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 10,000 kWh of energy to power a residence in the United States for one year. Recent reports show that the cannabis industry is having a significant impact on the use of electricity in states that have legalized it for medical and/or adult use. In 2015, various reports concluded that cannabis growers accounted for approximately 1.7% of the United States’ total electricity usage, a cost of upwards of $6 billion. The vast majority of states that have legalized cannabis cultivation, for medical and/or adult use, 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 that have legalized medical and/or adult use 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 for medical use, 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 such requirement.

Although New Jersey has not yet weighed in on the energy use issues associated with the emerging cannabis industry, it is imperative that growers (and those that are contemplating growing operations) consider the impacts of their operations regarding electricity use in order to be prepared for any future regulations and/or taxes that might negatively affect their operations and profitability.

Upon assuming office earlier this year, New Jersey Governor Phil Murphy emphasized his intention to legalize marijuana for adult use throughout the State as a priority item. To that end, the State of New Jersey has already taken visible steps toward legalization, namely through the recent introduction of proposed legislation in both the State Senate and Assembly.

Senate Bill 830 and Assembly Bill 1348 (collectively, the “NJ Bill”) propose  legalizing the possession of small amounts of marijuana for personal use for persons age 21 and over, and set forth a licensing scheme intended to facilitate the manufacturing, production and distribution of marijuana across the State. The NJ Bill would establish the Division of Marijuana Enforcement, a governmental agency vested with broad oversight and implementation authority pertaining to enforcement, licensing and general regulation. The regulations to be promulgated to facilitate implementation of the NJ Bill set forth, among other things, a proposed sales/transfer taxation scheme, in addition to regulations regarding advertising and marketing of marijuana products.

Introduction of the NJ Bill comes almost concurrently with the introduction of similar federal bills, Senate Bill 1689 and House Bill 4815, sponsored notably by Senator Cory Booker of New Jersey and co-sponsored by Senator Kirsten Gillibrand of New York. The push for legalization also comes amidst policy change at the federal level, following U.S. Attorney Jeff Sessions’s decision to overturn the Obama administration’s “Cole Memo” and issue a new memo, once again placing state-compliant marijuana-related businesses at risk of federal prosecution under the Controlled Substances Act.

Despite being a priority item for Governor Murphy, the legalization movement has encountered some skepticism and resistance. According to a survey recently conducted by NJ Cannabis Insider, the NJ Bill would fail in the State Senate if a vote were conducted today – with only 5 of the 40 senators polled committing to an affirmative vote in favor of the proposed legislation. Another 20 members indicated that they would vote against the NJ Bill, while 15 were either undecided or did not respond. Several New Jersey municipalities have also joined in the opposition, preemptively passing measures and/or resolving to oppose marijuana legalization and the institution of cannabis business enterprises within their bounds. Such locations include Middleton Township, Wall Township, Toms River and Seaside Heights.

While the NJ Bill remains pending, Governor Murphy has taken interim steps toward legalization, calling for a 60-day review of the State’s current medical marijuana program, potentially resulting in large-scale reforms to the program aimed at expanding access and loosening restrictions on both prescribers and users. These anticipated reforms, together with the proposed legislation, present a unique opportunity for entrepreneurs and investors to get in on the ground floor of what appears to be a rapidly emerging market sector.