hill country observerThe independent newspaper of eastern New York, southwestern Vermont and the Berkshires


News & Issues October 2014


Local agriculture’s new frontier: medical pot?

Washington County developer says he’ll seek state license


Contributing writer


The recent legalization of medical marijuana in New York is opening up a new market for entrepreneurs who would become the state’s first authorized growers and processors of cannabis.
Among those who hope to join this nascent industry is Ted Berndt, who operates the Washington County Agribusiness Park in the town of Jackson, just outside the village of Cambridge on Route 313.

Like other potential growers and processors, Berndt is currently waiting for the state government to set up its process for selecting providers of medical marijuana. He has been actively preparing to submit an application for a cultivation facility at his 110-acre complex once the state puts a process in place.

Berndt said he also has been negotiating with potential partners or consultants and has researched the industry by traveling to Colorado and other states that already have medical marijuana facilities in place.

Berndt’s agribusiness park got its start last year when he took over a sprawling complex that had once been home to a mushroom-growing operation. Apart from medical marijuana, he has been developing a mix of other activities at the site, which includes 28 buildings and a combination of tillable acreage, hayfields and woodland.

His main goal has been to develop the site as a regional food hub that would include space for retail food sales, tasting rooms for locally produced beer and wine, a food distribution center, growing space and other services related to agriculture.

“Basically I want to provide an infrastructure to support farmers and food producers in the region,” he said. “This site is perfect for that. It can also become a destination for agro-tourism.”
In addition, he also is looking at facilities and services for construction and landscaping businesses and other industries, including alternative energy production.
“There are a lot of synergies that can emerge here,” he said.


Economic opportunity
Berndt said that when it started to become clear earlier this year that Gov. Andrew Cuomo and state legislators would enact a state law allowing medical marijuana, he began considering the possibility of adding marijuana production to the mix of activities he envisions at the agribusiness park.

He said he saw both the potential for a lucrative addition to his operation and a valuable new crop that would also have benefits for the region’s economy and tax base.

“It would be a great revenue stream for this site,” Berndt said. “It can also provide a lot of good jobs and other economic opportunities for this area, which is very much needed. In addition, it could bring in substantial tax revenues to the county.”

Berndt said he also believes marijuana is an important medical resource.

“I’ve never used the product myself,” he said. “But I know that there are a lot of people who are suffering with medical problems that can be helped, and it’s important to provide that.”
He acknowledged that there are many challenges to be met before legal marijuana production could begin, but Berndt said he believes his facility is well positioned for the competition to become one of the selected suppliers of medical marijuana in New York.
He noted that the property has 36,000 square feet of currently usable indoor space, with the potential to expand that considerably. The buildings can be easily converted for indoor marijuana cultivation, and the property alsohas facilities that can be used or shipping, product preparation and other operations, he added.

“There are a lot of hurdles,” he said. “However, this site is perfect for this. With the physical facilities we have here, this has the capability to become one of the largest operations in the nation.”


Hot competition
There is indeed a long road ahead, however, and the competition will be intense for the very limited number of available licenses.

Besides Berndt, news reports from around the state have identified several other businesses interested in producing medical marijuana in New York, including Terra Tech, a publicly traded company based in California that grows fruits and vegetables in greenhouse and hydroponic facilities across the country, and H2Gro Greenhouses, a 12-acre greenhouse operation in Niagara County that currently produces tomatoes.

Locally, a city alderman in Hudson, N.Y., recently floated the idea of converting a former factory building on the city’s waterfront into a facility for producing medical marijuana.

The bill signed by the governor on July 5 legalizes the use of cannabis for treatment of selected medical conditions on a prescription basis. New York is the 23rd state to make some type of provision to decriminalize the use of marijuana for medical purposes. Medical marijuana has already been legal in Vermont for about a decade and in Massachusetts since last year.
Although New York’s new law protects medical providers and patients from criminal prosecution, it is also very restrictive and contains many limits on the extent and availability of medicinal marijuana production, distribution and use.

Under the current law, the state will only license up to five businesses to grow medical marijuana and distribute and sell the products. It will also limit the number of dispensaries each provider can operate to four outlets, for a total of 20 distribution points around the state.

The chosen providers will also be carefully monitored and restricted. At Cuomo’s insistence, the New York law does not allow for medicinal marijuana to be smoked; instead, it allows extracts of marijuana in edible form or in vaporizers. The law also calls for extensive security precautions to prevent the unauthorized use and diversion of any marijuana for recreational use or illegal sale.
Patients and providers will have to be registered to be eligible to prescribe, receive and use medical marijuana. The law limits the medical conditions eligible for treatment with medical marijuana to a specific list that includes cancer, HIV/AIDS, Parkinson’s disease, multiple sclerosis, amyotrophic lateral sclerosis, spasticity from spinal cord damage, epilepsy, inflammatory bowel disease, neuropathies and Huntington’s disease. State health officials, however, have the discretion to add other conditions to the list in the future.

In one potential risk to entrepreneurs, the medical marijuana law will expire after seven years unless the Legislature and governor specifically agree to extend it.

The law sets an 18-month period after its passage for the specific legal structure and processes to be developed by the state Department of Health and other agencies.

Another wild card is federal law, which continues to ban marijuana cultivation and consumption for any purpose. The Obama administration urged federal prosecutors in 2009 not to spend time and resources pursuing medical marijuana producers where state laws sanction such activity, although some advocates say federal authorities have continued to harass state-legal marijuana growers and stores.


Waiting for the details
Richard Winsten, an Albany lawyer who has been working with organizers of a new medical marijuana producers association, said would-be producers like Berndt are waiting for the state to come up with the specifics of licensing process.

“The state has up to 18 months to write the regulations,” Winsten explained. “That will determine the application and selection process. They have begun to work on that, and we are all currently awaiting the results.”

Officials are looking at the experiences of other states as they prepare to draft New York’s regulations.

“New York is looking at best practices, and they want to do this right,” Berndt said. “Other states have had mixed results, and in some cases it has been a failure because of the way it was handled. So they’re being careful about how they do it in New York, as they should be.”
One question is whether the state will aim to have medical marijuana facilities spread throughout New York or concentrated in heavily populated areas.

In Massachusetts, the medical marijuana law overwhelmingly approved by voters in 2012 allows for up to 35 state-sanctioned facilities to grow and dispense marijuana. But earlier this year, the state announced that it would only license 11 facilities, and only one of those will be west of Worcester County, in Northampton.

Berndt said he is prepared for a rigorous process in New York.
“Everything will be tightly controlled, from the seedlings to the sale,” Berndt said. “There are so many factors that have to be worked into this. For example, all of the product will be tracked, and there will have to be software that is effective and compliant.”

In addition to background checks for the operators and employees of any marijuana production companies, there will have to be very tight controls on the hiring process as well as security measures to keep the growing and production facilities isolated from the surrounding community.
“Even the clothing and tools of the people who work with it will have to adhere to certain requirements to prevent the possibility of diversion,” Berndt said.


Long-dormant facility
Berndt acquired the agribusiness park property, which includes a 12-acre complex of 23 buildings and surrounding land, at a tax auction last year for $125,000. The property originally was a turkey farm and more recently operated as a mushroom growing facility until 2001.
Berndt, a fly-fishing guide who has also worked in industry and real estate, said he had long wanted to see the site brought back to life.

“I would drive by every day and see so much potential there,” he said. “It made me really want to do something with it. So when the opportunity came along to buy it for a price I could afford, I took it.”

He has since been renovating the site and developing plans for it. He said its combination of buildings and land makes the site well suited for a variety of activities, especially as a support center for agriculture.

“The possibilities are endless here,” he said.
One unexpected source of revenue, he noted, was the reclamation of the seasoned hemlock wood that was used for mushroom racks and other fixtures inside the buildings. He has been removing and selling the wood to designers, builders and others who use it for architectural and decorative elements in structures.

“The demand for this is amazing,” he said. “That’s been providing an income that is supporting this project while I develop other activities and recruit tenants here.”

Berndt said that he is continuing to pursue these other goals while preparing to seek a license to produce and distribute medical marijuana.

“As long as the appropriate precautions are set up to keep that operation secure, it is likely to be compatible with other activities,” he said.

He acknowledged that, as an independent operator in rural New York, he faces stiff competition from established marijuana businesses from outside of the state -- as well as from enterprises backed by large pools of investors in metropolitan New York City.

But he said part of his planning effort so far has involved seeking support and forming working relationships with others who have the necessary resources and expertise.

“There are a number of possible arrangements,” he said. “It is possible that someone might come in and handle the operation. Or they might work as a consultant. I’m looking into all of those options and talking to people.”

Berndt said his plans have so far drawn no visible opposition from local government officials or the community.

“I believe the fact that the governor and legislators passed this gives it legitimacy in people’s eyes,” Berndt said. “And with all of the controls, it will only have positive benefits for the area.”
He said a facility producing medical marijuana could create perhaps 100 jobs directly, a development that would yield a ripple effect of new customers for other businesses.

“It will require people and businesses to handle the cultivation, testing, security, administration and other aspects of the operation,” he said. “Also, since it has to be put into a non-smokable form, that creates opportunities for businesses to produce food and other products for consumption.”

Despite what may be fierce competition and legal hurdles, Berndt said he believes the characteristics of the site and his own business planning efforts will help the agribusiness park to qualify for a license.

“As long as the process is open and honest, we have as good a chance as anyone,” he said.