For Clients & Friends of The Gualco Group, Inc.

IN THIS ISSUE – “A resounding thumbs down from the home team”

Pollster on 70% of California voters’ disapproval of Gov. Newsom running for POTUS

Capital News & Notes (CN&N) harvests California policy, legislative and regulatory insights from dozens of media and official sources for the past week. Please feel free to forward this unique client service.

FOR THE WEEK ENDING MAR. 3, 2023

 

Voters Like Newsom, Just Not As POTUS

Politico’s California Playbook

Gov. Gavin Newsom has repeatedly said he doesn’t want to run for president in 2024.

Apparently, voters agree.

Seven out of 10 said they would not like to see him make a bid for the White House in the next election, per a new Quinnipiac University poll of registered California voters. Even a majority of Democrats (54 percent) still say he shouldn’t run next year.

“A resounding thumbs down from the home team as California voters tell the governor: if you have designs on the big job beyond Sacramento, we’re not on board,” said Quinnipiac University Polling Analyst Tim Malloy.

The poll didn’t ask voters to give a reason for their decision, but we have a few ideas as 2024 starts to come into focus.

Even though it seems like the governor has been drinking from the proverbial fire hose throughout his entire tenure, now is especially not an easy time to hit the national campaign trail. Homelessness remains a constant battle, inflation has Californians struggling to meet basic needs, and the state is trying to figure out how to fill a $22.5 billion hole in the budget.

Of course, there’s always the chance that some voters just don’t like Newsom, and don’t see him as presidential material. The polling on that front, however, isn’t conclusive. The same Quinnipiac poll gave the governor a 44 percent approval rating among California voters.

A separate poll, from the U.C. Berkeley Institute of Governmental Studies, reported 54 percent approval for the gov — the highest among six of the top California politicians.

That popularity, however, could be tested by upcoming budget woes, IGS Poll Director Mark DiCamillo told the Los Angeles Times.

“It’s true of every governor: When you start having to cut back on the budget, that’s usually a time when voters get more critical of you,” he said.

Poll:

https://poll.qu.edu/poll-release?releaseid=3868

 

Re-Plumbing California’s Water System Faces 2023 Decision

Washington Post

As drought-weary Californians watched trillions of gallons of runoff wash into the Pacific Ocean during recent storms, it underscored a nagging question: Why can’t we save more of that water for not-so-rainy days to come?

But even the rare opportunity to stock up on the precious resource isn’t proving enough to unite a state divided on a contentious idea to siphon water from the north and tunnel it southward, an attempt to combat the Southwest’s worst drought in more than a millennium.

The California Department of Water Resources said such a tunnel could have captured a year’s supply of water for more than 2 million people.

“People are naturally focused on, are we doing everything we can to capture the water when we can?” said Karla Nemeth, the agency’s director.

The proposal from Gov. Gavin Newsom’s administration — one that would cost $16 billion to help 27 million water customers in central and southern California — is spurring fresh outrage from communities that have fended off similar plans over four decades, including suggestions to build other tunnels or a massive canal.

Before and since storms in December and January, there have been packed town halls and stern pleas to the Democratic governor from those for and against the idea. The appeals have come from state and federal lawmakers, including one pushing legislation in Congress to block the tunnel from receiving a key permit.

The conflict underscores the increasing difficulty of keeping taps running in communities far from the sources of the water they drink, and underlines thorny questions about the consequences of taking water from one place and giving it to another.

There are concerns the tunnel would hurt farmers while failing to solve California’s larger water woes, stoking long-simmering state divisions: north versus south, inland versus coast, agricultural versus urban. Nevertheless, the water crisis demands solutions.

California faces a future climate marked by both extended drought and increasingly intense rainstorms, known as atmospheric rivers, like the ones that repeatedly lashed the state in late December and January. Warming temperatures and dry conditions mean snowpack isn’t translating to as much river flow as it once did, and at the same time, the West is struggling to develop a plan to sustainably drink from the dwindling Colorado River, another key source of water there.

To be built, the project must withstand a long vetting process and any expected legal challenges. Even then, the tunnel likely wouldn’t be functional until maybe 2040. But the future of what would be one of California’s largest infrastructure investments ever could come to a head much sooner. Nemeth expects to decide whether and how to proceed by the end of the year.

California has been moving water southward for generations — an effort to get water where it’s not. While its largest population centers are clustered along the coast and across valleys in the lower half of the state, most of its precipitation falls on its northern half and inland mountains. Besides that, about half the state’s annual precipitation typically falls on just 15 days, if not fewer.

To fix that imbalance, California built what is known as the State Water Project, a more than 700-mile system of canals, pumps, aqueducts, reservoirs and hydroelectric dams that date to the 1960s. It delivers water to 750,000 acres of farmland and to communities across the Bay Area and Southern California.

The tunnel would be a key new element of that system, allowing it to take better advantage of the state’s boom-and-bust precipitation patterns that climate change is forecast to make only more pronounced.

It would carry water 100 feet beneath the delta — an estuary where the Sacramento and San Joaquin rivers meet, and which receives about half of all of California’s streamflow. The tunnel would take water in from a location near Sacramento and bring it to a reservoir about 45 miles south.

If the proposed tunnel had been in place when the series of rainstorms battered California beginning in December, it could have saved 202,000 acre-feet of water, state water managers said.

That’s about 35 percent of what the State Water Project delivered to customers in all of 2022. They estimated that there was an even larger missed opportunity to increase water stores during a series of storms at the end of 2021.

“This project would have enabled a significant amount of water to be moved in a short amount of time into storage, and that’s what makes it so important,” Nemeth said.

It’s one piece of a larger strategy to modernize California’s water systems, Nemeth said.

Other efforts aim to improve efficiency, promote reuse, adapt to a warming climate and prepare for damaging earthquakes, which the Army Corps of Engineers has said could damage levees that protect the water supply.

Nemeth said if there is a levee breach, it could allow salt water to taint the State Water Project system. But if there is a tunnel, she said it could bypass the contamination and ensure a continuous supply of fresh water from the north side of the delta.

Opponents question the risk of a breach. John Herrick, general counsel for the South Delta Water Agency, called it a strategy to justify routes for the tunnel that take water from farmers to give to desert communities east of Los Angeles. “It’s going to be operated at the detriment of farmers in the delta,” said Herrick, who defends the water supply of farmers.

In communities that would have to live around the tunnel, many say there are only costs, and no benefits. In the Sacramento-San Joaquin Delta region, where a patchwork of Central Valley farmland meets the Bay Area, the tunnel is viewed as a threat.

Worries are high there that it would reduce natural water flows enough to hurt farming communities and struggling fisheries, making the delta saltier and more prone to drought. Already there are concerns that, as water is pumped from the delta toward the 444-mile-long California Aqueduct, too much salty water flows in from the brackish bays to the west.

“We don’t believe one piece of infrastructure is going to solve California’s water woes with the extremes of climate change,” said Barbara Barrigan-Parrilla, executive director of Restore the Delta. “They’re really not planning for the future.”

For proponents of the project like Heather Dyer, general manager of the San Bernardino Valley Municipal Water District, separating into north vs. south or rural vs. urban factions misses a key point: That all of California needs water to support an economy, fifth-largest in the world, that likewise buoys all corners of the state.

MORE:

https://www.washingtonpost.com/weather/2023/03/01/california-tunnel-storm-water-rain/

 

Proposed Sites Reservoir: Year 8 and Counting…

CalMatters

Last century, California built dozens of large dams, creating the elaborate reservoir system that supplies the bulk of the state’s drinking and irrigation water. Now state officials and supporters are ready to build the next one.

The Sites Reservoir — planned in a remote corner of the western Sacramento Valley for at least 40 years — has been gaining steam and support since 2014, when voters approved Prop. 1, a water bond that authorized $2.7 billion for new storage projects.

Still, Sites Reservoir remains almost a decade away: Acquisition of water rights, permitting and environmental review are still in the works. Kickoff of construction, which includes two large dams, had been scheduled for 2024, but likely will be delayed another year. Completion is expected in 2030 or 2031.

Sites Reservoir would store as much as 1.5 million acre-feet of Sacramento River water and could eventually boost water supplies — especially in dry years — for more than 24 million people, mostly in Southern California, and 500,000 acres of Central Valley farmland.

The reservoir is now projected to cost $4.4 billion, with Prop. 1 covering up to $875 million and much of the rest coming from federal loans to water suppliers.

For years, state lawmakers, farm representatives and city water suppliers have bemoaned that the reservoir hasn’t been built yet, and their criticism has escalated during rainy periods.

In less than two weeks of storms last month, Sites could have captured 120,000 acre-feet of water,  enough to serve about 1.3 million Californians for a year, according to water agencies supporting the project.

Rep. John Garamendi, a Democrat from Walnut Grove, is one of many long-time Sites advocates who have grown impatient waiting for the new reservoir.

“California just received 22 trillion gallons of rainwater last month, which could have filled Sites and provided a greater supply of water for the dry months,” Garamendi told CalMatters.

Environmental groups oppose the reservoir, fearing  it will draw too much water from the Sacramento River and harm imperiled populations of salmon and other fish. An environmental review, which already has gone through multiple rounds of revisions and public comment periods, is still underway and could wrap up this summer.

The reservoir’s slow pace of progress doesn’t surprise leaders and water supply experts.

“For any large gray infrastructure project, permitting and planning are stages that take time,”  said Nina Hawk, chief of Bay-Delta Resources for the Metropolitan Water District, which has chipped in about $30 million for Sites planning.

Proponents say the Sites Reservoir is a necessary step to bolster California’s water supply, which is increasingly strained by drought as well as intense wet weather and flooding. Moreover, pressure is on Southern California to sharply cut its use of water from the Colorado River, perhaps increasing the importance of Delta water to Southern California.

Sites would make a small splash in California’s water supply: It would add only about 1.5 million acre-feet to major reservoirs that now hold about 50 million acre-feet. The Delta’s state and federal systems export an average of 4 to 5 million acre-feet a year. (An acre foot is about 326,000 gallons.)

“It’s an increase of a few percent, but it’s real water to someone,” said Jay Lund, a UC Davis professor of civil and environmental engineering.

There was a big hiccup last year, too, when the State Water Resources Control Board ruled that the project’s application for water rights did not adequately analyze water availability. The water board is currently mulling over a possible, controversial update to its plan, which would require that 55% of the river’s unimpaired flow reach San Francisco Bay for environmental benefits. The board determined that the Sites analysis failed to “assess or consider” these changes.

The Sites Project Authority resubmitted a more thorough analysis in January and is now waiting for the board to issue a water right that will allow the reservoir to divert water.

Water board officials declined an interview request. But in a brief written statement they said before a water right is granted, “the board must ensure that instream flows necessary for the protection of water quality, fish and wildlife in the Delta can be met sustainably.”

“At this point we are at the finish line with what we intend to proceed with,” Brown said. “We are full-steam ahead.”

The reservoir must provide public benefits in order to receive Prop 1 funding. This money is allocated under the assumption that operating the reservoir will provide recreation opportunities, ecosystem and water quality improvements and enhanced flood control for downstream communities.

Paul Cambra, a public information officer with the California Water Commission, said an assessment of these public benefits will ultimately determine whether all, or just a portion, of the Prop 1 funding will support the reservoir’s construction.

A 2022 federal loan of $2.2 billion and a $449 million loan from the U.S. Department of Agriculture to the Sites Project Authority, plus a financial pledge from the U.S. Bureau of Reclamation, will cover much of the rest of the cost.

Once built, the reservoir’s water will cost about $750 per acre-foot, according to Brown.

“That’s at the reservoir,” he said. The farther it travels, the more the water costs for the recipient, and for Metropolitan, Hawk said, the final cost per acre-foot will be roughly $1,000 to $1,300 — considerably more than the average State Water Project’s cost of $667 per acre-foot.

But Kightlinger, who helped conduct detailed cost-benefit analyses of the project when he worked for Metropolitan, said it’s a lot cheaper than desalinating water.

MORE:

https://calmatters.org/environment/2023/02/california-sites-reservoir/

 

Epic Snowback Ends Drought in Most of State

Associated Press

Tremendous rains and snowfall since late last year have freed half of California from drought, but low groundwater levels remain a persistent problem, U.S. Drought Monitor data showed Thursday.

The latest survey found that moderate or severe drought covers about 49% of the state, nearly 17% of the state is free of drought or a condition described as abnormally dry. The remainder is still abnormally dry.

“Clearly the amount of water that’s fallen this year has greatly alleviated the drought,” said Daniel Swain, a climate scientist at the University of California, Los Angeles. “It has not ended the drought completely but we’re in a very different place than we were a year ago.”

California’s latest drought began in 2020 and no relief appeared in sight heading into this winter.

The central Sierra and foothills are now free of drought or abnormal dryness for the first time since January 2020, the monitor said. The central coast from Monterey Bay to Los Angeles County is also now drought-free, along with two counties on the far north coast.

As of Thursday, the water content of the Sierra snowpack, which provides about a third of California’s water, was 170% of the historical average on April 1, when it is normally at its peak, according to the state Department of Water Resources.

Department officials plan to conduct a Sierra snow measurement today and hold a briefing on how the remaining month of California’s traditional snow season will impact the state’s water supplies.

Swain said the snowpack could become the largest ever observed in parts of California. The outlook calls for a continuing wet pattern, particularly for northern parts of the state, and more feet of snow, he said.

“If we can get through the rest of the season without any more roof collapses or snowmelt floods it will be quite a boon,” Swain said.

The snowpack potentially could face threats such as early heatwaves or, as some forecast models have hinted, a warm atmospheric river that could cause melting and flooding. Swain said California is expected to remain cold and the likelihood of the atmospheric river is very low.

“I think that snowpack is going to take well through the summer to melt and … some shaded patches might still be there next autumn,” he said.

While reservoirs have been filling from shockingly low levels, recovery has not been uniform as demonstrated by the state’s two largest water storage facilities. Lake Oroville, 65 miles (105 kilometers) north of Sacramento, is at 73% of capacity, 116% of average to date. Another 90 miles (145 kilometers) north, Lake Shasta is only 60% full, 84% of average to date.

https://apnews.com/article/california-drought-snow-rain-storms-d28c947cc8633f741871844c41006b7e

 

Legislators Criticize Governor’s Lack of Climate Change Plan

Sacramento Bee

Members of the California legislature questioned the state’s senior air pollution official on Wednesday about her agency’s climate action plan, pressing for particulars on policy action needed to achieve ambitious carbon emissions reductions. The concerns emerged at a joint committee hearing on the Air Resources Board’s (CARB) plan for the state to reduce fossil fuel dependence and reach carbon neutrality by 2045.

Echoing other criticism, lawmakers said that the plan lacks a clear implementation strategy. “There’s still a disconnect between our stated goals, what we know we need to do, and what we’re really willing to do,” Assemblymember Laura Friedman (D-Glendale) asked CARB chair Liane Randolph. “How do we make these goals real? What do we do next? And how can CARB help us?”

Randolph said implementation of what’s called the scoping plan is ongoing within her agency and across California government. She pointed to CARB’s intentions to strengthen cap-and-trade, which limits emissions by allowing businesses to buy and sell permits to produce carbon dioxide.

“It’s the responsibility of the entire administration and every state agency, not just CARB, to re-evaluate their programs to ensure that they are aligned with stakeholders and can achieve the emissions reductions we need,” Randolph said. “The completion of the plan is really the start of the multi-year regulatory process that will update existing programs and support new programs.”

The hearing follows sharp criticism from the Legislative Analyst’s Office on the scoping plan, which said the framework lacked a clear policy strategy and raised the possibility the state won’t meet its near-term emissions target in 2030.

Senate Natural Resources Committee chair Henry Stern, D-Calabasas, signaled the legislature’s desire for bolder leadership from Randolph to “push uncomfortable conversations.”

Senator Brian Dahle (R-Bieber) also lamented the lack of a practical game plan across the state’s major environmental agencies. “There’s got to be some holistic approach to the challenges that we face within the departments. Everybody has their own silo,” Dahle said in frustration. “There is no plan in my mind. We just don’t have a long term plan of getting there.”

In November, the Air Resources Board released its long awaited scoping plan to drastically reduce greenhouse gas emissions across all sectors of the California economy. It called for a reduction of emissions to 48% below 1990 levels by 2030 and 85% by 2045. California produced 431 million metric tons of greenhouse gas emissions in 1990 and 93 million last year — meaning the state has 132 million metric tons to eliminate in less than seven years.

The state is responsible for less than 1% of global carbon emissions, but as the world’s 4th largest economy, it is closely watched as a potential model for climate policy. The nearly 300-page scoping plan is full of data and explanations on the perils of climate change and goals it seeks to achieve.

But there is little in the way of actionable recommendations on how to meet targets, such as how heavily to rely on financial incentives, regulation or cap and trade. That’s according to a January evaluation of CARB’s plan by the Legislative Analyst’s Office, which warned that the scoping plan’s murky path toward carbon neutrality could mean California fails to meet its 2030 targets. Questions around future of the cap and trade program, which has long been the backbone of state climate action, played a significant role in the hearing.

https://www.sacbee.com/news/politics-government/capitol-alert/article272630008.html#storylink=cpy

 

Legislature Ponders Carbon Capture as Climate Change Remedy

Grist

In its latest ambitious roadmap to tackle climate change, California relies on capturing carbon out of the air and storing it deep underground on a scale that’s not yet been seen in the United States.

The plan — advanced by Gov. Newsom’s administration — comes just as the Biden administration has boosted incentives for carbon capture projects in an effort to spur more development nationwide.

Ratcheting up 20 years of climate efforts, Newsom last year signed a law requiring California to remove as much carbon from the air as it emits by 2045 — one of the world’s fastest timelines for achieving so-called carbon neutrality.

He directed the powerful California Air Resources Board to drastically reduce the use of fossil fuels and build massive amounts of carbon dioxide capture and storage.

To achieve its climate goals, California must rapidly transform an economy that’s larger than most nations, but fierce opposition to carbon capture from environmental groups and concerns about how to safely transport the gas may delay progress — practical and political obstacles the Democratic-led Legislature must now navigate.

Last year, the California state legislature passed a law that says no carbon dioxide may flow through new pipelines until the federal government finishes writing stronger safety regulations, a process that could take years. As a potential backup, the law directed the California Natural Resources Agency to write its own pipeline standards for lawmakers to consider, a report now more than three weeks overdue.

While there are other ways to transport carbon dioxide gas besides pipelines, such as trucks or ships, pipelines are considered key to making carbon capture happen at the level California envisions. Newsom said the state must capture 100 million metric tons of carbon each year by 2045 — about a quarter of what the state now emits annually.

“We do not expect to see (carbon capture and storage) happen at a large scale unless we are able to address that pipeline issue,” said Rajinder Sahota, deputy executive officer for climate change and research at the air board.

State Sen. Anna Caballero, who authored the carbon capture legislation, said the state’s goal will be to create a safety framework that’s even more robust than what the federal government will develop. But she downplayed any urgent need to move forward with pipeline rules, saying smaller projects that don’t require movement over long distances can start in the meantime.

“We don’t need pipelines across different properties right now,” she said.

Last year’s Inflation Reduction Act increases federal funding for carbon capture, boosting payouts from $50 to $85 per ton for capturing carbon dioxide from industrial plants and storing it underground. There are also federal grants and state incentives.

If the pipeline moratorium slows projects for three or four years, Brown said, “why would you put your money into those projects in California when you can do it in Texas or Louisiana or somewhere else?”

The geology for storing carbon dioxide gas is rare, but California has it in parts of the Central Valley, a vast expanse of agricultural land running down the center of the state.

Oil and gas company California Resources Corp. is developing a project there to create hydrogen. It plans to capture carbon from that hydrogen facility and the natural gas plant that powers it. The carbon dioxide would then be stored in an old oil field. That doesn’t require special pipeline approval because it’s all happening within the company’s property.

But the company also wants to store emissions from other industries like manufacturing and transportation. Transporting that would rely on pipelines that can’t be built yet.

https://apnews.com/article/politics-california-state-government-climate-and-environment-gavin-newsom-fa16aa985a1badf8e68fdd22914feb6b?campaign_id=49&emc=edit_ca_20230227&instance_id=86410&nl=california-today&regi_id=80823166&segment_id=126410&te=1&user_id=ebedd9f525ae3910eeb31de6bb6c4da0

 

Newsom’s Bid to Fine Oil Companies Runs Out of Gas in Legislature

CalMatters commentary by Dan Walters

Members of a state Senate committee spent more than four hours last week delving into the complexities of the supply chain that pumps more than 13 billion gallons of gasoline into Californians’ cars each year.

Immediately after the “informational hearing” ended, Gov. Gavin Newsom declared that it made the case for the tax-like “penalties” he wants to impose on refiners for exceeding still-to-be-determined profit margins, once again accusing them of price gouging.

“Today’s hearing provided even more evidence that we need to crack down on Big Oil’s price gouging at the pump,” Newsom said. “Experts detailed how gas price hikes led to record profits and why we need greater transparency. Big Oil’s lobbyists again used scare tactics and refused to provide answers or solutions to last year’s price spikes. We’re taking action to hold them accountable with a price gouging penalty and long-overdue transparency measures.”

Newsom’s statement bore little resemblance to what actually transpired during the hearing. Experts, including the state’s foremost authority on energy pricing, told legislators that the sharp, albeit temporary, spike in pump prices last year had little to do with refinery actions, but rather inexplicable hikes by retailers.

And even Democratic legislators were openly skeptical of Newsom’s claims.

“There is clearly a belief out there among many people that oil companies were profiting off the backs of Californians,” said Sen. Dave Min, an Irvine Democrat who will seek a congressional seat next year. “At the same time, we don’t really have a smoking gun as far as I can see, that shows intentional collusion.”

The Senate energy committee’s chairman, Steve Bradford, was equally unconvinced. Bradford, a San Pedro Democrat, asked, “What are we trying to solve for?…We have passed legislation here in California that has encouraged leaving oil in the ground…Have we created a scenario that has helped create this problem?”

And so it went. Democrats and Republicans alike, while expressing sympathy for motorists who saw transportation expenses jump sharply, offered almost no support, even conceptually, for imposing penalties that the petroleum industry says would merely increase prices even more.

“As outraged as we are (about high prices)…what the hell are the unintended consequences?” Sen. Bill Dodd, a Napa Democrat, mused.

California’s gas prices have historically been higher than those in other states, thanks mainly to its high taxes, both direct and indirect, and its distinct formulations to fight smog, which make it almost impossible to import fuel from elsewhere.

The state has adopted a policy of phasing out California’s oil industry along with gasoline-powered vehicles. As consumption declines, the state’s refining capacity has diminished.

The question before the committee last week was why the differential between California and other states suddenly widened to several dollars a gallon.

Severin Borenstein of UC Berkeley’s Energy Institute, acknowledged as the state’s leading independent analyst of gasoline price trends, cited those factors and others while telling the committee that last year’s price hikes occurred as gasoline was being moved from wholesalers to the retail level.

He, like several other witnesses, told the committee that the state needs more information about how pump prices are set before determining whether the state should intervene in some manner.

“The fact is, shooting first and then finding out if it is the right solution is likely to be just as detrimental as helpful,” Borenstein said.

Newsom obviously doesn’t want to wait for a more measured approach. He’s invested a lot of political capital into his anti-oil industry crusade and wants some action to trumpet. But last week’s hearing indicated that getting something “hairy and audacious,” to use one of Newsom’s favorite phrases, will be tough slogging.

https://calmatters.org/commentary/2023/02/newsom-oil-tax-legislature-skeptical/

 

Legal Cannabis Market Going Up in Smoke

CalMatters

How the troubled legal cannabis market impacts the famous Emerald Triangle of Humboldt, Mendocino and Trinity counties — is unclear.

For decades before California legalized recreational cannabis in 2016, this rural region of about 245,000 people was the base of weed cultivation for the entire country. The effects of the price crash, which has been particularly acute in the past two years, can be felt throughout the three counties, both within the industry and far outside of it.

Cultivators who can barely make ends meet are laying off employees, slashing expenses or shutting down their farms. That means money isn’t flowing into local businesses, nonprofits are getting fewer generous cash donations in brown paper bags, and local governments are collecting less in sales and property taxes.

Communities have been here before, stuck in a boom-and-bust cycle that played out with gold mining and cattle ranching and fishing. The last time, when the timber industry collapsed in the 1990s, cannabis cultivation flourished after the legalization of medical marijuana and filled the void. Now it’s unclear whether there’s anything left to sustain the local economies.

Some imagine that growing tourism can be the salvation, or attracting new residents with remote jobs and a desire to live way off the grid, or perhaps a logging revival driven by the urgent need to thin out California’s wildfire-prone forests. Others hope that a cannabis turnaround might still be possible.

But for a small, isolated town such as Hayfork — population: 2,300; high school student body: 88; empty sawmills: two — the answers are not obvious. The fear that the community could ultimately wither away is real.

“Long-term, I’m worried about it,” said Scott Murrison, a 68-year resident of Hayfork who owns half a dozen local businesses, including the gas station and mini mart (revenues down 10-15% over the past few years), a grocery store (down by as much as a third), the laundromat (bringing in about half of what it did when it opened a decade ago), a bar (stabilized since adding food to the menu), a ranch (hanging on, because there’s still demand for locally-raised beef) and a couple of greenhouses (leased to his nephew, who is not growing cannabis this year).

Cannabis should have been the sustainable alternative to gold and timber, a renewable resource that can be replanted each year. For a long time, it was.

Despite the challenges of growing an illegal crop, including enforcement raids that still scar residents, the “war on drugs” kept product scarce and prices high. The lure of easy cash attracted people from around the world to the Emerald Triangle, an annual flow of “trimmigrants” who could walk away from the fall harvest season with thousands of dollars in their pockets, much of which was spent locally.

“Everybody was making so much money it was insane,” Murrison said. “You could be here by accident, you could make money. Either trimming or growing or hauling water or if you had equipment, leveling spots or digging holes.”

Then came Proposition 64, the ballot initiative approved by California voters in 2016 that finally legalized recreational cannabis use and commercial sales in the state, though they remain illegal under federal law. Proponents including Gov. Gavin Newsom pitched it as both a social justice measure and a boon for tax revenues.

But the “green rush” that resulted has arguably harmed the Emerald Triangle more than it helped.

New farmers, sometimes licensed and often not, streamed in, flooding the market with cannabis. A cap on the size of farms intended to give small growers a head start was abandoned in the final state regulations, opening the door to competing cultivation hubs in other regions of California with looser restrictions. And with most local jurisdictions still closed to dispensaries, the legal market has been unable to absorb the glut, resulting in plunging prices and a vicious cycle in which farmers grow even more weed to make up for it.

Cultivators who might have commanded more than $1,000 for a pound of cannabis just a couple years ago said it is now selling for a few hundred dollars, not enough to break even with their expenses, taxes and fees.

Commercial cannabis sales in California actually fell by 8% last year to $5.3 billion, according to just-released state tax data, the first decline since it became legal in 2018 and a further cramp on the industry. State tax revenue dropped from $251.3 million in the third quarter of 2022 to $221.6 million in the fourth quarter.

Newsom, who once called himself the “poster child” for “everything that goes wrong” with Proposition 64, declined a request to discuss what’s happening in California’s historic cannabis communities. A spokesperson directed CalMatters to the Department of Cannabis Control, which did not make Director Nicole Elliott or anyone else available for an interview.

MORE:

https://calmatters.org/politics/2023/02/emerald-triangle-cannabis-communities/