Oakland Okays Indoor Medical Marijuana Mega-Farms

July 20, 2010

Phil Smith, Drug War Chronicle

In a marathon session Tuesday night, the Oakland City Council Tuesday approved an historic plan for large-scale indoor marijuana farms, but only after hearing from a cavalcade of medical marijuana patients, growers, and dispensary operators intent on ensuring that small and medium-sized growers are not squeezed out. While the ordinance is aimed at medical marijuana, the council, which has endorsed the Proposition 19 tax and regulate cannabis initiative, clearly sees the potential for tax revenues and jobs under a perhaps not-so-distant marijuana legalization in California.

The council passed a proposal that will authorize city officials to issue permits for four indoor marijuana farms to supply the city's four allowed existing medical marijuana dispensaries. The ordinance sets no size limitations. Some would-be medical marijuana cultivation entrepreneurs have proposed growing operations as large as 100,000 square feet.

Applicants for the four permits would submit proposals to the city. Permit holders would have to pay a $211,000 annual fee, as well as any taxes imposed by the city. The city currently taxes dispensaries at 1.8% and has plans to increase that tax to 8%. The large-scale grows would have a similar tax burden.

Councilmember Larry Reid, coauthor of the cultivation ordinance, said the new regulations were designed to ensure that patients receive a high-quality product grown at a safe, regulated, facility. He also cited house fires, robberies, and shootings that have plagued medical marijuana growers in the city, and said small growers or collectives could band together to apply for one of the four cultivation permits.

"I disagree with these folks that say it will be like McDonald's," Reid said. "If I was a patient, I would want to make sure that the medicine I buy and consume was grown in a safe environment. These folks that are out there growing on their own, you don't know what you are getting. That's why we will have some sort of product testing."

"I support this. It's a growing industry," said councilmember and mayoral candidate Jean Quan, before voting against the ordinance because it did not include specific eligibility criteria for the grow operations. "If you're going to have a growing use in the state, even if the state [legalization] proposition doesn't pass, the volume of medical marijuana and high-quality marijuana that is regulated is going to grow. Oakland has been a pioneer in this area."

In response to community concerns, the council voted to take up the issue of regulating medium-sized grows when it returns from summer recess in the fall. The vote also included a decision to defer any crackdown on non-permitted grows until after the first large-scale cultivation permits are issued next year, perhaps as early as January.

The ordinance would not affect patients, who would still be allowed to grow up to 32 square feet, or three-person collectives, which would still be allowed to grow up to 96 square feet.

Concerns about whether the ordinance would eliminate small and medium grows had been growing ever since it passed the council's Public Safety Committee last week. "The ordinance needs to allow for moderate and small size growers -- it shouldn't grant an oligopoly to four extremely large permittees and leave nothing for smaller operators," said Dale Gieringer, executive director of California NORML, before the Tuesday night session. "It's like giving Anheuser-Busch and Miller a monopoly on beer in Oakland. We need some microbrews, too."

"We fully endorse this effort to bring the production side of the medical cannabis industry out of the shadows and into the light and to work to regulate and protect the activity, said Kris Hermes, spokesman for Americans for Safe Access. "However, it should not be the domain of an oligarchy of producers, which will invariably reduce the diversity and will potentially not meet patients needs. The answer is to open the regulatory scheme to small and medium size collectives and producers who wish to be regulated."

That the Oakland medical marijuana community was concerned was understandable, said Hermes. "What they see is the council leaving the way open for large corporations to come in and dominate the market," he said. "In an era of decentralized small and medium sized cultivators, I can see why they're upset. You get better variety from a diverse community of small producer, and if this ordinance deters that activity, that would be a mistake."

"It's great that the city has started this dialogue on cultivation, but we didn't even see a draft of this until just before it went before the Public Safety Committee," said James Anthony, attorney for Harborside Health Center, a large Oakland dispensary. "As a matter of good policy, the city could take a little time to work with the stakeholders on this. It completely ignores the reality of hundreds and hundreds of individual and small collective cultivators who supply something like 12 to 15 pounds a day to Oakland dispensaries. There is no path for them to be regulated, licensed, inspected, and approved. Instead, there are only four marijuana factories of unlimited size. It seems like the ordinance could be amended to include some consideration for small and medium growers to come out of the shadows. Instead, the council just waved its hands in the air and said it would come back later," he said before Tuesday's council meeting.

"Harborside will apply under that system and try to create space inside its facilities to include as many of our existing 500 growers as we can," said Anthony. "It would be nice to give them an option to come into a regulated system."

The city council heard more of the same Tuesday night, with almost every public speaker calling on the council to address small and medium grows or put off a decision until the issue was addressed. "I support the idea of licensing and regulating cannabis cultivation in Oakland, but I think the council needs to pass a measure that has a way for small and medium growers to participate, 500 of whom are the heart and soul of the Harborside collective," said Harborside founder Steve DeAngelo. "It's not the role of government to pick winners and losers in the marketplace. Let's bring the small and medium-sized growers into the system. Let the market sort out what sort of cultivation it prefers."

"Dispensaries have been waiting three years to be able to cultivate our medicine off-site," said Keith Stevens of the Purple Heart dispensary. "This is an inherently flawed program. For you, the council, to take the right away from the dispensaries and transfer it to commercial ag is absolutely un-American."

"There is no reason to push the little and midsize growers out," Luis Santiago of Homegrown Wellness told the council.

"We consumers support moving toward licensed productions, but we have concerns this particular proposal is monopolistic and anti-competitive," Gieringer told the council. "I urge you to slow down and open the process up to competition."

The council didn't slow down, but it showed that it got the message loud and clear. "We're at a time when the medical cannabis industry is a growing and emerging industry and there is increased demand for permitted production facilities," said Kaplan. "We want to address concerns about fire danger and security, but also to provide opportunities for good paying jobs for local residents and revenue to fund basic public services. I support this ordinance, as well as the directions to return for the permits for the medium facilities."

Oakland has made history yet again. The first city to tax and regulate medical marijuana is now about to become the first city to permit, tax, and regulate industrial-scale marijuana production.

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