CANNABIS CATCH-22

As Dispensaries Look To Grow Product In County, State And County Codes
Conflict

New legislation regulating Colorado's budding medical marijuana
industry is leaving local dispensary owners and county officials in a
grey area, as dispensaries try to meet a new requirement that they
cultivate at least 70 percent of their cannabis on site or at an
"optional premises cultivation operation."

A number of Telluride dispensaries are turning to unincorporated
county land to set up these operations, which leaves the county
grappling with how to regulate grow operations.

Jeff Barnes owns Kokopelli Wellness Center on Colorado Avenue. He
recently started two grow operations in unincorporated San Miguel
County to meet the requirement that went into effect this week.

"These facilities cost tens of thousands of dollars," he said during a
county work session on Wednesday. "I have millions of dollars on the
edge of being ready to harvest."

When he went to the state's Department of Revenue, which is now in
charge of licensing and permitting dispensaries and their grow
operations, he was told he did not need county approval for the facilities.

The new law mandated dispensaries be certified with the state by
Wednesday that they meet the 70 percent requirement, but did not
require approval from the dispensary's local licensing authority -- in
this case, the San Miguel County Board of County Commissioners.

"I was told 'don't file your grow with anyone aE& keep it secret,'"
Barnes said.

However, the county requires any commercial operation to be permitted
and in accordance with its land use codes.

"If anyone is setting up a grow operation without county approval,
they are making a mistake," said County Commissioner Art Goodtimes
during Wednesday's work session. The work session was held to discuss
a number of unknowns associated with the new medical marijuana
legislation that was signed by Gov. Bill Ritter in June.

County Planning Director Mike Rozycki told a packed room of dispensary
owners, employees and other concerned citizens that the planning
department isn't looking to prohibit or ban grow operations but rather
figure out the appropriate place for them.

"We have a limited areas for business in unincorporated county," he
said.

The county currently has one dispensary approved to both sell medical
cannabis and cultivate it on site: Delilah LLC, located in the Ilium
Industrial Park. It was approved for cultivation because the park is
zoned for commercial green houses. They haven't issued a license for
the dispensary yet, but voted that it was in compliance with land use
codes, even though they never imagined what would be grown in said
green house.

Rozycki has been contacted by three dispensaries permitted through the
Town of Telluride that want to set up grow operations in the county.

"We don't know exactly how to handle this clearly and fairly for
everyone," Goodtimes said.

Even though Delilah was able to find a loophole in the code, the
county will eventually need to amend its land use codes if it wants to
permit more grow facilities. But planning officials want to wait for
more direction from the state before they go through the long process
of drafting changes, notifying the public and taking public comment on
any changes.

"With a new business opportunity, we have to go back to the land use
code and change it to allow citizens to decide if that's appropriate
aE& we've always done that with land-use changes," Goodtimes said.

Rozycki estimates that process could take three to four months, but it
will take that long or more until the state gives the county more direction.

A state task force has been assembled in Lakewood, Colo. to recommend
draft rules for local licensing requirements to the Department of
Revenue's Marijuana Division, but the group held its first meeting
just last week, and isn't expected to draft the rules until the end of
2010.

To further complicate the issue, the law makes grow facilities exempt
from the Colorado Open Records Act to help protect the cash crop that
can become the target of robbery. This makes the public notice of land
use code amendments difficult since the county can't notify the
community where grow operations want to set up shop.

Security and the safety of neighbors is a concern for the
commissioners and the county planning staff.

Barnes said his best security measure was not letting anyone know
where his facilities are located.

"The [economic] benefit outweighs any real security issues we have,"
Barnes said.

Goodtimes said the issue was finding a balance between safe and secure
neighborhoods and the economic value of such grow operations, and he
admitted it's difficult.

County planning staff and the county's attorney, Steve Zwick, will
draft temporary regulations to help permit grow operations while they
wait for local licensing authority requirements from the state task
force.

The interim measure will decide which zone districts could allow grow
operations. The temporary regulations will go before the public and
dispensary owners for input and comment before the going to
commissioners for a vote.

"The state's putting up every stumbling block it can," Goodtimes said.
"We're struggling to make it work."