The legal cannabis business in Michigan, both medical and adult use, is slowly maturing as a viable and profitable industry. Even though the nature of the business appears to be exotic, issues related to employment, mergers and acquisitions, transactions and tax also apply to cannabis businesses. The same holds true for environmental compliance.
In an earlier column, I discussed the resource intensive nature of cannabis growing and processing, which require significant amounts of energy and water. Operators of those types of facilities need to plan for access to those resources when they start up.
Cannabis growing and processing also require the use of significant quantities of potentially harmful materials, may generate air emissions and require specialized disposal methods for their wastes. Recently CBS's "60 Minutes" aired an episode on California's cannabis black market activities, including issues related to environmental impacts of such operations. But even legal operations require compliance with environmental regulations lest they run afoul of the law.
• The Michigan Medical Marihuana Licensing Act (MMFLA) assigns the responsibility of establishing standards for disposal of wastes to the Marijuana Regulatory Agency (MRA). MMFLA regulations require that cannabis products that are to be destroyed or considered waste must be rendered unusable and "unrecognizable," which is done by grinding the product and mixing it with other solid wastes so that the resulting waste is no more than 50 percent cannabis waste. The waste cannabis material must be recorded in the Michigan's monitoring system. If the waste is considered hazardous, it must comply with the state's hazardous waste statutes and regulations. Nonhazardous plant wastes must be secured and may be sent to a permitted solid waste landfill, a registered composting facility, a bio-digester or an incinerator.
• The adult-use rules promulgated pursuant to the Michigan Regulation and Taxation of Marihuana Act require identical processes for destruction and disposal of waste. Those rules also apply to microbusinesses, designated consumption establishments and those involved in temporary cannabis events.
• All those involved in the growing, processing and sale of cannabis products will need to carefully log their waste disposal efforts so the MRA can track the final disposition of waste.
• Wastes not directly related to cannabis growing or processing may also be regulated.
• If a facility generates waste from solvent use, it may want to consider recycling spent solvents and reusing it, either through in-house recycling or using an outside vendor.
• There are strict guideline and time limitations related to how, where, for how long one can store and where one may dispose of (or recycle) hazardous wastes.
• Processing of cannabis requires a variety of potentially harmful chemicals to extract oils from the plant material. These include volatile organic compounds (VOCs) that have the potential to pollute air. Depending on the nature and volume of potential pollutants, the operation may require a permit.
• A common community complaint related to a wide variety of cannabis operations pertain to nuisance odors. Existing technology can abate odor, but failure to address odor issues virtually guarantees multiple neighbor complaints and visits from regulatory authorities. Technology is available to reduce odor even from outdoor grow facilities.
• The state Department of Environment, Great Lakes and Energy (EGLE) is determining whether growing or processing operations will generate enough air pollutants to require air permits under Michigan's air pollution control statute and regulations. EGLE has not yet made that determination, but it is something that the regulated industry should monitor. Eventually, in addition to getting a license to operate from the MRA, a cannabis facility may also need an air permit before it can begin operations.
• If a facility is using generators (like natural gas or diesel generators) for generation of power, the air emissions from that equipment may also require an air permit.
• Cannabis regulations require that wastewaters created during growing or processing operations comply with state wastewater statutes and regulations.
• The same VOCs that can cause air pollution concerns also pose significant threats to soil, groundwater and surface waters. Operators should carefully store raw product in a manner that prevents its release into the environment. The waste materials from the use of solvents must be properly stored, transported and disposed of. Release of such substances into the environment could result in fines, penalties and costs of cleaning up releases.
• If solvents escape from one's facility, there may also be third-party liability in the form of lawsuits for nuisance and trespass.
• If a facility intends to discharge to a wastewater treatment plant, it may need to acquire a permit pursuant to an Industrial Pretreatment Program (IPP). The IPP is designed to protect sewer lines and wastewater treatment processes and infrastructure and ensure that water discharged from treatment plants do not pollute surface or groundwater resources.
• When developing new growing or processing facilities, one must comply with the various statues that govern construction activities. This includes soil and erosion permits, wetland and dredging permits, floodplain permits and compliance with local zoning requirements.
• Before acquiring or leasing property to conduct cannabis operations, owners or operators should confirm that the property is not contaminated, does not require construction or any activities in regulated wetlands and meets with all local zoning requirements. One can prevent future liability for past environmental contamination by conducting appropriate due diligence and using a variety of liability avoidance mechanisms in the event the property is in fact contaminated.
• If a facility requires the use of groundwater, depending on how much is needed, the operator may need to acquire a permit for large groundwater withdrawals.
As the cannabis industry matures, owners and operators will be faced with a whole host of issues completely familiar to those involved in more traditional and mature business activities. The newness of the cannabis industry will not protect it, as everyone is expected to comply with environmental statutes and regulations, just as they will be required to comply with labor laws, workplace safety laws, tax laws, etc. Before venturing ahead, make sure that you have considered all relevant aspects of compliance and plan accordingly.
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