Background on Proposed Regulations
On February 21, 2020, CDFA released its first set of proposed regulations for the establishment of cannabis appellations. In coalition with Origins Council, which represents other legacy growing regions across California, HCGA submitted extensive public comment on the proposed regulations. The overarching theme of HCGA and coalition comments was that, in order to have integrity, appellations must be based on terroir - an essential relationship to the land itself - and should be developed with a high degree of community consensus in appellation regions. HCGA’s summary of the February proposed regulations is available here.
On October 2, 2020, CDFA released a second set of proposed appellation regulations. The proposed regulations respond to comments on the first set of regulations from February, and integrate new rules established by SB 67.
Read the full proposed regulations here.
Read the Initial Statement of Reasons (ISOR) here.
Comments on the proposed regulations are due by October 19, 2020 and may submitted by mail or by email to:
California Department of Food and Agriculture
CalCannabis Cultivation Licensing Division
P.O. Box 942871
Sacramento, CA 94271
Summary and Major Changes in October 2 Proposed Appellation Regulations
Click here for a full summary of the October proposed regulations. There were several significant changes to the proposed regulations in February, many in response to HCGA and coalition comments. Significant changes include:
● Petition fees due on approval rather than submission - the fees for an appellation petition are now mostly assessed at the back end, after a petition is approved, with only a small percentage of the fee due at the time of application. The new proposed submission fee is $2,850, with an additional $14,250 due upon petition approval. While this somewhat decreases barriers to entry for appellation petitions, it also arguably incentivizes CDFA to approve sub-standard petitions, since CDFA receives limited financial compensation unless it approves the petition.
● Increased emphasis on terroir - appellation petitions are now required to discuss the quality of soils in the appellation region. Additionally, language is clarified that the petition must draw an essential link between the geography of a region and the quality of the cannabis produced. Previously, regulations were worded to require a link between the geography of a region and the cannabis cultivation, not the final product produced.
● Increased protection for appellations against conflicting trademarks - existing trademarks that were registered before February 21, 2020, and that conflict with appellation region names, can continue to be used for one year following the establishment of an appellation. Previously, they could be used for up to three years.
● Expanded definition of “practices” in appellation petitions - a practice in an appellation petition is now defined to include an “allowed or prohibited method of cultivation or method of conducting commercial cannabis activity.” This change likely enables appellations to specify practices that go beyond cultivation practices, such as social practices, environmental practices, or land use practices.
● Addition of city of origin - SB 67 created a “city of origin” designation, based on the existing county of origin designation, that protects cannabis produced 100% within city limits.
Potential Concerns in Proposed Regulations
While there are some improvements proposed in these regulations, on initial review, we’ve identified two major potential concerns:
Low quality petitions - taken as a whole, the proposed regulations provide an opening for the submission of a large number of low quality petitions. Petitions could be low quality because they’re submitted without widespread community support, not backed by sufficient research, don’t adequately define the appellation region, or because standard, practice, and cultivar requirements are not thoughtfully developed. Factors incentivizing low quality petitions include:
As few as three farmers can submit a petition. There is no requirement to demonstrate community consensus for a petition.
Regulations give CDFA the power to establish a Petition Review Panel, composed of appellation experts and community members, to provide recommendations on appellation petitions. However, CDFA isn’t required to establish this panel, and it’s unclear how quickly the panel could be established with the appellation program beginning on January 1, 2021.
CDFA provides the opportunity for public comment on proposed petitions, but there is no guidance for how CDFA is supposed to take this public comment into account to approve or deny a petition. If public comment is negative, does that mean a petition won’t be approved? What are the standards for petition approval? Proposed regulations don’t answer these questions.
New proposed petition fees assess a smaller fee for petition submission ($2,850), and only require full payment ($14,250) once a petition is approved. Although this lowers the burden for petition submission, it also gives CDFA an incentive to approve low quality petitions, since CDFA is only paid if they approve the final petition.
The appellations program is currently scheduled to be implemented by January 1, 2020. Stronger appellation petitions will come from communities that are organized more strongly and more extensively, but this deadline will make it difficult to build strong organizations quickly enough to file an application.
Reputation-based appellations - proposed regulations would require that appellation petitions include “a description of the quality, characteristic, or reputation of the cannabis which is essentially or exclusively caused by the geographical feature, including an explanation of how the geographical feature causes the cannabis to have that quality, characteristic, or reputation.”
In the Initial Statement of Reasons, CDFA states that reputation-based appellations would allow the creation of appellations such as an “Emerald Triangle” appellation.
The creation of appellations such as the Emerald Triangle would contradict the premise of SB 67 and other historic advocacy from legacy producing regions, that appellations should be based on terroir, not reputation. Drawing an essential causal link between the geography of an area and the quality or characteristic of a final product is the essence of appellations and would be undermined by reputation-based appellations such as the Emerald Triangle, which would be better protected through a county of origin-type system that is inclusive of all cannabis, regardless of production method.