A proposal to create four large-scale marijuana factories in Oakland has touched off a turf war in the lucrative market for medicinal marijuana. Established local merchants are trying to hold their ground against entrepreneurs who are seeking to gain a foothold in the rapidly evolving industry.
A nonprofit, nonpartisan news organization providing local coverage of the San Francisco Bay Area for The New York Times. To join the conversation about this article, go to http://www.baycitizen.org.
Under the proposal, which will be debated by the City Council on Tuesday, Oakland would issue four permits to operate the factories, which are currently not limited in size or scale. One would-be applicant is planning a 7.4-acre complex that could produce over 21,000 pounds of marijuana a year.
Based on current prices, such a factory would generate about $60 million in annual revenue, more than twice the gross receipts for Oakland’s four medical marijuana dispensaries last year.
Taxes on cannabis cultivation and sales could generate millions of dollars for Oakland, once the program is up and running, and create hundreds of jobs, according to supporters. The ordinance — written by Councilwoman Rebecca Kaplan, who is also a mayoral candidate, and Councilman Larry Reid — would also require the factories to pay a $211,000 “regulatory fee.”
“I think it’s a total win-win for everyone,” Ms. Kaplan said last week, after the Public Safety Committee voted 3 to 1 on Tuesday to send the cultivation ordinance to the full City Council.
The proposal is creating discord between businesses seeking to preserve the status quo and others who are trying to carve out new businesses in advance of Proposition 19, a November ballot measure that would legalize marijuana for adult recreational use in California.
“It’s big business; you’re talking about manufacturing gold,” said Jeff Jones, a longtime marijuana activist working with the legalization effort. “There’s going to be stakeholders, different opinions and different approaches, which lead to bickering like in any other marketplace.”
One of the most vocal critics of the cultivation proposal is Stephen DeAngelo, executive director of Harborside Health Center, the largest medical marijuana dispensary in the world. With outlets in Oakland and San Jose, Harborside has 58,000 members, or patients, who can buy dozens of strains of marijuana packaged in vacuum-sealed bags or in edible forms ranging from cookies to gelato.
The dispensary receives its marijuana from about 400 member/suppliers who deliver one or two pounds of cannabis at a time. Allowing large-scale production in Oakland would crowd out those small growers, according to Harborside officials and the dispensary’s lawyer.
“Why does this whole new system have to be created?” Mr. DeAngelo asked in an interview. “Let’s bring these citizen farmers out of the shadows and into the light and give them a role in this new industry.”
Jeff Wilcox, a Bay Area businessman, is an outspoken proponent of the industrial pot permits as well as a leading advocate for the Proposition 19 initiative. Mr. Wilcox is hoping to obtain one of the four permits to build AgraMed, a marijuana production complex on 7.4 acres beside Interstate 880 near Oakland International Airport.
AgraMed would include a bakery to create edible forms of marijuana, a lab to test for potency and contaminants and 100,000 square feet of cultivation space. If he obtains a permit, Mr. Wilcox said, he will offer to lease space to smaller growers.
James Anthony, a lawyer for Harborside, said Mr. Wilcox was a “Johnny-come-lately” motivated by profit, not by the desire to help patients who use marijuana for medical reasons.
Mr. Wilcox responded that Harborside and its supporters had been “sitting in the back just waiting.”
“They started this campaign of lies to kill the cultivation permits,” he said.
Mr. DeAngelo said he was not opposed to the Oakland plan, but wanted to see a permit process that would benefit smaller growers, an opinion that was echoed by many Tuesday at the meeting of the Public Safety Committee.
Oakland is known as a marijuana-friendly city, but friendliness was sometimes in short supply last week as Council members heard hours of contentious public comment on the proposed ordinance.
The Council chambers were filled with members of the Bay Area cannabis industry: dispensary owners, lawyers specializing in medical-marijuana law, would-be permit applicants, subcontractors who see the proposed factories as a means to expand their businesses and growers of all stripes.
A nonprofit, nonpartisan news organization providing local coverage of the San Francisco Bay Area for The New York Times. To join the conversation about this article, go to http://www.baycitizen.org. Some expressed concern that allowing industrial marijuana factories would drive down prices and squeeze out local cultivators.
“I think this ordinance is nothing more than a municipally sanctioned monopoly on medical cannabis,” one grower told the committee.
In a compromise effort, Vice Mayor Jean Quan and Councilwoman Patricia Kernighan suggested that Ms. Kaplan and Mr. Reid devise a similar permit process for medium-sized facilities. Those new rules will be up for discussion in September, but in the meantime, some growers worry that they are being run out of business.
“It’s politics,” said Dan Grace, who runs a 3,000-square-foot nursery for young pot plants called clones. “All you can count on is what we have now, and what we have now is not a process that allows for medium-sized growers.”
Councilwoman Nancy Nadel drew some applause from the audience when she raised concerns that the cultivation ordinance was not legal under state or federal law. “I don’t see any rush to do this until we know what happens in November,” Ms. Nadel said, referring to the ballot initiative.
Ms. Quan warned, however, that if Oakland did not act quickly, other cities could seize the opportunity to become a hub for the expanding medical-marijuana industry. “I want Oakland to be in place, so I want to move this out,” she said.
The debate was heated in part because the proposed ordinance has gone through several revisions, and rumors have swirled about the regulations. City Council members said they received a flood of calls amid concerns that all dispensaries would be required to buy marijuana from the industrial facilities. But that is not a requirement.
Until recently, cultivation of medical marijuana has not been closely regulated in any California cities.
“Our real goal is to eliminate a lot of the public problems stemming from illegal and unregulated cultivation,” said Dhar Mann, an Oakland businessman who plans to apply for one of the permits if the proposal passes.
A report attached to the proposal said residential electrical fires in Oakland rose from 133 in 2006 to 290 in 2009, a spike, it said, “likely attributable to cannabis cultivation.” There were also eight robberies, seven burglaries and two homicides linked to marijuana growing, the report said.
Mr. Mann, 26, owns a 15,000-square-foot hydroponic supply store called iGrow, which will soon open franchises in eight states. He recently scouted another large-scale warehouse with an architect and security contractor in the hope of growing marijuana there.
If he receives a permit, Mr. Mann said, he will outfit the building with solar panels, a grass roof and a state-of-the-art security system.