In a casual perusal of the shelves at our local bookstore, it was hard not to notice a prominent display groaning with investment ‘how-to’ guides. Maybe it’s because folks are mindful of the upcoming tax season and ruminating hopefully on where to plant their anticipated windfall. Or maybe those who observe Lent are watching their savings grow from renouncing an expensive daily coffee habit. Who knows? But it wasn’t the proliferation of investment guides as such that had us intrigued: it was the specific niche market they targeted. Billed as the Anheuser Busch investment of the 2020s, as even bigger than cryptocurrency, getting a stock foothold in this area is slated to be the new Big Thing. But before you jump into sinking your hard-earned dollars into this field, you should know that it remains something of a legal, ethical, and fiscal quagmire. We’re talking, of course, of everyone’s favorite weed: weed.
At the recent Super Tuesday primaries, candidates with a positive stance towards the nascent cannabis industry were largely ousted, leaving two out of the top three presidential hopefuls largely in favor of maintaining the ‘illicit’ status of the drug. According to The Motley Fool, Republican incumbent, Donald Trump, ‘while amicable to the idea of allowing states the right to set their own cannabis policies, is likely the most negative toward recreational weed than any candidate in the field. In fact, [he] would prefer to keep currently illegal drugs as illicit. That includes cannabis.’(1) Former Vice President Joe Biden has considered decriminalization but is opposed to legalization, and Vermont Senator Bernie Sanders is said to face a ‘potential uphill battle’ as the only candidate in favor of legalization.
And marijuana is still a Schedule 1 drug at the federal level meaning that it is considered to be prone to abuse, absent any medical benefits, and illegal. It does however also mean that, in a state which has legalized its cultivation, any commercial venture is subject to Section 280E of the US tax code. Not familiar with 280E? In essence it was set up to ensure that distributers (smugglers, at the time) were prevented from writing off their business expenses on federal tax returns. But in a time of legalization, Section 280E impacts legitimate growers by subjecting them to extremely high levels of taxation. Yes, as The Motley Fool succinctly puts it: ‘Despite marijuana being an illegal drug at the federal level, the Internal Revenue Service has no problem padding the government’s coffers with taxes paid by profitable U.S.-based pot companies. In 2017, the U.S. government collected a whopping $4.7 billion in taxes despite cannabis companies reporting a little less than $13 billion in total sales.’(2) Interesting…
When cannabis growing was still considered illegal across the board, cultivation was the purview either of those with secluded acreage in the middle of nowhere or enthusiasts with a convenient basement and a heavy duty circuit breaker. In other words, keeping a crop safe and profitable demanded either outdoor remoteness or indoor precautions, with advantages and pitfalls inherent in both approaches. With legalization/decriminalization, however, the challenges take on a different complexion with contamination control, pest management, and environmental impact being among the top questions for consideration. Let’s look at the first of these – contamination…
And in states which have legalized or decriminalized its use for medical and/or recreational use, marijuana is no different. However, according to Nate Seltenrich writing in Environmental Health Perspectives, maintaining the purity is fraught with difficulty on many levels. Indeed, marijuana is an effective delivery system not only for the desired cannabinoids tetrahydrocannabinol (THC) and cannabidiol (CBD) but also for wholly unwanted toxic compounds such as heavy metals, molds, pesticides, bacteria, solvents and fungus. Moreover, notes Seltenrich, although ‘many of these contaminants are also found in our food, water, and air, the potential exposures and health consequences are less well understood in the context of cannabis use.’(3)
Of the approximately 180 different species, only 4 are known to cause infections in susceptible individuals, a number that has led some states to skip testing for their presence in cannabis products. And where testing does occur, there is no general agreement on the best protocols, with different states adopting different practices. Take, for example, the neighboring states of California and Oregon. In the former, testing labs can use one of three different analyses to determine aspergillus risk: polymerase chain reaction (PCR) that identifies DNA specific to individual mold types; the more broad analysis of a live culture; and also quantitative PCR which, as the name suggests, both detects and quantifies spores. In Oregon, however, testing for this same contaminant relies upon the measurement of ‘water activity’ in the cured cannabis flower – with a specific moisture content deciding its safety or otherwise. Moreover, Oregon state policy requires only that goods containing marijuana carry a general warning label regarding risks to compromised individuals. But it is those most at risk through immunosuppression who may be using the substance for medical reasons – cancer patients, for instance, for whom cannabis may be effective in alleviating post-chemotherapy nausea and anorexia.
Used to extract the cannabinoids and terpenes like pinene and limonene from cannabis flowers, solvents such as butane and propane got their start in the cannabis industry prior to legalization/decriminalization. The more commonly used of the two petroleum-based solvents, butane, is however difficult to remove fully from the commercial product and exposure to it – either short-term or long-term – carries with it harmful impacts upon the human cardiac and respiratory systems. In a paper archived by the National Institutes of Health, ‘Fatal butane toxicity and delayed onset of refractory ventricular fibrillation,’ lead author Khalid N. Almulhim presented the case of an otherwise healthy individual who collapsed with seizures after contact with a butane lighter refill canister. According to reports, the individual had ‘no previous history of systemic disease, previous operation, medication and any known allergy’ yet quickly developed ‘ventricular fibrillation and [failed to respond to] amiodarone infusion, […] 4 times defibrillation and cardioversion. He died after 45 minutes of resuscitation.’(4) In a note relevant to our discussion here, the author states that ‘how many times and how long the case is exposed to butane is an important predicting factor, which makes the situation serious enough for a fatal incident.’(5) In other words, repeated exposure to butane inhalation – say from vaping or smoking products contaminated with residues of the solvent – is extremely dangerous to human health.
Let’s return to a point made near the top of this article: to date, marijuana has traditionally been best grown in one of two situations – unnoticed in remote outdoor locations or under blackout conditions in covert indoor grow facilities. But, as we also said, times are a-changing. As reported in TheStreet, a digital publisher of investment-related content, ‘[a]t the beginning of legalization, the industry was in a race to build as much indoor grow acreage as possible.’(6) But now, companies like Canopy Growth, a Canadian enterprise that became the first cannabis company in North America to be publicly traded, are shuttering their indoor facilities. Why? Simple economics: the projected potential for sales’ growth in the international market failed to materialize and the cost of outdoor cultivation is a mere 3 to 20 cents per gram of cannabis as opposed to 90 cents to $2 per gram for indoor production. And this had huge effects upon ancillary industries too. According to TheStreet, ‘[a]s the cannabis companies went on a building binge, the indoor growing sector blossomed along with it. Software was developed in order to get the most yields from plants by controlling lights and watering. Lights were created to use the least amount of energy possible and also to increase yields. Modular building units, movable tables and more were fueling the growth of this sector.’(7) Alongside the closing of the two greenhouses, FoodDive reports that Canopy is also canceling plans to open an additional facility in Ontario, Canada, and has laid off approximately 500 employees despite the company’s initial plans ‘to capitalize on the new cannabis-infused food and beverage market in Canada, [which hadnt] panned out either.’(8)
Growing plants in a hydroponic system, for instance, neatly eliminates many of the bacterial, fungal, and microbial vectors of pollution associated with the use of a growing medium such as soil, a fact that led companies such as Scotts Miracle-Gro and GrowGeneration to pivot towards sales of hydroponic equipment, nutrients, and lighting solutions. Like other ancillary businesses, these are companies whose bottom line will almost certainly be impacted by the move of marijuana growing to the outdoor space.
Of course, the ripples continue to spread. Not only must we assume fiscal impacts on the corporate level but also procedural changes too. In an article published in Leafly, a portal on cannabis education and journalism, Christine Giraud highlights how protocols in pest management are being forced to evolve as the industry continues to find its corporate feet. Emphasizing that ‘legal weed’ does not necessarily equate to ‘clean weed,’ Giraud exposes how growers, already lacking access to traditional routes of venture financing, find themselves in an ethical bind. While preferable for product quality, abstaining from the use of pesticides involves a significant risk to crop yields as marijuana plants are especially susceptible to spider mite infestations and fungal infections. Furthermore, as commercial plants are frequently cloned, each generation loses a share of its natural defenses against pests. And this puts growers in an invidious position: stay pesticide-free but risk a potentially disastrous infestation/infection or maximize crop yield by covertly applying pesticides and removing them prior to inspection: ‘Because of the federal prohibition on marijuana, the Environmental Protection Agency (EPA) won’t test the effects of synthetic pesticides on marijuana plants the way it does for other crops. Left on their own, state regulators [with] no experience in toxicology, lean toward greatly limiting or banning pesticides. [The result is that] cannabis growers feel they shouldn’t be held to such a strict standard [and have to] get around regulations by applying illegal pesticides on the down-low and then use remediation technologies to remove the chemicals after harvest to pass inspection.’(9)
You’re not alone but the main three techniques are fairly standard in organic chemistry. Based on compound polarity, the most popular is flash chromatography, in which the pure compounds are isolated from the base cannabis oil by selective elution – in effect, washing with a solvent. Glass reactor precipitation is an alternative, wherein cannabis oil is mixed with a solvent that allows water-soluble compounds to separate out, leaving the oil pesticide-free. And finally pressurized liquid extraction (PLE) dispenses with solvent use in favor of heating and pressure to extract the oil. Post-harvest remediation measures are a delicate subject with marijuana growers because their application assumes an illicit use of pesticides. And in an industry that is still in the process of gaining both regulatory and consumer confidence, any appearance of nefarious activity is to be avoided. But must we conclude that regulation is the responsibility of the industry itself? Perhaps, for the moment, it is. And one important component of any self-regulation would be the widespread adoption of a comprehensive Hazard Analysis and Critical Control Points (HACCP) protocol for each grower, processor, and manufacturer along the supply chain. For cultivators, a HACCP could include using an Integrated Pest Management (IPM) approach such as that described by Giraud: ‘Integrated Pest Management [is] an ecosystem-based strategy that focuses on long-term prevention of pests and damage through biological control, habitat manipulation, modification of cultural practices, and the use of resistant plant varieties. This approach is worth the effort but takes time, education, financial investment, and hard work.’
According to cannabis consultant Nelson Lindsley, IPM is an expensive risk: ‘With IPM you’re looking at a nine-month, costly battle that you might not win. Meanwhile, the market’s depreciating, taxes are incredibly high, and you’ve got a venture capitalist backer that’s going to bury you if you don’t produce.’(11)
It’s certainly not an simple problem to resolve but given that, at the time of writing, neither the Food and Drug Administration (FDA) nor the Environmental Protection Agency (EPA) has drawn up any guidelines regarding safe levels of exposure risk as they relate to potential contaminants, it does seem to fall to the industry to step up. Governmental reluctance to address the issue is based in part to the fact that cannabis is still considered an illegal substance un the U.S. at the federal level. But perhaps the sheer number of variables also contribute to the complexity: how/where/when the plant was grown, the specific strain of cannabis, cultivation methods used, environmental factors, manufacturing standards, and even genetic modification of the plants themselves all play a role. And then of course there is the mode of use: from the ingestion of tinctures to the consumption of the increasingly popular edibles like chocolates, gummies, candies, cookies, baked goods, and drinks, there seems to be a THC delivery system to suit all users. And that’s not even taking into account the traditional inhalation via combustion of the cured flower or the relative newcomer, the vape cartridge.
As Giraud notes in the Leafly article, ‘federal legalization would solve many of these problems: Growers would be more likely to forego pesticides if they were protected financially against crop failure, researchers would study pesticide inhalation, regulators would make evidence-based decisions, and consumers would feel more confident that products were clean.’(12) That volte-face, however, would assume a willingness on the part of the federal government to accept that the prohibition of a substance increasingly permitted at the state level is untenable in the long term and that a position revision is ahead. It’s just a question of how long it will take for the shift to occur. We will be watching with interest.
Did you enjoy our earlier article on the cannabis industry? Does this new feature add to your knowledge of the growing industry? Are you concerned by contamination levels in marijuana products? We’d love to know your thoughts!