The sunflower-processing facility in Dove Creek’s industrial park sits empty, a painful reminder to local farmers of unfulfilled promises of good times to come. After two years of operation, its owners could not overcome the negative economics of selling sunflower oil in a commodity market for food use, biodiesel or feedstock.
One problem is the scale of the facility, experts say. It is too large to be a pilot plant and too small to operate competitively with large oil-press plants. After years of exploring options to restart the facility, the Dove Creek Development Corporation watched the anchor tenant in its industrial park go into receivership, and finally be sold by the bank to a local, private party.
But recently, a new white hat has ridden into town. Bayfront Capital, LLC, a private equity firm from Bradenton, Fla., has made an offer to buy the facility to process industrial hemp.
The prospect of renewed operations with hemp has brought both hope and heartburn to the Dolores County commissioners and economic-development decision-makers.
Both the county and DCDC are involved in the deal because the land on which the facility is located is owned by DCDC as part of the Weber Business Park. The current land-development agreement between DCDC and Dolores County requires a public meeting to be held regarding new businesses, at the request of the county commissioners or planning commission.
On Oct. 31, with a dozen members of the public in attendance, the commissioners met with Bayfront Capital representative Les Vandenberg, a Durango real-estate agent handling the property sale. In addition, a representative from the Colorado Department of Agriculture, Duane Sinning, participated by speaker-phone, and extension agent Gus Westerman represented DCDC.
“We are closing in on getting that plant bought,” Vandenberg said, explaining that Bayfront Capital has a team that’s been doing “intense research” for the past four months. The Florida company holds the franchise for “form block” and plans to use both the sunflower- processing facility and adjacent cement plant to manufacture concrete block. This mortar-less block uses hemp fiber to add structural integrity.
“The headquarters for the form-block venture will be in Dove Creek,” he said. “In fact, Dove Creek will be in the company name.”
The operation is expected to employ about 12 people at the hemp-processing plant and an additional five or six at the cement plant.
Most of the meeting focused on questions by the commissioners related to the legal status of hemp on the federal and state level. Sinning assured them the county would be on solid ground to move forward with the processing plant.
“It is perfectly legal to process hemp imported from China or Canada in the U.S,” he said.
Sinning explained that if a processor can show the hemp was purchased from a registered grower using certified seed, or with test results showing THC levels below 0.3 percent, it is treated like any other agricultural commodity in Colorado. No additional testing or documentation is needed.
“Think of it like corn,” he said.
Still, there was a lengthy discussion on the legality of growing hemp in Colorado, a much thornier issue than processing it.
Amendment 64 to the Colorado Constitution defines industrial hemp as “a plant of the genus Cannabis and any part of that plant, whether growing or not, containing a Delta-9 tetrahydrocannabinol (THC) concentration of no more than 0.3% on a dry weight basis.” Or, as stoners know, hemp is the stuff with too little THC to get you high, no matter how much you smoke. Hemp and marijuana are classified as the same cannabis plant, but unlike pot, hemp has been bred to contain low levels of THC and high levels of oil and fiber for nonpsychoactive uses.
Hemp oil and one of its components – cannabidiol, or CBD – are the target products for the Dove Creek facility. There is currently a shortage of hemp processing facilities in Colorado, and it commands a higher price than THC.
The bottom line is that hemp farmers in Colorado could potentially make more money than pot farmers, if they could overcome the regulatory and processing bottlenecks.
Growing, processing, or possessing the cannabis plant, whether industrial hemp or marijuana, is still illegal under the Federal Controlled Substances Act without a Schedule I drug permit. Nonetheless, Colorado and several other states (and possibly five others, after the Nov. 8 election) have enacted legislation that allows cannabis to be grown and used for medical and recreational purposes. In addition, 28 states including Colorado allow growth and research of industrial hemp. And even though cannabis is still illegal on the federal level, the 2014 Farm Bill allowed universities such as Colorado State University to start researching industrial hemp.
This flurry of legislation has resulted in a patchwork of regulations in Colorado because the state left the final decision whether to allow growing, processing, and selling the weed up to local authorities.
Dolores County decided to opt out of the opportunity to allow recreational cannabis operations. The commissioners passed an ordinance banning marijuana- cultivation facilities, along with manufacturing and testing facilities and retail marijuana stores, within unincorporated areas of the county.
However, the ordinance clarifies that “marijuana does not include industrial hemp nor does it include fiber produced from these stalks, oil, or cake made from the seeds of the plant, sterilized seed of the plant which is incapable of germination, or the weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink, or other product.” Thus, the ordinance makes it legal to grow and process industrial hemp in Dolores County.
Currently there are no commercial hemp-growers in the county on the Colorado Active Industrial Hemp Registry. Five are listed in San Miguel County and five in Montezuma County, including Colorado State University’s Southwest Colorado Research Station and Perez Agricultural in Mancos.
On Oct. 31, issues related to the federally-owned Dolores Project, which provides irrigation water to Dolores County farmers, were raised – specifically whether it would be legal to use a federal project’s water to supply the hemp operation. It was pointed out that water from the Dolores Project is used to irrigate hemp grown at the Southwest Colorado Experimental Station in Yellow Jacket.
Landowners adjacent to the Weber Business Park raised concerns, based on their experience with the sunflower plant, about noise, odor, dust, and traffic. One neighbor said “the smell was terrible” when the sunflower plant was operating. Another said her bedroom windows faced that plant and the noise had been so disturbing she wished she had moved.
Westerman said noise, odor, and dust from the new facility would be the “same or less than sunflower facility.” This brought snorts of discontent from the audience. He added that DCDC had updated the park management plan to better protect neighbors.
“DCDC wants the park to be a good neighbor,” he said. “We want to bring benefit to the community and we will work with you to resolve these issues.”
Commissioner Ernie Williams also addressed the public’s concerns.
“The county will have to work with DCDC and the company to resolve potential traffic and emergency-response issues after the business plan has been submitted,” Williams promised.
Williams added that options could include impact fees or other measures imposed on companies like Kinder Morgan to mitigate impacts to county roads and services.
County Attorney Dennis Golbright assured the audience, “The county has teeth to enforce health and safety standards and to resolve nuisance problems.”
Sinning said other counties in Colorado are encouraging this type of development via economic incentives. In addition, Colorado is actively promoting hemp-growing and processing.
Vandenberg estimated that the deal would close in mid-November and operation is expected to start four months later. The next regulatory step will be for the new owner to negotiate a lease with DCDC to operate a business in the industrial park. The county commissioners requested that they be kept informed of the lease negotiations and start-up process. Commissioner Doug Stowe encouraged the public, particularly neighbors of the business park, to participate in the process early.
(For background on the sunflower plant, see “Field of Lost Dreams,” Free Press, March 2011, at http://fourcornersfreepress.com/news/2011/031103.htm)