MARIJUANA GOES MAINSTREAM IN SOUTHERN OREGON

Marijuana Has Been a Lucrative Underground Business in the South for
Decades, but As Pot Laws Become More Liberalized It's Become a Big
Part of the Above-Ground Economy.

The first thing you smell when you enter through the front door of
SO-NORML's offices directly next door to the James A. Redden U.S.
Courthouse in downtown Medford is some powerful skunk weed smoke,
wafting out from the medication lounge in back.

The first thing you see is an enormous potted plant on the reception
desk with a trunk about as big around as a cherry tree. It's a
marijuana plant, an impressive example of how well the weed grows in
Southern Oregon soil.

"They had to take it down with a chainsaw," says SO-NORML's
information manager Melanie Barniskis. "Sixteen pounds of medicine
were harvested off of this plant."

At $2,000 a pound, that's a $32,000 plant. The members of SO-NORML, a
nonprofit advocating for the legalization of marijuana, are quick to
point out that the pot they grow is for card-holding legal medical
marijuana patients only, with no money changing hands. They are also
quick to add that were prohibition to end, the economic opportunities
would be huge.

"It would be a modern-day gold rush," says Joshua Steensland, owner
of Healing Gardens, a Medford-based medical marijuana maintenance and
design consultancy. "An absolute gold rush."

With its famously productive soil, large swaths of remote public land
and proximity to the huge California market, Southern Oregon has
profited from a lucrative underground marijuana business for more
than 30 years. But never before has it been so clearly visible in the
above-ground economy. More than two years of recession have
devastated mainstream business, but the weed trade is stronger than ever.

One of the fastest-growing businesses in Medford is a hydroponics
superstore, thriving on a property that used to be a lumber yard. A
medical marijuana clinic in Ashland has achieved similar success next
to an abandoned rail yard and is running full-page ads and radio
slots once filled by local auto dealers. The SO-NORML offices used to
be home to a mortgage company that failed during the recession. The
landlord was so desperate for a new tenant that he gave the pro-pot
group a five-year lease at one-third the rent he charged a decade
ago, with an option to buy.

Unfortunately, the illegal side of the pot business is also
exploding. At the end of one recent trial at the federal courthouse
next door, a man was sentenced to 22 years in prison for growing
nearly 9,000 marijuana plants at a remote property in Wolf Creek
guarded by armed illegal immigrants. According to court documents,
the defendant, Henry Xavier Villa, threatened to kill witnesses to
prevent them from testifying.

"We've got a marijuana epidemic here, and nobody wants to face it,"
says Tim George, deputy chief of the Medford Police Department, who
has been with the force for over 30 years. "It's completely out of control."

Pro-marijuana advocates see it differently. They argue that not only
is marijuana a useful medicine for treating patients suffering from
cancer, HIV and chronic pain, it could also be precisely the cure for
what ails Oregon's flagging economy: a locally grown,
knowledge-intensive industry that could rival Oregon's wine and beer
industries for diversity and potential.

To a certain extent, it's already happening as pot-related businesses
sprout up all over Oregon. Eugene-based Aurora Innovations is doing a
brisk business with its Roots Organic line of nutrients for indoor
growers, selling bat guano-based "bloom stimulator" for $47.95 per
gallon. One of the indoor garden industry's leading manufacturers,
Sunlight Supply, is based in Vancouver, Wash., with a specialty in
"high-intensity discharge lighting systems." Two startups in the
Portland region, the American Medical Marijuana Seed Company and the
Oregon Medical Cannabis University, hint at further diversification,
as does the success of publications such as the California-based West
Coast Leaf, "The Cannabis Newspaper of Record," loaded with ads for
law firms, physicians and cannabis clubs.

There's even an "iPot" app for iPhone users that gives directions to
the nearest source of medical marijuana in California.

It might be tempting to dismiss the idea of a thriving mainstream
marijuana industry as a pipe dream for half-baked stoners, but the
numbers tell a different story.

According to the federal government, domestic marijuana production
has increased by a factor of 10 over the past 25 years. A 2006 study
by researcher and pot-legalization advocate Jon Gettman declared that
cannabis is the nation's most lucrative cash crop, worth $35.8
billion annually, more than corn and wheat combined. Gettman
identified Oregon as the nation's No. 10 marijuana-producing state
and one of 13 states where weed is the largest cash crop, with about
a million plants each year for an estimated value to the growers of
$474 million.

Another study, written in June 2005 by Jeffrey A. Miron, a visiting
professor of economics for Harvard University, estimates that
legalizing marijuana could save $7.7 billion per year on law
enforcement costs and bring in $6.2 billion per year in new revenues
if pot were taxed at rates similar to alcohol and tobacco. That adds
up to an annual fiscal benefit of just under $14 billion nationally.

It's impossible to verify the accuracy of marijuana trade statistics
because the plant remains illegal at the federal level. But Oregon is
at the forefront of states distancing themselves from that law and
even flaunting it. Oregon was the first state to decriminalize
marijuana in 1973, making possession of less than an ounce equivalent
to a traffic violation. Voters legalized medical marijuana for
qualifying patients through an initiative passed in November 1998.

Fourteen states allow marijuana for medical uses and Oregon's law
stands out for its generosity. Patients are allowed to possess 24
plants (18 starters and six mature) and a whopping one-and-a-half
pounds of high-grade, dried marijuana. "A pound and a half is a lot
of weed," says George. "That's a Cheech and Chong movie. All I can
say is, that's a whole lot of medicine."

Unlike several other medical marijuana states including California,
Oregon does not allow the retail sale of medical marijuana to
licensed patients through "dispensaries." Patients must grow their
own or have a licensed grower provide for them through an unpaid
arrangement. In California, by contrast, entrepreneurs have no such
limits and have followed the money with abandon, setting up pot shops
from Oakland to Los Angeles that rake in billions of dollars.

Prior to a government crackdown last fall, L.A. had more medical
marijuana dispensaries than Starbucks and McDonald's shops combined.
The business has become so mainstream in California that insurance
companies offer "cannabis industry insurance" protecting growers from
theft and liability.

The next move for California could be legalization. An initiative has
qualified for the November ballot that calls for taxing and
regulating the plant to improve the state's finances. Proponents
claim marijuana legalization would produce $1.4 billion in new annual
revenues and savings. Polls indicate strong voter support. A similar
measure to make pot legal in Oregon has been slowed by a court
challenge, but in the meantime Initiative 28, which would legalize
nonprofit dispensaries and authorize growers to be paid for their
marijuana, seems to be on its way to making the November ballot. The
initiative calls for sellers to purchase $2,000 licenses and growers
to pay $1,000. Sellers and growers would also pay 10% of gross sales
to the state. Chief petitioner Anthony Johnson, a 32-year-old
Portland pro-pot activist, says the initiative would bring millions
of dollars into state government while supporting "a lot of jobs and
a whole new blossoming industry."

Initiative opponent Dan Harmon, executive VP and general counsel for
Portland-based Hoffman Construction and chairman of Associated Oregon
Industries, counters that health and safety risks outweigh whatever
fiscal benefits might come from setting up dispensaries in Oregon.
Harmon says Hoffman does not allow medical marijuana use by employees
because a safe, drug-free workplace is crucial to the company's
success in a dangerous industry.

Of the 250 or so drug-test failures the company has documented over
the past decade following accidents, about one-third involved pot, he
says. "It's obviously an effort to make marijuana more mainstream,"
says Harmon, "and I don't think that's a good idea."

Passing through a curtain decorated with marijuana leaves at SO-NORML
headquarters, Melanie Barniskis enters a retail room stocked with
glass pipes, rolling papers and Cannabis Worm Tea, a concoction
originated by a Grants Pass entrepreneur with deep knowledge about
the power of bat guano.

"All of our pipes are made by local glass blowers," says Barniskis.
"The tools are all made by our members. We've also got folks creating
all sorts of great medibles."

Medibles are edible versions of medical marijuana. Pot brownies,
psychedelic salsa and plum jam are some of the clinic's most popular treats.

Barniskis is convinced that the key to legalization will be economic:
the money taxpayers stand to gain by taxing and regulating marijuana
and the above-ground jobs that would be created in a whole new
industry. "Twenty-two million Americans smoke weed and admit to it,"
she says. "That's quite a market." A former English teacher who
became a medical marijuana patient after prescription medications
failed to treat her neuropathy, Barniskis is no economist. But the
picture she paints of a multi-faceted cannabis economy is richly detailed.

It starts with the growers, both the outdoor farmers and the indoor
hydroponics experts, who study their plants the way vintners study
grapes. Then there are the manufacturing companies that build lights
and hydroponic systems and vaporizers, the artisans who build pipes
and bongs and the processors who convert the plant into hash for
smoking, tinctures for drinking, lotion for the skin, marinara sauce
for dinner, chocolate for dessert. There's the genetic crop research
already being done covertly and the potential for serious medical
research were a federal ban on cannabis to be lifted. The list of
possibilities goes on: marijuana-themed books and magazines and
websites; security teams to prevent theft; classes for growing,
processing and cooking with marijuana; Amsterdam-style cafes selling
specialty strains in an establishment similar to a brewpub or a wine
bar; the marketing of all of the above; and last but not least, the
mind-numbing potential for collaboration with the entertainment and
tourism industries.

"Imagine walking into a concert and there's a line on your right to
buy Bud to drink and a line on your left selling bud to smoke,"
Barniskis says, smiling. "I know which line I'd get in... Or what
about bud tours? Like the wineries do. We could drive people from one
grow site to the next and do bud tasting. That would be a hell of a
tourist draw."

Bud tours are unlikely to happen anytime soon, but several SO-NORML
members are testing the entrepreneurial waters.

"See a need, fill a need," is how Applegate Valley horse trainer
Angel Hoke describes her recent foray into creating marijuana-infused
food for cardholders and distributing them through the Green Acre
Co-Op & Organic Medible Bakery. Refining her goods through trial and
error, Hoke melts marijuana into butter or oil or else pounds it into
flour to add to her recipes. "It's been shocking how many calls I've
been getting," she says. "The demand is increasing each month. I'm
hoping it will blossom into a real business."

That's already happened for Joshua Steensland, the indoor marijuana
garden consultant. He used to run a hydroponics store in Medford next
door to a medical marijuana clinic. After years of hearing customers
beg him to come out and take a look at their plants to help them grow
better medicine, he finally went into business doing home visits for
$30 an hour to help people design and maintain healthy indoor
marijuana gardens.

As he sketches out the ideal design for an indoor garden in a
100-square foot room, Steensland thoughtfully discusses lighting,
water quality, air flow, nutrient quality and growing media in the
language of total dissolved solids and pH levels and parts per
million. He's also meticulous about costs: about $7,000-$10,000 to
build a top-rate indoor garden, plus another $400-$500 per month to
power the recommended 6,000-watt lighting system.

The amount of gear available to Steensland's clients through mail
order catalogs and hydroponics stores is jaw-dropping: $420
eight-foot light rails, $670 "Fuzzy Logic" carbon dioxide
controllers, $8,000 portable air conditioners, $25 six-ounce bottles
of odor control mists, $260 six-pound bags of "Oregonism"
super-soluble microorganisms for feeding the crop and much more. He's
hoping that liberalized marijuana laws will improve quality control
and accountability ("There's a lot of snake oil in the industry"),
while clarifying the legal position of businesses such as his.

"Once dispensaries open in Oregon, things will get a lot clearer," he
says. "People will be able to sell it and pay taxes on it and be
upfront about it. This gray area in the law is a killer."

Deputy chief Tim George is also tired of the gray area. Big time. His
three decades of service with the Medford police have convinced him
that the region is "swimming in weed" already, and it just keeps
getting worse. "People are traveling into this state with large sums
of money to buy marijuana," he says. "Weed is being shipped out of
Oregon at record levels. Medical marijuana has put more weed into the
marketplace, and made it easier for criminals to grow it." George
could not put a number on that record level.

George's drug and gang enforcement team recently collaborated with
Oregon state troopers and police from Minnesota to bust an interstate
drug ring, arresting three growers with 225 pounds of weed worth an
estimated $750,000. Another recent bust nabbed six people carrying
hundreds of pounds of weed, numerous firearms including assault
rifles and large amounts of ammunition. The homeowners charged with
running that illicit operation, Darren and Laurel Applegate, are
registered growers under the Oregon Medical Marijuana Program (OMMP).

Sgt. Erik Fisher of the Drug Enforcement Section of the Oregon State
Police says the perception that the marijuana trade is mellower than
other drug operations is wrong. "I've done a lot of search warrants
in my time, and one thing that has been striking to me is the fact
that nearly all marijuana distributors and growers I've run into
carry firearms," he says. "The other striking trend has been the
increase in home invasion robberies of the medical marijuana folks,
and how absolutely violent they can be. We have more home invasions
going on with medical marijuana people than any other drug dealer I
can think of."

In Fisher's view, loosening marijuana laws in Oregon would make the
state "an epicenter" for the diversion market, where medical
marijuana is shipped out of state and sold for black market prices.
That would create more burden for law enforcement and taxpayers, not less.

President Obama's drug czar, R. Gil Kerlikowske, holds a similar
perspective. He recently told a gathering of California police chiefs
that legalizing marijuana would "saddle government with the dual
burden of regulating a new legal market while continuing to pay for
the negative [effects of] an underground market whose providers have
little economic incentive to disappear."

Kerlikowske's conclusion: "Legalization means the price comes down,
the number of users goes up, the underground market adapts, and the
revenue gained through a regulated market will never keep pace with
the financial and social cost of making this drug more accessible."

Alex Rogers has built his business on making marijuana more
accessible. He opened Ashland Alternative Health last July in a new
building near a rail yard where the freight trains haven't moved in
years. The focus of his business is medical marijuana, and he says he
has seen steady growth and expects much more.

Working with a trio of physicians willing to recommend marijuana for
qualifying patients, Rogers and his two clinic employees charge $175
to help patients get a medical marijuana card, plus an additional
$100 which goes to the state ($20 if the patient qualifies as low
income). Revenues have been strong enough to fund an aggressive
advertising campaign starring Rogers pitching the power of marijuana
to reduce the need for prescription drugs and their harmful side effects.

A tall, lanky 38-year-old with sleepy blue eyes, Rogers is wide open
about his intention to use his business to expand the state's medical
marijuana program and to push for legalization of the drug. He first
got involved in the issue in 1994 in California, working with his
mentor, the late Jack Herer, author of the anti-Drug-War book The
Emperor Wears No Clothes. He was involved in the campaign to pass the
nation's first medical marijuana law in California and the follow-up
campaign in Oregon in 1998. Twelve years later, he finds himself
dealing daily with the practical realities of the law. He plans to
set up a political action committee to raise money for Initiative 28.

Rogers says the number of cardholder patients in Oregon held steady
at around 20,000 for years, but over the past year and a half has
nearly doubled, to over 35,000. That's about one-tenth of the number
of people he estimates could qualify statewide, based on the number
of patients who suffer from qualifying diseases and the increasing
mainstream acceptance of medical marijuana. To say that Rogers has
high hopes for marijuana is an understatement. "Imagine a cannabis
tincture mixed with Valerian root to help you sleep," he says, "or
with St. John's wort for depression, or with ginkgo and ginseng for
energy. Imagine the market for those products."

On the subject of medical research he is even more sanguine. "One of
these days it's going to come out that cannabis cures cancer, or some
form of cannabis cures some form of cancer. That is going to happen."

But for all of his over-the-top passion for all things having to do
with cannabis, Rogers makes it a point to keep his demeanor
businesslike and his clinic professional. His experiences within the
movement have taught him the importance of debunking stereotypes.
"This is a mainstream movement and needs to be represented as such," he says.

Two of Rogers' allies in the effort to mainstream the pot business
are Mike Welch, owner of Puff's Smoke Shop in Ashland, and Christine
McGarvin, a Medford resident who is writing a book about medical
marijuana in Oregon and establishing a research institute to study cannabis.

The 33-year-old Welch started his smoke shop 11 years ago with an SBA
loan. Crowded into an Ashland Street mini-mall with a computer shop,
an Allstate Insurance agency and an H&R Block, Puff's offers a wide
variety of bongs, pipes and rolling papers as well as books such as
Build this Bong, Psylocibin Mushrooms of the World and Cooking With Ganja.

A wiry, intense individual who races motorcycles and has competed in
cage fights (won once, lost twice), Welch moves quickly through the
store to offer examples of local enterprise. "We don't buy any
imports," he says. "Everything is locally produced. It takes 30 glass
blowers to keep up with the shop's demand for pipes. The art on the
window there is by artist from Portland. These bags are hand-crafted
by a single mom who lives in Ashland. There are all sorts of
industrious people in this business."

If Initiative 28 passes into law this fall, Welch is prepared to open
a dispensary in Ashland. "I've got the paperwork ready to go," he says.

McGarvin recently completed the paperwork on her project, the
Institute for Cannabis Therapeutics, based in Eugene. The newly
formed nonprofit's mission: to promote the expansion of reliable
knowledge about medical marijuana. "We hope to provide some of the
data and information that researchers everywhere want about
cannabis," says McGarvin. "The researchers can't touch the plant, but
we can because we're cardholders. Another thing we want to do is to
establish quality control and best practices in the cannabis business."

McGarvin, 50, suffers from fibromyalgia and post-traumatic stress
disorder. She had no idea how to get or grow pot when she and her
husband first became medical marijuana users in Oregon three years
ago. Now she teaches classes in cooking with marijuana and making
cannabis tinctures. As an advisory board member for the OMMP, she has
done a lot of traveling up and down the "Cannabis Corridor," as she
refers to Interstate 5, learning from people who grow and study marijuana.

"There are people in Oregon who have been developing strains of
cannabis for generations," she says. "I would correlate them with
[winemakers]. They may not be scientists but they've been working
with the land and working with this plant for a long time."

To reach Scott Averill's medical marijuana operation, you roll
through a lush valley of orchards and vineyards and wind your way up
a forest of madrona trees and Ponderosa pines to a remote Jackson
County dirt road that rarely sees traffic. Averill closes the gate
behind him, shoos off his two distinctly non-threatening guard dogs
and grins. "This is my place," he says. "My garden's right down
there. There's my bud room over there. That's my grow room."

Averill is a laid-back 57-year-old with a bushy moustache and a black
baseball cap with the label BUDTENDER printed on it. He figures he
first got interested in hydroponics about 45 years ago. "Pretty much
everybody up here grows [pot]," he says.

Averill's bud room crop of 25 or so plants is basking under 18 hours
a day of powerful electronic light, the bulbs cooled by an automated
air circulation system, the plants constantly fed liquefied
nutrients. He estimates he's invested about $10,000 in the equipment
for the room (the bulbs alone are $200 apiece).

"I've got five or 10 strains going in here," he says. The plants are
marked by name: Power Skunk, Northern Lights, even two named Church
and God. The plants are looking a bit yellow from a spider mite
infestation Averill's been battling, but he's confident they will
produce good medicine. "Our quality up here is unbelievable," he says.

Over in a separate room, Averill has planted clippings from promising
mother plants that will become the next generation of plants, to be
transferred to the bud room or planted in the outoor garden.

Downhill from his indoor gardens is the fenced outdoor garden where
Averill plans to grow the 36 mature marijuana plants allowed for
himself and five other cardholders.

As he describes the garden he is planning, Averill beams with
expectation. The tricky part will come when the plants mature. His
soil is so productive that it will be challenging to keep within his
harvest limit of 1.5 pounds per patient.

Averill is aware of the potential value of his crop on the black
market. He figures good Southern Oregon weed can bring $500 an ounce
in California or $5,000 a pound when sold in larger quantities. But
he says he has no intention to divert his medicine to feed
California's demand. "I'm not in this to get rich," he says. "I just
want to get it to people who need the medicine... We want to get
money back to the state by paying taxes."

Given the depth of California's fiscal crisis, voters may have a hard
time this November rejecting a potential $1.4 billion boost from
entrepreneurs clamoring to be taxed heavily. No one has yet produced
a study specific to Oregon, but given that Oregon's economy is about
one-tenth the size of California's and the rate of marijuana use is
similar, it's possible to estimate that Oregon could gain $140
million per year by taxing and regulating marijuana.

Polling conducted by Portland-based Grove Insight for proponents of
Initiative 28 found that support is strong among younger voters, with
69% of likely voters under 50 saying they would vote for medical
marijuana dispensaries.

But it remains to be seen how much state-by-state tinkering with pot
laws the federal government will allow. "I think the marijuana
advocates are wasting their time," says AOI's Dan Harmon. "There's a
huge constitutional issue with what they are trying to do. They are
going to find out that the state cannot legally tax and regulate marijuana."

The federal government may never back down on marijuana prohibition,
but it may not need to. In a 7,600-word article titled "How marijuana
became legal" that ran last September in Fortune magazine, senior
editor Roger Parloff shows that states with medical marijuana laws
are already leading a national policy shift away from prohibition.
The Obama Administration's pledge not to interfere with state medical
marijuana laws essentially returns the policy choice to the states,
much as the 21st Amendment allowed states to get around the national
ban on alcohol in the 1930s.

The end of alcohol prohibition enabled all sorts of economic
development in Oregon, from the billion-dollar wine industry to the
$2.25 billion statewide economic impact of the beer industry. The end
of marijuana prohibition could have similar potential, given how much
money already changes hands in spite of the persistent threat of
arrest and prison time. Maybe one day Oregonians will brag about
Purple Urkle and Afghani Bull Rider with the same passion they
reserve for Willamette Valley Pinot Noir and Shakespeare Stout, and
state officials will hold up Oregon's quirky cannabis industry as a
source of local pride.

It may be hard to imagine such a day, but if California becomes the
first state to legalize pot this fall, Oregon would seem a strong bet
to be the second. Opinions vary widely on whether ending marijuana
prohibition would bring disaster or diversification. It probably
won't be long before the debate is no longer theoretical.