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June 22, 2018

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Two years after getting green light, why hasn’t marijuana industry sparked to life?

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Ed Andrieski / AP

In this Thursday, Dec. 5, 2013, photo, marijuana matures in ideal conditions at the Medicine Man dispensary and grow operation in northeast Denver.

In November 2014, Joe LaMarca invited media members for a sneak preview of what he hoped would be the first dispensary in Nevada to begin legally selling medical marijuana to patients.

Construction had just begun, with workers tearing up floors, putting in new walls and installing security systems that would turn the building, located next to a bar and a dentist's office in a shopping center near Jones Boulevard and Robindale Road, into a Fort Knox of pot.

Ever optimistic, LaMarca anticipated the store, dubbed Euphoria Wellness, would be open to patients in early January.

Seven months later, construction has been completed, inspections passed and employees hired. LaMarca even invited the public to tour the dispensary and see the cases where medical marijuana would soon be displayed.

Euphoria Wellness Medical Marijuana Dispensary

Spokesman Jim Ferrence, owner Deanne Lamb and owner Joe Lamarca of Euphoria Wellness, soon to be a medical marijuana dispensary. They hosted an open house Wednesday, Nov. 19, 2014. Launch slideshow »

But still, not a single gram of marijuana has been sold by Euphoria Wellness or any other dispensary in Nevada, despite it being two years since the Legislature passed a law creating a system of growing facilities, laboratories and retail dispensaries to make it easier for patients to obtain their medicine.

For LaMarca, the issue comes down to one of supply. With growing operations just getting started and crops taking several weeks to several months to harvest, there isn't much product to sell.

While waiting for their crop to come in, LaMarca and his partners at Euphoria Wellness had planned to buy their initial stock of medical marijuana from patients who had been licensed to grow their own plants under the state's previous law.

But a dispute with Clark County over how much medical marijuana Euphoria Wellness can buy from an individual patient has thrown that plan into jeopardy and delayed the dispensary's opening by several weeks.

Euphoria Wellness is the closest dispensary to opening and the only one so far to run into problems with the county over acquisitions of patient product. But its tangle with government bureaucracy is just one of many setbacks suffered by operators throughout an industry anxious to get open.

When the Legislature passed the new medical marijuana laws in 2013, industry insiders projected stores would be up, running and selling to patients by the start of this year. But a lengthy application process followed by even more rule-making and several legal disputes have combined to set the industry back to the point where it will likely be the end of the year before it's in full bloom.

"The industry is being held back a little bit by government," said Jason Sturtsman, who co-owns a cultivation and production facility in North Las Vegas and manages a soon-to-open dispensary in Las Vegas, Las Vegas Releaf. "A lot of these businesses, when they applied in August, started paying rent. They're already starting to hemorrhage cash."

In the meantime, medical marijuana entrepreneurs have been caught in the lurch after having invested millions of dollars into the licensing process and building their facilities without a single dollar of return on their investments so far. The pinch has forced many businesses to raise additional funding, either by asking current investors to pour in more money or selling off stakes in their operations in return for new capital.

"I don't think it's gone as smoothly as it could have gone," said Dave Thomas, whose group NevadaPure recently broke ground on a cultivation and production facility on Boulder Highway. Thomas estimated that his group has had to raise more than $1 million additional dollars than initially expected to fund ongoing startup costs.

"There were a lot of hurdles to go through," he said. "You had to sustain your business and your facilities for a very long period of time, which made the thing much more costly than what people initially thought it would be. I think it's agonizing for people to continue to have to reach into their own finances and their own net worth to keep the business going. It's definitely an economic struggle for everybody involved."

Patients have also suffered, as the delays mean an even longer wait for access to high-quality, easily accessible medical marijuana. The drug has been legal for medicinal use in Nevada since voters approved a constitutional amendment in 2000, but until now patients were required to grow their own plants or turn to a black market of medical marijuana delivery services.

"There's not options out there for patients," Sturtsman said. "Do you want your mother or father who's suffering from cancer going out to the street corner to buy cannabis?"

No single factor is to blame for the lengthy delays. Instead, extended deliberations at multiple steps of the process, generally driven by a sense of caution and thoroughness by regulators, have combined to put the industry's launch behind schedule.

After the 2013 law was passed, the state anticipated that it would begin its licensing application process in the spring of 2014. But as regulators worked to create the rules and evaluation criteria from scratch, that process didn't launch until August, meaning state licenses needed to operate dispensaries and growing facilities weren't awarded until November.

In the meantime, Clark County led the way among local governments with its own separate zoning and land use process for medical marijuana businesses.

This caused problems when the state and county disagreed on which businesses should be awarded one of the limited number of dispensary licenses. The two sides agreed on only 10 of the 18 licenses designated for unincorporated Clark County, leaving eight dispensaries with state approval but no county license and eight others with sign-off from the county but not the state.

The schism led to lawsuits that have put those 16 applicants in legal limbo for the last seven months, although a new law passed by the Legislature during the most recent session is expected to resolve the issue and allow all 16 to begin operating later this year.

Another key process, writing the rules for independent testing laboratories, didn't begin until January of this year, with regulations being finalized only in the last few weeks. The labs are a critical piece of the medical marijuana system — without labs to test the product, dispensaries can't legally sell it to patients. So far, one lab has opened and another is expected to follow suit in the next month, although there hasn't been anything to test yet because only a handful of cultivation operations have begun growing plants.

Many more cultivation facilities are expected to go online over the coming months. With the growing process taking up to three months to produce marketable product, the industry should hit its stride later this year.

Despite the angst and hardship caused by the delays, medical marijuana operators credit the state for the thoroughness of its regulations.

For instance, Colorado only recently imposed uniform standards requiring labs to test for potency and contaminants, while Nevada will have extensive rules covering how labs test for everything from molds to pesticides from launch.

"I'm kind of glad they took their time. I think the slower you do things, the more thought out it is," said Antonio Del Hierro, CEO of Steep Hill Nevada laboratory. "I can see why a lot of people are upset. I'd rather them get it right the first time than us having to revamp (the rules) every couple of months."

Derek Peterson, CEO of the publicly traded Terra Tech, praised Nevada's regulations for being fair, merit-based and more "entrepreneur friendly" than those of other states.

"The reason (the industry) invited so much competition is it allowed for people to have a return on their investment. We think it's going to be one of the largest markets in the country," said Peterson, whose company holds eight licenses for dispensaries, cultivation and production facilities statewide. "The state put out very clear standards in terms of the application process. We had clear, concise info and always got a swift response."

With experience launching medical marijuana dispensaries in California, Peterson said his company knew licensing in Nevada would take longer than most expected and said the planned opening of its Las Vegas dispensary in late September or early October was close to Terra Tech's initial schedule.

"I actually thought (the state) worked through that process relatively swiftly. I don't care what business you're in, (opening) always takes time and is a difficult process," Peterson said.

Clark County Commissioner Steve Sisolak, who played a key role in leading the county's licensing efforts, admits things have taken longer than expected, but isn't sure what could have been done differently.

"We approved 18 dispensaries and all of the cultivators a year ago," Sisolak said. "I would have thought it would have been done in less than a year. I think it took a lot longer than a lot of operators anticipated for planning, inspections and tenant improvements."

Still, Sisolak said he would rather have the rules in place before the industry launches than be forced to go back and fix problems later.

"It's tough to set rules and keep changing them," he said.

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