Great question! Most people have never even heard of appellations, let alone cannabis appellations. Yet for the California cannabis industry, appellations are about to become a HUGE deal. California has reached a significant milestone on its way to starting the first cannabis appellation program in the world.
What is an appellation?
An appellation is an identifying name or title that represents a geographic area of origin of an agricultural product. Every region has different environmental characteristics, and a crop will vary depending on where it is grown. Especially in the context of high-end crops, having a reputable geographic origin associated with your agriculture can represent significant value.
This is most commonly found in the context of wine. Noteworthy appellations include the Bordeaux and Champagne regions in France, or Napa Valley here in California. These regions are renowned for having specific environmental factors. Those factors combine with a history and culture of growing to produce wine with unique qualities. The idea of being able to claim that your product is from a particular region therefore may add tremendous economic value.
In the United States, there are approximately 250 designated wine-growing regions called American Viticultural Areas (AVAs). The Tax and Trade Bureau (TTB) accepts petitions for new AVAs, maintains a list of the current AVAs, and generally oversees the industry. The TTB is a federal agency that oversees AVAs nationwide.
The cannabis industry has never had formal appellation protections. California has some laws regarding “county of origin,” meaning that you cannot claim that the product is from Humboldt if you grew it in a warehouse in East LA. However, those laws apply to all cannabis products, regardless of the cultivation method.
Qualifying for a cannabis appellation of origin has more targeted rules, including the specification of smaller regional cultivation areas that can be entirely nested within a county. Appellations will also include specific requirements for the strains and various cultivation practices in those areas.
Because cannabis remains illegal at the federal level, cannabis appellations will be controlled by state agencies. In California, the agency in charge of the program is the California Department of Food and Agriculture (CDFA).
CA’s Proposed Regulations
On February 20, 2020 the CDFA published the proposed regulations that provide the parameters for these new rules. This is their first draft.
As published, the regulations require an application process in order for an area to be approved as an official cannabis appellation of origin. Importantly, they require that three or more licensed cultivators from a region must join together to form a “petitioning organization”. That organization then must submit a petition to have the desired appellation of origin approved by the state. A list of the required items in a petition is set forth under section 9102, and includes:
- A detailed description of the proposed geographical area. This includes both a general identification of the area, as well as a narrative description including every single identifying piece of the boundary.
- The requested appellation name and proof that the name is widely used to describe the region.
- Climate, temperature, geological formations, cultural features, and other natural descriptors that play a role in the cannabis cultivation.
- “Standard, practice and cultivar” information, which includes things like the traditional customs, strains, and other measurable characteristics for the cannabis cultivated in that area.
- A description of the legacy, history, and economic importance of cannabis cultivation in the area.
Once the petition is submitted, section 9200 requires that the department review it for completeness. If it is not complete, the department must notify the applicant, who is then afforded an opportunity to supplement the application.
It certainly behooves petitioning organizations to enlist a qualified cannabis lawyer who is closely familiar with these appellations regulations, to ensure that their petitions are properly submitted.
Under section 9201, once the petition is complete, the department will publish a notice of the proposal. This will give the public time to review the proposal’s details, and 30 days to submit comments. Once that 30 days has passed, the department has discretion to officially approve the petition, and the appellation of origin is established.
The CDFA’s release of the first draft began a 45-day comment period, which was then extended to May 6, 2020 because of the COVID-19 emergency declaration. That period concluded with a public hearing in Sacramento on May 6, which was conducted via an online format.
Open Hearing for Public Comment
The hearing included public comments that highlighted several important issues and concerns with the current draft regulations. Some wanted the regulations to add additional “terroir” baseline requirements, which are requirements that the cannabis be grown naturally, in the soil, with the traditions associated with growing in that area. Others requested that the cost of the petition be lowered from its current non-refundable filing fee of $20,880. One commenter pointed out that small farmers may be best positioned to benefit from an appellation of origin, yet least able to afford one.
Berger Greer LLP’s own Adam Berger chimed in to point out a potential issue with one of the requirements of the appellation petition. The applicant is required to disclose information and evidence regarding the history and legacy of cannabis cultivation in the proposed geographic area. Berger pointed out that this could potentially implicate some privacy and constitutional Fifth Amendment concerns, and requested additional guidance from the Department on that issue.
Many interest groups provided recommendations to the CDFA, both at the hearing and in lengthy written submissions. It’s abundantly clear that the current draft of regulations will not be the last one. The CDFA has until January 1, 2021 to create the final version of the rules. It is likely that another version will be published in several months, followed by another comment period later this year. That will then lead to another public hearing, before the rules are hopefully completed in time for January.
The appellations program is an exciting opportunity. The legal industry continues to be dwarfed by the black market. As the legal market grows, it must continue to adapt and develop new ways to stand out. Getting a cannabis appellation will give legacy cultivation farmers added value to their product, protecting them from infringement and enhancing profits.
At the same time, the cannabis appellations program provides these farmers with a platform to create and develop organizations that consist of the cultivators in the area. It will also facilitate a more informed consumer, as the designation contains significant information about the origin of the product that is often hidden from the end-consumer. This knowledge will in turn empower consumers to make more informed purchasing decisions, and take pride in knowing the details of where their cannabis comes from.
As the coronavirus crisis continues to play out, cannabis has been deemed essential by nearly every state with a legal market. This is a far cry from the days of prohibition. Despite federal issues that remain, the industry is clearly on its way to becoming a mainstream component of American society. We believe that an important part of becoming a mainstream industry involves honoring, remembering, and recognizing the historical context that created the backdrop for the industry we know today.
It’s important to remember that California legalized an existing industry. Previously, the prohibition of cannabis discouraged the retention and publishing of information related to cannabis growing and culture. This means that much of the historical context remains shrouded in secrecy. The cannabis appellations program is a significant milestone in changing this. It provides a platform for the public to understand the significant history and backstory of cannabis cultivation in regions throughout the state. By shedding light on this information, the appellations program adds a dimension of culture and thoughtfulness to the cannabis market that sometimes gets lost on the “big-business suits” of the legalized market. If done right, the program can provide protection from infringement, yes. But it can also ensure that the legacy cultivation farmers and their stories–the ones that shaped the history of cultivation in these regions–will be remembered and honored for a long time to come.