U.S. Attorney General Jeff Sessions sent shock waves through the cannabis industry in early January when he issued a Department of Justice (DOJ) memo rescinding the Cole Memos and all related guidelines aimed at the legal cannabis industry, including how financial institutions should handle cannabis clients. Source: Justice Department

Bob Troyer, U.S. Attorney for the district of Colorado, told CBT that his priority is targeting crimes that “significantly threaten our community safety.” He said the Sessions’ memo returns prosecutorial discretion to U.S. Attorneys who can evaluate the impact of cannabis businesses in their districts. Source: Cannabis Business Times

Massachusetts’ Republican Governor Charlie Baker offered his strongest support of the legal cannabis industry to date in his message to the state’s U.S. Attorney Andrew Lelling. Lelling called cannabis a “dangerous drug” and pledged to investigate bulk trafficking and cultivation cases, as well as those who use the federal banking system “illegally.” Source: Boston Globe

Kansas State Rep. Steve Alford was harshly criticized for this statement he made during a legislative coffee session with constituents in his home state. Alford was referring to policies put into place by known prohibitionist and racist Harry Anslinger, who was the founding commissioner of the Federal Bureau of Narcotics. Source: Garden City Telegram

Mayflower Farms acquired a former storage warehouse in Aurora, Colo., in 2015, says Compliance Officer Mark Troutman, and he adds, “we … spent 13 months building out the best facility the Colorado cannabis community could produce.” Troutman says they doubled the space of the original structure, which sat at 24,000 square feet, by adding a second level. The facility, which features 40-foot ceilings, now boasts 48,000 square feet of cultivation and post-harvest production space. The second level-which Mayflower Farms uses for harvest, cure and extraction-is modeled after a commercial kitchen. (In other words, they take sanitation very seriously.)

“We’re uniquely positioned to succeed long term in the Colorado cannabis space due to our integrated cultivation and extraction facility, which is highly adaptable,” Troutman says. “[We’re] able to move quickly on trends in product development.”

Right now, Mayflower Farms produces wholesale buds and trim, and concentrates such as live resin, wax and shatter. But how has its approach to cultivation and extraction helped pave the company’s way into the state’s competitive cannabis marketplace? Cannabis Business Times writer Jillian Kramer spoke with Troutman, as well as Drew Greco, Mayflower Farms’ garden manager, and Travis Ingraham, the company’s head of processing, to find out more.

Jillian Kramer: Why did Mayflower Farms decide to use hydrocarbon extraction?

Travis Ingraham: Hydrocarbon extraction is a high-yielding and time-efficient extraction method for cannabis. The solubility of the cannabinoids in hydrocarbon solvents allows us to make high-potency extracts with minimal post-processing required. We find that we are able to capture the essence of the strain using this method, followed by gentle purging [which removes the solvent].

tically possible. This allows us to

Kramer: What environmental controls does Mayflower Farms use?

Drew Greco: At Mayflower Farms, each vegetative and flowering room has heat, air conditioning, dehumidification and CO₂ supplementation. We have an HVAC system that circulates chilled liquid [in a closed-loop system] throughout the facility to cool our rooms. With pre-programmable minimum and maximum temperature and humidity levels, we can make sure our rooms stay within a 10-degree or -percent variance. This is one of the most important factors in controlling mold and fungus growth. Our CO₂ enrichment is controlled and delivered by a fully automated system. This allows us to maintain an even level of CO₂ in our rooms during the day when the plants need it, and turn off the CO₂ at night while the plants sleep.

Mark Troutman: CO₂ levels are monitored in each flower room by a CO₂ gas-detection sensor that operates like a thermostat. When the CO₂ concentration in the room drops to an indicated low point, the system kicks on and introduces bottled CO₂ into the room until the indicated high point is reached, and then it shuts off. The room will slowly drift back to the low point and it starts again. The system also includes an optical sensor that detects whether the lights are on. We don’t introduce CO₂ into the rooms when they’re dark, as the plants are said to be “sleeping” and do not respirate as actively in the dark.

Kramer: What makes Mayflower Farms’ facility state-of-the art?

Greco: [It] was designed to be a cultivation facility. We did not just take over a warehouse and throw up some lights. Each individual room was designed for optimal air movement and environmental control. We believe that multiple 70- to 100-light rooms allow us to control the environment properly, resulting in a higher-quality finished product.

Mayflower Farms’ vegetative and propagation rooms are centrally located in the building, allowing for a smooth production flow when we move plants from vegetation to flower.

We have five flowering rooms that are all individually climate controlled and fertigated. [Outside of] each room is a 300-gallon reservoir … with an irrigation pump plumbed into the room. Each table in every room has an irrigation line and drip emitters that are pressure regulated to deliver an equal amount of nutrients to each plant.

We have an industrial elevator lift to transport plants up to our harvest room [on the second floor] for processing.

Ingraham: The build-out of our facility was designed with one purpose in mind: creating the ideal space to grow large numbers of plants and produce large quantities of concentrates. … This can be observed in every detail of [our] layout and construction-nothing is an afterthought.

Our extraction lab is designed to be fully compliant with … regulations regarding [Class 1, Division 1] classification [editor’s note: for hazardous locations, determined by the Occupational Safety and Health Administration (OSHA), “depending on the properties of the flammable vapors, liquids or gases … that may be present therein and the likelihood that a flammable or combustible concentration or quantity is present,” according to OSHA.gov]. Hydrocarbons are monitored in the air and [during] every step of our process to ensure a safe working place for our employees.

Kramer: How does your team determine if tweaks—whether to cultivars or recipes—are needed?

Greco: Our cultivation managers—Willy Gardiner, Drew Greco and Ryan Salnoske-have been working together for [more than] two years as a team to try and perfect a simple, yet well-rounded commercial cultivation SOP [standard operating procedure]. A major part of that SOP is plant inspection and health. We strive to create near-perfect environmental conditions as well as a complete feed schedule so that our plants thrive. We are striving for a clean, safe and potent product with every room we harvest.

The Mayflower Farms cultivation team works together to pair strains that feed similarly into a room. We can then adjust our feeding schedules to best fit the needs of each room.

Troutman: Each different cultivar feeds differently. Some strains require more nitrogen than others, while some strains may require more calcium than others. [For example,] OG Kush wants less nitrogen than other strains. This is why it is so important for growers to be able to recognize deficiencies, as well as toxicities, in plants. The plants will let you know through subtle indications what they need and what they don’t like. This is why cannabis growers develop such intimate relationships with their plants.

Kramer: Your cleaning procedures are modeled after those used in food-manufacturing facilities. What exactly does that mean?

Greco: We want to produce the cleanest product possible, and that means maintaining a clean cultivation environment. We only use cleaning products that are allowed for use in commercial kitchens or hospitals to be sure our facility is as sanitary as can be.

The Mayflower Farms cultivation team implements daily cleaning procedures and checklists to keep the facility looking cleaner than most. Maintaining a clean work environment is not only beneficial to the plants, but also the workers. Our cultivation team takes great pride in our facility, and we strive to keep it well maintained.

Ingraham: Coming from a background in cGMP [current Good Manufacturing Practice] nutraceuticals production in a [Food and Drug Administration (FDA)]-regulated facility, it was obvious to me that sanitation in the cannabis industry was lacking. All dishware used in [our] processing is cleaned and sanitized to FDA food-grade production standards. Hair nets, lab coats and booties are worn by all employees to prevent product contamination.

We chose to model our production to this higher standard because we believe our customers deserve the cleanest, safest extracts. We produce extracts for use in edible formulations by third-party companies, [and those] require a high level of cleanliness. It is also our belief that this is the direction all cannabis production will go in the future.

Kramer: Buds that you don’t consider top shelf become part of your extract products—how do you decide what doesn’t make the cut?

Ingraham: For sales at dispensaries, we are looking for large, dense, well-manicured buds. While we make every effort to ensure that there is as little flower produced that does not meet these criteria, there are buds lower on the plant that do not fill out as much. These buds still have significant levels of cannabinoids, but they have not developed the density we-and consumers-look for in shelf-ready buds. This flower is combined with any sugar leaf that is removed from the premium buds during trimming to create the perfect starting material for top-notch extracts.

Kramer: What led to your decision to use predatory bugs for pest control?

Greco: Our No. 1 goal … is to produce a clean, safe and potent finished product. … We use a lot of essential oils [such as rosemary oil, geraniol oil and peppermint oil] in the vegetative stage to help prevent powdery mildew and mold in the flowering stage.

We use multiple strains of bacteria and fungi to help boost our microbial colonies at the root zone. Since the root zone is the most important part of the plant, we want to ensure the healthiest roots, to produce as much flower as possible.

… Beneficial insects [such as Hypoaspis miles and Cucumeris] keep our garden clean. The insects are brought to us in little porous pouches that we hang on the bottom branches of the plants. As the bugs run out of food in the pouches, they exit the pouch to search for a food source.

Kramer: Research and development (R&D) is a large part of Mayflower Farms’ process. Tell us more about what the chemists in your lab do.

Ingraham: Currently, we have three full-time scientists employed in our extract lab. Recently they have been developing methods to increase yields, potency and flavor. In addition, blends of various strains are being explored for unique flavor combinations as well as effects. In the next year, the R&D will move into the development of unique products and formulations.

Kramer: What is your most unique product?

Greco: We have a range of strains and concentrate products to choose from. … But our most unique product is probably our live resins. To create this amazing product, we first harvest whole plants and freeze them quickly. By freezing the flowers fast, the terpenes in the flower are preserved in their “live” state, resulting in a product that smells and tastes more like the profiles of the live plant.

Ingraham: Our live resin definitely sets us apart. We are able to process our plant material as quickly as the state’s testing statutes allow us to. ... Being located in the same facility, we are able to hand-select the best plants, get them processed and frozen immediately, and keep them frozen up until the moment of extraction. This allows us to get terpene profiles and yields that many companies struggle to get.

Our sugar wax is definitely our most unique product currently, though others are in the works. ... The specific extraction and purging process we use to create our sugar wax is unique and intentional, giving our extract unparalleled flavor.

Troutman: Plant material from a harvest must be tested for potency and microbial contamination before it can be transferred from a grow to an extract lab. Since we are one integrated team, the extract lab has direct access to the grow’s test results.

Kramer: You provide comprehensive explanations of every strain you sell on your website. Why do you think it’s important to give so much information to your customers?

Greco: We believe it is part of our job to help educate customers. We want [them] to know the differences between a sativa, indica or hybrid strain, ... [and] between a high-THC or -CBD strain and a high-terpene-percentage strain. We want the customer to know exactly what they are getting so that they can make educated decisions on what products are best for them. This also means that we have to produce a consistent quality product, so that the customer experiences the products in a similar way every time.

Ingraham: We believe that it is critical for people to know about the products they consume. The more information a consumer has … about the products they are looking for, the more informed decision they can make when purchasing. This information could be the difference between a consumer purchasing a product they love the taste and effects of, or purchasing a product that leaves them wanting more-or less. With so many different flavor profiles, and physical and mental effects produced by the strains in our portfolio, this information gives consumers the ability to choose what is right for them and gives them information to find similar strains they may also enjoy.

Jillian Kramer A New York City-based freelance journalist whose work has appeared in the online or print versions of Glamour, Food & Wine, SELF, The Wall Street Journal, and more.

Alexis Bortell began suffering from severe, sometimes life-threatening seizures when she was 7 years old. She spent most school days in the nurse’s office recovering from her episodes, missing out on her education and the fun of being a kid.

Doctors in Texas, where Alexis and her family resided, offered different treatments, each one more drastic than the last. One doctor recommended a medication used in lethal injections, and another recommended a medication that could leave Bortell infertile. The most extreme solution came from a doctor who offered a lobotomy when Bortell was just 10 years old.

Her parents relocated to Colorado to give medical cannabis a shot. (At the time, Texas did not have a medical cannabis program that allowed Bortell’s parents to treat her. Questions remain as to whether that would be possible under the new state regulations.)

Now 12, Bortell enjoys a near-seizure-free life thanks to medical cannabis. She goes to school; works on her business ventures-OneLuv Organics, a hand-crafted goat-milk soap line, and Patches of Hope, where she grows food for the homeless-and has become the face of a lawsuit being brought against the Department of Justice (DOJ) and U.S. Attorney General Jeff Sessions.

Bortell is a co-plaintiff in the suit along with fellow medical cannabis patients including former NFL lineman Marvin Washington, U.S. Army veteran Jose Belen, Jagger Cotte, and The Cannabis Cultural Association (CCA).

Alexis Bortell v. Jeff Sessions

Bortell and the other plaintiffs are set to appear Feb. 14 in New York’s 9^th circuit.

“We will be opposing the government’s motion to dismiss our case,” says Lauren Rudick, the lawyer representing the plaintiffs in the suit. “We will argue that we have standing and have sufficiently stated multiple claims for relief.”

Rudick’s clients’ main argument is that the Controlled Substances Act (CSA) infringes on constitutional rights. For example, despite being the daughter of two veterans, Bortell cannot visit a military base to receive medical care and other free military services to which she is entitled; she cannot physically lobby her representatives in Washington; and she cannot visit a national park or go on a school trip with her classmates to a public or federal property without committing a felony.

The CCA is suing on behalf of minorities across the country who have been targeted by federal authorities for cannabis-related crimes. The CCA alleges “the Controlled Substances Act has been enforced against people of color exponentially more than Caucasians,” Rudick says. Washington, the former NFL player, is seeking to rectify that by suing for increased access to minority assistance and startup funding.

“People of color are grossly underrepresented in the cannabis space except when it comes to arrest/prosecution. It would help if people of color had access to federal funding, which would be available to minorities in any other (federally legal) businesses,” Rudick explains.

Belen, the Army veteran, hopes to change federal policy that prevents Veterans Affairs doctors from recommending medical cannabis to treat suicidal thoughts caused by Post Traumatic Stress Disorder (PTSD).

Yet these co-plaintiffs aren’t the only ones going after the U.S. government over its cannabis laws. Here’s a brief overview of other major cannabis cases currently in the hands of America’s judicial system.

C.A.H.C. v. IRS

Cannabis business owners are acutely aware of the restrictions placed on them and their businesses by Internal Revenue Service (IRS) tax code 280E. But one Colorado duo is fighting the IRS over what their lawyer calls an “absurd” double-taxation of their personal income.

The owners of Colorado Alternative Health Care (C.A.H.C.), a vertically integrated cannabis business in Palisade, Colo., are suing the IRS after the government agency determined the income declared in their W-2 is subject to taxation as S-Corp revenue due to 280E.

S corporations may pass business income to shareholders (i.e., “officers”) to avoid paying taxes. Those shareholders then report the income on their personal tax returns and are taxed at individual rates instead of corporate rates. This allows small companies and startups to avoid paying the large corporate rate.

“It’s the perfect illustration of the absurd results that happen when you apply an archaic law whose only purpose is to further punish people who are operating criminal enterprises, which is no longer the case in state-legal cannabis markets,” Gillette says.

Neither the owners of C.A.H.C. nor their attorney expect any significant change to 280E to result from this lawsuit—it is, after all, mostly about the owners’ personal income tax—but Gillette believes it can be “a crack in the glass.”

“[Hopefully this lawsuit] will show people the absurdity that results from punishing people playing by the rules. … And it could translate to some good savings for marijuana businesses.”

Gillette says the industry’s best chance of being freed from 280E is if Congress makes a legislative fix. She is hopeful that will happen soon, since Sessions rang in the new year by rescinding the guidelines noted in the Cole Memos and other cannabis-friendly Obama-era policies.

HIA v. DEA

The Drug Enforcement Administration (DEA) is being brought to court by the Hemp Industry Association (HIA). The HIA claims that the DEA’s scheduling of all cannabis extracts, including hemp-derived CBD, a non-psychoactive compound found in cannabis, goes against the Farm Bill that Congress passed in 2014.

That bill defined industrial hemp for the first time and described it as “all parts of the plant cannabis sativa l., so long as the dried materials of the plant is less than 0.3 percent THC,” says HIA lead counsel Patrick Goggin.

In January 2017, the DEA finalized a rule that would help the agency and the federal government stay compliant with United Nations drug treaties by assigning a four-digit drug code to all marijuana extracts. Therein lies the problem, Goggin says.

“They define [marijuana extracts] as one or more cannabinoids extracted from the plant genus cannabis,” he explains, meaning “there is no exception within the rule for industrial hemp pursuant to the Farm Bill, and their failure to carve out an exception means they are scheduling industrial hemp extracts” the same as cannabis extracts. The DEA’s interpretation essentially criminalizes interstate commerce, which the HIA believes the Farm Bill allows.

The HIA argues that hemp-derived extracts should be classified as nutraceuticals and natural products instead of drugs needing to be approved by the Food and Drug Administration (FDA). Its position is that the DEA is acting outside the purview of congressional intent by disregarding Congress’s definition of hemp in the Farm Bill.

The HIA will present oral arguments in an appellate hearing on Feb. 15 in the 9th U.S. Circuit court, but it could take several months before the judges issue a ruling.

With these lawsuits all hoping to make significant progress this year, it seems the federal authorities are going to be as busy defending themselves from cannabis businesses as they are trying to prosecute them.

2017 was a significant and eventful year for cannabis markets in the United States; we witnessed further maturation of marijuana’s legal landscape and identified important market trends:

Say Goodbye to the Wild West

Long unregulated or legally gray medical markets, including California, Michigan and Montana, are becoming formalized and regulated. The “Wild West” that characterized the cannabis industry in years past is quickly disappearing, as a more transparent, accountable and regulated industry begins to emerge across the board.

Flower and Pot Brownies in Decline; Cartridges on the Rise

As consumer and brand sophistication push forward, the products initially adopted in early legal markets have dropped in popularity, according to data from cannabis market research firm Brightfield Group.

Flower, for example, still makes up a substantial portion of both recreational and medical sales, but it is rapidly losing ground to products that are more discreet and user-friendly. Early adopters of legal cannabis were in large part those who already used marijuana regularly—often in its most accessible form: flower. Many new users seek more subtle consumption methods, such as vaping.

Furthermore, though initially in high demand as new legal markets began to emerge, baked goods’ popularity has declined rapidly as dispensaries seek products with longer shelf lives. However, sales of edibles such as sugar candy and drinks have been on the rise. This is in large part attributed to consumers’ demands for more easily microdosed options.

A Microdosing Boom

In fact, microdosed products emerged left and right in 2017. These less potent, consistently dosed products target medical users, newbies and more sophisticated consumers looking to use cannabis regularly while still being able to function throughout the day. Combine the vast consumer growth expected to follow California’s recreational market launch with the continued adult-use expansion in Nevada and along the East Coast, and microdosing is projected to explode in 2018, following trends in other states and medical markets.

CBD Garners National Interest

Hemp- and marijuana-derived cannabidiol (CBD) sales combined to create a nearly $500-million market in 2017 and are expected to balloon in 2018 and beyond. Given CBD’s non-psychoactive nature and medicinal value, as well as its increasing popular and congressional support (in January, dozens of legislators came forward to challenge the Drug Enforcement Administration’s definition of hemp-derived CBD as a Schedule 1 substance), the stigma surrounding CBD continues to subside as its popularity surges. CBD products have been legalized or are accessible in nearly all U.S. states, bringing many consumers and patients into the fold who previously could not or would not seek out cannabis products. All of this makes CBD an important market to watch in 2018.

Bethany Gomez is Brightfield Group’s director of research. She has extensive experience in quantitative and strategic research, specializing in the market research of the consumer goods industry. Gomez has also worked as an analyst and consultant on a wide variety of projects for private companies, nonprofits and multilateral organizations.

Jamie Schau attained a B.A. in International Studies and an M.A. in International Development from the University of California, San Diego. Since early 2015, she has been a market analyst with Brightfield Group, where she performs quantitative and qualitative analyses of various aspects of the U.S. marijuana markets.