Medical pot price rise feared in Nevada

The situation has drawn concerns from not only the entrepreneurs who hope to make lots of money from such operations, but also from local governments that have approved applicants hoping to break into the fledgling industry.

At the heart of the matter is a state regulation that allows, but doesn’t require, the state Division of Public and Behavioral Health to limit the cultivation of medical marijuana in Nevada. The state estimates Nevada needs about 650,000 to 1 million square feet of medical marijuana cultivation space to support the needs of Nevada residents and out-of-state visitors with medical marijuana cards.

Meanwhile, applications the state has received from throughout Nevada, including Clark County, are seeking a total square footage of cultivation space roughly two to three times the state’s calculations of what’s needed.

Industry insiders and local leaders fret that a potential limit would manifest into a twofold problem: Otherwise qualified applicants will be turned away and the price of medical marijuana will be driven up artificially from limits that need not exist.

John Laub, president of the nonprofit advocacy group Las Vegas Medical Marijuana Association, said he is “completely appalled” that the state is discussing the cap and the association is “dead set against any type of limitations” on cultivation.

“Let the cultivators take the risk of having too much product out there because the opposite is that you don’t have enough product out there (and) you get price increases.”

This chapter of Nevada’s foray into the medical marijuana arena is unfinished business. Supporters of medical marijuana say the drug helps a variety of conditions such as epilepsy and glaucoma, and relieves chronic pain from cancer, multiple sclerosis and other sources. Some say it also relieves nausea.

The state will hear from the public about the issue at a Sept. 23 meeting of medical marijuana stakeholders, which includes users, potential sellers and producers and local governments.

Chad Westom, the state division’s bureau chief, stressed that the state hasn’t set a limit or made a decision yet.

“We’re not bound by that projection,” he said. “That’s just what we had calculated. We’re looking to get other perspectives from outside our organization.”

Those who believe the demand is greater should come to the meeting to give input, he said.

After hearing the comments, state staff will review the information and make a decision about whether to put a limit in place.

There are varied possibilities. The state could determine a higher square footage is a better fit, or it could simply grant certificates to all qualified applications. Another option is to limit the amount of medical marijuana produced at all facilities that qualify.

The division was unable to provide precise state-level totals of the square footage sought by applicants for cultivation facilities.

SUPPLY AND DEMAND

The issue of medical marijuana supply is complex. For example, some infused medical marijuana products need a high amount of the drug. But there also are law enforcement concerns that an overstocked medical marijuana supply in Nevada would increase the likelihood of it being slipped into the black market.

Arizona businessman Mo Asnani, who has two cultivation applications in Las Vegas and Henderson, said a statewide cap should be closer to 2.5 million square feet.

That’s because medical marijuana edibles and concentrates require a lot of raw material.

It’s also hard to project how many out-of-state cardholders will come to Nevada, he said.

“I do believe in the concept (of a cap),” Asnani said. “I just think the estimating on it needs to be a little more based on the number of patients out of state.”

Nevada has nearly 6,300 medical marijuana cardholders. The cards allow an individual to buy medical marijuana from a dispensary. State Sen. Tick Segerblom, D-Las Vegas, has estimated the number could jump to 50,000 after the dispensaries open.

Segerblom, who wrote the 2013 bill establishing the medical marijuana dispensary program, called the idea of limiting cultivation square footage “outrageous.”

“The market can decide on its own,” he said.

The state intends to score and rank the applications through October, and issue certificates in November. State officials anticipate the first dispensaries opening early next year, after the state-qualified applicants meet local requirements and inspections.

LOCAL CONCERNS

Clark County commissioners will discuss the issue Tuesday. Commissioners in June approved 58 applicants seeking to operate cultivation facilities in unincorporated areas of the county. All applicants still need state approval before the businesses can open.

The cultivation facilities are part of a quadrant of new medical marijuana businesses. The county also approved 18 dispensaries, 38 production facilities, and five laboratories that test medical marijuana.

Commission Chairman Steve Sisolak said limiting cultivation would unnecessarily drive up the price for patients. He said he favors allowing the free enterprise system to determine what the demand is.

“All that they’re doing is artificially keeping the prices of medical marijuana high by limiting cultivation,” he said.

Commissioner Chris Giunchigliani said the issue is one that will need input from the business community. She noted that the county approved all qualified applicants for cultivation facilities.

“I don’t want to do anything to drive up the cost of people’s medicine just because we set an artificial number,” she said.

Other local officials agree that letting the market determine the course of the new industry is best.

Las Vegas City Councilman Bob Coffin said it should be left up to the business owners to regulate how much medical marijuana is grown, not the state.

“I don’t know what is too much cultivation,” said Coffin, who is on a legislative subcommittee reviewing state medical marijuana laws. “You’ll always need more than you think you will. If somebody grows too much and suffers a loss, that’s on them. If there’s a dispensary that does not buy from them, that’s on them. This is all business and I don’t think the state should intrude on that.”

Greg Blackburn, director of North Las Vegas community development and compliance, said the size of the cultivation facilities the city received applications for ranged in size from 5,000 to 200,000 square feet.

“We have applicants with more square footage in North Las Vegas for cultivation than what the state wants to have statewide,” Blackburn said. “With that, it would significantly limit our revenue opportunities.”

The state has received 520 application for medical marijuana establishments, 182 of which were for cultivation facilities. As a comparison, the state received 198 applications for the 66 dispensaries available statewide.

While the state Legislature had limited the number of dispensaries, no such limit on the number of cultivation or manufacturing facilities or laboratories was given prior to the state’s licensing process. Each application came with a $5,000 nonrefundable fee, generating $2.6 million in revenue for the state.

It’s not just application fees. Many prospective business owners have already bought or leased buildings, hired attorneys and consultants, and incurred other out-of-pocket expenses.

Blackburn said many applicants knew the limit on the number of dispensaries, so in some cases they decided to go another way.

“The unfortunate thing is the industry knew the limits on dispensaries so some of them just tried to focus on cultivation,” Blackburn said. “Now after the application period they’re told there’s probably going to be a limit on cultivation so they’re very uneasy.”

Contact Ben Botkin at bbotkin@reviewjournal.com or 702-405-9781. Find him on Twitter: @BenBotkin1. Contact Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3882. Find him on Twitter: @KnightlyGrind.