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Biros' Blog

Sustainability of Cultivation in 2016, Part II

By Aaron G. Biros
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In the second part of this series, I speak with Alex Cooley, vice president of Solstice, to find out what particular solutions growers can use to increase efficiency. Last month, I introduced the challenge of growing cannabis more sustainably. To recap, I raised the issue of sustainability as an economic, social and environmental problem and referenced recent pesticide issues in Colorado and carbon footprint estimates of growing cannabis.

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The growers at Solstice put their plants under a trellis net to increase yield.

Alex Cooley is the vice president of Solstice, a cultivation and processing business based in Washington. Solstice is at the forefront of the industry for innovating in energy, water and raw materials efficiency. I sat down with Cooley to discuss exactly what you can do to grow cannabis sustainably.

“Switching to outdoors or greenhouse will always be more sustainable than indoor, but depending on the type of facility, energy efficiency and specifically lighting should be at top of mind,” says Cooley. “Just looking at your bottom line, it is cheaper to use energy efficient lighting sources such as plasma or LED lighting, which will reduce your need for air conditioning and your overall energy consumption.”

Looking into sustainable technologies is one of the quicker ways to improve your overall efficiency. “We are big believers in VRF [variable refrigerant flow] HVAC systems because it is one of the most energy efficient ways to cool a large space in the world,” adds Cooley. “Use a smart water filtration system that gets away from wasting water by catching condensate off AC and dehumidifiers, filtering and then reusing that water.”

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Indoor cultivator facilities use high powered lights that give off heat, requiring an efficient air cooling system like VRF HVAC.

Utilizing your waste streams is another relatively simple and cost effective practice to grow cannabis sustainably. “Our soil and biomass goes through a composting company, we recapture any of our waste fertilizer and runoff for reuse,” says Cooley. “We try to use post-consumer or fully recyclable packaging to reduce what would go into the waste streams.”

So some of the low hanging fruit to improve your bottom line and overall sustainability, according to Alex Cooley, include things like reusing materials, composting, increasing energy efficiency and saving water. These are some of the easily implementable standard operating procedures that directly address inefficiency in your operation.

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The tops of plants are beginning to flower in this Solstice indoor facility.

In the next part of this series, I will discuss Terra Tech’s approach to sustainable cultivation, which utilizes the “Dutch hydroponic greenhouse model” on a large scale growing produce such as thyme and basil, but are now taking their technologies and expertise to the cannabis industry. I will also discuss the benefits of using a third party certification, Clean Green Certified, to not only help grow cannabis more ecofriendly, but also market your final product as such. Stay tuned for more in Sustainability of Cultivation in 2016, Part III.

A Q&A With Christian Hageseth: Innovate or Die

By Aaron G. Biros
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Christian Hageseth, founder of American Cannabis Partners, Green Man Cannabis and the Colorado Cannabis Ranch and author of “Big Weed,” gave a presentation at the recent High Times Business Summit titled “Innovate or Die.” During the session, he discussed at length why industry leadership in innovation is key in determining the progress and growth of the cannabis industry.

Christian Hageseth, founder of American Cannabis Partners
Christian Hageseth, founder of American Cannabis Partners

His company, Green Man Cannabis, has won the Cannabis Cup four times and he has been a partner at five dispensaries and six grow operations. He is currently a partner at two dispensaries and two grow operations and he is a founding partner of a medical research group in Israel. Christian Hageseth has years of experience working with cannabis in a number of capacities that has culminated in a keen eye for understanding the cannabis industry. We sat down with Hageseth to learn more about some of his expectations for the industry’s future.


 

Cannabis Industry Journal: Can you discuss why you decided to take your research group to Israel?

Christian Hageseth: Obviously the United States has barriers to medical research on the plant, so it is seriously lacking the ability to discover more about the plant. We know the NIH [National Institutes of Health] has been helping Dr. Raphael Mechoulam in Israel to study cannabis and THC for the past 35 years, even though this is not permitted in the United States. Israel is willing to allow the research in an open format. We will be able to get an independent review board and the ability to work with institutions in Israel.

Christian Hageseth, founder of American Cannabis Partners, Green Man Cannabis and the Colorado Cannabis Ranch and author of "Big Weed"
Christian Hageseth, founder of American Cannabis Partners, Green Man Cannabis and the Colorado Cannabis Ranch and author of “Big Weed”

CIJ: What kind of research are you looking to accomplish?

Christian: We are researching what cannabis formulation and delivery mechanism would work better than what is available for certain ailments. The research should initiate in March with the goal of reaching clinical trials in the future. We are looking to study the treatment of five ailments with cannabis: migraines, joint pain, insomnia, irritable bowel syndrome and psoriasis.

CIJ: How do you think your research will help people?

Christian: I own dispensaries, and I see people come in and ask for advice on how to treat their insomnia or migraines all the time. We want to be able to recommend something that will accurately treat them. Simply recommending an indica or sativa strain is such a hollow answer for people that are actually in physical pain and need precise treatment. We want to be able to provide the real answers to people seeking help.

The Colorado Cannabis Ranch will be the first cultivation center in Colorado to offer educational tours, similar to a brewery or winery
The Colorado Cannabis Ranch will be the first cultivation center in Colorado to offer educational tours, similar to a brewery or winery

CIJ: Switching gears a little, how is progress on the Colorado Cannabis Ranch?

Christian: We are ready to break ground on the Colorado Cannabis Ranch (the Weedery) in the beginning of March this year. We expect greenhouses at the Ranch to be operational by July along with a summer concert series a little later.

CIJ: Looking at the cannabis industry as a whole, where do you think innovation will come from in the near future?

Christian: Emerging medical technologies will have the greatest impact on the industry. Nanoparticle delivery systems for sublingual drug delivery are one example of biotechnology that I foresee having a major impact. I can expect some major innovations in some of the process technology around extraction. The technology around extracting specific and separate cannabinoids in particular will get refined more and more. The industry as a whole and market expansion will be driven by product development.

Pesticide Position Paper: Prepared by Comprehensive Cannabis Consulting (3C)

By Adam Koh, Nic Easley
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Those that follow the legal cannabis industry are undoubtedly aware of the struggles of Colorado to regulate pesticide use on cannabis. At the time of this writing, there have been 19 recalls of products contaminated by pesticides in as many weeks. Authorities could not in all cases identify exactly how many units of products may have been tainted, but based on the numbers available, roughly 200,000 individual cannabis products, if not more, have been pulled from dispensary shelves. Along with these recalls have come a large amount of coverage and commentary from various news outlets, industry stakeholders, and even those companies who have had products pulled from shelves.

As this is a controversial and contentious subject, it can be difficult to parse and evaluate the various points of view being offered. In what follows, we will outline the issues at hand objectively: first providing a brief overview of federal and state pesticide regulations and how they pertain to cannabis; addressing claims of whether pesticide usage is “safe” or not; and, finally, offering our opinion of how the cannabis industry should address the pesticide conundrum considering the current regulatory environment and the state of our knowledge.

Before diving in, we are also aware that there is controversy around cannabis testing methodologies, and that the reliability of cannabis testing labs in general has been called into question by a number of the companies that have faced recalls. While we cannot comment on the operations of particular labs, we do support the application of consistent standards, proficiency evaluations, and stringent regulatory oversight to testing labs themselves, so that their results can be assured of being beyond reproach.

Still, 3C’s stance is that quality cannot be tested into a product. To have growers continue to produce contaminated cannabis only to see it recalled repeatedly is unsustainable for the industry; indeed, it threatens its very existence, as we discuss below. That is why we focus in this paper on the cultivation of the plant, as correcting problems on the production side is the only way to ultimately resolve the dilemma in which the industry finds itself.

Pesticide Regulation in the US Relative to Cannabis Cultivation

Cannabis’ pesticide problems stem in large part from the fact the pesticide regulation takes place at the federal level, under the auspices of the EPA. All pesticides undergo years of research and development before they can be sold to farmers and employed on crops. That research addresses questions such as where and how a pesticide can be employed, on what crops, in what concentrations, with what frequency, and how long before harvest can a pesticide be applied. Questions of worker safety are also addressed, such as those concerning what Personal Protective Equipment (PPE) might be required and how long workers must avoid treated areas (Re­Entry Intervals), among other concerns.

The fruits of such studies are then distilled to the contents of a pesticide’s label, which must be registered with and approved by the EPA before a pesticide can be distributed for sale. Federal and state laws require that pesticides be applied according to label directions, making the label a legal document of sorts. “The label is the law,” is a phrase common among agricultural professionals with which the legal cannabis industry is becoming acquainted.

The sticking point in regard to cannabis is that, due to its federal illegality, no research has been performed on the use of pesticides on cannabis. Due to the lack of research, no pesticides registered currently with the EPA are labeled for use on cannabis. Since all pesticides must be applied according to label specifications, this essentially prohibits pesticide use in cannabis production. However, some labels are written in such a broad manner that the use of those pesticides could not be construed as a breach of the legally­ binding use directions. Additionally, certain pesticides are of such low­toxicity that the EPA has deemed that their registration is not required; these are known as minimum­ risk products under section 25(b) of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). At this time, the Colorado Department of Agriculture (CDA), in an attempt to offer guidance to cannabis growers, is maintaining a list of such products that, either due to broad label language or 25(b) status, may be used on cannabis without that use being a violation of the label.

Are Pesticides Safe for Use on Cannabis?

Since the first plants to be quarantined after discoveries of improper, off­-label pesticide use to the most recent recalls, some of the Colorado cannabis companies caught up in those enforcement actions have made public statements claiming that their products are safe. These statements are dangerously misleading, as they do not take into account the issues laid out above, nor the facts that follow.

Frequently, attempts to justify such claims point out that pesticides are employed on our food and therefore must be okay to apply to cannabis as well. This is a classic case of comparing apples to oranges; or, in this case, comparing apples and oranges to cannabis. Such data cannot be bridged for the simple reason that apples and oranges (and most other agricultural food crops) are not smoked. Smoking remains the primary method of cannabis ingestion, but cannabis products are also vaporized (concentrates), consumed (edibles), applied to the skin (topical creams and patches), and taken sublingually (tinctures, sublingual strips).

As noted, the studies that pesticides must undergo prior to being approved by the EPA involve measuring acceptable residues based on the method of consumption of the final product. Since most food is consumed and digested, few pesticides on the market have undergone pyrolysis studies, which examine how the chemical structures of pesticides degrade when burned. This means that while the fungicide myclobutanil, the active ingredient in Eagle 20EW, may be approved for use on grapes, that approval is meaningless in regard to cannabis, as grapes are not smoked and the relative safety of myclobutanil residues was not tested in regard to such a consumption method.

While studies may eventually reveal that certain pesticides may be used on cannabis without ill effects to the end users, such research has not been performed and no one can say with certainty what the effects of consuming cannabis containing pesticide residues might be. Even the CDA qualifies the list of products that may be used without violating labeling guidelines with the following statement, “These products have not been tested to determine their health effects if used on marijuana that will be consumed and thus the health risks to consumers is unknown.”

Again, no one can currently say what pesticides, if any, can be safely employed on cannabis; anyone claiming definitively that their products are safe despite off­-label pesticide use is making a statement that at this time lacks any scientific basis whatsoever.

Another claim made numerous times by companies defending their off­-label pesticide use is that no one has yet fallen ill from pesticide use on cannabis. While this is true, we must remember that we are in uncharted territory, and no large­scale public health studies have been done to determine what, if any, effects result from consuming cannabis to which pesticides were applied. We hope that no ill effects will surface, but the fact of the matter is that chronic health issues may take years to show themselves and a public health crisis may yet emerge.

Recommendations for the Cannabis Industry

We are advocates for cannabis legalization and want to see this industry grow and develop into one that is beneficial for all involved. We believe that cannabis can continue to be a force for positive change in numerous areas of society, from medicine to criminal justice to agriculture, and beyond. But, in order for it to do so, we must navigate issues such as those around pesticide use in an intelligent and responsible manner.

Our primary recommendation should be preceded by the statement that the use of chemical pesticides of the type triggering Colorado’s recalls is not needed in cannabis production. We make this statement based on years of experience working in, managing, and advising cultivation operations of all types, methodologies, and scales on how to grow successfully without illegal pesticides. Cannabis has survived and flourished throughout human history without pesticides, and will continue to do so if we cultivate it correctly.

As such, we recommend that growers n​ot​ employ any pesticides in a manner that violates label directions, and only use 25(b) products that have undergone pyrolysis testing to ensure that they are not releasing harmful compounds when burned. Furthermore, applications should only be made during the vegetative stage, prior to the emergence of flowers. Overall, if there is any doubt as to whether a product or material is safe, it should not be used until legitimate, peer­-reviewed research has been performed by a reputable institution.

Successful pest control can be achieved via intelligent facility design, robust environmental controls, workflow protocols, and strict cleanliness standards, in addition to preventative applications of appropriate minimum­ risk pesticides. There is no magic bullet that will solve all pest problems, which is why experienced agricultural professionals rely on Integrated Pest Management (IPM), defined as “an ecosystem­-based strategy that focuses on long­term prevention of pests or their damage through a combination of techniques such as biological control, habitat manipulation, modification of cultural practices, and use of resistant varieties.” Overall, the adoption of Good Agricultural Practices (GAP) is much needed in the industry, and cannabis growers should look to agricultural operations that promote the four pillars of GAP standards (economic viability, environmental sustainability, social acceptability, and safety and quality of the final product) for guidance in formulating best practices in this new field.

This recommendation is not simply a matter of principle, but one that will preserve your business. In addition to costly and brand­-damaging recalls, we have already seen the first product liability lawsuits filed last year against LivWell by cannabis consumers over off­label pesticide use. Another issue is that of worker safety. Most cannabis cultivation takes place indoors, where pesticide residues can linger in garden areas and on equipment, creating toxic work environments. Unfortunately, based on the widespread nature of pesticide use in the legal cannabis industry, we feel confident in stating that thousands of workers employed in legal cannabis cultivation operations have applied chemical pesticides without proper PPE or safety training. Businesses employing pesticides off­-label will likely find themselves subject to liability claims from workers, as well as consumers, in the relatively near future.

Conclusion

In closing, the bottom line is that applying pesticides off­-label is a violation of state and federal law and could result in criminal and civil sanctions, should regulators and affected parties choose to pursue them.

It must also be noted that off­-label pesticide use threatens the industry as a whole. Point six of the Cole Memorandum states that the federal government will not make the enforcement of the Controlled Substances Act a priority as long as the “exacerbation of (…) public health consequences associated with marijuana use” is prevented. The emergence of a public health problem would be a violation of the Cole Memo ­and it could be argued that the current situation unfolding in Denver is already a violation ­ and could trigger federal intervention against states that have legalized cannabis. In this light, the Denver Department of Environmental Health, which is driving the recalls, has not “launched a campaign against legal cannabis,” as a company recently subject to a recall claimed, but is actually acting as a bulwark against a potentially serious Cole Memo violation that could shutter the entire industry.

Based on the current situation, the cannabis industry must come together to denounce and eliminate off­-label pesticide use. In order to ensure the health of patients, consumers, workers, and the industry itself, we must seize this opportunity to grow without chemicals that are currently illegal, potentially very harmful, and ultimately not even necessary.

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From The Lab

Cannabis Research in Israel: Meeting with Dr. Raphael Mechoulam

By Seth Wong
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I had the pleasure of visiting the famous Dr. Raphael Mechoulam last month at his Hebrew University office just outside of Jerusalem, Israel. For those who may not have heard of him, Dr. Mechoulam is essentially the godfather of the endocannabinoid system. He is best known for his work in isolating and totally synthesizing delta-9 tetrahydrocannabinol (THC). Dr. Mechoulam is one of the leading recognized scientists in our field. Much of his work is focused on the nervous system, specifically how various acids, and particularly cannabinoids, bind to the nervous system and thus their effect on humans.

Dr. Mechoulam is a humble man whose energetic demeanor belies his age. He speaks six languages and continues working regularly even at the age of 86. His mind is as sharp as any 25 year old and, while our meeting was short, it lacked nothing in content.

Dr. Raphael Mechoulam (right) and Seth Wong (left) in the Dr.'s Hebrew university office.
Dr. Raphael Mechoulam (right) and Seth Wong (left) in the Dr.’s Hebrew university office.

His discoveries in cannabis have not been his only accolades and only represent about a third of his work in his accomplished life time. He has a vast number of papers and studies related to fatty and amino acids and their effect on the brain. The underlying principles of all of Dr. Mechoulam’s areas of study are similar and he has equally distinguished himself in these fields as he has in the realm of cannabis. Because of it’s taboo nature and the limited amount of sophisticated scientific research that cannabis has been subject to, Dr. Mechoulam is more widely recognized for this specific focus.

During our brief hour-long meeting, we discussed the impact of cannabinoids on cancer patients and bone marrow transplants, his cannabis research on schizophrenia as well as the role cannabis plays in diabetes patients – all topics on which he has volumes of published research but stressed the point that more research needs to be done; we have only scratched the surface.

Dr. Mechoulam is an inquisitive man who is always investigating, digging, and striving to understand more about the effects of cannabis, fatty, and amino acids on the brain. When asked what charge the cannabis and medical industries need to pursue, he stressed the need for more scientific studies to investigate the impact of cannabis not just on the brain but the entire human body, as well as the need for grants to help promote those studies. Dr. Mechoulam specifically stressed the importance that these studies employ scientific vigor in a responsible and legal manner.

He is man of high moral ground, inquisitive nature, and a thorough investigator. I am privileged and humbled to have met him and heed his call to bring sophisticated and responsible scientific studies to the forefront of the Cannabis Green Rush.

Ask the Expert Series: Straight Talk on Safety, Defense and Security with Bruce Lesniak

By Aaron G. Biros, Bruce E. Lesniak
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This is the first part of a series dedicated to understanding more about defense, security and safety as they relate to the cannabis industry, the importance of having standards and some tips for cannabis business plans. Over the next few weeks, we will hear from multiple industry pioneers discussing those topics and offering practical solutions for problems that many cannabis businesses face daily.

Inconsistent laws across multiple states created a fragmented network of regulations for cannabis. Some third parties are filling the gaps between the industry standards and state regulations. The Colorado Marijuana Enforcement Division (MED) and the Washington Liquor and Cannabis Board’s i-502 rule provide guidance on regulations surrounding packaging and labeling, advertising, pesticide use, retail and other areas.

Still there are many opportunities to fill the gaps. The Foundation of Cannabis Unified Standards (FOCUS), is an independent non-profit founded to develop some consistency in standards governing public health, consumer safety and the environment. In cultivation, the third party certification, Clean Green Certified, works to provide some guidance for growing cannabis organically based on USDA organic standards. For laboratories, Washington’s regulations provide some guidance, but organizations like FOCUS, the American Association for Laboratory Accreditation (A2LA) and the Cannabis Safety Institute seek to fill the gaps in laboratory standards along with the ISO 17025 requirements.

Security and defense is one particular area of the cannabis industry that still needs a benchmark for businesses to follow. In this series, we sit down to discuss security, defense and safety with Bruce Lesniak, president of the Food Safety and Defense Institute and member of the oversight committee for the establishment of standards in the cannabis industry in conjunction with FOCUS.

Cannabis Industry Journal: What changes do you see coming to the cannabis industry related to product safety, defense and security? 

Bruce Lesniak: As in every industry that provides a public consumable product, the primary objective is to protect the consumer by providing products that are consistently safe. The largest change coming to the cannabis industry will be the implementation of enforceable, nationally uniform standards across all states and all product lines. I believe that the standards and regulations developed for the cannabis industry will mirror those of the food industry. Companies are already busy working to develop this uniform standard, one such group is FOCUS. Founded by Lezli Engelking, FOCUS works with diverse professionals from regulatory, quality assurance, medical, law enforcement, business, research, and the government officials, medical and research professionals along with subject matter experts from numerous business disciplines across the industry to develop impartial, comprehensive, cannabis specific standards that will be presented for adoption by state and federal governing bodies. Lezli summarizes the FOCUS Mission as “ To protect public health, consumer safety, and safeguard the environment by promoting integrity within the cannabis industry.” Look for more on this in our next Ask the Expert update, on CannabisIndustryJournal.com or you can contact Lezli Engelking at FOCUS here: 866-359-3557 x101.


This series will highlight important issues involving security, defense and safety in the cannabis industry. Next week, Bruce, along with cannabis security professional, Tony Gallo of Sapphire Protection, will provide some advice on what companies can do to improve their master business plan. Stay tuned for next week’s Part II of Ask the Expert: Straight Talk on Safety, Defense and Security with Bruce Lesniak.

Year in Review, What’s In Store for 2016: A Q&A with Nic Easley

By Aaron G. Biros
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With 2015 coming to a close, to understand and start strategizing for the next year, we must look back on the year and gauge the industry’s progress. A lot has happened this year and there is a lot to look forward to in 2016.

Nic Easley presenting at the 2015 High Times Business Summit in Washington, D.C.
Nic Easley presenting at the 2015 High Times Business Summit in Washington, D.C.

Nic Easley, founder and CEO of Comprehensive Cannabis Consulting (3C), gave a presentation at the High Times Business Summit last week, reviewing the cannabis industry’s progress in 2015, and providing some insights on what to look for in 2016. 3C is a national cannabis and hemp consulting firm dedicated to ensuring the highest standards in large-scale, sustainable organic production and product manufacturing. Over the past eight years in Colorado and nationwide, Easley has helped more than 60 clients design, build, start up, and optimize their operations. Easley is an active participant on multiple committees in various industries, non-profit groups, and rule making organizations that are setting the standards and regulations guiding this industry. Through his involvement he is able to promote sustainable, sensible practices and policies that drive cannabis cultivation and industry best practices into new realms of productivity, profitability, and professionalism.

We were able to sit down with Nic Easley after the conference to get some better insights for how the industry performed in 2015 and what is in store for 2016.


 

CannabisIndustryJournal: How do you think Colorado’s year of pesticide recalls will help shape the industry’s future?

Nic Easley: As a member of the Pesticide Advisory Committee with the Colorado Department of Agriculture, I think there is a tangible need for better, more comprehensive regulatory guidance. If we come out with strict pesticide regulations, it will be better for everyone in the industry and consumers, but more importantly it will benefit patients gaining access to safe, laboratory-tested medicine. The regulators will need our help to write the rules. Harder laws are good for us though, because the ethical businesses will always take the route of integrity, as opposed to the businesses that cut corners. Those companies not playing above board will be weeded out and reprimanded in due time. A lot of it comes with the responsibility as a grower and producer to facilitate medical needs, that is a responsibility that requires great integrity. As for the testing regulations, there are too many conflicts of interest and we need to look toward third party testing and accreditation to prevent laboratory shopping, skewed results and other inconsistencies. We need to not allow producers to provide their own samples, sampling and sample preparation needs to be controlled through third party laboratories working above board, as opposed to labs wanting to keep clients instead of providing accurate and consistent test results. Looking forward to 2016, we will continue to see the pesticide issue shape the industry, for better or worse, this is a problem we need to find the right solutions for and that comes through working with regulators, like the Colorado Marijuana Enforcement Division, to write the required regulatory framework.

CIJ: Looking nationally, what major trends were highlighted in 2015 and what would you like to see change for 2016?

Nic: With Oregon going online October 1st, and Maryland’s license application process opening up, we are recognizing some diminishing barriers to entry in markets previously difficult to tap due to things like residency requirements and where the capital came from. Maryland’s infused product and processing licenses are much more readily available as opposed to the cultivation licenses due to stipulations. States like Oregon and Alaska that dragged their feet a little with regard to their regulatory model, are just releasing a lot of barriers to entry for licensing applications. Oregon may have missed some tax revenue in the initial launch of the program, but they are doing it right through diligent research instead of using their citizens as guinea pigs. For businesses looking to get started, you can avoid poor decision making by knowing the rules. New and established businesses alike need to take the responsibility to write the rules to be socially, environmentally and economically responsible. If we want to make money in this industry to help the government’s role in keeping us safe, then doing business in the most socially responsible way possible will lead to profitability. What I would like to see change for 2016 is the expanding list of qualifying conditions. As a military veteran, I would like to see Colorado stop looking at the tax revenue of adult use cannabis, and make PTSD a qualifying condition for medical marijuana. The Bob Hoban lawsuit suggests that Colorado is marginalizing medicine because they will make more tax revenue by blurring the lines of adult use and medicine. All of the studies out there, including Dr. Sue Sisley’s work, suggests PTSD can be treated with medical marijuana. That highlights another trend I would like to see change in 2016: We need clinical research on these conditions, because observational research just is not credible enough. We [businesses in the industry] need to actively promote the need for clinical research to help propel social change and get the information and knowledge out there. With the right information, this industry can make informed decisions that will help all stakeholders.

CIJ: What advice can you offer to cannabis businesses for 2016?

Nic: I tell my clients that, because cannabis is still federally illegal, you must understand the present risk associated with the work you are doing. We need to ask questions like how can we do this responsibly and set a good example so when the time comes, the federal government will look to us as a legitimate industry, working with regulators to write the rules for safety. For new businesses, produce the safest, highest quality, and affordable medicine and work with other businesses and regulators to keep innovating in the area of safety. Focus on the structure of your business: build your foundations and using expert advice, you can avoid major pitfalls and become the leaders in this brand new industry. Look for environmentally sustainable solutions, climate change issues need to be addressed in this industry. Use appropriate technology instead of burning coal to grow marijuana, which increases our carbon footprint. This includes both environmentally sound standard operating procedures and the right technologies, but also social justice. We are presented with a terrific economic opportunity to work on climate change issues, so work to address inefficient practices and innovate to be as sustainable as possible.

CIJ: For the entire cannabis industry in 2016 , what kind of growth do you expect?

Nic: We have reached a point where I foresee a holding pattern beginning to take shape. In 2016, the industry will continue to grow and demand will not be satiated by supply. August of 2015 was the first month when Colorado saw over $100 million in sales. We will increasingly see more price fluctuations as bigger projects come online. Many states in 2016 will focus on problems with their regulatory models and devising solutions for them. Businesses will continue their strategic growth planning, with key states potentially coming online for adult use such as Nevada and California. Nevada is one of the most up and coming markets in America with a 68% approval rating, and they have the ability to grandfather in businesses and previous rules associated with their medical marijuana program. Knowing licensing applications can take eight to eighteen months before you can become operational, we have to place our bets wisely. There is a lot happening in all these states and from the big November votes on, chaos will ensue as regulators tackle big problems with the overhaul. In 2016, the cannabis industry will make a big impact on the United States, and the exciting part is that progress is made through business as usual for us.

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Marijuana Business Planning: A Q&A with Mike McCulley

By Aaron G. Biros
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MasterPlans, a business planning firm based in Portland, Oregon, has more than 13 years of experience in the emerging cannabis industry. The firm has worked to develop financial models and business plans for new and existing companies that are looking to secure funding, grow partnerships, and manage their long-term strategies for success. They have created business plans for more than 100 companies at every level of the market, from cultivators to dispensaries, to businesses in packaging, security and tourism. They work with nonprofit ventures, investor propositions, commercial lending and self-funded companies.

“We know how difficult it is to launch a business in the cannabis industry, because we work with businesses in this field every day,” says Mike McCulley, VP of Sales at MasterPlans. Cannabis Industry Journal spoke with McCulley to learn more about some of the challenges that marijuana businesses face.

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MasterPlans Cannabis Business Plans

Cannabis Industry Journal: What are some of the biggest hurdles in launching a new grow operation?

Mike McCulley: Many of our cultivation clients say that the largest hurdle they face is in identifying the ideal location for their business. Grow operations need to factor in a wide range of concerns including cost, zoning, security, soil viability (for outdoor operations), energy costs (especially for indoor operations), and proximity to schools and similar buildings. Location can really make or break the success of any grow operation, and this is often the single largest cost incurred when launching this kind of business.

CIJ: What are some key ingredients in a successful marijuana business plan?

McCulley: It probably goes without saying that a successful business plan for a company in the marijuana field first has to execute all of the elements that every business plan needs to include: Detailed financial projections, accurate market analysis, [and] a comprehensive overview of strategies and goals. Marijuana business plans in particular need to also address the key issues and challenges that are unique to operators in this industry. How will your company be impacted by state-level regulations, and how will your operational model address those? What steps will you take to ensure the security of your product? How will you accommodate the complicated issue of accounting while federal regulations are still impacting the way marijuana companies manage their banking? These issues should be acknowledged and addressed if you hope for your plan to be compelling.

CIJ: With the growing schism between recreational and medical markets, how do you determine your target market and meet those customers’ needs?

McCulley: Determining a target market can be difficult before launching operations, but it’s not impossible. A key tool to help work through this question is up-to-date census information or demographics for the area in which your company is serving. Recreational markets provide a much broader audience to become potential clients, but medical markets can also offer lucrative opportunities if an operator can launch in an area with a high concentration of eligible patients. Accurate market data plays a key role in this process, and close analysis of that data can help operators determine their best course of action.