Pubdate: Wed, 03 Feb 2016
Source: Orange County Register, The (CA)
Copyright: 2016 The Orange County Register
Author: Brooke Edwards Staggs


Out in the Coachella Valley, in the small city of Desert Hot Springs, 
there's plenty of land and sunshine. What's missing is industry, 
along with the jobs and tax revenue those businesses bring.

So city officials welcomed the announcement Jan. 26 that CalCann 
Holdings planned to set up shop and build a greenhouse to grow some 
6,000 pounds of organic medical cannabis each year.

The pot will go to the Costa Mesa company's own Santa Ana 
dispensaries and others under a new state licensing system.

Desert Hot Springs became the first city in Southern California to 
regulate and tax commercial medical marijuana cultivation in 2014, as 
the cash-strapped city sat on the verge of filing bankruptcy for a second time.

The city has permitted at least three pot-growing facilities, with 
the CalCann project and several others pending.

"Desert Hot Springs has become the Silicon Valley of cultivation," 
said Aaron Herzberg, an attorney and founding partner at CalCann 
Holdings. "We are excited to be a pioneer in regulated commercial 
cannabis cultivation in California."

When Santa Ana held a lottery in February 2015 for 20 dispensary 
licenses, CalCann Holdings won three.

Its OC3 opened in August at 3122 S. Halladay St. and serves around 
8,000 patients now, according to Chief Operating Officer Chris 
Francy. The company's other two dispensaries are expected to open this spring.

While dispensaries are regulated in Santa Ana, cultivation is banned 
- - as it is throughout Orange County and most of California. That 
means even licensed retailers are forced to buy their products on the 
"gray market," Herzberg said, turning to indoor cultivators who have 
worked for 20 years under the unregulated fog of the state's 
Compassionate Use Act.

"I'm aware of many cultivation facilities nestled in industrial 
warehouses in our backyard," Herzberg said. "It's in Orange County. 
It's in Irvine."

The state is trying to rein in that chaos. On Oct. 9, Gov. Jerry 
Brown signed into law the Medical Marijuana Regulation and Safety 
Act, which creates a licensing program and rules for industrial-scale 
cultivation, dispensaries and related businesses.

CalCann Holdings hopes to get a 10A mega license, the largest license 
available under the MMRSA.

A limited number of those licenses will permit vertical integration, 
allowing companies to have three dispensary locations, one processing 
location and up to 4 acres of plant cultivation.

That regulation gives companies like CalCann Holdings a chance to 
operate in an open and regulated way, tracking their products from 
seed to sale.

It also means they can move cultivation out of hidden warehouses, 
which rely on artificial lights and air conditioning units.

There are so many of those indoor grows that a 2012 report in the 
journal Energy Policy projected they account for 9 percent of 
California's consumer electricity.

Massive greenhouses are popping up in other areas where cultivation 
is regulated - such as Colorado and Canada - because they provide the 
best of both worlds, Herzberg said.

Greenhouses allow for the continuous production and fully automated 
climate control of an indoor cultivation, Herzberg said, which 
produces the prettier plants preferred by dispensaries. It also 
allows for the sustainability and cost savings of an outdoor grow, 
with Marijuana Business Daily estimating utility bills are 51 percent 
lower in greenhouses than warehouses.

Along with a 36,00-square-foot glass greenhouse, CalCann also hopes 
to build a processing lab, a commercial kitchen to cook medicated 
edibles and a high-tech curing room on 2 acres of vacant desert land 
a few miles north of I-10.

The company applied for a conditional use permit for the project in 
late January. If approved, it hopes to start construction in September.

Coachella Valley Patients Collective was among the first to get 
permitted for cultivation in Desert Hot Springs, with plans approved 
Nov. 17 to build five warehouses for lease to growers.

Los Angeles-based Pineapple Express has snatched up 8.82 acres of 
land to build what Chief Executive Matthew Feinstein called the 
"Pineapple Park cultivation compound." The publicly traded company 
has leased a 23,000-square-foot building that used to be a church to 
local grower Clonenetics, with nine more 20,000-square-foot 
warehouses still available for lease.

Interest from potential tenants has been high, Feinstein said.

They're expecting demand for marijuana to skyrocket if California 
legalizes recreational use in November.
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MAP posted-by: Jay Bergstrom