Cannabis in Question by Ryan Pitkin

CANNABIS IN QUESTION

The future of hemp farming in North Carolina faces multiple threats

BY RYAN PITKIN

When Armaney Richardson-Peterson and Charles Peterson launched The Hemp Source in 2017, for which they transitioned their Wendell tobacco farm into a hemp farm, the couple expected to face their share of obstacles.

“They say with the hemp plant, like anything you grow, your third year is like your first year farming,” Hemp Source CEO Richardson-Peterson told Queen City Nerve during a recent phone call from Wendell.

“We had a lot of hiccups with mice, figuring out the soil, all the hurdles that come with farming. It’s not tobacco, it’s not any other grain, and it’s not marijuana — with all the lighting and stuff marijuana is a little bit different. It took a lot of test runs for us.”

The two entrepreneurs faced other barriers that they couldn’t have expected. There was Hurricane Florence in 2018, which led to the loss of half The Hemp Source crop that year. Then in 2020, the COVID-19 pandemic struck, forcing them to scale back their production for two years.

Despite the obstacles, The Hemp Source saw growth and success over its first five years. After humble beginnings — producing a kilo of hemp every two to three months and selling the resulting products at farmers markets and other pop-ups — the married couple opened their first dispensary in Wendell in 2018.

They saw their first franchise location, which you can read more about on page 6, open in Charlotte the same year. They now supply seven Hemp Source franchises spread across North Carolina and two more in Alabama.

Now, as the Wendell farmers return to preCOVID crop numbers — planting about 30 acres as they did in 2019 — they and others who work in the North Carolina cannabis industry face new threats: legislators and law enforcement agencies that appear to be turning their back on an industry that has exploded over the past five years.

On June 30, language included in state law that exempts “industrial hemp” from the definition of illegal marijuana will expire, and if allowed to do so by legislators, the new law that takes effect on July 1 will make all forms of cannabis, including hemp, illegal.

There are also concerns about overreach from the federal Drug Enforcement Agency (DEA), which one South Carolina hemp company claims has been unlawfully regulating certain products derived from lawful hemp, actions that the company and others say have “serious, immediate, and irreparable consequences” for hemp producers and processors.

Then there’s North Carolina’s Senate Bill 711, which would legalize medical marijuana in the state, but in a way that would effectively shut out independent hemp farmers and others in the hemp industry from participating, and could push them out of the cannabis industry altogether.

Richardson-Peterson hopes that when the North Carolina General Assembly reconvenes in May, legislators will act to extend the hemp exemption.

“I wouldn’t panic yet,” she told Queen City Nerve. However, she does worry that the actions being taken to further regulate North Carolina’s rapidly expanding hemp industry could have disastrous effects if they’re allowed to move further.

“That would be chaotic. It would be chaos after COVID, after all these things that have happened, to snatch people’s livelihoods, and to just say, ‘OK, this is illegal as of this day.’

“I don’t foresee that happening because we’ve worked so hard to get it here, and the industry blossomed so well that we became known — the hemp grows so well in our soil, North Carolina has become like a hub for hemp growing,” RichardsonPeterson said.

The hemp exemption

Current North Carolina law defines marijuana as “all parts of the plant of the genus Cannabis, whether growing or not,” followed by a long list of specifications of what those parts are and what they might include.

However this long definition currently includes a sentence that has been critical to the livelihoods of many in the CBD and cannabinoid industry: “The term does not include industrial hemp as defined in G.S. 106-568.51, when the industrial hemp is produced and used in compliance with rules issued by the North Carolina Industrial Hemp Commission.”

On June 30, if legislators don’t take action before then, that language will be removed from the law and the NC Industrial Hemp Commission referenced therein will be disbanded.

As reported by Asheville-based hemp attorney Rod Kight in April, the Industrial Hemp Commission discussed these upcoming changes during an Aug. 5, 2021, meeting.

“[T]he NC Industrial Hemp Research Pilot Program will no longer be valid due to the 2018 Federal Farm Bill establishing a Domestic Hemp Production Program,” the minutes from that meeting read. “This action will be effective as of June 30, 2022….”

That would do away with all laws on the state books protecting hemp growers, processors or

THE HEMP SOURCE HAS PLANTED ABOUT 30 ACRES OF CANNABIS FOR HEMP FARMING THIS YEAR.

PHOTO BY ARMANEY RICHARDSON-PETERSON

distributors, and leave no state agency in charge of overseeing or regulating hemp in North Carolina.

Under protections provided by the 2018 Federal Farm Bill, hemp producers licensed by the U.S. Department of Agriculture (USDA) will still be allowed to operate in the state after the new changes.

Richardson-Peterson said she takes comfort in that fact, as a USDA-licensed hemp producer. She also said the vertical nature of her business puts her in a better spot to adapt to laws as they change.

“By us being vertical — growing it, processing it and having the stores — our take on things is a little bit different because we can change any aspect of our industry,” she said.

Yet she recognizes that, if the hemp exemption is allowed to expire, it will have an impact on countless people in the industry.

“It would definitely shake up a lot of people — people that use it, number one, and people that are selling it,” she said. “How is that going to look? All the hemp stores closed? It would definitely be chaos. It would be a lot for them to do that, just to snatch it away like that.”

Michael Sims, co-owner of the Charlotte-based Crowntown Cannabis, is one person who stands at risk of having it all snatched away.

As reported in our story on page 16, Sims and the Crowntown Cannabis team are planning for more expansion in the Charlotte area, but he said he loses sleep over the possibility that the laws could remove protections for his business.

When Queen City Nerve stopped by Crowntown’s north Charlotte warehouse on a recent Friday, there was excitement in the air around the company’s long-term and short-term plans for new locations, mobile dispensaries, and other larger projects. However, a cloud of anxiety hung over all of that excitement due to the uncertainty around what will happen this summer.

“All of us — including myself, the people in this room and people in this industry — went all in because they told us it was OK,” Sims said. “And now again, in the eleventh hour, we’re fighting for our mere existence. We’re 100% invested. We’ve got millions and millions of dollars invested in this company, and it’s just one company. We’ve reinvested pretty much everything we’ve ever made because banks won’t give us funding. So if they do this they not only kill us, they kill this industry, they kill our business.”

In October 2021, the Hemp Industries Association and a South Carolina-based hemp company called RE Botanicals filed a new federal action aimed at clarifying the scope of the 2018 U.S. Farm Bill.

According to a press release issued upon the complaint’s filing, the lawsuit alleges the DEA is unlawfully attempting to regulate certain products derived from lawful hemp by misinterpreting the Agriculture Improvement Act of 2018, also known as the 2018 Farm Bill.

Specifically, the release states, the DEA classifies intermediary hemp material (IHM) and waste hemp material (WHM), “two necessary and inevitable byproducts of hemp processing,” as Schedule I controlled substances.

The plaintiffs argued that Congress deliberately removed such commercial hemp activity from the DEA’s jurisdiction when it legalized hemp production, including hemp processing, via the 2018 Farm Bill, putting it under the jurisdiction of the USDA.

“[A]ll hemp processors and manufacturers who work with and/or store IHM and/or WHM must now choose between ceasing to process, manufacture and/or store hemp; obtaining a Schedule I license from DEA; or risking criminal prosecution under the [Controlled Substances Act],” the lawsuit reads. “Given the centrality of hemp processing to the hemp industry’s supply chain, forcing processors to choose between the foregoing options would effectively destroy the entire hemp industry.”

The DEA’s actions are an attempt to shut down the sale of products that contain Delta 8 and other similar compounds that can be found naturally in hemp, making it legal for sale in states that have protections for hemp but not marijuana.

Unlike more traditional CBD products, items containing Delta 8, Delta 9 and other similar chemical compounds have been found to produce psychoactive effects not unlike marijuana.

Law enforcement groups have lobbied for banning Delta 8, citing a reported spike in calls to poison centers from people who take Delta 8 products thinking they will have no effect.

Sims said that, in recent years, sales of Delta 8 products have exploded in his stores, now making up around 80% of total sales.

He said he hopes lawmakers will be willing to listen to small-business owners like himself rather than only take the accounts of law-enforcement lobbyists into consideration.

While there is no official legislation on the table as of now to close the Delta 8 loophole in North Carolina, Virginia’s governor signed a ban on all Delta 8 products in that state on April 12, causing concern that North Carolina legislators will look to do the same.

Also, if the lawsuit against the DEA doesn’t go the way of the Hemp Industries Association that helped file it, that could have immediate effects on hemp distributors in states across the South where “marijuana” is illegal.

“A lot of this stuff is already in the works, and we’re hoping we have some kind of recourse,” Sims said. “We’re hoping that there’s some kind of commonality where we can come to the table and everybody discuss what’s best for the industry. But unfortunately, with these decisions, a lot of times, there’s no adjustment whatsoever. It’s like, ‘Kill the program.’ And [the legislature and judges] usually side with the side of law enforcement. Law enforcement is our largest lobbyist group in the state, and they are lobbying for this.”

Richardson-Peterson agreed that the fear mongering around Delta 8 is just “a law enforcement tactic,” as she called it.

She said she prioritizes education around these issues for her staff so they can educate The Hemp Source customers.

The Hemp Source stores, like all Crowntown Cannabis locations, are based on the dispensary model, where customers get one-on-one engagement from knowledgeable staff who can help them find what will work for them and warn them about the effects any product will or won’t have.

Richardson-Peterson said they treat all Delta 8 products as if they were marijuana, with warning labels and child-proof packaging.

“We make sure we educate everyone who’s buying it, and we give them suggestions on how to take it. They know what they’re doing,” she said. “It’s important to have the warning labels and to let people know, even buying from gas stations and stuff like that, that’s not safe. Either you need to know who’s growing your products or have a reputable source.”

For folks at companies like The Hemp Source or Crowntown Cannabis that have invested millions of dollars and spent years educating their staffs so they can serve as that reputable source, only time will tell if they’ll be allowed to do so past the summer.

RPITKIN@QCNERVE.COM