hello and welcome to a special edition of kqed newsroom. khancakansaca canabis. they passed a vote legalizing canabis for recreational use. people over 21 years old will be able to carry up to an ounce of marijuana and can also grow as much. we visited the second oldest dispensary in california to see how they're preparing for the changes. here's more. >> i take it this is where you

keep all your inventory? >> yeah, this is where we display all our edibles for our bud bar. we see hundreds of patients every day. >> do you have anything on special? >> reporter: the marijuana law will go into effect in california and anyone 21 and over can walk into a dispensary and buy pot. how will that impact your business? >> it's going to impact it a lot. it's going to increase our patient database probably double, i would say. that means the demands are higher and we'll have to satisfy demand from those products as well. >> how will you satisfy demand? >> because of the new state regulations we can only buy after 2018 from state cultivators. we may go from seeing 500 vendors to seeing five vendors. they may not meet the regulations put into place or

they don't have the finances to apply for the state permit or the state may lag on actually approving those permits meaning the couple may only get through. those are the only cultivators we are actually purchasing from at that time. >> you're saying that your dispensary could absolutely run out of marijuana. just like colorado and nevada did when they went recreational. they didn't have enough on hand from the cultivators to vend to the state, and we're worried that will happen here. >> they want licenses in part because they want to crack down on the black market for cannabis. isn't that a good thing? >> it is a good thing, but it takes a lot of money and time to get those that it causes the mom and pop operations in california to be pushed out of getting a permit, therefore not able to send their product and therefore

floods the market. >> it seems hard to believe that they could actually run out of pot. >> run out of legitimate pot that's licensed the way they want it regulated. it's a very fearful thing that could absolutely happen. >> what do you got for sme? >> today i brought in a pound of presidential purple. >> reporter: at the green door i also spoke with robert toll. earlier this year, toll grew marijuana in nevada which caused shortages when pot became legal there in july. what was that experience like? what did you see over there? >> it was exciting. it was a wave they weren't drid f -- ready for. they went from having a small amount of patients who could actually purchase marijuana to going to anyone in nevada could buy weed if they were a recreational user. they weren't ready for the

recreational user. >> how are patients or people who want to use it recreationally, how are they going to get their hands on pot? >> they're going to do it the old-fashioned way. they're going to the streets and get it in the bad way. we're not giving the money we need to make sure things go the way they should. >> california is about to regulate this billion-dollar industry you've been a part of for some time. what do you like about those efforts and what don't you like? >> i love the fact it's going to be legal. i love the fact that i'm going to be able to open a facility and do what i want and pay my taxes like i want. it's a great thing, but there's going to be paperwork. it's going to be a battle. it's going to be an uphill battle that a lot of people might not make. >> joining me now with further analysis are san francisco cannabis editor david downs, and christian groe, cofounder. david, we just heard from a retailer. they're worried about having

enough supply of the we ha. we have a situation here where you have medical and recreational users vying for a supply. >> the market will be clear i would say six to eight months after the law has been here. plenty of canna birbis will fai testing. much will go down rather than up. >> that's a lot of changes to go through. >> other states have gone through these changes, whether it's colorado, california or nevada. a lot of them have gone through these growing pains. we've seen a number of cities and counties begin to allow medical dispensaries for the first time in 21 years in this state. i'm counting many counties

allowing access to that will be a boon. >> and there are 20 different kinds of licenses for cannabis facilities. what areas are you fielding inquiries about? >> i'm fielding inquiries across the board from people wanting licenses. we have them across the state, dispensaries and manufacturers, but some of the new licensed types like distributors, i'm getting a lot of inquiries like distribution licenses, what that's going to look like, and delivery as well is a license that people are very curious about. >> and christian, you've been at this for about seven years now once this started being legalized in other states. you invest in the cannabis industry in not only canada but other states. in protecting consumers, what do you think the main challenges will be for california right now? >> i think the main challenges

are banking and the regulatory framework, meaning we've seen jurisdictions launch either medicinal or use in regulatory environments and they've failed or on the verge of failing. california has the most cultural significance on the planet and it's the sixth largest economy in the world sorks , so it has treated almost like a country rather than a state. if the regulators are able to get that piece of the regulatory environment right that allows entrepreneurs and start-up companies to flourish and bring in new products and brands and more factors into this space. >> how tough is that challenge to strike that balance? because you want to have regulation, but not so much regulation that it becomes a huge barrier for people to become legal, if you will. >> that's right. it's a fine line. you have to work with the taxation piece of it. you don't want it too high because it will allow the black market to undercut the regulator market, but you don't want to be too lais sersez 1/2 f laissez-fe

will take advantage of the market. >> and they've got to design and field a new operating system. will they be ready by january 1st? >> we hear it's full speed ahead over there. they're stocking up, hiring dozens of people. they have hundreds of millions of dollars in loans from the state and federal government to make th make this happen, and from what we hear, they'll be on a temporary licensee. it's going to start out small and expand slowly out from there. you're seeing many cities and counties which play as big a role in the state as most generations ban cannabis activity. so maybe six or eight cities in

california will have a ban on pot cities and pot farms. i think a lot of california owners will be surprised when they have to drive 100 miles to find the closest recreational store, at least in the near future. >> and how difficult is this for your job? now you've got this patchwork quilt of state law versus county law versus city law, and i take it that state will not supercede any of the local jurisdictions. >> you have to keep in mind state and local jurisdictions. they'll be working together. we have cities and counties, local jurisdictions that are regulating things completely differently all over the board. but ultimately we have state law on top of all of that. so business owners need to be mindful not only of complying with state law but also local law. in fact, in order to get a state license, you have to comply with local law. it's very important. so from my perspective, it's made my job really difficult, not just because of the patchwork of regulations across the state but because the

regulations are constantly changing, and quite frankly, because we don't even have the final regulations yet. we don't even know what the final rules are going to be to govern these licensees. so it's really difficult for my clients to make big business decisions when they don't even know what the rules are going to look like. >> stay here with me because we're going to humboldt county because it was the first county in california to allow a permanent system to allow medical marijuana to be grown openly for profit. take a look at what they've experienced. >> reporter: nearly 300 miles north of san francisco, big r redwoods stretch to the sky. in the land of giants, the buzz of sawmills were once the sound of a booming economy. today there is another industry that's thriving here and driving up demand for goods and services. >> and your total will be $3,023.99 after tax. >> to lawn services to special

forests, lawn services are big business in humble county. >> humble county is the napa of cannabis. it is by far and away the largest production zone of high quality cannabis in the world. >> reporter: for the first time in 50 years, it's coming out of the shadows. >> i believe the people of humble county will realize that's the smell of cultivating local prosperity. >> patrick murphy is the co-owner of cannabis farms. >> we'd like to create an atmosphere that is bio chemically sustainable. >> he wants all farms to grow medical cannabis for profit. it depends on the size and whether it's new or existing cultivation. >> the new cultivation are about a quarter of an acre. existing operations, we've

allowed up to 1 acre in size if they can meet requirements. >> steve la sdplrzar is head of building and planning department in napa. >> here we're looking at a photograph of 2006. the photograph shows a forest area, but by 2015, this area is now host to 20 to 30 different cultivation operations. so here we can see evidence of greenhouse construction, water storage. one could easily estimate that there is over 10,000 cultivation sites in the county at this point. >> good morning. >> hi, how are you doing today? >> fantastic. my back is hurting a little bit today. >> reporter: for two decades, cannabis was legal to use in california for medical purposes. patients could also grow pot and supply it to dispensaries as long as they didn't profit from it. then in november 2016,

california voters also legalized the drug for recreational use. state officials are now scrambling to regulate both medical and recreational marijuana by creating new regulations and licenses starting in 2018. >> now we can call a spade a spade. profit is part of being a farmer whether you're growing cannabis or tomatoes. >> maybe so, but it's still illegal at the federal level to grow and sell cannabis. >> every cannabis regulator lives in fear of law enforcement, having their children taken away from them, having financial ruin. >> reporter: 2,000 pot owners came forward, including murphy, to regulate medical cannabis. only a fraction of the county's pot ends up in the hands of patients. >> i would say 95%ç of the marijuana growing in humble county and possibly higher is going to the black market. >> reporter: using permits to control where and how marijuana

can be grown may not stop the black market. but it may help law enforcement target the massive and illegal growing operations that feed it. >> what we have here is evidence that it's been found in a marijuana grow that's been seized by the humble county sheriff's office. these right here are processed marijuana in 1-pound bags. we have typical farms that are seized in a marijuana grow. ak-47, the assault weapons, n-14 rifles. this is what they use to protect their marijuana. the new land use ordinance does help us in predicting the good actress, bad actress. >> they track through the supply chain to help keep it out of the black market. humble county launched its own pilot track and trace program in 2016. the program used traceable stamps to follow bags of processed pot from cultivation to distribution at 100 dispensaries across the state. the culture and business of

cannabis is changing throughout california. as this iconic plant turns into a scaleable economy, local and state policies may decide whether it thrives or withers. >> i believe it's being grown across the west coast. and i believe the price is so low that the industries can be driven out of humble county. >> the fear is that the people that were a part of this, that started the movement, will not have a place in the future. and it will only happen if we do not take part, if we do not stand up and make our voices heard as the heart and soul of the cannabis industry. >> we turn to our panel and talk about the market dynamics of cannabis in california. we just saw what's happening in humble county. smart and medium-size growers concerned that they may be put out of business or have their industry dominated by a handful of really big, powerful players. how real of a possibility is

that? >> it's real. we hope the economics and the framework allow for small to medium-sized growers to thrive. it if it's for a consumer or a patient, most of those users aren't really interested in vast grows in areas of california, but we are seeing different jurisdictions activate large-scale greenhouse grows on the central coast and southern california. there could be a scenario where the small cultivators up in humble county have been doing it for decades be eliminated by some other facilities. >> what about big tobacco or a big farmer even moving into this? >> i don't see that happening any time soon. federal prohibition has to end before you see big farm, big alcohol, big tobacco, big retail enter the space, but they're definitely looking at it and it's clearly on their radar. >> your fund, you've raised $140

million, and some of it came from tech companies. how big are tech players in the space right now? >> we're starting to see a number of major tech companies who are swallowing up more and more of traditional businesses begin to touch cannabis businesses as well. in terms of rhode island's track and trace systems, amazon is one of the big head shops now. >> do you ever tech investors in your fund? >> we do. peter teal's son made the first investment a couple years ago, but we saw that as essentially a pandora's box, and we're seeing them make active investments. not all directly into the space, but a lot of ancillary businesses as well. >> so, for example, joe montana -- he's not a tech guy, but who he works with just made

another investment in a canabis company, and a facebook company put, i think, 5 million in a media company related to canabis. >> a good number of my candidates are coming from the tech industry, whether they're looking to develop, you know, apps or things like that for the ca canabis industry specifically. >> the canabis industry needs one of everything the traditional leaders do. >> i want to touch on this as well. one of the arguments for legalizing marijuana is to help curb the black market. allison, i'm curious. you were based in seattle for a while. based on your experience, what have you seen in other states such as washington or colorado where pot has been legal for a while now? >> sure. there's always a transition period, right? there's going to be a period of time where there are people operating in compliance with state law and there are bad actors who are surviving. but as the regulatory system is

implemented and the state gets better at figuring out what's going on, they're getting better at eradicating the bad actors. we in washington have definitely seen a decline in the black market. i think that, you know, along those same lines, the argument that legalization is going to lead to increased access, you know, to canabis by children, things like that, just hasn't shown to be true. really, regulation, it's a good thing. putting restrictions on who can access, it has helped to undermine the black market, it has helped keep canabis out of the hands of people who shouldn't have it. >> california is the number one domestic producer of canabis for the entire country. so even after we legalize it and states like washington has, there are still people in the states that demand canabis and

they get it from us and other places, like colorado and the west coast. it's going to continue afterwards. a lot of our black market pots are going to illinois, chicago, new york, atlanta. we have research that says californ california's markets, only 1 billion is in the medical system, 3 billion is in the recreational. that's 20 billion going out of state and how long it continues to do that will depend on what happens to the rest of the country. >> they're trying to make a track and trace system. how is that coming along? >> it's going very well. the country that's doing the track and trace system has had a lot of business doing tobacco taxes and tobacco track and trace. we have that down and we can keep tracks trace cannabis in the legal market. it's growing in supply markets outside the state. >> i want to make sure we touch

on this. attorney general jeff sessions has compared canabis to heroin. how big of a fear is it that the federal government will come in and crack down and pull the rug out from under you? >> until federal prohibition ends, it's always a fear. there was a lot of anxiety post the november election, but that seems to have subsided a little bit. you're starting to see more responsible canabis entrepreneurs step up and take their message to washington at the local and state level, just to make it clear that this is not black market canabis we're dealing w. we're dealiith. we're dealing with a regulated market. >> we'll have to leave it right ther there. thank you, all. this is one entrepreneur's efforts to carve out a niche in

the marijuana business. coby gives us a look at changes in the industry. >> in humboldt county, cody strauss goes to a leather ban to check on his crops. tiny rows of marijuana plants ripen for harvest. he works for a company that has been producing medical canabis in humboldt since 2015. >> one of the biggest problems in the canabis industry is having consistency in product. that's one of the hardest things to do as a farmer, especially a canabis farmer. >> a keen eye must also be developed when catering to connoisseurs. >> if you ever a good nose, a really good quality smell. i think it's a little suffocated because the room runs a little bit hot. i think we're looking at the low end of the gold. >> strauss and his colleagues

run a good scale. >> the nose tells you everything up front. we can tell whether something was cured improperly. this was a great opportunity for us to bridge the gap and all the details that are really uncharted territory in canabis. right now it's a new beginning for canabis. >> making humboldt county the top level for canabis, the drug still needs permits at the federal level to grow. >> it's a gamble to be involved in an industry that's not quite set yet. it's dangerous. you know somebody who has been busted. you know somebody whose livelihood has been taken away from them. >> reporter: in february 2016, humboldt became the first california county to create a system of permits to allow medical pot growers to medically profit from their plants.

he grows up to 35,000 square feet of canabis. >> we got permits because we want to be professionals. we are compliant, legal, and it's our goal to really open up to the world in a way that's safe, and having a permit is the first step in that. >> reporter: it could also be the first step in ending a green rush of people staking out the forested hills of humboldt to cash in on canabis, which can sell for thousands of dollars a pound. >> five, six years ago we had a thousand, 2,000 grows within the county. now the number has gone up to about 12,000. >> to fight the environmental impact of this booming industry, humboldt's new rules require growers to get additional permits to legally take water from rivers and streams. the county also requires indoor growers from normal emirates. >> we capture up to 85% of all the water that we feed our plants in the rooms and reuse it for the following feeding.

there is a lot of challenges that i face as the owner of a canabis business. one is to have a bit of prejudice against us to start with. every step along the way, there is a premium for services rendered to us, everything from payroll costs, taxes, insurance, workmen's comp. what we can and can't write off. people would think we're just raking in the dough and it's really not that way. >> inside one of the climate-controlled grow rooms, he spur it on with flour. that's the main chemical in marijuana that generates a high. after nearly 12 weeks, the plants are ready for harvest and then cured for up to a month to remove moisture. the trimming team can now get to work spending six hours a day to meticulously manicure the bud. >> we look for mold and mildew or cut off the bud as necessary. after it's been trimmed, i see

it a second time and i'll sort it into three or four categories based on size, structure, color and potency. >> several companies in the country sell emmett's products. earnings from canabis cannare n the small part of the job. >> there are a lot of things to do when you're handling large quantities of cash. it requires strategy and care and trust. >> the legal division of canabis in california sparks new challenges and opportunities for young entrepreneurs to turn a field of green into a legitimate commodity they can more safely and openly bet on. >> it's a very exciting time to be in the canabis industry. they are exiting prohibition, just like the alcohol industry.

>> tastes pretty good. >> yeah. >> it's a relief that we have the opportunity to come out of the shadows. it's a lot more work but it's a big relief, and i think the people that are going to do it will be really happy with the results. that does it for us. you can find more of our coverage at kqed.org/newsroom. thank you for joining us.

robert: a year of upheaval. president trump has rocked american politics but to what end? i'm robert costa. we assess a transformational year for the republican party and the country. tonight on "washington week." president trump: i pledge to every citizen of our land that i will be president for all americans. robert: on election night, donald trump called for unity. president trump: it is time for us to come together as one united people. robert: one year later, president trump leads a deeply divided country. unemployment is at a 17-year low. the stock market is booming, and justice neil gorsuch sits on the supreme court. but many campaign promises remain unchecked, including a