Giant California greenhouse signals a big bet on cannabis legalization

CAMARILLO, Calif. - This is what the long game of California weed looks like.

Rising two stories from razor-straight rows of parsley, artichokes and strawberries, the greenhouse complex hums with solar-powered efficiency, its vast airy interiors redolent with the sticky plant that fills much of it.

Cannabis.

The flatlands here stretching between mountains and sea have attracted farmers for generations, just around a corner of the Pacific Coast Highway from the playgrounds of Malibu. Now this windy plain is a high-stakes table for a nine-figure bet on the future of California cannabis - that soon, within the next few years, adults across the country will be able to buy it as easily as hard seltzer or craft beer.

Graham Farrar has placed the bet here. He is the president and co-founder of Glass House Farms, and the company’s greenhouse offers 5 million square feet of indoor space for cannabis production. That comes to just over 114 acres, the equivalent of about 86 football fields.

Farrar, a garrulous proselytizer on behalf of cannabis and his company, said it is the second-largest greenhouse complex in the United States and the single largest dedicated to cannabis. What is harvested from these temperature-controlled cathedrals to weed is not necessarily meant to remain here in Farrar’s business plans.

Just look around.

Far from the misty northern redoubts of the state’s historic cannabis culture, the crop here grows just a few miles from highway-side outlet malls, an expanding regional airport, and the broad blue-stretch and logo-smile of an Amazon warehouse and distribution center.

Those neighborhood ambitions help reveal Farrar’s own restless intent - to create a national cannabis business, even though his product, while legal in the Republic of California, remains illegal in the United States of America.

“I have the capacity, when the time is right, to produce on a national scale the best cannabis in the world,” Farrar said during a recent tour.

“And when that happens,” Farrar added, speaking of national legalization, “this farm goes from feeling really big to really small.”

It’s the “when,” not “if,” that matters most here.

Since California voters approved cannabis for adult recreational use six years ago, a highly regulated market has emerged with a mishmash of rules set primarily by the state’s 58 counties and hundreds of cities.

The lack of uniform state regulations, governing how much cannabis can be cultivated and how many businesses should be licensed to sell it, has produced winners and losers among the state’s roughly 8,000 licensed growers. The state government, meanwhile, collects more than $1 billion annually in cannabis tax revenue from a roughly $5 billion industry.

Small growers have taken a beating. Without access to bank loans, many have been unable to afford the multiple levels of taxes and permitting required to become legal or to weather a severe recent supply glut in the western marijuana market.

Even more growers never bothered to come into the light. An estimated two-thirds of California’s cannabis market - by far the nation’s largest - is still black market.

The winners include big growers like Glass House, which also owns two smaller cannabis greenhouses north of here in Carpinteria and, in all, produces about 300,000 pounds of cannabis for sale annually.

The company has managed to secure both cultivation and retail licenses, which big and small farmers agree are far too few in number. There are roughly 75 times more places to buy an alcoholic drink in California than a legal joint.

The next evolution: Selling California weed beyond state lines, first nearby, then nationwide. The legal process to do so has recently accelerated.

California and 20 other states, plus the District of Columbia, have legalized cannabis for adult recreational use, even though the federal government still considers it a drug on par with heroin and fentanyl.

This two-tier legal landscape has required a willing suspension of disbelief from the Biden administration and its predecessors, an I-don’t-really-see-you pretension that Farrar and other cannabis entrepreneurs predict will soon give way.

Last year, the California legislature passed a bill to allow licensed California cannabis businesses to sell their products in other cannabis-legal states. Gov. Gavin Newsom (D), who signed the bill, would negotiate the terms of trade with his counterparts.

A couple steps must be taken first.

In a letter to the state attorney general’s office late last month, the state Department of Cannabis Control’s general counsel, Matthew Lee, sought a legal opinion assessing whether California could face federal punishment if it allows interstate cannabis trade.

Lee, in the course of his eight-page letter, answered his own question: No.

In a recent interview, Lee said that allowing trade with Oregon, Washington, Nevada and Colorado - all cannabis-legal states - would pose a risk not “qualitatively” different than what the state or cannabis businesses are taking now by defying federal law.

“Everything we do is illegal,” Farrar said in blunter terms. “We’ve already been acting as if we have broken into a hotel room, but we’ve promised to be out by check-out time. So it’s all ok. How are you supposed to understand that incoherence in the law?”

Other states are moving in the same direction.

Oregon approved a law several years ago allowing interstate trade. But the law was tied directly to federal legalization - a high bar to clear - and late last year an Oregon resident challenged that restriction on constitutional grounds in a case winding its way through the courts. Lee said Washington state and New Jersey have legislation pending to allow interstate trade - a sign, he said, “that perhaps this idea’s time has come.”

Farrar and others in the business believe California’s cannabis would have an edge in any new market, given the historic mystique surrounding its origin. In this marketing view, California is to weed what Cuba is to cigars.

Farrar and his partners had to take Glass House public on a Canadian exchange to raise the $92 million he needed to buy this greenhouse, a sale he completed in the fall of 2021. (A retrofit of the buildings took the overall cost to about $125 million.)

But Farrar had another problem: Ventura County, where this greenhouse sits, did not allow cannabis cultivation at the time he set his sights on the greenhouse. So he and his partners worked to place a measure on the county’s 2020 ballot to allow cannabis cultivation. Voters passed it easily.

Farrar was up and running here the following year - and what a spot it is.

A ragged line of mountain peaks dives toward the Pacific Ocean just outside the greenhouse’s soaring windows, which are cleaned by a $250,000 rooftop robot because even slightly dirty glass means less sunshine and lower crop yield. No lights except the sun are used in the growing process.

The Pacific Coast Highway begins one of its most famous stretches just a few miles west of here, bending south along soft bluffs above surf and sand toward Malibu, Santa Monica and Los Angeles, home to a vast, underserved market of pot-smoking customers, just a half-hour drive beyond.

The complex is almost entirely self-sufficient. It has its own groundwater wells, and three massive water tanks for storage. Three acres of solar panels power the buildings, rotating slowly to follow the sun, which nurture Crop Duster, Purple Push, Jealousy and other plants that stand among the hundred strains of weed the greenhouse grows.

At harvest time, carts run on tracks between the rows of mature plants, which stretch for hundreds of yards down a central aisle. It is too tiring and time-consuming for the workers to cut off the branches, heavy with buds, if they worked the rows solely on foot.

Then the branches are wheeled to the drying and trimming room on trolleys that resemble hotel luggage carts. The branches themselves dangle from clothes hangers, as low-tech as the operation gets.

Ranchera music, light and bouncy, provides the soundtrack as workers, masked and in white lab coats, work at stainless steel tables under bright lights trimming away extraneous stems and other imperfections. The operation employs 200 people year-round.

The rest of the work is highly automated.

Robots move knee-high cannabis plants from nursery sections, where they fight for light as they grow taller, to other parts of the greenhouse, spacing them out so each gets enough of the everyday sun (If they keep competing for light, the plants get stringy.)

Software knows when the plants, which sit in long, shallow troughs, need water.

“If there’s a zombie apocalypse, come here,” said Farrar, who is 45 and a Santa Barbara native. “We’ll have water, power, food and weed.”

Does his confidence justify the investment? This is where the cannabis world gets small.

Take the cannabis department’s January letter to the attorney general’s office. The state attorney general is Rob Bonta, a Bay Area Democrat, who as a state legislator previously was a staunch advocate of legalization.

It is unlikely Bonta will decide that cross-border trading is a bridge too far. Lee, the cannabis department’s general counsel, said he expects an opinion from the attorney general’s office a year from now.

But the big prize is national legalization - and it is another well-placed Californian who may help change things.

Last fall, President Biden asked his Department of Health and Human Services to reassess the federal drug “scheduling,” or classification, of cannabis as among the nation’s most dangerous controlled substances. Those who oppose the classification say it is a legacy of an overzealous drug war. But it has remained in place partly due to open questions about marijuana’s effect on the brain - especially among young users, who in theory would not be allowed to buy it even if deemed legal.

Who runs the department responsible for the review? Health and Human Services Secretary Xavier Becerra, who was California’s attorney general when voters legalized marijuana and who pledged to defend the law against explicit threats from the Trump administration.

Farrar, whose first cannabis grow was a 2-by-3-foot plot in his apartment closet at the University of Colorado at Boulder, is moving ahead with legalization in mind.

By the end of the year, he intends to bring another million square-feet of cannabis online in this greenhouse, where the roughly 45 percent profit margin of its harvest dwarfs the single-digit profits of the celery crop being grown next door.

“My goal is to get as much cannabis to as many people as affordably as I possibly can,” Farrar said. “If there is one farm in California that can make huge headway toward that goal, it is this farm.”