Tag Archives: licensees

New Guidance on Waste Disposal for Hemp Producers

By Stephanie McGraw, Emily Sellers
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On January 15, 2021, the USDA published its final rule on US hemp production. The rule, which becomes effective on March 22, 2021, expands and formalizes previous guidance related to waste disposal of noncompliant or “hot” crops (crops with a THC concentration above .3 percent). Importantly for the industry, the new disposal rules remove unduly burdensome DEA oversight and provides for remediation options.

Producers will not be required to use a DEA reverse distributor or law enforcement to dispose of noncompliant plants. Instead, producers will be able to use common on-farm practices for disposal. Some of these disposal options include, but are not limited to, plowing under non-compliant plants, composting into “green manure” for use on the same land, tilling, disking, burial or burning. By eliminating DEA involvement from this process, the USDA rules serve to streamline disposal options for producers of this agricultural commodity.

Alternatively, the final rule permits “remediation” of noncompliant plants. Allowing producers to remove and destroy noncompliant flower material – while retaining stalk, stems, leaf material and seeds – is an important crop and cost-saving measure for producers, especially smaller producers. Remediation can also occur by shredding the entire plant to create “biomass” and then re-testing the biomass for compliance. Biomass that fails the retesting is noncompliant hemp and must be destroyed. The USDA has issued an additional guidance document on remediation. Importantly, this guidance advises that lots should be kept separate during the biomass creation process, remediated biomass must be stored and labeled apart from each other and from other compliant hemp lots and seeds removed from non-compliant hemp should not be used for propagative purposes.

The final rules have strict record keeping requirements, such rules ultimately protect producers and should be embraced. For example, producers must document the disposal of all noncompliant plants by completing the “USDA Hemp Plan Producer Disposal Form.” Producers must also maintain records on all remediated plants, including an original copy of the resample test results. Records must be kept for a minimum of three years. While USDA has not yet conducted any random audits, the department may conduct random audits of licensees.

Although this federal guidance brings some clarity to hemp producers, there still remains litigation risks associated with waste disposal. There are unknown environmental impacts from the industry and there is potential tort liability or compliance issues with federal and state regulations. For example, as mentioned above, although burning and composting disposal options for noncompliant plants, the final rule does not address the potential risk for nuisance complaints from smoke or odor associated with these methods.

At the federal level, there could be compliance issues with the Resource Conservation and Recovery Act (RCRA), Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and ancillary regulations like Occupation Safety and Health Administration (OSHA). In addition to government enforcement under RCRA and CERCLA, these hazardous waste laws also permit private party suits. Although plant material from cultivation is not considered hazardous, process liquids from extraction or distillation (ethanol, acetone, etc.) are hazardous. Under RCRA, an individual can bring an “imminent and substantial endangerment” citizen suit against anyone generating or storing hazardous waste in a way the presents imminent and substantial endangerment to health or the environment. Under CERCLA, private parties who incur costs for removal or remediation may sue to recover costs from other responsible parties.

At the state level, there could be issues with state agency guidance and state laws. For example, California has multiple state agencies that oversee cannabis and hemp production and disposal. CA Prop 65 mandates warnings for products with certain chemicals, including pesticides, heavy metals and THC. The California Environmental Quality Act (CEQA) requires the evaluation of the environmental impact of runoff or pesticides prior to issuing a cultivation permit. Both environmental impact laws permit a form of private action.

Given the varied and evolving rules and regulation on hemp cultivation, it remains essential for hemp producers to seek guidance and the help of professionals when entering this highly regulated industry.

Metrc Takes Contract for Maine’s Tracking Software

By Aaron G. Biros
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Maine’s Office of Marijuana Policy (OMP), the government agency in charge of regulating their cannabis industry, announced today a six-year contract for traceability software with Metrc LLC. According to the press release, the software will be used for the newly formed adult use market, which is just a few months away from going live with legal sales.

Maine’s OMP was previously under contract with BioTrackTHC as their software provider before switching to Metrc with this new contract. The software is cloud-based and uses radio-frequency identification (RFID) tags on plants and products to track cultivation and distribution of cannabis products throughout the state. The software is commonly used across the country in states that have legal cannabis markets. It essentially prevents diversion to the black market, allows for a transparent supply chain with clear chain of custody tracking and it increases recall readiness.

Erik Gundersen, Director of Maine’s OMP, says Metrc is helping to make a smooth launch of the adult use market. “We are excited to partner with Metrc,” says Gundersen. “Metrc is an industry leader, and their team is committed to delivering a product that will allow us to proceed with the launch of our adult use program later this spring.”

Over the next few months, Metrc and OMP plan on helping the industry familiarize themselves with the new software. The two organizations will go on the road in March, giving licensees training and answering questions. Metrc will then offer online training and evaluations followed by credentialing licensees showing they are proficient with the software.

Jeff Wells, CEO of Metrc, says they are excited to get to work. “We’re excited to partner with the OMP to help launch the state’s adult-use marijuana market,” says Wells. “2020 is another significant year for cannabis industry growth, and we look forward to serving the OMP, local cannabis businesses, and the people of Maine.”

The agreement is a six-year contract with a value of roughly $540,000. License holders pay a $40 monthly fee to access the system, which helps support training and technical support, according to the press release.

Soapbox

Why are Business Professionals Hesitant to Enter the Cannabis Industry?

By Tyler Dautrich
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I recently had a discussion with a colleague of mine on how the cannabis industry lacks business sophistication. There are not many MBA level, or proven business professionals, that have made a living and name for themselves in another industry, entering the cannabis space. At first glance, you would think there should be, primarily because they can leverage their previous expertise and success into a new, multi-billion dollar space. Instead, those professionals are watching from afar and eying a move to enter the industry five to ten years down the line.

It just so happens that the individual I was speaking to is in the situation described above, so I asked why? Why not leverage your success and make a name for yourself in this industry where there is clearly an opportunity? This individual is coming from a legal background so this piece will focus on that area primarily. However, the story is the same for many others that come from different professional backgrounds.

They informed me that entering the cannabis industry could risk them potentially losing their license to practice law. They practice law in a state that does not have any form of cannabis legalization. So even if this person wanted to actively pursue working in the cannabis industry (where legal), they run the risk of potentially losing their license and not being able to practice law again. This creates a difficult decision for someone considering an emerging industry that still has an uncertain future.

Beyond putting professional careers and relationships in jeopardy, the cannabis stigma affects personal lives. It amazes me that there is still an extremely negative stigma that surrounds this industry. No matter the level of professionalism the industry demonstrates, many still think working with cannabis could be considered unprofessional.

I know from first hand experience in talking with a handful of professionals that are working in the industry, they do not tell everyone what their job is. Or they use their job title from their other current, or previous, job outside of the industry. They do not want certain individuals to know they are in the industry because they know it will damage their current reputation in certain groups.

This is one of the recurring issues with startups not only going through Greenhouse Ventures accelerator program, but throughout the industry. Many lack that level of business sophistication to have the know-how and ability to scale and grow their startup. Yes, they are the founding team and they have the idea and the vision, but they are not the team that investors put their faith and capital in.

My question is, what needs to happen to start attracting these business professionals into the cannabis space? We have already seen a few of the more risk averse professionals jump ship, but a majority are still hiding in the shadows or watching from the sidelines.

Marijuana Matters

The Legal State of Cannabis in Florida

By David C. Kotler, Esq.
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It is now December of 2015 and we are one year removed from the loss at the polls of an amendment that would allow for full spectrum medical cannabis in Florida. The defeat of Amendment 2 allowed for the implementation of the Compassionate Medical Cannabis Act of 2014, albeit a rather rocky implementation, thus legalizing low THC, high CBD cannabis strains. I participated in many of the public meetings which took place and watched the different draft regulations set forth by the Florida Department of Health be debated, commented on and ultimately revised. The process underwent legal challenges and as of the publication of this, applications for five license holders were awarded.

As many might be aware, the Compassionate Medical Cannabis Act applicants were required to be nurseries continuously operating for over 30 years with a plant registration of 400, 000 plants as of the time of application. There were other relevant requirements, but the two foregoing were the most restrictive and narrowed the market of potential applicants.

Following in line with legislative means to put cannabis in the hands of a few large, Florida-centric entities, a Bill recently passed the Senate in Florida allowing for the expansion of the use of cannabis with higher THC content for patients with debilitating diseases under Florida Statute 499.0295. Presumably, the five licensees would then be authorized to expand their crop to include THC based plants and provide those to qualifying patients.

My fear all along has been that Florida would abandon the possibility of having a robust economic, yet patient-centric model not dissimilar to Colorado, Washington or Oregon, but more akin to what one might see in New York or what was narrowly avoided in Ohio. In fact, I have considered the possibility that should the new Amendment supported by United for Care passed, since that Amendment allowed for the Department of Health to promulgate the rules and regulations, that the Department could, assuming the five licensees are operational, merely give responsibility to the five licensees, allowing them to expand.

Alas, I believe, and I am happy to admit it, I may be wrong. In Florida, constitutional amendments require a review by the Office of Economic and Demographic Research. It is the focus of this body to analyze and report the economic impact that a particular amendment might have upon passage and effectuation. Data from numerous sources are reviewed and integrated into the Committee’s opinion. Of note, during my review of the October Economic Estimating Conference Meeting and Reports was the position taken by the Department of Health. Specifically, the Department of Health did not indicate that it could implement a system by merely expanding or working off of the framework it has for the Compassionate Medical Cannabis Act. Instead, the Department took the approach that a new set of regulations and guidelines, as well as departmental operations, would need to be implemented. In fact, it would need to be implemented to comply with the MMTC system authorized by the amendment. Whether one believes in the vertical model or one which licenses similar to Maryland and a few other states, the important point is that the Department of Health seemingly recognizes that a more robust model will have to be implemented.

So what does all this mean for patients and potential businesses in Florida? In regard to patients, I wish I could say that the potential for treatment through cannabis is foreseeable in the short term. However, I am not convinced of this. I do believe that the selections and process for which applications were selected under the Compassionate Medical Cannabis Act will be challenged, thus resulting in more delays. With regard to the Amendment and implementation should it pass, it will not be until the middle of 2017, approximately one and one-half years away. Should businesses begin preparations in Florida currently? In my honest opinion I believe it is hard to say. In the summer of 2014, I spent a lot of time counseling individuals and businesses on planning for the legalization of medical cannabis in Florida. Some clients were more aggressive than others and ultimately spent time and money, perhaps unnecessarily. On the flip side, I participated in the application process in Maryland and am of the belief that individuals who made application for Maryland cultivation licenses benefitted from an early start and preliminary planning.

I know a number of successful cultivators in legal states who moved on Maryland as a last minute decision once recognizing that although scored as part of an application, residency or lack thereof was not a bar to licensure. I am therefore of the opinion that certain preparation in advance is advantageous and allows alteration of the plan and adaptation at a later stage without wasting resources to accomplish much of the work that is capable of being accomplished in advance. I do believe there are a good deal of uncertainties, depending on how things move forward, as to what our model will look like and if that model will get into place, depending on the rollout of the Compassionate Medical Cannabis licenses as well as the possibility of some of the legislative initiatives catching wildfire, much as the Compassionate Medical Cannabis Act of 2014 did at the very end.