Like many in the industry, editors from Cannabis Business Times stayed up until the early hours of Nov. 4 watching the 2020 election returns roll in and reporting the results as they were called, focusing primarily on the five states with cannabis legalization measures on the ballot. We constantly refreshed pages, discovering voters passed every cannabis initiative presented to them, celebrating each win as we witnessed history together.

In 2016, voters in eight of nine states with cannabis legalization on the ballot approved the measures. That year, California, Maine, Massachusetts and Nevada legalized adult-use cannabis—Arizona was the only state not to pass its initiative, which would have regulated cannabis like alcohol.

It was a big night for cannabis, but one that maybe was not as surprising, as traditional polling showed voters in blue states more willing to support legalization than those in red.

This year, the results were different. Voters in states both bright red and blue showed their willingness to usher in adult-use cannabis legalization in an election that was defined by close calls—except when it came to ending prohibition.

With blue New Jersey, battleground Arizona and red Montana and South Dakota passing adult-use measures, 15 states currently or are poised to regulate adult-use cannabis sales. Three dozen have approved cannabis for medical use. According to a recent Gallup poll, seven in 10 Americans support legalizing cannabis use and possession.

The potential of a new industry to help boost fledgling state economies while the world continues to wrestle control over the COVID-19 pandemic cannot be overlooked. Many predict New Jersey’s legalization could encourage already cannabis-friendly leaders in New York and Pennsylvania to write adult-use bills for state legislatures to consider and pass.

“I think the Northeast, with New York, Connecticut, Maryland [and] Pennsylvania, … [has] good prospects for moving forward as early as next year,” Steve Fox, counsel at Vicente Sederberg and managing partner of the firm’s policy and public affairs consulting affiliate VSS Strategies, told CBT.

You can read our election coverage, including key U.S. House, Senate and gubernatorial results that could impact the industry, here.

In post-election interviews, industry advocates and policy experts shared their excitement and repeated the mantra we’ve all embraced but seems closer now: If and when. If, and when, cannabis is legalized at the federal level.

Consumer research and market intelligence firm BDSA predicts federal legalization could be within reach by 2022.

And, just days after the election, the U.S. House announced it was planning a floor vote in December on the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, which would federally decriminalize cannabis by removing it from the Controlled Substances Act.

The MORE Act has been stalled in the House for more than year. Perhaps the result of this election will inspire more legislatures to advance the bill through Congress now that their constituents have shown bipartisan support.

U.S. voters have shown their willingness to end ineffective drug laws that imprisoned people while failing to stop the illicit market and prevented people from benefiting from and researching its medical potential. If and when the federal question comes before lawmakers, hopefully they will follow the lead of the voters they serve and end prohibition once and for all.

COVID-19’s Impact on Legal Cannabis

Demand from adult-use consumers and registered patients surged to unprecedented levels during the pandemic. Sales rose rapidly in almost every state market—from established adult-use programs like Colorado and Oregon to medical-only Arizona and Oklahoma—in the spring and early summer. Monthly sales have leveled off as of late summer and autumn but remain significantly elevated compared to pre-COVID.

Elevated demand has persisted even after enhanced unemployment payments through the Coronavirus Aid, Relief, and Economic Security (CARES) Act expired in July. With strong sales continuing despite record unemployment, economic uncertainty, and little relief from the federal government, it appears that COVID-19 has revealed cannabis to be a recession-proof commodity, along the lines of alcohol.

Strained and Uncertain Supply

In states with more mature legal markets, such as Colorado and Oregon, production capacity had largely stabilized beginning in 2019. Prices in both states, which had already recovered last year, saw increases this year as existing production capacity was strained by record-breaking sales.

In states with new and younger adult-use markets—namely, Massachusetts, Michigan and Illinois—cultivators were already struggling to build out production capacity to meet demand. The unprecedented demand that manifested during the pandemic combined with the usual strain on supply that occurs in new markets has pushed wholesale prices in those states to very high levels. In Illinois, for example, the Spot Index has approached $4,000 per pound on numerous occasions this year.

The usual injection of new supply from the autumn harvest is uncertain this year due to the devastating wildfires on the West Coast, some of which burned near prime outdoor cultivation regions such as California’s Emerald Triangle and Southern Oregon. The possibility of a smaller-than-usual harvest, with crops lost or damaged from the fires, smoke, high winds, power outages, evacuations, and other factors, has exerted upward pressure on wholesale prices in some of the country’s largest legal markets.

Despite the tragic events that have characterized 2020, there are silver linings for the legal cannabis industry. Licensed cannabis businesses have been designated as essential in nearly every state. They have used their experiences operating in an industry that was already heavily regulated and uncertain to successfully meet myriad public health requirements necessitated by the pandemic. And, even though supplies have been tested and prices have been on the upswing this year, shelves are not bare and young legal cannabis supply chains have continued to function even as more established businesses and industries have been challenged.

Adam Koh is editorial director for Cannabis Benchmarks and Hemp Benchmarks.

In the November election, voters in five states overwhelmingly approved establishing new cannabis regulatory regimes. With adult-use markets now imminent in Arizona, New Jersey, Montana and South Dakota, and medical markets on tap in Mississippi and South Dakota, potentially hundreds if not thousands of new cannabis businesses will be powering up their operations.

Businesses in each state will be entering unique regulatory environments and will need to stay aware of constantly evolving rules, including those that limit the cannabis industry’s energy and environmental impacts. While only a few states have specific provisions for cannabis businesses, it is a given that every legal cannabis company will have to abide by existing rules for all businesses while also possibly having to adapt to new ones.

While the prospect of additional regulations is sure to give many new business owners heartburn, there are ways you can prepare your operation to meet compliance standards and position your business for success.

TIP 1: Understand Your State’s Policymaking Context

States adopt regulations that comport with existing statewide goals, and it is helpful to have this context in mind as your state embarks on new rulemaking for the cannabis industry. Massachusetts officials, for example, seek to reduce the energy usage of cannabis cultivation as a direct response to its pre-existing statutory obligation to reduce economy-wide carbon emissions. Make sure key people on your team understand the regulatory environment and are able to weigh in as appropriate. If you are a member of your state’s cannabis industry association, be sure those representing you are plugged in. At the very least, familiarize yourself with the legislation to know what types of regulations to expect.

TIP 2: Engage Your Regulators

As we have seen in Massachusetts and Illinois, many cannabis businesses in states that first promulgated energy and environmental regulations were caught unprepared because they had not engaged in the process closely enough. For example, with very little industry input, Illinois enacted aggressive, yet somewhat perplexing, energy regulations, such as by calling out mini-split heat pumps as a preferred HVAC technology, even when that approach as a horticultural HVAC solution is unproven. Proactive engagement in the legislative and regulatory process would have given operators an opportunity to help shape those regulations.

California, in developing its updated indoor horticulture building energy codes that go into effect in 2023, has openly engaged stakeholders since July 2019.

As additional states start regulating cannabis marketplaces, regulators at both the state and local levels will probably be looking for input, and they need to hear perspectives from experts in the field.

TIP 3: Prepare Yourself

Energy regulations often contain jargon and an alphabet soup of acronyms that may not be part of cannabis cultivators’ everyday vocabulary: ASHRAE, IECC, LPD, QPL, MWh, RPS, Btu and PPE are just a few examples. Take time to understand these terms and how related regulations will affect your operation. Allocate bandwidth for your staff to study the rules, hire experts who have experience applying them to cannabis businesses, or better yet, do both. (Be aware that HVAC contractors and lighting engineers may not have the specific state-by-state expertise to provide overall energy guidance.)

TIP4: Stay Nimble

Keep an eye out for changes to regulations that may force you to adjust your assumptions. For example, in Massachusetts, regulators published a “frequently asked questions” document that included previously unpublished, re-defined essential terms necessary to comply with the state’s indoor horticultural lighting code. Many operators missed the changes, and now find themselves scrambling to meet the “clarified” code after they made decisions based on their prior interpretations of the rules.

TIP 5: Seize the Opportunity

Many existing energy regulations are designed to encourage cultivators to be thoughtful about their energy use and resource efficiency, and not necessarily force mandates upon them. For example, Massachusetts requires licensees to show in their applications that they are at least considering energy efficiency, energy demand reduction, and renewable energy opportunities. Some jurisdictions in Michigan require cultivators to share sustainability plans that demonstrate an understanding of their energy and environmental footprint.

Take advantage of these nudges. Because energy expenses can be up to half of a cultivator’s costs, it makes sense to seriously contemplate the benefits of available energy-savings opportunities. At the very least, your electric utility provider will probably offer rebates to purchase and install more efficient equipment. At best, by pursuing higher overall electric facility/equipment and electric production efficiencies, you will likely get better production with less energy input, saving you money.

Regardless whether your company prioritizes energy efficiencies, it will be subject to energy regulations one way or another. Treat these environmental regulations, and the prospect of future ones, as vital to your business, just like any other mandate where compliance is essential to your survival.

Sam Milton is principal of Climate Resources Group (CRG), a consulting firm with a focus on helping businesses on their journey of becoming smart energy consumers.

^ DC Holistic Wellness owner Norbert Pickett told Washington, D.C.’s NPR station (WAMU) and the DCist, a local media outlet, of how he encouraged and supported his employees unionizing. DC Holistic Wellness’ 13 employees are now represented by United Food & Commercial Workers (UFCW) Local 400 and have five-year contracts with their employer. Source: WAMU/DCist

^ Steve Hawkins, executive director of the Marijuana Policy Project, commented in a press release about the clean sweep all cannabis ballot measures achieved on election night. Voters in Arizona, Montana, New Jersey and South Dakota approved adult-use legalization, and Mississippi and South Dakota voters approved establishing the states’ first medical cannabis systems. Source: MPP

^ Megan Souza, owner of Megan’s Organic Market, spoke to San Luis Obispo, Calif., NBC affiliate KSBY in response to a San Luis Obispo County Superior Court judge’s ruling that billboards advertising dispensaries and cannabis products are illegal under California’s Prop. 64, the adult-use legalization measure passed in 2016. However, “cannabis can be advertised along highways that don’t cross state borders,” according to the article. Source: KSBY