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Proceed With Caution: A Warning to Tribes Wanting to Grow Medical Marijuana

A number of tribes are considering growing medical marijuana since December when a federal Justice Department memo became said they could do so.
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California’s Pinoleville Pomo Nation is poised to become the first American Indian tribe to grow medical marijuana, though investors claim at least 100 additional tribes are exploring their options.

Pinoleville is expected to break ground on a $10 million, 100,000-square-foot greenhouse within 60 days, said Barry Brautman, president of FoxBarry Companies, a group of Kansas-based operations that specialize in developing Native business enterprises.

Several other tribes may also join the marijuana industry this spring, Brautman said. He declined to name the tribes, citing confidentiality agreements, but said his company has fielded queries from more than 100 tribes—most since December when a federal Justice Department memo became public and stated that sovereign Indian nations can choose to grow or sell marijuana on tribal lands without fear of federal harassment.

“We’ve been contacted by more than 100 tribes from coast to coast that wanted to get into the business in one way or another,” Brautman said. “They have expressed interest and some are certainly actively pursuing the interest.”

In January, FoxBarry signed a consulting and licensing agreement with United Cannabis, a Denver-based consulting and production firm. The agreement allows FoxBarry to be the exclusive distributor of United Cannabis products in California. In return, United Cannabis will receive $200,000 in prepaid royalties and a 15-percent royalty payment on net sales.

FoxBarry has already committed $30 million to establish three sites in California, including the Pinoleville operation.

With more than half of the country’s 1 million medical marijuana patients registered in California, the state easily has the biggest market. It is also home to more than 100 federally recognized tribes, making it the prime location to launch tribally owned marijuana operations.

“California has the most fruitful market, but there’s opportunity in Florida and on the East Coast,” said Derek Peterson, CEO of Terra Tech, a hydroponic farming company with operations in New Jersey and California that joined the medical marijuana industry in January 2014.

“We’re finding that the best markets are large areas with dense populations,” he said. “States with big populations but struggling marijuana programs.”

Investors likely will go after tribes in states where marijuana use is restricted, Peterson said. States like Florida and New York have low supply and high demand, which could lead to lucrative ventures on tribal land.

Terra Tech is negotiating with 10 tribes or groups that are eying the market and weighing their options, Peterson said. He called investments “win-win opportunities” that allow both tribes and companies to take advantage of a unique market.

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“Tribes have sovereignty, which means a better level of safety, a better level of protection for investors,” he said. “There’s a level of uncertainty about medical marijuana right now with a presidential election coming up and a new attorney general coming. If the industry can do business with tribes, it’s a lot more stable.”

But operations like the one in Pinoleville are raising concerns among attorneys and Native groups. Medical marijuana is illegal in 27 states, and some experts fear tribes are taking unnecessary risks, which could be costly or even land tribal members in jail.

“There are lots of outside forces looking to take advantage of potential economic development in the tribal context,” said Anthony Broadman, a partner at Galanda Broadman, a Seattle-based, Native-owned law firm. “So you would expect that the outside entities are looking to help, exploit, assist, develop, incubate—all the good and bad things that happen with development in Indian Country.”

In states where medical marijuana is legal, tribes can’t afford to ignore the industry, Broadman said. But with federal, state and tribal governments involved in its regulation, marijuana is still a sticky topic.

“The DOJ memo was not a blank check to just got out and start growing weed,” he said. “If anything, regulation is going to be more robust on tribal lands.”

RELATED: What Does Marijuana Memo Mean for Hemp Production and Traditional Uses?

All eyes may be on Pinoleville as it forges its way into the industry, and Broadman cautions all tribes to act slowly.

“There’s going to be a lot of money poured into this,” he said. “That will drive a lot of poor decision-making. Tribes that are being cautious are taking the right approach.”

Walter Lamar, president of Lamar Associates, a Native-owned consulting and professional services company, also warns tribes to be cautious when considering pot. At the end of the day, marijuana is still an illegal drug, he said.

“We’re going to have to watch out for opportunists and hucksters,” said Lamar, who is Blackfeet and Wichita. “The promise of substantial revenues that are coming from this will lure some tribes into it blindly.”

The Pinoleville Pomo Nation did not respond to phone calls seeking comment. Its medical marijuana plant is expected to create between 50 and 100 jobs, with preference going to tribal members.