According to a press release published back in September, Steep Hill announced their expansion to the state of Oklahoma. Steep Hill, a cannabis science company that started with cannabis testing labs in California, has been on an impressive expansion trajectory over the past few years.
Kandice Faulkenberry, co-owner and CEO of Steep Hill Oklahoma, says they hope to raise the bar for cannabis lab testing in Oklahoma. “With Oklahoma being one of the fastest-growing medical markets in the nation, we are excited and honored to be a part of our state’s growth,” says Faulkenberry. “We hope to be a valuable resource in our community and Oklahoma’s cannabis industry. Through our partnership with Steep Hill, the world’s leading cannabis science company, we aim to raise the bar in laboratory services, education, and product safety for the medical cannabis industry in the Sooner State.”
Dr. Chris Orendorff, the other co-owner of Steep Hill Oklahoma, is a family physician based in Sallisaw, Oklahoma. “As a physician, I understand that safety and regulations are critical to patient outcomes and I look forward to providing the same assurance for my patients and fellow Oklahoma residents in the cannabis industry,” says Dr. Orendorff. “I am excited to partner with Steep Hill to provide the highest quality testing in the State of Oklahoma.”
According to a press release published earlier this week, A2LA announced the accreditation of two separate cannabis laboratories in two separate states; both are the first cannabis testing labs accredited in their states. Demeter Laboratory, based in Oklahoma City, Oklahoma, and Galbraith Laboratories, based in Knoxville, Tennessee, achieved the ISO 17025:2017 accreditation.
According to Cassy VanTassel, M.S., quality manager at Demeter Laboratory, Oklahoma is still developing and defining their regulatory framework for cannabis testing requirements. “Even though the State of Oklahoma is still establishing regulations and legislation, Demeter will always strive to meet the highest quality standards, so our customers know they are getting the best quality testing,” says VanTassel. “Demeter chose A2LA as its Accreditation Body due to their reputation in the industry, their diverse clientele, and the quality of their assessors.”
In Tennessee, Galbraith Labs is looking to aid the hemp industry in product safety testing. Christy Myers, customer service manager at Galbraith Laboratories, says they want to help farmers produce safe hemp products. “We are proud of our commitment to stay current within our industry and achieve the high standards set by A2LA,” says Myers. “Adding cannabis testing to our line of services was a great opportunity for Galbraith Laboratories to serve the community by helping farmers produce safe and legal hemp.”
Galbraith Labs was founded in 1950 as a contract lab in Knoxville serving many industries. With their newly established accreditation, they hope to aid the cannabis industry in Tennessee with hemp testing. Demeter Laboratory is the first medical cannabis lab in Oklahoma. Their goals include “advancing quality controls in medical cannabis, supporting safe consumption of cannabis and ensuring the transparency of the cannabis community.”
Two bags are sitting on the table in front of you. The first bag contains legal hemp. The second one contains illegal marijuana. Can you tell which is which? Neither can state troopers at a traffic stop.
On January 24, 2019, Dennis Palamarchu, an interstate truck driver, had 6,700 pounds of hemp in his rig. Mr. Palamarchu had picked up the load at Boones Ferry Berry Farms in Hubbard, Oregon. Before he reached his destination at Big Sky Scientific, LLC (“Big Sky”) in Aurora, Colorado, the Idaho State Police stopped him on I-84, outside of Boise. Mr. Palamarchu indicated that he was hauling hemp. He did not try to run or escape, and he never tried to dispose of the load. The bill of lading showed that the shipment consisted of approximately 7,000 pounds of hemp. The Idaho State Police arrested Mr. Palamarchu for felony trafficking in marijuana.
Around the same time, Pawhuska police in Oklahoma seized over 17,000 pounds of hemp on its way from Kentucky to Colorado. The cargo was valued at about $850,000. A spokesman for the Oklahoma Bureau of Narcotics and Dangerous Drugs Control said, “We don’t know if it is marijuana. We don’t know if it is hemp.”
The recent events in Idaho and Oklahoma are inevitable consequences of the passage of the Agriculture Improvement Act of 2018, Pub. L. 115-334 (“2018 Farm Bill”). The 2018 Farm Bill provides that no state shall be allowed to prohibit the transportation of hemp through the state. However, a product that contains more than 0.3% THC – in the eyes of federal law – is marijuana, not hemp. Unlike hemp, marijuana still is subject to state statutes and the federal Controlled Substances Act. The legal distinction between hemp and marijuana is too subtle for the human eye, or a trained K-9’s impressive nose, and it has created a quandary for interstate hemp shippers like Mr. Palamarchu and Big Sky.
When Idaho State Police seized Big Sky’s hemp, Big Sky went to federal court1. On February 19, 2019, the United States District Court for the District of Idaho recognized that in the 2018 Farm Bill, Congress legalized the interstate transportation of hemp grown in the United States so long as the hemp was “produced in accordance with subtitle G” of the Agricultural Marketing Act of 1946. However, the federal plan is undeveloped and Oregon does not have a federally-approved plan, so no one knows what it means to be “produced in accordance with subtitle G.” The federal court therefore concluded that Big Sky’s hemp could not possibly have been “produced in accordance with subtitle G.”
The court recognized, “[a]t some future date, industrial hemp that has been ‘produced in accordance with subtitle G’ will undoubtedly be transported in interstate commerce across states like Idaho that have not legalized industrial hemp.” In the meantime, however, the court found that Idaho could keep Big Sky’s cash crop, which sits deteriorating in the possession of law enforcement. Big Sky has appealed to the United States Court of Appeals for the Ninth Circuit.
The hemp market is projected to approach $2 billion by 2020. By then, hopefully, federal law will clarify what it means for hemp to be “produced in accordance with subtitle G.” In the meantime, Idaho’s House of Representatives recently passed a bill that would allow hemp producers from the 41 states that have legalized hemp to transport their crops and products through Idaho, so long as they get a permit from the state and do not unload any of their cargo there. Idaho Senators then added a section to that bill, announcing their intent for Idaho to legalize hemp in time for the 2020 growing season. The House, however, never signed off on the Senate amendments, effectively killing the bill. Until such a bill becomes law, transporters of interstate hemp should consider taking the long way home.
Big Sky Scientific, LLC v. Idaho State Police, et al., No. 19-cv-00040-REB, Dkt No. 32 (D. Id. Feb. 19, 2019)
With the Trump Administration sending mixed signals on legal cannabis, and with Congress beginning to ramp up efforts for reform, in order for industry stakeholders to best understand where we are headed, it will be helpful to remember how we got here. As readers may be aware, the current status of federal cannabis law can be traced back to the legislative prong of Richard Nixon’s War on Drugs. His Controlled Substances Act of 1970 (CSA) made it a federal crime for anyone to use or possess any amount of marijuana anywhere in the U.S. Current federal cannabis policy, on the other hand, complicates the matter, and can be traced back to a memorandum issued in 2013 by then-Deputy Attorney General James M. Cole. The Cole Memo instructed U.S. attorneys general in states that have legalized marijuana to use their limited resources in prosecuting CSA offenses only if they violated specific federal enforcement priorities. The highest of these priorities include diverting legal marijuana business revenues to illegal drug operations, transporting marijuana over state lines, making marijuana accessible to minors, and growing marijuana on federal lands. The problem is that the Cole Memo is only a policy, it is not law; and so not only can the current administration unilaterally change it whenever it wants, but state-legal cannabis businesses, their employees and customers are breaking federal law every single day!
This is a very unusual situation to be in for both the states and the feds, and it raises two basic constitutional questions: What gives the feds the right to make cannabis illegal everywhere in the U.S.? And how can states simply defy the prohibition?
The first question was in fact answered by the U.S. Supreme Court in 2005 when two California women (Diane Monson and Angel Raich), both with very serious illnesses, sued the federal government for confiscating their state-legal medical cannabis. The feds defended their actions by claiming that the Constitution’s Commerce Clause gave them the authority to march into California, march into the homes of these women, and enforce the CSA. Diane and Angel argued that the Commerce Clause only gives the feds the authority over interstate commerce; and since their cannabis was grown by themselves, used by themselves, never bought or sold, or transported out of the state, it was therefore wholly intrastate cannabis and had nothing at all to do with interstate commerce. The Court sided with the feds, ruling that even though the cannabis was intrastate, when you take all intrastate cannabis activity like that and add it together, it will have a substantial impact on the interstate cannabis market. Because of that connection it was ‘necessary and proper’ for the feds to enact the CSA and enforce it anywhere in the country they wanted. Although there is still much debate over this ruling, it remains the law of the land to this day.
Fast forward to 2014. The states of Nebraska and Oklahoma sued Colorado claiming that by legalizing marijuana, Colorado was violating federal law under the CSA. Because federal law overrides state law when they conflict, then Colorado’s cannabis laws must be struck down, or so they argued. In response Colorado took a very interesting position that built on the hard realities of the cannabis market. It is best to explain it in four parts. First, they cited the fact that the federal government lacked the resources to enforce the CSA, a claim which the feds have admitted to themselves. Second, Colorado pointed to a constitutional doctrine called ‘anti-commandeering’, which says that they have no obligation to criminalize cannabis at all. If the feds want to make it a federal crime, that is one thing; but that does not mean CO must make it a state crime as well. Third, Colorado said that by regulating cannabis as extensively and strictly as they have done, they are reducing the amount of cannabis activity compared to not regulating it at all. Taken together, this means that because Colorado does not have to criminalize cannabis, and because the federal government cannot enforce their own criminalization, then Colorado is actually helping out the feds by regulating the drug instead of allowing for a free-for-all under state law.
In March of 2016 the Supreme Court declined to hear the case in full or issue an opinion, which had the effect of giving a default victory to Colorado. Among political and legal commentators the speculation is that enough justices on the Court either agreed with the logic of Colorado’s position or wanted to wait for this federal-state controversy to be worked out by Congress. Because it was only a default victory, the constitutional status of the legal cannabis industry remains on unprecedented and unstable ground. The Controlled Substances Act has not yet been found to preempt state law, so cannabis businesses are still able to operate legally in their state. But because the CSA still applies to everyone, they do so at the whim of the Trump Administration’s policy preferences. The confusion that this presents has put cannabis businesses in many difficult situations, and it serves as the legal backdrop for such familiar problems as access to banking and contract enforcement.
Currently, legislative and judicial fixes are in motion. Related cannabis litigation is pending in federal court at the 10th Circuit Court of Appeals in Denver. And a Cannabis Caucus has formed in the U.S. Congress to address the shortcomings of the CSA. In the coming articles we will explore both of these routes to reform, the likelihoods of various possible outcomes, and the impact they will have on the legal cannabis industry.
Editor’s Note: For readers interested in learning more about this topic click here for Brian’s research article published by the Virginia Journal of Social Policy & the Law
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