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Outlook dim for US marijuana legalization in 2022, but banking reform alive

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The federal marijuana reform landscape in 2022 is cloudy, with most national insiders doubting a comprehensive legalization bill will succeed just yet given the unfavorable political dynamics in Washington DC.

Rather, if the U.S. marijuana industry is going to score legislative victories in Congress, they likely will be smaller but notable steps forward, such as the possible passage of the SAFE Banking Act or other federal reforms, sources said.

“Are we going to get comprehensive reform? No. Could we get an incremental reform? The numbers are there,” said Michael Correia, director of government relations for the National Cannabis Industry Association.

As the Marijuana Policy Project summarized it in a fundraising email on Jan. 7, “2022 will be an uphill battle in the fight for cannabis legalization.”

But the email also noted, “We know progress is possible.”

A variety of factors are complicating legalization efforts:

  • President Joe Biden’s administration has been lukewarm at best when it comes marijuana.
  • The ongoing coronavirus pandemic remains a major focus in official Washington.
  • The upcoming midterm elections will increasingly demand lawmakers’ attention.

What to watch

Still, marijuana industry officials remain upbeat about 2022, even if full legalization is years away.

They are keeping an eye on several reform measures.

Topping the list is the Cannabis Administration and Opportunity Act (CAOA) spearheaded by Senate Majority Leader Chuck Schumer.

The legalization measure, while not yet introduced, arguably represents the best opportunity for comprehensive reform in the near future.

But a lot of industry organizations have not yet offered full endorsements because solid details have yet to be released.

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Stakeholders have been waiting since trade organizations and activists submitted written feedback to Schumer’s office in August.

It’s unclear when Schumer might release an updated draft of the bill or introduce a measure for committee hearings.

Several industry officials predict it will likely be released in April to coincide with 4/20, the unofficial marijuana holiday.

But the bill’s fate remains uncertain and, at best, faces major hurdles to reach the 60-vote threshold for passage, said David Mangone, principal at The Liaison Group, which lobbies on behalf of the National Cannabis Roundtable.

“I don’t think anyone knows where (Schumer) stands with his whip count on that bill,” Mangone said.

“Where that actual number of votes falls ultimately depends on what the revised content of that bill looks like.”

The initial draft released last summer included a proposed 25% federal cannabis tax, which drew fire from all corners of the industry as too high.

Even if Schumer introduces the CAOA sooner than later, getting to 60 votes would require obtaining at least 10 Republican senators to back the measure.

Mangone and Correia said it’s hard to see how the CAOA could surmount such an obstacle, given the partisan rancor in Congress and the fact that many senators don’t consider marijuana reform a major priority.

According to the website Cannabis in Common, which is run by the U.S. Cannabis Council (USCC), only 23 of the 100 senators have thus far stated they favor federal marijuana legalization.

“It is a stretch,” Mangone said.

Banking reform

By contrast, the SAFE Banking Act might find its way to Biden’s desk this year, said Steve Hawkins, the chief executive officer of the USCC.

Hawkins noted the bill – which would, in effect, allow financial institutions to serve state-legal marijuana businesses – almost became law last year as an attachment to an omnibus defense spending bill.

But the measure ultimately was removed from the must-pass defense legislation.

That same approach – amending SAFE into a key bill – could still be effective, Hawkins said.

Or it might find enough support as a stand-alone measure.

“SAFE has now reached a critical mass of bipartisan support. And there’s a broad base of supporters that includes the American Banking Association, the (United Food and Commercial Workers) union, the National (Association of) Realtors,” Hawkins said, ticking off mainstream political support for SAFE Banking.

“I’d say the wind is to our backs on SAFE, and we will get there before this session of Congress is out,” Hawkins said.

Other possible moves

Other legalization efforts remain alive on Capitol Hill, but industry officials said two key measures have little chance of success in the Senate:

  • The MORE Act, a sweeping social justice-focused marijuana legalization bill that has passed the House multiple times already.
  • Republican Rep. Nancy Mace’s States Reform Act.

The congressional appropriations process, however, is likely to give the marijuana industry some victories, Mangone said.

A longstanding budget rider that has prevented the District of Columbia from launching a licensed adult-use marijuana market has been removed, and city leaders are prepping for a new recreational cannabis industry.

There’s also a general sense among marijuana industry officials that the conversation has evolved from whether to legalize marijuana to how to legalize the plant, Correia and others agreed.

“There’s an increasing recognition among members of both parties that supporting these reforms is good for their polling numbers,” said Morgan Fox, political director at NORML

But, Fox added, “the midterms definitely complicate things. The closer we get, the more Democrats are going to be afraid to embrace even comprehensive or incremental cannabis policy reforms, at least publicly.”

Fox noted that Senate Minority Leader Mitch McConnell and other GOP leaders used cannabis as a political “cudgel” against Democrats when they included marijuana-related provisions in a coronavirus relief package in early 2020.

Regardless, Fox said, that even if not much happens in Congress this year on marijuana reform, advocates will still be well-positioned heading into 2023.

“At the very least, we are definitely doing to see the conversation progressing,” Fox said.

“The name of the game right now is just building momentum.”

John Schroyer can be reached at john.schroyer@mjbizdaily.com.

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EU Cannabis Consumption Increased and Ecstasy Use Decreased in 2021

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A new survey studying the consumption habits of participants in the European Union (EU) reveal that cannabis use has increased, and the use of ecstasy has decreased considerably.

The European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) recently found that cannabis and ecstasy saw the strongest changes in consumption habits. The European Web Survey on Drugs was conducted online between March and April 2021 with the intention of illuminating patterns of drug use to consider in future regulation. Throughout 21 EU countries and nine non-EU countries, the survey recorded answers from those who were 18 or older and had used drugs.

The survey results, published on January 20, recorded the drug use breakdown of the 48,469 participants. “Cannabis was the drug used most, with 93 percent of survey respondents reporting to have used it in the previous 12 months and with little variation between countries,” the survey results state. “MDMA/ecstasy (35 percent), cocaine (35 percent) and amphetamine (28 percent) were the next most reported illicit substances, with the order of the three drugs varying by country. Around a third of respondents (32 percent) reported using more (herbal) cannabis and 42 percent using less MDMA/ecstasy.” The results also show that a group of participants had used LSD (20 percent), a new psychoactive substance (16 percent), ketamine (13 percent) and heroin (three percent).

Furthermore, participants from the Western Balkans (which is made up of a Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia and Kosovo) also echoed the high consumption of cannabis, and decreased use in other substances—especially ecstasy. “Most respondents (91 percent) reported using cannabis in the previous 12 months, followed by cocaine (38 percent), MDMA/ecstasy (22 percent) and amphetamine (20 percent). Again, around a third of respondents (32 percent) reported using more (herbal) cannabis and 34 percent using less MDMA/ecstasy.”

In terms of where these substances were consumed, 85 percent of participants in the EU and 72 percent of the Western Balkans used these substances at home, rather than at public venues. It also takes into account that the motivation for cannabis use at home was because of a multitude of reasons. Participants wanted to relax, get high in order to improve sleep, but their use of MDMA or ecstasy was used to attain “euphoric and socialising [sic] effects.”

The study result breakdown states that the information shared by the 50,000 people included in the survey is just a small portion of the EU, but still offers a useful glimpse into the changing habits of residents. “While web surveys are not representative of the general population, when carefully conducted and combined with traditional data-collection methods, they can help paint a more detailed, realistic and timely picture of drug use and drug markets in Europe. Over 100 organisations [sic] took part in the initiative, including the Reitox national focal points, universities and NGOs.”

EMCDDA Director Alexis Goosdeel shared a statement regarding the goal of this survey, and the amount of participation needed from organizations to sort and analyze the data. “Web surveys are a key ingredient in our monitoring of Europe’s shifting drugs problem,” Goosdeel said. “They help us reach an important target population through innovative online methods. Today’s results reveal the wide variety of drugs available across Europe and provide valuable information on emerging trends and changing patterns of use during the COVID-19 pandemic. An impressive 100 organisations [sic] joined us this time in building, translating and disseminating the survey, ensuring that this is now an invaluable tool to help tailor our responses and shape future drug policies.”

Other studies in the U.S. have shed light on other topics related to cannabis, such as targeting teens with ads on social media or an updated Gallup survey that shows that a majority of Americans support legalization.

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3 tips for making a cannabis grow operation sustainable without breaking the bank 

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Image for a Sustainability in Cannabis Cultivation series(This is the second installment in a series examining sustainability in cannabis cultivation. Read Part 1 here.)

Environmental sustainability in cannabis cultivation operations sounds nice in marketing material, but in practice, marijuana growers need to turn a profit to keep their companies alive.

So how can a cannabis grower do both?

“Balancing the health of the pocketbook with the health of the planet is a step that all cannabis facilities should consider regardless of their own worldviews, because it just makes sense,” said Av Singh, cultivation expert at Nova Scotia-based Flemming & Singh Cannabis.

Three key areas to consider when thinking about improving a cannabis operation’s impact on the environment are:

  1. How to add financially viable sustainability.
  2. How to work sustainability into a business plan.
  3. How to ensure a return on a sustainability investment.

To gain some advice and insights, MJBizDaily spoke with three cultivation experts.

Here are their thoughts.

  1. How to add financially viable sustainability.

Singh recommends growers start with a “trash inventory” to take stock of what is lost to the landfill.

“When you find that the majority of your waste is in rockwool or coco blocks or it’s in foot covers and pesticides, or that most of your money is being spent on electricity or water – you now have real information which you can act on for some more cost-effective and sustainable solutions,” he said.

For example, foot covers are not costly, but they add trash.

Instead of assuming that foot covers are the only way to minimize pathogens, do an environmental scan and test where pathogens are truly a problem, Singh added.

“Sustainable business practices and profitable businesses are not necessarily mutually exclusive,” said David Kessler, chief science officer of Billerica, Massachusetts-based Agrify Corp., which makes hardware and software for indoor cannabis cultivators.

“Making choices based on sustainability can often lead to a more successful enterprise.”

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Kessler recommended growers looking to improve sustainability focus on the following areas:

Cultivation room environmental management: Sizing HVAC systems for a cultivation room is more like the requirements for an indoor pool than a factory, Kessler said.

“Managing the temperature in a grow room is easier than controlling the humidity, a problem that compounds with increased plant density,” he added.

“Also, consider more than the price and the size of your HVAC equipment. Consider the operational efficiency.”

Lighting selection: Electricity is one of the primary cultivation cost drivers, according to Kessler.

Choosing energy-efficient LED lighting over high-intensity discharge (HID) bulbs can reduce energy consumption by more than a third, he added.

Fertigation automation: This can reduce the amount of water used by a cultivation operation. It also eliminates human error and reduces the amount of spent water and fertilizer, according to Kessler.

Media selection: Choosing a sustainable growing media such as coco coir over peat-based substrates reduces the depletion of peat bogs, Kessler said.

“Peat fields house roughly one-third of the world’s soil-sequestered carbon, the harvesting of which releases tremendous amounts of the greenhouse gas carbon dioxide, contributing to climate change,” he added.

Switching from hydroponics to organic or living soil is another way cultivators can make their operations more sustainable, according to Ryan Douglas, a Florida-based cannabis consultant.

“Soil-based substrates are teeming with microorganisms that constantly break down organic matter and slowly release nutrition to the crop,” he said.

“This minimizes the amount of additional fertilizer required, and the soil can be used more than once.”

Use appropriate caution, however.

Soil-borne pests, difficulties sourcing raw ingredients and problems ensuring sufficient volume for commercial-scale production can result in a steep learning curve for cultivators new to soil growing, Douglas added.

  1. How to work sustainability into a business plan.

Singh doesn’t recommend setting a specific budget for sustainability.

Instead, the operation should maintain a healthy work environment. It also should maintain optimal quality and continue to reduce production costs, he added.

“Hopefully, you can, over time and with proper management, increase your efficiency,” he said.

“The savings from these efficiencies should go toward meeting your sustainability goals.”

A good business plan will weave sustainable practices and initiatives throughout, mindful of the costs and contemplating the benefits, according to Kessler.

For example, buying grow media in bulk can offset cost differences and allow for more sustainable options.

Douglas said cultivators should focus on staying profitable when wholesale marijuana flower prices are about $500 a pound, much lower for hemp flower.

They can do so through a combination of process improvements, automation and sustainable cultivation practices.

“Focusing only on sustainability at the cost of profitability makes no business sense,” he added. “A cultivation business that’s (environmentally) sustainable but not profitable is not a sustainable business.”

  1. How to ensure a return on the investment.

Climate-smart cultivation practices can help lower a crop’s overall cost of production and decrease a company’s exposure to variations in the supply chain, according to Douglas.

For example, living soils provide their own nutrients and can be used repeatedly, whereas hydroponic facilities rely on single-use substrates that require the constant addition of mineral fertilizers, he added.

“Sustainable operations are also less reliant on global supply chains,” Douglas said.

“If your 100,000-square-foot facility grows in coconut shell fiber sourced from Sri Lanka and there’s a disruption to the worldwide supply chain, now what?”

Choosing to adopt environmentally sustainable practices doesn’t necessarily equate to less profit, according to Kessler.

The ongoing savings of energy-efficient cultivation systems pay for themselves in short order.

“Now, more than ever, consumers vote with their wallets. If you make sustainability a core value, tie it to your brand identity,” he added.

“Let sustainability and environmental conscientiousness drive consumers to you.”

Bart Schaneman can be reached at bart.schaneman@mjbizdaily.com.

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Cannabis company BC Craft Supply seeks creditor protection

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Vancouver, British Columbia-based BC Craft Supply Co. filed for temporary protection from creditors under Canada’s Bankruptcy and Insolvency Act while the craft cannabis firm pursues restructuring.

The filing imposes an automatic 30-day stay of proceedings, protecting the company from any claims of creditors while it pursues restructuring, with Vancouver-based Crowe MacKay & Co. acting as trustee.

BC Craft Supply warned investors in August of “significant doubts as to the ability of the company to meet its obligations as they fall due.”

The company said day-to-day operations will continue throughout the process as it looks to restructure and put forward a proposal to creditors.

The objective of the filing, per the notice, “is to regain the company’s financial footing although there can be no guarantee that the company will be successful in securing further financing or achieving its restructuring objectives.”

Failure to achieve the financing and restructuring goals will likely result in bankruptcy, the company warned.

According to the most recent financials, BC Craft Supply lost 2.4 million Canadian dollars ($1.9 million) for the nine months ended June 30, 2021.

That left the company with only CA$105,801 in cash at the time. Revenue in the same period was CA$801,276.

In 2019 and 2020, BC Craft Supply lost CA$54.2 million and CA$35.6 million, respectively.

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MJBizDaily Cannabis Extraction Buyers Guide 

Get strategies and tips from expert processors on choosing cannabis extraction systems, costs, safety precautions and more. Curated by MJBizDaily.

Inside:

  • How to choose between solvent-based and solventless extraction methods
  • Learn which strains are most efficient for each extraction process
  • Tips on safety precautions from design to training to protective equipment

BC Craft Supply is the first Canadian cannabis company to seek creditor protection this year.

A number of companies have sought creditor protection as competition in the cannabis industry intensifies.

In December, British Columbia-based Ascent Industries was granted creditor protection by the Supreme Court of British Columbia.

In 2020, Kitchener, Ontario-based cannabis cultivator James E. Wagner Cultivation (JWC) entered creditor protection as part of a debtor-in-possession loan deal with cannabis sector lender Trichome Financial.

The Toronto-based lender ended up acquiring JWC’s assets, possibly providing a blueprint for reviving struggling, deeply indebted marijuana producers.

Shares of BC Craft Supply are traded on the Canadian Stock Exchange under the ticker symbol CRFT.

Matt Lamers can be reached at mattl@mjbizdaily.com.

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