When Ernest Small published a paper on the differences between cannabis and hemp nearly half a century ago, he had no idea his findings would one day become the bane of the entire United States hemp industry.
His work from 1976 first established the 0.3 per cent THC threshold that has since become enshrined as the key federal U.S. legal distinction between legal hemp and still-banned cannabis. Decades later, the Canadian government scientist acknowledges the figure was never intended to serve that purpose.
“I have had considerable experience with those who prepare or modify drug legislation, and while the general intent is understood, scientific or factual subtleties are often not understood,” wrote Dr. Small via email. “The 0.3 percent THC figure...was in effect determined by observation of the frequency distribution of THC in hundreds of samples of different kinds of plants, not for legal-control purposes, but simply as an exercise in biological classification.”
Continuing to impose that limit today poses “somewhat of an impediment to the CBD industry and therefore to the hemp industry, which is increasingly turning to CBD,” Dr. Small said, “few cultivars/strains are available that can produce high levels of CBD without exceeding” 0.3 percent THC.
More than just an “impediment”, John Vardaman says “a fucking mess” more accurately describes the current state of the U.S. hemp sector. The former U.S. Department of Justice official - known for authoring the second Cole Memo before leaving government in 2016 to join a cannabis startup - said continued use of that ultra-low THC limit (roughly one third of the one percent THC limit used in Swiss hemp regulations, for example) has led to widespread confusion and crop destruction.
“At least with marijuana, if you can get over the fact that it is federally illegal, the lines are actually pretty clear. With CBD, I wouldn’t even know where to start.”
Last year, for example, close to half of all the hemp grown in Arizona tested “hot” (meaning THC content was above 0.3 percent) and had to be destroyed as a result. Since various weather factors can impact THC levels in hemp (i.e. a wetter-than-usual growing season), farmers often have no way of knowing whether they are growing legal hemp or illegal cannabis until it comes time to harvest.
Making matters even worse, losses stemming from having to destroy “hot” hemp are among the few agricultural liabilities that are not insurable. The United States Department of Agriculture (USDA) Risk Management Agency unveiled two new insurance programs for hemp farmers last month, but in a press conference announcing those offerings, administrator Martin Barbre was quick to note “hemp that has more than 0.3 percent THC is an uninsurable cause of loss.”
The myriad of differences among state-level hemp policies complicate matters even further. In January, an Idaho state judge ruled a truckload of hemp seized en route to Colorado from Oregon one year earlier was not protected under federal law. Perhaps most notably, the Jan. 21 2020 opinion from Idaho Fourth District Judge Jonathan Medema referred to the language distinguishing hemp from cannabis as being “legal terms, not scientific ones.”
Close to half of all the hemp grown in Arizona last year tested “hot” (meaning THC content was above 0.3 percent) and had to be destroyed as a result.
That ongoing lack of legal clarity actually makes it easier to enter the U.S. cannabis sector than the hemp market, Mr. Vardaman said, despite the former remaining federally illegal.
“Some [hemp products] are legal and some others are very much not and that line is very blurry and frankly is one of the reasons why banks are just as skeptical to bank CBD as they are with marijuana, sometimes even more so because at least with marijuana, if you can get over the fact that it is federally illegal, the lines are actually pretty clear,” he said. “With CBD, I wouldn’t even know where to start.”
Efforts to address those concerns have been slow. It wasn’t until late February that the USDA said hemp farmers would no longer have to get THC levels tested by one of only 47 labs registered with the Drug Enforcement Administration (DEA), which the agricultural community had long argued was logistically infeasible.
“The farmers for this growing season are going to have to abide by that 0.3 percent THC threshold and it is going to be very difficult for them to do so,” said Jesse Mondry, an attorney based in the Portland, Oregon offices of Harris Bricken who regularly does litigation work involving hemp and CBD. “Depending on how this growing season goes, there might be enough political pressure on the USDA and the DEA to change that, but I think it is far from certain. Farmers have a lot of pull and a lot of influence in American politics, so to the extent that farmers struggle as a result of this, I think their elected representatives are going to take their concerns pretty seriously.”
Dr. Small agreed the widespread destruction of “hot” hemp in the U.S. “is unfortunate, particularly where the THC levels are under one per cent and therefore the abuse potential is still limited” he remains unconvinced that even more dramatic crop losses will drive change.
“This is an issue for legislators to consider,” Dr. Small said, “and given the conservative nature of legislation concerning drugs that are considered to have abuse potential, it is unlikely to be modified in the near future.”
This is not an offer to sell or a recommendation to trade in any securities. This information is provided as of the date hereof. This document contains data obtained from third parties that Canopy Rivers has not independently verified. This document also contains forward-looking information within the meaning of Canadian securities law, which is based on certain assumptions. While management believes these assumptions are reasonable based on information available as of the current date, they may prove to be incorrect. Many assumptions are based on factors outside of Canopy Rivers’ control and actual results may differ materially from current expectations. Forward-looking information involves risks, including, but not limited to, the risk factors set out in Canopy Rivers’ most recent Management’s Discussion and Analysis and Annual Information Form. You should not place undue reliance on forward-looking information. Except as required by applicable law, Canopy Rivers assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances.
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