Gaming gone bust, tribe turns to marijuana farming

A small Indian tribe in a remote stretch of San Diego County has traded in its failed dream of casino riches for what could be the next big payout — marijuana cultivation.

The Iipay Nation of Santa Ysabel — which shuttered its 35,000-square-foot gaming hall in February 2014, buried under $50 million in debt — has transformed the vacant space into a high-tech medical marijuana operation, and is leasing part of the property to growers who cultivate and distribute the drug to legal dispensaries throughout the state.

On the building’s sprawling parking lot, more than a dozen greenhouses are in various stages of construction awaiting more tenants.

The tribe is the first in San Diego County to embrace the marijuana industry in the wake of a December 2014 memo by the U.S. Justice Department that declared sovereign nations would not be prosecuted for growing pot on tribal land in states that had already legalized the drug.

Indian tribes across the nation have been mostly wary of that decision, but at Santa Ysabel the timing of the Justice Department memo, 10 months after the casino failed, seemed also serendipitous.

In 2007, when the Santa Ysabel Resort and Casino opened on a hillside off state Route 79 overlooking Lake Henshaw, the tribe envisioned building a hotel to serve the hordes of gamblers who would surely flock there. That never happened — there were too many other casinos closer to San Diego and major transportation corridors like Interstate 15.

The 700-member Santa Ysabel tribe had watched its neighbors get rich, but saw its own prospects evaporating.

So in early 2015, tribal leaders quietly jumped at the opportunity for a new revenue source. They soon created laws regulating marijuana on the reservation and established the Santa Ysabel Cannabis Regulatory Agency and Cannabis Commission to oversee the fledgling venture.

For the past 18 months, marijuana cultivated at the site has been shipped to legal dispensaries across the state, said Dave Vialpando, who heads the tribe’s regulatory agency.

Vialpando declined to identify the marijuana businesses that are leasing grow space, or the financial arrangement between those companies and the Santa Ysabel tribe.

He said the operation at the casino property is still “very, very small. It’s two grow rooms, less than 1,000 plants. Mostly it’s still empty space. It’s still in development.”

“The greenhouses are at various stages of construction,” he added. “It won’t be all cultivation. There will be processing rooms and trimming rooms and storage rooms. There’s a lot of infrastructure that goes with the enterprise of medical cannabis.”

Vialpando said the testing lab is about to open and there is the possibility that other cannabis products such as lotions could be produced in the future.

Meanwhile, law enforcement agencies across the region say they’re aware of the tribe’s marijuana operation and are taking a wait-and-see approach.

Executive Assistant U.S. Attorney Blair Perez released a statement to the San Diego Union-Tribune Tuesday saying that “Santa Ysabel was informed in September 2015 that a marijuana grow violated federal law. Since 2015, this office has enforced the federal drug laws in compliance with current Department of Justice guidance and will continue to do so.”

Interpretation: Federal law prohibits the cultivation and distribution of marijuana, but current policy allows for pot to be grown on reservations as long as a list of requirements is met. The San Diego County Sheriff’s Department said in a statement it does not license, inspect, or regulate marijuana cultivation on tribal lands. “The Iipay Nation of Santa Ysabel is operating under tribal law and tribal authority in this case.”

The District Attorney’s office said it’s aware of the grow operation at Santa Ysabel “and has advised the tribe that if state laws are broken in a location where we have jurisdiction, our office will review any resulting investigation for potential criminal charges.”

Vialpando — who worked as an officer with the California Justice Department before retiring in 2011 to head up the tribe’s gaming operations and then its cannabis agency — said he’s confident the Santa Ysabel tribe is doing everything by the book.

“We have a highly regulated operation,” he said. “The tribe has no ownership interest in cannabis. It doesn’t cultivate it, doesn’t process it.”

“It’s not been a secret to our government partners,” Vialpando added. “It’s a highly regulated enterprise. We have inspections and audits and waste disposal to assure that no cannabis waste leaves the reservation.”

Though California voters approved Proposition 64 in November, legalizing the recreational use and cultivation of pot, Vialpando said the tribe’s laws only allow the cultivation of medicinal marijuana. He said the tribe has no plans to expand those rules to include recreational marijuana.

Vialpando said no other local tribe is involved in the pot business, but Santa Ysabel has had inquiries from other reservations.

Bob Miller, an Indian law attorney and professor at Arizona State University, said growing pot on reservations is a hot topic among tribal leaders across the country.

He said that at a national conference on Native American issues next month in Las Vegas, many of the scheduled seminars have to do with marijuana.

The growing acceptance of the drug, however, could hit a roadblock with the Trump administration. Miller said tribal leaders are watching what develops.

“The way (Attorney General) Jeff Sessions talks about marijuana has got to make tribes very, very hesitant,” he said.

Sessions has publicly said that “Good people don’t smoke marijuana” and last year, as a senator, he said “we need grown-ups in charge in Washington to say marijuana is not the kind of thing that ought to be legalized… that it is, in fact, a very real danger.”

At the Santa Ysabel reservation, Vialpando said the tribe also has its eyes on Washington, but is moving forward with its plans.

Security is a priority, and the old casino building is just about perfect for such an operation, Vialpando said. To get to the facility requires a long drive up a paved road that is blocked by a security gate and an armed guard.

“We have quite a few security measures built in and yes, the location is ideal in not creating any sort of undue public safety risk,” said Vialpando. “The hilltop is a very defensible position, a very secure position.”