Pubdate: Sun, 13 Jan 2013
Source: Columbus Dispatch (OH)
Copyright: 2013 The Columbus Dispatch
Contact:  http://www.dispatch.com/
Details: http://www.mapinc.org/media/93
Author: Jonathan Martin, The Seattle Times

GROWING LIKE A WEED

DENVER - Inside the industrial-scale marijuana farms that dot Denver's
low-rise warehouse districts, it is perpetual summer - 78 degrees,
with moderate humidity and fields of shoulder-high plants with fat,
sticky buds swaying in the breeze.

These unmarked THC factories are easy to miss from the street, except
for the casino-style security cameras perched on each corner. But
inside the world's only fully regulated, for-profit marijuana market,
there are few secrets.

Colorado has approved 739 of these indoor farms over the past two-plus
years after vetting their owners' finances and requiring the buds be
tracked on high-definition video and bar-coded every moment from seed
to sale. Local building inspectors have signed off, and cops - city,
state and federal - can drop in at any time.

This out-in-the-open marijuana is the best glimpse of the strange new
reality coming next to Washington state.

If Washington, as expected, follows Colorado's experiment, its state
regulators will be investigating entrepreneurs' finances for links to
organized crime and keeping steady watch over leakage to the black
market - even as they allow warehouses of weed.

The challenges are immense. Washington's new marijuana law, approved
by voters in November, creates a market for social use - vastly bigger
than the medical-marijuana market regulated in Colorado. There is
nothing like it anywhere.

In Colorado, regulators had to broker a shotgun marriage between law
enforcement and marijuana dealers. Anxious state regulators wrote more
rules than they could enforce. The state is now thinning its thick
rule book, even as drug cops say Colorado-regulated marijuana has
popped up across the Midwest.

Capitalism unleashed, medical marijuana suddenly became a $200 million
industry, with retail prices - averaging about $7.50 a gram - among
the cheapest in the country.

The federal government - despite its ban on marijuana - has largely
been hands-off. Not a single big growing operation has been raided.
It's unclear how the Justice Department will react to the massive,
voter-approved expansion last fall of social-use markets in Washington
and Colorado.

Colorado Gov. John Hickenlooper, the grandson of a bootlegger, said
regulations need to address teen use while acknowledging consumers'
"huge appetite" for an increasingly potent drug.

"This is not your father's marijuana," he said.

Colorado's one-of-a-kind system arose through necessity.

In 2000, it joined Washington in allowing medical marijuana, but it
wasn't until 2009 that Denver, like Seattle, began seeing wildcat
marijuana dispensaries popping up across the city.

Then-state Sen. Chris Romer, son of a former governor, in 2010 pushed
through medical marijuana regulations envisioned to be "as strict, if
not twice as strict, as alcohol."

Five-figure licensing and application fees - plus security and
requirements that dispensaries grow most of their own product - added
up to $500,000 or more. That was intentional, Romer said.

"If you raise the bar high enough, they won't risk their $500,000 or
million-dollar investment to sell to youngsters," he said.

With a new law in place, a retired liquor regulator and onetime drug
cop, Matt Cook, was brought in to broker a five-month negotiation that
"had drug dealers on one side, law enforcement on the other, and my
staff in the middle," he said.

Cook had one primary goal: no "diversion" of marijuana spilling from
regulated grows onto street corners.

The result was a blizzard of rules: 24-7 video surveillance in farms
and dispensaries accessible to enforcement officers via the Internet;
bar codes on each plant; criminal background checks; and manifests
faxed to Cook's staff each time a pound of pot was moved.

"The process works," said Cook, who retired and is now a consultant to
the medical marijuana industry. "It sort of set the example for the
rest of the nation. This commodity won't go away. And it can be regulated."

Colorado's 2.9 percent state sales tax last year generated $5.3
million from medical marijuana sales. Cities, which can impose huge
licensing fees and extra sales taxes, have reaped far more. Dispensary
owners say they pay federal income tax, often at high rates because
their businesses do not qualify for many deductions.

With all the marijuana and money out in the open, theories abound
about why federal authorities haven't intervened. Most cite Colorado's
role as a swing state in presidential elections and the fact its own
regulators - not federal drug cops - are called to handle problem
dispensaries.

Denver Relief's growing site, in a nondescript warehouse in northeast
Denver, is a midsize operation by local standards: 2,000 plants,
13,000 square feet, 62,000 watts of power and 2,000 gallons of
filtered water a day. Building costs were $500,000, including the
site's own transformer.

Up close, flowering marijuana plants look like Frankenflowers,
genetically filtered into strains such as Romulan or Red Headed
Stranger to produce plum-sized buds dangling from spindly stalks. The
dispensary was one of the first amid the Colorado medical marijuana
land rush of 2010. More than 1,800 budding entrepreneurs, some pushing
shopping carts full of documents, lined up at Cook's office, dreaming
of getting a state license to grow or sell pot.

To get one, applicants had to waive their Fourth Amendment right to
limitations on search and seizure: regardless of state law, the
business is illegal under federal law. They also had to disclose years
of bank statements.

"I think a lot of the info they required weeded out a lot of people
who would have been bad for the industry," said Kayvan Khalatbari,
co-owner of Denver Relief.

It is a tightly competitive market, with more than 520 dispensaries
and 150 processors of cannabis-infused food statewide. The industry
leases an estimated 1 million square feet in the Denver area, with
some growing sites having as many as 10,000 plants.

Still, all this would be dwarfed by Washington's new marijuana market.
The state predicts 363,000 consumers will go through 187,000 pounds of
dry marijuana a year in Washington.

By Khalatbari's calculations, Washington would need about 1,000
growing sites the size of Denver Relief. "Wow, that's a lot of
marijuana," he said.

It is "naive" to think that any rules Washington may create will keep
that much bud from leaking into the black market, said Colorado
Attorney General John Suthers, a Republican ex-federal prosecutor.

He and other opponents say Colorado has become a bulk exporter: a
recent report documented cases of state-regulated marijuana finding
its way to 23 other states.

Recreational use will only make it worse, Suthers fears, and sends a
"terrible" message to teenagers.

"We're in a cultural collapse, in my opinion. But I'm an old fogey,"
Suthers said. "The industry would call me a drug-war dinosaur."

In theory, Colorado's Medical Marijuana Enforcement Division was to
have dozens of regulators so vigilant that every plant could be
tracked, in person and on camera, from seed to sale.

But that ambition gave way to financial reality. The agency overspent,
then had to cut staff; now there are 10 regulators for a $200 million
industry. Shipping manifests, spit from a state fax machine, have gone
unread, and more than 860 license applications still need to be vetted.

"Sometimes it feels like the division bit off more than it could chew,
truly looking over the shoulder of the licensee at every step of the
way," said Laura Harris, who took over the enforcement division a year
ago.

Her agency is now simplifying rules with input from industry leaders
such as Norton Arbelaez, an attorney who runs River Rock, one of the
largest dispensaries in the state. He said his company pays $1 million
in taxes, with top-end growers earning $100,000.

"The free market has done a good thing," said Arbelaez. "Isn't that
better than operating in the shadows? Isn't it better for the city of
Denver that revenue from medical marijuana funds the parks?"

Colorado, like Washington, is just starting work on the social-use
market. Both states plan to open retail stores in about a year.
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MAP posted-by: Jo-D