’SO FAR APART:’ UP tribe’s venture into cannabis highlights tension with state as potential compact talks continue – MiBiz: West Michigan Business News

Since the Bay Mills Indian Community announced plans in August to launch a vertically integrated cannabis business, accusations about the state’s unwillingness to work with the tribe and the state’s own relative silence highlight what tribal experts say is a complicated web of state regulation and tribal sovereignty.

At the heart of the issue is whether the state and tribes that operate cannabis businesses should sign compacts stipulating agreements involving revenue sharing and oversight, not unlike casino gaming compacts.

However, Bay Mills has publicly said the state is unwilling to work with them while reports have suggested the state is seeking a blanket compact that would apply to all 12 federally recognized tribes in Michigan — a non-starter, as one tribal expert says. 

Further complicating the issue is that cannabis is still illegal at the federal level, and cannabis remains a controversial topic within tribal communities.

“The tribes are in this place where they’d really like to do it on tribal trust lands,” said Matthew Fletcher, a professor and director of Michigan State University’s Indigenous Law and Policy Center. “They want to participate in the internet business, local retail, manufacturing and production on their own land so they can be free of things like state regulation and taxation. The problem with that is that it’s still illegal under federal law.”

The federal government isn’t helping. Since a 2013 Obama administration memo saying federal law enforcement wouldn’t interfere with state-sanctioned cannabis operations, the Trump administration has been mum on any formal guidance. Former Attorney General Jeff Sessions formally rescinded the guidance from the 2013 “Cole memo,” but Attorney General William Barr testified last year that the Department of Justice wouldn’t prosecute state law-abiding cannabis businesses.

While other states including Washington and Oregon have signed compacts with tribes over recreational cannabis businesses, Michigan is relatively new to the adult-use market, which voters approved in November 2018.

“The regulatory structure for doing a lot of this stuff is very unsettled,” Fletcher said. “Tribes will always take the position that the state doesn’t take jurisdiction over them. That’s why the tribes really have been trying to talk to the state to cut a deal. It’s something that all sides want to happen, but it’s a slow process to begin with. It’s very politically fraught both within the tribes and within the state government, and it’s not entirely clear what a deal would look like.”

The office of Gov. Gretchen Whitmer did not respond to a request for comment, while Attorney General Dana Nessel declined to comment for this story. 

Marijuana Regulatory Agency Executive Director Andrew Brisbo declined to comment on Bay Mills’ proposal specifically and responded to a series of questions from MiBiz about tribal cannabis businesses generally with a statement.

“The MRA has been exploring — and will continue to explore — options for tribal involvement in the marijuana industry, including through compacts,” Brisbo said.

New front

Indeed, cannabis represents an emerging front for state-tribal relations — there’s no precedent in Michigan for how such an agreement between the two entities would look. The model of a gaming compact would be ideal, Fletcher said, but federal law gives the “outer contours” of how gaming compacts are structured, unlike with cannabis.

“With cannabis, there’s absolutely nothing,” he said. “It helps to have that frame.”

One model could come from Washington, where 11 of the state’s 29 federally recognized tribes have signed compacts with the state over cannabis. The state has published a 21-page template for a marijuana tribal compact that involves retail sales, providing notice to local jurisdictions, taxation and record-keeping and dispute resolution.

Tribes in Nevada and Oregon also have negotiated compacts with the state government, agreeing to minimum regulations and taxes that mirror the states’ policies.

Fletcher said the state’s concerns at this point likely involve taxation, consumer protections and the fact that recreational cannabis is relatively new. Tribes, meanwhile, want to maintain sovereignty and the economic benefits that could be redistributed within the tribal community.

“All sides’ positions on this are so far apart,” Fletcher said. “It makes perfect sense they’re so far apart but still coming at it with goodwill — everyone wants a deal but doesn’t know how to do it.”

Other options

Although cannabis may be a controversial topic among tribal members, it’s an economic development tool at its core and a way for tribes to diversify their economy particularly during the fallout of the COVID-19 pandemic when many of them closed their casinos for six to eight weeks, if not longer. 

Fletcher said Upper Peninsula tribes, in particular, are interested in cannabis because they don’t generate as much gaming or economic development revenue as downstate tribes.

“They’re really desperate,” he said.

Bay Mills recently detailed plans for a vertically integrated operation to grow about 10,000 cannabis plants on 110 acres of tribal land in the eastern U.P. The operation would include processing and a retail store open to tribal members and the public.

Bay Mills Tribal Attorney Whitney Gravelle previously told MiBiz the plan is a demonstration of tribal sovereignty. The Brimley-based tribe was also the first in the state to legalize recreational cannabis on tribal lands, doing so in January 2019, two months after Michigan voters passed a referendum approving adult-use cannabis.

“Bay Mills as a sovereign nation has always made its prerogative to control and regulate its own tribal lands,” Gravelle said. “By not opting into the state license and state jurisdiction, we’re able to control how we are regulating the product that we make.”

Bay Mills has a “built-in advantage” of going it alone by operating under its own regulations and avoiding state taxes, which is expected to make the tribe’s product less expensive. But there remain unanswered questions about transporting those products off tribal land and engaging in tribe-to-tribe sales.

Although Bay Mills wants to be an owner/operator, other tribes — including the Sault Ste. Marie Tribe of Chippewa Indians and the Little Traverse Bay Bands of Odawa Indians — have taken a different approach by leasing tribal land to cannabis companies. The state isn’t interfering in these arrangements, and it’s also giving tribes and companies a leg up if the surrounding municipality decides not to license recreational cannabis businesses.

“We don’t begrudge anyone else who has found a different way into this industry,” Bay Mills Tribal Chairperson Bryan Newland said in a statement announcing the tribe’s cannabis venture. “At the same time, Bay Mills has no interest in turning over our sovereign lands to private, for-profit corporations who are regulated and taxed by the State of Michigan.”

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