San Diego may not have a local supply chain for its marijuana dispensaries as quickly as expected because of rigorous city environmental approvals and other regulatory hurdles facing indoor pot farms and factories for edible products.
The 65 applicants seeking to open such businesses in San Diego are facing requirements for studies of their energy use, water consumption and greenhouse gas emissions in order to gauge their compliance with the city’s climate action plan.
The applicants are also unsure what kind of lengthy reviews they might face under state environmental law because city officials haven’t decided whether to require comprehensive environmental impact reports or more cursory analysis.
Meanwhile, citizen-led community planning groups where the businesses will cluster – Mira Mesa and Otay Mesa – have taken the unusual step of delaying their recommendations until all environmental analysis is complete.
City officials want the 18 legal dispensaries they’ve approved to have a local supply chain as soon as possible to eliminate the need to truck marijuana in from elsewhere and to prevent a local “black market” of marijuana producers.
The businesses are expected to boost the local economy, create jobs and improve the quality and safety of local marijuana, while also generating revenue for the city from its new 5 percent cannabis tax.
The city has agreed to allow three dozen local businesses already allowed to engage in cultivation and manufacturing without formal city approval to continue operating through November 2019 before shutting down.
But it’s not clear how many are actually producing marijuana, or how much of the marijuana products sold at local dispensaries they supply.
When San Diego agreed last November to allow pot farms and edible factories, industry leaders said they expected the approval process to be shorter than the 14-month average for the dispensaries approved over the last few years.
That was primarily because the local marijuana industry had become more familiar with city development regulations and had developed relationships with the city officials overseeing the process.
In addition, during the dispensary approvals the city revised and made easier to understand a series of requirements that marijuana businesses be certain distances away from schools, parks, housing and other sensitive uses.
But that optimism has been tempered by the more rigorous environmental review and the decision by planning groups to take a different approach than they did with dispensaries.
In addition, some of the proposed businesses could get rejected outright, instead of just being delayed.
“The city is making some requests that are different than with dispensaries,” Kimberly Simms, one of the region’s leading marijuana attorneys, said last week. “I think approvals will take longer because they are asking for more.”
The greenhouse gas emissions studies, which cost about $25,000 each, have played a key role in delaying applications for marijuana production businesses, partly because such analysis is a relatively new process.
“You need to analyze whether this project uses more gas and power than what was there before,” Jessica McElfresh, another marijuana attorney, said by phone. “We’ve had to hire firms to do these reviews.”
San Diego’s climate action plan, which was adopted in 2015, commits the city to slashing its greenhouse gas emissions 15 percent below 2010 levels by 2020 and 50 percent below that benchmark by 2035.
The greenhouse gas studies and other requirements under the climate action plan are also delaying a city decision on how to handle approval of the marijuana producers under state environmental law, McElfresh said.
Dispensaries were deemed exempt under the law, the California Environmental Quality Act, but city officials won’t decide whether to grant the same exemptions to marijuana producers until they see the greenhouse gas studies.
If not, the pot farms and edible factories could have to analyze their impact on traffic, water and other parts of the surrounding environment with either a mitigated negative declaration or a more intense environmental impact report.
McElfresh noted that many cities and counties around the state, including Chula Vista last month, built CEQA exemptions into their decisions to allow marijuana production businesses.
A city spokesman declined to say what factors will determine what type of CEQA analysis is required for each project, or to say when those determinations will take place.
“The timing of the determination depends on the project scope, and features and setting,” wrote the spokesman, Scott Robinson. “Furthermore, sometimes additional information is needed to be able to analyze the project for potentially significant impacts.”
The environmental requirements have prompted community planning groups in Mira Mesa and Otay Mesa, where 30 of the 65 proposed businesses would be located, to change their approach to making recommendations on the projects.
"We decided as a group we didn’t want to hear any of them until they've done their full environmental with the city, which is usually the last thing done with the city," said Rob Hixson, chairman of the Otay Mesa Planning Group, by phone last week.
That approach will require applicants to schedule hearings, make presentations and receive planning group recommendations near the end of the process instead of near the beginning.
"Usually we like to give input on what a development will look like before somebody designs the whole thing, but because most of these facilities are going to be in existing industrial buildings we thought this would be a better way to go about it," said Hixson, whose community is considering 12 proposed marijuana production businesses.
In Mira Mesa, the planning group has asked the 18 applicants to make two presentations: one at the beginning of the process and another once the environmental work is done.
"By that time, we'll have all the comments back from the city and whatever environmental document the city decides that they need," said Jeff Stevens, chairman of the Mira Mesa Community Planning Group, by phone last week.
Stevens said during the initial presentations over the winter that some additional concerns came up.
One applicant is jeopardizing the building insurance for other tenants of the same property because insurers are reluctant to do business with marijuana producers.
Another would be located near the Miramar Café on Miramar Road, possibly damaging the restaurant’s business if strong odors emanate from the production facility.
The city’s ordinance requires that marijuana production businesses have “odor-absorbing ventilation and exhaust systems,” but it’s unclear how the city will handle such businesses if there is odor anyway.
The planning groups play only an advisory role when they make recommendations on projects.
But even when projects get approved despite their objections, their comments can prompt the addition of new requirements such as more parking spots or relocated entrances.
Stevens said he is unsure how many of the proposed marijuana production facilities his group will endorse.
"We're working to make sure the ones that go in do not have negative side effects," he said. "I think what we're looking for is that they don't cause problems for their neighbors, they don't emit odors and they satisfy environmental requirements. If they're basically not a bother to anyone, then they'll probably go through."
McElfresh, one of the marijuana attorneys, said despite the additional requirements, she doesn’t believe city officials are singling out the controversial marijuana industry for extra scrutiny.
She compared the climate action plan’s role in the process to when accessibility requirements under the Americans with Disabilities Act were a new thing cities had to deal with during project approvals.
“This is a use the city’s never processed before and the climate action plan is new,” she said. “It doesn’t mean we are being treated unfairly.”
While the city is processing 65 applications for marijuana production businesses, the city law includes a cap of 40 total in San Diego, so the first 40 that get final approval will be allowed to operate.