Pot Gamble

Warm Springs bets on cannabis even though marijuana use and possession is still illegal on the reservation.


WARM SPRINGS — In a nondescript, low-slung building on a barren plateau above the village of Warm Springs, a tight band of dreamers imagines a vibrant future for the hard-luck Indian reservation. And while it’s clearly no pipe dream, a drug — cannabis — does lie at the heart of their strategy to reinvigorate the reservation.

They dream of Warm Springs rising—not like smoke but like a mountain slowly pushing up through the earth.

Warm Springs Ventures inhabits the building’s warren of cubicles. The company, established by the Confederated Tribes of Warm Springs council in 2001 to explore business opportunities for the reservation, envisions a tribal economy powered by new engines of commerce — first among them cannabis.

The days of dependency upon timber, hydroelectric power, gaming and tourism are to be replaced by an era of innovation where technology and untapped markets are the keys to success.

Here’s the vision: Industrial and recreational drones cruise over the reservation while below cannabis is grown and processed, then sold throughout the state, much of it through tribal-owned retail stores.

Meanwhile, the forests that once provided the lumber for the recently shuttered Warm Springs lumber mill will bring in millions simply by growing, as giant corporations fund their maintenance in a complex system of carbon offsets.

In this plan, the current pillars of the moribund tribal economy — health care and education, government, the Indian Head Casino and Kah-Nee-Ta Resort — will continue to play their roles, employing reservation residents, the latter two generating revenue for possible reinvestment.

But the big money will come from the new sources of income. And those dollars will be reinvested both on and off the reservation.

 “The tribe needs innovative sources of revenue, of jobs,” says Don Sampson, CEO of Warm Springs Ventures and himself an enrolled member of the Umatilla tribe in Northeastern Oregon. The tribe’s lone lumber mill closed earlier this year, boosting a reservation unemployment rate already hovering around 30%. “Timber has gone away,” Sampson says. “Hydroelectric power has declined. We’re looking at new opportunities: cannabis, drones and carbon offsets. We see a bright future for the people here.”

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Most observers agree that Warm Springs is poised to be a leader in Indian cannabis growing. The project, which will employ about 85 and generate between $11 million and $27 million annually, is a good six months from producing its first cannabis grow.

But the reservation provides plenty of land, sunshine, water and on-rez hydroelectric power — the perfect ingredients for growing pot. Its sovereign nation status, coupled with the state’s legalization of marijuana, represents a powerful political one-two punch.

That’s why the tribe’s cannabis venture is being closely watched by tribes around the U.S. Cannabis cultivation has emerged as the latest potential solution to tribal economic difficulties, and Warm Springs is seen as one of the primary testing grounds for cannabis as economic driver.

“What’s happening in Oregon is a model built on optimism. We are watching Oregon,” says Duke Rodriguez, CEO of UltraHealth, an Arizona-based cannabis consulting firm.

Cannabis could well be the first reservation economic breakout business since gaming, says Victor Rocha, founder of Victor Strategies, a gaming consultant based in Hinsdale, Ill. “All good things don’t last,” he says, noting that casino revenue growth around the U.S. has slowed in recent years. “It’s important that tribes look at other areas for economic opportunity, like cannabis.”

While Warm Springs isn’t the first tribe to push into the grow-and-sell-pot business, the way the tribe is managing both the business and political facets of cannabis distinguishes Warm Springs’ approach. The tribe aims to control the entire process, from cultivation to processing to distribution and retail sales, Sampson says. “No other tribe has done that.”

And as one of the first tribes to explore the market — the Warm Springs community itself, which voted overwhelmingly in the spring to permit cannabis cultivation — it will almost certainly help identify the pain points that lie ahead. For tribal cannabis businesses face unanswered legal questions, not the least of which is a reservation’s “right” to grow and sell pot.

At present, that right rests on the language of two U.S. Department of Justice memos issued by the Obama administration. Essentially, the memos state that the DOJ won’t prosecute pot operations on reservations in states where the growing and selling of pot is legal. In theory, because reservations fall under federal, not state, law, the feds could shut down an Indian growing operation.

That’s a rather tentative position from an investor’s viewpoint, says Robert Miller, a professor at the Sandra Day O’Connor College of Law and an appellate judge for the Grand Ronde tribe. “The legal questions cause uncertainty, and business and investment hates uncertainty,” says Miller, who is also the author of Reservation Capitalism: Economic Development in Indian Country.

Ground has been broken for a 36,000-square-feet indoor grow facility, but it’s unclear who will put up the seed money: the reservation or outside investors. Currently, Sampson is leaning toward the former, so that profits stay on the reservation.

Another challenge has been getting the approval of the Bureau of Indian Affairs. The BIA, which must sign off on a land lease for the grow facility, has assumed a hands-off approach to Warm Springs, largely because of the uncertain protection of the Justice Department memos. Sampson says the tribe is “working around” the BIA approval bottleneck.

Ironically, marijuana use and possession remain illegal on the reservation. Legalizing it in Indian country represents one of Sampson’s longer-term goals. “It’s ridiculous that you can’t buy it and use it here,” he says.

The Warm Springs tribe’s bold move into the cannabis business comes at a time when the reservation, by many measures, is at rock bottom. In addition to the reservation poverty rate (at 28%, it’s double the state rate), a third of Warm Springs families live on less than $25,000 a year, and mean household income is 60% of the average Oregon household income.

Once fairly prosperous by reservation standards, Warm Springs is now among the poorest in the nation. That’s led to a brain drain as young people with promise left and never returned, says tribe member Brent Florendo.

“Right now Warm Springs is in pretty much of an economical hard place,” says Florento, who left the reservation years ago and now serves as native nations liaison for Southern Oregon University in Ashland.

“Trying to take those funds that it has today and support all the programs we need for the people just isn’t working. Housing, health, education — they’ve all pretty much suffered. Finding a new direction for the economy has been difficult,” he says. “But now, with cannabis and all, it looks like something good is finally happening.”

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Sampson and his team have been laying the political groundwork for their operation for several years. Now everything is in place for cannabis to be a “home run for the tribe,” he says.

Warm  Springs Ventures’ drone project promises to  be yet another “home run,” Sampson says. The team has lined up $1 million in grants and loans to get the project off the ground. Like cannabis, the drone strategy is to create a vertically integrated business, with Warm Springs providing the facilities and space for training, certification, manufacturing and testing.

Work is underway to convert an existing facility into one for the repair and manufacture of drones. The tribe also plans to partner with a Portland company to manufacture drones on the reservation that would serve the electrical power industry. Meantime, Warm Springs has been designated as one of a handful of drone certification sites across the U.S. by the Federal Aviation Administration.

Another niche: Teaching forest firefighters how to integrate drones into their work. “We’ve got the perfect place for that,” says Aurolyn Stwyer, in charge of Warm Springs Ventures’ drone project and niece of a former tribal chief. “We can do control burns on the reservation where firefighters can learn to use the drones.” 

Stwyer dreams of developing a “drone theme park,” where drone owners can engage in competitions and otherwise improve their drone-operation skills.

Then there’s Warm Springs Ventures’ carbon-offset business. Major corporations that produce polluting emissions can, rather than invest in antipollution equipment, purchase carbon-emission offsets. Essentially, they can pay money to owners of forest lands — like the Warm Springs tribe — to help maintain pristine forest conditions.

Such a business doesn’t create a lot of jobs; most of the workers are employed to safeguard the forest through pruning and cleaning the forest floor. But, Sampson says, it could bring in millions from major polluters, especially as more states adopt California’s carbon-offset regulations.

Cannabis. Drones. Carbon offsets. The tribe has been down the economic “home run” road before, only to find its efforts rebuffed — most recently by another tribe. Warm Springs tribe members are still stinging from the failure to win approval for construction of a major off-reservation casino in Cascade Locks. That project, formally floated in 2005, was defeated due to the massive opposition mounted by the Grand Ronde tribe, which operates the highly successful Spirit Mountain Casino in Grand Ronde.

After putting up millions in planning costs and political contributions, Warm Springs finally threw in the towel on the project in 2013. Sampson says tribal members “don’t want something like that to happen this time. They want to make sure this one is successful.”

There is precedent. In key ways, the move to grow pot in Indian country mirrors the movement to legalize gambling on Indian reservations decades ago. In the early days of casinos on Indian reservations, the feds tried to stamp them out, claiming they violated federal antigambling law. But the tribes eventually prevailed, and in so doing strengthened the notion of reservation sovereignty.

To be sure: Users flocked to the casinos from on and off the reservation as soon as they opened. Now, ironically, reservation residents will have to drive to Portland, Eugene or Bend to buy reservation-grown marijuana in reservation-run retail stores.

Still, UltraHealth’s Rodriguez predicts that tribal rights to cultivate cannabis will be upheld and that more tribes will embrace it. “There is simply no question that cannabis will, over time, be larger than gaming for tribes that have the land, water and power to grow it,” he says.

Dan Cook

Dan Cook is a Portland-based freelance writer. 

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