OAKLAND SEES POT AS EVEN MORE OF A GROWTH INDUSTRY

The City Could OK a Plan to Set Up Four Marijuana Factories

Oakland could approve a plan Tuesday to set up four marijuana factory
farms, a step that could usher in the era of Big Pot.

The proposal is a testament to just how fast the marijuana
counterculture is transforming into a corporate culture. And it has
ignited a contentious debate in Oakland that could spread as cities
face pressure to regulate marijuana cultivation and find ways to tax it.

"Everybody knows it's going bigger and big money is moving in," said
Dale Gieringer, an Oakland resident and prominent marijuana activist.
As the state edges toward legalization, he said, more businessmen
will seek to capitalize on a fast-growing market in a
recession-hindered economy, forcing cities to make difficult choices
on how to exert control.

If the City Council approves the plan, one Bay Area businessman has
already made it clear that he intends to apply for a cultivation
permit. Jeff Wilcox, who owned a successful construction firm and has
already incorporated as AgraMed, hopes to convert his empty
industrial buildings near Interstate 880 into an enormous production
facility. He plans to manufacture growing equipment, bake marijuana
edibles in a 10,000-square-foot kitchen and use two football fields
of space to grow about 58 pounds of marijuana every day, many times
the amount now sold in Oakland.

What caught the City Council's attention was Wilcox's projection that
he could hire 371 employees and pay at least $1.5 million a year in
taxes. Oakland faces severe budget deficits and has already let go of
80 police officers.

Last week, a council committee sent to the full council the proposal
to allow four large cultivation operations, worried that a delay
might allow other cities to get the jump on Oakland. "I do want to
encourage a few large growers because I think that's where the
industry's going, and I don't think you're going to be able to hold
that back," Councilwoman Jean Quan said.

But it has ignited intense opposition from medical marijuana
activists, dispensary operators and growers in Oakland, who complain
that the plan fails to include the growers who have risked federal
prosecution for years to supply the city's four dispensaries.
Normally secretive, they have started to speak out.

"It's not providing a pathway for folks to become more legitimate,"
said Dan Grace, an owner of Dark Heart Nursery, which raises about
10,000 pot clones a month in a 3,000-square-foot space. Grace said
that his operation could triple its size - if Oakland allowed it.

Oakland takes pride in setting new marijuana precedents. It was the
first city to regulate dispensaries, make marijuana crimes the lowest
police priority and enact a special tax on marijuana. And Richard
Lee, who operates one of its dispensaries, put the marijuana
legalization initiative on the November ballot.

Even if Oakland approves the plan, it faces a serious obstacle: the
feds. The Obama administration's policy is to leave medical marijuana
operations alone if they are in "clear and unambiguous compliance
with state law." In a memo, one council member wrote "this proposal
is not legal under state law according to our city attorney." City
Atty. John Russo's office declined to release his memo, citing
attorney-client privilege.

Drug Enforcement Administration agents remain on the hunt for major
growers. This month, agents raided a collective in Mendocino that was
complying with the county's new cultivation ordinance, ripping out
all 99 of its plants. The San Francisco DEA office referred questions
on the Oakland proposal to the drug czar's office, which called it
"the latest example of ongoing efforts to legitimize, through local
ordinances, activities that remain illegal under federal law."

Said James Anthony, an Oakland lawyer who thinks the proposal should
accommodate smaller growers: "There are no giant cannabis factories
anywhere in the world, and it strikes me as a rather odd assumption
that the first one is going to come into existence in the United
States of America. I don't know. Maybe."

Oakland's proposal, drafted by council members Rebecca Kaplan and
Larry Reid, would still allow small unregulated cultivation in homes
but is intended to supplant hundreds of larger operations,
establishing the four industrial operations "as the only legal model."

They argue that medium-size operations, often in gutted homes and
illicit warehouses, are a hazard, causing electrical fires and
drawing violent crime.

Many cities and counties are grappling with this issue.

Some, such as Redding and Tehama County, have placed strict limits on
marijuana growing. . Long Beach has required its dispensaries to grow
all of their marijuana on site. In Los Angeles, the City Council did
not explicitly require collectives to grow on site, but the city
attorney's office says that state law requires it.

And Berkeley, like neighboring Oakland, decided earlier this month to
ask voters in November to approve six marijuana production operations
of up to 30,000 square feet each.

Under Oakland's proposal, the four operations would pay an annual fee
of $211,000, which would support a city staff to ensure they are
operated safely and securely. But opponents see it as a steep barrier
to entry and have proposed a sliding scale based on size.

"The ordinance basically sets up an oligopoly," said Gieringer, the
longtime head of California NORML, which advocates for legalization.
"I don't think we want just four humongous growers, not just
Wal-Marts. We'd like to see lots of microbreweries, rather than Budweisers."

Steve DeAngelo runs Harborside on the Oakland waterfront, the largest
legal marijuana retailer in the world. From his bright, airy
dispensary, he and his 80 employees serve more than 600 patients a
day, selling about 8 pounds of marijuana in about 100 varieties. He
has nurtured a network of more than 400 patient-farmers, as he calls
them. Fearing for their livelihoods, he has stirred up much of the
opposition. "Any new system that is created needs to have a role for
these pioneers," he said. "It's not the role of government to decide
the winners and losers in the marketplace."

Standing next to about 60 thriving, 5-foot-tall plants sprouting from
30-gallon buckets, David Fry, a longtime Oakland grower, said he has
little sympathy for these growers. "Why do it? It's not legal," he
said. His operation, he said, is a by-the-book collective with
members who share the work and the costs.

Scores of applicants are expected for the four permits, which would
not be issued until January, but two businessmen who have been public
about their dreams have galvanized opponents, who resent their wealth
and recent arrival on the scene.

Wilcox declined to discuss his proposal until after Tuesday, when the
council could vote. But when he spoke last week at the committee
hearing, he appeared sensitive to the criticism. "I do not want and
never want to monopolize this industry," he said. "I think we should
open up some of these facilities for safe sanctuaries for the small-
and medium-sized growers."

Dhar Mann made a lot of money brokering mortgages and escaped before
the implosion. In January, he opened iGrow, a 15,000-foot hydroponics
superstore , pitching it as the first to cater openly to medical
marijuana growers. He also founded the University of Cannabis to
teach cultivation classes. And he continues to envision new ventures
at a rapid clip. "I really saw the pot industry as one with future
growth," he said.

Mann said he has assembled a team to design an energy-efficient
proposal for a large cultivation facility that would stack pallets of
pot plants as high as five levels.. "This is the natural next step,"
he said. "If it is not Oakland, it's going to be some other city
that's going to do it."