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FDA Issues Warning Letters on Marketing and Sale of OTC CBD Products

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The U.S. Food and Drug Administration (FDA) issued warning letters this month to two companies concerning the marketing and sale of over-the-counter (OTC) drug products containing cannabidiol (CBD) as an inactive ingredient. The letters allege violations of the Federal Food, Drug, and Cosmetic (FD&C) Act related to current good manufacturing practice requirements and marketing of new drugs without FDA approval.

At issue: labeling, NDAs and active ingredients

The companies subject to the warning letters market OTC drug products that contain CBD as an inactive ingredient. In the warning letters, the FDA states that it has not approved any OTC drugs containing CBD. According to the FDA, an approved new drug application (NDA) is required to legally market nonprescription or OTC drug products containing CBD, regardless of whether the CBD is an active or inactive ingredient. The FDA notes that CBD has known pharmacological effects and demonstrated risks, and that CBD has not been shown to be safe and suitable for use, even as an inactive ingredient. As a result, the FDA states that CBD cannot be marketed in OTC drug products.

Further, the warning letters noted the marketing of several CBD products that highlighted the benefits of CBD for a range of conditions in such a manner that, according to the FDA, “misleadingly suggests that [their] . . . products are approved or endorsed by FDA in some way when this is not true.” The FDA also took issue with the way products were labeled, which included callouts on the front label regarding the CBD content of the product (a requirement under most state laws that permit CBD as an ingredient). Similarly, the FDA also noted that some of the products advertised CBD as an active ingredient in a topical pain reliever product. According to the FDA, no company may legally market such a product, since there are no OTC monographs or NDAs that allow the use of CBD in an OTC drug.

What this means for you

These warning letters highlight the FDA’s vigilance regarding OTC CBD products. Regardless of whether the CBD is labeled as an active or inactive ingredient, the FDA has taken the position that nonprescription CBD drugs are in violation of the FD&C Act. Companies marketing CBD products should be careful to ensure their marketing practices, as well as their product formulations, do not present a heightened risk of FDA enforcement.

The New Jersey Cannabis Microbusiness License: An Entrepreneur’s Guide

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Reliable heating, ventilation and air conditioning (HVAC) equipment can cost upward of $300,000 or more for a 5,000-square-foot growing facility in the cannabis space. Proper lighting might cost just as much.

But those environmental controls become less effective for an ideal harvest if they are not complemented by the intelligent application of air distribution through engineered ductwork, which isn’t overly complicated nor expensive in the grand scheme of a productive room, according to Geoff Brown, vice president of technical solutions for Quest.

Often an afterthought, airflow is currently the biggest hump for growers in relation to environmental controls, but it doesn’t have to be, Brown said. Through Quest’s partnership with Hawthorne Gardening Company, growers now have access to the Airflow Mapping service, a computer-aided analysis that calculates or predicts where a diffuser’s air will travel. In turn, growers have access to custom solutions to their specific facilities without making major changes to those facilities.

Featured here, Brown shares more about Airflow Mapping, the importance of intelligent air distribution, working with manufacturers, return on investment and other pertinent knowledge to help avoid oversights associated with environment controls.

Q: Why is airflow so important in cannabis cultivation?

A: Ultimately it just comes down to building productive plants. TIP 1 Good air circulation at the leaf is what allows the leaf to breathe, to get rid of the oxygen around the leaf and to absorb more CO2 to make sure that the transpiration is happening and that you don’t have a locally deficient vapor pressure deficit (VPD). It’s really how the system needs to work. In my opinion, airflow is the single most overlooked thing in cannabis right now, or at least it is the next hump to get over.

The hump 10 years ago was, “Oh, shoot, we’re going to put cooling units in these rooms and hopefully they’ll do enough for dehumidification.” And then there was a dehumidification problem. Now there’s a notion, “We’re putting cooling units and dehumidifiers in, so we don’t have to think about airflow.”

So, how has that been addressed? Well, people have thrown in rotation fans in the space to move air around, but there’s no real concerted effort at managing airflow, or at least thinking intelligently about how airflow works in your room. It’s an afterthought at best.

TIP 2 Proper engineered ductwork is relatively inexpensive in the grand scheme of indoor grow rooms. A 5,000-square-foot, which is a big room, and a productive room, might cost $20,000 in ductwork. And properly designed ductwork reduces the need for air-rotation fans in the space.

TIP 3 Air-rotation fans, although they’ve been used successfully, are actually a really bad thing for an efficient growth. For one, every watt they consume is an additional watt that needs to be removed from the space by a cooling system. So, you pay to run the fan and then you pay to cool off the fan. And most of those fans are also relatively inexpensive, open-pole motors. They can’t be cleaned properly between grows. So, you end up with either a vector for infection in your space or a fan that’s a pain to clean. The bottom line is it’s not a good use of resources, it’s not sustainable, and there’s a better way to manage it.

Q: What exactly is the Airflow Mapping service that Quest and Hawthorne have partnered to offer indoor operators?

A: Airflow Mapping is basically using computer-aided design to calculate or to predict where each airflow stream, or where each diffuser’s air will go. It uses things like internal duct pressure and velocities and volumes to predict or map out very accurately what the airflow in the space is going to look like. It truly creates an airflow map in the space. Typically, those are presented as velocity maps.

TIP 4 Roughly 5 feet per second is the ideal speed through the canopy, and Airflow Mapping shows very easily what your duct concept is going to give you in terms of overall rotation in the space. It’s a relatively inexpensive way to do your duct design and to test your duct design without needing to sacrifice a million-dollar room.

Q: Is Airflow Mapping a one-time analysis, or are there certain components installed that provide continual, live readings?

A: Airflow Mapping is a completely computerized analysis. The Quest IQ systems are designed as constant velocity and volume systems. So, Airflow Mapping day one versus day 50 versus harvest day, the only change is the height of the canopy. TIP 5 There are only a couple of different models that need to be done to accurately reflect what’s happening in any given room.

Typically, you’ve got an engineer who has designed ductwork systems, who has laid out his or her best estimate or best experience of what that ought to look like. We run it through the Airflow Mapping tool and then are able to either tweak the engineer’s design or strategically apply air-rotation fans to hit trouble spots instead of relying on them for the entire room.

TIP 6 That’s typically what we’re doing, is we’re looking at that design and saying, “Yes, this is reasonable. It’s not going to cost too much money to fix that particular corner. So, let’s apply in our rotation fan, but let’s de-stratify that one particular problem area and move on with our lives.” It allows us to do that without sacrificing a plant, or having a bad harvest, or having powdery mildew developed in the corner because it’s a stratified air mass. These are the kinds of things that we can determine in the computer, and map out in the computer, prior to a grower running the facility.

Q: The Airflow Mapping modeling software is the same software used by NASA engineers to design space shuttles—is that what makes the service groundbreaking to the industry?

A: Absolutely. Software like that has existed for a long time, but it has typically been reserved to agencies like NASA using it to determine the heating of individual tiles on a space shuttle at reentry, or velocities over individual parts of the ship. So, the technology itself is not new, but its application in anything other than specialized military projects or NASA is new and has become more of a commonplace in the past few years among high-performing organizations that have brought the software to the prosumer market.

Q: The Airflow Mapping basically helps indoor growers with custom solutions to their specific facilities without making major changes to those facilities, correct?

A: Exactly. TIP 7 Airflow Mapping is able to quickly identify potential problem areas that are much easier to change in the design phase than after everything is installed and after you’re stepping on the master grower to make ductwork changes in a space.

Q: What’s the importance of good ductwork to achieve an ideal airflow?

A: It’s not just a matter of putting up whatever ductwork happens to be cheaper or fell off your sheet metal guy’s truck. TIP 8 Real ductwork with good diffusers, getting the right flow, and getting the right throw out of your diffusers and out of your duct design is crucially important. So, it really does need to be an engineered system to do that properly.

Right now, there’s a lot of interest in things like fabric ducts because they’re quick and easy to put up. They’re quick and easy to take down and launder between grows, if you ever need to. TIP 9 But even something like that duct, you can get real air devices in it. You can get real diffusers with long-throw devices or high-velocity patterns that get air in the right spot. That is very important.

TIP 10 That’s only useful if you have enough airflow out of your HVAC system to make it work. That’s where with Quest IQ handling the entire needs of the space, the heating, cooling and dehumidification of the space in one unit, we run a higher than typical airflow than you would out of a rooftop package cooling unit, for instance. The extra airflow plus good duct design means that we’re able to get the canopy movement and get the penetration into canopy to get the real leaf movement that we’re looking for without requiring the use of some of the band-aids that have been put in previously, like air-rotation fans.

Q: When it comes to tracking the canopy velocity, is it ideal for airflow to be moving horizontally, vertically or both?

A: Like anything, it depends. TIP 11 It’s going to depend on the type of grow, the type of lights and the tiering of it. We’re seeing a lot more multi-tiered rows—two, three, four levels sometimes—particularly with LED lights being more common and not dealing with quite as many heat issues as the market has previously. That’s going to affect where air distribution is effective.

Also, getting the air in the right spot is important. It can be difficult sometimes with a typical grow room, 14 feet tall, and you’ve got a supply grill on the roof and your return is up top, because your equipment is on the roof. It can be hard sometimes to get the air down low. TIP 12 That’s where a good air device with the right amount of throw to get the air to the canopy matters.

In my perfect world, TIP 13 I would love to see supply and return happen opposite each other. So, if you’re going to supply high and pull air down through the canopy, your return would be low to help that, to not have as much opportunity for stratification, or vice versa, right? If you’re going to supply low, which some people do, they supply into the under-table ductwork or something like that, and then pull or draw air up through the canopy to have a high return, that’s going to be situational. Sometimes it’s just growers get shoehorned into things because they’re retrofitting an existing building. They’re not building a facility from scratch; it’s what is available to them.

Regardless of what is available to them, the Airflow Mapping can help them determine the best way to lay out that airflow pattern. Whether it’s a high supply, low return, or whether they’re forced to do a high supply, high return and would naturally have some stratification problems, we can help mitigate that through the Airflow Mapping.

I’m not sure that I’m comfortable putting my hat in the horizontal versus vertical versus both. TIP 14 I think all of them can be applied properly with some intelligent thought.

Q: What other oversights do cultivation facilities make when it comes to airflow?

A: One is that example of high return, high supply. If you were to look over your head right now, if you’re in your office, you’d probably see one of those four-way supply grills. They have no throw and they’re not designed to, because they’re designed to get air from a 9-foot ceiling down to a 6-foot breathing space.

We often see rooms that have those same style of diffuser in a 14-to-16-foot-high room and high supply. TIP 15 Issues like that are going to naturally cause stratification, where you’ve got a high supply, you’ve got high return. You don’t have a good air device. You’ve got your lights that sort of naturally create a bit of an umbrella or barrier to the air dropping down low. You may have horizontal air-rotation fans giving you a bit of an air curtain. And you’ve got a space that’s always going to be stratified as a result.

TIP 16 Reducing air-rotation fans can reduce your overall HVAC demand costs by something like 8% to 10% a year. So, if you’re talking about a typical room that would easily spend $50,000 a year in energy, you’re going to save $5,000 a year by doing ductwork properly. It pays for itself very quickly.

Q: Do taller or bushier plants play a factor in dead-zone considerations for facilities?

A: They absolutely can, as well as moving racking. Between the two we can often end up with situations with a bit of an aisle effect, where air doesn’t penetrate well into the canopy and will naturally go where there’s less air resistance. TIP 17 If you’ve got moving racking where you’re no longer working in the room and your rack home position changes on a daily basis, or changes versus where the ductwork was designed, you can end up with a situation where the air isn’t going into the canopy the way it ought to and instead is finding the easy path.

That can happen as well with bigger or bushier cultivars, or cultivars with thicker canopies. It absolutely can be harder to get air into the canopy. TIP 18 That’s where an intelligent application of under-canopy ductwork may make more sense, where you draw air up through the canopy in a vertical way instead of trying to push it from the side on an angle. But that’s quite application-specific. It’s really going to depend on the cultivar that you’re trying to grow.

Q: How can a grower with movable racking avoid airflow problems?

A: Movable racking is becoming very common, of course, TIP 19 but home positions for that racking are not always well-respected and can absolutely cause problems if you’ve got an engineered system and then you change some aspect of the system, like where the plants are. You can certainly have a negative impact on your airflow there.

There is an education piece in ensuring that the person in the room who’s working on the plants understands the impact of maybe not quite following standard operating procedure and not returning the rack to the right spot because, “Who cares if it’s a rack in the same room; what does it matter?”

I’m a big proponent of process improvement overall, TIP 20 but a big part of process improvement is knowing the why and having everybody know and understand why something is being done, not just, “Those are the rules, so do it.” Understanding why the racks need to be in the right spot when you leave the room matters.

Again, I just think air distribution generally is the biggest problem facing this industry. It’s the one that’s most ripe for some good education right now.

Senate Follows Suit in Reintroducing SAFE Banking Act

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Thirty U.S. senators attached their names to the Secure And Fair Enforcement (SAFE) Banking Act of 2021, legislation that was reintroduced March 23 in the upper chamber of Congress. Among them, seven Republicans are on board.

Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT) are leading the charge as primary sponsors of the bill, which would create protections for financial institutions that provide services to state-legal cannabis businesses. The Senate version of the bill comes on the heels of SAFE Banking being refiled in the House on March 18, where it carries more than 100 co-sponsors. The lower chamber overwhelmingly passed a standalone version of the bill in 2019, and then House members passed the measure two more times as part of federal coronavirus relief bills in 2020. 

None of those previous efforts cleared the Senate, where there now lies new optimism with Democrats taking control of a 50-50 split via Vice President Kamala Harris representing the tiebreaker vote. In the last Congress, the SAFE Banking Act of 2019 had 35 senators signed on for sponsorship, including then-Sen. Harris, but former Majority Leader Mitch McConnell (R-KY) never acted on calendaring it for floor debate.

Many state-legal medicinal or adult-use cannabis businesses are denied access to the banking system because banks fear they may be prosecuted under federal law given the ongoing federal restrictions on cannabis, Merkley said in a press release March 23. The lack of access to bank accounts, credit cards and checks has forced some state-legal cannabis businesses to operate in cash, opening the door to tax evasion and to a dangerous pattern of robberies, including one that resulted in the murder of a store clerk in Portland, Ore., Merkley said.

“No one working in a store or behind a register should have to worry about experiencing a traumatic robbery at any moment,” Merkley said. “That means we can’t keep forcing legal cannabis businesses to operate entirely in cash—a nonsensical rule that is an open invitation to robbery and money laundering. Let’s make 2021 the year that we get this bill signed into law so we can ensure that all legal cannabis businesses have access to the financial services they need to help keep their employees safe.”

Helping motor more than $17.5 billion of legal cannabis sales in the U.S. in 2020, there were 515 banks and 169 credit unions providing services to cannabis-related businesses at the end of last year, according to Financial Crimes Enforcement Network’s (FinCEN) quarterly cannabis banking update. But, like Merkley said, not all cannabis-related businesses have access to those financial institutions, and those financial institutions don’t have guaranteed safe harbor for taking on clients who operate in a sector that is not federally legal.

Providing all state-legal cannabis businesses access to banking services would not only improve community safety, but also make it easier for Americans of color—who have long been disproportionately impacted by America’s war-on-drugs policies and generations of asset-stripping policies and practices—to access the capital necessary to participate in the merging cannabis industry, Merkley said in his release.

Daines, who did not sponsor SAFE Banking in the previous Congress, is now taking the lead for Republicans who support the reintroduced version of the bill. Perhaps influencing his sponsorship, Montana was one of four states that passed voter-approved ballot measures to legalize adult-use cannabis in the November 2020 election.

“Montana businesses shouldn’t have to operate in all cash—they should have a safe way to conduct business,” Daines said. “My bipartisan bill will provide needed certainty for legal Montana cannabis businesses and give them the ability to freely use banks, credit unions and other financial institutions without the fear of punishment. This in turn will help increase public safety, reduce crime, support Montana small businesses, create jobs and boost local economies. A win-win for all.”

To address the safety concerns resulting from state-legal businesses being shut out of banking services, the SAFE Banking Act would prevent federal banking regulators from:

  • Prohibiting, penalizing or discouraging a bank from providing financial services to a state-sanctioned and regulated cannabis business, or an associated business (such as a lawyer or landlord providing services to a legal cannabis business);
  • Terminating or limiting a bank’s federal deposit insurance solely because the bank is providing services to a state-sanctioned cannabis business or associated business;
  • Recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; or
  • Taking any action on a loan to an owner or operator of a cannabis-related business.

In addition to Merkley and Daines as the primary sponsors, the legislation is co-sponsored by Sens. Kyrsten Sinema (D-AZ), Edward J. Markey (D-MA), Alex Padilla (D-CA), Patrick Leahy (D-VT), Richard Durbin (D-IL), Ron Wyden (D-OR), Mazie Hirono (D-HI), Tina Smith (D-MN), Angus King (I-ME), Catherine Cortez Masto (D-NV), Michael Bennet (D-CO), Robert Menendez (D-NJ), Jon Tester (D-MT), Jacky Rosen (D-NV), Kevin Cramer (R-ND), Dan Sullivan (R-AK), Kirsten Gillibrand (D-NY), Elizabeth Warren (D-MA), Chris Murphy (D-CT), Gary Peters (D-MI), Bernie Sanders (I-VT), Brian Schatz (D-HI), Patty Murray (D-WA), Amy Klobuchar (D-MN), Rand Paul (R-KY), Bill Cassidy (R-LA), Cynthia Lummis (R-WY) and Lisa Murkowski (R-AK).

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Cannabis & Chemicals: Why Glove Sourcing is Vital

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Freya Farm, a pesticide-free cannabis producer and processor located in Conway, Wash., was recently forced to issue a recall after the chemical o-Phenylphenol, listed under CA Prop 65, was found on its products. Testing traced the antimicrobial compound, known to cause cancer, back to the FDA-compliant food grade gloves used by Freya during packaging.

The reason this could happen with FDA-compliant, food grade gloves needs urgent attention. The production and manufacturing of food contact gloves is largely unsupervised, with limited and infrequent checks on gloves imported into the US. After initial approvals, non-sterile, FDA-compliant food grade gloves are not subject to ongoing controls. This may lead to lower grade and cheap raw materials being used in sub-standard production facilities and processes.

Why “Food Safe” Gloves Aren’t Always Safe

The quality and safety of disposable gloves are limited to Letters of Compliance and Guarantee on the general make and model of the glove, not necessarily the glove you are holding in your hand. There are few controls on the consistency of raw materials, manufacturing processes and factory compliance for both food contact and medical examination grade gloves. Therefore, the opportunity exists for deliberate or accidental contamination within the process of which the Preventive Controls Qualified Individual (PCQI) may not be aware.

Read more about this in Disposable Gloves: The Unregulated Cannabis Threat, previously published in the Cannabis Industry Journal.

The Cost of Recalls

In the words of Freya Farm, “Nothing ruins your day like testing your product, confident it will be clean, only to find it contaminated with some crazy, toxic chemical.” In tracing the issue, the gloves were the last thing Freya Farm tested, as they never suspected something sold as food safe could be the culprit.

A recall of this type can be expensive, as fines range up to $200,000. Since this incident, Freya Farm has implemented a responsible sourcing policy for gloves using supplier Eagle Protect to protect its products, people and brand reputation.

Glove inspection includes five factors of quality controls

Eagle Protect, a global supplier of PPE to the food and medical sectors, is currently implementing a unique proprietary third-party glove analysis to ensure a range of their gloves are regularly checked for harmful contaminants, toxins and pathogens. This Fingerprint Glove Analysis mitigates the risk of intentional or accidental physical, chemical or microbiological glove contamination by inspecting five factors: the use of safe ingredients, cross-contamination potential, cleanliness, structural integrity and dermal compatibility.

Harmful toxins and contaminants in gloves have been identified in many peer reviewed scientific studies. This is now a real issue for companies producing consumer products, especially in industries such as organics and cannabis whose products must be handled by gloves and test clean.

Three key areas that can be tested for in a glove analysis to ensure safe product handling include:

  • Dermal compatibility tests for toxins and chemicals will flag any toxic chemical, such as o-Phenylphenol
  • GCMS testing for consistent quality and safety of glove raw materials
  • Cleanliness tests for pathogens inside and outside the surfaces of gloves – particularly pathogens also required in cannabis testing, such as E. coli and Salmonella, mold and fungus and pesticides.

For cannabis producers responsible glove sourcing is vital, especially as the COVID-related demand for single-use gloves exceeds supply, with poor quality, counterfeit and even reused gloves flooding the market. For producers with a product that rests very much on its quality, it’s important to focus on quality and not just cost when procuring gloves.

FTC’s ‘Operation CBDeceit’: How to Understand It and What To Watch For Going Forward

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Reliable heating, ventilation and air conditioning (HVAC) equipment can cost upward of $300,000 or more for a 5,000-square-foot growing facility in the cannabis space. Proper lighting might cost just as much.

But those environmental controls become less effective for an ideal harvest if they are not complemented by the intelligent application of air distribution through engineered ductwork, which isn’t overly complicated nor expensive in the grand scheme of a productive room, according to Geoff Brown, vice president of technical solutions for Quest.

Often an afterthought, airflow is currently the biggest hump for growers in relation to environmental controls, but it doesn’t have to be, Brown said. Through Quest’s partnership with Hawthorne Gardening Company, growers now have access to the Airflow Mapping service, a computer-aided analysis that calculates or predicts where a diffuser’s air will travel. In turn, growers have access to custom solutions to their specific facilities without making major changes to those facilities.

Featured here, Brown shares more about Airflow Mapping, the importance of intelligent air distribution, working with manufacturers, return on investment and other pertinent knowledge to help avoid oversights associated with environment controls.

Why is airflow so important in cannabis cultivation?

Ultimately it just comes down to building productive plants. Good air circulation at the leaf is what allows the leaf to breathe, to get rid of the oxygen around the leaf and to absorb more CO2 to make sure that the transpiration is happening and that you don’t have a locally deficient vapor pressure deficit (VPD). It’s really how the system needs to work. In my opinion, airflow is the single most overlooked thing in cannabis right now, or at least it is the next hump to get over.

The hump 10 years ago was, “Oh, shoot, we’re going to put cooling units in these rooms and hopefully they’ll do enough for dehumidification.” And then there was a dehumidification problem. Now there’s a notion, “We’re putting cooling units and dehumidifiers in, so we don’t have to think about airflow.”

So, how has that been addressed? Well, people have thrown in rotation fans in the space to move air around, but there’s no real concerted effort at managing airflow, or at least thinking intelligently about how airflow works in your room. It’s an afterthought at best.

Proper engineered ductwork is relatively inexpensive in the grand scheme of indoor grow rooms. A 5,000-square-foot, which is a big room, and a productive room, might cost $20,000 in ductwork. And properly designed ductwork reduces the need for air-rotation fans in the space.

Air-rotation fans, although they’ve been used successfully, are actually a really bad thing for an efficient growth. For one, every watt they consume is an additional watt that needs to be removed from the space by a cooling system. So, you pay to run the fan and then you pay to cool off the fan. And most of those fans are also relatively inexpensive, open-pole motors. They can’t be cleaned properly between grows. So, you end up with either a vector for infection in your space or a fan that’s a pain to clean. The bottom line is it’s not a good use of resources, it’s not sustainable, and there’s a better way to manage it.

What exactly is the Airflow Mapping service that Quest and Hawthorne have partnered to offer indoor operators?

Airflow Mapping is basically using computer-aided design to calculate or to predict where each airflow stream, or where each diffuser’s air will go. It uses things like internal duct pressure and velocities and volumes to predict or map out very accurately what the airflow in the space is going to look like. It truly creates an airflow map in the space. Typically, those are presented as velocity maps.

Roughly 5 feet per second is the ideal speed through the canopy, and Airflow Mapping shows very easily what your duct concept is going to give you in terms of overall rotation in the space. It’s a relatively inexpensive way to do your duct design and to test your duct design without needing to sacrifice a million-dollar room.

Is Airflow Mapping a one-time analysis, or are there certain components installed that provide continual, live readings?

Airflow Mapping is a completely computerized analysis. The Quest IQ systems are designed as constant velocity and volume systems. So, Airflow Mapping day one versus day 50 versus harvest day, the only change is the height of the canopy. There are only a couple of different models that need to be done to accurately reflect what’s happening in any given room.

Typically, you’ve got an engineer who has designed ductwork systems, who has laid out his or her best estimate or best experience of what that ought to look like. We run it through the Airflow Mapping tool and then are able to either tweak the engineer’s design or strategically apply air-rotation fans to hit trouble spots instead of relying on them for the entire room.

That’s typically what we’re doing, is we’re looking at that design and saying, “Yes, this is reasonable. It’s not going to cost too much money to fix that particular corner. So, let’s apply in our rotation fan, but let’s de-stratify that one particular problem area and move on with our lives.” It allows us to do that without sacrificing a plant, or having a bad harvest, or having powdery mildew developed in the corner because it’s a stratified air mass. These are the kinds of things that we can determine in the computer, and map out in the computer, prior to a grower running the facility.

The Airflow Mapping modeling software is the same software used by NASA engineers to design space shuttles—is that what makes the service groundbreaking to the industry?

Absolutely. Software like that has existed for a long time, but it has typically been reserved to agencies like NASA using it to determine the heating of individual tiles on a space shuttle at reentry, or velocities over individual parts of the ship. So, the technology itself is not new, but its application in anything other than specialized military projects or NASA is new and has become more of a commonplace in the past few years among high-performing organizations that have brought the software to the prosumer market.

The Airflow Mapping basically helps indoor growers with custom solutions to their specific facilities without making major changes to those facilities, correct?

Exactly. Airflow Mapping is able to quickly identify potential problem areas that are much easier to change in the design phase than after everything is installed and after you’re stepping on the master grower to make ductwork changes in a space.

What’s the importance of good ductwork to achieve an ideal airflow?

It’s not just a matter of putting up whatever ductwork happens to be cheaper or fell off your sheet metal guy’s truck. Real ductwork with good diffusers, getting the right flow, and getting the right throw out of your diffusers and out of your duct design is crucially important. So, it really does need to be an engineered system to do that properly.

Right now, there’s a lot of interest in things like fabric ducts because they’re quick and easy to put up. They’re quick and easy to take down and launder between grows, if you ever need to. But even something like that duct, you can get real air devices in it. You can get real diffusers with long-throw devices or high-velocity patterns that get air in the right spot. That is very important.

That’s only useful if you have enough airflow out of your HVAC system to make it work. That’s where with Quest IQ handling the entire needs of the space, the heating, cooling and dehumidification of the space in one unit, we run a higher than typical airflow than you would out of a rooftop package cooling unit, for instance. The extra airflow plus good duct design means that we’re able to get the canopy movement and get the penetration into canopy to get the real leaf movement that we’re looking for without requiring the use of some of the band-aids that have been put in previously, like air-rotation fans.

When it comes to tracking the canopy velocity, is it ideal for airflow to be moving horizontally, vertically or both?

Like anything, it depends. It’s going to depend on the type of grow, the type of lights and the tiering of it. We’re seeing a lot more multi-tiered rows—two, three, four levels sometimes—particularly with LED lights being more common and not dealing with quite as many heat issues as the market has previously. That’s going to affect where air distribution is effective.

Also, getting the air in the right spot is important. It can be difficult sometimes with a typical grow room, 14 feet tall, and you’ve got a supply grill on the roof and your return is up top, because your equipment is on the roof. It can be hard sometimes to get the air down low. That’s where a good air device with the right amount of throw to get the air to the canopy matters.

In my perfect world, I would love to see supply and return happen opposite each other. So, if you’re going to supply high and pull air down through the canopy, your return would be low to help that, to not have as much opportunity for stratification, or vice versa, right? If you’re going to supply low, which some people do, they supply into the under-table ductwork or something like that, and then pull or draw air up through the canopy to have a high return, that’s going to be situational. Sometimes it’s just growers get shoehorned into things because they’re retrofitting an existing building. They’re not building a facility from scratch; it’s what is available to them.

Regardless of what is available to them, the Airflow Mapping can help them determine the best way to lay out that airflow pattern. Whether it’s a high supply, low return, or whether they’re forced to do a high supply, high return and would naturally have some stratification problems, we can help mitigate that through the Airflow Mapping.

I’m not sure that I’m comfortable putting my hat in the horizontal versus vertical versus both. I think all of them can be applied properly with some intelligent thought.

What other oversights do cultivation facilities make when it comes to airflow?

One is that example of high return, high supply. If you were to look over your head right now, if you’re in your office, you’d probably see one of those four-way supply grills. They have no throw and they’re not designed to, because they’re designed to get air from a 9-foot ceiling down to a 6-foot breathing space.

We often see rooms that have those same style of diffuser in a 14-to-16-foot-high room and high supply. Issues like that are going to naturally cause stratification, where you’ve got a high supply, you’ve got high return. You don’t have a good air device. You’ve got your lights that sort of naturally create a bit of an umbrella or barrier to the air dropping down low. You may have horizontal air-rotation fans giving you a bit of an air curtain. And you’ve got a space that’s always going to be stratified as a result.

Reducing air-rotation fans can reduce your overall HVAC demand costs by something like 8% to 10% a year. So, if you’re talking about a typical room that would easily spend $50,000 a year in energy, you’re going to save $5,000 a year by doing ductwork properly. It pays for itself very quickly.

Do taller or bushier plants play a factor in dead-zone considerations for facilities?

They absolutely can, as well as moving racking. Between the two we can often end up with situations with a bit of an aisle effect, where air doesn’t penetrate well into the canopy and will naturally go where there’s less air resistance. If you’ve got moving racking where you’re no longer working in the room and your rack home position changes on a daily basis, or changes versus where the ductwork was designed, you can end up with a situation where the air isn’t going into the canopy the way it ought to and instead is finding the easy path.

That can happen as well with bigger or bushier cultivars, or cultivars with thicker canopies. It absolutely can be harder to get air into the canopy. That’s where an intelligent application of under-canopy ductwork may make more sense, where you draw air up through the canopy in a vertical way instead of trying to push it from the side on an angle. But that’s quite application-specific. It’s really going to depend on the cultivar that you’re trying to grow.

How can a grower with movable racking avoid airflow problems?

Movable racking is becoming very common, of course, but home positions for that racking are not always well-respected and can absolutely cause problems if you’ve got an engineered system and then you change some aspect of the system, like where the plants are. You can certainly have a negative impact on your airflow there.

There is an education piece in ensuring that the person in the room who’s working on the plants understands the impact of maybe not quite following standard operating procedure and not returning the rack to the right spot because, “Who cares if it’s a rack in the same room; what does it matter?”

I’m a big proponent of process improvement overall, but a big part of process improvement is knowing the why and having everybody know and understand why something is being done, not just, “Those are the rules, so do it.” Understanding why the racks need to be in the right spot when you leave the room matters.

Again, I just think air distribution generally is the biggest problem facing this industry. It’s the one that’s most ripe for some good education right now.

11 Tips for Proper Air Distribution in Your Cannabis Facility

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Editor’s Note: This article has been adapted from Chapter 2: Grow Rooms Today: A New Dawn from Getting Grow Rooms Right, written by Geoff Brown, Quest’s VP of Technical Solutions, and Dan Dettmers, Quest’s Applications Engineer.

Just as the cannabis industry has grown at a rapid rate over the past five years, the grow room environment has also experienced significant evolution. 

Growers have gone from amateur to pro, seemingly overnight. As they seek to produce massive harvests and secure a place in the market, they’re coming up against several major challenges associated with producing at scale. This is a new frontier for many and a new field that requires different ways of thinking — novel solutions, many of which are unfamiliar to both long-time growers and the new entrants into the industry like engineers and equipment vendors.  

The four key challenges of scaling up in this landscape are:  

  • Lack of experience across multiple domains,
  • market and regulatory pressures,
  • lack of standards,
  • misapplication of traditional equipment. 

These four challenges have combined to put tremendous strain on the new, modern-day cannabis companies. However, before we can hope to solve these problems, we need to first understand what the problems and challenges are and how they came to be. 

 

1. Lack of Experience Across Multiple Domains 

There are severe knowledge gaps in this industry that need to be closed before it can truly progress and mature. 

The issue is not necessarily knowledge related to cultivation. As noted, master growers are experts when it comes to growing cannabis. Some of them were once amateur growers operating out of their basement or small-footprint operations, others have a Ph.D. in related fields — now they’re bringing their world-class knowledge to a newly legitimized market as employees, shareholders, executives or even founders, of new cannabis companies. Naturally, any industry that started in a basement is bound to experience some growing pains.  

We want to talk about the knowledge that is missing or has serious inconsistency as it relates to how best to scale up the production environment. The ideas that applied well to basement grow-ops are not applying well to commercial indoor grow facilities — something the industry is discovering through great pain and expense. 

Lack of understanding also persists among those who are ancillary to the industry, such as third-party equipment suppliers. Manufacturers are paying serious attention to the grow industry these days, as they hope to provide some much-needed solutions to many of the challenges growers are facing. Doing so successfully means big profits and the possibility of significant repeat business. 

But getting traditional suppliers involved with the cannabis industry has its risks. It’s a mixed bag — you could benefit, or you could lose. They don’t all necessarily understand the growing environment. On top of that, growers — who do understand — are now dealing with products and services they never had to before, or at a scale they never dealt with before. The result is confusion, poor communication and poor implementation of proposed solutions, which often don’t hit the mark. 

“It’s important to select and work with manufacturers who know the industry and offer products that are purpose-built for it.”

The inconsistency of knowledge has led to major harm, especially to growers in new markets who are scaling up to meet the demands of the market and investors looking for outsized returns on investment before commoditization at massive volume. Facilities of a million or more square feet are under construction, and huge amounts of money are being poured into these developments. But with technology and knowledge in its infancy, it’s an open question whether those dollars are being invested intelligently and put toward a facility that will work and deliver value. 

2. Market and Regulatory Pressures 

Pressures related to the market or regulations are a very modern challenge facing growers. Obviously, under the illicit market, someone growing cannabis at home didn’t have to worry about following any government regulations. Additionally, there were very few market pressures for them to worry about, as they most often had a captive customer base — as long as their prices were reasonable, clients were not likely to seek out another supplier. 

The legal market has brought about a new landscape that changes that game dramatically.  

For one, many growers are now large publicly traded companies with regulated facilities. This brings some transparency requirements, including quarterly releases of financial results. Producers are also typically expected to publish in their quarterly reports the grow yields they are achieving. There is  pressure to improve financial results on a quarter-to-quarter basis, and investors want to see that production is being maximized at all facilities as quickly as possible.  

The public nature of these companies means more diversity in the types of investors who hold stocks in them. Many of the new investors on the scene have less patience than the early venture capitalists or angel investors. There is now an expectation among many investors that there will be a certain level of market maturity in the cannabis industry, but that market maturity is still evolving. The industry is simply too new to expect anything else. However, with many growers relying on investors to supply the capital needed to take on the market and build up, falling short of expectations is not an option. 

Cannabis markets are unpredictable and rapidly evolving. Any new markets under development  are experiencing major supply shortages, as few were prepared to meet the tremendous demand among people in areas where cannabis has become legal for adult and medical use. It drives the pace of facility development to dizzying levels as growers, seeing an opportunity to grab market share early on, scale up to fill the demand. By having a large supply and brand recognition in markets where there is little product available, growers improve their chances of gaining large market share at an early stage – which has huge business and strategic value. But the execution must be done properly. For one, they need to be able to consistently produce — so avoiding mistakes that could lose crop or create inconsistent product is necessary. They also need to ensure quality and consistency even as they attempt to grow lots of crop very quickly.

Therefore, it is critical that growers scale up the right way. This is no area for a “rush job.” The idiom “buy once, cry once” applies well here — while it is slower and more expensive at first to take time to do things right, you’ll save more in the long run by way of avoiding headaches and unnecessary ownership costs. 

Adding to this pressure, the varying regulatory environments also challenge growers a lot. 

Some regulatory set-ups may make business less flexible and require different approaches. For example, some may require a full grow to be evaluated before the producer can receive a production permit. To minimize their capital exposure early on, this may motivate the grower to build a small first stage of their facility simply to satisfy this licensing requirement. After they go through the required harvests and receive the permit, the facility can be expanded to accommodate full production. This is a good example of how local regulations can have an impact on all aspects of growing, because it impacts the HVAC system type and design. Some types of HVAC systems are not conducive to incremental expansion. The ideal HVAC solution is one that can cost-effectively scale with additional rooms or square footage. 

Another example of regulatory pressures relates to the economics of growing in a given market. Some markets that have low barrier of entry for growers and don’t limit the number of licenses are having the opposite of a supply shortage – they have an enormous glut. These markets are at or near saturation, causing the market price per gram to drop. This results in even more pressure for growers to cut costs so they can offer cheaper products. In a saturated market, one of the drivers of success for a producer is lower cost.  

The economics of growing is discussed more in the next chapter, but the key takeaway is that your choice of HVAC equipment can vary significantly depending on variables like what kind of company you are, where you’re located and what the regulatory landscape looks like. These factors further contribute to challenges in the new frontier of growing at-scale. 

3. Lack of Standards 

One of the main reasons there is lack of consistent knowledge in the grow industry is because there are no standards in place regarding buildings and their systems. It’s seriously hurting the industry right now by contributing to the information vacuum.  

“Standards are important for any industry because they help ensure the right solutions are applied, because those involved in the sector already discussed and agreed on them. The cannabis industry does not yet have any standards for buildings and systems, which makes the design process more challenging.” 

In the mainstream, engineers rely on proven and documented standards in order to properly handle buildings they are not familiar with. An example are codes published by the American Society of Heating, Refrigeration and Air Conditioning Engineers — or ASHRAE. ASHRAE’s codes are used as well-defined standards relating to built environments and are applied in all kinds of buildings across North America, as well as implemented as the basis for countless local building codes. ASHRAE’s handbook has been published for many years with continual updating, with the earliest version dating to the 1920s. 

However, ASHRAE’s codes are geared toward residential and commercial buildings that are primarily designed for humans. There currently are no ASHRAE standards that relate directly to indoor plant environments and few of their standards are sufficient to address the unique needs and demands of these spaces. 

Of particular note in the hyper-competitive grow industry: even the folks who think they have found the answers to these challenges are not inclined to share information or insights. This “secret sauce” mentality has exacerbated the challenges by ensuring no research or data-sharing occurs in the industry. If this secrecy continues, there can be no hope for developing industry standards and best practices. 

As a result, engineers are without guidance as they get involved in the design and construction of modern grow rooms. It forces them to improvise and feel their way along. They wind up inventing solutions based largely on guesswork and the application of best practices from other environments or industries. The result is a bit like trying to put a square peg in a round hole. It doesn’t quite fit.  

Benefits of Standards

Standards in any industry are critical. Countless industries before have faced a similar challenge and wound up developing their own sets of standards. It’s the mark of a maturing industry and has served many useful purposes. 

One key benefit of having standards is that it reduces risk for businesses. As companies in the grow industry navigate their way to market, they need a clear set of guidelines to streamline the process and minimize false moves. Investments can be made with more confidence by knowing there is a body of work that backs up any decisions that have been made. This provides a clear sense of direction for executives and investors, as well as people directly involved in projects, like engineers. It would help all parties involved to learn strategies to repeat success and create consistent and sustainable outcomes — something that’s good for everyone! 

By seeking out the best standards, the grow industry can benefit from improved business economics, better efficiency, better ROI and a reduced environmental footprint. 

Standards also provide a framework for innovation. As the British Standards Institution notes, agreed-upon guidelines establish “rules of the game” by “defining common vocabularies, establishing the essential characteristics of a product or service, and by identifying the best practice within the ecosystems that will ensure successful outcomes.” Most relevant for the grow business is that standards allow everyone to identify what the main issues are and then work together to find solutions. This is especially critical in the early stages of a new business ecosystem, which is exactly where this industry is in the present day.  

While innovation exists to a great degree, the industry would benefit from the kind of scope and direction that comes from having a set of standards in place. That could signal to ancillary manufacturers exactly what the market needs and remove the guesswork involved in providing it by breaking down communication barriers. 

Medical Cannabis

You may think some standards would have been created in the 25 years of medical cannabis. While it’s certainly true that some things have changed since that industry got started, it isn’t necessarily true that the experience of the industry has translated into formalized guidelines. Nor would those standards reflect the extraordinary advancements made in industry technologies just in the past couple of years. The main standards borne out of medical grows are governmental regulations relating to quality of crop and specific chemical contents, such as level of CBD vs. THC, for example. But these are of little help to someone building a new operation today with questions relating to facility design and operation. The medical grows of before are not necessarily similar to what is being built today, especially for adult use grows — which, as a reminder, are expected to be the fastest-growing market segment in cannabis for the next few years.  

The game is different now. A lot of medical cannabis operations from before were at a lower scale than what growers want to accomplish today with adult use crops and medical crops. While the plant is similar, and the facility operates in much the same ways, we know the scale is a lot bigger and that presents its own challenges. 

As well, the nature of medical grows is quite different than adult-use grows. It’s important to recognize this difference, because it can have consequences in the cost of designing and operating a grow room. For example, medical cannabis operations and products are typically regulated very tightly by both the grower and government. There are a different set of regulatory requirements to follow, and there may potentially be more stringent testing required. Medical crops must be very consistent, because successful patient outcomes depend on it. People usually choose their medical product based on trial and error. Once a good solution is found, they stick with it and expect that it will be regularly available and provide the same results every time. This is obviously important for both the patient’s health and consistency of medicinal benefits as well as the grower’s business success.  

Adult-use cannabis grown at scale similarly must be consistent, but its needs are driven more by the brand and its target market rather than certain regulations. A facility for adult-use grows may have different requirements in terms of its design than one intended for medical cultivation. What works for medical may not be the best or most cost-effective solution for adult use.  

Standards In Progress

Clearly, the grow industry is missing out on a lot by not having building standards in place. So, what kind of work is underway now to create them? 

The American Society of Agricultural and Biological Engineers (ASABE) has taken notice of the vacuum that exists today and has partnered with ASHRAE to create a new guideline for indoor growing environments: ASABE X653 guideline “Heating, Ventilating, and Air Conditioning (HVAC) for Indoor Plant Environments without Sunlight.” The author of this book is a contributing member on the developing committee. This guideline is intended to provide clarity for engineers regarding the design and operation of isolated indoor plant environments — in other words, warehouses that do not have windows and totally rely on high-performance HVAC systems to control the environment. 

Certainly, one reason engineers may be prone to make mistakes in this context is because grow rooms are so different from other indoor environments. For example, unlike most other types of facilities, grow room HVAC systems normally don’t introduce any outdoor air. They are typically 100% recirculation with CO2 added, to the tune of about three times the normal ambient concentration. This is just one of many examples, all of which contribute to significantly different requirements for the design of grow room HVAC systems that engineers who are unfamiliar with this space may not realize. Not having any standards certainly does not help. 

4. Misapplication of Traditional Equipment 

In many cases with new grow rooms, certain solutions have been used simply because they’ve worked before in other applications. As noted, the unique nature of the cannabis growing environment means different approaches need to be taken. Many of the solutions proposed in the recent past for grow rooms are simply not sufficient and deliver poor value for growers.  

There are potentially many approaches to HVAC that could be applied to this space. But some of them would be a misapplication of technology. One example is standard commercial air conditioners. These types of air conditioners been a typical choice because they’re cheap and are often used in similar large facilities. The setup is quite simple, and many engineers are familiar with how they work, so they feel comfortable applying them here. 

But ordinary air conditioners are not necessarily well-suited to the grow space. This is because they have some technical limitations that may cause them to be poor performers on the metrics that growers care about, like control of humidity and ability to cool the indoor space when it’s cold outside, not to mention energy efficiency and optimal room control. 

This has led to some growers to spend  a lot of money on new projects that involved equipment that doesn’t work for what they need. This results in underperforming grows that cost even more money in terms of reduced yield to the company and higher operating expenses. 

As a result, the predominant technologies applied are actually band-aid solutions meant to mitigate the limitations of existing equipment that was already installed. For example, supplemental dehumidification has exploded as of late. These only have a moisture removal capacity in the hundreds of pints and typically include no outdoor heat rejection device because they’re so small. This means they have no capacity to do air conditioning — only dehumidification, and any heat generated by the compressor goes back into the space. It solves the biggest challenge with air conditioners — lack of latent capacity — but this comes at the cost of adding more sensible heat to the space and thus requiring more air conditioning, which reduces efficiency.  

This may not always be the best solution and is often used as a quick fix for the grower in a jam. In the long-term, more growers need to look at unitary HVAC solutions instead, particularly for large-scale operations where installing a large number of separate, low-capacity dehumidification units, paired with traditional air conditioners, is likely to represent a larger installation and maintenance cost than fewer high-capacity unitary systems. It would require hanging multiple small units inside a space, all with separate electrical and condensate lines, along with related maintenance costs due to filter changes and repairs.  

Fundamentally, the misapplication of technology is largely due to lack of knowledge and understanding of the products available on the part of many different stakeholders in the industry. This goes back to engineers, but also contributing to this information vacuum are traditional HVAC suppliers and contractors.  

On the side of manufacturers, one issue has been the lack of purpose-built HVAC equipment for grow rooms. Traditional large-scale manufacturers have been reluctant to invest R&D capital into producing a dedicated product for this marketplace for potentially many reasons: Indecision over how to approach the design, questions about liability due to legal uncertainties and uncertainty over whether the market opportunity was worth the required investment to make a new type of product. The cannabis market has had an arguably questionable trajectory until late 2018, with federal adult-use legalization in Canada, so the potential market size for HVAC manufacturers up until that point had been unclear.  

Few manufacturers are offering purpose-built HVAC systems specifically for cannabis growing, due to reluctance to invest in R&D for a new market that was quite small until relatively recently.  

The Limitations of Repurposing

For those who have entered the market, most are repurposing existing products designed for a different application. It’s not necessarily that the solution has to be designed from scratch — there are some applications that bear similarity to grow rooms that can provide a starting point. For example, indoor swimming pools have similar latent loads and operating conditions in terms of temperature and relative humidity levels. This has meant manufacturers of indoor pool dehumidifiers have been well-positioned to provide for the cannabis market — but only to a certain degree. There is still a requirement to further develop their product line specifically for grow rooms and not all have been willing to invest significantly in doing this. 

Then there are applications that are not as compatible with grow rooms. One example is data center air conditioning. At face value, it would appear data centers are quite like grow rooms — they’re both isolated indoor spaces with significant heat loads that originate from equipment that require active air conditioning year-round. For data centers, the heat comes from servers while, for grow rooms, it comes from lamps. But data centers have no need to dehumidify the air — in fact, most add humidity to help reduce static electricity. Meanwhile, grow rooms have a large humidity load due to plant transpiration and evaporation from the watering system. That makes a huge difference from a science and technology application perspective. Therefore, the air conditioning equipment that works well in data centers does not usually apply well to grow rooms.  

Air conditioners for data centers are great for cooling the air but are not usually designed to effectively remove moisture — that’s because data centers typically want slightly humid air to control static electricity, but grow rooms want to control humidity in fine detail to protect the plants. 

Related to misapplication of technology is the poor implementation of it. For example, not all growers are familiar with the modern and high-tech building control systems of today. After all, they have never needed to use these systems before. Some growers are still sorting out their approach to building and equipment controls and not everybody understands how to properly implement them. This requires more involvement from equipment manufacturers and start-up contractors to solve. Building control systems, or specific equipment controls, may require software engineering to tailor their logic to the grower’s needs.

 

 

Flower-Side Chats Part 3: A Q&A with Harvey Craig, CEO Harvey’s All Naturals and Co-Founder of Boot Ranch Farms

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In this “Flower-Side Chats” series of articles, Green interviews integrated cannabis companies and flower brands that are bringing unique business models to the industry. Particular attention is focused on how these businesses integrate innovative practices in order to navigate a rapidly changing landscape of regulatory, supply chain and consumer demand.

Large-scale agricultural practices can take a toll on soil health leading to inefficiencies over the long term. Harvey’s All Naturals is a Colorado-based company specializing in premium farm-to-table full spectrum CBD products. Harvey’s gets all of its hemp from Boot Ranch Farms, an off-grid sustainable hemp farm in Southern Colorado supplied by an artesian well.

We spoke with Harvey Craig, CEO Harvey’s All Naturals and co-founder of Boot Ranch Farms, to learn more about the benefits of regenerative agriculture, how he thinks about soil health, and how they produce their CBD products. Harvey started Boot Ranch Farms in 2014 after the passing of the Farm Bill and Harvey’s All Naturals followed shortly thereafter.

Aaron Green: How did you get involved in the cannabis and hemp industry?

Harvey Craig: I got involved at a very young age, as the youngest of eight kids, seven of which are boys, I was introduced to cannabis on the marijuana side first. As an engineer through the years, I’ve always been involved in creating very efficient growing systems for cannabis.

Harvey Craig, CEO Harvey’s All Naturals and co-founder of Boot Ranch Farms

In the early 2000s, I learned about CBD a little bit through experimenting with marijuana strains to help a friend who had Parkinson’s and also through the research performed by Raphael Mechoulem, an organic chemist and professor at the Hebrew University of Jerusalem in Israel. In 2014, when the Farm Bill made hemp legal, I dropped everything and went into it because I felt “this is what I need to be doing.”

Green: What is sustainable farming mean to you?

Craig: Sustainable farming to me means putting soil health and responsible natural growing practices at the forefront of all agriculture – regenerative processes for soil, in a nutshell. To me, soil health is one of the biggest problems in the United States right now. By regenerating and making our soils living, healthy and with a rich nutrient base we create an ecosystem that is good for human health and health all around.

Green: What do you mean specifically when you say, “soil health?”

Craig: Soil is living. A good natural soil has a living microbiotic structure inside it. There’s a living habitat that forms inside our soil over the years. Large scale agriculture in many cases has depleted or killed this living structure through readily accessible fertilizers and tilling practices.

Farmers understand the soil. There are practices we can undertake that are helping our living soils and helping the microbiotic habitat to thrive. Practices such as no-till technologies, rotating crops, using cover crops, not being a monocrop, responsible water use, healthy fertilizer and pesticide technologies, minimal processing, the list goes on and on…

When we talk about this thing called sustainability, I think it’s very important that we understand there are two sides of cannabis. There’s the marijuana and then there’s the hemp. We can’t put those two together – they’re governed very differently. Hemp became legal through the Farm Bill and is governed by the Department of Agriculture. Hemp is just like any other crop out there really. That means we can mix hemp in with other crops. It’s very much like corn and other crops in how it’s grown on a large scale, industrial basis.

Marijuana on the other hand is governed by each state’s regulatory commission. Those regulations make it very hard to mix in with general agriculture. So, when it comes to the marijuana side, unfortunately, it must be a monocrop. Most marijuana is grown in pots and pots are fine. However, if you are just growing in a pot and then throwing your soil away, that is not very sustainable. As it sits right now, in the marijuana industry there is really no sustainability, unfortunately. The energy use for the lights in indoor grows, for example, creates a huge carbon footprint and load on the electrical grid. I’m not trying to put indoor growing down, but that’s the way it is. The only way I foresee sustainability in the marijuana side of cannabis is to let loose a little bit on regulation and allow it to become a part of normal agricultural processes.

Green: What is it about tilling that degrades the soil quality?

Craig: When we till our soil, we’re turning the organisms in the soil up and we’re allowing the sun to dry them out. If it’s not done properly, you kill that soil structure.

Now, these little microorganisms in our soil create a healthy soil, but it doesn’t happen instantly, this takes years to create. Nobody has the time anymore, everybody’s “go go go” and “make it happen instantly”. So that gets destroyed. Now we have all these dead soils that everybody’s growing in and growers turn to factory-produced fertilizers with readily available nutrients.

When we are talking about cannabis, we can’t just look at monocropping. If you grow one crop in the same soil over and over, the soil is going to get depleted. One of the main things that we deplete is nitrogen and growing other crops, such as clover, can replenish that nitrogen. Growing cover crops protects the soil from the sun, creates nitrogen for the soil, and holds the water within the soil.

Instead of tilling, you can rotate with crops like root vegetables, radishes and other things that have deep root structures. Instead of tearing them up, just let them degrade organically and go back into the soil. Those deep root structures will also help aerate the soil.

Green: What is a farmer’s first approach?

Craig: Farmers want their land to be healthy. True farmers have a oneness with the earth and understand the earth. The farmer’s first approach keeps the farmer involved in creating new technologies for agriculture.

Green: Let’s say you’re a farmer that has land or recently acquired land that’s been industrially grown upon. How would you take that land and start fresh with a regenerative process?

Craig: The first thing you have to do is take soil samples and send them to a lab. That’ll tell you what you’re working with. Also, knowing a little history about the land helps as well. Was it used for grazing? Was it used for growing corn? What was it used for? Were organic practices used?

Then, there are many things you can do to start to regenerate your soil, but it takes time. In many situations, people don’t want to take that time. But what we’re learning is, the people and the farmers that do take that time often take a hit monetarily for the first two or three years. After that, once that structure is maintained, the natural health of the soil can be replenished. Crops will grow better, and they won’t spend as much money on fertilizers and pesticides in the long run because the microbiotic structure in the soil is creating a healthy ecosystem. When we destroy that ecosystem, it doesn’t come back easily or quickly. If there’s a little bit there, it can be regenerated with the right practices.

Green: I understand that the Boot Ranch is an off-the-grid farm. What was your motivation for either going off-grid or remaining off-grid?

Craig: I have a background in alternative energies and engineering, and when creating Boot Ranch Farms there was a lot that went into the sustainability side of it. The farm is extremely far away from the power grid for starters. So, an investment in solar for electricity was money well spent. My thought process was, why would I invest in bringing the wires in when I could actually save money and resources by creating a very efficient solar system and not be tied to the grid? Our farm is self-sustaining without being connected to any grid, which is one of the main reasons for remaining off-grid.

Green: I understand the farm is supplied by an artesian well. How do you monitor your water quality?

Craig: Well, we’re very fortunate. Existing natural water quality is one of the main reasons we decided to grow in the San Luis Valley. When you’re starting something new, you have to look at your financial side of things. Investing in a hemp farm is very different than the marijuana side because you won’t make as much money per pound of product sold. So, you have to watch your budget and not spend too much, or you’re never going to make a profit.

The self-sustaining artisanal well and water rights were existing on the property. There’s no pumping required for it and the water goes into a 10,000-gallon holding tank, where we can monitor and test for water quality. In order to water our plants, we use a pump/drip water system that supplies water to each individual plant. It’s very efficient compared to most watering systems out there, such as flood irrigation or pivots, and really doesn’t use a heck of a lot of water.

Green: Are you growing in open air or greenhouses?

Craig: We grow in two 3,000 square feet industrial-grade greenhouses at Boot Ranch Farms. Greenhouse One has all the bells and whistles including heating, cooling, light deprivation, supplemental lighting, automated controls and more. That greenhouse allows us to mimic Mother Nature a little bit. We can get up to six harvests throughout the course of the year in that greenhouse. However, in reality, we get about four.

In addition, we have a second greenhouse that is set about 100 feet away and set up to keep plants growing on mother nature’s cycle. We can move groups of mature plants to Greenhouse One after each harvest for multiple flowering cycles. Lastly, between greenhouses, we have a 10,000 square foot courtyard that’s protected with shade cloth and other things to help protect those plants from the elements. In late October, all remaining plants in both greenhouses and the courtyard become mature and ready to harvest due to shorter days created by mother nature.

Green: Do you insure your crops?

Craig: We have not. Hemp is a new industry and we have not found good crop insurance.

Green: Do you cultivate your own genetics?

Craig: We work with some other companies here in Colorado to provide genetics. Consistent genetics are extremely important on the hemp side because we need to trust that they are going to keep the THC levels down. On the marijuana side, that part doesn’t matter so much

There are different strains that have been created that I absolutely love, and I’ve tried to stick with them and stay with that seed stock. One of them is called The Wife and the other Cherry Wine. Most of the best hemp I have found is based upon the Cherry strain. People are always looking for high CBD. I’d rather have a lower CBD level in the 8% to 12% range. Something higher in the 14% to 20% range has a higher chance of producing a product with more than the legal amount of THC.

Green: Is Harvey’s All Naturals fully supplied by Boot Ranch Farms?

Craig: Yes, it is. There are a lot of things that go into a quality product and we focus on that at Boot Ranch. We’re small, not trying to compete with the large-scale market. Unfortunately, a high percentage of the products out on the market come from large-scale industrial hemp grows. We focus on long-term medicinal value and grow very high-quality hemp and we try not to degrade it in any way, shape or form throughout processing.

Green: How many square feet or acres is the Boot Ranch Farm?

Craig: Boot Ranch farm is about 260 acres. We only grow on less than three of it.

Green: What’s your extraction process?

Craig: We use cold alcohol extraction. We do not distill to separate our alcohol from the hemp oil. We use what’s called a roto vape. That cold processing preserves our terpenes, it preserves our full-spectrum cannabis oil profile and doesn’t fully decarboxylate our CBDa. We want a large CBDa percentage because there are many things that CBDa is good for when it comes to long term medicinal reasons.

Green: Are you processing your own hemp?

Craig: No, we sub that part of it out. What I’ve learned in this industry is three main parts: 1- the farming; 2- the extraction, and; 3- the product line. Those are three very separate processes and require specialized expertise within themselves. Each is a large investment and it’s very hard to do it all. I decided to work with other people on the extraction part of it. They have the expertise, and we pay them well to do what they do.

Green: Okay, great. And then any final words for Ag Day?

Craig: Support your small farmer in nutrient-rich agricultural products.

Green: Great. That concludes the interview, Harvey!

Craig: Thank you very much!

National Ag Day: An Interview with Industry Leaders Disrupting Agriculture in Positive Ways

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National Agriculture Day (March 23, 2021), is an annual event held by the Agriculture Council of America (ACA), a not-for-profit 501-c (6) organization, to increase the public awareness of agriculture’s vital role in our society.

The ACA believes that every American should:

  • Understand how food and fiber products are produced.
  • Appreciate the role agriculture plays in providing safe, abundant and affordable products.
  • Value the essential role of agriculture in maintaining a strong economy.
  • Acknowledge and consider career opportunities in the agriculture, food and fiber industry.

We investigated how the hemp and cannabis industry is disrupting agriculture in positive ways, from automated trimming, to controlled environment agriculture, to water conservation and beyond. We interviewed Aaron McKellar, CEO and President of Eteros Technologies, parent company of Mobius Trimmer and Triminator, Mark Doherty, Executive Vice President of Operations, urban-gro, Inc. and Derek Smith, Executive Director at Resource Innovation Institute (RII) to get their perspective on agricultural innovation.

Aaron McKellar, CEO and President of Eteros Technologies

Aaron Green: Why is hand-trimming inefficient at scale?

Aaron McKellar: Hand-trimming is inefficient at scale because it is so labor-intensive and time-consuming, not to mention repetitive and frankly boring. It’s hard to stay fully engaged as a worker trimming by hand, so the consistency of your finished product isn’t reliable with a crew of hand-trimmers.

Aaron McKellar, CEO and President of Eteros Technologies

A hand-trimmer can produce good quality trim on about 2 or 3 pounds per day. A scaled-up facility running just one Mobius M108S Trimmer can realize up to 120 pounds per hour, replacing many dozens, or even into the hundreds of hand-trimmers. The HR nightmare this presents, and all the associated costs of paying and facilitating dozens of employees (parking, washrooms, lunchrooms, PPE and gowning, etc) is simply unworkable. And that’s before COVID.

Green: How does automated trimming benefit large producers and how does the quality compare to hand-trimming?

McKellar: Not all automated trimmers are created equal. Any of the machines out there will help to reduce the need for hand-trimmers by taking off the bulk of the leaf, leaving a small team of “hand-polishers” to finish it up. The Mobius Trimmer is the only automated trimmer on the market today that leaves the technology of the original machines in the past and employs next-gen technology to truly mimic hand-trimmed quality with stunning through-put rates.

We have high-end producers using Mobius Trimmers whose own QC department cannot discern Mobius-trimmed flower from hand-trimmed flower. Hand polishing crews tend to be far smaller when using a Mobius vs first-gen machinery, and many Mobius users don’t touch up at all, instead going straight to market right out of the trimmer. For a look at how our technology differs from the rest of the field, check out this look under the hood.

Mark Doherty, Executive Vice President of Operations, urban-gro, Inc.

Aaron Green: What is controlled environment agriculture?

Mark Doherty: Cannabis cultivators understand growing indoors because, prior to legalization, they had been doing it for years in the gray market. It is by way of that experience that cultivators learned how to manipulate a highly-valuable, complex plant in an indoor setting. As cannabis legalization spread across the United States, many government regulators required that it be cultivated indoors according to strict regulatory protocols. Fast forward 10 years, and we have an industry that is keenly aware of the indoor environmental conditions required to be successful. Critical factors like heating, cooling, ventilation, dehumidification, and how to best mimic Mother Nature’s energy through lighting are all deliberately optimized.

Mark Doherty, Executive Vice President of Operations, urban-gro, Inc.

With cannabis cultivation driving the advancements of controlled environment agriculture, market and regulatory forces demanded higher efficiency, reduced energy and resource consumption, and clean crops. In most states, cannabis crops have more stringent testing than food crops. For instance, the lettuce in Massachusetts will not pass the standards for cannabis in Massachusetts. It’s through rapid innovation and technology adoptions that the cannabis industry has paved the way for lettuce to be profitably grown indoors.

Green: How can controlled environment agriculture help alleviate supply chain stresses?

Doherty: By growing food closer to the consumer, you reduce food miles; meaning, that link in the food supply chain gets a lot shorter and is less prone to disruption. Whether you have hyper small cultivation facilities on every street corner, or a larger cultivation facility geographically close to consumers, you can grow 24/7/365. Furthermore, growing locally allows for better prediction of facility output—10 boxes of greens on Monday, 50 boxes of greens on Tuesday, and five boxes of greens on Thursday. This eliminates harvesting a large crop before it is ripe and likely requiring cold storage. The controllability of controlled environment ag is that consistent, reliable contribution to the food supply chain and shortening that path to the consumer.

Derek Smith, Executive Director at Resource Innovation Institute (RII)

Aaron Green: What motivated you to publish the Cannabis H2O: Water Use and Sustainability in Cultivation report?

Derek Smith, Executive Director at Resource Innovation Institute (RII)

Derek Smith: Until this report, if you searched for cannabis water usage, you’d basically find one cited statistic. It was “six gallons per plant per day.” We knew this was from a model based on one extreme illicit market scenario. Based on the data we were seeing and the conversations we were having, this number seemed way off. So, we pulled together a multidisciplinary Water Working Group as part of our Technical Advisory Council. The objective of the Water Working Group was to establish a scientific understanding of how, and how much, water is used for cannabis cultivation so that cultivators have confidence in taking steps to be more efficient, and so that industry leaders, governments and media can be accurately informed about the range of water practices of today’s regulated market.

Green: What key points should cannabis cultivators take away from the report? What key points should regulators and policymakers take away from the report?

Smith: As the cannabis industry matures, water use efficiency will become more important, as it has for other agricultural crops. Pressures to use water efficiently will mount from multiple channels including – reducing input and energy cost, protecting the environment, meeting regulatory standards and simply being good stewards. We recommend that industry and regulators focus efforts on the following areas:

  1. When grown outdoors, water for cannabis production should be assessed like any other agricultural crop and be subject to state and local regulations that apply to other crops. Our research indicates that cannabis neither uses a massive share of water nor uses more water than other agricultural crops. Applying the same standards to cannabis as to other agricultural crops will correctly categorize outdoor grown cannabis as an agricultural crop.
  2. In areas where there may be conflict between water use for cannabis and environmental concerns, regulators and the industry should focus (1) on the timing of water use and (2) the potential of storage to mitigate environmental conflict. Our results show that in many parts of the country legal cannabis farmers have ample water storage to satisfy their needs. In areas where storage is insufficient, increasing storage should be a priority for farmers and regulators.
  3. Our research shows there are still massive differences between cannabis production techniques. As farmers continue to experiment and improve, we expect to see water use be a more important part of cannabis farming decisions and expect new plant varieties and growing techniques to be developed that increase water use efficiency. Yet more data from actual farms and facilities are needed to point the way toward the technologies and techniques that drive optimal efficiency and productivity. It is recommended that producers benchmark their performance and governments consider requiring energy and water reporting by producers. The Cannabis PowerScore can assist in these efforts.
  4. As indoor production continues to grow, especially in areas that have unfavorable climatic conditions for outdoor growing, we expect more cannabis users to rely on municipal water sources. Yet, it is unclear if municipal water suppliers are equipped to work with the cannabis industry. We suggest outreach efforts between the cannabis industry and municipal water suppliers to incentivize efficiency where possible.

Should Your Business Invest in Delta-8-THC?

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Editor’s Note: This article has been adapted from Chapter 2: Grow Rooms Today: A New Dawn from Getting Grow Rooms Right, written by Geoff Brown, Quest’s VP of Technical Solutions, and Dan Dettmers, Quest’s Applications Engineer.

Just as the cannabis industry has grown at a rapid rate over the past five years, the grow room environment has also experienced significant evolution. 

Growers have gone from amateur to pro, seemingly overnight. As they seek to produce massive harvests and secure a place in the market, they’re coming up against several major challenges associated with producing at scale. This is a new frontier for many and a new field that requires different ways of thinking — novel solutions, many of which are unfamiliar to both long-time growers and the new entrants into the industry like engineers and equipment vendors.  

The four key challenges of scaling up in this landscape are:  

  • Lack of experience across multiple domains,
  • market and regulatory pressures,
  • lack of standards,
  • misapplication of traditional equipment. 

These four challenges have combined to put tremendous strain on the new, modern-day cannabis companies. However, before we can hope to solve these problems, we need to first understand what the problems and challenges are and how they came to be. 

 

1. Lack of Experience Across Multiple Domains 

There are severe knowledge gaps in this industry that need to be closed before it can truly progress and mature. 

The issue is not necessarily knowledge related to cultivation. As noted, master growers are experts when it comes to growing cannabis. Some of them were once amateur growers operating out of their basement or small-footprint operations, others have a Ph.D. in related fields — now they’re bringing their world-class knowledge to a newly legitimized market as employees, shareholders, executives or even founders, of new cannabis companies. Naturally, any industry that started in a basement is bound to experience some growing pains.  

We want to talk about the knowledge that is missing or has serious inconsistency as it relates to how best to scale up the production environment. The ideas that applied well to basement grow-ops are not applying well to commercial indoor grow facilities — something the industry is discovering through great pain and expense. 

Lack of understanding also persists among those who are ancillary to the industry, such as third-party equipment suppliers. Manufacturers are paying serious attention to the grow industry these days, as they hope to provide some much-needed solutions to many of the challenges growers are facing. Doing so successfully means big profits and the possibility of significant repeat business. 

But getting traditional suppliers involved with the cannabis industry has its risks. It’s a mixed bag — you could benefit, or you could lose. They don’t all necessarily understand the growing environment. On top of that, growers — who do understand — are now dealing with products and services they never had to before, or at a scale they never dealt with before. The result is confusion, poor communication and poor implementation of proposed solutions, which often don’t hit the mark. 

“It’s important to select and work with manufacturers who know the industry and offer products that are purpose-built for it.”

The inconsistency of knowledge has led to major harm, especially to growers in new markets who are scaling up to meet the demands of the market and investors looking for outsized returns on investment before commoditization at massive volume. Facilities of a million or more square feet are under construction, and huge amounts of money are being poured into these developments. But with technology and knowledge in its infancy, it’s an open question whether those dollars are being invested intelligently and put toward a facility that will work and deliver value. 

2. Market and Regulatory Pressures 

Pressures related to the market or regulations are a very modern challenge facing growers. Obviously, under the illicit market, someone growing cannabis at home didn’t have to worry about following any government regulations. Additionally, there were very few market pressures for them to worry about, as they most often had a captive customer base — as long as their prices were reasonable, clients were not likely to seek out another supplier. 

The legal market has brought about a new landscape that changes that game dramatically.  

For one, many growers are now large publicly traded companies with regulated facilities. This brings some transparency requirements, including quarterly releases of financial results. Producers are also typically expected to publish in their quarterly reports the grow yields they are achieving. There is  pressure to improve financial results on a quarter-to-quarter basis, and investors want to see that production is being maximized at all facilities as quickly as possible.  

The public nature of these companies means more diversity in the types of investors who hold stocks in them. Many of the new investors on the scene have less patience than the early venture capitalists or angel investors. There is now an expectation among many investors that there will be a certain level of market maturity in the cannabis industry, but that market maturity is still evolving. The industry is simply too new to expect anything else. However, with many growers relying on investors to supply the capital needed to take on the market and build up, falling short of expectations is not an option. 

Cannabis markets are unpredictable and rapidly evolving. Any new markets under development  are experiencing major supply shortages, as few were prepared to meet the tremendous demand among people in areas where cannabis has become legal for adult and medical use. It drives the pace of facility development to dizzying levels as growers, seeing an opportunity to grab market share early on, scale up to fill the demand. By having a large supply and brand recognition in markets where there is little product available, growers improve their chances of gaining large market share at an early stage – which has huge business and strategic value. But the execution must be done properly. For one, they need to be able to consistently produce — so avoiding mistakes that could lose crop or create inconsistent product is necessary. They also need to ensure quality and consistency even as they attempt to grow lots of crop very quickly.

Therefore, it is critical that growers scale up the right way. This is no area for a “rush job.” The idiom “buy once, cry once” applies well here — while it is slower and more expensive at first to take time to do things right, you’ll save more in the long run by way of avoiding headaches and unnecessary ownership costs. 

Adding to this pressure, the varying regulatory environments also challenge growers a lot. 

Some regulatory set-ups may make business less flexible and require different approaches. For example, some may require a full grow to be evaluated before the producer can receive a production permit. To minimize their capital exposure early on, this may motivate the grower to build a small first stage of their facility simply to satisfy this licensing requirement. After they go through the required harvests and receive the permit, the facility can be expanded to accommodate full production. This is a good example of how local regulations can have an impact on all aspects of growing, because it impacts the HVAC system type and design. Some types of HVAC systems are not conducive to incremental expansion. The ideal HVAC solution is one that can cost-effectively scale with additional rooms or square footage. 

Another example of regulatory pressures relates to the economics of growing in a given market. Some markets that have low barrier of entry for growers and don’t limit the number of licenses are having the opposite of a supply shortage – they have an enormous glut. These markets are at or near saturation, causing the market price per gram to drop. This results in even more pressure for growers to cut costs so they can offer cheaper products. In a saturated market, one of the drivers of success for a producer is lower cost.  

The economics of growing is discussed more in the next chapter, but the key takeaway is that your choice of HVAC equipment can vary significantly depending on variables like what kind of company you are, where you’re located and what the regulatory landscape looks like. These factors further contribute to challenges in the new frontier of growing at-scale. 

3. Lack of Standards 

One of the main reasons there is lack of consistent knowledge in the grow industry is because there are no standards in place regarding buildings and their systems. It’s seriously hurting the industry right now by contributing to the information vacuum.  

“Standards are important for any industry because they help ensure the right solutions are applied, because those involved in the sector already discussed and agreed on them. The cannabis industry does not yet have any standards for buildings and systems, which makes the design process more challenging.” 

In the mainstream, engineers rely on proven and documented standards in order to properly handle buildings they are not familiar with. An example are codes published by the American Society of Heating, Refrigeration and Air Conditioning Engineers — or ASHRAE. ASHRAE’s codes are used as well-defined standards relating to built environments and are applied in all kinds of buildings across North America, as well as implemented as the basis for countless local building codes. ASHRAE’s handbook has been published for many years with continual updating, with the earliest version dating to the 1920s. 

However, ASHRAE’s codes are geared toward residential and commercial buildings that are primarily designed for humans. There currently are no ASHRAE standards that relate directly to indoor plant environments and few of their standards are sufficient to address the unique needs and demands of these spaces. 

Of particular note in the hyper-competitive grow industry: even the folks who think they have found the answers to these challenges are not inclined to share information or insights. This “secret sauce” mentality has exacerbated the challenges by ensuring no research or data-sharing occurs in the industry. If this secrecy continues, there can be no hope for developing industry standards and best practices. 

As a result, engineers are without guidance as they get involved in the design and construction of modern grow rooms. It forces them to improvise and feel their way along. They wind up inventing solutions based largely on guesswork and the application of best practices from other environments or industries. The result is a bit like trying to put a square peg in a round hole. It doesn’t quite fit.  

Benefits of Standards

Standards in any industry are critical. Countless industries before have faced a similar challenge and wound up developing their own sets of standards. It’s the mark of a maturing industry and has served many useful purposes. 

One key benefit of having standards is that it reduces risk for businesses. As companies in the grow industry navigate their way to market, they need a clear set of guidelines to streamline the process and minimize false moves. Investments can be made with more confidence by knowing there is a body of work that backs up any decisions that have been made. This provides a clear sense of direction for executives and investors, as well as people directly involved in projects, like engineers. It would help all parties involved to learn strategies to repeat success and create consistent and sustainable outcomes — something that’s good for everyone! 

By seeking out the best standards, the grow industry can benefit from improved business economics, better efficiency, better ROI and a reduced environmental footprint. 

Standards also provide a framework for innovation. As the British Standards Institution notes, agreed-upon guidelines establish “rules of the game” by “defining common vocabularies, establishing the essential characteristics of a product or service, and by identifying the best practice within the ecosystems that will ensure successful outcomes.” Most relevant for the grow business is that standards allow everyone to identify what the main issues are and then work together to find solutions. This is especially critical in the early stages of a new business ecosystem, which is exactly where this industry is in the present day.  

While innovation exists to a great degree, the industry would benefit from the kind of scope and direction that comes from having a set of standards in place. That could signal to ancillary manufacturers exactly what the market needs and remove the guesswork involved in providing it by breaking down communication barriers. 

Medical Cannabis

You may think some standards would have been created in the 25 years of medical cannabis. While it’s certainly true that some things have changed since that industry got started, it isn’t necessarily true that the experience of the industry has translated into formalized guidelines. Nor would those standards reflect the extraordinary advancements made in industry technologies just in the past couple of years. The main standards borne out of medical grows are governmental regulations relating to quality of crop and specific chemical contents, such as level of CBD vs. THC, for example. But these are of little help to someone building a new operation today with questions relating to facility design and operation. The medical grows of before are not necessarily similar to what is being built today, especially for adult use grows — which, as a reminder, are expected to be the fastest-growing market segment in cannabis for the next few years.  

The game is different now. A lot of medical cannabis operations from before were at a lower scale than what growers want to accomplish today with adult use crops and medical crops. While the plant is similar, and the facility operates in much the same ways, we know the scale is a lot bigger and that presents its own challenges. 

As well, the nature of medical grows is quite different than adult-use grows. It’s important to recognize this difference, because it can have consequences in the cost of designing and operating a grow room. For example, medical cannabis operations and products are typically regulated very tightly by both the grower and government. There are a different set of regulatory requirements to follow, and there may potentially be more stringent testing required. Medical crops must be very consistent, because successful patient outcomes depend on it. People usually choose their medical product based on trial and error. Once a good solution is found, they stick with it and expect that it will be regularly available and provide the same results every time. This is obviously important for both the patient’s health and consistency of medicinal benefits as well as the grower’s business success.  

Adult-use cannabis grown at scale similarly must be consistent, but its needs are driven more by the brand and its target market rather than certain regulations. A facility for adult-use grows may have different requirements in terms of its design than one intended for medical cultivation. What works for medical may not be the best or most cost-effective solution for adult use.  

Standards In Progress

Clearly, the grow industry is missing out on a lot by not having building standards in place. So, what kind of work is underway now to create them? 

The American Society of Agricultural and Biological Engineers (ASABE) has taken notice of the vacuum that exists today and has partnered with ASHRAE to create a new guideline for indoor growing environments: ASABE X653 guideline “Heating, Ventilating, and Air Conditioning (HVAC) for Indoor Plant Environments without Sunlight.” The author of this book is a contributing member on the developing committee. This guideline is intended to provide clarity for engineers regarding the design and operation of isolated indoor plant environments — in other words, warehouses that do not have windows and totally rely on high-performance HVAC systems to control the environment. 

Certainly, one reason engineers may be prone to make mistakes in this context is because grow rooms are so different from other indoor environments. For example, unlike most other types of facilities, grow room HVAC systems normally don’t introduce any outdoor air. They are typically 100% recirculation with CO2 added, to the tune of about three times the normal ambient concentration. This is just one of many examples, all of which contribute to significantly different requirements for the design of grow room HVAC systems that engineers who are unfamiliar with this space may not realize. Not having any standards certainly does not help. 

4. Misapplication of Traditional Equipment 

In many cases with new grow rooms, certain solutions have been used simply because they’ve worked before in other applications. As noted, the unique nature of the cannabis growing environment means different approaches need to be taken. Many of the solutions proposed in the recent past for grow rooms are simply not sufficient and deliver poor value for growers.  

There are potentially many approaches to HVAC that could be applied to this space. But some of them would be a misapplication of technology. One example is standard commercial air conditioners. These types of air conditioners been a typical choice because they’re cheap and are often used in similar large facilities. The setup is quite simple, and many engineers are familiar with how they work, so they feel comfortable applying them here. 

But ordinary air conditioners are not necessarily well-suited to the grow space. This is because they have some technical limitations that may cause them to be poor performers on the metrics that growers care about, like control of humidity and ability to cool the indoor space when it’s cold outside, not to mention energy efficiency and optimal room control. 

This has led to some growers to spend  a lot of money on new projects that involved equipment that doesn’t work for what they need. This results in underperforming grows that cost even more money in terms of reduced yield to the company and higher operating expenses. 

As a result, the predominant technologies applied are actually band-aid solutions meant to mitigate the limitations of existing equipment that was already installed. For example, supplemental dehumidification has exploded as of late. These only have a moisture removal capacity in the hundreds of pints and typically include no outdoor heat rejection device because they’re so small. This means they have no capacity to do air conditioning — only dehumidification, and any heat generated by the compressor goes back into the space. It solves the biggest challenge with air conditioners — lack of latent capacity — but this comes at the cost of adding more sensible heat to the space and thus requiring more air conditioning, which reduces efficiency.  

This may not always be the best solution and is often used as a quick fix for the grower in a jam. In the long-term, more growers need to look at unitary HVAC solutions instead, particularly for large-scale operations where installing a large number of separate, low-capacity dehumidification units, paired with traditional air conditioners, is likely to represent a larger installation and maintenance cost than fewer high-capacity unitary systems. It would require hanging multiple small units inside a space, all with separate electrical and condensate lines, along with related maintenance costs due to filter changes and repairs.  

Fundamentally, the misapplication of technology is largely due to lack of knowledge and understanding of the products available on the part of many different stakeholders in the industry. This goes back to engineers, but also contributing to this information vacuum are traditional HVAC suppliers and contractors.  

On the side of manufacturers, one issue has been the lack of purpose-built HVAC equipment for grow rooms. Traditional large-scale manufacturers have been reluctant to invest R&D capital into producing a dedicated product for this marketplace for potentially many reasons: Indecision over how to approach the design, questions about liability due to legal uncertainties and uncertainty over whether the market opportunity was worth the required investment to make a new type of product. The cannabis market has had an arguably questionable trajectory until late 2018, with federal adult-use legalization in Canada, so the potential market size for HVAC manufacturers up until that point had been unclear.  

Few manufacturers are offering purpose-built HVAC systems specifically for cannabis growing, due to reluctance to invest in R&D for a new market that was quite small until relatively recently.  

The Limitations of Repurposing

For those who have entered the market, most are repurposing existing products designed for a different application. It’s not necessarily that the solution has to be designed from scratch — there are some applications that bear similarity to grow rooms that can provide a starting point. For example, indoor swimming pools have similar latent loads and operating conditions in terms of temperature and relative humidity levels. This has meant manufacturers of indoor pool dehumidifiers have been well-positioned to provide for the cannabis market — but only to a certain degree. There is still a requirement to further develop their product line specifically for grow rooms and not all have been willing to invest significantly in doing this. 

Then there are applications that are not as compatible with grow rooms. One example is data center air conditioning. At face value, it would appear data centers are quite like grow rooms — they’re both isolated indoor spaces with significant heat loads that originate from equipment that require active air conditioning year-round. For data centers, the heat comes from servers while, for grow rooms, it comes from lamps. But data centers have no need to dehumidify the air — in fact, most add humidity to help reduce static electricity. Meanwhile, grow rooms have a large humidity load due to plant transpiration and evaporation from the watering system. That makes a huge difference from a science and technology application perspective. Therefore, the air conditioning equipment that works well in data centers does not usually apply well to grow rooms.  

Air conditioners for data centers are great for cooling the air but are not usually designed to effectively remove moisture — that’s because data centers typically want slightly humid air to control static electricity, but grow rooms want to control humidity in fine detail to protect the plants. 

Related to misapplication of technology is the poor implementation of it. For example, not all growers are familiar with the modern and high-tech building control systems of today. After all, they have never needed to use these systems before. Some growers are still sorting out their approach to building and equipment controls and not everybody understands how to properly implement them. This requires more involvement from equipment manufacturers and start-up contractors to solve. Building control systems, or specific equipment controls, may require software engineering to tailor their logic to the grower’s needs.

 

 

Cannabis Revival and Year of the SPAC’s: What’s To Be Expected the Rest of 2021?

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The unusual nature of 2020 gave rise to a reciprocally roller-coaster-like cannabis market. Cannabis was cemented officially as an essential industry with the rise of COVID-19, and November elections resulted in even more United States markets welcoming medical and adult-use sales.

The stagnant cannabis stock market of 2019 became a thing of the past by the end of 2020. Throughout the course of last year, bag holders anxiously watched cannabis options creep back up. Now, nearly two years since market decline in 2019, the cannabis stock market is exploding with blank checks and buyout fever. Much of this expectant purchasing is due to Canadian companies considering U.S. market entrance. Combined with the recent surge in the use of special purpose acquisition companies (SPACs) to invest, this has led to an increase in asset prices.

A SPAC is defined as “a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.” Though they have existed for decades, SPACs have become popular on Wall Street the last few years because they are a way for a company to go public without the associated headaches of preparing for a traditional IPO.

In a SPAC, investors interested in a specific industry pool their money together without knowledge of the company they’re starting. The SPAC then goes public as a shell company and begins acquiring other companies in the associated industry. Selling to a SPAC is usually an attractive option for owners of smaller companies built from private equity funds.

The U.S.-Canadian market questions that this rising practice asks are: Can Canadian companies enter a bigger market and be more successful? Is it advisable for U.S. companies to sell their assets to Canadian corporations whose records may be marred by a history of losses and a lack of proper corporate governance? Regardless — if both SPAC’s and Canadian bailout money is here, what comes next?

What is Driving this Bull Market?

Underpinning these movements are record cannabis sales internationally, making last year’s $15 billion dollars’ worth of sales in the U.S. look small in comparison. New markets have opened up in various states and countries throughout 2020, and that trend is only expected to continue. New demographics are opening up, especially among older age groups. This makes sense, as most cannabis sales — even in a recreational setting — are people treating something that ails them like insomnia or aches and pains.

Cannabis is set to take off, and we are entering only the second phase of its market expansion. The world is becoming competitive. Well-run companies that are profitable in key markets are prime targets for bigger, growing companies. At the same time, the world of SPACs will continue to drive valuations. Irrespective of buying assets, growing infrastructure is and will continue to be greatly needed.

The Elusive Profitability Factor

When Canada blew up, one of the biggest changes was companies began focusing the year on cost cutting and — most importantly — profitability. Profitability became the buzzword. But bigger companies are on the search for already-profitable enterprises, not just those that have the potential to be. However, profitability is currently still unobtainable in Canada. Reasonable forecasters should expect this year will show a few companies getting bailed out while many others will be forced to either merge for survival or declare bankruptcy.

An ideal company’s finances should highlight not only revenue growth, but also profitability. Attention should be focused on how well businesses are run, and not on how much money they have the potential to raise or spend. Over the years, there have been many prospective companies that spent hundreds of millions only to barely operate, and are now shells in litigation. Throwing money at any deal should have been a lesson learned in the past, but SPACs are tempting because they are trendily associated with new, interesting management styles and charismatic businesspeople.

Companies should be able to present perfect and clear financials along with maintenance logs for all equipment. In today’s day and age, books must be stellar and clean. As money pours into SPACs, asset valuations for all qualities of companies will rise. The focus instead becomes about asset plays, which will cause assets to continue rising as money is poured into SPACs.

Once upon a time, if number counters presented a negative review or had to dig too much, executives would turn a cold shoulder on investment. But in the age of SPACs, these standards of evaluation will be greatly undervalued. Aging equipment and reportability of every piece of equipment may or may not be properly serviced and recorded in a fast-moving market. Costs of repair or replacing equipment that isn’t properly maintained may be a problem of the past. Because when money comes fast, none care for the gritty details.

Issues for SPACs

Shortage of talent and training has become a big concern already in the era of SPACs. How many quality assets are out there? Big operators in the U.S. are content and don’t see Canada as an enticing market to enter. So, asset buys are likely to primarily be in the U.S. Large companies like Aphria may buy out some of the major American players, but most Canadian companies will use new funding rounds to pay down debts. Accordingly, they will then be forced to piece together smaller operators as a strategy.

A cannabis company’s personnel and office culture are very important when looking to integrate into a larger corporate culture. Remember, it’s not just the brick and mortar that is being invested into, it is also the people that run a facility. Maintaining employee retention when a deal occurs is always critical. Your personnel should be highly trained and professional if you want to exit. Easy to plug-in corporate structures make all the difference in immediately gaining from the sale or having to retool the shed and bring in all new people.

The rise of the SPAC-era and Canadian entry into the U.S. market will cause asset increases, but it is only the second chapter in the market expansion of cannabis. Proper buys will nail profitability, impeccable books, proper maintenance records and will have created an efficient corporate structure with talented personnel. The rest will be overpriced land buys that will require massive infrastructure spending. The basics of a well-run organization don’t change. The cannabis market is going to ROAR, but don’t worry if the SPACs pass you by- they are buying at the start of cannabis only.