February 26, 2023
By: Manzuri Law

California Environmental Quality Act (CEQA)

Compliance with the California Environmental Quality Act (CEQA) is the largest hurdle for cannabis provisional licensees to obtain an annual license from the Department of Cannabis Control (the “DCC”). Only after a project provides evidential CEQA compliance will the DCC issue an annual license.

By way of background, CEQA is a state law passed in 1970 that requires an environmental review of all proposed projects in the state of California. The required in-depth environmental analysis is intended to “(1) Identify significant environmental impacts, (2) Avoid or reduce environmental damage, (3) Aid public participation, and (4) Add transparency to government decisions.”

In California, Legal Cannabis is a Two-Tiered Licensing System = CEQA Complications

Typically, non-cannabis companies work with a singular regulating government agency to obtain the necessary documentation and specific information to elucidate their compliance with CEQA.

However, the California cannabis industry is a two-tiered licensing system, which adds a significant wrinkle to the CEQA review process. The two-tiered system requires operators to be licensed by both their local government as well as licensed by the state.

Thus, during the CEQA review for cannabis businesses, one government agency chooses to operate as the “lead” agency, whilst the other acts as the “responsible” agency. Despite this distinction, both “lead” and “responsible” agencies must ensure CEQA compliance.

Who is the Lead Agency? Who is the Responsible Agency?

The lead agency is defined as the agency given primary responsibility and discretionary authority for carrying out or approving a project. As the lead agency, their duties include identifying and obtaining required documents, and ensuring the business meets CEQA criteria. The responsible agency has a limited amount of discretionary authority over the project. It’s important to note that there can be more than one responsible agency on a single project. Furthermore, the responsible agency is still required to independently review and approve the CEQA documentation and “not rely automatically on the Lead Agency’s judgments.”

In cannabis, the local government typically acts as the lead agency, and DCC acts as the responsible agency. However, there are exceptions to this, whereby the DCC will always act as the lead agency (and may assess additional fees for preparation of CEQA documents), these include:

What Does CEQA Compliance Mean?

Local governments throughout the state have instituted unique requirements for commercial cannabis businesses to demonstrate CEQA compliance.

This may include project-specific CEQA documentation, such as:

Other documentation may also be needed for the CEQA review process, including:

CEQA Compliance in the City of Los Angeles

For cannabis business applicants in the City of Los Angeles, the DCR is steering the CEQA process as the “lead” agency and the DCC is operating as the “responsible” agency.

Consequently in mid-May 2022, the Los Angeles Department of Cannabis Regulation released their newly created Project-Specific Information Form (LIC-4013-FORM) to applicants who at that time had Temporary Approval.

Through various channels of communication, the DCR also notified the public that there would be a fee waiver for the applicable $2,596 CEQA Categorical Exemption Fee. The DCR further stated this waiver is to be first come, first served and the DCR began accepting CEQA form submissions starting on June 1, 2022.

As of February 2023, the DCR has stated Temporary Approval licensees who have submitted the completed LIC-4013-FORM’s are now under the review process. The DCR anticipates that entities with Temporary Approval and a complete LIC-4013-FORM will be eligible to submit an annual application to the DCR on or before July 1, 2023.

Further, the DCR has acknowledged that the final environmental document required by CEQA will have to be adopted with the annual licensing determination and DCR, as the lead agency, will communicate CEQA compliance to the DCC after the final environmental document has been adopted and the appeal periods allowed under CEQA have elapsed.

Only then will cannabis businesses be able to obtain an annual license from the state regulating agency, the DCC.

If you are seeking advice from a CEQA compliance advocate, contact one of our California cannabis law firm specialists today by phone at (310) 912-2960 or online to learn more about how we can help.

Stay tuned for more updates!