A Tiny Texas Town Takes a Chance on Medical Marijuana

Last September, a farm near Schulenburg, Texas, a quiet, conservative town of fewer than 3,000 people, became a medical-marijuana dispensary. Knox Medical, based in Florida, owns the farm and is one of the three newly licensed cannabis outfits in Texas to start selling cannabidiol, or CBD, a substance derived from low-THC marijuana. When deliveries start going out to patients this month, Schulenburg, home to distinctively painted churches and the Texas Polka Music Museum, will become one of the first legal outposts for medical marijuana in Texas.

It’s not an identity residents of the area are rushing to embrace. Town officials are quick to point out that the site of the greenhouses and the future dispensary is technically outside of city limits. And Kristopher Emola, the cultivation manager for Knox Medical, has already learned not to volunteer that he grows pot when talking to people in Schulenburg. “It’s one of those things that has been so stigmatized for so long,” Emola says, “that it’s natural to question it initially.” But if small towns like Schulenburg can get past the stigma, they may just be the perfect entry points for a booming marijuana business in a largely conservative state. “If it helps people and it doesn’t hurt anything,” asks Fayette County Judge Ed Janecka, “why not do it?”

It is unclear whether marijuana will ever become a significant part of the state’s economy. Despite a push across the country to legalize both recreational and medical marijuana (30 states and the District of Columbia have legalized it in some form so far, and 15 others have legalized CBD for medical uses), Texas officials have been reluctant to go anywhere near state-sanctioned cannabis. Mainstream Texan culture doesn’t support it yet, and new legislation is very narrow when it comes to legal use. In fact, the only reason this plan is viable now is due to CBD. Derived from low-THC cannabis, a person would have to smoke an entire barrel of CBD to get high. With recreational use or abuse therefore unlikely, Texas lawmakers got onboard and passed the Texas Compassionate Use Act in 2015.

The law authorized the Texas Department of Public Safety (DPS) to create a registry of prescribing doctors. It also required the DPS to issue licenses by September 2017 to at least three dispensaries to sell low-THC cannabis (containing 0.5 percent or less THC) that is at least 10 percent cannabidiol. Sales must be aimed specifically at the 150,000 patients in Texas, mostly children, who suffer from intractable epilepsy. The drug drastically reduces the number of seizures many patients with this condition suffer with almost no side effects, says Andrew Lerman, a neurologist who has been prescribing the drug to his own epilepsy patients in Florida since it was legalized there four years ago.

It’s a fair bet that none of the Texas lawmakers who supported the legislation imagined the first dispensary to open would be located in Schulenburg, but Knox Medical’s CEO, Jose Hidalgo, says the location makes sense for a lot of reasons. Schulenburg is roughly an hour and a half from each Houston, Austin, and San Antonio, granting easy access to some of the largest cities in the state. Plus, Fayette County is a farming and ranching community, so there’s plenty of space available to grow marijuana without being near schools, parks, or neighborhoods. When the DPS started taking applications in early 2017, Knox representatives quickly reached out to Janecka and other community leaders. “Immediately, when we came in wearing suits and looking professional,” Hidalgo says, “they looked surprised and relieved.”

Opening the dispensary in Schulenburg could be a boon for the town, says Dietrich Vollrath, a University of Houston economics professor. Medical marijuana is generally a low-risk business, and the town did not have to put up money or offer incentives to get Knox to base its Texas operations there. So, if it works, great; if it doesn’t, there’s no big loss of investment or effort for Schulenburg. “For a small town that may not have many other opportunities for growth, this may be the right move,” Vollrath says. “Once you’re the first, the natural fit would be to expand the business from there. There’s no reason it has to be Schulenburg versus anywhere else in Texas, but if it becomes the marijuana capital of Texas, why not?”

At most, though, the economic impact will be quite modest, says Jeffrey Miron, a Harvard economics professor focused on marijuana policy. Initially, the dispensary will only employ about a dozen people, and the products will be available for delivery only, via nondescript white vans. Plus, the number of doctors prescribing the drug is limited, and the number of patients who can afford cannabis oil—which will not be covered by insurance since it is still classified as a Schedule I narcotic—may be quite low.“If you tax medical marijuana, you can always collect tax revenue, but the true employment numbers, the GDP in the county, will hardly change at all,” Miron says. “Selling low-THC marijuana is like low-alcohol drinks: Nobody wants it aside from those who need it, and the market for those who need it isn’t huge and the number who can actually afford it is even smaller.”

But with the market for marijuana expected to grow three- or fourfold in the next seven years, many believe this is really just the beginning. Despite Governor Greg Abbott and other state politicians’ insistence that the Texas Compassionate Use Act is not the first step toward broader legalization, it’s likely going to be pretty tempting for legislators to expand the laws once legal CBD revenues start coming into the state. “On the medical side, it’s just a matter of time,” says Franklin Snyder, a Texas A&M University law professor who taught one of the first marijuana law classes in the country. “The evidence is accumulating about the benefits, and the drug is so much less dangerous than the alternatives. We have a nationwide opioid epidemic right now, and the fact that this could be a way to cut back on prescribing those drugs is going to propel this further.”

Any expansion would likely be a slow process. As it is, per federal law, doctors in Texas could be risking their prescribing rights by recommending CBD to their patients, which is likely why, according to the DPS, only seven doctors have signed up for the Compassionate Use Registry of Texas so far. And marijuana’s future in Texas won’t be helped by its uncertain legal status at the federal level: Last week, the Justice Department rescinded a policy instated under President Obama that steered prosecutors away from bringing any charges in states with permissive marijuana laws.

Still, Knox Medical, when contacted after the rescission, said it was proceeding with its plans under the assumption that the policy shift wouldn’t change much in Texas. Snyder doesn’t think the company is being overly optimistic: He expects the DOJ’s new position to have a negligible bearing on a state where prosecutors have demonstrated little interest in cracking down on CBD. (He says it might be a different story for “states with recreational-use and broad medical-marijuana programs like California’s, where you can buy doobies to deal with your headaches.”)

As federal policy gets hashed out, the folksy Schulenburg location, the benefits to sick children, and the suit-wearing Knox executives could all have a powerful effect on public opinion. “They made a savvy choice putting the dispensary there,” Snyder says. “There’s something about Schulenburg that sounds very ordinary and Texas-like, reassuring in a way that, say, downtown Austin does not.”