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JUNE-JULY 2018

Standing out from the crowd

SUN GOD MEDICINALS ENTOURAGE EFFECT CANNA COUNCILOR A LOOK INSIDE A LAB CBD: NEW OREGON GOLD RUSH


FEATURES Volume 1, Issue 3

PUBLISHER

Steven Saslow

EDITOR

David Smigelski dsmigelski@rosebudmedia.com

PHOTOGRAPHERS Jamie Lusch, Andy Atkinson

GRAPHIC DESIGN Brian Fitz-Gerald

CONTRIBUTING WRITERS

Caroline Cabral, Rick Cipes, John Darling, Liz Gold, Damian Mann, Annette McGee-Rasch, Jinny Neiswanger, Jefferson Reeder

ADVERTISING

Athena Fliegel, Specialty Publications & Events Manager 541-776-4385

SUBSCRIPTION SERVICES

For subscription services, call 541-776-4455. Southern Oregon Good Herb is published bi-monthly by Rosebud Media, P.O. Box 1108, Medford, OR 97501. Phone: 541-776-4411. Copyright 2018 by Rosebud Media. All rights reserved. Reprinting in whole or in part is expressly forbidden without written permission from the publisher.

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RICK CIPES Straight Dope

QUICK TOKES Cannabis briefs

RECIPE: CHICKEN POT POT PIE Cooking with cannabis

CANNABIS DUII One toke over the line

HEMP IS HOT CBD is the new Oregon gold rush

RECREATIONAL MARIJUANA Need weed? Call the Canna Councilor

CANNABIS TESTING A look inside a lab

CANNABIS BRANDING Standing out from the crowd

WHOLE PLANT MEDICINE ‘Entourage effect’ doesn’t refer to the HBO show

SUN GOD MEDICINALS A place in the Sun

CANNABIS COMMERCE Forget about a federally subsidized loan

Rosebud Media LLC assumes no responsibility for any claims or representations in this magazine or in any advertisement. All materials contained within are for educational purposes only and intended for legal marijuana operations where allowed by state law. Rosebud Media does not encourage the illegal use of any of the products contained within.

ON THE COVER: Photo illustration by Brian Fitz-Gerald

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

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Illustration: Paul Bunch Source: Oregon Liquor Control Commission

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Straight Dope

THE

T L U C The Dude

MARIJUANA

of

BY RICK CIPES

always came down to the beach in his orange robe, love beads and sandals, his guitar strung over his back, and a look of “lost bliss” on his face. He was typically after our weed. I thought about him recently after watching the six-part documentary “Wild, Wild Country” on Netflix. The doc was about the followers of the Bhagwan Shree Rajneesh, who migrated to a small town in Oregon in the ‘80s and tried to set up a new home for themselves. I learned shortly after watching that the Dude was a member of the Rajneeshies. One of my criticisms of the documentary is that it never specifically laid out what attracted the Dude, and thousands of followers, to the Bhagwan. What did the Bhagwan offer that was so irresistible? And why do people go batshit-crazy-obsessed over one specific thing, whether it be a guru, a sports team or the most awful politician in history? Can’t almost anything popular, in some sense, be classified as a cult? These cults have one thing in common: devoted followers who hold steadfast to their target of adoration, come hell or high water. They have drunk the punch, so to speak. Or, for the purposes of Straight Dope, they have smoked the weed. The Cult of Marijuana is at a tipping point: sliding down the slippery slope from hipster counter-culture drug to country-wide gold rush. No transition to the mainstream ever goes smoothly, and that is especially true for pot, with the Feds a major thorn in the side of state’s rights. Another thorn, I believe, are many of the

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original weed cult members, who think weed can do no wrong, cure anything and everything, and have always flipped the bird in the direction of the establishment. But now, that establishment is curious to get in on the game, and the legalization movement needs them to help legitimize the vast potential of the drug, both medically and economically. As an example, I refer to many in the cult who spend an inordinate amount of time taking bong hits for their quarter of a million YouTube, or Instagram, followers. That kind of behavior doesn’t exactly represent the tremendous potential of marijuana. It’s just another “head” fawning over someone with vast lung capacity — or horn-dogging over a scantily clothed, tatted gal displaying 101 different ways to blow a smoke ring and look skanky. This “stoner” stereotype feeds right into Attorney General Jeff Sessions’ Propaganda Machine, which starts with “Mr. Magoo” claiming: “Good people don’t smoke Marijuana.” Let’s prove the backassward, blind folks like Sessions wrong. What appealed to us originally about the Cult of Marijuana was the escape it provides. But now, the stakes are so much higher. And in order to reach critical mass, we no longer need to be hopping around in an orange robe chanting the Gospel of our Chosen One. We need to put on a business suit and prove to the nonbelievers that good people DO smoke Marijuana — and we’re here to stay. Rick Cipes has written for more than 40 publications including L.A. Times, Playboy and ESPN Magazine. Visit his dope 420 T-Shirt Collection at www.420tsc.com. 

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Cannabis Briefs

Quick Tokes Ganja Goddess Getaway

Ganja Goddess Getaway, a 3-day, 2-night retreat for women focusing on ways to use cannabis as a creative tool and spiritual medicine, will hold an event this summer at Smoke on the Water resort at Lake Selmac. The outings are held four times a year in California, and the event at Lake Selmac is the first event held outside of California. “Our intention is that each goddess leave the Getaway renewed and refreshed and ready to be the best version of herself,” according to a press release from organizers. The outing, scheduled for Friday-Sunday, July 13-15, costs $210. For details, see www.ganjagoddessgetaway.com/shop/ lake-selmac-oregon. 

Weed gets recreational cannabis

Weed, California, the city with the best name in the U.S. for legal cannabis, will now allow recreational pot sales. After California went legal last year, the Siskiyou County town of Weed, located an hour south of the Oregon border, decided to start slowly, allowing only medical marijuana sales. But after seeing that the sky didn’t fall and comets didn’t strike cities that allowed recreational sales, Weed City Council voted April 12 to loosen up and get with the spirit of legalization. The town has two medical dispensaries across the street from each other on Main Street. La Florista, 242 Main St., opened for business in mid January, and Canna Trading, 241 Main St., opened in April. 

Medford police halt cannabis delivery

In the April issue of Good Herb, we featured Emerald Triangle Dispensary, 246 E. 10th St., the only dispensary in Southern Oregon we could find that was offering cannabis delivery services. After the article published, Medford police Code Enforcement officers paid the store a visit, saying cannabis delivery violated city codes. Medford police Cpl. Tom Venables emailed us the relevant code: “10.839 Marijuana-Related Businesses,” which says, in part, “All marijuana-related businesses will conduct operations inside secure, enclosed structures. No production, processing, storage or sales may be conducted out of doors.” Police are saying that delivery sales are “conducted on their consumers front porch/steps and not in a enclosed structure,” Venables wrote. The store has spoken to Medford City Council about the matter, but as of late May, deliveries from the store have been put on hold. 

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Medford cannabis company third-largest in Oregon

Grown Rogue, a Medford-based cannabis company featuring a wide range of products, was listed in April as the third-largest cannabis business in Oregon by Portland Business Journal. The company, which has two outdoor grow facilities and one indoor operation, has 45 employees, the publication said. The largest cannabis company was identified as Golden Leaf Holdings, a “vertically integrated cannabis company” in Portland with 165 employees. The second-largest was Cura Cannabis Solutions, a Portland-based company with 285 employees that provides cannabis oil to both consumers and companies. 

Cannabis workers need permits

Did you know you have to pass a test to get a job at a cannabis business? Actually, to be accurate, you have to get a state-issued permit to work at a cannabis business in Oregon, and to get a permit you have to pass an online test — and pay $100. The test contains 30 multiple choice and True/False questions, such as: Which of the following is true? A) A visibly intoxicated person can purchase marijuana as long as they are not driving B) You must be 18 to purchase cigarettes or marijuana C) Customers can consume marijuana at a retail recreational marijuana business D) You must be 21 years or older to purchase recreational marijuana. If you are sick or have an open wound it is OK to be handling marijuana. True or False Who should not be sold marijuana? Choose one answer: A) Minors B) Visibly intoxicated customers C) Elderly customers D) A & B A score of 70 percent or better is needed to pass the test. 

OLCC stiffens penalties for underage sales At the end of January, the Oregon Liquor Control Commission increased the penalties for marijuana retailers who sell marijuana to minors. The rule includes a provision to revoke a person’s marijuana worker permit if they intentionally sell marijuana to a minor. A first-time offense for unintentional sale of marijuana to a minor increased to a 30-day license suspension or a fine of $4,950. Previously the penalty was a 10-day license suspension or a $1,650 fine. OLCC stiffened the penalties after it ran some decoy operations around the state and caught stores selling to minors. “There’s no margin for error on making sure that marijuana doesn’t get in the hands of minors — period,” said Paul Rosenbaum, OLCC Commission Chair. “The integrity of Oregon’s regulated system depends on industry compliance across the board.” The temporary rule will be in place for six months. Af-

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

ter that, OLCC will re-evaluate the situation. The penalties for multiple violations also increased. Two violations in a twoyear period would result in an automatic 30-day license suspension; three violations in a two-year period would result in license revocation. “It’s our core mission at the OLCC to prevent the sale of marijuana to minors,” said Steve Marks, OLCC executive director. “The early results are unacceptable, and we’ll keep holding retailers and their employees accountable until they get it right.” 

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Cooking with Cannabis Recipe and photos by JINNY NEISWANGER

CHICKEN POT POT PIE This pot pie is a comfort-food classic and favorite in my Canna kitchen. Enjoy!

Ingredients: 1 box Pillsbury dough pie crust ½ pound boneless chicken, cut into bite-size pieces 1 large russet potato 2 tablespoons of cooking oil (sunflower or coconut oil preferred) 1 cup small mixed baby potatoes 1 (32-ounce) container of chicken stock/broth 2-3 tablespoons of milk ¼ tablespoon of butter 1 cup baby carrots or sliced carrots 3 celery stocks 1 cup fresh peas 1-2 tablespoons of canna butter (*see note on canna butter below) 1 ounce poultry gravy mix Salt and pepper, to taste

How to make Canna Butter with a Magical Butter machine

Canna Butter ingredients: ¼ to ½ ounce (7 to 14 grams) decarboxylated botanicals per cup of butter 2-5 cups unsalted, softened butter (Kerrygold pure Irish butter preferred) Important: Minimum is 2 cups/475 ml. Maximum capacity 5 cups/1180 ml. Do not use margarine or water. 1 tablespoon lecithin per cup of butter.

Directions: Place the ingredients into your Magical Butter machine, and secure the head. Press the temperature button and select 160°F/71°C. Then press the 2 Hours/Butter button. After the cycle is complete, unplug the unit and remove the head of the appliance. Put on the glove that’s provided with the appliance, and pour the contents slowly through the supplied filter into Magical Butter trays, formed molds, or other storage container.

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Directions: Preheat oven 425 degrees. Measure ½ cup of the chicken stock and set aside. Cut the russet potato into quarters and boil in water, reduce heat to medium and cook until potato is soft. Drain water. In a mixing bowl, add ¼ tablespoon butter and 2-3 tablespoons of milk to the russet quarters and whip. Cut baby potatoes in half. In a small frying pan, add 1 tablespoon of cooking oil, baby potatoes, a dash of salt and pepper to taste, and ¼ cup of the chicken stock. Cook on medium heat for 10 minutes, covered, then uncover and cook an additional 5 minutes to brown. Pour the remaining chicken stock into a medium sauce pan. Add 1 cup sliced carrots or 1 cup baby carrots and 3 celery stocks sliced into bite-size pieces. Bring to a boil and reduce the heat to medium. Cook until carrots are soft, about 7-9 minutes. Strain the remaining stock into a bowl for gravy. Cut ½ pound of chicken into bite-size cubes. In a saucepan, add 1 tablespoon of cooking oil, dash of salt and pepper, and ¼ cup of chicken stock. Heat on medium-high heat, then cover and reduce heat to medium for 7-10 minutes or until chicken is cooked through and tender. In small sauce pan, add 1 cup of the remaining chicken stock and 1 ounce of poultry gravy mix. Add 1 to 2 tablespoons of canna butter depending on your tolerance. Stir, and bring gravy to a light boil, then pull pan from heat and cool. Line bottom of 9-inch pie pan with the pie dough. Add an even layer of mashed potatoes, then add baby potatoes, chicken cubes, carrots, celery and fresh peas. Pour chicken gravy over the pie filling and cover with the top pie dough. Seal the sides with fingers or a fork, and slice the top of the pie crust to allow it to breathe as it bakes. Bake for 25 minutes at 425 degrees or until the crust is a golden brown. Note: For best results do not pre-grind botanicals. Adjust botanical weight according to personal preference. Magical Butter machines can be purchased online from numerous retailers for about $150, and a quick Google search will turn up many reviews and videos that explain how to use the machine to make canna butter, infused oils, soups and other foods using cannabis, as well as other medicinal and culinary herbs. Other companies make similar appliances, but you don’t have to use a machine to make canna butter.

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


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Cannabis DUII

ONE TOKE over the line BY JEFFERSON REEDER

How do police spot stoned drivers? 12

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


Everyone agrees

that driving while stoned is a bad thing. After that, however, it’s hard to get a consensus. What constitutes driving while high? What are the legal standards for a marijuana DUII? And how big of a problem is it? Chelsea Jones, Jackson County deputy district attorney, says she couldn’t provide specific data about the number of marijuana DUIIs because “marijuana is lumped in with other controlled-substance driving violations.” Medford police Sgt. Trevor Arnold, a drug recognition expert, says, “I’ve not personally seen an increase.” Studies in Colorado and Washington seem to track with Arnold’s experience here. A report cited in TIME magazine by the Colorado State Patrol shows that in the first quarter of 2017, the number of marijuana DUIIs dropped by 33.2 percent from the same period in 2016. Washington state data tallies with the Colorado stats. Paul Loney, a lawyer and founder of Loney Law Group, which specializes in, among other services, defense in marijuana DUII, says he hasn’t seen “anything new” since legalization. “It has always been out there,” he says. These observations about the extent of marijuana-impaired driving — from people involved in DUII enforcement — seem to be good news, but one stoned driver on the road (or in your neighborhood) is one too many. And here is where it gets more complicated for police. Marijuana DUIIs are problematic for law enforcement, because there is no straight-across test for it like there is with alcohol.

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

Breathalyzers don’t work for somewhat technical reasons, and urine tests will show a presence of THC in the system, but because THC is stored in fat cells, it can stay in your system much longer than alcohol, so urinalysis won’t say when a driver smoked cannabis or whether he is currently intoxicated. Some states (six at this point) use a blood-THC test, but this is controversial because there is no agreed-upon, standardized amount that guarantees impairment. It appears that Oregon is not going there. In a recent DUII legislative report, the Oregon Liquor Control Commission said it is recommending against a per se blood-THC limit. “Due to restrictions on cannabis research and limited data, it is difficult to make definitive statements about the risk of THC-intoxicated driving,” the report says. “The body of evidence that does exist indicates that while attitudes toward driving after marijuana use are considerably more relaxed than in the case of alcohol, the risk of crashes while driving under the influence of THC is lower than drunk driving. Little evidence exists to compel a significant change in status quo policy or institute a per se intoxication standard for THC.” In addition to testing complications, there are other issues with marijuana testing and enforcement for drivers. As anyone familiar with cannabis knows, the same amount can affect people very differently. Edibles and smoking can have different effects, while gender, percentage of body fat, and experience of use are also factors.

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How Marijuana DUII Enforcement Works in Oregon With all these chemical tests problematic and inconsistent, Oregon police rely on an old-school method for enforcement: Observation. Here’s how it works: A policeman might observe a driver behaving erratically, such as making abrupt lane changes, speeding or the perennial driving with headlights off. Then there are other issues that can lead to a traffic stop, such as expired plates or a broken taillight. The officer will interview the driver and look for clues of intoxication — in the case of marijuana, those could include red eyes, inappropriate laughter, even candy wrappers all over the front seat, says Sgt. Arnold. “It’s a fact that marijuana use stimulates appetite,” he says. “So it is very common to observe food wrappers and containers in the cars we stop.” If an officer suspects impairment, he or she will apply a field sobriety test. If a Breathalyzer test is taken and there is a lack of alcohol or a very low level in the system, but there are still signs of impairment, the observations go to the next level. This is the where the drug recognition expert comes in. A DRE is a trained impairment observer who has gone through a standardized training program and uses a standardized protocol. Arnold is a certified DRE instructor and regional coordinator. He says there are 25 DREs in Jackson and Josephine counties. “When I pull over someone on suspicion of DUII, they always tell me they’ve had two beers,” he says. “When I pull someone over for suspicion of driving under the influence of marijuana, they always say they’ve had just one joint.” DREs use a 12-step process to examine a DUII suspect, including an interview with the arresting officer, a preliminary examination, an eye examination, vital signs and pulse checks, divided attention tests, dark

room evaluations (this checks on pupil size), the suspect’s statements and other tests and observations. It took many years to come up with a national standard for drunken driving, so it’s only natural that testing, education and standards for marijuana DUIIs will take a number of years to evolve into some sort of standard. This doesn’t factor in the states that don’t yet have legal marijuana. “The problem I find is that cannabis relaxes your inhibitions and makes you think it’s safe to drive, which is the same thinking as people drinking have,” says Arnold. “I would say that if you’re feeling the effects, don’t drive.” The best thing you can do is to drive sober, and the problem goes away by itself. If you do feel under the influence, and you must go out, call a taxi, Uber or Lyft, or find a sober friend to drive. Sometimes it’s better to simply go for a walk, or stay in and watch a movie, or as Loney suggests, read a book. Jefferson Reeder is a freelance writer living in Medford. Reach him at jeffersonreeder@hotmail.com. 

Expanding With The Nation In CBD Processing www.innovativeseparations.com info@Innovativeseparations.com Central Point

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SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


Hemp is Hot

CBD is the new Oregon gold rush BY GILLIAN FLACCUS

Cannabis growers are turning to hemp as the market for CBD extract explodes 16

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A hemp plant is pollinated at the Unique Botanicals facility in Springfield. AP PHOTO / DON RYAN

A glut

of legal weed is driving Oregon pot prices to rock-bottom levels, prompting some nervous growers to start pivoting to buzz-free hemp to make ends meet. “Word on the street is everybody thinks hemp’s the new gold rush,” said Jerrad McCord, who grows marijuana in Southern Oregon and just added 12 acres (5 hectares) of hemp. “This is a business. You’ve got to adapt, and you’ve got to be a problem-solver.” Applications for state licenses to grow hemp — marijuana’s non-intoxicating cousin — have increased more than 20-fold since 2015, making Oregon No. 2 behind Colorado among the 19 states with active hemp cultivation. The rapidly evolving market comes amid skyrocketing demand for a hemp-derived extract called cannabidiol, or CBD, seen by many as a health aid. In its purified distilled form, CBD oil commands thousands of dollars per kilogram, and farmers can make more than $100,000 an acre growing hemp plants to produce it. That distillate can also be converted into a crystallized form or powder. It’s a problem few predicted when Oregon voters opened the door to legal marijuana four years ago. Oregon large population of expert growers produced bumper crops, but under state law, none can leave Oregon. That, coupled with a decision to not cap the

number of licenses for growers, has created a surplus. Oregon’s inventory of marijuana is staggering for a state its size. There are nearly 1 million pounds (450,000 kilograms) of usable flower in the system, and an additional 350,000 pounds (159,000 kilograms) of marijuana extracts, edibles and tinctures. These figures do not include backyard bud grown by home gardeners. The Oregon Liquor Control Commission, which regulates the industry, says some of the inventory of flower goes into extracts, oils and tinctures — which have increased in popularity — but the agency can’t say how much. A comprehensive market study is underway. Yet the retail price for a gram of pot has fallen about 50 percent since 2015, from $14 to $7, according to a report by the Oregon Office of Economic Analysis. Several cannabis stores in Southern Oregon regularly advertise flower for $3 a gram. Growers and retailers alike have felt the sting. “Now we’re starting to look at drastic means, like destroying product. At some point, there’s no more storage for it,” said Trey Willison, who switched his operation from marijuana to hemp this season. “Whoever would have thought we’d get to the point of destroying pounds of marijuana?” That stark prospect is driving more of Oregon’s mari-

The first rendering from hemp plants extracted from a super critical CO2 extraction device on its way to becoming fully refined CBD oil spurts into a large beaker at New Earth Biosciences in Salem. AP PHOTO / DON RYAN

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Trevor Eubanks, plant manager for Big Top Farms, readies a field for another hemp crop near Sisters. AP PHOTO /GILLIAN FLACCUS

juana entrepreneurs toward hemp, a crop that already has a foothold in states like Colorado and Kentucky and a lot of buzz in the cannabis industry. In Oregon, the number of hemp licenses increased from 12 in 2015 to 353 in May. Colorado and Washington were the first states to broadly legalize marijuana. Both have seen price drops for marijuana but not as significant as Oregon. Like marijuana, the hemp plant is a cannabis plant, but it contains less than 0.3 percent of THC, the compound that gets people high. Growing industrial hemp is legal under federal law, and the plant can be sold for use in things like fabric, food, seed and building materials. But the increasing focus in Oregon is the gold-colored CBD oil that has soared in popularity among cannabis connoisseurs and is rapidly going mainstream. At least 50 percent of hemp nationwide is being grown for CBD extraction, and Oregon is riding the crest of that wave, said Eric Steenstra, president of Vote Hemp, a nonpartisan organization that advocates for pro-hemp legislation. “There are a lot of growers who already have experience growing cannabis, and when you’re growing for CBD, there are a lot of the same techniques that you use for growing marijuana,” he said. “Oregon is definitely a hotbed of activity around this.” Workers assemble pre-rolled joints of hemp flower containing CBD at Unique Food Works, a state-licensed hemp handling facility in Salem. AP PHOTO / GILLIAN FLACCUS

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continued on page 20

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ABOVE: Trevor Eubanks, plant manager for Big Top Farms, shovels dried hemp as branches hang drying in barn rafters overhead at a production facility near Sisters. RIGHT: Pollen is removed from a hemp plant at the Unique Botanicals facility in Springfield. AP PHOTOS / DON RYAN

continued from page 18 CBD is popping up in everything from cosmetics to chocolate bars to bottled water to pet treats. One Los Angeles bar sells drinks containing the oil, massage therapists use creams containing CBD, and juice bars offer the stuff in smoothies. Dozens of online sites sell endless iterations of CBD oils, tinctures, capsules, transdermal patches, infused chocolates and creams with no oversight. Proponents say CBD offers a plethora of health benefits, from relieving pain to taming anxiety. Scientists caution, however, that there have been very few comprehensive clinical studies of how CBD affects humans — mostly because the U.S. Drug Enforcement Administration still considers cannabidiol extract off-limits, and the government requires special dispensation to study it.

Pre-clinical studies have shown promise for treatment of chronic pain, neuro-inflammation, anxiety, addiction and anti-psychotic effects in animals, mostly rodents, said Ziva Cooper, an associate professor of clinical neurobiology at Columbia University who focuses her research on the therapeutic potential of cannabis and cannabinoids. The U.S. Food and Drug Administration next month could approve the first drug derived from CBD. It’s used to treat forms of epilepsy. Christina Sasser, co-founder of Vital Leaf, isn’t waiting for government action to market CBD products in stores and online. She sells about 500 bottles of Oregon-sourced CBD oil a month and ships only to customers living in states with state-run hemp pilot programs, to better avoid the possibility of legal trouble.

continued on page 22

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TOP: Maxwell Reis, beverage director, adds drops of CBD extract to a mixed drink at the Gracias Madre restaurant in West Hollywood, California. AP PHOTO / DAMIAN DOVARGANES MIDDLE: Products containing CBD on display at Unique Food Works, a state-licensed hemp handling facility in Salem. AP PHOTO / GILLIAN FLACCUS BOTTOM: Karen Rhodes with her elder dog Ransom as she displays the hemp-derived CBD supplements she gives him, at her home in Seattle. AP PHOTO / ELAINE THOMPSON

continued from page 20 “Everybody in the CBD world has recognized the risks involved, and I would say the vast majority of us really believe in the power of the plant and are willing to operate in this, sort of, gray area,” she said. Willison was selling marijuana clones to pot startups when he realized last spring he was selling way more clones than Oregon’s market could support. The two-story building where he grew 200 pounds of weed a month sits nearly empty, and a greenhouse built to expand his pot business is packed with hemp plants instead. He breeds hemp plants genetically selected for their strong CBD concentration, harvests the seeds and extracts CBD from the remaining plants that can fetch up to $13,000 per kilogram. His future looks bright again. “The (marijuana) market is stuck within the borders of Oregon — it’s locked within the state,” he said, as he took a break from collecting tiny grains of pollen from his plants. “But hemp is an international commodity now.” Flaccus is a member of AP’s marijuana beat team. Follow her on Twitter at https://twitter.com/ gflaccus . Follow complete AP marijuana coverage: https://apnews.com/tag/LegalMarijuana. 

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Recreational Marijuana

Need weed? Call the Canna Councilor BY DAMIAN MANN

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SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


Cherry Vanilla Cookies strain of weed for sale at Oregon Farmacy in downtown Medford. PHOTOS BY ANDY ATKINSON

Clay Bearnson

is a pretty laid-back guy, and at first blush you might find his hip, bluesy gift for gab disarming. Cross swords with him by spouting outdated ideas about marijuana, however, and you’ll see another side to the Medford city councilor and owner of Oregon Farmacy, a cannabis store in downtown Medford. The only known city councilor in the state to own a marijuana store, 42-year-old Bearnson has been vocal in trying to push a reluctant Medford City Council to relax rules about pot, which last year decided to make it illegal to grow in backyards inside the city limits. On the ongoing council debate about a loophole in the backyard grow ban that allows growing pot in greenhouses, he said, “It’s like a hemorrhoid that flares up every fall.” When the council devised rules for recreational marijuana stores in the city, police and some councilors expressed concern that it could bring more

Clay Bearnson grabs a jar of Gillz Nilz, his personal favorite strain of flower, at Oregon Farmacy in downtown Medford.

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

crime to the city. Bearnson said the fears were unwarranted. “Crime hasn’t increased,” Bearnson said. “The sky hasn’t fallen.” Not only does Bearnson own a cannabis store, he’s also well known in the community for his other business, Gypsy Blues Bar. Lately, though, he’s been hanging out at his spacious cannabis store on Evergreen Way, between Main Street and Sixth Street, which has sandwich-board signs situated off the sidewalks to help guide customers to the front door. Inside, he’s got jars of flowers, edibles and other popular products. On the walls he hangs posters, including one referencing the propaganda film “Reefer Madness.” When customers come into the store, Bearnson has a no-BS attitude about selling product. He points to two edibles on the shelf that have the same amount of THC, but one costs $20 and the other $40.

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Despite the market problems, Bearnson said he thinks state and local officials are beginning to see that the problems they imagined with legalization haven’t come to pass. 28

Front entrance of Oregon Farmacy in downtown Medford.

“Which one would you pick?” he says. Like every cannabis store in the state, Bearnson’s displays the percentage of THC, the active ingredient in products, next to jars of flowers. But he’s not buying the numbers. “I think it’s complete bull****,” he says. Bearnson said he’s got strains with low THC that produce a bigger buzz than strains with higher THC numbers. Cookies ‘n’ Cream has 24.11 percent of THC and is “OK,” according to Bearnson. Chee Dawg, at only 13.95-percent THC, is altogether different. “It does the trick,” Bearnson said. He said the problem with testing for THC in flower isn’t with the labs but has to do with the random sampling of flower that is then averaged to come up with a percentage. Still seeing a strong demand for flower, Bearnson said he’s got an assortment of potent products, some of which may not be suitable for beginners. Some newer items on the shelf include Moon Rocks, which are infused flowers that have a whopping 50-percent THC and is recommended for advanced cannabis users.

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


Rosin Rolls, which are pre-rolled cannabis infused with kief and extract, also pack a significant THC punch. “It’s for Friday nights,” says Bearnson. While extracts are big sellers, Bearnson said he still has a fondness for flower. Gillz Nilz, produced by local company Zen Pharms, has a 26-percent THC content and is known for its euphoric, happy high. It is one of his top sellers, he says. Cannibinoil, or CBD, has attracted a lot of attention recently. Even though CBD doesn’t get you high, it’s widely touted to help with pain and inflammation. “CBDs are the new gateway drug,” Bearnson quips. Usually happy to talk to customers to help educate them, Bearnson said it can be frustrating. After all, he’s trying to run a business. “A minor sale could be the result of a 20-minute conversation,” he said. “What’s hard to believe is a 20-minute conversation without a sale.” He said he gets customers of all ages, as long as they are 21 or older, who enter the store. They’re greeted with an array of flower and other products, including soft drinks and chocolate bars with THC. “There’s a lot of 55-and-olders who are trying for the first time and for the

first time in a long time,” he said. Bearnson opened his store in May 2016, the third medical dispensary in the city. The store sells both recreational and medicinal marijuana. Since then, two dozen stores have opened in and around Medford providing lots of competition. “The saturation of the market is in full effect,” Bearnson said. This is when Darwinism comes into play.” Despite the market problems, Bearnson said he thinks state and local officials are beginning to see that the problems they imagined with legalization haven’t come to pass. Previously, the only way you could buy cannabis legally was if you had a medical marijuana card. Bearnson said he, like a lot of Oregonians, are confident that cannabis is here to stay. According to the Oregon Health Authority, the number of medical marijuana cardholders was 9,066 in Jackson County in January but had dropped to 6,741 by April. Bearnson just paid to register himself as a medical marijuana patient. “I hope it’s the last time,” he said. You can reach reporter Damian Mann at 541-776-4476 or dmann@rosebudmedia.com. Follow him on www.twitter.com/reporterdm. 

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Cannabis Testing

A look

inside a lab

When you get high,

BY DAMIAN MANN

you don’t want to get poisoned. And the only way to make sure you’re not sucking up any toxic pesticides or solvents is to have cannabis tested. MW Labs, at 724 S. Central Ave., Medford, is one of 22 accredited labs throughout the state that give you the skinny on weed before it’s consumed. If you go to a store and the Dragon OG says it has 30 percent THC, that percentage has been verified by a lab. Wendy Wen, owner of MW Labs, collects samples from local growers and analyzes them for 59 pesticides as well as THC levels. For cannabis oils, she tests for pesticides, potency and solvents, which are used in the extraction process. “It took a year for me to establish the method and the assay,” says Wen, who has degrees in chemistry and computer science. “I think that is why there aren’t many people with labs.” All cannabis sold in stores must be tested, according to regulations established by the Oregon Legislature, the Oregon Liquor Control Commission and the Oregon Health Authority. OLCC conducted a four-day audit of MW’s procedures and equipment last July. She finally went live with her lab last October and is now able to process 100 samples a day. MW is able to test for pesticides and solvents, which only about half the labs in the state have received accreditation to analyze. Samples are tested for minute concentrations of pesti cides such as pyrethrins, which attack the nervous system

30

of insects. Labs look for concentrations of anywhere from 0.2 parts per million to 2 parts per million, depending on the pesticide. “Anything over the limit, they fail,” says Wen, who adds she doesn’t consume cannabis products. The $290 testing package at Wen’s lab looks for pesticides, potency and moisture content. Cannabis oil testing costs $325 and looks for potency, pesticides and residual solvents. Not only is running a lab complicated, but you’ve got to know how to operate and repair mass spectrometers and other high-tech equipment, including huge canisters of nitrogen that help separate molecules. Wen’s liquid chromatograph machine ionizes samples with a 4,000-volt blast. The equipment is expensive, says Wen, who compared the cost of the machines to buying a house. “It’s not easy to set up a lab,” says Wen, who previously worked in the pharmaceutical industry. “The most critical thing to have is the knowledge.” Wen previously had a testing lab in Colorado, and she has labs in the South that are used by doctors and hospitals to test patients for opioids. “My goal is to help the farmers as much as I can, and to educate the public,” says Wen, who moved to the U.S. from China in 1999. Cannabis testing actually begins in the field. Wen typically goes to a grow site and takes samples to get a good cross-section of a field.

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


Marijuana samples are tested at MWLabs in Medford. PHOTO BY JAMIE LUSCH

“If you don’t get a representative sample, you don’t get good results,” Wen says. She typically surveys a field and plots out the plants on a computer to come up with a sampling plan. All the samples are mixed to come up with an average for the entire field. Even though a particular flower might be labeled 30 percent THC, that amount is based on an average. The actual flower you’re consuming might have higher or lower THC. Most growers typically pass the testing, Wen says. When cannabis was first legalized, independent reviews found inconsistent results from lab to lab, and many growers complained about the length of time it took for the labs to test their product. OLCC spokesman Mark Pettinger says he thinks many of these initial problems have been resolved. The state accreditation program requires standardized testing protocols for labs. “Before, when we had a bottleneck, we had less than a dozen labs,” Pettinger says. With more labs and more consistent testing protocols, the long lead times have improved markedly, he says. In addition to the testing for pesticides and solvents, there are other checks that most people don’t know about, he says. A check for water activity during the drying process is important to keep the plants from getting mold, Pettinger says. In addition, the moisture content of the dried flower is checked to make sure it doesn’t affect the weight of the product. The main idea behind the testing is simple. “We want to ensure quality products that won’t get people sick,” Pettinger says. You can reach reporter Damian Mann at 541-776-4476 or dmann@rosebudmedia.com. Follow him on www.twitter.com/ reporterdm. 

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

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Cannabis Branding

STANDING out from the

CROWD BY LIZ GOLD

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SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


Cannabis companies need authenticity, high-quality products to thrive in a saturated market

Jacque Habra, right, chief strategy officer at Grown Rogue, and Juda McMullen, center, the company’s director of cultivation, discuss growing operations. PHOTO COURTESY OF GROWN ROGUE

What’s it take

to brand a dispensary — especially in a saturated market like Southern Oregon? Turns out, you not only need good products, but you need to provide them consistently to your customer base. Dispensary owners must be clear on the experience they want to create for their consumers and realize, while their location might be to their benefit, cannabis marketing experts say it won’t be enough to keep people coming through the doors. “Dispensaries are the slowest businesses to adopt branded marketing. They don’t typically have a large marketing budget; most of what they are taking in goes to the employees or the business,” says Bridget Renee, co-founder and marketing director of KindTyme, a Portland-based marketing firm that helped design the website for Ohana Canna (http:// ohanacanna.com/), a craft cannabis farm in the Illinois Valley near Cave Junction.

Professional snowboarder Justin Norman wears Oregrown gear on the slopes, part of the cannabis company’s strategy to position itself as an active lifestyles company. PHOTO COURTESY OF OREGROWN

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

“They rely on their location in order to make business work. Visual branding is very important to those dispensaries.” That said, don’t be surprised if you see more upscale dispensaries nixing large marijuana leaves or the green crosses outside their locations. “That’s what a lot of stores think they have to do,” says Aviv Hadar, founder of Oregrown, a farmto-table cannabis company, about the aesthetic that seems to go along with “stoner-based” culture. “You really have to be authentic and be who you claim to be. This is Oregon, and we don’t fall for B.S. out here, and that’s a fairly known thing.” Oregrown is a lifestyle brand — an athletic one at that — with almost 44,000 Instagram followers and growing. Its flagship store is in Bend, and it partners with several farms and dispensaries in Southern Oregon, including Madrone Farms in Ashland and

33


House of Leaves in Medford. “We have decided that to brand our lifestyle we are going to brand ourselves and brand what we are doing on a daily basis,” Hadar says. “Secondary to that is cannabis. We skate and ski and we also smoke cannabis. We have one of the most outperforming dispensaries in the state, and it’s because people don’t want it right in their face. They want a classier approach to the situation, so we focus on experience. We know that we are a lot of people’s first Oregon cannabis experience, so we make sure we represent cannabis well.” Jacques Habra, chief strategy officer of Grown Rogue, agrees on the importance of the consumer experience in dispensaries. Grown Rogue is a fully licensed seedto-sale cannabis company with two outdoor facilities and a warehouse with nine flower rooms all based in Medford. Its product goes in more than 100 dispensaries throughout the state. “It really comes down to the experience,” Habra says. “The conventional, traditional dispensary experience was very intimidating for the average consumer. Even for the avid consumer of cannabis, there is a sort of sense that if you didn’t know a good amount about the strains you were considering or the products behind the shelves, that you were out of the loop. That makes people feel awkward.” As a result, Grown Rogue has simplified its products by classifying them by effect to make it easier for consumers to choose what’s right for them. So it’s less about the particular strain and more about the vibe the consumer is after — whether that’s to relax, optimize, groove, uplift or energize. “There’s obviously a major price compression issue in Oregon — Oregon is a producer state. There are a lot of farms, there are a lot of people in the market,”

34

Habra says. “Everyone is trying to get the lowest-price cannabis from the farmers and producers who are willing to lower the price. Dispensaries need to not just play the volume game, they have to be choosy. Premium products are better. You can see the difference, you can taste it, you can smell it. There are some consumers who don’t care and are just looking for the highest level of THC for the lowest amount of money. If you build your brand around that, my expectation is that you won’t be in business for 18 months.” The products dispensaries provide do matter, and while many will continue to advertise sales on inexpensive flower, it’s not necessarily the way to go to attract the best customers. “Southern Oregon is the epicenter of the outdoor grow, so there are huge growers growing such vast quantities of B+ grade cannabis, which is mid-shelf in a lot of dispensaries,” says Sean Lucas, vice president of Nug Digital Marketing in Portland. “There is so much of it that being able to differentiate yourself and offer other products and bring in novelty into what you sell is really going to help you.” Lucas points to the shift in CBD because of the medical aspect and how it is trending across the country. He foresees a huge CBD push and says he’d like to see Southern Oregon provide most of the country’s CBD supply. “Vertical integration is key,” Lucas says. “Moving forward, growers down in Southern Oregon are going to have to diversify into an emerging and popular market, which is CBD. You can sell it nationwide and they are equipped to grow it, so why not?” But when it comes to dispensaries, Lucas agrees you have to cater to your customers by having a great selection and good prices, but with an atmosphere that is comfortable and evokes trust. He’s also seeing an explosion of delivery clients at his firm, which is becoming an increasingly popular way for people to get cannabis. “It is coming, in a big way,” Lucas says, adding that dispensaries that make sure they have the same craft brand and strain of cannabis consistently will build brand awareness and trust, which helps keep customers coming back. “Being able to order online is legal, you can preorder it, or you can order it for delivery and you can set it up and do it in-house. Look at the way we consume food: Lyft brings you food now, it’s everywhere, and the same thing is going to happen with cannabis. Why have a brick-andmortar store when you can have a warehouse?” You can follow Liz Gold on Twitter/Instagram @lizstacygold or read her blog at www.14karatliving.com. 

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

35


Whole Plant Medicine

‘Entourage Effect’ doesn’t refer to the HBO show BY JOHN DARLING

36

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


The term

“entourage effect” has been bandied about in medical marijuana circles in recent years, referring to the interaction of all the many compounds in cannabis. Many people use cannabis for its medical benefits, but they don’t want any mood alteration, so they get CBD. And many users who want to get stoned seek the greatest potency, so they often look for very high THC content. But neither group may be getting exactly what they’re after, according to people in the industry. “You need a little THC to get the full benefit of CBD,” says Obie Strickler, CEO of Grown Rogue in Medford. “You have to look at the broader effect of other components. Of course, you can get too stoned. Some consumers still believe in potency. What’s important is to look at the cumulative effect of other components of cannabis, the terpenes, the CBD, to create the experience you feel.” Strickler’s company produces a strain called

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

Tangie that sports a roughly 2:1 ration of CBD to THC — a THC content of about 6.5 percent and a CBD content of about 14 percent. It has enough THC to get a buzz, while delivering a potentially therapeutic dose of CBD. “There’s an effect on your body when you take in the full spectrum of cannabis products,” says Matthew Behr of Grateful Meds in Talent. “They’re all in the plant, and when you inhale, you get all the beneficial chemicals in one setting.” It’s been shown with epilepsy that CBD alone can have a good effect, he notes. Cannabinoids and terpenes reportedly bind to receptors in the body, and they have a synergistic effect with each other. “However, CBD seems to work better in therapeutic sessions when combined with a small amount of THC,” Behr adds. “Some want the benefit of cannabis but don’t want to get high. So they can take THC in sub-psychoactive doses.”

37


The most efficient way to preserve the entourage effect is to toke, vape or take it sublingually. The least efficient is to wait for it to digest, which can take an hour or more.

“CBD is the ‘it’ chemical and everyone wants it,” Behr adds, but that doesn’t mean you should target this one molecule and forget about the rest. For instance, the CBD from full-spectrum cannabis is superior to hemp-derived CBD, he says, as it has more molecules and more therapeutic effects, and that’s part of the entourage effect. “Most people don’t want to feel high but want their pain taken away. That means not above two milligrams (of THC). Above that, you feel psychotropic effects.” The most efficient and direct way to preserve the entourage effect, he says, is to toke, vape or take it sublingually. The least efficient is to wait for it to digest, which can take an hour or more. “If you’re in anxiety and panic attack,

38

you don’t want to wait an hour. Vaping and smoking are immediate. Sublingual is 15 minutes. But remember, everyone is different and maybe cannabis isn’t going to work for them.” In other words, the road to cannabis bliss might best be found in “whole plant medicine,” which means not messing with the bud — just roll up a jay and toke it, allowing all 400 molecules identified in weed to do their magic. The website Project CBD defines it this way: “Many of these compounds interact synergistically ... so that the medicinal impact of the whole plant is greater than the sum of its parts.” John Darling is an Ashland freelance writer. Reach him at jdarling@jeffnet.org. 

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


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39


Sun God Medicinals

A Place in the

Sun

BY CAROLINE CABRAL

40

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


Sun Breeze and its offshoots combines herbs with cannabis in myriad products

Tinctures from Sun God Medicinals. PHOTOS BY JAMIE LUSCH

What started out

as a farm selling its own herbal teas at growers markets has turned into a major seed-to-sale cannabis company with several entities under its umbrella. Sun Breeze Inc. sells herbal tea products in Oregon, Washington and California. In summer 2014, owner Brie Malarkey and her husband, Jon Cunningham, began a cannabis product line. Their recreational marijuana store in Gold Hill, Breeze Botanicals, was the first in Oregon, and Sun Breeze was the first processor in Jackson County. “We really are at the cutting edge of innovation down here combining different herbs with cannabis,” Malarkey says. Sun God Medicinals, another of Sun Breeze’s offshoots, offers several product lines, including both THC- and hemp-based tinctures, topicals, concentrates, edibles, pet products and non-cannabis herbal goods. “Pain, anxiety, sleep, and muscle tension or

Seth Girvin, production manager at Sun God Medicinals, works at their processing facilty.

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

spasms are the four main product areas we’ve gone to market with in our THC dominant products,” says Malarkey, who is the company’s compounding herbalist. Each product in the line is named after a specific lore or myth related to what the product targets. “There’s all this lore and mythology about it (cannabis), but now we can look at this new modern testing and identify what works for people,” she says. Malarkey started working with herbs in an effort to help her family. “In the beginning it’s because I was a mom with a son on the autism spectrum who couldn’t sleep,” Malarkey says. “I became an herbalist, and I really wanted to know: How can I help my family and my children if the big Cascadia earthquake happened and there is no way to get pharmaceuticals? How can I forage off the land or grow what I needed to help them?”

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Massage oil from Sun God

Sun God’s herbal supplements and teas are USDA-certified organic. The USDA does not certify cannabis, but Malarkey’s commitment to organic practices carry over to the way she runs the cannabis side of the business.

“Our product line is made 100 percent with herbs and plants that can be cultivated here. We want people to know what they can grow here and what they can find.” Sun God’s herbal supplements and teas are USDA-certified organic. The USDA does not certify cannabis, but Malarkey’s commitment to organic practices carry over to the way she runs the cannabis side of the business. “We have medicinal herb farms, and we really have our hands in organic agriculture. My business partner and I have a true understanding of what it takes to produce healing herbs,” she says. “‘Organic’ as a word has really been watered down over the last few years, so we try to strive to go beyond organic. We try to work harmoniously with the land and just make sure we have good, healthy plants. If we have good, healthy plants, hopefully they’ll produce good, healthy constituents that maybe can help people. “Organic agriculture — or growing and cultivating as nature intended — really is a way to make sure that what you’re giving people is the healthiest products possible. If people have a compromised immune system or a disorder they’re suffering from, and they’re trying to get off pharmaceuticals and go to holistic plant medicine, the last thing you wanna do is introduce any foreign body or something potentially toxic to them.” For more information about Sun God Medicinals, including retail outlets, see https://www.sungodmeds.com/ or call 888-470-7394. 

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Brie Malarkey works at her dispensary in Gold Hill. Breeze Botanicals was the first dispensary in the state to receive official OLCC Recreational Marijuana Retail Licensing.

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43


Cannabis Commerce

MAKE MONEY

FROM POT?

Forget about a federally subsidized loan BY SOPHIE QUINTON

Marijuana legalization at the state level has created a moneymaking opportunity not only for licensed growers and sellers but also for a wide range of ancillary businesses, from publicly traded garden product companies to local print shops. Now a new Small Business Administration policy could force some entrepreneurs to choose between serving cannabis clients and getting a federally subsidized loan. In an April policy notice, the federal agency said it won’t approve loans to businesses that derive any portion of their revenue from sales to marijuana clients, because the drug is illegal under federal law. The policy could hurt local nature centers, architects, designers, lawyers and other businesses that occasionally work with the licensed weed industry, legal experts say. Supporters of cannabis legalization are speaking out against the lending policy. “This rule would be impossible to implement and wreak havoc across multiple sectors of the economy,” said Oregon Rep. Earl Blumenauer, a Democrat, in a recent letter to the SBA. “For example, would just one order from a cannabis business for soil preclude a locally owned garden center from receiving federal government loan support in the future?” Nine states and Washington, D.C., allow marijuana to be sold for recreational and medical use and 21 others allow it to be sold for medical use. Nationwide, sales of the plant and its products hit an estimated $8.6 billion in 2017 and supported more than 121,000 jobs, according to a report from the Arcview Group and BDS Analytics, cannabis industry research firms. That’s almost dou-

44

ble the sales Arcview estimated for 2014. Even more jobs have been created at non-marijuana businesses. In states where marijuana is legal, it’s easy to find marketing agencies that create campaigns for cannabis brands, greenhouse manufacturers that sell products just for marijuana growers and commercial printers that offer new services for marijuana clients. The SBA has backed more than 300,000 loans nationwide since fiscal 2013, and some loan recipients are currently serving cannabis clients, according to a cursory Stateline review of federal loan data and company websites. The agency’s new policy could make them ineligible for future loan assistance. Take the Green Sunshine Company, a Portland-based business that makes lighting systems for growing plants and has used social media to promote its success with cannabis growers. A company representative said the lighting technology is made for anyone who wants to grow indoor plants, and that he may not know what customers intend to grow. The Green Sunshine representative didn’t want to disclose his name — a reticence shared by several other SBA loan recipients whose websites boast of pot-related clients, but who declined to comment on the new policy. The SBA isn’t answering questions, either. “Please be aware that the Small Business Administration is not making any comments at this time,” Cecelia Taylor, an agency spokeswoman, said in an emailed statement. It may be too soon to assess the impact of the policy, said Barbara Vohryzek, president and CEO of the National Association of Development Companies, a trade association

SOUTHERN OREGON GOOD HERB | JUNE-JULY 2018


for lenders that provide SBA-backed loans. She said she’s not sure why the agency made the new policy but it may be because the licensed marijuana industry has grown too big to ignore. “It’s becoming an issue that they’re having to address,” she said. The SBA’s move to restrict loans to companies that touch marijuana money is the latest example of a federal agency obeying federal law and hurting pot entrepreneurs in the process, said Michael Correia, director of government relations for the National Cannabis Industry Association. “It doesn’t shock me or surprise me in any way,” he said. Government agencies are risk averse, and would rather say no to the cannabis industry than get into trouble with the Justice Department, he said. Federal law classifies marijuana as a Schedule I controlled substance, on par with heroin and ecstasy. U.S. Attorney General Jeff Sessions is also a prominent opponent of legalizing the plant. The SBA doesn’t make loans directly. Instead, it guarantees loans, allowing banks to lend money to businesses on better terms. Businesses are eligible for the loans based on the size of their revenues and number of employees, among other factors. Under longstanding federal law, businesses can’t get government-backed loans if they engage in illegal activity. The agency issued updated guidance last October that said borrowers are ineligible for federally subsidized loans if they lease space to businesses that violate federal law, including marijuana dispensaries. In April, the agency issued clarification on the marijuana issue — among others — in response to feedback from lenders. “Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance,” the notice said. Ineligible businesses include both those that directly touch cannabis plants, such as growers, processors, distributors and retailers, and businesses that derive any gross rev-

JUNE-JULY 2018 | SOUTHERN OREGON GOOD HERB

enue from sales to growers, sellers and the like, the notice said. It cited businesses that sell bongs, grow lights and hydroponic equipment as examples of potentially ineligible borrowers, and said some hemp businesses also may be ineligible for loans. The new SBA policy could hurt non-white entrepreneurs who have been pushed to the fringes of the cannabis boom, said Kayvan Khalatbari, who chairs the board of the Minority Cannabis Business Association, a business group that advocates for equal access to the industry. “We’ve see a lot of people of color move to ancillary businesses in this space,” he said, in part because they tend not to have the capital to start a licensed dispensary or grow operation. Khalatbari said it’s “really unfortunate” that such businesspeople will lose the opportunity to get a low-cost loan. SBA staff may not be commenting publicly, but they’re privately telling banks to increase their due diligence to make sure potential borrowers have no ties to the marijuana trade. Mark Abell, senior vice president and SBA

45


division director at NBH Bank, said SBA officials have told him that banks should carefully review borrowers’ websites to make sure they’re not marketing to the pot industry. If banks see any red flags, they should submit the prospective borrower’s file to the federal agency for legal review. He said his bank also has started requiring all prospective borrowers to certify, to the best of their knowledge, that they have no connections to the marijuana industry. No loan applications have been denied yet, he said. “When you’re in a market like Colorado, cannabis is pretty pervasive,” Abell said, and it’s hard to figure out if non-marijuana businesses are profiting from cannabis. “A business that sells online may not know if it’s selling to the cannabis industry,” he said. NBH Bank has branches in five states, including Colorado, where Abell is based. Steve Schain, a lawyer at the Denver-based Hoban Law Group who focuses on banking and cannabis law, says he doesn’t think the new lending policy will work. “I think it’s almost impossible to implement,” he said, because it’s impossible to police every business transaction. The policy may create unreasonable due diligence re-

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quirements for companies, too, said Andrew Freedman, Colorado’s former “pot czar” and now a consultant working on marijuana legalization. “Making sure that you’re not doing it is much harder than a regulatory system for doing it,” he said. Freedman gave the hypothetical example of a small electrical services business that occasionally works with indoor marijuana growers. Does the owner now need to train his electricians to identify marijuana businesses? “That’s the part where I’m like, ‘This could be real trouble,’” Freedman said. Abell said it makes sense that companies that exist for the sole purpose of serving the marijuana industry — such as some businesses that sell grow lights — shouldn’t be getting federal loan aid. “I think we should all agree that that isn’t a business that should get SBA financing,” he said. But businesses that just happen to serve cannabis clients operating legally in the state — such as garden supply centers — are a different matter, he said. The SBA may rethink its policy in the future, Abell said. “I’m optimistic that ultimately we’ll get to a more reasonable place.” Sophie Quinton writes for Stateline.org. 

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