There’s a growing industry here in North Carolina, and with it come countless rules, gray areas, and legal confusion—and no, we’re not talking about NFTs.
The hemp industry has been blooming in the state for years, but North Carolina is one of 12 states that doesn’t have a medical marijuana program. With the end of the legislative session on Thursday, and with it the sunset of the state’s 2017 industrial hemp pilot program legalizing hemp, CBD, and delta-8 products for sale here, we’re left puzzling over a number of bills sitting in the General Assembly—some of which could help patients who desperately need access to medical marijuana, and some of which could hurt local hemp farmers and business owners who have built their lives around the industry.
North Carolina is far ahead in the hemp game but far behind in legalization, putting the local industry at a disadvantage, says Gabrielle Jarrell, a chair at NC NORML, an organization that advocates for decriminalization and legalization of weed.
“There’s lots and lots of hemp farmers in North Carolina. We have a phenomenal climate for growing hemp, so it’s become a blossoming industry, especially out west—but it’s an industry that’s been hit hard,” Jarrell says. “There were 1,500 hemp farmers in 2020. And now there’s only 360 remaining.”
But those 360 farmers include only those whose hemp farms are officially registered with the U.S. Department of Agriculture (USDA). In January, the USDA took direct oversight of all hemp cultivation in the state. Farmers weren’t pleased with this development, says Sarah Carson, fundraising chair at NC NORML.
“A lot of farmers have private farms and when the USDA comes in, you have to give them open access—anytime they want. They can come to your farm, inspect your crop, do all of these things that farmers are like, ‘Whoa, I don’t want to be a part of this,’” Carson says.
There are still many more active hemp farmers in the state, many of whom likely didn’t know they were supposed to register with the USDA or are waiting to see the future of the North Carolina hemp industry before they register, says Nicolette Baglio, a cannabis policy advocate and hemp entrepreneur.
Another reason the industry is in flux right now is the uncertainty of medical marijuana legality. There are several cannabis-related bills in the state legislature. One of those is Senate Bill 711, or the NC Compassionate Care Act, currently awaiting a vote in the state house. Axios reported that house Republicans voted internally last week not to advance the bill, but even if it doesn’t pass this session, it’s likely it will be pushed through soon, given public support to pass the Republican-led bill while the party controls both chambers of the General Assembly, says Baglio.
What is SB 711?
SB 711 would set up a restrictive medical marijuana program in North Carolina, granting 10 medical cannabis supplier licenses for companies to apply for in the state. The Medical Cannabis Production Commission, which is established in the bill, would decide on 10 companies out of 20 recommended applicants chosen by the North Carolina Department of Health and Human Services. Baglio says this bill would create a very limited, unprofitable structure that doesn’t benefit the majority of North Carolina’s patients.
“Not only are the license structures incredibly limited—that’s 10 licenses that would get to operate 80 dispensaries—but the patient access list is so small that it really only covers between 3 and 5 percent of North Carolinians that would even qualify, so it just doesn’t make sense,” Baglio says. “‘The math doesn’t math’ is what we like to say.”
But here’s the bill’s main catch: each license costs $50,000, and the bill requires proof that each applicant will be able to operate as a supplier for two years in the form of liquid and non-liquid assets, which could be difficult for local start-ups and small business owners. The bill also mandates that each company has someone on board with prior operation experience of cultivation, production, and management of cannabis products in a state-licensed medical or adult-use cannabis operation—neither of which have ever been legal in North Carolina.
Morgan Davis, a cannabis business lawyer based in Raleigh, says that the bill “requires that the company prove that they have a consultant or an investor or someone who’s been involved in the medical marijuana industry before, which necessarily requires that they’re going to have to go out of state, because obviously no one in North Carolina has been involved in that industry in the last five years. Not legally, anyway.”
Even if a North Carolina business does have experience growing, announcing it to the government would instantly put a target on their back, says Carson.
“You’re going to be looked at like, ‘Why do you have experience growing?’” Carson says. “A lot of people are just like, ‘Why am I going to incriminate myself?’”
Because local cannabis businesses would have a difficult time participating in SB 711’s medical marijuana program, the bill opens the door to huge cannabis companies called multistate operators (MSOs) to come in from other states where medical marijuana is legal and monopolize North Carolina’s industry, says Carson.
“If a business is a multimillion-dollar business, they could buy five of those licenses and own half of the market in this state,” Carson says. “That’s really not fair, and that’s what a lot of these businesses are looking at.”
Several MSOs are waiting to jump in the moment SB 711 passes, including Cresco Labs, Jushi Holdings, and Trulieve, the largest medical marijuana company in Florida. Trulieve and Merida Capital—the private equity firm behind Cresco and Jushi—hired state lobbyists shortly after the bill was introduced last year, says Baglio.
“One of the reasons that North Carolina is so confusing is because we actually built a bustling hemp industry before, we’re late to the legalization game,” Baglio says. “And so why would these incoming MSOs want to play nice and be like, ‘You guys keep that, we’ll do this.’ They’re not. They’re being like, ‘Great, we’ll take it all, thanks.’”
But Baglio says there is still hope for local hemp farmers.
Most of the major MSOs, including Cresco and Jushi, reported declines in revenue in the first quarter of 2022 compared to the previous quarter. (Trulieve’s revenue was up 4 percent.)
Baglio says those declines were driven by discerning consumers. She compares the cannabis industry to another popular industry in the state—craft beer.
”You’re starting to really see that nobody’s going to want your Walmart cannabis,” Baglio says. “As the customer is getting more knowledgeable and more sophisticated, they don’t want Sam’s Club. They don’t want Walmart cannabis. They want craft beer. They want craft cannabis. They want to buy local and from someone that they trust.”
But unless another bill is passed quickly, North Carolina’s whole hemp industry as it currently operates is under threat.
What other bills are there?
The state’s 2017 industrial hemp pilot program is set to expire June 30, and even though hemp is legal and off of the controlled substances list under the federal 2018 Farm Bill, North Carolina lawmakers have so far chosen not to address the program—leaving no state protections for hemp after June 30 unless a new bill is passed this week.
Senate Bill 762 was originally the champion bill for farmers, but after it was stripped last week of language protecting hemp in its most recent version, there are now two other bills that could benefit the hemp industry if passed this session: House Bill 1051 and Senate Bill 455. Both have the goal of conforming the state’s hemp laws to match federal hemp laws, but SB 455 would permanently exclude hemp from the state’s controlled substances act—and is the furthest along of any of the bills. Versions of the bill passed both the state senate and house, but its current iteration is awaiting a senate committee hearing.
“Senate Bill 455 is actually the closest to the touchdown in our opinion,” Baglio says. “The senate could vote on this bill and have it on [Gov. Roy] Cooper’s desk in an hour—and they’re unwilling to do it.”
If lawmakers don’t make any moves on this bill or any others by Thursday, all hemp products will become illegal in the state Friday, says Baglio. While hemp growers with a USDA license are safe, businesses involved in the retail side lose all protection.
“It essentially criminalizes an entire industry of CBD and delta-8 manufacturers, retailers, growers, processors—so we hope that doesn’t happen,” Baglio says. “And obviously, if no hemp bill is passed and the provisions expire, it’s just going to create a very confusing gray area of what’s legal and what’s not—even though all we’ve really been asking for is to operate under the federal farm bill.”
Grace Holtkamp owns Merry Hill Hemp, an organic CBD hemp farm in Mebane created in 2017. It was the first farm in the country to run a pick-your-own hemp season, an annual tradition that was created to destigmatize cannabis.
“I have a USDA hemp license, because I’m required to, so I can still grow,” Holtkamp says. “But I cannot sell to my own home state, and as a farm that is dedicated to our local community and dependent on our local community, that’s not only unfair, it’s nonsensical.”
Furthermore, Holtkamp says, farmers are attempting to understand the chaos and confusion of these bills at the same time that they are investing their livelihood in their plants for another year of growing, as hemp growers need to get their crop in the ground by mid- to late June in North Carolina.
“So you have people like us, who have just planted hundreds, if not thousands, of plants, and now this legislation has suddenly taken this U-turn,” Holtkamp says. “It’s very daunting.”
What does this mean for the hemp industry?
John Boccella, co-owner of The Hemp Company, a family-owned hemp store in Raleigh, says he is fighting hard to hold on to their right to sell their products.
“I feel an obligation for advocacy,” Boccella says. “The Hemp Company is a family business for us. Two of my three boys work at The Hemp Company, and it’s really important to us as a family business. It’s also really important to the relationships that we’ve built with our customers in the community. I’ve been focusing very much on getting the hemp laws restored back in the state.”
Boccella says that SB 711 was not created for the benefit of hemp farmers and companies based in North Carolina. He also emphasized that North Carolina has the capacity to benefit from all of this.
“It’s important that the state benefits, and when I say the state, I mean in revenue tax dollars. They can benefit as well—[the] North Carolina farms, manufacturers, retailers, families that are North Carolina residents versus these giant corporations that are outside and not even registered to the state of North Carolina,” Boccella says.
With SB 455 languishing, lawmakers seem to have little urgency in renewing hemp provisions before they expire, says Baglio, the hemp entrepreneur.
Baglio, among other business owners, has also put pressure on Cooper to issue an executive order protecting hemp, but she says Cooper hasn’t made any indication that he will do so.
“We as North Carolinians have always embraced and supported our small businesses and farmers,” Baglio says. “So I think it’s pretty shocking to see the legislators turning their backs on this industry.”
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