, not to mention state it, regulatory compliance issues. Indeed, one of the criminal liability. (See e.g., Bus. & Prof. § 26057(b) policy reasons behind California’s legalization ef- (1).) forts has been compliance with and enforcement of environmental and water laws to avoid and mitigate Overview of California Water Rights resource impacts. This article discusses environmental Cultivators need water and California water rights and water laws, some old and some new, with which are, to put it bluntly, complex. Many doctrines and cannabis operators in California must now comply. principles were forged in the early days of Califor- nia’s history, when gold miners squabbled over water Introduction sources. It is therefore fitting, perhaps, that Califor- Since enactment of the Medical Cannabis Regula- nia’s new “green rush” will also be heavily influenced tion and Safety Act (MCRSA) [Bus. & Prof § 19300 by water. et seq., repealed] and the people’s election day passage of the Adult Use of Marijuana Act (AUMA) [Cali- Surface Water fornia Proposition 64 (2016) adding Bus. & Prof. § California operates under a “dual” or hybrid system 26000 et seq.], much of the industry’s focus has been of water rights that recognizes two distinct doctrines: on business matters such as corporate formation, riparian and appropriation. The riparian rights investing, taxation, and banking. [California ini- doctrine originated under English common law. It tially had two different statutory schemes separately confers upon owners of land adjacent to a waterbody addressing medical and adult-use cannabis; however, the right to divert natural water flowing by the land on June 27, 2017 the Governor signed the Medicinal for use upon the land, without regard to when such and Adult-Use Cannabis Regulation and Safety Act use was initiated or how much is used. (See, Miller & (MAUCRSA), which harmonized various provisions Lux v. Enterprise C. etc. Co. (1915) 169 Cal. 415.) In of MCRSA and the AUMA so that medicinal and times of shortage all riparians must reduce their usage adult-use licensees would be regulated similarly.] proportionately and share the available water under However, would-be participants in this new can- a theory called “correlative rights.” (Prather v. Hoberg nabis market should not ignore California’s water and (1944) 24 Cal.2d 549, 559-560.) environmental laws, notorious for being among the As mining increased, water was diverted for use most stringent in the nation. As the ones directly on distant nonriparian lands, requiring that Cali- working the land, cultivators will be among the most fornia establish and incorporate a new doctrine: the The opinions expressed in attributed articles in Cannabis Law & Regulation Reporter belong solely to the contributors and do not necessarily represent the opinions of Argent Communications Group or the editors of Cannabis Law & Regulation Reporter. May 2019 3 doctrine of appropriation. (Irwin v. Phillips (1855) 5 water not needed by those having overlying rights is Cal. 140.) Unlike riparians, appropriators need not surplus. Surplus may be pumped and used on other own land contiguous to a watercourse to use water lands—even outside the basin—as an appropriative from it, but their rights are subordinate to riparians groundwater right. Between groundwater appropria- so that in times of shortage riparians are entitled to tors, the one first in time is first in right. Gener- fulfill their needs first. (Meridian, Ltd. v. San Francisco ally, therefore, overlying rights trump appropriative (1939) 13 Cal.2d 424, 445-447.) Between appropria- groundwater rights, except that an appropriator may tors, the rule is “first in time, first in right,” meaning acquire rights against overliers or more senior appro- during shortages that the earlier “senior” appropriator priators through prescription, which is established by is entitled to fulfill her needs before a later-arriving continued groundwater pumping while a basin is in “junior” appropriator. (U.S. v. State Water Resources overdraft. Control Board (1986) 182 Cal.App.3d 82, 102.) Groundwater has generally been encumbered Before 1914, appropriative water rights were by fewer state and local regulations. Disputes were generally acquired filing notice with the county traditionally