The Business

An Inside Look at America's Pot Industry

In this excerpt from a chapter in her forthcoming book, CNBC's Trish Regan visits the three-county area of Northern California known as the Emerald Triangle, where more pot is grown than anywhere else in America...

Ukiah Police Chief Christopher Dewey and I are standing on a cul-de-sac outside a pale blue townhouse. There are about a dozen town homes on this street and each house looks the same. In the front of each property sits a tiny front lawn—some with bright yellow daffodils adorning stone walkways. In one driveway, I spot a small red tricycle with blue and silver streamers dangling from its handles. This is a quiet, family neighborhood—but, according to Mendocino investigators, it’s also home to a significant commercial grow operation.

Guns in hand, the officers bang on the door. Pulling out a loud speaker, they demand entry into the town home. No answer. They bang again. Nothing. Drawing their guns, they hoist themselves against the door to gain entry. I’m watching from behind and as soon as that door swings up, the smell hits me. It’s pungent. Overwhelming. I hold my hand up to cover my nose and shield myself from the stench. This is not the faint smell of a few well-tended pot plants. This is far more concentrated. It’s like nothing I’ve ever smelled before.

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As the police storm in, their guns pointing ahead, I stand in the doorway, peering into what would be the home’s living room. It’s dark (every shade is drawn) and all I can see are rows of enormous plants. They’re each over 7 feet tall and grazing the ceiling. After getting an “all-clear” signal from one of the officers, I inch my way into the house—there is barely room to move the plants are so close to one another. Everywhere I look, the living room, the hallway, the kitchen and the dining area—all I see are marijuana plants. Every inch of this town home is being used for growing purposes.

Chief Dewey is standing on the stairs, “Come on, it’s clear. There’s more upstairs,” he hollers, motioning for me to follow him. Upstairs I spot three small bedrooms and a bath. In the bathroom, the showerhead is hooked to a hose. It’s providing a simple irrigation system for the grow operation. Chief Dewey leads me into one room, filled with tiny plants. This is a clone room where the growers are creating small plants in hydroponic beds. They’re essentially creating a root system on the stem of each plant, Dewey explains.

The second bedroom serves as a holding room for the plants’ intermediate stage. “They’re growing them up in here,” Dewey says, his eyes fixed on the dozens of small potted plants in the second bedroom.

Meanwhile, in the third bedroom are 15 large plants, similar to the ones I saw downstairs, all about 7 feet tall with mature buds. The Chief tells me these buds are ready to be harvested.

We finish surveying the property and make our way back downstairs toward the garage. It’s empty, but evidence remains scattered on the floor: some empty pots, a few lights, and some trimming equipment. “They just finished a harvest.” Dewey tells me, folding his arms and shaking his head. “This is a commercial operation,” he is emphatic. “This house was rented for one purpose, and that’s to grow marijuana.” I ask him how he knows it isn’t a medicinal operation. “If you were growing for medicinal purposes, you would be growing the two or three plants you need, not that many plants," he says gesturing back to the main part of the house.

The money being generated from an indoor grow operation like this adds up. “That one room that was ready to be harvested,” Dewey says, his eyes looking up at the blue sky as he computes the math, “was probably worth about $20,000.” The room they already harvested was, “twice the size. So it could have been $40K,” he estimates. “And then, they had two more cycles on the way, probably at $20K each.”

The beauty of the indoor operation, as commercial growers see it, is that plants can be grown and harvested every 90 days, affording them four major cash opportunities a year.

But the problem, Dewey laments, is that this kind of bust has become too typical. “What used to happen out in the woods—large commercial operations—just made its way into our neighborhoods.”

According to the Mendocino Major Crimes Task Force, this commercial grow was a family-run operation involving six individuals, including a seemingly upstanding citizen: the city government reporter for the Ukiah Daily Journal paper. Authorities allege the reporter and his fiancé rented the town home (along with other locations) while the fiancé’s brother covered the $2,000 a month electric bill. The fiancé’s parents were allegedly involved in the scheme as well. All in, authorities confiscated 80 plants and 22 pounds of marijuana, which they claim the ring was selling for $3,000 a pound to local cannabis clubs. It’s great money—until you’re caught.

Still, the allure of quick cash is causing more and more residents to roll the dice.

Jim Wattenburger says he knows why his community has gone to pot, so to speak, and it all comes down to one thing. Economics.

The Chairman of the Board of Supervisor for Mendocino County, Wattenburger is a larger than life personality. His booming voice and hearty laugh makes him seem more like one of the good ‘ol boys from Texas than a life-long resident of Mendocino County. But Wattenburger grew up here and has become an outspoken critic of marijuana. Wattenburger believes the industry has grown too fast, too soon, and he is actively trying to limit the amount of marijuana that can be grown in Mendocino. It’s a position that makes him increasingly unpopular with some growers. When I met him, he had already received four death threats thanks to his efforts to regulate marijuana, and he told me he carried a gun with him six out of seven days a week.

“We used to have timber.” He tells me. “We were the timber king in Redwood for the last 150 years.” But that industry has been nearly decimated. “When I was a kid here,” he reminisces, glancing up toward the ceiling of the County office then back at me, “we had 33 operating lumber mills of various sizes in this valley. We now have a total of three mills for the entire county."

Why did marijuana, of all things, become the replacement for timber?

“We’re the fifth largest geographically-sized county in California. We are one of the most sparsely populated counties. So you have vast areas where you have no people. Out of sight, out of mind.”

Wattenburger makes a convincing argument. Driving through Mendocino County, you can go miles without seeing a soul. It’s both beautiful and eerie.

The community’s natural resources also make it a prime area for growing. As Wattenburger points out, there is “lots of water and a great climate.” He stresses the diversity of agricultural products grown here. “We have a Japanese maple tree nursery here that ships all over the world. We have award-winning grapes. We have alfalfa. We have cattle. We have more organic acreages under cultivation in this county than anywhere in the United States!” He’s getting excited now, almost patriotic, and waves his hands for emphasis, almost as though he’s making a campaign speech.

“How much is all that worth?” I ask, trying to put it in context.

He sighs. He knows where I’m going with this, and I’ve just burst his bubble. “Well, all the legal agricultural products, wine, raw crops, timber livestock, about $2.4 billion.

(Editor's Note: This excerpt of CNBC anchor/reporter Trish Regan's forthcoming book is courtesy of the author and the publisher, John Wiley & Sons. The book, provisionally titled, "The Green Rush", is due to be published in the next year. Minor display changes were made to suit online viewing.)