A Cannabis Landlord in East Oakland Seeks to Overturn Order to Shut Down Diesel Generators

Updated 3 p.m. Friday

Regional air regulators are locked in a court dispute with an Oakland cannabis landlord that has been running massive diesel generators without permits for nearly two years.

The Bay Area Air Quality Management District (BAAQMD) filed an injunction request late Thursday in Alameda County Superior Court seeking enforcement of an abatement order issued against Denver-based firm Green Sage last week by the agency's independent hearing board.

In addition to seeking an injunction against Green Sage, the district is seeking penalties of up to $175,000 a day for continued violations of the abatement order and state air pollution laws. The district's legal action also targets cannabis growers in the Green Sage complex.

The district's action came hours after Green Sage asked the court to block the abatement order.

The company argued the generators are necessary because existing PG&E power supplies are insufficient to power cannabis growth at its properties and claims that pot worth millions of dollars will be lost if they're turned off.

The air district hearing board issued its formal order last week directing Green Sage to immediately cease operating generators at its two San Leandro Street buildings until it gets air district permits.

The air district had already indicated that Green Sage was likely ineligible for such permits. That's because the firm has used the diesel generators as the primary source of power for nearly two years in violation of air district rules.

Green Sage began leasing generators to provide power for cannabis tenants beginning in October 2020. At one point, an expert for the air district found, the firm had a dozen generators running simultaneously, producing 11.1 megawatts of electricity – enough to power about 9,000 California homes.

Green Sage residential tenants first complained to the air district about the generators last September, saying they're beyond frustrated with the engines' continued around-the-clock operation.

In a letter to the air district joined by environmental advocates and community supporters, they said they were disillusioned with the district's hearing process and demanded immediate enforcement of its order.

"We placed faith in this system and were extremely patient," the joint letter from residents, the Center for Environmental Health and the Environmental Democracy Project said. "We’ve spent hundreds of hours on the board’s abatement process because Green Sage’s conduct is so obviously at odds with the district’s regulations. After all that investment of our time, it seems that we were misled into believing that the district would actually shut the generators down."

The letter complained that "Green Sage has been afforded every opportunity to appeal, delay, and ignore the law without consequence."

In response, the air district issued a statement calling Green Sage's continued generator use "alarming and unacceptable." The district said it "will deploy all our available tools and work with other enforcement agencies to hold Green Sage accountable and shut down these generators, which are a threat to air quality and public health in the surrounding community."

The air district's hearing board process gives Green Sage 30 days to appeal last week's abatement order. The company would also need to seek a separate court order to delay enforcement of the air district's shutdown decree.

Green Sage, which has failed to comply with at least three other city and air district violation notices related to the diesel generators since late last year, did not respond to questions this week about whether it will contest the abatement order. Prior to filing Thursday's injunction request, air district officials said they had not received notice that Green Sage would appeal.

Testifying before the hearing board on July 12, Green Sage Managing Director Ken Greer argued the generators are necessary to preserve cannabis crops worth millions of dollars.

Greer also said that PG&E power upgrades will be complete for one of the two Green Sage buildings by the end of September and asked the board to hold off on an abatement order until that work is complete. 

But he maintained that even with the PG&E upgrade in place, more power will be needed to keep cannabis operations running. He said that could be supplied by a company he's formed, New Grass Power, which would generate electricity using natural gas turbines fueled by methane from dairy waste. 

"We're desperately trying to get off the diesel generators," Greer told the hearing board. "We can't afford them. We don't want them. But we have no other alternative." 

Evidence produced during the hearing board's three sessions showed Green Sage began relying on generators as an ongoing source of supplemental power nearly two years ago, and a January 2022 court filing by Greer indicated that supplying diesel generators for cannabis operations had become Green Sage's standard operating procedure. 

The city of Oakland issued notices of violation last December and again in April warning Green Sage that the unpermitted generators must be shut down. The April notice is under appeal, and the generators continued to run. 

The air district issued its own notice of violation in February because the generators had been set up and operated without district permits. After Green Sage filed only incomplete permit applications, the district issued a formal "accusation" in April charging Green Sage with violating generator regulations. 

That accusation led to the hearing board, which met for three days to consider the case, and its subsequent abatement order. 

Tanya Boyce, a longtime East Oakland resident, former city of Oakland planner and executive director of the Environmental Democracy Project, which is suing Green Sage, said this week she's infuriated that the enforcement process has taken so long and produced such a lack of results. 

"This is total and complete fuckery," Boyce said.

In her hearing board appearance earlier this month, Boyce testified about recently produced city data that show the neighborhoods most likely to be affected by fallout from Green Sage's generators are also those that already suffer Oakland's highest levels of air pollution.

She says she sees a connection to fallout from another crisis.

"This ultra-deference for the environmental criminal is absolutely insulting to Black and brown communities that have been completely devastated by the war on drugs," Boyce said. "I know a lot of street drug dealers. Imagine how different the world would be if they were given the same respect as Green Sage. Imagine if crack dealers went through such an administrative process with the right to appeal before they stopped selling crack."

Green Sage acquired its two East Oakland properties — The Tinnery, at 5601 San Leandro St., and The Cannery, at 5733 San Leandro St., a historic live/work building — in 2016 and 2017. 

The firm attracted investors with a vision of converting the two 1930-era buildings into one of California's largest cannabis production facilities. But the project has run into a long series of legal disputes and financial and infrastructural problems. 

Over the past 4 1/2 years, Green Sage has been sued nearly two dozen times in California, Colorado, Virginia and Nevada. Those suits include complaints filed by investors, a former business partner, contractors, a generator rental firm, cannabis tenants and The Cannery's current and former residents. The most recent actions were filed over the past month by environmental groups and tenants alleging the company has violated the federal Clean Air Act and California's Proposition 65 toxics law. 

Green Sage defaulted on its $54.5 million mortgage last year and faces a possible foreclosure auction on Aug. 3.