Often forgotten in the rush to expand the cannabis industry is the environmental impact of indoor cultivation operations and environmental considerations for the engineering and design of cultivation facilities. This article will briefly address environmental impacts of cannabis cultivation, specifically energy usage, in various states and how cultivators looking to the emerging New Jersey market can better equip themselves for potential regulation similar to what is being seen in other states.

Growing cannabis, especially indoors, is energy intensive. It can take upwards of 5,000 kWh to grow just one kilogram of cannabis (2,000 kWh to grow one pound) as compared to roughly 10,000 kWh of energy to power a residence in the United States for a year. Recent reports show the cannabis industry is having a significant impact on the use of electricity in states that have legalized it. In 2015, various reports concluded that cannabis growers accounted for approximately 1.7 percent of the United States’ total electricity usage, a cost of upwards of $6 billion. The vast majority of states that have legalized cannabis cultivation have not addressed the issues surrounding energy consumption prior to enacting legislation. As a result, municipal governments, state agencies and public utilities have had to take a reactive approach to the astronomical utilization of energy.

Currently, states and municipal governments are implementing various techniques in order to curtail electricity use. The techniques vary, but the most common are taxes and/or fees on energy consumption. For example, Boulder County, Colorado has a requirement that growers either offset energy consumption with the use of renewable energy or pay a $0.02 charge per kWh of energy use. In addition, some state regulations have an adverse effect on energy consumption, and compliance results in an increase in energy consumption by growers. For example, when Pennsylvania legalized cannabis in 2016, its regulations required growers to contain their entire crop in indoor facilities without addressing how the state would cope with the corresponding energy use from the requirement.

Though most states have not addresses environmental impacts of cannabis cultivation until after licenses were already awarded, one state has put into place some of the strictest energy regulations for cannabis cultivation.

In 2008, Massachusetts entered into the Global Warming Solutions Act, which required a reduction in the state’s greenhouse gas emissions by 80 percent no later than the year 2050. However, with the legalization of adult-use cannabis, the state had to address the fact that not only is cannabis an energy-hungry crop, but that it also emits dubious amounts of carbon dioxide (CO2). On average, the energy needed to grow one pound of cannabis indoors emits roughly 5,000 pounds of CO2 into the atmosphere. As a result, the Cannabis Control Commission of Massachusetts has included in their regulations a limit on how much energy can be utilized for cultivation operations.

Although New Jersey has not yet weighed in on the energy use and carbon emission issues associated with the emerging cannabis industry in the most recent adult-use cannabis legalization bill, state lawmakers are openly moving New Jersey towards being a leader in climate change solutions, especially with New Jersey rejoining the Regional Greenhouse Gas Initiative. Additionally, broad environmental concern has not completely escaped legislators, as the most recent call for medicinal cannabis licenses required applicants to submit an environmental impact plan as part of the application process.

As a result, it is imperative that cultivators from out of state, as well as those who are thinking of starting a cultivation operation, who wish to apply for licensing in New Jersey, consider the impacts of their future operations regarding electricity use in order to be prepared for any future regulations and/or taxes that might negatively affect their operations and profitability.

This article was originally published on the NJSBA website.

New Jersey’s new governor signed an executive order yesterday directing his acting Department of Environmental Protection commissioner, Catherine McCabe, and Board of Public Utilities President Joseph Fiordaliso to begin negotiations with current state members of the Regional Greenhouse Gas Initiative (RGGI) to re-enter the program.  This order reverses former Governor Chris Christie’s 2011 action to withdraw New Jersey from the program.

RGGI, established almost 10 years ago in 2009, is the first mandatory market-based program in the United States to reduce greenhouse gas emissions.  At Governor Murphy’s direction, New Jersey will rejoin the cooperative effort among fellow northeastern states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce carbon dioxide (CO2) emissions from the power sector.

What does that mean?  From the 30,000 foot view, it means fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater would be required to hold allowances equal to their CO2 emissions over a three-year control period.  The power plants can use allowances issued by any of the participating states, and can buy them at regional auctions or in secondary markets.  The regional cap on total CO2 emissions ratchets down 2.5% each year until 2020, theoretically relying on the regional market to drive prices and efficiencies.  Proceeds from the auctions are used to fund renewable energy and energy efficiency projects.

In the weeds, it means the Department of Environmental Protection drafting new regulations (presumably using RGGI’s Model Rules), participation in a complex and well-developed compliance and tracking system as well as the auctions and secondary markets, passing along costs and savings to consumers, periodic reviews and adjustments, entering cooperative memorandums, and more.  It may also mean more opportunities to promote solar, wind, and other renewable projects.

Overall, RGGI has been seen as a success, reportedly reducing power sector carbon emissions as much as 40% since 2005, while member state economies continued to grow.  There are, however, many ways to interpret the different data and forecast future impacts.  Nonetheless, New Jersey is on the path back to RGGI and we will be on the lookout for the implications, costs, and opportunities.  We are also keeping an eye on state legislation directing New Jersey to join the U.S. Climate Alliance, which Governor Murphy is expected to approve if it hits his desk.  The governor may also bypass the legislature and use the executive order route.  The U.S. Climate Alliance doesn’t come along with the same compliance commitments as RGGI, but it is another example of ramped up state- and regional-level actions to address climate change in reaction to the reduction in federal action.  The U.S. Climate Alliance was formed in direct response to President Trump’s withdrawal of the United States from the Paris Climate Accord.

 

The growth of New Jersey’s solar industry has been driven by an ambitious requirement that increasing percentages of the regulated power suppliers’ energy come from renewable energy sources, favorable financial incentives and favorable regulatory provisions such as net metering rules.  In order to determine the economic viability of a solar project and the return on investment, the financial incentives available under both New Jersey and federal law must be analyzed.  Catherine Bostock, a Member of the Environmental Law Department of Cole Schotz and Gordon Duus, Chair of the Department, recently had an article on this subject published in the December 13, 2010 issue of the New Jersey Law Journal.  Click here to read the article.

On April 22, 2010, Governor Christie signed a new law that exempts solar panels from the calculation of impervious cover under a number of state laws. The calculation of impervious cover can be a critical factor in development projects in New Jersey, as many state and municipal laws limit the percentage of a property that can be covered by impervious cover. For instance, the Highlands Water Protection and Planning Act limits the size of new developments to 3% impervious cover, while the stormwater management rules are triggered based upon the amount of impervious cover added by a project.

The goal of the new legislation is to remove regulatory obstacles to developing solar power projects. The new legislation amends the Waterfront Development Act, the Pinelands Protection Act, the Coastal Area Facility Review Act, the Highlands Water Protection and Planning Act, the Municipal Land Use Law as well as laws related to county site plan approvals, stormwater management plans and the conversion of age-restricted community developments.

Under the new law, a “Solar Panel” is defined as “an elevated panel or plate, or a canopy or array thereof, that captures and converts solar radiation to produce power, and includes flat plates, focusing solar collectors, or photovoltaic solar cells and excludes the base or foundation of the panel, plate, canopy, or array.” Thus, while the solar panel itself is not impervious, the area where the solar panel attaches to the ground – the base or foundation – is still deemed impervious.

The new law does not, however, change how the calculation of impervious cover is undertaken under the Freshwater Wetlands Protection Act and the Flood Hazard Area Control Act. The legislative history does not indicate whether this was a deliberate or inadvertent omission. However, given the strict development limitations under these two laws, and the large areas covered by them, this omission could be significant.

Any New Jersey developers seeking to build a solar energy project, or include solar power generation as an ancillary feature of a development, will need to consult with their development team professionals to consider how this new legislation might impact their project.

On March 31, 2009, Governor Corzine signed three clean energy bills in front of a combined heat and power production facility at Rutgers University Busch Campus.

With stated goals of reducing dependence on foreign oil, creating jobs and combating global warming, the first bill requires developers to offer to install solar energy systems on development of certain new home construction.  The bill also gives home owner associations, within developments of over 25 units, the right to access the units to repair solar energy systems and collect fees from owners for maintenance costs of such systems.

A second bill permits renewable energy facilities to be located in industrial zones.  Renewable energy facilities are facilities that engage in the production of electric energy from solar technologies, photovoltaic technologies or wind energy.

The final bill authorizes the Board of Public Utilities to use revenue from retail margin assessed on certain customer classes to benefit only those customer classes by supporting development of combined heat and power, energy efficiency and demand response projects.