Pubdate: Fri, 06 Dec 2013
Source: Capital Press (OR)
Copyright: 2013 Capital Press Agriculture Weekly
Contact:  http://www.capitalpress.com/
Details: http://www.mapinc.org/media/834
Author: Steve Brown

POT ATTRACTS DIFFERENT KINDS OF FARMERS

Despite the risks involved, hundreds of people are eager to step into
Washington state's new recreational marijuana industry. Potential
profits are high, but pot's federal status remains unchanged: It's
illegal under the Controlled Substances Act.

Seattle businessman Brandon Milton has no experience as a farmer, but
he figures he can make millions of dollars growing marijuana.

Small farmer Nicholas Pouch has been growing medical marijuana for
years, and the possibility of growing recreational marijuana stirs his
passion for what he sees as a "beneficial product."

Marijuana has been grown illegally across the U.S. Now that Washington
state and Colorado have legalized the recreational use of pot, growing
it legally is a brand-new prospect, both for entrepreneurs like Milton
and farmers like Pouch.

Call it agri-juana or mari-culture, growing marijuana is becoming part
of the American farming landscape. Growers see before them a crop that
is both high value and high risk. At one end of the spectrum, they
could net millions of dollars an acre. At the other, they could lose
their entire investment. Despite pot being legal in Washington and
Colorado, it's still illegal under the federal Controlled Substances
Act.

On Aug. 29, U.S. Attorney General Eric Holder called Washington Gov.
Jay Inslee and Colorado Gov. John Hickenlooper to outline the federal
government's stance on legalized marijuana. Holder listed the federal
government's priorities that in Washington have been addressed by the
state's Liquor Control Board, which has jurisdiction over the new
industry. Holder insisted the states keep pot away from minors,
prevent criminals from selling it, prevent it from going to other
states, prevent driving under its influence and prevent growing pot on
public land and possessing it on federal property.

Holder's statement does not change federal law, nor does
voter-approved Initiative 502 pre-empt it. In fact, the department
reserved its right to challenge the state laws at a later time.
Washington residents involved in marijuana production or retailing
could also be subject to prosecution if the federal government changes
its position, for example, under a new president's administration. One
of the enforcement options available to federal authorities is the
confiscation of assets.

"I'm not blind to that risk," said Milton, who hopes to grow marijuana
on a large scale near the small town of Vader, in southwestern
Washington. "But there's a movement underway to add places making it
legal, like Oregon and Alaska and Portland, Maine."

The will of the people is moving toward more legalization, he said,
and he believes it's unlikely a new administration would take a
different path.

When the Liquor Control Board held public hearings across Washington,
project implementation director Randy Simmons said he heard similar
words of optimism.

"I don't think they have a lot to fear. There's the possibility of a
change in federal approach, but other states have medical marijuana
and are moving to legalize recreational," Simmons said. "It's a
once-the-genie's-out-of-the-bottle mentality."

How permits work

Washington's new marijuana industry is open to anyone who has lived in
the state at least three months, passes a background check and raises
money within the state.

The state began accepting applications Nov. 18, and within a week the
Liquor Control Board had received more than 400 applications to grow
pot, more than 250 to process it and more than 150 to retail it. No
specific number has been set on how many permits will be issued, but
retail permits will take into account the local population and safety
and security issues. The application period ends Dec. 19.

Permits will be issued starting in February or March, Liquor Control
Board spokesman Brian Smith said, with priority given to producers and
processors so a crop can be ready for retail sales in late spring.

Costs include a $250 application fee, a $1,000 annual renewal fee and
additional fees for a background check and filing for a local business
license.

Licenses will be granted for three sizes of growing
operations:

* Tier 1: Less than 2,000 square feet.

* Tier 2: 2,000-10,000 square feet.

* Tier 3: 10,000-30,000 square feet.

The maximum amount of space for marijuana production in the state is
limited to 2 million square feet, or 46 acres - about one-quarter the
size of the Washington State Fairgrounds in Puyallup.

That acreage could potentially produce $276 million of marijuana,
making it the eighth highest value crop in the state, between nursery
and greenhouse production and grapes. The top crop is apples, which
brought in $2.2 billion last year.

The 25 percent excise tax imposed at the production, processing and
retail levels could earn the state as much as $2 billion over five
years, Smith said.

All funds from marijuana excise taxes will be deposited in the
Dedicated Marijuana Fund, Simmons said. The money will be disbursed to
the Liquor Control Board for administering the program, to Washington
State University and the University of Washington for research and to
agencies dealing with drug abuse prevention.

The initiative directed the bulk of the money go to the Washington
Basic Health Plan. That agency is defunct under the federal Affordable
Care Act, Simmons said, so it will fall to the Legislature to decide
where the money will go.

State business and occupation taxes will apply to the production and
local retail sales.

The plans

Milton has applied for three state permits to grow marijuana on
30,000-square-foot areas, each slightly less than 0.7 acre. He has
been aiming to develop 30 acres, including a warehouse he owns south
of Vader, and the legalization of marijuana opened the door for new
opportunities, he said.

He estimated each grow site has the potential to produce about 7,000
pounds of marijuana worth $8.4 million each year. He also says the
community will benefit from the creation of 25 jobs and an added
$6,700 a year in property taxes from each site.

"There's been plenty of support, and some who don't want it to
happen," he said. "But it doesn't require a vote."

Milton's background is in used car parts, and he has neither
experience in agriculture nor knowledge of marijuana.

"That's kind of a Catch-22," he said. "Some say you don't have
experience (in growing marijuana), but if I did, I'd be a criminal,
guilty of a felony.

"It's a new industry, so there's plenty to figure out."

Milton and other prospective large-scale growers will invest their own
money, Simmons said.

"The banking issue is one of the largest challenges facing the
industry," he said.

Banking on marijuana

Banking and access to working capital are problematic, since banks are
regulated under federal law and would put themselves at risk of
prosecution on racketeering and money-laundering charges. However, the
Justice Department wants to address that problem, Deputy U.S. Attorney
General James Cole told a congressional committee in September. He
said his agency and federal banking regulators will help clear the way
for financial institutions to transact business with the legitimate
marijuana industry without fear of prosecution, The Associated Press
reported.

The Washington Bankers Association and Northwest Farm Credit Services
did not return phone calls seeking comment.

"It's not cheap" to get started, Simmons said. "Big operations have
their own money, and smaller growers can move over very easily. But
the mid-range grower has no place to get capital."

At the small end of the production scale are people like Pouch, who
owns and operates a farm on Washington's Olympic Peninsula. As a
registered medical marijuana patient, he already grows it for his own
needs and is "heavily entertaining" the option of seeking a license to
grow for the recreational market.

His farm is small, but he wants as big an operation as he can
accommodate.

"In business, bigger is better," he said. "Hopefully we're all gonna
be millionaires - but not really. I'm a farmer anyhow, and I have a
deeper passion than making a bunch of money. Instead of 'Now I can get
rich,' I want to produce a beneficial product."

Before he dives in, he said, he needs to make sure he feels secure
about the federal legal aspects.

"I'm not necessarily an activist, but willing to take risks for what I
believe in," he said.
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MAP posted-by: Matt