By Beau Eastes

The Bulletin

The Warm Springs Indian Reservation may soon be home to a 36,000-square-foot marijuana greenhouse, owned and operated by the Confederated Tribes of Warm Springs.

On Dec. 17, tribal members will vote on whether the Warm Springs Tribal Council should be authorized to “allow, regulate and operate an on-reservation, tribally owned cannabis cultivation and extraction facility, with retail sales allowed only off the reservation.”

At least a 30 percent turnout — approximately 1,110 tribal members — is necessary to make the vote valid, and of those who cast ballots, at least 51 percent must vote in favor of the proposed marijuana project to allow it to go forward.

Research done by Warm Springs Ventures, the business arm of the tribes, estimated the marijuana-growing facility and three proposed tribal-owned retail stores in the Portland and Bend areas would produce $11.7 million of net income — profit — in its first year and $26.1 million in its second year, which would be the enterprise’s first full year of operation. Warm Spring Ventures projected the seven-year net income for its farm-to-table marijuana operation would be in excess of $173 million.

“We think this is a great opportunity for the tribes,” Don Sampson, Warm Springs Ventures’ executive director said Monday. “Obviously we’re proceeding with all due diligence. We’ve studied this for the past 10 months and think our proposal will be a model for other tribes to follow.”

The marijuana facilities, based on Ventures’ estimates, would easily become the tribes’ highest revenue-producing business. According to Sampson, the combined expected revenue in 2016 for Indian Head Casino, Warm Springs Power & Water, Warm Springs Composite Products, Kah-Nee-Ta Resort & Spa and Warm Springs Ventures is $8.75 million.

Equally as important, tribal officials expect the marijuana project would create at least 82 new jobs, including several management positions with salaries between $45,000 and $85,000 a year.

“The bottom line is we want to create jobs for tribal members,” said Sampson, who hopes if the referendum passes, the marijuana production facility could be built and completed by spring or summer 2016. “The way we’ve crafted (the business plan), it’s a very proactive strategy. We’ll have tribal members job-shadow some key management positions, as well as receive intensive training in all aspects of the business.”

The tribes would partner with Sentinel-Strainwise, Sampson said, a partnership itself created specifically to help Native American tribes set up marijuana businesses on tribal lands. The Sentinel Group, which could provide the capital for construction and initial operation of the marijuana facility, is a private equity fund out of Orlando, Florida. Sentinel’s partner, Strainwise, operates nine marijuana stores and five grow sites in Colorado and would work as consultants on the project.

“This will be a 100 percent owned tribal subsidiary,” Sampson pointed out. “Sentinel may offer a line of credit to help with the initial operations. And Strainwise owns one of the more mature (marijuana) business models in the country. … It’s the first company in Colorado and the country to get a license for a recreational marijuana shop.

“We’re still developing the terms of the agreement,” Sampson added, “but we’d have the option of keeping (Sentinel-Strainwise) on for up to five years if we wish. But from day one, we’ll be training and having tribal members job shadowing so we can quickly take over full management.”

Sampson said at least 10 percent of all revenue from the marijuana operation would be reserved for alcohol and drug treatment and prevention and police and law enforcement. The Warm Springs Tribal Council would be in charge of directing the remaining funds.

“There’s a number of needs,” Sampson said. “Tribal council, as well as (tribal) membership, would decide how the excess revenue would be spent. It could be in the form of dividends to tribal members or help with elder benefits or programs and services. There’s been talk of a new community center. We recently helped build a public school; we could pay off that loan, just education in general.”

By pursuing a project that includes production, extraction and retail, the tribes will be able to maximize their profit, Sampson said.

“We want to be totally vertically integrated,” Sampson said about controlling the plants from seed to sale. “And I think there’s no better place for a (grow) site than Warm Springs. Our production costs could be less than 50 percent of those sites in Colorado.”

The Warm Springs marijuana facility will not have to pay property taxes since it will be located on the reservation, and the tribes hope to take advantage of the abundance of sunshine in Central Oregon — the proposed greenhouse would have a Plexiglas ceiling — which would lower the production site’s power costs.

“We may even be able to use some geothermal energy from the hot springs, depending where the location of the facility is, to heat the building,” Sampson said. “It’s all part of our strategy of being the first fully integrated tribal cannabis production and extraction facility — and possible testing center — in the country. As other tribes want to look into creating their own facility, we would be able to help with that, too.”

According to Sampson, legal marijuana businesses offer tribes many of the same benefits as on-reservation casinos.

“It’s very similar in that both businesses are highly regulated and highly controlled,” Sampson said. “It’s different in that we’re not operating (retail shops) or selling marijuana on the reservation. We’re selling off the reservation where adults can already (legally) purchase these products.”

Interestingly, the December vote on the tribal-owned marijuana production, extraction and sales project will have no effect on the tribes’ laws regarding the sale and possession of marijuana, which remains illegal.

Mark Pettinger, the Oregon Liquor Control Commission’s public affairs specialist on marijuana, said the OLCC has not yet had any specific conversations with the Warm Springs tribes, but that his organization is fielding legal questions on a daily basis about the newly regulated marijuana market.

“People are trying all kinds of entrepreneurial approaches to this newly regulated market,” Pettinger said Monday. “And the Indian tribes are no different. They’re trying to be thoughtful and creative as to what is and what isn’t possible.

“It’s a fast-moving environment,” he added. “We’re barely eight weeks out from accepting (recreational marijuana shop) licenses. Everything really is a work in progress now.”

Warm Springs’ production and retail facilities would be one of the first tribal-owned marijuana businesses in the country. Last week, the Squaxin Island Tribe near Olympia, Washington, opened what is believed to be the first recreational marijuana store on a U.S. Indian reservation. The Squaxin Island Tribe is not growing its own marijuana as proposed in the Warm Springs project but buying the product wholesale like other pot shops in Washington.

“As a business model, this brings both jobs and revenue to the tribes at a much-needed time,” Sampson said. “We’re really excited now about preparing it for the ballot for tribal election and really encouraging people to get out and vote regardless of their position. This vote in particular will help the economic security of Warm Springs.”

— Reporter: 541-617-7829, beastes@bendbulletin.coma

11466624