Marijuana cultivators in RI facing extinction under proposed legislation

“Whose interests is this bill serving?” asks cultivator Domenic Passarella. “The Cultivators certainly would not benefit, we won’t have a market to sell to. Who is benefiting? Ask yourself who is pushing for this and why.” Currently, there are three Compassion Centers in Rhode Island. The Compassion Centers have the right to both grow and process marijuana, and to sell

Rhode Island News: Marijuana cultivators in RI facing extinction under proposed legislation

January 21, 2020, 11:00 am

By Domenic Passarella

“Whose interests is this bill serving?” asks cultivator Domenic Passarella. “The Cultivators certainly would not benefit, we won’t have a market to sell to. Who is benefiting? Ask yourself who is pushing for this and why.”

Currently, there are three Compassion Centers in Rhode Island. The Compassion Centers have the right to both grow and process marijuana, and to sell it at retail to card holding patients.

The three Compassion Centers sell about 900 lbs of marijuana a month. Some of that is sold as dried flower and some is converted into other products.

Of the 900 lbs a month, the Compassion Centers grow about 400 lbs of it themselves.

There are currently 51 licensed Medical Marijuana Cultivators in Rhode Island. In total, they supply the other 500 lbs of the market.

On average, the Compassion Centers produce roughly 133 lbs per month.

Last session, the General Assembly approved the creation of six new Compassion Centers and has chosen to let them virtually grow as much marijuana as they can sell.

Even if they grow only the average of what the existing Compassion Centers grow, they will produce 1,200 lbs a month for a 900 lbs market.

Who are Cultivators supposed to sell to? Our market share is being legislated away from us. Without a place to sell to, we will be forced to lay off our hundreds of employees. Why should these employees, your constituents, lose their jobs?

When demand for medical marijuana in Rhode Island exceed the growing capacity of the Compassion Centers, the General Assembly chose not to increase the growing capacity of the Compassion Centers, but to create a new license class to supply them, the Cultivators. At that point, the General Assembly chose not to limit the number of Cultivators like they did the amount of Compassion Centers. They very easily could have done so. One can argue that this was an indication that they intended to create a robust market. The statute and the following regulations put in place requirements for these Cultivators which required a large, up front investment.

Obviously, no one forced us to enter this market. However, no one ever said that shortly after you make this huge investment and create hundreds of jobs, we are going to pull the carpet from under you, you will lose your investment and your employees will lose their jobs.

Another way to look at is this: On an annual basis, Rhode Island Compassion Centers and Cultivators currently produce about five tons of marijuana a year. That is with the Compassion Centers producing at about 100 percent of their capacity and Cultivators producing at about 12 percent of their capacity.

If demand grows, and if the companies already approved grow produce at full capacity, they can produce about 27 tons of marijuana a year. In addition, patients and caregivers also have the right to grow, and rightfully so. There is something awesome about being able to grow the medicine that heals you. Patient and caregiver grows, at full capacity, could produce another 216 tons a year. That is a total of 243 tons a year. (18,000 patients times 12 plants per patients times .5 lbs per plant times four grow cycles per year / 2000 lbs per ton)

Now it is very difficult to predict how much marijuana the state consumes on an annual basis. I don’t think anyone really knows. However, I researched and created three separate models to predict Rhode Island consumption, including medical and non-medical. Those three models average out to about 20 tons of marijuana consumed annually in Rhode Island.

Rhode Island already has the ability to grow about 50 times what is needed for the patient market and about 12 times what it would likely consume if legalized. I am having trouble understanding why politicians would jeopardize the jobs of hundreds of their constituents by legislating Cultivators out of business to create six new multi-millionaires with even more grow space.

Whose interests is this bill serving? Certainly not the patients, whose variety will be slashed and will likely experience higher prices than if these centers could not grow. A center who could not grow would experience far less initial cost, on going cost, and could come to market far quicker if they did not have a grow attached. A grow of the magnitude likely to be built without Department of Business Regulation (DBR) regulation would be at least $2M, with a $200K to 300K retail build out. That money will need to get amortized somewhere. In contrast, a retail only Compassion Center could come to market very fast with about a $200K build out of a retail only space.

The Cultivators certainly would not benefit, we won’t have a market to sell to. Who is benefiting? Ask yourself who is pushing for this and why.

Who ever gets one of the six new licenses will be instant multi-millionaires, whether they have the right to grow or not. There is enough meat on the bone here so people can keep their jobs, people can keep their businesses, and the people chosen as new Compassion Center owners will still make millions. Compassion Center sales last year were alone were $56 Million. And remember, they sell at retail for around a 300 percent markup!

I know that the sponsors of this bill have marketed it as necessary to fix a perceived separation of powers issue. However, that is not all that is going on here.

This bill is designed to take away some very important regulation oversight from DBR to favor a system that will be more favorable to the six new Compassion Centers.

Consider the following current statute:

RIGL Statute 21-28.6-12.1(i) Prohibitions

(1) A compassion center must limit its inventory of seedlings, plants, and marijuana to reflect the projected needs of qualifying patients;

The Department of Business Regulation is tasked with regulating the medical marijuana program in Rhode Island. If not DBR, then who does the statute intend to regulate Compassion Centers?

The language of the proposed statute states that, regardless of anything else written in this chapter, DBR shall not determine the limit of a Compassion Centers inventory of seedlings, plants, and marijuana.

This is something new that the General Assembly is trying to do, to take regulating authority away from DBR. It is not merely a separation of powers issue, this is something new that has not yet been debated and has not had its impact studied.

Furthermore, it is even more frustrating that the sponsors of this bill clearly do not understand the medical marijuana market. One of the bill’s lead sponsors stated only a few days ago that the Compassion Centers are not buying from Cultivators. That is completely not accurate. Cultivators supply roughly 60 percent of the market. We are the majority, not nothing.

He also said, “Under the governor’s proposal, the three can grow as much as they want…” Not accurate. DBR can currently limit them based on patient need. And that was not proposed in the Governor’s proposal, that is statute created by the General Assembly. This bill will deregulate them for unlimited growing.

Now, I understand the difficult position you committee members are in. For whatever reason, leadership has insisted that these new centers should be able to grow an unregulated amount. This puts you in a position where you either need to upset leadership or upset your constituents who own or are employed in these business, whose numbers are in the hundreds. It is not an enviable position: I do not think it’s fair for leadership to put you in this position, and I hate to put you in this position. I would not be doing so if the situation was not so dire.

There is some very easy middle ground that should satisfy leadership, patients, and cultivators, and it lies in either eliminating or changing the wording in:

(2) Preclude any compassion center from cultivating medical marijuana or from determining the limit of its inventory of seedlings, plants, and marijuana;

Getting rid of this languages would be ideal. It would generate the most revenue for the state, as the six new Compassion Centers would generate an additional $3M for the state in license fees and Cultivators should still stay in business and continue to generate around $1M in license revenue. Patients would continue to have access to the widest variety of products and should see lower prices. And again, these new license holders would be instant multi-millionaires.

If completely deleting (2) is not possible, limiting the new Compassion Centers growing area to the smallest of the Cultivation sizes, a micro license with 2,500 square feet, would also work. It is a very reasonable compromise. These new Compassion Centers would still be extremely valuable, and many Cultivators should still survive. Jobs will be saved, companies will be saved, your constituents will be happy, and we can all get through this relatively unharmed. Please suggest this to leadership. I believe it would be unfair to you, to us, and to our employees if the sponsors of this bill would not try to compromise.

As a part owner in this business, there are two things we have done that I am most proud of:

  1. We have created about 20 well paying jobs in Rhode Island for Rhode Islanders. Many of our employees have found it difficult to find traditional jobs. We offer flexible hours and very good pay for non-college educated workers. Our employees are very happy working with us and we have become a family. We support them and they support us.
  2. We have done many charity projects. My favorite to date is that we bought a video game system, stand, and television for the Tomorrow Fund at Hasbro Children’s Hospital. Kids can use it while they get chemotherapy to help take their mind off their situation. With the help of two compassion centers, we helped raise $10k for the Gloria Gemma Breast Cancer Foundation. We have helped purchase 1500 toys for Toys for Tots. In partnership with another cultivator, we gave away more than 20 Turkeys for families in need this Thanksgiving. We did a food drive/video game tournament for the Rhode Island Food Bank. We did this all before paying ourselves back. I believe we are good members of our community, and I really hope we have the opportunity to keep doing great things.

Thank you for your time. We would all rather be doing anything else, but at the very least I am very appreciative that you have considered my thoughts.