United States: Overview Of Environmental Health And Safety Compliance Issues Facing The Cannabis Industry

As more states legalize the use of cannabis¹, the market value of the U.S. cannabis industry is projected to reach $30 billion annually by 2025. Fifteen states currently allow the recreational use of cannabis and 36 states allow for the use of cannabis for medicinal purposes. In addition, there is increasing pressure at the federal level to legalize cannabis for both medicinal and recreational uses. In order to sustain this rapid growth, ensuring consistent compliance with applicable environmental, health and safety rules and regulations cannot be underestimated.

As further discussed below, each stage of the cannabis manufacturing process presents its own environmental, health and safety challenges. For example, emissions associated with cannabis growing and processing operations can trigger permitting requirements as well as potential lawsuits from neighboring properties. Wastewater discharges from these operations are regulated at the local, state and federal levels. Ensuring the proper management of hazardous wastes generated during processing and extraction is critical to minimizing the risk of environmental liabilities. In addition, strict compliance with state and federal health and safety operations is integral to protecting worker health and safety.

This article is intended to highlight typical environmental, health and safety issues that may be applicable to cannabis operations throughout the United States. Because these regulatory requirements are often location-specific, it is important to engage with knowledgeable professionals to ensure that one identifies the applicable rules and regulations to ensure compliance and avoid potential penalties and lawsuits.

CANNABIS EMISSIONS

One of the more evident environmental issues associated with cannabis operations relates to emissions, and more specifically, odor issues. Growing and extraction operations generate a number of regulated emissions. For example, terpene emissions- emitted from the cannabis plant itself-are classified as volatile organic compounds ("VOCs"). Butane, which can be used during the oil extraction process, is also classified as a VOC. Because terpene emissions have a very strong odor, cannabis growing and processing operations are often the target of enforcement actions and/or private party litigation. As further discussed below, cannabis operations should proactively take steps to minimize the risks of private party and enforcement litigation and ensure compliance with applicable air permit requirements.

Private Party Litigation

Private party claims are typically initiated by adjacent property owners alleging common law nuisance theories. For example, several residents and a nonprofit organization in Carpinteria, California filed a class action lawsuit against several commercial cannabis operations on February 27, 2020.² The plaintiffs sought monetary and injunctive relief for nuisance, trespass, and violations of California's Unfair Competition Law. The plaintiffs alleged that the cannabis growing operations resulted in reduced property values, exposure to chemicals, and "an ever-present noxious odor."³ The plaintiffs stated that their goal is not money, but rather injunctive relief from the "awful smells and noxious odors and chemicals."⁴ As of January 2021, the litigation was ongoing.

In addition to state common law claims, since cannabis is still classified as a Schedule I drug under the federal Controlled Substances Act (21 U.S.C. § 811), the use, sale and/ or possession of cannabis containing THC in excess of 0.3% is illegal under federal law. Enterprising plaintiffs have sought to capitalize on cannabis's illegal status by challenging cannabis growing and processing operations under the federal Racketeer Influenced and Corrupt Organization Act ("RICO").

Section 1962 of the RICO statute "makes it unlawful for a person employed by or associated with an enterprise to conduct the enterprise's affairs through a pattern of racketeering activity."⁵ Federal courts have consistently held that cannabis growing operations can constitute racketeering activities. For example, the Hickenlooper court found that "cultivating marijuana for sale-which the Marijuana Growers admit they agreed to do and allegedly began and are continuing to do-is by definition a racketeering activity."⁶

To successfully plead a RICO claim, a plaintiff must allege (1) injuries to business or property (2) caused by these violations. For example, in Hickenlooper, the plaintiffs alleged that the mere existence of the cannabis growing operations coupled with the noise and smell from those operations (i) interfered with their use and enjoyment of the land; and (ii) resulted in a diminished market value of the property. The Hickenlooper court found that plaintiffs had properly alleged an injury to their property under Colorado law that would survive a motion to dismiss.⁷

Following the Hickenlooper decision, the Oregon district court in Ainsworth v. Owenby et al., 326 F. Supp.3d 111 (D. Ct. Ore. 2018) also found the cannabis growing operations violated the RICO statute. However, the court found that under Oregon law, the impairment of use and enjoyment of one's property was a non-compensable property interest.⁸ Plaintiffs also failed to "plausibly allege a concrete financial loss."⁹ Because plaintiff did not claim any past or present effort or intent to rent, sell, or otherwise monetize their property interests, the district court dismissed plaintiffs' RICO lawsuit.

In Bokaie v. Green Earth Coffee, LLC, No. 18-cv-05244-JST, 2018 WL 6813212 (N.D. Cal. 2018) four families filed suit against an unlicensed cannabis growing operation and had several grievances related to the cannabis cultivation, such as noises, odors, medical complications, and reduced property value. Similar to Ainsworth, the court found that the plaintiffs' injuries, including "sickening cannabis odor" and loud noise, are considered personal injuries and are not compensable under RICO.¹⁰ While the plaintiffs alleged "a diminution in present market value of their homes, because the nuisance ha[d] been abated and the cause of the depreciation had been removed," the plaintiffs failed to sufficiently plead an injury to property.¹¹ Therefore, the district court dismissed the plaintiffs' RICO lawsuit.

In another case, Momtazi Family, LLC v. Wagner, 2019 WL 4059178 (D. Or. 2019), the plaintiff brought suit against a neighboring cannabis growing operation, alleging diminished property value and rental income and decreased marketability of its wine grapes grown on the property due to concerns that the cannabis growing operations contaminated the grape supply.¹² The court found the reasoning in Ainsworth persuasive and agreed that the plaintiff alleged facts that stated a plausible claim for a RICO violation. Therefore, the court denied the defendants' motion to dismiss.

While these RICO claims to date have been largely unsuccessful, it is likely that cannabis operations will continue to face RICO claims until such time as the federal government decriminalizes cannabis.

Local and State Regulations

As cannabis operations continue to proliferate, state and local governments are increasingly promulgating regulations and ordinances that directly regulate cannabis emissions. In addition to these cannabis-specific regulations, governmental entities can also rely on nuisance common law statutes to regulate cannabis emissions.

Most cannabis odor regulations are promulgated at the local level. For example:

In the absence of state and/or local regulations specifically targeting cannabis operations, most state and local governments have general nuisance regulations that can be used to regulate these emissions.

In November 2019, relying on the above-referenced Pennsylvania nuisance statute, the Pennsylvania Department of Environmental Protection ("PDEP") initiated an enforcement action against a hemp drying, processing and storage facility. PDEP claimed that these operations resulted in objectionable odors which constituted a public nuisance.²¹

In December 2019, PDEP entered into a consent order and agreement with the hemp facility. The consent order imposed additional monitoring and odor abatement requirements on the company, required the company to conduct a technical study into technologies and equipment for ventilation and odor control for the facility and to apply to install such equipment as appropriate. In addition, the company was assessed a $29,000 civil penalty.

Although the above-referenced enforcement action was initiated against a processing facility, cannabis-growing operations should be cognizant that in some states, agricultural operations are specifically exempted from the state nuisance regulations. For example, California's Santa Barbara Air Pollution Control District regulations provide that "[g]rowing and harvesting of cannabis is considered an agricultural operation" and is therefore exempt from the general prohibition on the discharge of air contaminants that cause a public nuisance.²²

In order to mitigate the risk of private-party and/or regulatory enforcement actions related to facility emissions, care should be taken when siting new cannabis growing and processing operations to avoid placing these facilities in close proximity to residential properties, schools, and other recreational uses. In addition, installation of emission controls can help abate odors and minimize potential odor issues. Examples of such technologies include air purifiers, molecular filtration, oxidation systems, and neutralizing agents. Molecular filtration, commonly referred to as carbon filtration, works by filtering the odor from the air, whereas the oxidation systems destroy the odor from the air.

Air Permitting

As noted previously, cannabis growing and processing operations emit a variety of air contaminants including but not limited to VOCs and combustion by-products. These contaminants are regulated under the federal Clean Air Act ("CAA"). In addition to the federal CAA requirements, many states impose their own more stringent permitting requirements. As further discussed below, cannabis processing operations have the greatest potential to trigger air permitting requirements but emissions from growing operations may trigger permitting requirements in the not too distant future.

As a general matter, only major sources require federal CAA permits and the threshold for major source status is significantly higher than the emissions typically associated with cannabis processing operations. For example, the CAA VOC major source threshold is 100 tons per year.²³ However, as noted above, states may set lower permitting thresholds.

Recent guidance issued by the Michigan Department of Environmental Quality ("MDEQ") suggests that VOC emissions from cannabis processing operations could exceed Michigan's forty (40) ton per year threshold that would trigger the obligation to obtain a permit prior to commencing operations.²⁴ In addition, cannabis operations with natural gas-fired boilers or emergency generators are likely to require a permit to install these pieces of equipment in Michigan.²⁵

The Oregon Department of Environmental Quality also issued air permitting guidance for cannabis operations. Oregon's VOC permitting threshold is only ten (10) tons per year-larger cannabis growing operations could emit in excess of ten tons of VOC emission per year.²⁶ In addition, boilers in excess of 10 million BTU/hour heat input and generators in excess of 30,000 horsepower must be permitted under Oregon's air regulations.²⁷

The permitting obligations discussed above are more likely to be triggered by cannabis processing operations. Although cannabis-growing operations emit VOCs (terpenes), there are not generally accepted methodologies for measuring VOC emissions emitted by the cannabis plants so it is difficult to determine whether these operations exceed the air permit threshold. However, there are ongoing efforts to develop methodologies for measuring these emissions and so the obligation for growing operations to obtain air permits may not be too far in the future.²⁸

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Footnotes

[1] Although this article is focused on cannabis operations, many of the regulatory requirements have equal applicability to hemp operations.

[2] See Santa Barbara County Coalition for Responsible Cannabis et al. v. Ever-Bloom Inc. et al., 20CV01124 (Santa Barbara Cty. Sup. Ct. Feb. 27, 2020).

[3] Id. at 2.

[4] Id.

[5] Safe Streets Alliance v. Hickenlooper et al., 859 F.3d 865, 881 (10th Cir. 2017).

[6] Id.

[7] Id. at 886; On remand, a jury ruled in favor of the cannabis growing operations, finding that plaintiffs had failed to prove that the cannabis growing operations damaged plaintiffs' property.

[8] Id. at 1122

[9] Id. at 1126.

[10] Id. at 8.

[11] Id. at 10.

[12] Id. at 4.

[13] Los Angeles, California, Amendments to Cannabis Regulations (July 23, 2018), https://cannabis.lacity.org/sites/g/files/wph1081/f/Amendments%20to%20Cannabis%20Regulations.CLEAN_.7.23.18.pdf.

[14] Oakland, California, 2018-2019 Administrative Regulations and Performance Standards for City Of Oakland Cannabis Operators, http://www2.oaklandnet.com/oakca1/groups/cityadministrator/documents/procedure/oak071140.pdf.

[15] Long Beach, California, DIVISION III. - GENERAL OPERATING CONDITIONS, 5.92.540 - Ventilation and filtration system, https://library.municode.com/ca/Long_Beach/codes/municipal_code?nodeId=TIT5REBUTRPR_CH5.92ADECABUAC_DIVIIIGEOPCO_SDICAFALORE_5.92.420LORE.

[16] Pendleton, Oregon, City Council Agenda (May 19, 2015), https://cityofpendletonor.civicweb.net/document/4305.

[17] Ill. Admin. Code tit. 35, § 245.121(a).

[18] 25 Pa. Code § 273.218.

[19] Denver, Colorado, Rules & Regulations Governing Nuisance Odors (January 2017), https://www.denvergov.org/content/dam/denvergov/Portals/771/documents/EQ/Odor/Updated%20Nuisance%20Odor%20Rules-Regs%20Jan%202017.pdf.

[20] Denver, Colorado, Code of Ordinances, https://www.denverinc.org/wp-content/uploads/2015/12/Denver-Air-Pollution-Control-Ordinance.pdf.

[21] PA DEP Order, https://www.environmentalsafetyupdate.com/wp-content/uploads/sites/248/2019/12/PA-DEP-Order-Matter-of-Patriot-Shield-PA-LLC.pdf.

[22] Santa Barbara County Air Pollution Control District, APCD ADVISORY Air Quality and Cannabis Operations (Apr. 26, 2019, last updated May 7, 2019), https://www.ourair.org/wp-content/uploads/APCD-Cannabis-Advisory-v2.pdf.

[23] The 100 ton per year threshold applies to attainment and marginal and moderate non-attainment areas. The threshold drops to 50 tpy for serious non-attainment areas, 25 tpy for severe non-attainment areas, and 10 tpy for extreme nonattainment areas.

[24] Mich. Admin. Code R. 336.1119; Michigan, Protecting Air Quality When Growing and Processing Marihuana Guidance (August 2019), https://www.michigan.gov/documents/egle/egle-tou-aqd-MarihuanaProcessingAirGuidance_664273_7.pdf.

[25] Id.

[26] Oregon Department of Environmental Quality, Title V Rules and Fees, https://www.oregon.gov/deq/aq/aqPermits/Pages/TVrule.aspx.

[27] Oregon Department of Environmental Quality, Air Contaminant Discharge Permit Application Guidelines (revised Jan. 21, 2020), https://www.oregon.gov/deq/FilterPermitsDocs/acdp-applguidelines.pdf.

[28] Currently, a study is underway in Colorado to determine the quantity of VOC emissions from marijuana plants throughout their growth cycle. As more information on emissions from grow operations becomes available, marijuana cultivation operations may become subject to air permitting requirements.

Originally published by Cannabis Law Journal March 15, 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.