New regulations proposed in New York will assure consumers that CBD products manufactured and sold in the state meet minimum potency and safety standards while also clearing the way for hemp-infused beverages and food.
The long-awaited rules were largely hailed by industry, but included one glaring omission that raised objections from growers and processors who are trying to reinvigorate a business stuck in neutral following once grand growth projections.
Among the prohibitions contained in the 63 pages of recently released rules is a ban on the sale of flower from the non-psychoactive form of the cannabis plant. The smokable form is among the most popular items in the fledgling CBD market, and the prohibition cuts off a potential lucrative avenue for growers.
“By banning it, you’re really screwing over farmers,” said Kaelen Castetter, of CSG Hemp, a Binghamton producer of CBD products.
Cannabinoids, the byproduct from the low-THC derivative of the cannabis plant, have been touted for their potential in relieving several maladies, including anxiety and chronic pain, among other afflictions, though the science to back up the claims remains elusive.
But based on anecdotal evidence, some CBD-laced products have found a loyal following among consumers.
“These (regulations) are fantastic guardrails for safety and quality assurance because they mandate compliance with good manufacturing practices,” said Joy Beckerman, owner and founder of Hemp Ace International, an expert witness and legal consulting firm.
New York’s regulations attempt to restore order to a marketplace where product standards are wanting, and consumers have few assurances that the product on the shelf adheres to information on the label.
The rules finally provide the industry a more definitive path toward commercialization of industrial hemp.
“A lot consumers didn’t know what they weren’t being told,” said Assemblywoman Donna Lupardo, D-Endwell, who heads the Assembly Agriculture Committee and has been spearheading the effort to develop the hemp industry in New York for the past six years.
Under the rules now being considered, all aspects of the hemp supply chain would be licensed and regulated under the auspices of the state Department of Health and the Department of Agriculture and Markets.
Merchandise on the shelf would be covered by strict labeling codes that will provide the ability to trace the product’s provenance from field to store.
CBD producers are optimistic but guarded in their assessments.
The new regulations are “a great start” for the local hemp industry, said Ed McCauley. He and former flower farmer Adam Kurtz run Fusion Holding Group in Oregon and New York’s Orange County.
Opened in 2016, it makes the already popular Fusion CBD brand.
“There’s definitely going to be better quality products on the shelves in New York,” said Michael Geraci, co-owner of the Orange County-based Hemp Farms of New York, another early local hemp grower and CBD maker.
New regulations strive for quality control
The state regulations note there has been a “rapid increase” in the use of cannabinoid hemp products and notes the federal government has not implemented its own regulatory system.
“In this absence, unscrupulous actors have entered the market and sold cannabinoid hemp products that do not meet the quality control standards common in the established supplement, food and cannabis industries,” the regulations read. “Reports of cannabinoid hemp products that do not contain any cannabinoids at all or are contaminated with harmful toxins and pesticides are common.”
Random testing at all stages of production by Health Department inspectors would be allowed under the proposed New York regulations.
Permission to produce food and beverages infused with CBD, within certain limits, was roundly applauded by the industry.
The move will allow the production of water, seltzer, gummies, chocolates, teas, juices and even items such as granola and bread infused with hemp extract.
“That’s huge for the industry,” Castetter said.
No alcohol products or transdermal patches will be allowed.
New York setting the standard
By establishing strict regulations, New York hopes to set the standard going forward, Lupardo said, establishing the state as a leader in the hemp industry, allowing merchandise by home-grown producers to be considered among the best on the market.
Lupardo said extensive rules issued by the health department should give the industry a much-needed boost, encouraging a host of start-ups to gear up, generating a new source of jobs across upstate New York.
“You’re going to see a stabilization of the marketplace, and then you’re going to see growth,” Lupardo predicted.
The assemblywoman also said the rules could jump-start Canopy Growth’s $9 million investment in an industrial hemp hub outside of Binghamton. Though announced more than a year ago, the progress on the effort has been slow.
After being burned by over-producing hemp last year, it’ll likely take at least two years for the new state regulations to begin paying off for many farmers, said Maire Ullrich, the Cornell Cooperative Extension’s agriculture program leader for Orange County.
Hudson Valley farmers planted upward of 1,500 acres of hemp last year, including up to 700 acres in Orange County alone, Ullrich estimated in 2019. Statewide nearly 20,000 acres were planted last year, up from 3,500 acres in 2018, according to state estimates.
Yet, local farmers planted a small fraction of that hemp acreage this year, as the coronavirus sent produce prices rising, Ullrich said.
Plus, all that New York hemp production last year led the price per percentage point of CBD per pound of hemp to plummet to less than $1 in early 2020, compared with a high of $4 as recently as summer 2019, Ullrich said.
Some growers need between $4 and $10 per pound for it to even be worth growing hemp for CBD, McCauley said.
Any retailer seeking to sell CBD products will be required to pay $300 for a state license.
“It’s going to be a shockwave for some operators,” Castetter said of the extensive regulations.
Flower ban draws criticism
Conforming with federal rules, New York will require all products contain less than 0.3% THC, the substance responsible for the sense of euphoria after using marijuana or other cannabis infused products.
Industry representatives were left searching for a rationale behind the flower ban, saying it seemed counter-intuitive given New York’s expected to move toward the adoption of adult-use marijuana next year.
In the adult-use market, flower products are among the most popular products.
“I share in the frustration of our members and the hundreds of growers throughout the state who have spent significant resources in harvesting their crop this year that hemp flower will not be allowed for sale,” said Allan Gandelman, president of the New York Cannabis Growers & Processors Association.
The federal government removed the non-psychoactive variant from the controlled substance list in late 2018 as part of the updated Farm Bill. New York has allowed industrial hemp cultivation under an experimental program since 2015.
Comments on the new regulations will be accepted by the Health Department from Nov. 10, 2020, through Jan. 11, 2021 — meaning they could take effect as soon as early next year, following time for revisions and more public notification.
Lupardo said she expects a few tweaks to the proposal based on the discussion and have final rules in next year’s first quarter.
Jeff Platsky covers transportation and the economy for the USA TODAY Network New York. He can be reached at JPLATSKY@Gannett.com and followed on Twitter: @JeffPlatsky.