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In a public meeting April 10, the Sonoma County Board of Supervisors considered new regulations that could ban outdoor commercial cultivation in unincorporated areas of the county. The threat of further restrictions on outdoor cultivation has alarmed cannabis-industry leaders.

North Bay Business Journal interviewed Ned Fussell, co-founder of CannaCraft, the largest cannabis business in the North Bay, with nearly 350 employees and headquarters in Santa Rosa.

You are following the move at the Board of Supervisors to push outdoor cultivation indoors in the county?

That’s one of the proposals that the most vocal group is trying to push forward.

That group is residents in unincorporated areas of who don’t want cannabis cultivation nearby?

Yes. Even though they live in agricultural areas, they want their neighborhoods to stay safe from any kind of crops.

A similar phenomenon happened in areas with vineyards near residents

With existing (applications for cannabis-cultivation) permits sitting at the ag department, waiting to be permitted, there are about 80 collective acres throughout the county. There are about 68,000 acres of (wine) grapes. (Yet) I hear complaints about water use and the environment (by cannabis cultivators). The impact (of cannabis cultivation) compared to vineyards — it’s not even a conversation.

Cannabis is efficient. You need little land to grow it?

That’s right. And that’s not taking into consideration the economic impact. In the past year, according to Sonoma County GoLocal estimates of economic impact, the cannabis economy in Sonoma County was about $900 million. The grape industry was less. (Sonoma Co. had 205,000 tons of wine grapes crushed, average price $2,300 a ton, total crop value nearly $475 million.)

In CannaCraft, you are responsible for cultivation and Dennis (Hunter) manages extraction?

Yes.

How many tons of cannabis do you buy from local sources?

Upwards of 10 tons a month.

Most of that from Sonoma County?

That’s the biggest bummer of this situation. CannaCraft has been built on support of Sonoma County growers over the last eight years. We have done everything we can to keep sourcing local. We also go (source) in Hopland and Mendocino (County), and a little in Humboldt (County) as we’ve grown. We have been proud that 80 to 90 percent of our source material has come from Sonoma.

Is it still in the 80 percent range?

Yes. About 80 percent of what we get is from Sonoma County. It has taken years for us to manage quality control, to find operators and people who care enough about the crop they are growing to make sure it’s pesticide-free, herbicide-free and fungicide-free. We have a laboratory at our facility (in Santa Rosa). We test everything that’s coming from third-party sources.

In the early days, we were failing 80 to 90 percent of all raw material coming in. It has taken years to find (quality-oriented) operators here locally. We make sure their processes and growing (are free of contaminants).

Since passage of Prop. 64, have you restricted sourcing so CannaCraft only works with legal, licensed operators?

Yes. Unfortunately, as of January we went from using 80 percent raw plant material from Sonoma County to now (almost none). Sonoma County doesn’t have any recreational licenses in place (for commercial cultivation).

They don’t have licenses, so they can’t sell to you legally?

Exactly.

Where do you go now for sourcing?

Santa Barbara, Humboldt County.

You truck it in?

Yes. Our trucks drive six, seven hours one way. Instead of going 10 minutes away, it’s a 14-hour round trip.

Does CannaCraft have a retail outlet for recreational cannabis?

Yes, in Hopland at Solar Living Institute, the Emerald Pharms Cannabis Dispensary.

That was originally your operation?

Yes. We received our recreational license there. Mendocino is ahead of Sonoma.

You seek one in Santa Rosa?

Yes. We’re filing (applications for) permits in the next two months for a couple of locations.

Will that be at Giffen Avenue?

No. It will be right outside the downtown area. Giffen will be for manufacturing, distribution and production.

Is Giffen Avenue cultivating indoors?

It’s going to be turned on in the next three weeks. They are putting on last coats of paint.

Your company has total revenue of nearly $100 million a year?

Yes. You could say that.

CannaCraft is the most sophisticated cannabis operation in the North Bay?

Yes. Northern California has been the bread-basket for cultivation and production (of cannabis). It allowed us to expand.

You have about 300 employees?

We are getting close to 350 or 375.

What percent is from extracted products compared to cannabis to smoke or ingest?

About 80 percent of our revenue comes from Care By Design and AbsoluteXtracts. Flower still makes up maybe 45 percent of retail purchases. From early on, we focused on formulated products to separate (differentiate) ourselves.

Dennis was arrested in June 2016 and police took about $2 million of extraction equipment and $500,000 in cash. Police kept the cash?

Yes. They called it costs of investigation.

Has the extraction equipment been returned to CannaCraft?

We’re supposed to get it back this week, actually. (Almost) two years later. Unfortunately, we are already onto two versions later (in extraction technology). So two years later, they’re all antiques.

In technology, two years is an eternity?

Yes. It’s bittersweet to get all our stuff back. We have to store it, but don’t have need for it.

Your actual loss is $2.5 million?

It’s more than that, for sure (lost production). But it’s part of the evolution (of the industry). Santa Rosa Police Department put us in a stressed position that made us evolve faster than we normally would have. We probably wouldn’t have made the next version of machines if we had not lost it all. It forced us into growth, innovation. We had to build another 30, 40, 50 machines. We made them better than the last ones.

The bust served to educate lawmakers, council members here?

When we were raided, little was known about cannabis manufacturing. Being in such a stressed position, having so many jobs at risk, the Santa Rosa City Council really had our back, helped support us, pushed legislation through that has propped us up and given us a huge competitive advantage on the state level. We have some of the friendliest tax rates outside Humboldt in the state. We feel super blessed and thankful. It has been a bit of a roller coaster, but we are here.

Are you worried that federal agents may clamp down on the California cannabis industry?

No more than we have been for the last 15 years. We have community support. We are the largest medical-cannabis company in California, probably the largest in the country. We are helping a lot of people, getting product to people who need it. The last raid only helped our numbers and our street cred. It also brings the industry together.

Have you ever been arrested?

I have been arrested. They never charged me with anything. I never served time.

Resistance from rural neighbors about cannabis is strong?

The biggest disappointment has been lack of willingness to have a dialogue and communicate. The opposition is trying to create a divisive mentality. There are less differences than people would think. We live in an agricultural community. For two months, all you can smell in the county is manure from fields. Chicken houses have the most awful smell. Grape processing is not an amazing scent, either.

Is there movement toward acceptance of cannabis cultivation in rural areas?

We have reached out to the opposition, invited them in and tried to have conversations. There’s total lack of willingness. We’re one of the top 20 employers in Sonoma County, committed to being here. We want to stay local. We would rather purchase our raw materials from people who have gotten us here instead of new corporate interests that have 30-acre permits in Santa Barbara.

With recreational (cannabis), there is a huge need for growth. It’s a bummer. I hope we can figure it out and come together as a community.

James Dunn covers technology, biotech, law, the food industry, and banking and finance. Reach him at: james.dunn@busjrnl.com or 707-521-4257