Wildfires and PG&E Outages… a Nightmare for California Cannabis Companies

Wildfires and PG&E Outages… a Nightmare for California Cannabis Companies

October holds significance for many California cannabis companies. The month is the peak of wildfire season, as well as main harvest time for cannabis plants grown outdoors. Past years’ wildfires ravaged marijuana farms, many of which never recovered or still are rebuilding. The decision by local utility company Pacific Gas and Electric (PG&E) to prevent fires by scheduling power outages for several days in October directly and indirectly impacted cannabis companies across the state.

Overview of the California Wildfires and PG&E Outages

Transmission lines operated by PG&E have been linked to wildfires that have decimated several California communities. PG&E’s power lines sparked 2018’s devastating Camp Fire, California’s deadliest fire on record. The wildfire not only killed 88 people and razed the entire town of Paradise, it destroyed more than 1.6 million acres, making Camp Fire the worst in terms of sheer scope as well. State fire officials also deemed the power company responsible for 12 of the fires that raged through California in October 2017.

In the past two years, at least 17,000 wildfires burned more than 5,000 square miles of California.

In October 2019, faced with red flag weather conditions of high winds, low humidity, and high temperatures, PG&E decided to implement what it termed “Public Safety Power Shutoffs.” The utility pulled the plug on electricity early in the month to 800,000 customers in 34 affected counties, impacting from 1.5 to 2.5 million people. At the end of the month, high-wind conditions led to outages to 973,000 customers. Businesses and homes were without electricity for up to several days.

Impact to Growers

Wildfires and power outages have wreaked havoc on many of California’s cannabis companies, which already were vulnerable thanks to the high costs of legalizing their businesses and limited availability of insurance coverage. Estimates of the impact made by the 2017 fires speculate 30 to 40 percent of the state’s marijuana growers were affected in some way, whether by the fires themselves or the smoke and toxic particles released in the air. The economic damages from the PG&E blackouts are not fully known. The so-called Emerald Triangle, the source of significant marijuana supplies, was particularly impacted by the blackouts, though; Humboldt County, for example, was the only county to completely lose power during the blackouts. 

Lost Crops

An obvious threat to cannabis comes from the direct destruction of crops lost to flames. In 2017, for example, in Sonoma County alone 30 pot farms and three pot manufacturers were destroyed. Though California’s wildfires have raged less in 2019, blazes still scorched more than 122,000 acres since the start of October. At least 58 fires have burned in 27 of the state’s 59 counties, leading to the evacuation of more than 200,000 residents during a declared state of emergency. Sonoma County, with 79 cultivator licenses, suffered the most damage, with a reported 77,758 acres burned in October. Also that month, the counties of Santa Barbara, Mendocino, and Monterey, with more than a thousand cultivator licenses among them, lost hundreds of acres each.

The loss of power to dozens of counties can have even broader ramifications. All sectors of the cannabis industry require electricity, including for lights in propagation, controlling the environments of indoor facilities, and operating HVAC and processing equipment. California’s cultivation industry uses 2.3 million megawatts of electricity annually. A power outage can destroy or damage crops at various stages of the cycle.

During October, the bulk of the outdoor crop is harvested and comes in from the field for the processing and drying stages. Cannabis farmers who harvested their crops before the first power shutoff on October 8 were more impacted. Electricity powers the circulation and exhaust fans, dehumidifiers, and HVAC necessary for ideal drying conditions. For those with freshly-cut plants in drying sheds, their crops were at risk of rotting. Fresh cannabis can develop mold after only two days of humid, static air. The quality of the harvest also can deteriorate, since cannabis’ aromatic terpenes and active cannabinoids, such as THC and CBD, begin degrading above 68 degrees.

Power outages can ruin crops grown indoors as well. Prolonged periods without indoor light stresses the plants, which can cause the plants to flower prematurely or to hermaphodite and pollinate.

Contaminated Soil and Plants

Cannabis plants may be spared the flames, but they still face potential contamination from wildfires. Airborne toxins like pesticides, ash, soot, insulation, building materials, and more can taint bud and would be either a danger to consumers or produce an inferior product:

  • Cannabis in the seed stage can be damaged by toxic ash introduced into the soil.
  • Plants in the vegetative state can be harmed if toxins impact their root systems.
  • Cannabis is in its reproductive, flowering cycle, is the most vulnerable for contamination, and smoke can coat the resinous flowers with dangerous toxins and foreign materials.
  • Bud impacted by smoke may suffer from stunted growth and cannabinoid levels.

Even if smoke-damaged plants pass toxin tests, their flavor likely will be affected and undesirable.

Impact to Manufacturers and Dispensaries

The PG&E power outages caused cannabis businesses to lose access to the California Department of Public Health’s inventory tracking system, CCTT-METRC. Foe some, operations could continue via paper as long as the database is updated within three days of regaining power. Regulations permit farmers to switch to hand-written transfer manifests, and retailers can sell with written receipts. Regulations are less clear as to whether transporters and distributors can transfer inventory during an emergency.

Less Products, Lost Productivity

Limits to cannabis crops, whether due to wildfires or power outages, affect the entire supply chain. Manufacturers have less and lower quality raw materials with which to make products. Dispensaries receive fewer products, and they lose business when consumers are dissatisfied.

Manufacturers like extract makers also suffer from power outages. The volatile chemicals they use to make cartridges and concentrates must be kept cool. Fresh-frozen cannabis products require constant minus 38-degree temperatures. Without electricity, melting results. The product can be damaged in less than 24 hours when water pools in the bags.

Future Impact

Recovery from disasters like wildfires and power outages challenges most cannabis companies, particularly due to industry-specific obstacles encountered because marijuana remains illegal at the federal level. Unlike traditional businesses, marijuana businesses and farms cannot qualify for access to FEMA relief funds or get adequate insurance to cover their losses. Most banking institutions will not fund loans to rebuild.

California’s woes extend beyond the cannabis industry as well as state borders. The state produces 58 percent of the cannabis cultivated in the United States. Losses affecting the multi-billion dollar industry are felt in other areas of the state and national economy as well.

Most California cannabis companies businesses will persevere. Those that are located in areas prone to electricity outages or wildfires are learning from the losses and better preparing their emergency responses.

November 12, 2019Comments Off

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