Earlier this year, Politico published a story on the outbreak of fires and explosions at Cannabis extraction facilities. It documented 10 incidents over the last five years where hash oil was being extracted. The reporting shed light on the risks involved in the process: “Extracting hash oil from cannabis is dangerous because typically it requires pouring highly-flammable butane or some other volatile solvent into a cannabis-filled pipe,” according to the story.
These accidents, sometimes deadly, serve as a cautionary tale for one of the fastest growing industries in the country. As Politico notes, “…labor unions complain that state governments are moving too swiftly to license producers, outpacing the states’ ability to inspect production facilities for potential safety violations.”
In the rush to keep up with the demands of growing markets, cannabis facility owners need to take a step back and ensure they have safety protocols in place. This is especially challenging for two reasons: 1) safety compliance is determined at the state level since cannabis remains federally illegal, and 2) “Most of the states where marijuana is legal offer no safety and health guidance for the new industry,” according to Politico. “The National Institute for Occupational Safety and Health, which researches work-related injury and illness, has conducted only two hazard evaluations of legal marijuana facilities, neither of which focused on the extraction of hash oil.”
“Even in those states that do offer safety and health
guidance — Colorado, California, Michigan, Oregon,
and Washington — fire safety officials complain that
worker safety protections are often inadequate.”
Still, business owners can educate themselves and their employees by engaging with their local fire department so that they are in step with fire code, permitting, and inspections.
Speaking of which…
Seek Permits and Inspections
Mark de Souza, CEO of Chicago-based Revolution Enterprises, recently warned of the pitfalls of the cannabis industry’s growth outpacing regulation. “I have long thought the best way to help Illinois citizens deal with this change is to ensure the industry grows in tandem with the state’s ability to regulate it,” he wrote in Crain’s Chicago Business. “And by ‘regulate it,’ I mean ensure that its use remains safe…Creating a new and unregulated market overnight—in a business that some citizens find unusual and scary—seems the easiest way to ensure its failure.”
An area related to this concern is acquiring the requisite permits and scheduling routine inspections to protect facilities. In the last year, the National Fire Protection Association (NFPA) updated its fire code to address these issues. Per Politico “The revised code requires any hazardous hash-oil extraction process to be performed in a non-combustible room, in a building that contains no child or health care facilities. Staff must be trained on safe operation of the extraction equipment, and the extraction room must be equipped with a gas detection system and multiple fire extinguishing systems.”
Utilize a Closed Loop System
Cannabis or hash oil extraction via a closed loop system is the safest method. Compared to open blasting, which uses flammable solvents, closed loop systems contain these in extraction cylinders. Open blasting, dangerous as it is, is not uncommon and has resulted in devastating accidents. In June of last year, an extraction facility in Millcreek, Utah exploded, and two people experienced severe burn injuries in Sonoma County, California while extracting hash oil by open-blasting. Closed loop is only safe if strictly adhered to. Marijuana Venture advises following the manufactures’ instructions for equipment to a T and being vigilant about every detail, like routinely tightening bolts on extraction cylinders.
Don’t Do it Yourself
Some cannabis facility owners and operators skirt safety and compliance checks to be operational faster. In addition to obviously violating the law, this can create hazardous conditions, especially where electrical systems are concerned.
“Where necessary, hire a professional,” advises Marijuana Venture. “Building, fire and electrical codes must be followed. Don’t overload the electrical panel. Don’t steal power from a nearby building. Be careful with wall construction. Pay attention to door sizes. And perhaps most importantly, everything should be properly permitted.”
Cannabis businesses are on notice and have suffered financial and legal consequences. California and New Mexico’s occupational safety and health agencies issued fines of $50,470 and $13,500, respectively, against a cannabis manufacturer and processor for explosions that occurred at their facilities. Felony charges were brought against an Oregon business owner whose employees sustained burn injuries following an incident.
In addition to NFPA’s increased efforts, labor groups in states considering cannabis legalization are advocating that labor peace provisions requiring marijuana processors to ease the path to unionization be incorporated into legislation. Other states like Rhode Island and Arizona are weighing making extraction against the law altogether. Either way, there are enough resources and education to mitigate the risks of fire at your cannabis facility.
The green rush is on in the Sooner State.
Oklahoma–renowned for its once harsh possession penalties–is now a land of opportunity for medical cannabis businesses. Among the nation’s most progressive medical cannabis programs, Oklahoma has hit the ground running in only six months and is light years ahead of other states delayed by stagnating legislation.
One of Oklahoma’s greatest differentiators is its reciprocity program that allows patients with out-of-state medical cannabis cards to qualify for renewable, temporary licenses.
The Oklahoma medical cannabis market could realize $250 million in annual sales in its first few years. According to the Oklahoma Medical Marijuana Authority, more than 2,200 business licenses had been issued, with an approved patient pool of more than 24,000 as of December, 2018. This speed-to-market is attributed to the fact that SQ 788 bypassed a special legislative session likely to have imposed restrictions, but instead prioritized patient-needs to get immediate access to cannabis treatments. The result is that there is no limit on business licenses, and doctors are free to recommend medical cannabis to patients for any condition they deem appropriate. In addition, the program is all-encompassing, prohibiting municipalities, cities, or counties from opting out.
High Retail & Wholesale Prices
Though there’s no cap on business licenses, supply is tight and product demand high, which is good news for dispensaries. Patients are lining up en masse for the state’s program, creating premium value for inventory. An ounce of cannabis flower, for example, averages $400, double the cost of Arizona’s medical cannabis market. Cultivation is prospering as well, with wholesale prices averaging between $3,500 – $4,500 per pound–at least twice that of competing markets.
One of Oklahoma’s greatest differentiators is its reciprocity program that allows patients with out-of-state medical cannabis cards to qualify for renewable, temporary licenses. They cost $100, are valid for 30 days, and permit patients to purchase, use, and even grow cannabis in Oklahoma. This provision is especially enticing for Arkansan customers as a stopgap while that program ramps up.
Some industry insiders caution that the possibility of over-cultivation and low prices will drive down retail and wholesale prices as it’s happened in other markets. Still, with so much success in its nascent stage and the evolution of regulations, Oklahoma may find a way to stabilize supply, increase demand, and sustain momentum.
Processing or cannabis extraction is emerging as a promising growth area for cannabis businesses, opening opportunities for vertical integration. Scientific and technological innovation are taking extraction to new heights, converting the raw material of cannabis into a cornucopia of usable forms. Christian Sweeney, Director of Science and Technology at Cannabistry Labs, which develops top-of-the-line extraction methods, identifies processing as one of the four pillars–along with cultivation, analytics and biochemistry–for developing the optimal cannabis process. It’s only natural that integrating processing into your cannabusiness has many advantages, including the following:
Vertical integration creates self-sufficiency for cannabis businesses and can help reduce costs. Businesses that grow, process, and sell their product may reduce their dependence on suppliers or other third parties. Colorado Springs-based Strawberry Fields, for example, makes its own products, including vape pens, edibles, and lotions. They are initially contracting with a processor until they obtain the proper equipment, which can change as they incorporate distillation into their services. Strawberry Fields budgets around $3 million annually for processing fees but will spend $200,000 on equipment to bring the function in-house.
“A well-designed cannabis process goes far beyond just extraction, overlapping heavily with cultivation on the front-end and product development on the back-end.”
Diverse Retail Opportunities
Cannabis products processed and sold onsite have the potential to become a game-changer for the industry. Similar to the farm-to-table restaurant concept, some dispensaries have added kitchens staffed with culinary personnel and food scientists, who are extracting compounds and producing edibles, oils, waxes, shatters, and more. The Mint Dispensary in Tempe, Arizona launched the country’s first full-service cannabis kitchen in October, serving the medical cannabis community. Acres Cannabis recreational dispensary in Las Vegas takes it a step further, featuring a 2,000 square foot open-view kitchen that houses its edible production and cannabis extraction operations. Customers observe the process of removing cannabinoids and terpenes from flower to create cannabis oil, and can buy the product off the shelf.
Better Quality Control
Integrating processing and cultivation at the same site can open the door for better quality control. Well-engineered facilities monitor each piece of equipment and instruments through a Building Automation System or a Direct Digital Controller. These systems provide alerts when a room or piece of equipment is not operating within the programmed specifications or range of tolerance. If both functions are located in one space, the Director of Facilities can supervise operations more efficiently.
The Bottom Line
Cannabis businesses have to keep track of many moving pieces in the name of compliance, growth, and sustainability. Integrating processing into your cannabis business can help you stay ahead, and as Sweeney notes, “A well-designed cannabis process goes far beyond just extraction, overlapping heavily with cultivation on the front-end and product development on the back-end.”
Four years ago, Mosaic Construction entered a new vertical in construction as we jumped feet first into the cannabis industry as a result of one of our loyal client asking for our help. Mosaic had previously built retail spaces and when we were approached to complete three design/build projects for their cannabis dispensaries in Illinois, we learned very quickly how fast the market was growing (pun intended!)
Cannabis Facility Construction was created to brand our efforts in the cannabis industry. We have grown to a nation-wide, industry leading design/build construction company. We have worked with design professionals to create unique spaces for our cannabis clients and have completed twelve Dispensary, Cultivation and/or Processing projects in six states totaling over 140,000 square feet. We have a loyal client base and have expanded our reach and talents within the cannabis industry to provide quality and highly functional facilities within this booming sector.
We are proud, sponsoring members of the National Cannabis Industry Association which represents nearly 2,000 member-businesses and tens-of-thousands of cannabis professionals. NCIA promotes the growth of a responsible and legitimate cannabis industry where they believe “Our industry is stronger, smarter, and more prosperous when we work together.” Recently, we attended the Midwest Quarterly Cannabis Caucus which is the premier B2B event series for making meaningful connections with the cannabis industry’s leading executives and policymakers while also getting the tools we need to advance the cannabis industry nationally. Recently, we spent a few days in Anaheim, CA at the California Cannabis Business Conference, the only industry association trade show preparing California cannabis businesses for success in the largest adult-use market in the world. The California Cannabis Business Conference unifies the Golden State and brought together seasoned industry leaders to convene on best business practices and operations.
Later next month, the Cannabis Facility Construction team will attend the MJBiz convention in Las Vegas. This event is the preeminent conference to drive business deals and forge valuable connections with cannabis professionals in business today. There will be over 20,000+ cannabis professionals and 1,000+ exhibitors attending. It is the networking event for anyone serious about networking in the cannabis industry.
To learn more about Cannabis Facility Construction, check out www.cannabisfacility.net.