Pubdate: Sun, 18 Oct 2015
Source: Sacramento Bee (CA)
Copyright: 2015 The Sacramento Bee
Author: Peter Hecht


Gov. Jerry Brown this month signed regulations he said would bring 
"robust controls" to govern California's long untamed medical 
marijuana industry, with clear standards for "local government, law 
enforcement, businesses, patients and health providers." Steve 
DeAngelo, executive director of Oakland's Harborside Health Center 
medical marijuana dispensary, said the new rules signal that "we're 
going to move from a nonprofit service model to a for-profit service 
model." Michael Allen Jones Sacramento Bee file

His signature also may bring something else: a decidedly robust new 
era for cannabis commerce. By 2018 or sooner, marijuana businesses 
from small pot farms to cannabis superstores  effectively can begin 
earning legal profits under the nation's most diverse state licensing 
scheme for pot.

Until now, California's vast pot economy has flourished with nebulous 
state guidelines enacted by lawmakers after voters in 1996 approved 
Proposition 215 to legalize marijuana for medical use. Purportedly 
nonprofit medical marijuana providers currently take in millions of 
dollars under a legal notion of patients cultivating and sharing 
cannabis in collectives with other medical users.

Now marijuana is set to be a regulated business activity, governed as 
a unique agricultural product in an industry that will be transparent 
and, soon, unabashedly for-profit.

Medical marijuana dispensaries annually ring up more than $1 billion 
in sales, and about 1 million Californians now have physicians' 
recommendations for pot use to address a range of conditions, 
including nerve pain, cancer and anxiety. With a ballot initiative to 
legalize adult recreational pot use looming for 2016, investors are 
poised to get in on this new era of marijuana regulation.

"You're going to see the emergence of a California medical marijuana 
commodities market," said Sebastopol attorney Omar Figueroa, who 
represents marijuana dispensaries and venture capitalists. "Investors 
will be coming in and betting on the future price of marijuana. There 
is going to be a full-blown marijuana casino."

Steve DeAngelo, executive director of Oakland's Harborside Health 
Center medical marijuana dispensary, said the new rules signal that 
"we're going to move from a nonprofit service model to a for-profit 
service model."

Harborside, which already bills its Oakland dispensary as the largest 
marijuana provider in the world, has a second dispensary in San Jose 
and plans for a third in San Leandro. DeAngelo also heads a national 
marijuana industry investment group, Arc View, that envisions new 
opportunities in California as "medical marijuana companies and 
stores begin to look a lot like other businesses."

But if regulated marijuana commerce is indeed California's next 
burgeoning business sector, it remains to be seen who gets to play and where.

"I'm a little wistful," Figueroa said. "There was romanticism in the 
peaceful cannabis growers rebelling against conformity. Now the suits 
are coming in and taking over."

California's pot governance, to be headed by a yet-to-be-staffed 
Bureau of Medical Marijuana Regulation, will be funded by $10 million 
loaned by the state and repaid in still-to-be specified taxes and 
fees on cannabis businesses.

Detailed regulations are to be drafted and implemented between now 
and Jan. 1, 2018. In addition to the new Bureau of Medical Marijuana 
Regulation, state agencies on public health, taxation, consumer 
affairs, water, fish and wildlife and pesticide control all will play 
a part in regulating cannabis. In addition, 58 counties and 482 
cities will decide on local rules, including whether to accept or ban 
pot businesses.

The three medical marijuana regulation bills signed by 
Brown  Assembly bills 266 and 243 and Senate Bill 643  will create 17 
different marijuana business licenses. There will be 10 licensing and 
fee tiers for pot cultivation alone, two licenses for manufacturing, 
one for laboratory testing, two for retail sales and one each for 
transportation and distribution.

 From seed to sale

The market structure that California is attempting to implement is 
far different from that of Colorado, which in 2010 became the first 
state to impose strict medical cannabis regulations. Under the 
Colorado model, now expanded to include recreational marijuana, 
licensed stores largely grow their own pot in cavernous 
state-inspected warehouses or buy product from other licensed 
retailers in an integrated production system. Would-be independent 
marijuana farmers were effectively frozen out.

As its rules are formalized over the next two years, California seeks 
a sweeping approach to open the entire marijuana supply line for 
businesses large and small  and to regulate each step in the journey 
from pot seed to pot sale. The system takes inspiration from alcohol 
rules that create separate licenses for producers, distributors and 
retailers to prevent big players from colluding or dominating the market.

So, one day soon, a licensed medical marijuana farmer in the 
backwoods of Humboldt County may harvest a crop and then contract 
with a registered delivery driver to bring buds to a state-sanctioned 
cannabis distributor in San Francisco. The distributor then might 
send samples to a licensed testing lab in Oakland and later ship 
product to a state-inspected cannabis foods kitchen in Berkeley and a 
regulated marijuana store in Los Angeles.

Under the California legislation, the Department of Food and 
Agriculture and the new marijuana regulation bureau are to construct 
a "track and trace program" to govern the movement of pot throughout 
the distribution chain.

"I think we're going to see a bit of culture shock, just like 
transitioning California from the Wild West to statehood," said Dale 
Sky Jones, executive chancellor of Oaksterdam University, a cannabis 
institute in Oakland. "With regulation comes things like inspections 
and measuring and fees and audits. And from that, hopefully, 
structure and confidence."

In California's north coast pot-growing region, home to a long 
illicit cannabis culture, the new rules are creating excitement and anxiety.

"Everyone is afraid, wary  and hopeful," said Casey O'Neill, a 
medical marijuana grower in Mendocino County who cultivates 25 
cannabis plants under county guidelines. "It does feel like a new 
era. We are now farmers. We are no longer criminals."

Small outdoor cannabis growers such as O'Neill, with 50 plants or 
fewer and no more than 5,000 square feet of cultivation space, will 
be at the lowest tier of California's licensing structure. State 
rules will allow for outdoor pot nurseries of up to an acre and 
indoor production of half an acre.

O'Neill said some small farmers are worried about being squeezed out 
by bigger players in a California market "on a fast track to 
conglomeration." Under the new regulations, the Department of 
Agriculture is expected to set limits on the number of licenses for 
larger pot-cultivation ventures.

In Humboldt County, where marijuana fuels the economy, local 
advocates are debating strategies to retain market share as a 
state-regulated medical marijuana trade  and potentially expanded 
legalization  are expected to spur competition across California.

"What is going to carry Humboldt County through the day is that we 
grow the best cannabis in the world," said Andy Powell of California 
Cannabis Voice Humboldt, an advocacy group for local growers. "It's a 
question of how we protect it. Can we brand it? Can we maintain 
control of farms that are growing craft or boutique cannabis?

"We want to grow the fine wine, whereas Fresno is welcome to the 
two-buck chuck."

'A clear and certain signal'

So far, the Central Valley, California's most renowned agricultural 
region, has been mostly hostile to the notion of commercial cannabis 
production. Medical marijuana cultivation is banned in unincorporated 
Fresno County, and the city of Fresno allows only four-plant indoor 
grows for medical marijuana users.

According to Americans for Safe Access, a medical marijuana advocacy 
group, 193 California cities and 20 counties, including Sacramento 
County, ban cannabis stores or commercial cultivation. But other 
jurisdictions, enticed by the prospects of local tax revenues, are 
expected to welcome pot business expansion.

Oakland may be at the top of the list. That city in 2010 set out to 
become the Silicon Valley of weed with an ambitious plan to license 
four indoor marijuana farms, each with up to 100,000 square feet. 
Oakland expected to reap a tax bonanza from the project under a 
voter-approved 5 percent local levy on medical cannabis sales.

The city's plan riled the U.S. Department of Justice, which in 2011 
launched sweeping raids on California cannabis businesses. The 
federal actions included a still-pending 2012 civil suit that seeks 
to shutter the Harborside Health Center dispensary. Harborside and 
Oakland officials argue that California's new medical cannabis 
regulations are grounds for the Justice Department to drop the suit.

In 2013, after Colorado and Washington legalized recreational 
marijuana use, Deputy Attorney General James Cole issued a memo 
saying the Justice Department wouldn't intervene in states legalizing 
pot if those states enacted "robust controls" regulating marijuana 
sales and distribution.

Federal authorities said they want safeguards against marijuana sales 
to minors and illegal pot diversions into criminal markets and to 
states where marijuana use remains illegal.

In his signing statement, Brown said California's new regulations 
send "a clear and certain signal to our federal counterparts that 
California is implementing robust controls not only on paper, but in practice."

Medical cannabis lawyer Figueroa said the state's regulatory 
framework is "just the scaffolding on the house and there are rules 
to be worked out." He said there likely will be a lot of "lobbying 
and sausage-making" in follow-up legislation.

"Now we have 100 years of implementation to do in two years," said 
Hezakiah Allen, a former medical marijuana farmer from Humboldt 
County who heads the Emerald Growers Association lobbying group.

"I don't know of a lot of people who are saying, 'Hooray, we get to 
do a bunch of paperwork now,' " he added. "But this marks the 
beginning of the inspections-not-raids era. ... A lot of (marijuana) 
business owners are ready to be legitimate and fully participating 
members in their local economies."


California cannabis

Annual medical marijuana sales: $1.3 billion

Number of medical marijuana dispensaries: 1,200-1,500

Marijuana farms, medical or otherwise: 50,000

People with doctors' recommendations to use marijuana: 750,000-1.1 million

Californians who use marijuana in a year: 4.4 million

Percent of registered voters who have tried marijuana: 47

Cities that ban cannabis stores or commercial cultivation: 193

Counties that ban cannabis stores or commercial cultivation: 20

Sources: California Board of Equalization; United Food & Commercial 
Workers Union; Emerald Growers Association; Americans for Safe 
Access; California chapter of National Organization for Reform of 
Marijuana Laws; 2012-13 National Survey on Drug Abuse and Health; 
California Field Poll
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MAP posted-by: Jay Bergstrom