Concerning Cannabis

Concerning Cannabis

Story by Kirk Goble, ALC

Courtesy of The REALTORS® Land Institute

In 2012, the citizens of Colorado voted decisively to become the first jurisdiction in the world to allow legal adult possession, use, growing and retail sales of cannabis (marijuana). Colorado has had legal medical marijuana since 2000. The 2012 amendment to the Colorado Constitution (Amendment 64) also set forth retail marijuana sales rules, a taxing structure that provides for revenue to schools, public and youth education regarding cannabis and the production of industrial hemp.

Colorado became ground zero for cannabis reform and many other states and municipalities have since been looking to Colorado for guidance and example. Colorado citizens, in greater numbers all the time, have supported this groundbreaking change, and the legislature, regulators and industry have been working diligently to construct a business and legal framework within which to operate.

Cannabis reform is also sweeping the nation. Thirty-three states and the District of Columbia currently have passed laws broadly legalizing marijuana in some form, and the 2018 Farm Bill set the framework for legal industrial hemp nationwide. This movement will continue, and the Federal Government will catch up or be forced to approve and adapt in time as reform states lead the way. The latest Gallup poll on cannabis shows 66 percent of all Americans across the board support full legalization of this ancient plant. Canada has had legal hemp since the 1990s, and last year they legalized marijuana nationwide.

Colorado has managed this matter pretty well by writing good laws, monitoring the law’s status and effects and adjusting regulations as needed to mitigate unanticipated issues for regulation and law enforcement while addressing the needs of the ancient industry. The entire conversation has changed in our state—fewer talk of fears and pot jokes and more talk of business opportunity. In short order, legalization has brought about normalization. For example, in Denver proper, there are more dispensaries than Starbucks.

Retail cannabis sales in Colorado began in 2014. Last year, the adult use (recreational) sales alone topped $1.5 billion, with tax revenues of over $266 million in calendar year 2018. Since 2012, the cannabis industry has created over 2,500 new jobs in the state; jobs that are home grown (pun intended) and won’t be exported overseas.

Colorado studies have shown little impact to law enforcement due to adult use, declining use by youth under 21, increased tourism and tax revenues in excess of predictions. Appropriately, marijuana is regulated by the Marijuana Enforcement Division of the Colorado Department of Revenue, and industrial hemp is regulated by the Colorado Department of Agriculture.

Other states have recognized the futility and costs of cannabis prohibition and are beginning to realize that it is a product that is best regulated, taxed and properly controlled rather than treated as a criminal matter. Idaho, Kansas, Iowa, Texas, Nebraska, Wisconsin and South Dakota are the remaining states that have resisted cannabis reform, and several of those are either reexamining their status or have citizen-driven initiatives attempting to modernize the regulations in their jurisdictions.

Current legal retail marijuana sales in the U.S. are approximately $6 billion. With recent legalization in California and Michigan, those figures are expected to grow exponentially. The estimated total marijuana demand in the U.S. (including black market) is $50–$55 billion, which is the potential under nationwide legalization. The hemp products industry is hovering around $620 million and is estimated to exceed $5 billion by 2020. Clearly, this is an exciting growth industry with much opportunity. There are numerous impacts of the changing laws to the real estate industry, including land brokers, and it is a billion plus dollar industry that should not be ignored.

At some point, it is likely that we as real estate brokers in reform states will encounter a cannabis issue in the course of daily business. It could be an inspection issue for a home grow, a request for cannabis-appropriate properties, warehouse or retail facilities, leases, hemp production farms and processing, or a myriad of other possibilities. Whether this poses a difficulty or an opportunity, you should be aware of the rules and regulations of the industry.

Hemp and marijuana are the same plant: cannabis sativa. The cannabis plant contains over 60 compounds known as cannabinoids which are unique to the plant. Hemp is a variety of cannabis sativa that contains less than 0.3 percent of delta-9 THC (tetrahydrocannabinol), the component of cannabis that produces the high from marijuana.

Hemp has been a historically important crop and was widely used in industry prior to being made effectively illegal under the Marihuana Tax Act

of 1937 and rendered completely illegal under the Controlled Substances Act of 1971. Hemp has a long list of useful applications: fiber, cloth, paper, oils, plastics, lubricants, cosmetics, food products, bio-diesel and ethanol, insulation and building materials. It has more than 25,000 documented uses but will not produce a high. Industrial hemp was first addressed in the 2014 Farm Bill, which allowed interested states to establish programs for research of propagation, growing, utilization and marketing of hemp. The first seven states that chose to participate gained a head start in developing a robust hemp industry.

The 2018 Farm Bill, passed in December 2019, made major changes to the law:

1.  Defines hemp as any part of the cannabis plant containing 0.3% THC

2.  Removes hemp, as defined, from the Controlled Substances Act

3.  Provides that raising hemp will not impact participation in Farm Service Agency programs

4.  Provides that hemp can be included in Federal Crop Insurance programs

5.  Requires each state to propose a state plan or operate under federal rules

6.  Allows states to opt out of hemp production

7.  Allows interstate transportation of hemp and hemp products

The passage of the new 2018 Farm Bill has really energized interest in the crop; however, full codification, rule writing and promulgation and implementation of all elements of the new law will take time. Most federal rules will not be complete until the 2020 crop year, and some issues like crop insurance could take longer. Some farmers have tried hemp production and have decided to wait until the rules are clear and the markets settle before planting again. Processors are still catching up with growers, leaving some farmers with a harvested crop with nowhere to go. I always advise a producer to secure the sale before planting the seed.

The hemp plant has about a third less moisture and nutrient requirements than corn and far less, if any, pesticides. It is an annual plant that grows rapidly to a height of eight to 12 feet with large seed heads, a fibrous stalk and tap root. About 40 percent of the plant material is returned to the soil, adding organic matter. Hemp is a dicot plant with a deep tap root that improves soil aeration and water permeability, particularly in compaction prone soils. The crop is harvested for seed (used as seed stock and a source of oils and food products), fiber (for cloth, paper pulp, rope, insulation, building materials) and production of CBD (cannabidiol), a non-psychoactive substance used medically to suppress seizures, reduce anxiety, pain relief and other uses. The cannabis plant is resilient and grows well in several different soil types.

As commodity prices for traditional crops remain at 30-year lows, hemp is poised to be a viable, productive plant for continued agricultural production and has raised major interest from all sectors of the agriculture industry. Every hemp meeting for farmers that I have attended has been a standing-room-only crowd. Approximately 78,000 acres of hemp were grown in the U.S. in 2018. Of that, 70 percent was grown for production of CBD; 10 percent for grain; 10 percent for fiber; and 10 percent for other uses or crop loss. Some states have opted out of hemp production so far, including Kansas, Nebraska and Idaho. Over-exuberant and uninformed law enforcement has caused several instances of hemp transporters being arrested and detained on marijuana charges. These arrests are examples of some of the rough spots that may occur during the transition to a legal cannabis economy.

I have developed a four-hour course entitled Cannabis Country that goes deeply into the topics addressed here plus an in-depth history of cannabis prohibition, the multitude of uses of the plant, phytocannabinoids, endocannabinoids, legislation, propagation, markets and the future of cannabis in the U.S. Watch for it near you or contact me for information and scheduling. °