Clyde Snow

Ripple Effect 03: Getting on the Cannabis Train

by | Mar 12, 2020

Hannah Follender and Jon Clyde join the discussion to talk about Utah’s new and growing cannabis industry and the nexus with federal water projects. Hosted by Emily Lewis.



Brian Lebrecht , President of Clyde Snow & Sessions 0:02
This podcast is brought to you by the law firm of Clyde Snow and Sessions based in Salt Lake City with offices in Oregon and California. For over 65 years Clyde Snow has represented clients throughout the West. Clyde Snow: Serious About Solutions.

Emily Lewis, Host 0:24
Hello, welcome to Ripple Effect, a podcast putting water into context. I’m Emily Lewis, your host and I’m a water attorney here in Salt Lake City, Utah, practicing creative solutions to today’s and tomorrow’s water problems. Welcome to the conversation.

Okay, welcome to the third episode of Ripple Effect, a podcast putting water in context. I’m very excited for today’s podcast, we have two real smart experts here in the room with us to talk about the new Cannabis Section of the Bar here in Utah and kind of movements here in Utah on the cannabis front. And then also talk about how water fits into that. So I have Hannah Follender from Workman Nydegger, and Jon Clyde from here at our own office at Clyde Snow amd Sessions. I’m hoping today is just kind of a free ranging conversation about, kind of what the movements here in the state are on cannabis. And then some considerations that water users in the water community kind of might want to think about in terms of taking this home to their own water uses and practices. With that I was hoping that Hannah could give us a little introduction about herself, and then maybe start us off a little bit with talking about what the current status the law is here in Utah regarding cannabis. And then we move into a little bit of discussion about the new bar section.

Hannah Follender, Guest 1:57
Hi, I am Hannah Follender. I am a patent and trademark attorney here with Workman Nydegger in Salt Lake and my practice is mainly in the preparation of patent and trademark applications and trademark enforcement. And I do have quite a few cannabis clients both in the hemp space and the marijuana space right now who are pursuing IP strategies. And so the Cannabis Law Section brand new and it was really exciting. We had our first CLE last week. And the impetus to form that was really I went to the ABA. ABA had their first cannabis focused conference back in September. And I realized that there were so many different discussions going on around cannabis. And I wanted to bring that conversation back to Utah.

Emily Lewis, Guest 2:46
Right, and what kind of turnout did you have? You had a pretty good turnout, right?

Hannah Follender 2:48
Yeah, we had almost 60 attorneys show up.

Emily Lewis 2:50
That’s a really good turnout for our bar event. Very exciting.

Hannah Follender 2:55
We offered snacks somebody had actually emailed the bar before we hosted the event to say that they were upset with the wording of our event invitation. Because we said hors d’oeuvres instead of saying munchies so it was pretty good. Cue all the jokes. But at least everyone is interested.

Emily Lewis 3:14
So yeah, engagement, for sure. So now that we know that there’s a need for legal services, would you just kind of give us a little bit of background of kind of like what the federal status is on marijuana now and how that kind of fits in with like states exploring an expanded use and regulation of hemp or marijuana in their state.

Hannah Follender 3:36
Right. So right now, Cannabis, as far as marijuana is concerned, isn’t legal at the federal level. Cannabis in relation to hemp, though, is legal, due to the Farm Bill of 2018, which officially legalized hemp. But right now the USDA, I think they might have either just released guidelines or they are actually actively working towards creating guidelines for state production of hemp. So that’s okay, cannabis is no. As far as states are concerned states have one at a time. Either legalized cannabis as a medical use, or as adult recreational use with Colorado being the first recreational state in 2014.

Emily Lewis 4:21
And so can you give us a little bit of a distinction between when when people say cannabis versus marijuana versus hemp like what are we really talking about?

Hannah Follender 4:29
Right, so cannabis is that’s the actual scientific name for the plant. There’s cannabis sativa which is the hemp plant and then cannabis sativa L, which is the plant that we associate with the psychoactive effects. So getting “stoned.” We call it marijuana. The term marijuana is actually kind of a loaded term when it comes to cannabis and right now the community is trying to change that terminology and focus more on just calling it it’s as Its scientific name cannabis.

Emily Lewis 4:59
Cannabis L?

Hannah Follender 5:01
Just cannabis.

Emily Lewis 5:02

Hannah Follender 5:03
Sort of depending on who you’re talking to, in the context, kind of figure out what you’re talking about.

Emily Lewis 5:08
That’s a good sign when there’s language change.

Hannah Follender 5:12

Emily Lewis 5:12
All right. And so then how did cannabis, the parent term, and then marijuana, you know, the more illicit drug term really come to be regulated by the federal government? Like, you know, it’s been, and this is an area that’s relatively new to me, but my understanding is that, there are the wives tales of George Washington growing hemp, and it’s been part of our history for quite some time. How do we get to the point today, where it is a controlled substance?

Hannah Follender 5:37
Right, so hemp, cannabis in general came from Asia, at least 12,000 years ago, we’re not exactly sure when but it has been used over time in many different cultures as a medication. It was actually very popular as a topical use during childbirth. And it was also widely prescribed by physicians in the United States, up until the early 1900s. And the second half of the 19th century was when organic chemistry came about. And people started to realize that they could isolate compounds from plants. And they did this with opium, with coca, with willow bark, which, from that they derive salycilate, which is the base for aspirin. And they tried and tried and tried with cannabis, and they could never figure out how to actually isolate any compounds from cannabis. And if you can’t isolate a compound, then you have a really hard time patenting it. So because of that, because they couldn’t have a monopoly on the market. pharmaceutical companies actually lobbied against having cannabis as a legal substance and lobbied for prohibition. So there’s the pharmaceutical side. But then also, there’s the social side of it. And in the 1930s, Harry Anslinger, he oversaw drug enforcement in the United States.

Emily Lewis 6:59
The “U.S. Drug Czar”

Hannah Follender 7:01
Yes, and he was very, he was notoriously xenaphobic, and racist individual with some very interesting quotes. He said that cannabis or marijuana, which is how he referred to it, basically, he used the term that Mexican immigrants used to call the plant. And that way, he said that it was these immigrants and he used the term Negro. He said that these are the people who would typically use a marijuana. And that was a reason for controlling it and making it illegal.

Emily Lewis 7:40
So kind of got these conversions of kind of some xenaphobic as – the 1930s too is, you know, an era that’s deep Jim Crow. And so kind of like you’re seeing our policies reflect that as well. And then you have the convergence of kind of xenophobic policies, and then scientific advancements to really kind of get to where we are today as a controlled substance. That’s interesting.

Hannah Follender 8:02
And in 1936, that’s when Reefer Madness came out. And a lot of our policy that we still have today, is all based on Reefer Madness.

Emily Lewis 8:10
Okay, so now that we’re kind of like opening up our policies, you know, what does, – this is a new thing for Utah. You know, as you mentioned, other western states and areas have kind of been exploring an expanded use of cannabis in their state. What is the status in Utah right now? Like, what are we allowing what is happening and just with you give us like a brief little overview, that’d be very helpful.

Hannah Follender 8:33
Sure. So hemp is legal based on the Farm Bill 2018. That’s a federal bill applies across the country. So hemp is grown in Utah can be grown in Utah and people are very excited about growing hemp here in Utah.

Emily Lewis 8:48
Have we – do know of anybody who’s like switched to hemp products in the last two years? Or I guess we only have like one growing season between probably –

Hannah Follender 8:56
Right, and we’ve had so there was the Farm Bill of 2014, which did allow some hemp grows. So there might have been some that were already pre existing in Utah, but I’m sure since the Farm Bill of 2018 officially legalized hemp that there are other growers that I’m sure have popped up since then, because I mean, now you can’t drive down the street and not see CBD sold here.

Emily Lewis 9:17
Yes. On our big billboards, right.

Hannah Follender 9:20
So then on the cannabis side or medical marijuana, I’ll use that term because that is actually a policy term. So medical marijuana is legal here in Utah, and Utah is set to start dispensing March 1. So that’s coming up next week. So right now the state will open with one pharmacy. They prefer the language pharmacy to dispensary. It’s very confusing, but we just have to call them pharmacies. And by July on or after July 1 of 2020. We’re supposed to have 16 pharmacies in operation.

Emily Lewis 9:51
Wow. Okay. That’s a quite an expansion in a short period of time.

Hannah Follender 9:55
It is but we will see I mean, they’ve provided for market analysis if we don’t have enough to serve the population who needs prescriptions. And I mean, I think we’ll probably exceed that number pretty quickly.

Emily Lewis 10:09
Okay, awesome. So before we kind of turn to the water side on that, just real quickly, would you kind of tell us from a patent attorney side, like what you do and how that’s related to the cannabis industry?

Hannah Follender 10:21
Sure. So cannabis industry, it’s still it’s a new industry, there are lots of new companies, startups. And generally speaking of business 70% to 80% of the value of a company is their IP. So that’s patents, copyrights, trademarks, trade secret. And in the cannabis space, you have the patent side, which can include the plant itself to any compounds derived from the plant to your latest, greatest smoking device, or way of – favorite way of consumption. And then there’s the trademark side, which is your branding. And on the patent side, there’s no federal prohibition on filing for and receiving a patent for cannabis. You can, if you have a great way to make cocaine, you could patent that you couldn’t sell it, but you could patent it. So the real interesting issues have been on the trademark side, because trademark is based in interstate commerce. And you obviously you can’t sell cannabis between states. So there have been ways to work around it. And a lot of my job has been jumping through hoops for clients. It’s been really interesting. frustrating, but interesting and exciting one, get stuff through. But hopefully what we’re waiting on right now is some directive from the FDA, which will allow for the interstate sale of CBD.

Emily Lewis 11:45
Okay, and so right now it’s all this intrastate. And so all the CBD signs we see are going to be CBD that’s essentially produced and marketed and sold inside Utah.

Hannah Follender 11:54
Right. So and I should clarify this. So CBD is the part of the plant that’s the non psychoactive part.

Emily Lewis 12:00
And that’s CBD. Would you spell that out?

Hannah Follender 12:02

Emily Lewis 12:04
Oil, right?

Hannah Follender 12:05
Oh, no, CBD is cannabidiol

Emily Lewis 12:07

Hannah Follender 12:07
CBD is the short form of cannabidiol. And so yeah, a non psychoactive component of the cannabis plant, and use as an analgesic. General pain reliever. And it’s actually used in a drug called epidiolex. And it’s a seizure medication. And since that drug is under control of the FDA, that means the FDA can control CBD.

Emily Lewis 12:30
Oh, interesting.

Hannah Follender 12:31
So while, CBD is no longer a controlled substance, you can trademark it for that reason, it’s still a contentious issue with the FDA just for sale of something like a drug. So we’ll see how that comes down in the next couple of months, hopefully.

Emily Lewis 12:47
Great. Well, that’s a great segue into introducing one of my favorite colleagues, Jon Clyde. And so really kind of one of the reasons I wanted to have you on this podcast is, you know, a lot of what our firm represents, are kind of, you know, large water suppliers, a lot of which have some kind of federal nexus. And so it’s an area that I don’t know a lot about. And so I wanted to have Jon on to kind of talk about, like, if this becomes a more grown industry in the state, how does that really affect like water supply, and you know, kind of like our water infrastructure for providing water for this kind of niche agricultural product, knowing that it’s a little bit of a on the edges. So with that, Jon, if you want to, you know, give a brief introduction to yourself and kind of maybe talk about what your thoughts on this matter are.

Jon Clyde, Guest 13:35
Sounds good. Thanks for letting me come on the podcast. Jon Clyde, third generation water rights lawyer here. My grandfather actually started Clyde Snow back in the 60s, under a different name at that point, but it’s kind of a fun family business that I’ve been able to join into and continue on.

Emily Lewis 13:52
And now you’re here in Utah with us, more regularly.

Jon Clyde 13:55
Yes, back from Oregon. So yeah, cannabis is farming, you know, people are cultivating it. It’s basically, you know, it’s farming when you’re out there, and it requires water and it requires sunlight, all those different things. So to that extent, cannabis requires water, right permits, water rights, you have to require them with the property or separately from the property to – in order to grow them. You know, obviously, there’s differences. You know, if you’re in a city, you can get municipal. If you’re doing like an indoor hydroponic grow, you could probably get some municipal water that way.

Emily Lewis 14:31
I guess that’s a good question for Hannah, do you know if there’s a big difference between like outdoor cultivation versus indoor hydroponic facilities? Is that – do you know what kind Utah’s experimenting with?

Hannah Follender 14:42
So I know how the law stands right now, and what’s what they’re working on in this legislative session. So there was a provision in the original bill for medical cannabis that required that you had to choose between an outdoor grow and indoor grow and they removed that or restriction. And what they’re working on now is being able to allow stacking for indoor growing, just to maximize the amount of space, because I think it’s up to four acres of grow?

Trevor Nielson 15:15
I believe so, yes.

Hannah Follender 15:15
And if they’re going to use an indoor facility, they don’t want to be limited by the size of the facility, obviously.

Emily Lewis 15:21
Grow tall. Okay, that’s helpful for a water discussion – kind of like where these grows are really going to occur.

Jon Clyde 15:28
Yeah, you know, and it’s, it’s marijuana has been or cannabis has been legalized. You know, a lot of people that were illegally growing this before, typically in the Pacific Northwest, are starting to come out of the shadows and kind of comply with the systems and the water rights. And it’s not primarily a Utah issue. And I’m not sure that anyone’s really had a large cannabis growing drug bust in Utah, but at least I’m not aware of any. So anyway, we’re starting to get more people into the system. And we’re starting to get more people wondering about how do I get water for this? What do I What steps do I need to go through? Primarily, the issue is, what obstacles there are,

Emily Lewis 16:12
How much water does a cannabis grower take? Do you have an idea about the quantities we’re talking about?

Jon Clyde 16:16
Growers up in Oregon have been averaging about 3000 gallons per day for their grow, which is about half as much as alfalfa or one and a half acre feet per acre.

Emily Lewis 16:27
So potentially less water consumptive crop, than we grow here in Utah, which can help us you know, kind of maybe spread our water resources, then if farmers are looking to change to a more lucrative, you know, crop,

Jon Clyde 16:37
Exactly, my understanding is that they don’t plant them very close together, either. So when they’re actually reaching maturity, they’re quite a ways away. And so it’s, it’s not a very dense crop either on the ground. So you know, potential there. It’s definitely an emerging market. We’ve all seen that. And there’s a lot of market for these new CBD products and medical marijuana as well. We’ve helped at least one entity acquire a cultivation license, just gone through the state procurement process to get that license. And it was quite an interesting process for sure. But the thing I really wanted to talk about, and the reason why we’re kind of here is how the state legalized medical marijuana interacts with federal project facilities. And we’ll discuss that a little bit, I think as we get into this, but essentially, the problem is, cannabis is a schedule one drug. And maybe Hannah, you can explain that a little bit better what a schedule one drug is.

Hannah Follender 17:40
Schedule one drugs are drugs that are controlled by the Controlled Substance Act. They are illegal and cannot be sold in interstate commerce, cannot be produced anywhere, and they’re just across the board not allowed. So what states are doing right now by legalizing within their own states, it does not prevent the government from coming in if they want to.

Emily Lewis 18:07
The federal government?

Hannah Follender 18:08
The federal government. But they’ve stood down in the last few years and sort of let states do their own thing.

Emily Lewis 18:15
Laboratories of democracy.

Jon Clyde 18:17
Just a question about that. So it’s still illegal, but they’ve just chosen not to enforce it or not to pursue it? Is that basically what’s happening?

Hannah Follender 18:26
Yeah, so that’s what’s happening and what used to happen in Colorado, right around 2014, when they had just legalized, the DEA would come in and raid, legal grows that were state legal, but obviously not federally legal, and disrupt the whole business. So what they’ve done since then, is they’ve stopped, the government has stopped doing that. And I believe there is a protection in place where they’re actually it’s just it’s not a focus of enforcement right now. Not a priority, right. And as they see more and more states come online, whether it’s medical cannabis or recreational use we’re starting to see the tides change pretty quick. And it’s less of a priority than say, cocaine or heroin or other hard drugs.

Jon Clyde 19:10
I think what you were talking about was the Cole memorandum. That came out in 2014, I believe. And the point of that was, I think he was Deputy Attorney General James Cole, issued this memorandum out to U.S. state attorneys. And the point of it was, look, we realize states are legalizing marijuana for either recreational and medical purposes. And then they kind of went and he’s like, here’s how we want you to handle it. And he went through eight different priorities that the feds looked for with drugs and it was, I don’t know all of them off the top of my head but it was like prohibiting them getting to miners, public health and safety, gun violence, crime, and some other stuff like that. And he basically told the State Attorney’s like, use your discretion, but it’s not the best use of federal resources to go after these legal entities that are complying with the state regulatory systems that are robust have enforcement practices. And generally, if somebody is in compliance with that it’s not a great use of our resources to go after them. And then, interestingly, Jeff Sessions as the Trump administration came in, he issued another memorandum and basically rescinded that.

Emily Lewis 20:31
The anti Cole memo?

Jon Clyde 20:32
The anti Cole memo. And he said, you know, the Federal priorities are the federal priorities, we don’t need this. We don’t need something specific about marijuana or cannabis. So he rescinded that, practically, from what I’ve seen, that has had no real combat, as far as I can tell. People have continued to, you know, the US Attorney’s have continued to investigate and prosecute about the same, and drug cases are up, but marijuana cases are down is my understanding.

Emily Lewis 21:06
Make senses. I mean, these are huge economies. I mean, look at Colorado, it’s a lot of money brought in the state coffers.

Hannah Follender 21:12
Yeah, well, so I’m gonna say this wrong, because I’m from New Jersey, I say Nevada, but everybody here says Nevada. But so Nevada actually made $640 million in revenue last year from recreational marijuana sales. And then the state of Illinois that just started dispensing recreationally January 1 of this year, they made $10 million in tax revenue in one month.

Emily Lewis 21:41
Okay. So we do have robust tax discussions here in the state of Utah, maybe we should open those up a little bit about income streams.

Jon Clyde 21:50
Yeah, it’s big business. And my understanding is that a lot of the drug cartels, marijuana makes it the bulk of their finances. So that’s why it’s a big priority federally to look at these huge operations. Actually, I’ve heard that the state legalizing or decriminalizing, it has really made a huge impact on the cartels, business and black market.

Emily Lewis 22:14
Now that there’s a legal market for it kind of diminished the demand for black market.

Hannah Follender 22:18
Yeah, I think legalizing and then actually meeting the demand with the supply is what will actually take care of the drug cartels. Because in Canada, I know. So they were the second country to legalize, Uruguay was actually the first, and they were having a problem meeting the demand in Canada. And the prices were so high and the demand or the supply just wasn’t there to meet the demand that people still are going to the black market to buy their cannabis. So they’re working on fixing that problem.

Emily Lewis 22:49
Market inacuracies?

Hannah Follender 22:49
Yeah, exactly. And I think that’s something that we should be looking at as we start to shape our own cannabis economy here in Utah, or just in the US in general.

Emily Lewis 23:01
Well that brings us back to the good discussion about kind of like, of that economy, water is a key component of that, because like, I think Jon very aptly stated that, you know, cannabis is farming. And so like, one thing we are really good at here in the state is pretty robust agriculture. And so, you know, Jon, can you just kind of tell us a little bit for those who are kind of newer to this, this topic, just generally, how farms get water from federal projects and how like the federal project Nexus for agriculture in general?

Jon Clyde 23:30
Yeah. So primarily, the west was developed with the help of the federal government. Water out here, as most of us know, is not abundant. And it’s usually not where people need it. And there’s not a lot of storage. You know, we here in Utah, we primarily rely on snowpack and the runoff to fill our reservoirs every year, but those reservoirs which catch that runoff and make it usable throughout the year, were primarily built by the Bureau of Reclamation throughout the West. In fact, the Bureau of Reclamation is still the largest water distributor in the country. Almost every project, every big project in the West was funded by the Bureau of Reclamation.

Emily Lewis 24:12
And how many projects do we have here in Utah? You know, federal projects.

Jon Clyde 24:16
There’s a couple that I can think of off the top of my head, which is the Weber Basin project. And then also the Central Utah project.

Emily Lewis 24:24
We’ve got the Provo River project – Really the largest water providers here in the state are kind of the backbone of the Federal project.

Jon Clyde 24:31
Yeah. So we can talk about the Central Utah project because that’s one we’re quite familiar with. And that is a process whereby they bring, I think, about 200,000 acre feet annually from out by the Colorado River Basin out by Duchesne. And it goes down into Starvation Reservoir, Strawberry Reservoir, then it’s piped over to Jordanelle and from Jordanelle then runs down to the Wasatch Front in the mountains/canyon where it’s distributedfrom there throughout Utah Valley and Salt Lake Valley. And that’s where a very large bulk of the municipal water for the Wasatch Front comes from. So these projects were all authorized under the Reclamation Act of 1902. And the reason that’s important is that said, you can build these projects, but you have to comply with State Water Law. So reclamation builds the project, they acquire the water rights, they acquire the additional storage. And just like any other entity, they own the water, right, typically, until a title transfers occurred, which happens after the project’s been paid back. Under the Trump administration, there’s been a pretty big push to try and transfer as much title as they could.

Emily Lewis 25:49
And so can you walk us through that repayment for a second, though, like, how would they actually repay? How are the federal investment of funds and these projects are paid back to the federal government.

Jon Clyde 25:58
So as the project is developed, people will subscribe or purchased petition to purchase water. And they will do that generally at a wholesale rate with the price per acre foot and they’ll acquire the storage and annually, typically, with I think about a 3% interest, they’ll have to make payments to the federal government, usually over a 40-50 year period. Sometimes they get refinanced, interest rates go up, you have to make repairs, stuff like that. It kind of keeps the ball rolling, but you know, through bonding and or rate structure is how they generate the money to pay these back.

Emily Lewis 26:38
Yeah, it’s – the basic instruments basically a water contract that has various funding mechanisms to kind of buy the water.

Jon Clyde 26:44
Yep, that’s correct. So how this connects with cannabis, and you’re probably all wondering that maybe you are, maybe you’re not, but there’s a prohibition on use of federal funds for production of what is essentially a controlled substance under federal law, so you can’t spend money towards growing marijuana. That’s kind of the nuts and bolts of it. And that is extended to federal facilities. You can’t use a federal facility to grow marijuana, you can’t. In this case, you can’t take water from a federal project that was acquired by a federal project, if it was owned, and if the water is owned by the federal government, The Bureau of Reclamation, you cannot use that to grow marijuana. Likewise, if you have a Warren Act contract, and a Warren Act contract is a kind of bizarre contract that allows individual water users, it could be a city, it could be an individual, to borrow or buy excess capacity in a reclamation project and use those facilities to transport their own water.

Emily Lewis 27:53
So basically storing their privately held water rights in a federal facility?

Jon Clyde 27:57
Yep. or running it through a pipeline or a canal, anything like that, that was built by reclamation.

Emily Lewis 28:02
So even though those are independently owned water rights, not owned by the federal government, because they’re in the federal project, it creates a federal access

Jon Clyde 28:09
Yep, because you’re using the federal facility. So anything that runs through the federal facilities to deliver water to you or if it’s federal water alone, there’s a 2014 temporary policy memorandum. Not sure if this has been updated, but I think it’s supposed to expire in May of this year. So we’ll see what happens there. But it prohibits Bureau of Reclamation water from being used for cannabis growth. And reclamation employees, if they come across that they’re required to report it to the DOJ. And but it does not provide an enforcement mechanism, which is interesting.

Emily Lewis 28:51
So maybe that’d fall into the Cole Memo?

Jon Clyde 28:54
Yeah, I mean,

Emily Lewis 28:54
Or the Anti Cole Memo, not under, not follow up on it.

Hannah Follender 28:59
I have a question. So if there’s some sort of intermediary between where the water’s coming from, what breaks up that connection from federal water?

Jon Clyde 29:07
That’s a very good question. And one that I don’t really think has a correct answer. We sometimes when we’re talking about water rights refer to red water and blue water. Red water goes through this pipe blue water goes through that pipe. But you can’t really tell which you know, when it commingles you can’t tell which ones which. And so I’m not sure where that nexus gets separated, and how much distance between the federal project needs to occur before you’ve separated from federal water and a good example of that is down in Utah County, the Central Utah project, wholesales water to all of the cities, Saratoga Springs, Provo, Orem you name it everywhere down there. And certainly once it gets into the municipal system, It’s probably no longer federal water, but that’s where it originated. And so that’s a question that I think needs some answering as to how that gets separated out. And I’m not really quite sure where it will fall on that. I think because it doesn’t really impact those federal priorities in the Cole memo, which may or may not still apply with the Sessions memo. It’s probably not that big of a deal. I suspect there won’t be many enforcement actions over this sort of stuff from the federal standpoint. We still advise our clients say, if you’re getting federal water, don’t grow cannabis, just because we don’t want them to do that. The flip side, though, is you mentioned Hannah, that the farm bill in 2018, legalized hemp growth. So that’s essentially a cannabis plant with low THC levels, is that correct?

Hannah Follender 30:59
Right. So that’s hemp is cannabis plant with THC that’s less than 0.03% by dry weight.

Jon Clyde 31:06
Is that a federal standard? Or is that a state standard?

Hannah Follender 31:10
That’s a federal standard. It’s a hotly debated standard. Because there’s really no clear understanding. There’s not enough science out there right now. That’s the main problem with cannabis in general, because as far as the water side, we don’t really know exactly how much water we need in all these different regions to grow cannabis. And then we also don’t know the extent of the effects on medical patients, because we don’t have enough research yet. So everything related to cannabis, the primary issue is the lack of research.

Jon Clyde 31:40
Yeah. And my understanding is that that ties back to using federal funds to study a controlled substance. There’s been very limited research, at least federally funded is my understanding.

Hannah Follender 31:54
Yeah, so actually what Utah did in its amendments to HB 3001, which is the Utah cannabis medical cannabis act, they provided for research to be done at the universities here in Utah to study medical cannabis.

Emily Lewis 32:07
Based on state funding?

Hannah Follender 32:08
Right, because they do want more information. They want to know how these patients are affected by use and what guidelines they should create for qualified medical providers who are prescribing cannabis to patients.

Emily Lewis 32:20
Seems like you Utah state would be a great place to do that.

Hannah Follender 32:22
Like it’s already in the farms.

Emily Lewis 32:23
Yeah, well, and it’s like a land grant state or school with, you know, already pretty robust agricultural programs. Yeah.

Jon Clyde 32:31
It was interesting. When I was doing my research, I actually came across a letter from somebody at the US Department of Health and Human Services to Governor Herbert basically said, yeah, if you guys spend money studying cannabis, or if you run kind of the state programs, which they ended up eventually going away from. The question was, will that affect our federal funding for these? Health and Human Services basically said no, but then included all this caveat language that said, you know, federal funds can’t go to study of drugs that can’t go to this. So it was kind of interesting to see how they tried to walk that line a little bit.

Emily Lewis 33:16
Stand down gray area?

Jon Clyde 33:17

Hannah Follender 33:19
Yeah, the main one there is privatizing pharmacies, because that took the state out of the position of being the dispenser of an illegal substance and also taking money for an illegal substance. So they’re just a few levels removed from that they’re still regulating it, but they don’t actually do any plant touching or selling.

Emily Lewis 33:38
And then here in Utah, it’s gonna be a pharmacy right?

Hannah Follender 33:41
Correct. Yeah, we like the word pharmacy in Utah. We’re very medical oriented, which, I mean, their dispensary is let’s be honest, they’re not. It’s not where you’re gonna go get your other prescriptions.

Emily Lewis 33:53
Yeah. But hopefully, you won’t need them if it’s effective for you.

Jon Clyde 33:59
So yeah, kind of the last thing I wanted to talk about is, as we said, these individuals get their Bureau of Reclamation water, primarily subject to water contracts. Those always include, you can’t do anything illegal with the water, stuff like that. And so while we were talking about federal enforcement with from DOJ and this and that, there is the potential that growing cannabis violates that contract and therefore they can stop or cease water deliveries to you pursuant to the contract. So it’s important to look at your subscriber contract or your water sales contract and see what you obligated yourself to and if there’s ways around it, we don’t, certainly don’t advocate breaking the law, but you know, be aware of what you’re doing.

Hannah Follender 34:52
So when you were applying for a cultivation license for one of your clients did you have to address the water issues or talk about how much water you might need? Or how much exactly what that involves?

Jon Clyde 35:06
Um, for the person that we helped out, we actually didn’t no, it was an existing farm. So they had their existing water rights, they didn’t need to change the type of use, they didn’t need to do anything along that. They were down in Southern Utah quite a ways and so pretty isolated ranch, but they had everything they needed from the get go. But if you were looking to start this up, you would find some suitable property. And then what we typically do as a due diligence on the water rights, you’d call us up, we would examine the property, see what water it had with it if the water was a pertinent, which means kind of attached to the land. And I’m sure we’ve discussed that yet in our podcasts, but so we’d see if it was attached to the land, if not where it came from how to acquire water. And we kind of just look at the market that way and start to bring it there, we’d need to file typically a change application, if it was primarily a stock, right, or different place of views, different point of diversion, to bring it to the farm, where it was going to be used.

Emily Lewis 36:14
I think the nature of use would be irrigation. And so this, from my perspective, the state engineer doesn’t ask you what you do with your irrigation, they just give you a standard acre for duty based on alfalfa. So depending on where you are on the state will depend on how much water you get, you know, some areas, areas in the state, are four acre foot duty, some areas of state are five acre foot duty. And so with a 1.5 acre foot duty required to grow cannabis. I mean, it seems like it might be something that would be a good water-savvy crop, post alfalfa for people to explore.

Jon Clyde 36:45
Yeah, I do think they would probably apply the standardized alfalfa duty. So probably would just have an excess water. And for those of you at home, an acre foot is just what it sounds like. It’s enough water to cover an acre of ground with one foot of water. And that’s pretty typical water measurement.

Emily Lewis 37:07
Yeah. And just so you know, Hannah, and one of the big conversations in the state right now is about this duty value. And like how with, you know, growing populations and changing demand demand patterns, how are we going to provide water for future growth? And a lot of it is talking about, do we adjust this kind of standard acre foot duty to really accommodate per crop values? Or do we do it so that if you can serve water, you can market that in a separate transaction? And so those are kind of some of the hot button topics right now in the state like, how do we kind of better look at this consumptive value of the crops and how much water they actually use? And so, to me, it seems like a really interesting way to grow and potentially has some opportunities for farmers in the future to be a little more water savvy or potentially market additional water they save.

Hannah Follender 37:51
Yeah, so this is where actually, because you mentioned Oregon and taking numbers from Oregon, and their climate, I think what’s interesting, they generally have a lot more water, at least in certain parts of the state. So I’ve had I’ve heard mixed things as far as how much water it takes to grow a hemp crop or marijuana crop. And some say you can’t in an arid place like in Utah where where much drier climate, relatively speaking that you do need actually a lot more water at least in the first six weeks of growing because if you don’t have enough water, then this is going to end up with a plant that has a very low yield. So I think this comes back to the we don’t have enough research yet question because there is this debate whether it’s a more – it is being marketed as like renewable resource we have this like hemp fiber, and all these products like plastic alternatives made from hemp. But I think the water levels that it needs to grow are still being learned.

Emily Lewis 38:52
The water footprint, we’re still understanding. I think it’s a good thing for us to start looking into I mean the state is going to change in a variety of different ways. And I think that this these are the kinds of discussions that really need to be happening is like really getting some raw data about water use crops and like looking at kind of new fits for the state as we kind of move into the next century. Well, I think that might be a good way to cut us off today. But that was a great conversation and I so appreciate both of you coming in your time. And I want to just quickly again Hannah for our readers to say your name again and where you work so in case somebody wants to get in contact with you they can do that.

Hannah Follender 39:28
Sure. My name is Hannah fall under and I am at work midnight occur. We are a boutique IP firm located in Salt Lake City,

Emily Lewis 39:36
And Jon Clyde?

Jon Clyde 39:37
Jon Clyde here at Clyde Snow and Sessions. We do a lot of different stuff but we we have a fair amount of us here just primarily doing water.

Emily Lewis 39:47
Yeah water and we do have a growing cannabis section as well in our firm.

Jon Clyde 39:50
Yes, this is great.

Emily Lewis 39:52
Okay, well thank you guys so much.

Hannah Follender 39:54
Thank you.

Brian Lebrecht 37:20
Nothing said in this podcast should be taken as providing legal advice or as establishing an attorney client relationship with you or anyone else. Thank you for listening.

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