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New Lab Rules Are Killing Oregon’s Craft-Scale Companies

If you’ve been in an Oregon cannabis shop lately, you may have noticed that many of your favorite non-flower products are missing. That pain-relieving topical or chronic-infused ice cream you’ve come to love? Gone and gone. Shelves are empty, budtenders across Portland are apologizing for the slim product selection, and a date for the return of the missing products seems hazy at best.

What’s going on?

In a nutshell: Craft-scale infused products companies across Oregon are being killed by state lab testing rules that went into effect on October 1. That’s when the OLCC (Oregon Liquor Control Commission, the agency that regulates cannabis) implemented new testing rules for all products sold at adult-use cannabis stores. Prior to Oct. 1, there were more labs available to do testing, with faster turnaround time, cheaper pricing, and higher thresholds for failing a test.

“Testing now costs more than the entire product batch.
Trista Okel, owner of Empower Bodycare

The OLCC put together a rules advisory committee that made recommendations for consumer safety and quality control measures. Labs were then required to upgrade equipment and testing procedures to a higher standard known as ORELAP (Oregon Environmental Lab Accreditation Program).

Mark Pettinger, a public affairs official with the OLCC, said the new rules were needed because “up until  October 1st, labs did not need to be accredited, equipment did not need to be calibrated, and employees did not need to have specific training. In short, there were no requirements for labs. This resulted in ‘lab shopping’.” That is, some companies would hop from lab to lab, looking for the results they desired. “The new rules look for a broader range and concentrations of pesticides, which emerged from HB 3400, the follow up [legislation] to Measure 91.”

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But those new rules made the cost of testing all but prohibitive for smaller independent producers.

“The cost to test per sample can be anywhere from $200 to $400, and you’re testing 30 samples in three lots,” said Ashley Preece Sackett, co-founder of Cascadia Labs. “The cost for a company can come close to $30,000 just to verify that their products are consistent. And licensees have to continue regular batch package testing after verifying conformity.”

That’s extremely time-consuming for lab employees, added Preece Sackett. “It’s cost-prohibitive for most craft-scale cannabis processors, as many of these business are still in startup mode.”

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Trista Okel, owner of Empower Bodycare, has produced a well-regarded line of THC and CBD infused oils and soaking salts since 2013. But she doesn’t know if she can continue operating given the new lab costs.

“We make our Empower Soaking Salts in small batches to ensure product freshness, and I just got a quote on testing the potency for $2600,” she said. “If we make 80 pounds of salts at a time, the wholesale value of the product is around $2000. The small batches ensure that we have the highest quality products on the shelves, but potency testing costs more than the batch of product. This is not a public safety issue, this is a greedy lab issue.”

Okel suspects that the new lab rules were written with an assumption that industrial-scale companies could afford to pay for the new lab tests.

“My small, woman-owned business was doing just fine until these big, out-of-state cannabis businesses showed up to take over the market,” she said. “My educated guess is the new testing regulations won’t ease up until the majority of the small, local businesses are gone, and big business takes over. That said, we are going to fight to stay in the Oregon market. We care about Oregonians’ health and well-being. Big, out-of-state money does not.”

“Tests that used to cost $150 now cost $2,000.”
Andi Bixel, CEO of Drip Ice Cream

Andi Bixel, founder and CEO of Drip Ice Cream, faces a similar situation.

“For Drip to get our oil simply batch tested (the bare minimum we can do to be able to use the leftover oil inventory we have already in house) would cost us $1,500, vs what used to cost $150,” she wrote in an email. “For us to get our ice cream tested (just one flavor) will be $2,000 vs. what used to be $150. We went from $300 to get product on the shelf, to $3,500. And that doesn’t make us good forever, that’s just for a single batch.”

“The OLCC, OHA, and ORLAP didn’t do an economic analysis before pushing this rule through,” Bixel added, “and the most frustrating part has been that they have called us in for testimony, asked for letters, and have been absolutely zero responsive to letting us know whether things will change or not.”

Drip Ice Cream has been shut down for the past seven weeks. Bixel, like other small craft-scale operators in the Oregon infused-products industry, has had to lay off the majority of her staff. “This big push back is unfortunately making folks employed by cannabis companies feel wary about the stability of their future if they choose to continue working in this industry.”

One lab has told customers to hold off testing, indicating a change may be in the works. Hopefully that’s the case, as this isn’t a sustainable situation for producers, patients or consumers. There are people counting on access to these products, and it’s beyond the pale to not make them available.

“Here is my solution: Hit the pause button on the new testing rules while the agencies figure the rest out.”
Amy Margolis, Head of the Oregon Cannabis Association

Amy Margolis, head of the Oregon Cannabis Association, recently expressed frustration at the situation. The Oregon industry “is slowly grinding to a halt due the serious and systemic problems with the new testing regime,” she wrote. “The OLCC and the OHA have been fielding concerns from the cannabis business community since before the October 1st deadline letting them know that the labs are simply not ready for the capacity, that the protocols are not appropriate, the process validation doesn’t make practical or economic sense, the batch sizes are off and the absence of an on-ramp to the new system is serious and reckless. At the end of the day those voices appear to have been drowned out by the push to implement at whatever cost.”

“The agencies appear to now recognize this and held an ‘all hands’ meeting with stakeholders,” Margolis wrote. But that was in mid-October—four weeks ago.

“Here is my solution,” Margolis added, “Hit the pause button on the new testing rules while the agencies figure the rest out. Feel free to put a sticker on products not tested to the higher standards. No. Big. Deal. Then, agencies, take all the time you need to hold meetings, make phone calls, shoot shit about it over cocktails, accept and read 10,000 letters. Whatever. But people need a reprieve right now. I have other suggestions for a long term, meaningful fix but this is my ‘today-is-right-now-and-things-are-going-off-the-rails’ solution.”

Mark Pettinger of the OLCC said the agency is “always listening, learning and modifying based upon industry feedback,” so while “some rules may change, other rule changes cannot occur until the legislature meets again in early 2017.” He was unable to say exactly which rules could change and which could not, as some fall under the purview of the Oregon Health Authority.

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