Business

“We’re Kind of S.O.L.” West Coast CannaBiz Learns to Live with Fires

By Willis Jacobson Oct 13, 2020
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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As they deal with the impacts of record-setting wildfires, West Coast cannabis operators have turned their attention to recovery and preventing future devastation – topics that are vital to the industry’s long-term survival.

Millions of acres have burned across California and Oregon over the past few months, devastating thousands of acres of cannabis crops and destroying many retail establishments and other ancillary businesses. Many cannabis business owners face largely uncertain futures, as most don’t have business insurance and are ineligible for federal relief programs due to marijuana’s federal illegality.

Compounding those issues, operators whose crops or businesses survived the blazes must now contend with smoke, ash and potentially dangerous chemicals that could ruin a harvest and further disrupt business throughout the supply chain.

Still, many remain bullish on the industry’s viability and are confident this year’s setbacks will lead to better practices in the future. More supportive governmental policies and better planning and fire mitigation efforts by operators could go a long way, they say.  

“It’s a crazy time, but I think the industry will get through it – just like we have from the beginning,” said Kim Stuck, CEO of Allay Consulting, which advises cannabis businesses throughout the country with offices in Colorado and Oregon.

“No matter what, there’s always a risk,” she added. “As a community we just have to figure it out and try as hard as we can to prevent these types of things from happening.”

Recovering crops

In mid-September, there were roughly 40 large fires burning along the West Coast, with California alone simultaneously experiencing five of the 10 largest blazes in its history.

While exact figures on damage are not yet available, the fallout from the fires, as it relates to cannabis, has been extensive. In Oregon, roughly 20% of the state’s licensed cannabis businesses received evacuation orders in September, and multiple dispensaries in the southern portion of the state were burned down completely.

In California, where multiple cannabis farms were lost to fires in August, the August Complex Fire burned more than 1M acres and threatened portions of the Emerald Triangle – the region of Humboldt, Trinity and Mendocino counties known for cannabis production – en route to becoming the largest fire in state history. As of Tuesday, the August Complex Fire, which is believed to have sparked from lightning strikes in mid-August, was still only 76% contained.

As farmers in the affected region attempt to salvage what they can from their crops, they must first determine what is still healthy to consume. There isn’t a lot of scientific research into the effects of smoke and ash on cannabis, though experts express concern that ash from structure fires can carry potentially harmful heavy metals.

Those possibly dangerous particulates can simply be washed off of most produce, but cannabis plants are tested more rigorously than other crops before going to market. 

In a typical season, according to information provided by New Frontier Data, about 2% to 5% of California’s cannabis crops fail mold tests. Some within the industry predict that number will at least double this season, a result of sunlight-blocking smoke weakening plants’ resistance to mold and disease.

It is also widely accepted that climate change will continue to fuel larger wildland fires, which has many in the industry looking for ways to contend with what is expected to be a “new normal.”

One way to help cannabis operators deal with their new reality is to improve public policy.

“You have people already struggling in the system we have,” said Amanda Reiman, VP of community development for Flow Kana, a high-profile brand based in California’s Mendocino County. “The fires are absolutely a threat, and will continue to be. We need to work on the regulatory system.”

Finding insurance

Much of the reform recommended by cannabis advocates would open cannabis business owners to federal loan and other relief programs that other companies can typically utilize when facing a disaster.

Stuck, with Allay Consulting, noted that other agricultural crops – like soy and corn, for example – are eligible for bailouts and other assistance from the federal government when they are faced with a catastrophic event.

“In the cannabis industry, we’re kind of S.O.L., if you will,” she said. 

“We can’t really do anything,” she added. “These crops need to be treated the same way that every other agricultural crop is treated.”

Insurance is another major area of concern.

Many operators have said they’ve found liability or property insurance in the cannabis industry to be either not available or overly expensive.

Kieran J. O’Rourke, who heads up a proprietary cannabis insurance program for Ohio-based Cannasure, encouraged operators, particularly those in fire zones, to reach out to a local cannabis adviser for help finding companies that will insure them. Those companies do exist, he said.

“Whether it’s deemed to be more expensive than some other industry or some other non-cannabis property, it might be,” he said. “There’s a lot of different exposures out there in the insurance world.”

O’Rourke noted that Cannasure offers services in multiple states, but doesn’t yet offer its proprietary program in California. The company does offer insurance to cannabis clients in the state, however, as do other companies.

O’Rourke said the higher premium prices that generally accompany cannabis policies owe largely to the industry’s relative novelty. There isn’t a lot of available data, he said, like there is for homeowner’s insurance. Other factors also play a role, including that cannabis manufacturers commonly use explosive gases. Other factors can include the construction of the business’s building or its proximity to a fire station.

Many of the big-name insurance companies don’t offer services to cannabis clients, so finding a plan with hundreds of millions of dollars in coverage can potentially be difficult, O’Rourke acknowledged. But, he noted, Cannasure offers up to $30M in property coverage at any one location.

Although it would be more competition for him, O’Rourke said he was hopeful more insurance carriers would enter the space. Not only would that drive down prices for consumers, he said, but it would benefit the entire industry.

“It would make us all better and [provide] that much more data … and then everyone else can feel good about where this industry is headed,” he said.

Planning for the future

Many West Coast operators are preparing for a future with more extreme fire seasons.

“With the constant issue that we have with climate change, this kind of thing isn’t going to go away any time soon,” said Stuck, who is based in northern Oregon.

O’Rourke, who underwrites insurance plans, advised operators to be mindful of their locations and other fire mitigation methods as they prepare to open or expand their businesses.

Stuck said the industry and policymakers need to do more to support farmers and other small operators who lack the financial safety net that large corporations are able to deploy.

“They’re doing this thinking they’re going to be successful,” she said of farmers and small business owners, “when the government is actually making it very hard for them to be successful.”

Natalynne DeLapp, with the Humboldt County Growers Alliance, said the issue goes way beyond just cannabis.

“Everyone needs to have a ‘come to Jesus’ moment and a real scientific conversation about fire and climate change and forest management,” she said. “This isn’t a cannabis issue; this is a human issue, and a land-use issue and an ecological issue.”

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