By BEVERLY STODDARD, InDepthNH.org
Paul Morrissette has a lot to say. Born and raised in New Hampshire, he has been an auctioneer for the better part of three decades, and the speed with which he talks matches the cadence as he would take bids and declare a product sold. But we are here to talk about his newest passion and business, cannabis. We meet on a rainy day at his Penacook location for his company, Regal Auctions.
The building is a long brick structure filled with household items for his next national auction. His auction business is in New Hampshire. His cannabis business is in Maine. So, how does an auctioneer get so deeply involved in the cannabis business? In our conversation, Morrissette explains the problems with the proposed state-run cannabis proposal of ten stores the state would model on the state liquor store system. It’s a wide-ranging interview including why he believes ATCs are failing, the black market, and how cannabis should be kept in the private industry.
Let’s start with the vote that will take place Thursday, March 31 for HB 1598, legalizing the possession and use of cannabis. The House calendar reads: The bill seeks to create a Liquor Commission-owned and operated monopoly for all cannabis sold at retail within NH. How do you stand on this proposal? Why did you want to get involved with cannabis?
“I absolutely wanted to get involved. I had gotten together with a Massachusetts company called MariMed. They are one of the players in the cannabis business. They needed somebody in New Hampshire for one of the New Hampshire ATCs (Alternative Treatment Centers) because you had to have a New Hampshire resident hold the license. The majority of the board members had to be New Hampshire citizens, which is an attempt for all the states to try and keep the licenses away from the big corporate guys. It doesn’t work because you need giant amounts of money. I filed an application for Merrimack and Hillsborough counties to get the license to be an ATC. We didn’t win the license.”
Talk about the plan to use the state liquor store model that is about to get voted on in the House.
“All the cannabis businesses in the United States are being tolerated and are paying federal taxes, and they are private companies. All of a sudden, the Republicans want to do a communistic thing and have the state control private business. Nobody has tried this anywhere. The feds have said we’re not going to touch private businesses. If you are New Hampshire and it is going into the pot business, it is saying we are not going to pay federal taxes. We don’t pay income tax. New Hampshire isn’t writing the feds a check for the profit they make on liquor. They’re putting that in schools. They want to take cannabis another private product, and they want to sell it. The Republicans have been holding up legalization for years. Now they have a plan, and (Gov. Chris) Sununu has signaled that this is the only legislation he’ll sign for cannabis. He’s facing a seventy-four percent approval rating for this in the state.”
Let’s take that process and give it to me point by point. First, it gets into the state-owned cannabis store, and they need the product, so who do they go to?
“The state is going to hire one person that’s been in the industry who is going to come in and decide how much the state is going to need. In the budget, they have ten stores. They are figuring $700,000 for ten stores, $70,000 per store. In my store in Lebanon that just opened last Wednesday wholesale, we spent $270,000 for the stock in the store. But New Hampshire will have bigger stores than mine and thinks they can do it for $70,000. And they are only going to allow the stores to sell flowers. They won’t sell manufactured products to the general public. The stores will be allowed to carry manufactured products to sell to someone who comes in and has a medical card. What are they going to do with the ATCs? They’re going to sell the same products. They’re going to compete with their own state stores that they gave exclusive right to do this. They’ve been breaking even, and not only will they steal the retail adult use business, but they’re also going to steal some of their customers and sell them in their stores and selling at a lower price.”
What will happen to the New Hampshire ATCs?
“I think they’ll go out of business. They tried to compare this to liquor. That is in a national distribution chain. You’re buying exactly what you need for your market. Plants don’t grow that way. Can you grow a tomato plant and tell me how many pounds of tomatoes you’ll get off that plant. A buyer comes in from the state and decides he doesn’t want their product. They might have $2 million in their grow, and now the state doesn’t want it. What will you do with the product? You’ll have to destroy it. You can’t sell it to someone else because it’s illegal.”
“New Hampshire cannabis stores will be white-label cigarettes at their stores if they try that. The whole thing they are trying to do is convoluted. They don’t know anything about anything they are doing, not even the most basic stuff. Then they tempt fate with the feds on top of it because technically, this isn’t legal. Some day you might get a different president who will make an example of somebody in the cannabis business. We don’t like the fact that New Hampshire is not taxing cannabis. Do you think the state pays tax on the booze they sell at the liquor stores? No.”
I visualize walls around all of the states selling cannabis. You can make licenses with other companies. They will license within these walls of each state, and everything has to take place in the state.
“Anything illegal does. Anything that has THC in it has to take place in the state. It has to do with the Interstate Commerce Clause. You can’t cross state lines. The state is going to control everything, and we’ve got one buyer, and he’s going to name the price that I have to grow, and I hope to make money on. The state liquor store model for cannabis will never fly.”
What I hear from you is that the state is not considering the grower’s needs.
“They know full well.”
The vote goes to the next step on Thursday.
“We think it’s probably going to die. If not, it’s going to the Senate.”
“This is what I think they should do. When it becomes nationally legal or taken off the Schedule 1 drug list, it should be an open market system and opt-in for towns. It should go to private enterprise. You shouldn’t allow giant cultivation licenses. Make the maximum license smaller so more people can get involved. I think we should bring this back to farms. And I think what should happen with the taxes is New Hampshire should export what is in the market and become a provider. We have farmland and farmers, and I think we should take this onto farms. Still, they could grow in buildings but prompt it to go into farms. That way, towns like Groveton and Berlin and smaller towns can participate in this, and it’s not going to be the big cities that take all the opportunities. I think we should allow up to three percent tax on the product in the town that goes to the town that it is in. It could do something good.”
“I don’t want my state hurt. And I don’t want the industry hurt. I love this state, and I want to see it done right here. It has to be done the right way.”
What is the condition of the ATCs in New Hampshire?
“What I hear through the grapevine for those I’ve talked to, they are about breaking even because they have a small patient base. Getting a medical card is harder than in other states, and frankly, the medical industry existed because the retail adult-use industry didn’t exist. If it’s the same product, it’s true you can go into a medical dispensary and talk to someone who can give you advice. But, once you know what you’re taking, you can go to a retail store. If there’s a retail store two miles from you and in New Hampshire, you’ve got to drive an hour to get your medicine. I can tell you what’s going to happen. What happens everywhere that state’s become legal? The first thing is the medical people want to convert to adult-use, and then the medical thing starts to fall apart. It contracts. It still exists, but the customer base is not there. It doesn’t go completely away because they don’t tax medical cannabis in a lot of states. It’s medicine. It’s a little bit cheaper.
In New Hampshire, we have ATCs, and the fight now is to have adult-use legislation.
“The ATCs want it legalized. They have a patient base of approximately 10,000 people. Thirty-two percent of the state uses this product. So that’s 400,000 people.”
“The State of Maine will be collecting all the sales tax from the people in New Hampshire. Most of the license plates that came in my Lebanon store last week say live free or die on them. That’s what’s going on.”
Does New Hampshire care that its residents are going to Maine and Massachusetts to buy cannabis?
“The UNH poll said seventy-four percent of Granite Staters approved legalization. What else is polling at seventy-four percent?”
How do you know the percentage?
“From industry polls and behind the scenes talking at events. There has been a lot of polls taken. When you talk behind the scenes, there is a lot of hypocrisy from the legislature. I know for a fact with regards to this product. Do you know how many times I’ve heard; I don’t want my kids to see me voting in favor of marijuana while telling them that they shouldn’t be smoking it. So, there is some of that. But it gets less and less every year as this product gets accepted.”
“There’s a big fight in Maine now because they’ve legalized. They have compassionate caregivers that grow up there.”
What is a compassionate caregiver?
“You’re a patient for cannabis, perhaps a cancer patient, and you’re at home, but you can’t travel. You need someone to help you with your medicine, pick it up, and be responsible. So, a compassionate caregiver doesn’t necessarily consume the product. They act as a caregiver for the person who needs the product. They go pick it up and bring it back or get advice. The patient can call in an order, and then the caregiver picks it up on their behalf and brings it to them at their house.”
How do they track the caregiver?
“The caregiver is registered with the state. In Maine, they can grow and manufacture, too.”
How many plants?
“Here’s how it works. You apply to the state of Maine for a compassionate caregiver license. They don’t necessarily grow or provide the product. You might just go to a dispensary. That compassionate caregiver can make their license bigger. They can grow at their house. On top of the annual fee, they can get a license for cultivation in two ways. They can pay based on the number of plants. On the application, for one plant to ten plants, the annual license fee is $200. The licenses can go up to like fifty plants. That’s a lot. Our ATCs only had seventy plants to start with in New Hampshire. Here’s how the ordinance was written They could start with seventy plants and add six plants for every patient they registered. The medical cardholders can’t go to any one of the medical ATCs. You can only go to the one that you registered at. That’s how it developed in New Hampshire. In Maine, the compassionate caregivers, generally speaking, were smaller. There are over 3,000 compassionate caregivers in Maine. These 3,000 people can grow. They can pay by the plant, or now they’re offering a new license that says you can grow anything you want up to 500 square feet. They can stuff a 500 square foot room with as many plants as they want. That’s a lot of plants. You can grow. You can manufacture. And, I’ll say that it is not very regulated. There are no maximum amount of milligrams of THC.”
You could put one thousand milligrams in one chocolate bar.
“It makes it interesting for the black market. Where do you think the stuff is coming from in New Hampshire for all these people who are smoking it in giant quantities? It’s either being grown here in New Hampshire or Vermont or Maine, where a system is in place. I think a very larger percentage of what’s coming to New Hampshire and Massachusetts in the black market is coming from Maine. Every person over twenty-one can grow up in Maine. You can grow up to six plants in your house. It’s like growing a tomato plant. They put it into the law. In New Hampshire, they’ve tried to put growing through. They cannot grow here. They can consume only goods they buy from the four medical dispensaries.”
“The federal government allows us to operate, and they tolerate it because they collect an exorbitant amount of tax from anybody in the business. I was one of the first ones to educate Representative Abbas, who wrote HB 1598 about cannabis, when he got there a couple of years ago when we were doing another bill. They are totally clueless. They think they are going to go into the cannabis business, and they are going to set up stores. All their numbers are wrong. The problem they have is they want to put ten stores in, but they’ve got an opt-out provision in the bill. The projections are on the moon right now because if you cut out the best sales area, how will you project sales? Their numbers are extravagantly high. Now we know. It’s absurd.”
“And the problem is with the federal government is you aren’t paying any tax. So, if the feds decide they want to make an example of somebody in a big way, they’ll say you aren’t paying federal tax.”
“The New Hampshire medical ordinance was supposed to have a study done five years after it was signed. It was to report on whether it should even be continued. They never did it. And when you call and talk to the attorney general’s office or Department of Health and Human Services, there’s no answer for it. It’s been seven years. Two years ago, they started it, and it didn’t go so well. We didn’t hear anything. They fight about these laws. They put these laws together. Then they don’t even follow the laws.”
How did cannabis come to be grown in buildings? It’s a plant. Plants grow outside.
“A lot of corporate guys got involved in the business. It didn’t seem like they wanted the farmers to be involved with this so much. They saw the opportunity in it. They wrote laws and forced cannabis to be grown inside buildings under lights which uses a lot of electricity. I was with a corporate guy, and I sat at a desk in a room full of guys from a huge cannabis company where they talked more frankly about their intentions. The New Hampshire ATCs are not really making any money. They came here for future legalization and spent millions of dollars, and now the state wants to stick the thumb in their eye after they’ve done all this. You had corporate America as this went from state to state. When New Hampshire wrote some of their medical bills, they didn’t know what to write. They took some from Mass and some from Maine. Mostly the plants were grown in commercial mills, and they were spending $300-$400 per square foot to renovate the buildings and then put these things under lights which do give you higher quality, but they, for the most part, ignore the fact that it is an agricultural product. They put it in cities, which is politically expedient for them, too. The cannabis gets directed to where they think they can make most of the money. On top of that, you need people. If you’re in Groveton and you have a big grow, where are you going to get the people? You have to bring in knowledgeable people who don’t want to live in the willywags. They want to live in cities. That’s how it moved across the country.”
“One of my partners, who is the COO of one of the big Mass companies growing, let him grow outside this year. He grew an acre of weed outside at the old Bayer Pharmaceutical plant in Fitchburg, Mass. The fallacy is when cannabis comes, and all this crime comes in. That’s not what happens. The opposite is what happens. We opened in Lebanon, Maine, last week. It’s a 2500 square foot converted restaurant. We have 36 cameras in the building that go into a central system for 42 days. Do you think you want to break into that building? There is very good security no matter how you’re growing it. Now what’s happening is markets are maturing. Growing it the most expensive way possible might have worked when you had monopolies in medical dispensaries, but it’s not going so good now. I had this in my testimony before the Ways and Means committee. The big cannabis companies are crashing. The time is coming when they will go out of business. One of the largest cannabis companies in the world is Canopy Growth. They are a Canadian company that has an option to buy a big American company. In the last few years, their stock is off seventy-five to eighty percent.”
Why is their stock dropping?
“They’re not making a profit. It’s not legalizing fast enough. The laws aren’t going their way. The market is maturing. Prices are coming down. My partner, Byron Staton, grows in Fitchburg, Mass. He grows in modified greenhouses. You have composite buildings with an opaque roof and supplemental lighting. It’s a fraction of the cost of growing in a building. It was a natural evolution to go from one to the other. A lot of the grows in Massachusetts are in big buildings. Holyoke, Mass is like the epicenter of the cannabis business in Massachusetts. They grabbed it and liked it because they were an old mill town with many empty buildings, one of the places that cultivation goes to.”
How does a New Hampshire citizen born and raised here end up in Maine for his cannabis business?
“My friend, Tom Cusano, the real estate guy, and I heard rumors that they were going to vote in Lebanon, Maine, to allow adult-use cannabis. That’s on the side of Rochester, New Hampshire. East Coast Cannabis has three partners. One of the founding partners, Dana Brearley, was a compassionate caregiver and medical grower and seller in Maine. He’s from the Concord area in New Hampshire. He and two others, Ryan Ward and James Folan decided when Eliot, Maine was going to allow recreational, they would try and get the license there. And they did. They became vertically integrated. They developed Eliot. Then Tom and I came along last year. Maine had only just approved recreational cannabis in November 2021. We brokered to become part of East Coast Cannabis. That’s the storefront we have and the manufacturing license. We converted this old 1950s diner, Miners. It belonged to my partner’s aunt and uncle. When we saw the location and got cannabis in town, we worked with the town and ended up with a retail license and a manufacturing license that we’re partners with East Coast Cannabis. We have two-20,000 square foot cultivation licenses. It takes years, and we are in the process. We have a nursery license there, too.”
“I’ve never seen an opportunity to develop like this, you know, like the tech boom. We thought the cannabis industry would consolidate once federal legalization came. But the feds have largely ignored it, and now it’s to the point they couldn’t make an arrest if they wanted to. It’s in thirty-five states.”