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NJ Cannabis Industry to Focus On Environmental Considerations Banner Image

NJ Cannabis Industry to Focus On Environmental Considerations

Month: June 2021

NJ Cannabis Industry to Focus On Environmental Considerations

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Most people don’t think of the environmental impact of cannabis, but producing cannabis products can be energy intensive and involve issues relating to water, air quality, and waste management.  In New Jersey, where the recently legalized adult-use cannabis industry has been estimated to be worth more than $2 billion annually, cannabis operations will be required to consider and address environmental impacts.  In fact, both the new law regulating the adult-use cannabis industry in the Garden State, as well as the prior laws regulating the Medical Marijuana Program, obligate prospective cannabis businesses to prepare and submit an environmental impact plan as part of the competitive licensing process.  Cannabis businesses looking to operate in New Jersey should prepare early in the planning process to focus on environmental considerations, bringing together architects, engineers, and environmental professionals to do so.  Put simply, minimizing environmental impacts will improve a prospective cannabis business’s chances of securing a license.

Governor Phil Murphy signed legislation on Feb. 22, 2021 to legalize and regulate adult-use cannabis in New Jersey.  As under New Jersey’s Medical Marijuana Program, the law requires businesses seeking to engage in the cannabis industry to obtain licenses, at least some of which will be limited in number, and awarded through a competitive process that is scored based on different aspects of the licensing application.  As part of the competitive application process, prospective cannabis businesses will need to prepare and submit an environmental impact plan, which will be scored as part of the overall application.

To date, New Jersey has provided little guidance on the proper components of environmental impact, odor mitigation, and waste disposal plans for cannabis businesses.  Additionally, although the New Jersey Department of Health (“DOH”) has published information about licensing applications submitted under the Medical Marijuana Program, we are not aware of any environmental impact plans from these prior applications that have been made public.

However, the DOH previously promulgated regulations and issued guidance regarding management of cannabis waste.  The DOH defines appropriate waste management alternatives based on whether the waste is “usable marijuana” (i.e., the dried leaves and flowers of the female marijuana plant, and any mixture or preparation thereof), “unusable marijuana” (i.e., marijuana seedlings, seeds, stems, stalks, roots, and large fan leaves), and any marijuana waste that is considered hazardous.

  • Usable marijuana must be stored in a locked area until it can be escorted by DOH staff to a permitted incinerator and destroyed.
  • Marijuana waste that is hazardous must be stored in a locked area as well and disposed of in a manner appropriate for hazardous waste pursuant to the Resource Conservation and Recovery Act.
  • Unusable marijuana may be disposed of as solid waste or by composting, provided that the marijuana is finely shred or ground, and mixed with at least 50% non-marijuana waste by volume.

While the ability to compost cannabis waste reduces the environmental impact of cannabis operations, other states, including Colorado, have improved on the foregoing requirements to further reduce the impact associated with managing cannabis waste (e.g., by relaxing the 50% mixing rule).  It is important to note that the New Jersey Cannabis Regulatory Commission will promulgate regulations to govern the adult-use cannabis industry, and the Commission may promulgate regulations that differ from the foregoing DOH regulations and guidance.

Prospective cannabis businesses also may look for guidance on environmental impacts to the National Cannabis Industry Association, which issued a report in October 2020 titled “Environmental Sustainability in the Cannabis Industry: Impacts Best Management Practices and Policy Considerations.”  This comprehensive document details the potential environmental impacts of the cannabis industry and presents best practices to mitigate these impacts.  As is summarized in the “key takeaways” of the guidance: “Optimizing all resource usage in the cannabis industry will simultaneously reduce environmental impacts and increase profit margins while maintaining product quality.”  Obviously, growing and manufacturing operations will have the greatest potential for environmental impact, and, therefore, for reducing such impact, but retail and other operations still have an opportunity to develop business plans that further sustainability and climate change efforts.  For instance, retail operations should focus on properly managing packaging and paper waste to the maximum extent practicable.

In any event, cannabis businesses in New Jersey will be required to comply with applicable environmental laws and legal requirements relating to air quality, water usage and quality, and waste management.  As noted above, minimizing environmental impacts also will improve a prospective cannabis business’s chances of securing a license.  Consequently, prospective businesses are encouraged early in the planning process to consult with appropriate professionals to evaluate and minimize environmental impacts.

For more information, please contact any attorney in our Environmental Practice Group.

Changes to New Jersey Provider Immunity After the End of the Public Health Emergency

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, or Labinot Alexander Berlajolli.

On June 4, 2021, Governor Murphy signed A5820 into law, ending the COVID‑19 public health emergency.  Immediately after signing the legislation, Governor Murphy issued Executive Order No. 244, officially lifting the COVID‑19 public health emergency in New Jersey that has been in place since March 9, 2020.

The new law provides that all executive orders issued in response to the public health emergency shall expire 30 days following the effective date of the law, i.e., July 4, 2021.   The law, however, keeps 14 executive orders issued during the pandemic in place until January 1, 2022, with the option for Governor Murphy to modify or rescind them prior to that date.  One of those executive orders is Executive Order No. 112, which, among other things, granted temporary licenses and civil and criminal immunity to healthcare providers in connection with the COVID-19 response.

Importantly, however, the law modified Executive Order No. 112 in two significant manners.   First, the law states that the civil and criminal immunity provided to healthcare providers under Executive Order No. 112 and the Department of Health (“DOH”) Executive Directive No. 20‑006 will expire on September 1, 2021 – not January 1, 2022.  Second, civil immunity will continue beyond September 1, 2021 only for healthcare professionals for vaccinations or testing related to COVID-19.  The remaining aspects of Executive Order No. 112 that addresses temporary licenses, etc., will remain in place until January 1, 2022.

In addition, Executive Order No. 111, which directed that healthcare facilities must report data concerning capacity and supplies on a daily basis, is among the orders that remains in effect until January 1, 2022.

Just as important, with certain exceptions, any administrative orders, directives, or waivers issued by a State agency that relied on the existence of the public health emergency, including the DOH, are extended until January 11, 2022, but such orders, directives or waivers may be revoked or modified at the discretion of the State agency.  If necessary, the Governor may seek a further 90‑day extension of such orders, directives, or waivers as long as the Governor’s request is approved by the State Senate and Assembly.

Court Rules That HHS Must Recalculate Hospitals’ Medicare Pay for Training Physicians

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, or Labinot Alexander Berlajolli.

Following a recent federal court ruling, hospitals can expect an increase in Medicare reimbursements for training physicians in their residency programs.

In Milton S. Hershey Medical Center v. Becerra, No. 19-2680, the United States District Court for the District of Columbia (the “DDC”) ruled that the Department of Health and Human Services (“HHS”) unlawfully changed the statutorily‑assigned weighting factors used to calculate reimbursements to hospitals for resident stipends, supervisory physician salaries, and administrative costs related to training residents and fellows. These reimbursements, known as direct graduate medical education (“DGME”) payments, are, in part, determined by the weighted average number of full-time equivalent (“FTE”) residents employed by the hospital.

The challenged regulation was originally promulgated in 1997 and operates to reduce the weighted number of FTEs a hospital may claim for reimbursement when that hospital’s unweighted FTE count exceeds the number of FTE residents for the hospital’s most recent cost reporting period ending on or before December 31, 1996 (the “1996 cap”). In other words, when a hospital exceeds the 1996 cap, its weighted FTE count is reduced commensurate with the amount by which the hospital exceeds the cap.

The DDC held that “the text of the statute does not give the Secretary [of HHS] the latitude to decide, under these conditions, to change the weights that Congress assigned to residents and fellows when he calculates the FTE residents for each hospital.” Accordingly, the DDC remanded the matter to HHS to recalculate Plaintiffs’ reimbursement payments consistent with the Court’s opinion.

New ADT Guidance from CMS, and Other Federal Updates

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, or Labinot Alexander Berlajolli.

CMS Issues New Guidance on ADT Notifications

Centers for Medicare & Medicaid Services (“CMS”) recently released guidance for hospitals outlining the new requirements for admission, discharge, and transfer (“ADT”) electronic patient event notifications. These requirements originally stemmed from the Interoperability and Patient Access Final Rule published on May 1, 2020, and require healthcare providers to send electronic patient event notifications of a patient’s admission, discharge, and/or transfer to another healthcare facility or to another community provider or practitioner. These requirements are intended to improve care coordination by allowing a receiving provider, facility, or practitioner to reach out to the patient and deliver appropriate follow-up care in a timely manner.

The new guidance can be found here.

CMS Increases Medicare Payments for COVID-19 Treatment

As part of the ongoing response to address the COVID‑19 pandemic, CMS has increased the Medicare payment rate for administering monoclonal antibodies to treat beneficiaries with COVID‑19.  Beneficiaries will pay nothing out of pocket, regardless of where the service is furnished – including in a physician’s office, healthcare facility, or at home.

Effective May 6, 2021, the national average payment rate will increase from $310 to $450 for most healthcare settings. In support of providers’ efforts to prevent the spread of COVID‑19, CMS will also establish a higher national payment rate of $750 when monoclonal antibodies are administered in the beneficiary’s home, including the beneficiary’s permanent residence or temporary lodging (e.g., hotel/motel, cruise ship, hostel, or homeless shelter).

HHS Retracts Mobile Health Apps Notice

A notice first published by the Department of Health and Human Services (“HHS”) on January 15, 2021, proposing to exempt certain mobile health devices from agency regulation, has since been retracted by HHS following pushback from FDA. FDA has argued that HHS failed to consult with, involve, or even notify FDA before issuing the notice this past January. Upon further review, HHS and the FDA determined the notice was published without scientific support, contained errors and ambiguities, and was overall flawed. The notice has since been retracted in full.

President Biden Signs Cybersecurity Executive Order

President Biden recently issued an executive order aimed at improving cybersecurity of the federal government and developing a concrete cyber incident response plan, with assistance from the private sector. The 18-page executive order does not set forth specific requirements, but rather sets deadlines for named agencies to develop requirements, standards, or guidelines on specific cybersecurity areas. The administration had been planning the order to address a cyberespionage campaign stemming from an attack on software provider Solarwinds Corp. that compromised networks of at least nine federal agencies, including the U.S. Department of Homeland Security. But cybersecurity vulnerabilities at U.S. critical infrastructure systems were underscored again when a ransomware attack caused a temporary shutdown at Colonial Pipeline Co., which ferries nearly half of the East Coast's supply of diesel, gasoline, and jet fuel from Texas to northern New Jersey.

The executive order will require technology providers that do business with the government to tell authorities about data breaches that could pose a danger to federal networks.  Biden also announced the formation of a Cybersecurity Safety Review Board that will analyze how major breaches unfold, similar to the way that the National Transportation Safety Board issues reports after airplane crashes. Further, a government contractor that provides software or services would be required to report cyber incidents to the relevant federal agencies based upon a sliding scale of risk assessment, with the highest risk requiring notice within 3 days of discovery. The order includes several other topics, including modernizing federal government cybersecurity, standardizing the federal government’s playbook for responding to cybersecurity vulnerabilities and incidents, improving detection of cybersecurity vulnerabilities and incidents on federal government networks, and improving the federal government’s investigative and remediation capabilities. The agencies charged with rulemaking will have to act quickly to meet near‑term deadlines and flesh out the specific requirements and details to achieve the policy directives.

New Jersey Appellate Division Finds Lack of Endorsement Does Not Prevent Valid Transfer and Negotiation of an Electronically Deposited Check

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In a decision approved for publication, New Jersey’s Appellate Division recently affirmed the dismissal of an enforcement action against an issuer of a dishonored check, finding that the lack of endorsement on the electronically deposited check did not prevent the valid transfer and negotiation of the check. See Triffin v. SHS Grp., LLC, 466 N.J. Super. 460 (App. Div. 2021). In the case, a hair styling school issued a check to one of its students in the amount of $1,431. That same day, the check was redeemed twice, once via electronic deposit in the student’s bank account and once at United Check Cashing, a check cashing business. The student electronically deposited the check by taking pictures of the check through an application on her cell phone. However, the check was not endorsed at the time it was electronically deposited. When cashed at the United Check Cashing, the check was endorsed, stamped and relinquished. Five days later, the check was dishonored when presented to a bank for payment and returned to United Check Cashing as a “Duplicate Presentment.” United Check Cashing then sold the dishonored check through an assignment agreement to plaintiff, who subsequently brought an enforcement action against the school and the student. The trial court dismissed plaintiff's claim, finding that the check had been electronically deposited and paid by defendants’ bank before the physical copy of the check was presented to United Check Cashing for payment. Relying on N.J.S.A. 12A:3-414(c), which discharges a drawer’s obligation to pay a check that had been accepted by a bank, the trial court also denied plaintiff’s motion for reconsideration.

On appeal, the Appellate Division affirmed the dismissal and denial of reconsideration. First, the Court noted that although endorsement is a prerequisite to negotiation of an instrument in most instances, N.J.S.A. 12A:4-205 permits a customer of a depository bank to transfer a draft without a prior endorsement. Further, commentary to N.J.S.A. 12A:4-205 explains that “‘[w]hether [a depository bank] supplies the customer’s endorsement is immaterial.’” Here, the student was a customer of the depository bank. Thus, the Court found that when the student electronically deposited the check into her account, valid transfer and negotiation of the instrument occurred. Second, the Court found that copies of the check provided by each party conclusively demonstrated that the check was electronically deposited and endorsed by the bank before it was cashed at the check cashing business. The Court noted that the presence of the additional markings such as the student’s endorsement and United Check Cashing’s dated stamp on plaintiff’s copy of the check indicated that it had been electronically deposited first. Further, the markings on the check, as well as the school’s bank statement showing $1,431 deducted from its account, clearly demonstrated that the check was processed and paid as a result of the electronic deposit. Given the foregoing, the Court affirmed the dismissal and denial of reconsideration.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Andrew Raimondi at araimondi@riker.com.

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