In California’s Weed Country, wildfires burn both cash and crops

As a massive fire on the horizon belched smoke into a Northern California valley last week, about 20 people helped a pot farmer evacuate cows, goats, alpacas and other animals from a property at risk of being torched. As the motley group loaded the livestock onto borrowed horse trailers, about a dozen police officers roared up in cruisers.

“The officers said that anyone who had any dope in their car was going to jail,” one of the farmers helping load the animals recounted in a telephone interview. “That was really scary.”

The farm was one of the few permitted cannabis farms in Mendocino County, more than 100 miles north of San Francisco, making the pot on it as legitimate as can be in the haze of today’s regulatory environment. The cops didn’t find weed in the cars of those helping evacuate animals, but what amounted to a raid during the most destructive series of wildfires in recent California history underscores the continuing risks and challenges facing the marijuana industry in a state that has voted to legalize the drug.

The wildfires’ effect on California’s famed wine industry have been well-documented, but the fires affecting the North Bay’s pot farms as well as those farther north in an area known as the Emerald Triangle—Mendocino, Humboldt and Trinity counties—have received less attention even as they have killed more than 40 people and burned at least 200,000 acres.

The financial cost, thus far hard to measure, could be massive: As federal laws force the cannabis industry to deal in all cash, it could mean millions in paper money is up in flames alongside uninsured crops that farmers need to continue operations.

Forced to operate in cash, without insurance, and under the constant threat of raids despite legal protections, the cannabis industry faces continued struggles as it waits for legal recreational marijuana laws to take effect in California. Yet as the fires continue to rage through the rural hills dotted by cannabis farms, law-enforcement officials say that they will continue to do their jobs.

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“Is the California Highway Patrol going to stop writing traffic tickets [during a wildfire]? No,” said Lt. Chris Stoots of the California Department of Fish and Wildlife, which enforces some water-related aspects of cannabis law, since illegal growers often divert water endangering the fragile ecosystem.

He said he doesn’t have knowledge of the specific raid farmers recounted, but that what the farmers said sounded typical; other agencies said to be involved in the raid didn’t respond to requests for comment.

“’Don’t you have anything better to do?’ is a common statement people make when they don’t like the outcome of what is happening,” said Stoots. “That’s always a lame defense. Those officers still have a job to do, and laws still apply even though there’s a crisis.”

Estimates for the effect on the cannabis industry from the California wildfires are tough to nail down, much like the actual size of the market.

California tax collectors estimate taxable pot sales of $486 million through June of this year, after taxable sales of $937 million in 2016. But those are just medical-marijuana sales. According to a report commissioned by the California Department of Food and Agriculture, outlaw growers produce around 11 million pounds every year—$9.9 billion at current prices—with the vast majority illegally sold across the U.S.

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That black market exists in part because cannabis remains a Schedule I drug in federal guidelines, which means production, transport, sale and consumption of the drug are punishable by prison time. As a result, big banks won’t touch cannabis cash — despite Obama-era guidance that suggests they would not be prosecuted.

Consequently, everyone involved in the industry, from cultivators to retail shops, stores hundreds of thousands of dollars in cash. Those bills, like the crops, are uninsurable for many of the same reasons that the industry deals in cash, which becomes its insurance against crop destruction.

“Nobody has crop insurance, nobody has insurance for what they’ve got in their safes,” said Tim Blake, co-founder of the Emerald Cup, a marijuana festival held annually in Santa Rosa, referring to the stacks of bills stashed in the rural hills of Northern California.

Deep in weed country, most of the cultivators that have been evacuated had a chance to grab their cash, says cannabis cultivator Justin Calvino, who was present at the Mendocino raid.

“You can’t move your crops. You pretty much have time to grab your cash, your birth certificate—the sheriff will give you about an hour.”

But farther south, in the wine regions of Napa and Sonoma counties, where pot also thrives — it is similar to grapes in terms of the growing conditions and crop cycle — many were less fortunate.

“I know 12 people who have had their cash burned by the fire,” said Joyce Williams, chief revenue officer of Big Rock, a private-equity firm that invests in cannabis businesses.

Williams says that some of those who have lost property and cash have had more than $100,000 go up in flames. “In other businesses you’re going to have access to resources when this type of disaster happens,” she said. “But in cannabis there’s no infrastructure or opportunity to act.”

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Blake says that the fire’s timing was doubly damaging because many of the affected businesses had spent tens of thousands of dollars on equipment and permits as the new regulatory regime slowly came into focus. Now, without access to credit, he suspects some will get wiped out.

Some farmers may be able to sell their property if they can’t bankroll rebuilding and another year of crops, but others, including those that lease the land, may not recover.

Cannabis producers in Sonoma and Napa are dwarfed by growers elsewhere in the state, as is the case in the wine industry, where catastrophic damage at least a dozen major North Bay wine producers will reportedly represent less than 1% of the $34.1 billion California industry’s winemaking capacity.

Blake estimates that between 3% and 5% of the farms in Northern California have been torched, but notes that early rains and massive humidity in 2016 put a much more significant dent in the crop numbers — as much as 40% of the region’s crops were bad last year.

This year’s hot, dry summer made also means that near-perfect growing conditions had the industry on track for a bumper year that could have made up for last year’s downturn. Unfortunately, it also made the environment ripe for wildfires, which now could drive some farmers out of the business.

As for the raids on farmers and others in the industry complying with the law, that may well continue beyond the change in California law.

“It’s unrealistic to expect that everyone [in law enforcement] is going to change. I think it is going to take time for [them to] change in a realistic way,” said civil rights attorney Matt Kumin, who has years of experience defending those charged with cannabis related crimes. “Until then, it’s business as usual with many in local law enforcement and sheriffs’s departments.”