Marijuana industry undaunted by federal threats, regulations

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K.C. Stark, a consultant with Alternative Medicine Colorado Springs on west Colorado Avenue, holds a medical marijuana bud.

K.C. Stark, a consultant with Alternative Medicine Colorado Springs on west Colorado Avenue, holds a medical marijuana bud.

A medical marijuana bill that drew a warning from a U.S. Attorney appears set to pass both chambers of the General Assembly in the waning days of the session.

But whether it helps the fledgling industry — or threatens it — is open to debate.

House Bill 1043 loosens some restrictions on the state’s medical marijuana industry and tightens others. U.S. Attorney John Walsh warned the state last month against passing the bill.

“The Department of Justice remains firmly committed to enforcing the federal law and the Controlled Substances Act in all states,” Walsh said in a letter to Attorney General John Suthers. “Thus, if the provisions of H.B. 1043 are enacted and become law, the Department will continue to carefully consider all appropriate actions.”

Medical marijuana dispensary owners in the Springs aren’t concerned about Walsh’s warning — and apparently Colorado’s legislators weren’t dissuaded either.

“Puff, puff the magic dragon. That statement is just hot air, scare tactics to try to shake, rattle and roll the new members of the legislature,” said K.C. Stark, consultant Alternative Medicine  Colorado Springs on the west side of Colorado Springs.

Industry insiders believe the federal government has no choice but to respond with a warning, when asked to review medical marijuana laws.

“They have to say that,” said Wanda James, co-owner of Simply Pure, a statewide manufacturer of edible medical marijuana products that sells to 250 dispensaries across the state. “What else can they say but that marijuana is a Schedule 1 controlled substance? When asked, they have to respond with federal law.”

The bill would allow the Department of Revenue to issue grower and marijuana-infused product licenses to anyone convicted of a drug felony, if the conviction is no longer a felony under current law.

It would also allow dispensaries to use automated dispensing machines and the sale of more than six immature plants to patients. It would eliminate the waiting period to purchase additional plants and lift the moratorium on licenses July 1.

But it also tightens security restrictions, requiring cameras, plant identification numbers and customer tracking.

“It’s a clean-up bill, basically,” Stark said. “Or, it could be a mess-up bill, depending on the interpretation.”

One aspect of the bill is unfavorable for the industry — allowing cultivation licenses for caregivers.

“That’s a gotcha,” Stark said. “It allows caregivers to compete with dispensaries, to grow it in their homes, where they don’t need security, cameras and other kinds of equipment. It’s robbing Peter to pay Paul.”

The industry is saturated with dispensaries, however, owner Bill Robinson said some people are planning to leave the industry instead of complying with stricter security and licensing regulations, some of which are included in HB 1043, and some were created during the last session.

“They’re just waiting until July 1, and then they’re going to close,” he said. “And that’s the main thing this bill will do — weed out people. It will make the industry more pliable, but also narrow it down to just a few owners.”

Robinson said his numbers have dropped 25 percent as more dispensaries opened. He now has about 300 patients and his own growth facility.

“That’s the secret — grow your own. Only grow what you sell, only sell what you grow,” he said.

Having dispensaries close isn’t necessarily a bad thing, Stark said.

“Some people just got into this as a way to make quick money,” he said. “Those are the people who aren’t going to stick around and deal with changing regulations.”

He also is opposed to lifting the moratorium on new licenses a year earlier than originally legislated.

“I wish they had given it more time,” he said. “Let the industry even out, let people recoup costs before allowing more people to come in.”

There are more than 800 dispensaries in Colorado, serving 128,000 patients. That business model isn’t sustainable, James said. In Colorado Springs, there are 137 dispensaries.

Basically, the bill will give the fledgling medical marijuana industry some legitimacy within the state — and possibly open the door toward overall legalization, James said.

“This bill will show people that we can do this, we can sell marijuana to patients, and we can do it in a safe way,” James said. “This allows the industry to move forward. Some people say it’s restrictive, but that’s the game we’re playing right now.”

Every session of the legislature will result in changes to the industry, she said.

“That’s the phase we’re in right now, and will be in for the next 10 to 20 years,” she said. “We have to make people confident with the fact marijuana can be sold property and sold legally, and that the industry is a benefit to the state.”

While the bill would loosen some of the restrictions, it would tighten others. For example, it limits manufacturers of infused products to 500 plants. Caregivers who also grow their own plants must register the site and all patient identification numbers, as well as comply with all zoning and building codes.

“This bill is going to be more expensive,” she said. “If people are going to comply with it, it’s going to cost money. They have to invest in cameras, tagging plants, point of sale technology. Owners are going to have to be well-funded top make it in this business.”

But the cost will be worth it, she said.

“If this is what it takes, then we’ll do it,” she said. “It’s a legal process, and it’s just part of doing business in this industry. We’ve been entrepreneurs most of our lives, and you have expense with business. These regulations make us all safer.”

By the numbers

$1.7 billion

Medical marijuana industry in the United States

$2.2 million

Sales tax paid to the state of Colorado in 2010

$380,000

Sales tax paid to the city of Colorado Springs in 2010

Mayoral candidates support medical marijuana industry

Both mayoral candidates up for election in Colorado Springs’ first strong mayor race say they support the medical marijuana industry — but their enthusiasm for the matter is another story.

Steve Bach, a commercial real estate developer running for his first political office, said he “supports state law.”

But he is concerned about dispensaries being located in residential neighborhoods.

“There are too many of them located in the west side neighborhoods,” he said. “I think that needs to stop. I support state law, but I think having them in residential areas could be a problem for law enforcement. We want to ensure safety for everyone in Colorado Springs.”

Richard Skorman said he supports the medical use of marijuana and applauds the local industry for working with City Council and with local law enforcement to come up with reasonable regulations.

“I don’t think we need to come up with more regulations than we already have,” he said. “It’s already highly regulated. But the dispensaries should be located in the same areas where any physician’s office is located. It’s the same kind of business.”

Skorman also believes it should be more difficult to get a medical marijuana card, but overall, he said the local industry was doing what it should.

“It’s a good medical resource for people,” he said. “The industry is putting a great deal of effort in remaining in compliance with local laws.”