January 10, 2013

Colorado in the pot-growing spotlight

The state's tight regulations could be a model for the new commercial reality.

By JONATHAN MARTIN, The Seattle Times

DENVER - Inside the industrial-scale marijuana grow farms that dot Denver's low-rise warehouse districts, it is perpetual summer - 78 degrees, moderate humidity and fields of shoulder-high plants with fat, sticky buds swaying in the breeze.

medical marijuana industry
click image to enlarge

In a former bus barn near Denver, marijuana plants grow on camera, part of an intense security system that marks Colorado’s medical-marijuana industry.

Alan Berner/Seattle Times/MCT

These unmarked THC factories are easy to miss from the street, except for the casino-style security cameras perched on each corner. But inside the world's only fully regulated, for-profit marijuana market, there are few secrets.

Colorado has approved 739 of these indoor grow farms over the past two-plus years after vetting their owners' finances and requiring the buds be tracked on high-definition video and bar-coded every moment from seed to sale. Local building inspectors have signed off, and cops - city, state and federal - can drop in at any time.

This out-in-the-open marijuana is the best glimpse of the strange new reality coming soon to Washington state.

If Washington, as expected, follows Colorado's experiment, its state regulators will be investigating entrepreneurs' finances for links to organized crime and keeping steady watch over leakage to the black market - even as they allow warehouses of weed.

The challenges are immense. Washington's new marijuana law, approved by voters in November, creates a market for social use - vastly bigger than the medical marijuana market regulated in Colorado. There is nothing like it anywhere.

In Colorado, regulators had to broker a shotgun marriage between law enforcement and marijuana dealers. Anxious state regulators wrote more rules than they could enforce. The state is now thinning its thick rule book, even as drug cops say Colorado-regulated marijuana has popped up across the Midwest.

Capitalism unleashed, medical marijuana suddenly became a $200 million industry, with retail prices - averaging about $7.50 a gram - among the cheapest in the country.

The federal government - despite its ban on marijuana - has largely been hands-off. Not a single big grow operation has been raided. It's not clear how the Justice Department will react to the massive, voter-approved expansion of social-use markets in Washington and Colorado.

Colorado Gov. John Hickenlooper, the grandson of a bootlegger, said regulations need to address teen use while acknowledging consumers' "huge appetite" for an increasingly potent drug. "This is not your father's marijuana," he said.

Colorado's one-of-a-kind system arose through necessity.

In 2000, it joined Washington in allowing medical marijuana, but it wasn't until 2009 that Denver, like Seattle, began seeing wildcat marijuana dispensaries popping up across the city.

Then-state Sen. Chris Romer, son of a former governor, in 2010 pushed through medical marijuana regulations envisioned to be "as strict, if not twice as strict, as alcohol."

Five-figure licensing and application fees - plus security and requirements that dispensaries grow most of their own product - added up to $500,000 or more. That was intentional, Romer said.

"If you raise the bar high enough, they won't risk their $500,000 or million-dollar investment to sell to youngsters," Romer said.

With a new law in place, a retired liquor regulator and onetime drug cop, Matt Cook, was brought in to broker a five-month negotiation that "had drug dealers on one side, law enforcement on the other, and my staff in the middle," he said.

Cook had one primary goal: no "diversion" of marijuana spilling from regulated grows onto street corners.

The result was a blizzard of rules: 24-7 video surveillance in grow farms and dispensaries accessible to enforcement officers via the Internet; bar codes on each plant; criminal background checks; and hard-copy manifests faxed to Cook's staff each time a pound of pot was moved.

"The process works," said Cook, who retired and is now a consultant to the medical marijuana industry. "It sort of set the example for the rest of the nation. This commodity won't go away. And it can be regulated."

(Continued on page 2)

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